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Summary of Significant Accounting Policies | 9 Months Ended
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Sep. 30, 2024
Accounting Policies [Abstract] |
Summary of Significant Accounting Policies | Note 3—Summary of Significant Accounting Policies Significant Accounting Policies ​ Allowance for credit losses on net investment in sales-type leases and Ground Lease receivables—Effective January 1, 2023, upon the adoption of ASU 2016-13, the Company implemented procedures to estimate its allowance for credit losses on net investment in sales-type leases and Ground Lease receivables, including unfunded commitments, using a quantitative analysis to estimate expected loss rates for its portfolio of net investment in sales-type leases and Ground Lease receivables. ASU 2016-13 replaced the incurred loss impairment methodology in prior GAAP with a methodology that reflects expected credit losses over the life of the investment and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company analyzed historical data provided by Trepp (“Trepp”) for single asset borrower loans and considered comparable loan to value ratios, loss rates, timing of losses, vintage, property type and other statistics. The Company updated its analysis for current market conditions and reasonable and supportable forecasts of unemployment rates to develop an estimate of credit losses. Beginning in the third quarter of 2024, the Company enhanced its policy to inform credit loss estimates by analyzing historical loss data for high-credit rated long-duration bonds, which the Company believes have similar risk profiles to its Ground Leases, provided by external third parties along with the historical data provided by Trepp. The Company continues to consider comparable loan to value ratios, loss rates, timing of losses, vintage, property type and other statistics in its estimate of credit losses. The Company also continues to analyze its portfolio of Ground Leases in two categories, based on whether the underlying property is a stabilized property or a development project (projects with unfunded commitments that are under development or in transition). The Company’s development properties are assigned a higher loss rate due to the higher potential risk for deals under construction. The Company may adopt alternative approaches to estimate its credit losses in the future based on factors such as, but not limited to, the loan to value ratios, property type and the availability of relevant historical market loss data for similar type financial instruments. The Company did not have any charge-offs of its net investment in sales-type leases or Ground Lease receivables for any of the periods presented. ​ Interest receivable is not included in the Company’s allowance for credit losses on net investment in sales-type leases and Ground Lease receivables as the Company performs timely write-offs, if any, of aged interest receivables. The Company has also made a policy election to write off aged interest receivables through interest income from sales-type leases as opposed to through the provision for credit losses. ​ Fair Values—The Company is required to disclose fair value information with regard to its financial instruments, whether or not recognized in the consolidated balance sheets, for which it is practical to estimate fair value. The Financial Accounting Standards Board (“FASB”) guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The following fair value hierarchy prioritizes the inputs to be used in valuation techniques to measure fair value: Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2: quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and Level 3: prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). The Company determines the estimated fair values of financial assets and liabilities based on a hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the Company and the Company’s own assumptions about market participant assumptions. The following table presents the carrying value and fair value for the Company’s financial instruments ($ in millions):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | As of September 30, 2024 | ​ | As of December 31, 2023
​ | ​ | Carrying | ​ | Fair | ​ | Carrying | ​ | Fair
​ |  | Value |  | Value |  | Value |  | Value
Assets | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net investment in sales-type leases(1) | ​ | $ | 3,440 | ​ | $ | 3,818 | ​ | $ | 3,255 | ​ | $ | 3,118
Ground Lease receivables(1) | ​ |  | 1,779 | ​ |  | 2,069 | ​ |  | 1,622 | ​ |  | 1,603
Loans receivable, net - related party(1) | ​ | ​ | 112 | ​ | ​ | 115 | ​ | ​ | 112 | ​ | ​ | 114
Cash and cash equivalents(2) | ​ |  | 16 | ​ |  | 16 | ​ |  | 19 | ​ |  | 19
Restricted cash(2) | ​ |  | 9 | ​ |  | 9 | ​ |  | 28 | ​ |  | 28
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Liabilities | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Debt obligations, net(1) | ​ |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Level 1 | ​ | ​ | 1,035 | ​ | ​ | 972 | ​ | ​ | 739 | ​ | ​ | 617
Level 3 | ​ | ​ | 3,261 | ​ | ​ | 2,796 | ​ | ​ | 3,315 | ​ | ​ | 2,874
Total debt obligations, net | ​ | ​ | 4,296 | ​ |  | 3,768 | ​ |  | 4,054 | ​ |  | 3,491
(1) | The fair value of the Company’s net investment in sales-type leases, Ground Lease receivables and loans receivable, net – related party are classified as Level 3 within the fair value hierarchy. The fair value of the Company’s debt obligations traded in secondary markets are classified as Level 1 within the fair value hierarchy and the fair value of the Company’s debt obligations not traded in secondary markets are classified as Level 3 within the fair value hierarchy.
(2) | The Company determined the carrying values of its cash and cash equivalents and restricted cash approximated their fair values and are classified as Level 1 within the fair value hierarchy.
​ Redeemable Noncontrolling Interests—In February 2022, the Company sold 108,571 Caret units (refer to Note 12) for $19.0 million to third-party investors and received a commitment from an existing shareholder (which is affiliated with one of the Company’s independent directors) for the purchase of 28,571 Caret units for $5.0 million (which did not close). As part of the sale, the Company agreed to use commercially reasonable efforts to provide public market liquidity for such Caret units by seeking to provide a listing of the Caret units, or securities into which they may be exchanged, within two years of the sale. Because public market liquidity was not achieved by February 2024, the investors in the February 2022 transaction had the right to cause their Caret units purchased in February 2022 to be redeemed by Portfolio Holdings at their original purchase price less the amount of distributions previously made on such units. During the three months ended March 31, 2024, the redemption option was extended to April 2024. In April 2024, all of the investors in the February 2022 transaction exercised this right and elected to have their Caret units redeemed at the original purchase price less the amount of distributions previously made on such units. The Company classified these redeemable Caret units in accordance with Accounting Standards Codification (“ASC”) 480: Distinguishing Liabilities from Equity. ASC 480-10-S99-3A requires that equity securities redeemable at the option of the holder be classified outside of permanent stockholders’ equity. The Company classified redeemable Caret units as “Redeemable noncontrolling interests” in its consolidated balance sheets and consolidated statements of changes in equity. The redeemable noncontrolling interest’s carrying amount was equal to the higher of (i) the initial carrying amount, increased or decreased for the redeemable noncontrolling interest’s share of net income or loss and dividends; or (ii) the redemption value. Acquisitions—The Company evaluates each acquisition transaction to determine whether the acquired asset meets the definition of a business. Under ASC 805, an acquisition does not qualify as a business when (i) substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets; (ii) the acquisition does not include a substantive process in the form of an acquired workforce; or (iii) there is an acquired contract that cannot be replaced without significant cost, effort or delay. Acquisitions of a business are accounted for as business combinations and other acquisition transactions are accounted for as asset acquisitions. Transaction costs related to asset acquisitions are capitalized as part of the cost basis of the acquired assets, while transaction costs related to business combinations are expensed as incurred. ​ The Company’s acquisition of iStar in 2023 was accounted for as a business combination. For business combinations, the Company recognizes and measures identifiable assets acquired, liabilities assumed and any noncontrolling interest in the acquiree at their fair values on the Company’s consolidated balance sheets. In a business combination, the difference, if any, between the purchase consideration and the fair value of identifiable net assets acquired is either recorded as goodwill or as a bargain purchase gain. ​ Fair values are based on available information including discounted cash flow analysis or similar fair value models. Fair value estimates are also made using significant assumptions such as capitalization rates, discount rates, fair market lease rates and other market data. The fair value of the Company’s interests in equity investments acquired is calculated using the fair value of the investments held by the venture, which are valued using methods as described above, and considers the Company’s economics in the venture. The fair value of financial instruments, which could include loans receivable or net investment in sales-type leases, is based on current market conditions and loan or lease agreements in place. The fair value of tangible assets, which could include land, buildings, building improvements and tenant improvements is determined as if these assets are vacant. Intangible assets may include the value of right of use lease assets, above-market leases and in-place leases. As lessee, right of use lease assets and lease liabilities are measured at the present value of lease payments not yet paid, discounted at the implied rate charged by the lessor if that rate is readily determinable, or if that rate is not readily determinable, the Company's incremental borrowing rate, as of the date of the acquisition. As lessee, operating lease right of use assets are included in “Deferred expenses and other assets, net” and operating lease liabilities are recorded in “Accounts payable, accrued expenses and other liabilities” on the Company’s consolidated balance sheets. As lessee, above-market operating lease intangibles and below-market lease assets are each recorded at their fair values and included in “Deferred expenses and other assets, net” on the Company’s consolidated balance sheets. ​ The table below shows the Company’s purchase consideration for the acquisition of iStar ($ in thousands):
​ | ​ | ​ | ​
Total Company shares as purchase price(1) | ​ | ​ | 1,195,034
Stock price of the Company’s common stock(2) | ​ | $ | 29.78
Fair value of the Company's stock transferred | ​ | ​ | 35,588
Cash consideration paid by the Company to iStar | ​ | ​ | 88,685
Purchase consideration | ​ | $ | 124,273
(1) | The total post-Merger shares of the Company to be held by iStar shareholders includes 12.7 million shares that were issued as consideration for the investment in Old SAFE previously held by iStar as of March 30, 2023 that were retired in connection with the Merger. Accordingly, these shares are excluded from the purchase consideration as they are reflected as a treasury stock repurchase and retirement by Old SAFE.
(2) | Based on the closing price of Old SAFE’s common stock as of March 30, 2023, representing the final closing price prior to the effective time of the Merger.
​ The Merger was accounted for as a business combination pursuant to ASC 805 and all Merger related costs were expensed as incurred. The Company recorded $0.1 million of Merger expenses during the three months ended September 30, 2023 in “Other expense” in the Company’s consolidated statements of operations. The Company recorded $18.9 million of Merger expenses during the nine months ended September 30, 2023, of which $14.1 million was recorded in “Other expense” and $4.8 million was recorded in “General and administrative” in the Company’s consolidated statements of operations. During the nine months ended September 30, 2023, the Company also recorded $0.9 million of related non-recurring charges in “Other expense” and a provision for credit losses of $2.3 million on the Secured Term Loan Facility (refer to Note 6) which was originated at the time of the Merger in conjunction with the Spin-Off. Excluding $3.0 million of related non-recurring charges and the $2.3 million provision for credit losses on the Secured Term Loan Facility, the Company has incurred $26.6 million of Merger expenses. The following table sets forth the preliminary allocation as of March 31, 2023 of the purchase consideration to the fair values of identifiable tangible and intangible assets acquired and liabilities assumed, recognized as a result of the acquisition described in Note 1 above, measurement period adjustments and a final allocation of the purchase consideration ($ in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Preliminary | ​ | Measurement | ​ | Final
​ | ​ | Purchase Price Allocation | ​ | Period Adjustments | ​ | Purchase Price Allocation
Cash and cash equivalents | ​ | $ | 3,213 | ​ | $ | — | ​ | $ | 3,213
Real estate | ​ | ​ | 1,508 | ​ | ​ | — | ​ | ​ | 1,508
Equity investments(1) | ​ | ​ | 61,247 | ​ | ​ | — | ​ | ​ | 61,247
Deferred tax asset(2) | ​ | ​ | — | ​ | ​ | 6,292 | ​ | ​ | 6,292
Deferred expenses and other assets(2)(3) | ​ | ​ | 25,442 | ​ | ​ | 6,480 | ​ | ​ | 31,922
Total assets acquired | ​ | ​ | 91,410 | ​ | ​ | 12,772 | ​ | ​ | 104,182
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Accounts payable, accrued expenses and other liabilities(2)(4) | ​ | ​ | (22,939) | ​ | ​ | (2,340) | ​ | ​ | (25,279)
Debt obligations(5) | ​ | ​ | (99,995) | ​ | ​ | — | ​ | ​ | (99,995)
Total liabilities assumed | ​ | ​ | (122,934) | ​ | ​ | (2,340) | ​ | ​ | (125,274)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net identifiable (liabilities assumed) assets acquired | ​ | ​ | (31,524) | ​ | ​ | 10,432 | ​ | ​ | (21,092)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Purchase consideration | ​ | $ | 124,273 | ​ | $ | — | ​ | $ | 124,273
Add: net identifiable liabilities assumed | ​ | ​ | 31,524 | ​ | ​ | (10,432) | ​ | ​ | 21,092
Goodwill(6) | ​ | ​ | 155,797 | ​ | ​ | (10,432) | ​ | ​ | 145,365
(1) | Equity investments were valued using discount rates between 7.2% and 13.9% and are classified as Level 3 within the fair value hierarchy.
(2) | During the three months ended June 30, 2023, the Company recorded a deferred tax asset in the amount of $6.3 million, net of a valuation allowance in the amount of $2.8 million, and reduced goodwill by $6.3 million. The net deferred tax asset relates to net operating loss carryovers to which the Company’s taxable REIT subsidiary is a successor and were finalized upon filing tax returns subsequent to the Merger for periods prior to the Merger. During the three months ended September 30, 2023, the Company recognized $6.5 million of deferred expenses and other assets related to final state tax receivables and $2.3 million in accounts payable, accrued expenses and other liabilities as a result of finalizing its tax returns which produced additional information not available at the time of the Merger. The following table presents a rollforward of the Company’s goodwill:
​ | ​ | ​ | ​
Balance at December 31, 2022 | ​ | $ | —
Goodwill recognized at Merger | ​ | ​ | 155,797
Reduction to goodwill resulting from measurement period adjustments | ​ | ​ | (10,432)
Impairment | ​ | ​ | (145,365)
Balance at December 31, 2023 | ​ | $ | —
(3) | Deferred expenses and other assets includes $11.0 million attributable to operating lease right of use assets, $4.7 million attributable to prepaid expenses resulting from the settlement of iStar’s compensation plans, $2.1 million attributable to in-place prepaid contracts, $1.3 million attributable to office furniture and equipment and $6.3 million attributable to other receivables.
(4) | Accounts payable, accrued expenses and other liabilities primarily includes a $14.2 million operating lease liability. In addition, under the Merger Agreement, iStar was required to fund its share of merger-related costs and to provide sufficient cash to fund any unresolved corporate obligations and accrued liabilities or costs yet-to-be incurred prior to the Merger. Accounts payable, accrued expenses and other liabilities includes approximately $8.7 million of obligations assumed from iStar, which are offset with corresponding amounts in cash and cash equivalents and amounts receivable in deferred expenses and other assets, net sufficient to settle such obligations.
(5) | Debt obligations were valued using a discount rate of 6.7% and are classified as Level 3 within the fair value hierarchy.
(6) | Goodwill is calculated as the excess of purchase consideration over the fair value of the net identifiable assets acquired and primarily relates to the acquisition of iStar’s workforce and future synergies expected to be realized after the completion of the Merger.
​ During the three months ended September 30, 2023, the Company experienced a precipitous and sustained decline in the price per share of its common stock, which it identified as an indicator of goodwill impairment. As a result, the Company performed an interim goodwill evaluation. At that time, the Company determined that its current operations are carried out through a single reporting unit with a carrying value of approximately $2.4 billion. The estimated fair value of the Company was determined to be the Company’s market capitalization adjusted for a control premium estimated by the Company representing an amount a market participant would pay to obtain a controlling interest in the Company. The Company determined that its carrying value exceeded its estimated fair value and therefore recorded an impairment of goodwill. The Company recorded a $145.4 million full impairment of the goodwill recognized as a result of the Merger, which is recorded as a non-cash charge in “Impairment of goodwill” in the Company’s consolidated statements of operations. Goodwill did not have any tax impact on the Company’s financial statements. ​ The following table summarizes the Company's pro forma revenues and net income (loss) for the three and nine months ended September 30, 2023 as if the Merger described in Note 1 was completed on January 1, 2022 ($ in thousands):(1)
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Three Months Ended | ​ | Nine Months Ended
​ | ​ | September 30, 2023 | ​ | September 30, 2023
Pro forma revenues | ​ | ​ | $ 85,561 | ​ | $ | 268,478
Pro forma net income (loss) | ​ | ​ | (122,846) | ​ | ​ | (66,412)
(1) | The pro forma revenues and net income (loss) are presented for informational purposes only and may not be indicative of what the actual results of operations of the Company would have been assuming the transaction occurred on January 1, 2022, nor do they purport to represent the Company’s results of operations for future periods. From the date of the Merger closing through September 30, 2023, $0.1 million of total revenues and $6.0 million of net income of the acquiree are included in the Company’s consolidated statements of operations.
​ New accounting pronouncements—In August 2023, the FASB issued ASU 2023-05, Business Combinations - Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement (“ASU 2023-05”). ASU 2023-05 requires a joint venture to initially measure all contributions received upon its formation at fair value and is effective for all joint venture entities with a formation date on or after January 1, 2025. ASU 2023-05 is to be applied on a prospective basis, while retrospective application can be elected for joint ventures formed before the effective date. The Company is currently evaluating ASU 2023-05 but does not expect this standard to have a material impact on its consolidated financial statements. ​ In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 improves disclosures for reportable segments primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective on a retrospective basis for annual periods beginning after December 15, 2023 and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating ASU 2023-07 but does not expect the adoption of ASU 2023-07 to have a material impact on its consolidated financial statements. ​ In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires greater disaggregation of information in the rate reconciliation, income taxes paid disaggregated by jurisdiction and certain other amendments to improve income tax disclosures. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating ASU 2023-09 but does not expect this standard to have a material impact on its consolidated financial statements.

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