iStar Inc.

For Q4 2022, iStar reported net income of a loss of $86.7 million, or a loss of $1.00 per diluted common share, and adjusted earnings of a loss of $79.9 million, or a loss of $0.92 per diluted common share. For full-year 2022, net income was $397.8 million and earnings per share was $4.92; adjusted earnings were $522 million, or $6.25 per share. At quarter end, iStar had approximately $1.4 billion of unrestricted cash, $1.3 billion of Safehold stock, ground lease plus and leasehold loan investments, and $483 million of legacy and other non-core assets; total debt outstanding was approximately $1.7 billion, with common equity of approximately $1.1 billion. Management said roughly $150 million of net proceeds had been generated in the fourth quarter and early 2023, and an additional $110 million of proceeds were still needed to reach the monetization target tied to the merger. For Safehold, Q4 originations were three new ground leases totaling $79 million, and full-year originations were 26 new ground leases totaling $1.4 billion. After quarter end, Safehold closed an additional $500 million unsecured revolving credit facility, bringing total unsecured credit lines to $1.85 billion and liquidity to about $1.2 billion. No formal next-quarter or full-year financial guidance was provided; instead, management said the merger could potentially close around March 31, subject to approvals and remaining conditions.

Jay Sugarman framed 2022 as a pivotal transition year focused on monetizing legacy assets and positioning Safehold as the long-term value driver. He emphasized that the merger is the culmination of that strategy and said management is working to finish the process, with a vote scheduled for early next month and a hoped-for close by quarter end. His tone was constructive but candid about the disruption, saying the firm wants to move past the merger process and get back to business.

Brett Asnas focused on the balance sheet, asset monetization, and Safehold’s financing strength. He cited approximately $1.4 billion of unrestricted cash at iStar quarter end, $1.7 billion of total debt with a 2.9-year weighted average maturity, and common equity of approximately $1.1 billion, or $10.48 per share on an adjusted basis. He also highlighted Safehold’s post-quarter liquidity improvement from the new $500 million revolver, plus the $91 million carrying value of the seven ground-lease ecosystem investments and approximately $147 million of unfunded commitments, while noting the remaining non-ground-lease assets and gains/losses from sales are still being worked through.

Analysts pressed on the remaining $110 million of asset sales needed for the merger, with management saying the last assets are a mix of sales, repayments, and potential marks, and that they feel confident they have a handle on what is in the market or under contract. Questions also focused on the credit cycle and whether distress could create opportunities; management said higher rates are hurting real estate values now but could create a rebound later, with current transaction volume still muted and only some green shoots visible. On the merger structure, Jay Sugarman said there were no material changes expected, only minor adjustments if needed to close as soon as possible.