Okay, well, I think we'll get going for those here and on the line. Good afternoon, and thanks for joining us, and thank you to Jay Sugarman, Chairman and CEO of Safehold. I'm Caitlin Burrows, and I cover REITs at Goldman Sachs. So to start, I guess, Jay, could you give us a quick intro into what Safe does, how it's different, and kind of the unique opportunity that you present to the REIT sector? Sure. Six years ago, we started Safehold to really change the way commercial real estate was owned in the United States. We had been a longtime player in net lease and finance and saw a lot of efficiencies that the corporate real estate finance world had taken advantage of by separating their operating businesses from their real estate. Safehold looked at the ground lease business and commercial real estate as a perfect analogy, where the buildings, in most cases, were operation-intensive, leasing, managing, marketing, designing, financing, and the land effectively was this lower return, passive, long-term asset. So the commercial real estate world in the corporate sector is now a multi-trillion-dollar net lease business. Why hasn't that same efficiency taken hold in the commercial real estate world, where buildings and land fundamentally represent different investments? So we set out to modernize what had become a relatively niche business, ground leasing, controlled by a number of parties that really weren't in the business of helping their customer, the business side of the real estate, the building owner, be more effective at their job. We said, "Wait a second, we can help them do that." So we think the modern ground lease that we invented at Safehold six years ago is a new, powerful tool for commercial real estate owners, to create what we think is a higher return, lower cost, form of capital. And we've seen that, business grow from about $300 million of assets to just over $6 billion. So slowly but surely, we are converting a lot of commercial real estate owners, into believers. And again, if you look at the corporate net lease world as an analogy, it took a long time for that business to really convince corporations that they were being inefficient with their capital. But once it happens, you see this tidal wave of real estate find a more, more... new, more efficient form, and we think Safehold is well-positioned to be the leader in that transition. I guess as we think more, I guess, near term in that process, you guys were talking on the earnings call about transaction activity, and well, obviously, transaction activity has been low this year across the real estate sector. I guess, what do you think it will take to get transaction activity to increase? Yeah, it's an interesting question right now. I think you know, transaction activity is really a function of healthy real estate markets. Healthy real estate markets are really a function of confidence in the future. Confidence in the future is really a function of you know, good leadership, good policies in the major cities in this country. So we have been longtime believers that over you know, reasonable periods of time, good leadership ultimately creates the conditions for value creation, and the real estate industry is great at taking advantage of those opportunities. Right now, we're in a tougher market. I think particularly in some of the gateway cities, leadership and policies need to adapt relatively quickly. If you look at San Francisco, if you look at Chicago, if you look at New York, if you look at DC, you know, getting people back to the heart of the urban centers is critical for not just offices, but the office ecosystem, the retail around that, the restaurants, the fast food, the dry cleaners, all of that ecosystem depends on a vibrant urban core. And we've seen, you know, in some markets, the first steps towards making that reinvention of that urban core happen faster, but it's not happening fast enough. So right now, I would say, you know, transaction volume is really a function of confidence. Buyers and sellers are still pretty far apart on pricing, and we're gonna need to establish some confidence here, both, I think in the rate environment, but also in terms of fundamentals. And I don't think that corner's been turned, although I think certainly rates have done what we'd hoped. On our last earnings call, we said the cycle felt like it was pretty much done to us. 90% to 95% of the cycle felt over, and, you know, that seems to be what's happening now. And I guess, as you think more specifically to Safehold, then, in that transaction market, obviously, your ability to participate in it is impacted by your cost and sources of capital. So how is your cost and source of capital impacting transaction activity today and maybe expectations for the future as activity picks up? Yeah, look, our goal is to drive down the cost of our capital for our customers as low as it can be. We ultimately compete with the traditional, you know, mortgage market that finances the land and the building together, and we need to be a better solution than that, and we think we are. In dislocated debt markets like today, it's harder to do that. The cost of capital for our customers, not just from the ground lease perspective, but all their alternatives have been very dislocated, unnaturally so. So we think we need to see more stability across the entire finance spectrum. Ground leases, leasehold financing, even, you know, regular way mortgage financing, all need to come down in terms of spreads and base rates. But it's starting to happen, and I think as we go into 2024, we certainly expect a lot more stability. That stability will imbue confidence, and confidence will lead to transactions. So I think we see the mechanism beginning for more transactions, but it still feels a bit muted right now. Mm-hmm. And I guess just a quick follow-up on that, I mean, you have long-term leases. It's a really long-term business, so it seems like you are impacted by cyclical drivers. So, can you talk a little bit about those cyclical drivers that end up being relevant to you? Yeah, they said, look, the real estate market is highly entrepreneurial. If you give them the conditions to create value, they will. I think, again, in some of these major cities, we're hopeful that leadership and policies will begin, you know, looking towards the future and creating the conditions in which real estate developers and entrepreneurs can get back to work to do what they do best. It's been a challenge, I think, looking at some of the policies. Certainly, in New York City, we have housing policies that are predicated on 1929 tenement laws, where windows have to open and bedrooms have to have windows. Those were all, you know, vestiges of firefighters having to climb up to the third floor and rescue you. You now have, you know, internal fire safety, you have MERV-13 filters. The air inside's better than the air outside. All those conditions have changed, and technology is just making that all happen faster. So we think smart, forward-thinking leadership actually can accelerate the value creation that can take place in these urban centers. But it still feels like, you know, people haven't really gotten to the core of it. Tax policies, the way old buildings and new buildings are taxed still makes very little sense. You know, you can't have a building with $50 to 60 rents, particularly in the office sector, pay $25 of taxes. It's just not gonna be sustainable. So we see lots of opportunities. If somebody could just, like, shake the system by the shoulders and say, "Hey, we can, we can solve these problems." Real estate people are really good at this, but you got to give us the conditions in which that makes sense. So 2024 should be one of these inflection years where somebody will do it correctly, and then everybody will follow, and that's certainly our hope for some of these major, gateway cities. And then in the fast-growing Sun Belt cities, you know, we're seeing that vibrancy really, continue. Certainly, in the multifamily sector, we're seeing a ton of opportunities to work with customers who, either have, strong projects or want to build strong projects. So, there's no shortage of opportunities. I just think the cost of capital hasn't come into alignment for a lot of our customers, or even on our balance sheet, we can't drive our cost of capital to where we'd like to, yet. And I guess then, as you think about the types of properties and transactions that could be of interest to you, I think there's probably lots of pieces, but one I can think of is on the geography, the other is on the property type. And so, I know you've been generally diversifying both, but could you talk a little bit more on the geographies that are attractive to you? And then on the property type side, you are historically very in on office, more recently on multifamily, kind of where you see that mix going. Yeah. Our real power focus has been on multifamily for the last couple of years, so that makes up the majority of the portfolio right now. We do see, as the markets mature, some segments that we can slide into to actually expand the overall ground lease marketplace. So, we recently announced the deal in the affordable housing sector, which we think is quite interesting. But as you know, our core focus is great land. Let real estate entrepreneurs build the best and highest and best use buildings on top of that, but we wanna be in great locations where there's transportation, there's financial centers, there's educational centers, there's supply restrictions, all those things, when you look back in time, you see the power of compounding really take place on top of that land. So, we wanna be in major cities. We're in the top 30 cities around the country. We wanna be in the top product types. We think that's where not only value gets created, but reinvention happens most quickly. And then I would say, as you know, as we look around the country, you know, certainly the faster-growing cities are very much on our radar. We've actually done a lot of transactions there. So I think in terms of product type, multifamily and offshoots of multifamily are really compelling still. I think there'll be a point in time were hospitality, office will also be compelling. We're just not seeing a lot of transactions there. And then ultimately, I think if you look further out down the road, this is a business where you must be diversified. We're not gonna be right about every city, right? We have a ground lease book from 1925 or 1929, and Toledo and Detroit were the top cities, Kansas City. So you can't just pick one city, and that's why I think the modern ground lease and the ability for Safehold to have a very large, diversified portfolio by both product type and geography is critical. Because over long periods of time, there'll be massive winners. That's what history tells us. There'll also be some losers, but overall, the types of returns we think we can generate for the risk we're taking still strike us as very compelling. You mentioned, I think like hotels or hospitality in there. How does gaming fit in there? Would that be of interest? You know, gaming's interesting. There's a lot of value in the building and sometimes less value in the land, particularly in some of the regionals, so it's been a tricky mix for us, not one we've pursued. I would say core Strip in Vegas has intrigued us. We've actually been active there. We just haven't landed anything, but that's a place where we've seen land values consistently grow. We haven't seen that dynamic really in the regional, so I don't think that's a place we'll look, but, you know, certainly there's no reason someone who owns great land in core Strip location shouldn't at least talk to us about ways to capitalize that in a little more efficient, little better way. Mm-hmm. I guess turning back to investment volumes, I know, so it's probably like a year or two, something ago, you guys had talked about reaching a portfolio size of $7.5 billion. And obviously, a lot changed since then, but kind of what's your latest thought on the potential. I'm sure you think you're gonna get there, just like pace or how you, how you get there, timing. Yeah, those were different times. Unfortunately, there was a lot of normalcy in the market. I think, again, back to our other themes, you know, the market has to start transacting again. We are a function of how many transactions are taking place. We will get our fair share of those. Right now, there's just not a lot taking place. So we think we're gonna need stability before we can give any sort of forward guidance like that. We do think, again, the business of modern ground leases should continue to grow. And we, you know, continue to believe we have the, by far, the best platform to execute on those. So, our marker is how many transactions are taking place? What percentage of those can we win? Right now, that equation's, you know, out of whack because there's just not a lot of transactions happening. Buyers and sellers are not meeting. You know, we haven't seen the distressed sort of opportunities that you might expect in this market. A lot of can kicking going on. So we're gonna be ready when it happens, when volumes get back to normal, but right now, it's hard to predict when that's gonna happen. And I guess on the point of thinking that the modern ground leases should, you didn't use the word-term more popular, but become more popular. I guess, what makes you confident in that, and what's different today than X amount of years ago to make that kind of the right way to evolve? Yeah, look, I go back to the very simple logic of the business, which is, it's very analogous to what the corporate world realized 20 years ago. If you have a business that generates X return, and another part of that business only generates a much lower Y return with much more stability, you should not finance both of those components the same way. And for us, watching the net lease business grow, you know, dramatically and now become a multi-trillion-dollar industry, it's hard to believe that commercial real estate can remain this inefficient corner of the world, where efficiency and capital markets don't eventually try to say, "Wait a second, if there's a better solution, we must take advantage of that." Again, I would say growing from $300 million to over $6 billion feels good, but it's really just the first inning. We think this market has far more potential. We need to continue to innovate. We need to continue to be the leader, find these areas where we can stratify the market a little better than just saying, "Hey, there's a modern ground lease. This is what it is." There are parts of the market we think we can come with a slightly different tweak and say, "We've got a product just for you. I guess, maybe it's too soon to tell, but when transaction volumes do pick up and you guys are looking to be active, how do you think about what the right yield is and how something becomes accretive to Safehold's? You know, again, let's go back to first principles of the business. There are long-term fixed income instruments in the market. We can see that benchmark every day right now. It's come down a lot. It's right just over 5% today. So if you want to put money out in a nice, safe place and earn 5%, you can just go buy a liquid bond, you're fine. So we have to beat that benchmark. A little more complexity, a little more, you know, pieces of the puzzle to understand. But if we can create 100 basis points more than that on an ROA basis and give you some inflation kickers to boost that if inflation's higher, and give you a very large capital gain on top of that throughout the life of the instrument, to us, that's not only worth it, but that's, you know, significant value creation. So that benchmark sits here. We try to create an ROA of this, plus some inflation kickers, plus a very large capital gain on top of that. Now, we know we're gonna get that capital gain, history tells us, at the end of the lease term of a ground lease, typically, you know, 99 years. But what's happened is, we can actually measure how much of that capital gain is building up in the portfolio. Every quarter, we can tell you how much is sitting there, and right now it's just under $10 billion or just over $10 billion. To us, that is a very, very tangible pool of value for shareholders that we can't put on our balance sheet, but we can tell you it's there. We can have a third party like CBRE go out every quarter and tell us, "How much embedded capital appreciation is in the book?" And to us, that's a big piece of the story that I think the market has not yet understood. We have begun to sell strips of that to third parties, very smart, sophisticated investors, so we're hoping we'll see some of that translate through the share price. But that's a key part of the value creation. So the core returns are good, the inflation kicker is good, the capital appreciation is good, and when you stack all those up, given our risk profile versus the alternatives we see in the marketplace, we think modern ground leases are really compelling. I think you mentioned before, not today, but on the earnings call or something. You've mentioned that you think an opportunity for SAFE could arise from distressed opportunities, including recapitalizations, upon revaluation, forced liquidation events, or delinquencies, foreclosures. I guess, could you discuss this potential opportunity, and have you started to see any of those types of opportunities show up yet? The short answer is there's plenty of distress, it's just not leading to transactions. So we haven't seen it yet. As I said, some of the can kicking, some people just can't access the other parts of the capital stack to get a deal done. We're ready, willing, and able to be a piece of that solution, but we're not the whole solution. So we need all parts of the markets to start functioning more normally, equity, you know, financing and ground lease. But again, I would say we continue to believe we can be a part of that solution that will unlock value for either the existing owners or future owners. We just need to see some transactions start to take place. Mm-hmm. And I guess then, as we think about the kind of valuation and some of what you touched on before, there's the UCA portfolio. I know it's been a major focus, and I know you've been working for a while to get that piece of the business in particular kind of recognized. Do you think that is the most misunderstood piece of the business? And I guess, how have your conversations been going to make people understand what it is? Yeah, again, the business actually is not that complicated. We have long-term cash flow streams that are very, very predictable. Those tend to trade valuation-wise with where the long-term bonds trade. So people have done a pretty good job of tracking that. You see our stock move in a high correlation with that. But that's only part of the story. The other parts of the story, the inflation kickers and this capital appreciation piece, I think are misunderstood. The inflation piece is not giant, so that's just a sweetener, but the CARET piece is giant. And so in our minds, when we look at other investments in the world, and we compare what we're doing, we still like what we're doing better because we're getting an enormous tax-efficient wealth creator sort of as a bonus every time we do a ground lease. And if you can aggregate those, and if you can diversify that portfolio, and if you can make it large enough, it will become liquid. And we've talked a little bit in the past about how big do you need to be before you can create liquidity? Well, we're starting to do it in the private market. I think we're still a ways away, just in terms of size, from doing something more, you know, more liquid. But right now, even in the private market, we are seeing the kind of interest that suggests to us, there is real value here. It is real tangible value for shareholders. Michael Dell has bought into them, the Rubin family. Kevin Durant, family office is an investor. So it's not like the others aren't seeing that value. It's not. It's not, you know... At least in our mind, it's not being reflected in our share price yet, but I think that's a matter of time and education. It's not a question of, does this have value? I think we've already proven that. And I guess, as you think about how do you continue to show people that value, I know in the past you did those small private sales, like you mentioned. I guess going forward, how does doing additional sales stack up on your, I don't know, medium-term things you want to do? Yeah. So the company's position is: We'd like to sell the minimum amount necessary to get the value reflected in our share price. You can probably tell us what, you know, investors think, what that minimum number is, but clearly, some have told us, "Look, $20 to 25 million is not enough. It's not gonna change the dynamic. We may believe, but to get a broader audience to believe, you're gonna have to do it larger." Part of us is, it's the size, but it's also the quality of the investors. We have been focusing more on quality of investors than size. We don't really want to sell at this price point. We want growth to kick in and people to see the full value. But, you know, even at the Dell valuation of the last round, which was about $2 billion, that was $25 a share. That's clearly not being reflected in the stock that's trading at $22. So we think there's lots of value there. Let us see if we can, in 2024, put a little more meat on the bones on CARET and see if we can get that reflected in the share price. Again, our goal is not to sell CARET. It is simply to get the value of this, not on the balance sheet asset, but highly tangible and valuable asset, that we go out every quarter and tell you how much is in the box, how much are you, as a shareholder, entitled to. We give you a mark-to-market every quarter. To me, that, when I look at lots of other types of ways to invest, this is still one of the most compelling, and we need to do a lot of work in 2024 to get more people to see that value because I can't find anywhere else in the capital markets where you can get the tax efficiency, the compounding, the diversification, the tangibility. This is, you know, this is a fundamental asset class that people should own who want to create wealth. And you probably know lots of parts of Goldman Sachs, where that is their mandate: to create tax-efficient wealth creation that compounds over time with minimal fees, no, no operating responsibilities, can't screw it up. That, to me, is a very big market that will find CARET very, very attractive. We need to season it a little more, but boy, we've got the anchor investors now that I think can really open some people's eyes, and once they spend some time with us, I think they're really gonna like what they see. Switching to the funding side, maybe less relevant today because you did a equity offering just a couple of months ago now. But as you think of, transaction activity going forward and your use of equity, I guess, what metrics should everyone be looking at to assess, like, when it's time to raise equity? And I guess, how sensitive can you be, to the share price and, like, kind of timing of when that happens? Yeah. Look, we, we look at three things. We want it to be accretive to earnings, accretive to value, and keep our leverage in the range that we have promised, the market and the rating agencies. agencies. We did an offering that, candidly, was very painful from a price standpoint because it is really important for us to get our ratings, to the highest level we think, is appropriate, which, you know, is kind of the single A level. And the last offering allowed us to, to, fortunately, get Moody's to move us from positive to actually an A3 rating. So there was some method to the madness on that raise. We kept our leverage in a, an appropriate range for, the model we've set out in front of the market and the agencies. I do think, you know, because what we're doing in modern ground leases should create a lot of value, we think we can be accretive to the value of the portfolio, and to earnings, when we get this sort of positive spread to our cost of debt. And that's where we're kind of pushing hard to get our ratings up, because if we can push that cost of debt down just a little bit, I think you'll see the earnings cycle and the value cycle kick in again. Mm-hmm. And I guess on the credit rating side, you guys did just get the upgrade from Moody's this year. And I think you're targeting from Fitch as well. So I guess if you were to get the upgrade from Fitch, would that directly impact borrowing costs? And I guess, kind of going forward, as you think about what those borrowing costs are like, how much of a benefit do these upgrades mean? Yeah, I mean, most of you know, the fixed income market requires really two ratings. So Moody's has been great, a very strong statement. But if we get Fitch, it's probably on the order of 30+ basis points, initially, and then and obviously, as we season and mature the company, it could be more than that. But I, you know, I think the business itself is still somewhat in the first or second inning. I think the same is true in the fixed income markets. Our capital markets team has done an amazing job in the private market, working with individual providers of credit. We haven't done a ton of that in the public market yet on an unsecured basis, so the liquidity will get better. That's a key part of our long-term thesis, is that as we become a more consistent issuer, we're gonna see more liquidity, and that'll bring our spreads in. So it's the rating, it's eliminating any sort of illiquidity premium sitting in some of our existing securities. And then you can pass that on to your customers, and that's gonna open even more opportunities to spread this modern ground lease product, and still make the kind of excess returns that we think we're generating. I guess you mentioned how you think the sector is still in the early innings. I feel like at some point, people were talking about, like, new entrants. Would that be a good thing? Would it be a bad thing? I guess, have those potential entrants gone away, or are they still also trying to make it happen? And to the extent there were new entrants, do you think that would be a positive? Yeah, I know... You know, in the tech world, they, they talk about making the pie bigger and not worrying so much about your slice of the pie. We're, we're probably from, you know, slightly different angles, saying we want the pie to be bigger, and if others can help us expand modern ground lease, you know, technology into the commercial real estate world faster, that's, that's a good thing. We still want to be the leader, we still- we, we invented the concept, we created a lot of the, intellectual property around it. So our goal is to constantly innovate and find new slices and new niches and new segments that we can help expand the market, but if others can help us do that, great. And I do... You know, I fully expect there to be a, as the market matures, a segmentation. There may be different structures and price points for different parts of the market. So, you know, at this point, I think we're still very early. We have not seen a lot of competition succeed, sort of as a one stop, we can do everything. We've pretty much been the most important name for that. But, you know, we fully expect people to start sliding into particular slices of the market, maybe with different risk profiles or different structures. And ultimately, what that should do is make this a much larger market. You know, commercial net lease market, multi-trillion, modern ground lease market, $10 billion, there's a lot of opportunity for everyone here. Mm-hmm. And I guess to the extent that others do get involved, do you think that would change any of your process, or is one of your points that kind of you have your process, and you think they might do it a different way, but? I think people are still trying to search for their strengths. Our strength is we're the only public company, we're the only investment-grade company. We've got 75-80 people propping this in the marketplace. So, you know, we have kind of built the middle of the fairway out fully. It was expensive to do so, but there's, you know, first cut of rough, there's plenty of opportunity. We haven't really focused as much time there, and we have seen some people kind of be successful on a one-off basis, but we haven't seen, at least at this point, anybody put their shoulder to it the way we have. Mm-hmm. Maybe switching gears back to CARET. I think at one point, or I know at one point, you guys had talked about a public listing for that. Yeah. So I guess what's the kind of latest thinking on that? And assuming it's not imminent, like, what does it need to take or happen before that could happen? So, CARET, for all those who aren't familiar with the technology, just think of it as capital appreciation real estate trust. This is a way to capture the capital appreciation that builds up on top of land. You pay for the land as the ground lease today, and you get, at the end of the term, the land and the building and everything that they're worth. So we measure that every quarter. We think that is a tangible, measurable diversified pool of very high quality real estate that represents a very large capital appreciation for our shareholders. Kind of sounds like something that could be a, you know, liquid security in the public markets. But as I said, I think until we get the stability and the growth back into the machine, getting private trades is probably a precursor to anything we would do publicly. And then we have to just have to see, what is the best way to get the value reflected in Safehold shares? Because when Safehold shares reflect that value, our cost of capital goes down, we will do more deals, it will make CARET grow faster, there will be more capital appreciation embedded in the company. So it's a little bit of a flywheel that needs to start up again. You know, we definitely believe we're getting closer to the point where the capital markets are starting to line up, buyers and sellers will start finding a price where they can transact, and then you're gonna see that opportunity sort of kick back into gear. But the kindling, the sort of flashpoint right now, is rates falling. You're seeing the share price respond to rates falling. It's not yet responding to what that means longer term for our business, but we think it's a, obviously, a very big positive to have rates come back down. Mm-hmm. And I guess right now, with the transaction market relatively slow, is there any other aspects of your business that you could turn your attention to? I know obviously you guys went through the merger with iStar, so that's behind you, I guess, from a balance sheet or business development perspective. Anything else that you wanna talk about? Yeah, we're always doing a lot of R&D behind the scenes, so we're constantly looking for areas where we can think the same concept of efficiency, separating two things that are not the same more efficiently for our customers, so we'll keep doing that. You know, we have some cost inefficiencies that are carrying over from the merger. We would like to continue to whittle those down. Cost containment is something we're focused on. And then I think the, you know, the capital markets team is never in a never-ending search for the kind of capital that will find lending to us really compelling. So we're constantly working on that, bringing in new accounts too. There's never been a ground lease company before. There's never been a ground lease sector, so we're kind of, for the first time, introducing a lot of capital pools to these long-term, call protected, highly, you know, low LTV positions. And I think we're gonna find more and more people go, "Yeah, I do wanna play. This is a big sector, potentially. I do wanna have exposure in the top 30 cities in the United States, not at 65% or 55% or 45% or 35%, but you guys are offering me at 25%? That's really compelling." And that's our goal, is to, to get people to understand we're not at 100 cents on the dollar or 50 cents on the dollar. Our portfolio tries to sit in that 40, 45% range, and our lenders in that are in that 25% LTV range. That, to us, as a lender, is a great place to be, particularly when you have markets as choppy as the ones we're in now. Okay. Well, I think with that, we'll stop. But thank you, Jay, and thanks, everybody else. Thanks, Caitlin.