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Safehold launches $750 million commercial paper program

EditorNatashya Angelica
Published 06/21/2024, 04:26 PM

NEW YORK - Safehold Inc. (NYSE: NYSE:SAFE), a real estate investment trust known for pioneering the modern ground lease model, has unveiled a new commercial paper note program through its operating entity, Safehold GL Holdings LLC. The program will allow the issuance of up to $750 million in unsecured commercial paper notes, which the company intends to use for general corporate purposes.

The notes, which will be sold in the U.S. commercial paper market, are set to rank equally with the operating company's existing unsecured senior debt. Safehold will guarantee the notes fully, aligning with its strategy to optimize capital costs.

This move is anticipated to offer Safehold a cost advantage in the commercial paper market compared to its $2 billion revolving credit facility. The company plans to maintain the credit facility as a safety net for repaying the commercial paper notes.

The notes issued under this program will not be registered under the Securities Act of 1933, as amended. Consequently, they cannot be offered or sold within the United States without registration or an exemption from the registration requirements. This press release is not to be taken as an offer to sell or a solicitation of an offer to buy the notes.

Since its inception in 2017, Safehold has aimed to revolutionize the way real estate owners capitalize on the value of their land. The company's ground lease approach has targeted a range of property types, including multifamily, office, industrial, and hospitality, among others. As a REIT, Safehold's objective is to provide its shareholders with stable income growth and long-term capital appreciation.

The announcement of the commercial paper note program is based on a press release statement from Safehold Inc. and reflects the company's ongoing efforts to leverage financial instruments to support its growth and operational goals.

In other recent news, Safehold Inc. has been the subject of analysts' attention with Mizuho Securities downgrading its rating from Buy to Neutral and RBC Capital Markets adjusting its price target. Mizuho's decision is influenced by a challenging economic environment marked by high interest rates and subdued growth prospects for the company.

On the other hand, RBC Capital Markets, despite reducing the price target, maintains an Outperform rating on Safehold, citing potential for a gradual recovery in origination volumes and long-term growth prospects.

In the first quarter of 2024, Safehold reported solid earnings with key financial highlights including the issuance of $300 million in ten-year unsecured notes and the establishment of a $2 billion unsecured revolving credit facility. The company's portfolio is valued at $6.5 billion, with liquidity standing at $1.1 billion. Safehold has set a goal to cut net general and administrative costs by 10% for the year.

These developments reflect the company's strategic efforts to manage its expenses and capitalize on future growth opportunities. Safehold's robust financial position, coupled with its focus on controlling costs, positions it well to navigate the current economic climate. Despite the challenging environment, the company is optimistic about the recovery in transaction volume and its ability to capitalize on investment opportunities.

InvestingPro Insights

Safehold Inc. (NYSE: SAFE) has taken a significant step in diversifying its funding strategy with the new commercial paper note program, which appears to align with its financial growth trajectory. As the company moves forward with this initiative, recent data from InvestingPro provides a comprehensive view of its financial health and future prospects.

InvestingPro Data shows a robust revenue growth of 33.3% in the last twelve months as of Q1 2024, suggesting that Safehold is expanding its top-line earnings at a notable pace. This growth is further underscored by an impressive gross profit margin of 98.22% in the same period, indicating the company's ability to maintain profitability on its revenue streams.

Despite a negative P/E Ratio of -45.05, which may raise questions about the company's current earnings relative to its share price, the adjusted P/E Ratio for the last twelve months as of Q1 2024 stands at a more favorable 12.96. This adjustment might reflect market expectations of Safehold's future profitability, as analysts predict the company will be profitable this year, according to InvestingPro Tips.

Furthermore, the company's liquid assets exceed short-term obligations, which is reassuring for investors considering the potential risks associated with the issuance of commercial paper notes. This aligns with the company's strategy to optimize capital costs while maintaining a safety net through its revolving credit facility.

For those looking to delve deeper into Safehold's financial metrics and gain additional insights, InvestingPro offers more tips that could further inform investment decisions. Currently, there are several additional InvestingPro Tips available, which can be accessed through InvestingPro's dedicated page for Safehold: https://www.investing.com/pro/SAFE. Investors interested in these insights can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing an even greater value.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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