Safehold Inc (SAFE) Q3 2021 Earnings Call Transcript

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Safehold Inc (SAFE)
Q3 2021 Earnings Call
Oct 21, 2021, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning and welcome to Safehold's Third Quarter 2021 Earnings Conference Call. [Operator Instructions]

At this time for opening remarks and introductions, I would like to turn the conference over to Jason Fooks, Senior Vice President of Investor Relations and Marketing. Please go ahead, sir.

Jason Fooks -- Senior Vice President Investor Relations and Marketing

Good morning, everyone, and thank you for joining us today for Safehold's Earnings call. On the call today we have Jay Sugarman, Chairman and Chief Executive Officer; and Marcos Alvarado, President and Chief Investment Officer.

This morning, we plan to walk through a presentation that details our third-quarter results. The presentation can be found on our website at SafeholdInc.com, and by clicking on the Investors link. There'll be a replay of this conference call beginning at 2:30 p.m. Eastern Time today, and the dial-in for the replay is (866) 207-1041, with the confirmation code of 8590415.

Before I turn the call over to Jay, I'd like to remind everyone that statements in this earnings call which are not historical facts may be forward-looking. Our actual results may differ materially from these forward-looking statements and the risk factors that could cause these differences are detailed in our SEC reports. Safehold disclaims any intent or obligation to update these forward-looking statements except as expressly required by law.

Now with that, like to turn the call over to Chairman and CEO, Jay Sugarman. Jay?

Jay Sugarman -- Chairman and Chief Executive Officer

Thanks, Jason. And appreciate everyone joining us today. Strong portfolio growth and a large increase in our estimated unrealized capital appreciation account combined to create a very strong quarter for Safehold, powered by the growing portfolio and a small accounting gain, GAAP earnings were up significantly year-over-year. Third-quarter investments together with recent closing since the end of the quarter have taken us to over $4 billion in ground leases. And our customers tell us our ability to deliver both low-cost capital and a high level of execution certainty is a potent competitive advantage. Our mission is to help building owners generate higher returns with less risk, and we'll continue to look for ways to lower their cost of capital and provide them with the full benefits of Safehold's modern, ground lease innovation. Our estimated unrealized capital appreciation jumped over $600 million in the quarter, continuing to add value for shareholders and highlighting the unique growth rate of our ownership asset. Our goal in the coming quarters is to unlock this value for shareholders, and the tangible quality, measurable underlying value, and demonstrated growth rate of this asset should make it compelling to investors.

We recognize it may take a few steps to get the value of UCA fully recognized in our share price, but having grown estimated UCA from $400 million at IPO, it's almost $7 billion today. Each passing quarter adds to our confidence that others will want to own a piece of this unique asset as they begin to understand its value both in the near term and long term.

And with that, let's have Marcos walk you through the details of the quarter. Marcos?

Marcos Alvarado -- President and Chief Investment Officer

Thank you, Jay, and good morning, everyone.

Let's jump right into it on Slide 3. It was a strong quarter for the company and we're pleased with the continued progress in scaling our business. The third quarter was highlighted by solid earnings results, robust investment activity, and UCA growth, along with the successful equity offering, which left us with a significant amount of dry powder at quarter-end to pursue our growing pipeline.

Moving to slide 4. Let me walk you through this quarter's earnings results. Revenues were $47.3 million for the third quarter, a 24% increase from $38 million in the same period last year. Net income was $20.2 million, a 43% increase from the $14.2 million we earned in the prior-year period. And earnings per share was $0.38, 36% above the $0.28 we earned last year.

Included in the quarter was an accounting reclassification of the lease on our balance sheet, from an operating lease to a sales-type lease, which resulted in a one-time non-cash accounting gain of $1.8 million. Slide 5 provides an overview of our investment activity. During the quarter, we originated six new ground leases, comprised of five multifamily and one office asset, totaling $321 million, of which, $300 million was funded during the quarter, with the remaining $21 million to be funded in the near term.

Total fundings for the third quarter were $332 million, comprised of the aforementioned $300 million of new investments and $32 million of funding for transactions originated in prior quarters. The six new originations during the quarter spend [Phonetic] five different markets and four new customers. The investment metrics associated with these deals are in line with our targets, with a weighted average underwritten effective yield of 4.9%, a weighted average effective yield of 4.8%, ground lease to value of 41%, and rent coverage of 3.2 times.

At the end of the quarter, our aggregate portfolio stood at approximately $4 billion, representing 12 times growth since our IPO. During the quarter, two separate leasehold properties on top of our Safehold ground leases were sold to new third-party owners, marking the first two individual leasehold properties in our portfolio to do so. In both cases, our customers received bids from multiple bidders for the leasehold. The first property was a multifamily asset where the leasehold traded at approximately a 3.5% cap rate, comparable to the fee simple cap rates for similar assets currently selling in the same market. The other property was an office building which despite being in lease-up and facing the COVID headwinds in the asset class, still traded for north of a 10% premium to our customers' basis in the leasehold. Both of these transactions service examples of how a Safehold ground lease can allow our customers to access the most efficient capital and that a properly sized, properly structured, modern ground lease does not impair the liquidity or the value of the building.

Slide 6 provides a snapshot of our equity offering this quarter. During the quarter, we raised $242 million of fresh equity capital to fund our growing pipeline. We were pleased with the overall execution of this offering with iStar taking a smaller stake than previous offerings. It was the largest offering we have completed with third-party investors since our IPO. The strong demand had allowed us to upsize the transaction by 10%. The offering was priced at $76 a share, less than a 1% discount to where the stock had closed that day, and a 25% premium to our prior offering in November of 2020.

More portfolio metrics can be seen on Slide 7. As of September 30, Safehold generated an annualized yield of 5.2%, with annualized in-place GAAP rent of $204 million. The portfolio's annualized cash yield was 3.4%, with annualized in-place cash rent of $127 million. Our portfolio's weighted average ground lease to value was 40%, and weighted average rent coverage improved to 3.4 times, as our hotel properties are seeing a rebound in occupancy. By property type, our portfolio consists of 53% office, 31% multifamily, and 15% hotel. Our weighted average lease term is 90 years.

On Slide 8, you can see the geographic breakdown of our portfolio as we continue to expand in the top MSAs, with the inclusion of Houston this quarter. Slide 9 provides an overview of our capital structure. At the end of the third quarter, we had $2.3 billion of debt, comprised of approximately $1.5 billion of non-recourse secured debt, $400 million of unsecured notes, and $272 million of our pro-rata share of debt on ground leases which we own in partnership. Our weighted average debt maturity is 25 years. In addition, we had $165 million drawn on our $1 billion unsecured revolver, combined with the $44 million of cash on hand, we had approximately $900 million of liquidity at quarter-end. We are levered 1.4 times on a book basis and 0.6 times levered on a debt-to-equity market cap basis.

The effective interest rate on our non-revolver debt is 3.7%, which is 151 basis point spread to the 5.2% yield on our portfolio. The weighted average cash interest rate on our non-revolver debt is 3.1%, a positive spread to the 3.4% current cash yield on our portfolio. Moving on to Slide 10, we provide an update on UCA. With the addition of the high-quality properties we closed this period which are highlighted on the right side of the slide, estimated unrealized capital appreciation in our portfolio grew $624 million to $6.7 billion, representing a compound annual growth rate of 89% since our IPO. We believe UCA is reaching scale and diversity, and we have proven our ability to grow it meaningfully and on a sustained basis.

As we have been spending more time discussing UCA and a framework for its valuation, we have been encouraged both by the level of engagement from investors as well as seeing several of our research analysts work to analyze the asset class and begin incorporating it into their valuation models. That being said, we still have a lot of work to do to get this asset understood and valued by the market.

In conclusion, we continue to make good progress scaling our business. We are encouraged as new investment activity continues to grow our pipeline and remain optimistic about reaching our growth target of a $6.4 billion portfolio by the end of 2023. With the first two individual properties having gone round trip for our customers and more expected in the coming quarters, we now have an even more compelling data to show our customers about how Safehold ground leases create value.

With that, let me turn it back to Jay.

Jay Sugarman -- Chairman and Chief Executive Officer

Thanks, Marcos. And let me just finish up by touching on inflation. While we can't control where inflation and interest rates go over the life of a ground lease, we have built significant protections into our modern ground lease structure and our long-term liability strategy. These not only help mitigate the impact on our cash flow returns but also enable us to benefit from inflation's positive impacts on the value of our future ownership asset. If inflation is a concern, we encourage you to let us take you through the CPI protection in our leases and the impact on our unrealized capital appreciation asset, and we think you'll walk away quite pleased with how we are positioned.

Now, let's go ahead and open up for questions. Operator?

Questions and Answers:

Operator

Thank you. Today's question-and-answer session will be conducted electronically. [Operator Instructions]

And our first question will come from Nate Crossett from Berenberg. Please go ahead.

Nate Crossett -- Berenberg -- Analyst

A good quarter. Curious. The two sale transactions that happened in the quarter, are those buyers, new customers of you? And does that kind of open the door for potential new engagements with those buyers?

Marcos Alvarado -- President and Chief Investment Officer

Nate, fantastic question. You should come on our originations team. They are new customers. We immediately obviously reached out to them and we're engaged with both of those new clients and potential new transactions.

Nate Crossett -- Berenberg -- Analyst

Okay. And it sounded like the pricing for both of those skills was [Technical Issues] the ground leases and they're really affected by [Technical Issues] Maybe if you could just comment on the amount of repairs and [Technical Issues] expectations of [Technical Issues] versus what they wanted versus what they got? [Technical Issues] It's a good case study for [Technical Issues] business.

Marcos Alvarado -- President and Chief Investment Officer

Yeah, Nate. Given the confidential nature of the transactions, we can't get into too much detail. It was a liquid bidding marketplace and I think the pricing expectation, it exceeded our customers' expectations. So it was a very fruitful transaction for both clients.

Nate Crossett -- Berenberg -- Analyst

Okay. It seems like most of the deals [Technical Issue], and I'd appreciate if you could comment what you're seeing in terms of office and hotels and if you're expecting that to kind of take a [Technical Issues] at any time? [Phonetic]

Marcos Alvarado -- President and Chief Investment Officer

So, it's a good mix as we've talked about in prior quarters. The multi-family business, the repeat customer business within that asset class has been going really well and we continue to add to that with new clients. Selectively, we're looking at hospitality and office assets within our pipeline, so if they fit our metrics and our profile, and as we see those markets start to open up and assets actually trade, we will start to continue to see some additional hospitality and office assets to supplement the multifamily business.

Nate Crossett -- Berenberg -- Analyst

Okay. And then, just one lastly on pricing trends. It looks like that [Technical Issues] similar to last quarter, but it's down slightly from last year. [Technical Issues] I just wanted to know is there anything [Technical Issues] there [Technical Issues]

Can you give us an update on any new [Phonetic] [Technical Issues] that you're seeing?

Marcos Alvarado -- President and Chief Investment Officer

So we're really focused on harnessing the power of our overall enterprise. And so, as our cost of capital has dropped over the last 12 months or so, we're passing on that benefit to our customers. We're really focused on continuing to maintain that kind of 100 basis points to 125 basis points spread over our cost of liabilities, and we're still doing that. So we are still making our margins but excited about the potential scaling opportunities as we passed on that cost of capital to our customers.

Nate Crossett -- Berenberg -- Analyst

Okay. And then, just competition-wise, I'm assuming that your cost of capital is helping you continue to win everything that you do? I mean, have you seen enough to make [Phonetic] that all hit [Phonetic] the competition in the market? [Technical Issues]

Marcos Alvarado -- President and Chief Investment Officer

No, not particularly. Our main competition is still the fee financing market which, Nate, as you know, is really liquid and aggressive, especially for high-quality assets, which we're focused on. That's still our primary competition. We're working very hard to convert potential customers over from the old way of capitalizing their real estate. We still run into the start-up, nascent ground lease providers, but to the extent we want to execute on a transaction, we do have a cost of capital advantage, and as Jay alluded to the certainty of execution, the amount of transactions we've done, the partnerships we have with the leasehold lending community, those things really matter to our clients.

Nate Crossett -- Berenberg -- Analyst

Thanks guys.

Operator

Thank you. And our next question will come from Caitlin Burrows from Goldman Sachs. Please go ahead.

Caitlin Burrows -- Goldman Sachs -- Analyst

Hi. Good morning. So you guys made $300 million of new investments in the quarter across six ground leases, which is another significant quarter of activity. I was wondering if you could give some detail just on the depth and mix of your current pipeline and if you think that run rate is sustainable?

Marcos Alvarado -- President and Chief Investment Officer

Hi, Caitlin. As of few weeks ago when we did our equity offering, we disclosed the pipeline of $1.4 billion of transactions under letter of intent. As Jay alluded to, we've closed a few transactions since quarter-end to take our portfolio over $4 billion. So, we've done a nice job of closing some transactions through the quarter as well as backfilling our pipeline. So, we feel good about hitting our kind of long-term growth targets of $6.4 billion by the end of 2023.

And of course, it goes without saying, when we talk about future pipelines, some of these transactions will potentially not close.

Caitlin Burrows -- Goldman Sachs -- Analyst

Got it. And then, just following up on the inflation point that Jay referenced earlier. I guess could you guys just remind us the inflation protection that is embedded in your portfolio, and whether you are making any changes to what might be fixed versus CPI-linked?

Jay Sugarman -- Chairman and Chief Executive Officer

Hey, Caitlin. Yeah, look our sort of standardized ground lease has a long-term inflation built-in through rent resets every 10 years that look back. And if inflation has been above 2% over that period, there is a modest adjustment at the end, usually capped that protects us from about the first 100 basis points of inflation pick up over the long-term 2% level. So, we studied inflation over the past 50 years. We think temporary changes are not really the focus, it's really what happens over longer periods of time. We've built a nice protection that gives us what we need and protects our customers so that everything is underwritable [Phonetic] and within a boundary that's quite comfortable for the market.

So, we're not changing that. We think that's the right way to approach it. We think it optimizes for both the finance markets, our customers, and our investors. So we think we've found the right solution. And we do think the future ownership is the positively correlated piece of the equation. So, we'll be talking about that some more.

And when you think about our long-term liability strategy, the nature of a 25-year or 30-year fixed liability, at a fixed price, certainly mitigates quite a bit of the inflationary risks. So that combination of those three things, we think, puts us in a pretty good position.

Caitlin Burrows -- Goldman Sachs -- Analyst

Got it. Okay. And then maybe a last one. I know you guys have talked a lot about how maintaining your current portfolio is relatively straightforward. But growing it is what takes the most amount of effort. I was wondering if, for the four new clients in the quarter, you could give some background on just how those relationships kind of came to be and maybe how long they took if that's relevant?

Marcos Alvarado -- President and Chief Investment Officer

Caitlin, great question. Looking at the list right now. So, one of them is a large institutional multifamily owner that we've been pursuing for about two years and we're actually pursuing two transactions with them right now. So, it was a long work in progress.

Another with a new client on a high-quality asset in the Denver market. Institutional fund manager and operator, and the balance I'm looking at it was repeat business.

Caitlin Burrows -- Goldman Sachs -- Analyst

Got it, OK. Thank you.

Operator

Thank you. And our next question is from the line of Rich Anderson from SMBC. Please go ahead.

Rich Anderson -- SMBC -- Analyst

Hey, thanks. Good morning, everyone. So, Jay, on the inflation protection, I think you said and I think I understand is to be like a kind of a 10-year cycle where you could look back and correct for any inflation. First of all, do I have that right?

And second, is there any circumstance where that could be fast-tracked if there is sort of a suddenness to inflation so that you don't have to wait around for -- to address that?

Jay Sugarman -- Chairman and Chief Executive Officer

No, I think you've got it right, Rich. Again, that's our standard form. We do have some assets, there is -- a little bit different. Some actually have CPI protection on a shorter-term basis, but that's not the baseline in our business. So, I think the way you described it in the first piece is the right way to think about it. Again, we're trying to capture long-term changes in the value of real estate and create above-market returns for the credit risk we take. Those are dynamics that we want to protect over the long term.

So, we want our customers to have the benefit of the low-cost capital and be able to know what it is. So, we're probably not going to change that format to try to chase short-term movements. But anything that jumps up above 2%, it was basically in the account, and we'll get picked up on these sort of 10-year cycles. So I think you've got two things happening. One is, going into the calculation and then the actual impact is out in the future, but in effect, it's in your account and you can kind of track that, and we know where inflation has been running and where it may run next. And so we'll be able to give some visibility on that if inflation does tick up and stay there for a while.

Rich Anderson -- SMBC -- Analyst

Okay, great. On the UCA, you talked about -- you said this many times over the past several quarters about getting investors interested in owning a piece of that asset. I can't figure out if that -- if you're thinking more in lines about just valuing it inside SAFE or if there has been a renewed thought about some sort of securitization or something beyond that, or is it still a TBD? Are you going -- are you leaning any specific way at this point?

Jay Sugarman -- Chairman and Chief Executive Officer

Yeah, I think we -- we definitely believe that we need to go down all paths, Rich. We think our shareholders should get the benefit of it inside of Safehold stock and we have been talking about it more this year. But we also are a company that believes different assets should be owned by different owners. And we think this is fundamentally a new asset class that has some very compelling attributes that lots of investors would like to own.

And so, we'll continue to look at the best way to reach those investors with something we think they want. They will understand, they will compare it to other alternatives, and realize what we believe which is this is one of the most compelling ways to create wealth and have a compound.

So, no specific guidance I can give you other than we feel stronger every quarter that we can monetize this for shareholders and have it reflected in the share price. And we'll do it in the most efficient and compelling way possible.

Rich Anderson -- SMBC -- Analyst

It's correct to say right now though that it's owned 15% by management, 85% by shareholders; is that correct?

Jay Sugarman -- Chairman and Chief Executive Officer

That's correct. There is a few more time vests before the full 15% actually is fully vested. But for working purposes, that's a good assumption.

Rich Anderson -- SMBC -- Analyst

What is -- can you provide any update on the Park Hotel master lease, which is nearing -- you're closing in on its due date. Any conversation going on there?

Jay Sugarman -- Chairman and Chief Executive Officer

I think COVID kind of put that on the shelf a little bit. We've seen some nice recovery in a number of the assets in that portfolio, but certainly, the business travel has not come back yet. So, I think it's probably not the best time to try to rework that. But we'll remain open to that conversation when things stabilize.

Rich Anderson -- SMBC -- Analyst

Okay, last question. Any status of the net lease portfolio on iStar? I know it's not this company, but it's obviously related to what's going on here in terms of the growth of the ground lease business. Can you comment on that now, or do I have to wait for the iStar conference call?

Jay Sugarman -- Chairman and Chief Executive Officer

Let's put that one off to the iStar call. But we feel like we've built a valuable portfolio. And so, we're looking forward to sharing those results with the market when it's appropriate.

Rich Anderson -- SMBC -- Analyst

Okay. Sounds good. Thanks very much.

Operator

Thank you. Our next question is from Haendel St. Juste from Mizuho. Please go ahead.

Haendel St. Juste -- Mizuho -- Analyst

Hey there. Good morning. Audio's terrible here.

I guess first question, just on the accounting item in the quarter. I think you mentioned reclassification of a lease from a sales lease you're operating [Phonetic] with. I guess, I'm curious maybe if you could give us a bit more color what drove the change? Why now, how much more of this type of, say, risk is in the portfolio?

Marcos Alvarado -- President and Chief Investment Officer

Hey, Haendel. So that was -- this is an old lease pre the accounting change. And there was a provision when the asset was sold that triggered us to effectively reclassify it from an operating lease to a sales-type lease and that's what triggered the change. So, I would say, most, the lion's share of our portfolio, does not have these permissions [Phonetic]. This is just a -- we truly view this as a one-time occurrence.

Haendel St. Juste -- Mizuho -- Analyst

Got you, got you. Thanks. Then just going back to installation to a degree here but maybe from a cost of capital perspective, I think it's clearly been one of the items that's caused your stock to now [Phonetic] perform here, which obviously have implications on your cost of equity and ability to grow accretively. You mentioned having $900 million of liquidity, I think, after the equity offering, so I guess I'm curious on the -- your appetite for acquisitions. How much more robust that could be into next year? And if your stock price continues to lag, I guess, broadly what level of acquisitions could you do without the need for more -- more equity?

Jay Sugarman -- Chairman and Chief Executive Officer

Hey, Haendel. Yeah, look, I think two things. One, we believe we are adding value extremely accretively every time we do a deal, so our growth is still very much a focus here. We're building what we believe can be a [Phonetic] enormous market. So I think there are places -- when we have to make a decision where capital needs to come into the company, either on the debt side or the equity side. But one thing doesn't change, which is every deal we do is highly accretive for shareholders. So, that's really the driving focus here. We have begun to raise capital in the unsecured debt markets and that's certainly a place we want to continue to expand the spectrum of capital available to us.

And then, on the equity side, again, I think you'll hear us talk more about the unrealized capital appreciation asset because, we think, right now, we're trading at candidly half of fair value. So, our focus right now is to continue the growth to get the shares valued more fairly to help people see why every transaction we do is highly accretive for them. And we feel quite confident there'll be plenty of capital available, and that's a rare and unique story in the investment world. And we'll continue to execute on it and share it with more and more people.

Haendel St. Juste -- Mizuho -- Analyst

I appreciate that. One last one if I may. I think you mentioned five different markets in the quarter for new customers. I am curious if you -- any new asset types you're underwriting or looking at here. Obviously, the portfolio's tilted [Phonetic] -- office, multifamily, hotel. Is it too early to be discussed retail? Is that still may be a red line, and maybe thoughts on casinos or other asset classes, as you expand your investment portfolio here?

Marcos Alvarado -- President and Chief Investment Officer

So, no new asset classes in Q3. We alluded to this in our equity offering. We are pursuing some transactions in the life science space, which we think would be a great addition to our portfolio. We're looking at some healthcare assets as well, and which we currently don't have in our portfolio. And then, I would say for the more esoteric assets that you're describing, kind of in the casino space, I think for the right asset and the right location, we would, of course, take a look.

Haendel St. Juste -- Mizuho -- Analyst

Great. Fair enough. Thank you.

Operator

Thank you. Our next question is from Stephen Law from Raymond James. Please go ahead.

Stephen Laws -- Raymond James -- Analyst

Hi. Good morning. [Speech Overlap] Just tell us on the origination questions. It looked like the average size -- around $55 million [Phonetic], up from less than [Indecipherable] last quarter. Can ou talk about the pipeline? Are you seeing a bigger flow [Phonetic] starting to materialize in your pipeline or is that just coincidental from -- on a sequential basis?

Marcos Alvarado -- President and Chief Investment Officer

I think it's a little coincidental. It gets skew -- there is one larger transaction within that that skews the averages a tad. Our sweet spot has always been kind of the $20 million and up ground leases, because usually when you're talking about the markets that we're investing in that means you're investing in high-quality locations and institutional assets.

On the large transactions, they're reemanating [Phonetic] in our pipeline as we've discussed in prior quarters. It's often difficult to predict when those are going to come across the line. But there are some large transactions along with our flow business in the pipeline.

Stephen Laws -- Raymond James -- Analyst

Great. And if I -- somewhat on the Star front, but [Indecipherable] and on the ground lease plus opportunities there where you're looking at ground leases and construction assets that feed [Technical Issues] if any [Technical Issues] this quarter? [Technical Issues] what is the timing of when you expect some contribution to SAFE portfolio growth from those leases moving over?

Marcos Alvarado -- President and Chief Investment Officer

So we closed two of those ground lease plus transactions in the prior quarter. Too early to tell exactly when those will hit at SAFE when those conditions are met. My expectation is beyond 2022. And we have some transactions in our pipeline that we're working on to continue that product offering.

Stephen Laws -- Raymond James -- Analyst

Great. And finally, Jay, I know you kind of deferred to the Star call for the comments on the -- any actions there. But I just see that Avis [Phonetic] [Technical Issues] about the solicitation first, in your notes, and thinking about that, so clearly, you guys continue to move pieces around to try and position some type of combination. I know you've talked about $5 billion in assets like [Technical Issues] number will hit -- some time middle or second half next year. Can you give us an update on -- how you're thinking about a combination? What are the key things that need to happen? And is -- how likely is that to be a [Technical Issues] of the [Technical Issues]

Jay Sugarman -- Chairman and Chief Executive Officer

Yeah, I think the good news is both companies are razor-focused on how to maximize the value of this ground lease ecosystem that they're both deeply invested in. So, we have set out some markers. You mentioned the $5 billion which feels like a good milestone in terms of scale at Safehold.

The things going on at iStar, obviously, will make a conversation simpler. The fewer distractions that are part of that conversation, the better. So all those things are in process. You're right, we're clearing the pathway to what we think could be a good conversation about how to unlock even more value, make Safehold more mainstream for more investors. We've talked in the past about internalization as a possibility. Architecturally that may make sense, but not until we are at a certain scale. We also think there are things that the companies do together that are very powerful for our customers.

So, we will continue to make the potential for that conversation a good one. There's still a lot of work to do between here and there, but you're seeing the bread crumbs as we sort of clear the path, and iStar has got a big stake in Safehold's success. And so, it's fair to say a lot of the steps we're taking are meant to prepare for the moment where we really can get the market to understand how valuable this company is, Safehold is, and to understand what we're building and why it's so unique.

We still -- we keep saying we're in the first or second inning. I think there's just a lot of people who are not yet really fully paying attention to what we're building. You need to give us a little more time, but every quarter feels like we get closer and closer to being able to tell the really compelling story. And so, I think, you'll see other steps we're going to take to get us in that position. And then, once we've checked off all the boxes we think are appropriate to check off, that conversation can take place in earnest.

Stephen Laws -- Raymond James -- Analyst

Great. Appreciate the comments, Jay. And [Technical Issues] iStar call. Appreciate it.

Jay Sugarman -- Chairman and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question is from the line of Anthony Paolone from J.P. Morgan. Please go ahead.

Anthony Paolone -- J.P. Morgan -- Analyst

Yeah, thanks. My first question is, as it relates to the ground lease-plus pipeline, can you put some dollars around just what amount of deals are of red Star that can ultimately make their way over to SAFE at this point?

Marcos Alvarado -- President and Chief Investment Officer

So, Anthony, let me just get that for you. Give me a second, while you go to the next question.

Anthony Paolone -- J.P. Morgan -- Analyst

Yeah, sure. And then, you talked a lot about inflation having an effect on the business, stuff like that. But just from a more practical point of view, near term, what's the most attractive source of debt capital that you see right now. And then, how do you trade-off, I guess, the options between going something perhaps fixed in the unsecured market with perhaps the more ratcheted debt that you've been able to get from life insurance companies?

Jay Sugarman -- Chairman and Chief Executive Officer

Yeah, good question. And, Anthony, I think we have told the market we want to be a unsecured borrower in the same sort of tenors that we have historically done today. I think it's around 25 years. So that 25-year to 30-year context is important to us. So we'd like to see some depth in that market and get them comfortable with this asset class, so they understand the safety and the quality the way we do, and the agencies have evaluated us on that basis. So that's a key piece going forward, and probably a piece we'd like to establish.

We obviously have those relationships in the other places in the secured world. And I think we'll be thoughtful about that, but right now I think, our next important step is to establish a 30-year unsecured type of transaction to really give us the full suite of everything we need to run this business, long term. We've got the revolver, we've got the tenure, we've got the secured, we've got the step rate, and really the last piece of that puzzle is about 30-year unsecured context.

And so, it's something that I think rounds out the liability strategy that we think is pretty darn unique, both in terms of its long-term nature and some of the features that our capital markets team has created, is kind of perfect for our business plan.

Anthony Paolone -- J.P. Morgan -- Analyst

Okay [Speech Overlap]

Marcos Alvarado -- President and Chief Investment Officer

So I think it's clear -- sorry. To circle back on your other question about GL-plus, so the total opportunity for SAFE within the GL-plus product today is at about $275 million.

Anthony Paolone -- J.P. Morgan -- Analyst

Okay, got it. Thank you. And then just last question. I think there was a footnote in the deck about some of the deals having -- that you did that have some percentage rent pieces to it. Just wondering if that's material or if we should think about adding a chunk of income in a given quarter going forward like you have with the Park Hotel's percentage piece?

Jay Sugarman -- Chairman and Chief Executive Officer

Yeah, no. I wouldn't worry about that, Anthony. It's not something to focus on.

Anthony Paolone -- J.P. Morgan -- Analyst

Okay, got it. Thank you.

Operator

Thank you. And our next question is from Matthew Howlett from B. Riley. Please go ahead.

Matthew Howlett -- B. Riley -- Analyst

Great. Thanks for taking my question. Just on the -- do you see a change in the quarter -- the seven new properties -- was that -- was there any other sort of changes with the existing properties to get those $700 million change?

Jay Sugarman -- Chairman and Chief Executive Officer

Yeah. As we know, we have a third party that does rolling evaluation throughout the year to reset upraising numbers. It's a small delta. Obviously, the hotels are probably made up the bulk of the downward adjustments and some of the multifamily made up the bulk of the upward adjustments. But, overall, is a sub-5% delta on all the appraisals they did.

Matthew Howlett -- B. Riley -- Analyst

Got you! So the bulk was from the new additions, from the seven new transactions?

Jay Sugarman -- Chairman and Chief Executive Officer

Yup.

Matthew Howlett -- B. Riley -- Analyst

Got you. And then, Jay, just switching to, obviously, the next step's going to be debt, but clearly, over time, you're going to get to the $6 billion. The way I think about a 60-40 sort of debt-to-equity structure. You're going to need somewhere in the order of $5 million or something [Phonetic] of equity per year. When I look at Star, they participated less, significantly less in the transaction in September, but they've been out buying these form fours. They seem filed every -- almost every day, buying stock in the open market. They're obviously going to come upon a capital event soon here. I mean do I -- how do I think about further participations?

I mean, you said that the stocks 50% of where it should be at. Do I think about Star stepping up? Private placement, participating more in transactions going forward? How do I think about their role?

Jay Sugarman -- Chairman and Chief Executive Officer

Look, I think you touched on two big themes that are -- one is, we believe the stock is materially undervalued. We think one large component of value is in even being focused on other than by a few leaders -- thought leaders. And so, we think there's plenty of opportunity there. We've also said we need to create a larger shareholder base, we want to broaden the shareholder base to all types of investors who should have the opportunity and desire to invest. So, while it's a compelling investment, iStar has to make room for other people to participate and make money. That dynamic played out in our last offering. But now that that's over, it's sort of free -- free market opportunity. The stock is going to trade at substantially less than iStar believes it's worth. Certainly, a chance to deploy some of that growing liquidity at iStar into an asset it knows better than anybody else in the marketplace is a good opportunity.

Longer-term, again, our goal is to expand the shareholder base well beyond just the group that I think today understands it as a compelling way to play one sector of the real estate world. We think this is a growth opportunity, we think it's a value opportunity, we think it's compelling for everything from 401(k)s, all the way up to endowments in sovereign wealth funds. And we're making good progress and meeting with investors who probably never heard of what a ground lease is, ever finding the right pocket in those places, getting a chance to meet with them, walking them through the above-market returns, the growth prospects, the dramatic changes we've made to the ground lease product.

Yeah, it doesn't happen in one meeting. Typically, it's a process. But I can tell you, our Investor Relations team is continuing to stack up meetings of interested investors well beyond the real estate world. And those are -- that's really -- if you think about our long-term capital strategy, iStar can pick off the stock when it's cheap, but long-term, we want shareholders who understand why this is going to be a core asset in a lot of people's portfolios. And that's really the job right now: make it mainstream for customers, make it mainstream for investors, and we're still early in that process, but in the interim, yes, iStar has a ton of capital. This is one of the most compelling investments we see out there and they can deploy capital. But, long term, I think we want the message to be really expanded far beyond the shareholder base we have today.

Matthew Howlett -- B. Riley -- Analyst

Then last question. Just on -- more on the UCA. I know you're working to educate the investment community on it, and I think everyone has their certain own way to think about it, but when you talk with steps being pulled that we -- is there something that needs to be done on the SEC side, registering a tracking stock, or I mean, what are the steps that they're going to need to be taking to unlock the value?

Jay Sugarman -- Chairman and Chief Executive Officer

Yeah, I think you're on the right track. You can imagine there's a number of things we need to do to get ready to make sure -- from a corporate governance standpoint, from a valuation standpoint, there's a lot of legal steps, there's a lot of business steps. We've told the market since day one of our IPO that this is going to be one of the most compelling parts of the story. And we've been tracking it for 17 quarters now. And you've seen the growth. And we think we've put up the key markers that we needed to see the growth over the last four years. The long-term stability that investment-grade ratings give us, the diversity in the portfolio of the management team, the customer base.

All those things were sort of prerequisite to having a larger investor base understand what we've built and why this is a new asset class that they candidly should and will want to own. And now we can go through some of the more tactical steps of, OK, we built it. It's been proven in terms of 17 quarters in a row, what it is and how it grows. It's tangible. Its values are out there for all to see. We've done a lot of the hard work and now we need to get really tactical and technical about how to unlock this value for shareholders. And there are a bunch of little steps along the way that will have to happen. And you will see, we continue to take those baby steps, really preparing for the larger unlocking that we were confident will happen. We just -- we're giving ourselves the time to get it lined up and then go.

Matthew Howlett -- B. Riley -- Analyst

Great. Thanks, Jay.

Operator

Thank you. [Operator Instructions]

Mr. Fooks, we have no further questions in queue.

Jason Fooks -- Senior Vice President Investor Relations and Marketing

Great. If anyone else should have any additional questions on today's earnings release, please feel free to contact me directly.

Louis, would you please give the conference call replay instructions once again? Thanks.

Operator

Thank you. And ladies and gentlemen, this conference will be made available for replay after 2:30, today, and running through November 4, at midnight.

You may access the AT&T replay system at any time by dialing (866) 207-1041 and entering the access code 8590415. Again, the number's 1-866-207-1041, with the access code 8590415.

That does conclude our conference for today. Thank you for your participation and for using AT&T event conferencing. You may now disconnect.

Duration: 46 minutes

Call participants:

Jason Fooks -- Senior Vice President Investor Relations and Marketing

Jay Sugarman -- Chairman and Chief Executive Officer

Marcos Alvarado -- President and Chief Investment Officer

Nate Crossett -- Berenberg -- Analyst

Caitlin Burrows -- Goldman Sachs -- Analyst

Rich Anderson -- SMBC -- Analyst

Haendel St. Juste -- Mizuho -- Analyst

Stephen Laws -- Raymond James -- Analyst

Anthony Paolone -- J.P. Morgan -- Analyst

Matthew Howlett -- B. Riley -- Analyst

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