UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
~~March 31,~~September 30, 2022
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File No. 1-15371

iStar Inc.

(Exact name of registrant as specified in its charter)


Maryland		95-6881527
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
1114 Avenue of the Americas, 39th Floor
New York , NY		10036
(Address of principal executive offices)		(Zip code)

Registrant’s telephone number, including area code: (212) 930-9400

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value	STAR	New York Stock Exchange
8.00% Series D Cumulative Redeemable Preferred Stock, $0.001 par value	STAR-PD	New York Stock Exchange
7.65% Series G Cumulative Redeemable Preferred Stock, $0.001 par value	STAR-PG	New York Stock Exchange
7.50% Series I Cumulative Redeemable Preferred Stock, $0.001 par value	STAR-PI	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	Accelerated Filer	Non‑accelerated Filer	Smaller Reporting Company	Emerging Growth Company
☒	☐	☐	☐	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of ~~April 29,~~November 1, 2022, there were ~~82,847,755~~86,697,347 shares, $0.001 par value per share, of iStar Inc. common stock outstanding.

Table of Contents

TABLE OF CONTENTS


		Page
PART I	Consolidated Financial Information
Item 1.	Financial Statements:
	Consolidated Balance Sheets (unaudited) as of ~~March 31,~~September 30, 2022 and December 31, 2021	2
	Consolidated Statements of Operations (unaudited)—For the three and nine months ended ~~March 31,~~September 30, 2022 and 2021	3
	Consolidated Statements of Comprehensive Income (Loss) (unaudited)—For the three and nine months ended ~~March 31,~~September 30, 2022 and 2021	4
	Consolidated Statements of Changes in Equity (unaudited)—For the three and nine months ended ~~March 31,~~September 30, 2022 and 2021	5
	Consolidated Statements of Cash Flows (unaudited)—For the ~~three~~nine months ended ~~March 31,~~September 30, 2022 and 2021	67
	Notes to Consolidated Financial Statements (unaudited)	89
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3946
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5059
Item 4.	Controls and Procedures	5160
PART II	Other Information	5261
Item 1.	Legal Proceedings	5261
Item 1A.	Risk Factors	5261
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5263
Item 3.	Defaults Upon Senior Securities	5263
Item 4.	Mine Safety Disclosures	5263
Item 5.	Other Information	5263
Item 6.	Exhibits	5364
SIGNATURES		5465

Table of Contents

PART I. CONSOLIDATED FINANCIAL INFORMATION

Item 1. Financial Statements

iStar Inc.

Consolidated Balance Sheets

(In thousands, except per share data)⁽¹⁾

(unaudited)

As of

March 31,

December 31,


2022

2021

ASSETS





Real estate





Real estate, at cost

$
113,679

$
113,510

Less: accumulated depreciation

(22,245)

(21,360)

Real estate, net

91,434

92,150

Real estate available and held for sale

301

301

Total real estate

91,735

92,451

Real estate and other assets available and held for sale and classified as discontinued operations⁽²⁾

226,309

2,299,711

Net investment in leases ($281 and $0 of allowances as of March 31, 2022 and December 31, 2021, respectively)

28,131

43,215

Land and development, net

277,421

286,810

Loans receivable and other lending investments, net ($4,932 and $4,769 of allowances as of March 31, 2022 and December 31, 2021, respectively)

331,839

332,844

Loans receivable held for sale

—

43,215

Other investments

1,526,019

1,297,281

Cash and cash equivalents

1,500,203

339,601

Accrued interest and operating lease income receivable, net

1,666

1,813

Deferred operating lease income receivable, net

3,046

3,159

Deferred expenses and other assets, net

97,682

100,434

Total assets

$
4,084,051

$
4,840,534

LIABILITIES AND EQUITY





Liabilities:





Accounts payable, accrued expenses and other liabilities

$
198,886

$
236,732

Liabilities associated with real estate held for sale and classified as discontinued operations⁽²⁾

15,963

968,419

Liabilities associated with properties held for sale

—

3

Debt obligations, net

2,084,252

2,572,174

Total liabilities

2,299,101

3,777,328

Commitments and contingencies (refer to Note 11)





Equity:





iStar Inc. shareholders' equity:





Preferred Stock Series D, G and I, liquidation preference $25.00 per share

12

12

Common Stock, $0.001 par value, 200,000 shares authorized, 69,096 and 68,870 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively

69

69

Additional paid-in capital

3,100,665

3,100,015

Accumulated deficit

(1,625,086)

(2,227,213)

Accumulated other comprehensive loss

(21,224)

(21,587)

Total iStar Inc. shareholders' equity

1,454,436

851,296

Noncontrolling interests

330,514

211,910

Total equity

1,784,950

1,063,206

Total liabilities and equity

$
4,084,051

$
4,840,534


	As of
	September 30,		December 31,
	2022		2021
ASSETS
Real estate
Real estate, at cost	$	111,719	$	113,510
Less: accumulated depreciation		(22,575)		(21,360)
Real estate, net		89,144		92,150
Real estate available and held for sale		1,283		301
Total real estate		90,427		92,451
Real estate and other assets available and held for sale and classified as discontinued operations⁽²⁾		11,925		2,299,711
Net investment in leases ($0 of allowances as of December 31, 2021)		—		43,215
Land and development, net		248,246		286,810
Loans receivable and other lending investments, net ($2,890 and $4,769 of allowances as of September 30, 2022 and December 31, 2021, respectively)		176,623		332,844
Loans receivable held for sale		—		43,215
Other investments		1,605,268		1,297,281
Cash and cash equivalents		1,335,722		339,601
Accrued interest and operating lease income receivable, net		1,035		1,813
Deferred operating lease income receivable, net		2,842		3,159
Deferred expenses and other assets, net		50,044		100,434
Total assets	$	3,522,132	$	4,840,534
LIABILITIES AND EQUITY
Liabilities:
Accounts payable, accrued expenses and other liabilities	$	140,876	$	236,732
Liabilities associated with real estate held for sale and classified as discontinued operations⁽²⁾		2,918		968,419
Liabilities associated with properties held for sale		—		3
Debt obligations, net		1,680,708		2,572,174
Total liabilities		1,824,502		3,777,328
Commitments and contingencies (refer to Note 11)
Equity:
iStar Inc. shareholders' equity:
Preferred Stock Series D, G and I, liquidation preference $25.00 per share		12		12
Common Stock, $0.001 par value, 200,000 shares authorized, 86,695 and 68,870 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		87		69
Additional paid-in capital		3,457,961		3,100,015
Accumulated deficit		(1,772,843)		(2,227,213)
Accumulated other comprehensive loss		(4,898)		(21,587)
Total iStar Inc. shareholders' equity		1,680,319		851,296
Noncontrolling interests		17,311		211,910
Total equity		1,697,630		1,063,206
Total liabilities and equity	$	3,522,132	$	4,840,534

(1)	Refer to Note 2 for details on the Company’s consolidated variable interest entities (“VIEs”).

(2)	Refer to Note 3 - Net Lease Sale and Discontinued Operations.

The accompanying notes are an integral part of the consolidated financial statements.

Table of Contents

iStar Inc.

Consolidated Statements of Operations

(In thousands, except per share data)

(unaudited)

For the Three Months Ended March 31,


2022

2021

Revenues:





Operating lease income

$
3,109

$
4,931

Interest income

4,948

9,789

Interest income from sales-type leases

356

—

Other income

8,640

13,015

Land development revenue

14,900

32,249

Total revenues

31,953

59,984

Costs and expenses:





Interest expense

29,243

28,809

Real estate expense

10,117

8,719

Land development cost of sales

14,496

29,323

Depreciation and amortization

1,357

2,401

General and administrative

1,375

21,439

Provision for (recovery of) loan losses

135

(3,642)

Provision for losses on net investment in leases

281

—

Impairment of assets

—

257

Other expense

930

253

Total costs and expenses

57,934

87,559

Income from sales of real estate

492

612

Loss from operations before earnings from equity method investments and other items

(25,489)

(26,963)

Loss on early extinguishment of debt, net

(1,428)

0

Earnings from equity method investments

25,032

11,768

Net loss from continuing operations before income taxes

(1,885)

(15,195)

Income tax (expense) benefit

(3)

698

Net loss from continuing operations

(1,888)

(14,497)

Net income from discontinued operations⁽¹⁾

797,688

22,486

Net income

795,800

7,989

Net loss from continuing operations attributable to noncontrolling interests

18

44

Net (income) from discontinued operations attributable to noncontrolling interests

(179,089)

(2,564)

Net income attributable to iStar Inc.

616,729

5,469

Preferred dividends

(5,874)

(5,874)

Net income (loss) allocable to common shareholders

$
610,855

$
(405)

Per common share data:





Net income (loss) allocable to common shareholders





Basic and diluted

$
8.85

$
(0.01)

Net loss from continuing operations and allocable to common shareholders:





Basic and diluted

$
(0.11)

$
(0.28)

Net income from discontinued operations and allocable to common shareholders:





Basic and diluted

$
8.96

$
0.27

Weighted average number of common shares:





Basic and diluted

69,037

73,901


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
Revenues:
Operating lease income	$	3,424	$	3,732	$	9,715	$	13,456
Interest income		2,093		6,972		11,262		24,846
Interest income from sales-type leases		129		526		861		683
Other income		27,024		39,033		51,545		60,950
Land development revenue		15,087		93,369		54,390		157,936
Total revenues		47,757		143,632		127,773		257,871
Costs and expenses:
Interest expense		22,664		28,695		76,056		86,145
Real estate expense		16,204		13,369		39,337		33,404
Land development cost of sales		16,778		87,380		55,369		147,507
Depreciation and amortization		1,290		1,742		3,985		5,715
General and administrative		14,210		17,121		10,406		68,954
Provision for (recovery of) loan losses		(157)		(1,610)		22,556		(7,411)
Provision for (recovery of) losses on net investment in leases		(380)		(315)		—		465
Impairment of assets		—		421		1,768		679
Other expense		4,171		894		6,624		1,358
Total costs and expenses		74,780		147,697		216,101		336,816
Income from sales of real estate		951		25,611		1,443		26,319
Income (loss) from operations before earnings from equity method investments and other items		(26,072)		21,546		(86,885)		(52,626)
Loss on early extinguishment of debt, net		(13,209)		—		(131,200)		—
Earnings from equity method investments		57,797		87,795		102,222		110,661
Net income (loss) from continuing operations before income taxes		18,516		109,341		(115,863)		58,035
Income tax (expense) benefit		(564)		39		(567)		117
Net income (loss) from continuing operations		17,952		109,380		(116,430)		58,152
Net income from discontinued operations⁽¹⁾		—		21,614		797,688		69,415
Net income		17,952		130,994		681,258		127,567
Net (income) loss from continuing operations attributable to noncontrolling interests		53		(10)		(46)		55
Net (income) from discontinued operations attributable to noncontrolling interests⁽¹⁾		—		(3,254)		(179,089)		(8,092)
Net income attributable to iStar Inc.		18,005		127,730		502,123		119,530
Preferred dividends		(5,874)		(5,874)		(17,622)		(17,622)
Net income allocable to common shareholders	$	12,131	$	121,856	$	484,501	$	101,908
Per common share data:
Net income (loss) allocable to common shareholders
Basic	$	0.14	$	1.71	$	6.16	$	1.40
Diluted	$	0.14	$	1.51	$	6.16	$	1.30
Net income (loss) from continuing operations and allocable to common shareholders:
Basic	$	0.14	$	1.45	$	(1.70)	$	0.56
Diluted	$	0.14	$	1.28	$	(1.70)	$	0.52
Net income from discontinued operations and allocable to common shareholders:
Basic	$	—	$	0.26	$	7.86	$	0.84
Diluted	$	—	$	0.23	$	7.86	$	0.78
Weighted average number of common shares:
Basic		85,458		71,299		78,706		72,675
Diluted		85,867		80,487		78,706		78,402

(1)	Refer to Note 3 - Net Lease Sale and Discontinued Operations.

The accompanying notes are an integral part of the consolidated financial statements.

Table of Contents

iStar Inc.

Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

(unaudited)

For the Three Months Ended March 31,

2022

2021

Net income

$
795,800

$
7,989

Other comprehensive income (loss):





Reclassification of losses on cash flow hedges into earnings upon realization⁽¹⁾

621

2,338

Unrealized losses on available-for-sale securities

(3,013)

(1,031)

Unrealized gains on cash flow hedges

2,755

11,973

Other comprehensive income

363

13,280

Comprehensive income

796,163

21,269

Comprehensive (income) attributable to noncontrolling interests⁽²⁾

(179,071)

(4,978)

Comprehensive income attributable to iStar Inc.

$
617,092

$
16,291


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
Net income	$	17,952	$	130,994	$	681,258	$	127,567
Other comprehensive income:
Reclassification of losses on cash flow hedges into earnings upon realization⁽¹⁾		562		2,683		1,763		7,507
Reclassification of losses on available-for-sale securities		386		—		386		—
Unrealized losses on available-for-sale securities		—		(539)		(4,623)		(913)
Unrealized gains on cash flow hedges		12,026		273		19,163		11,483
Other comprehensive income		12,974		2,417		16,689		18,077
Comprehensive income		30,926		133,411		697,947		145,644
Comprehensive (income) attributable to noncontrolling interests⁽²⁾		53		(4,207)		(179,135)		(11,951)
Comprehensive income attributable to iStar Inc.	$	30,979	$	129,204	$	518,812	$	133,693

(1)

Reclassified to “Net income from discontinued operations” in the Company’s consolidated statements of operations for the three and nine months ended ~~March 31,~~September 30, 2021 is ~~$2,104.~~$2,050 and $6,183 respectively. Reclassified to “Earnings from equity method investments” in the Company’s consolidated statements of operations for the three months ended ~~March 31,~~September 30, 2022 and 2021 are ~~$621~~$562 and ~~$234,~~$633 respectively. Reclassified to “Earnings from equity method investments” in the Company’s consolidated statements of operations for the nine months ended September 30, 2022 and 2021 are $1,763 and $1,324, respectively.

(2)

For the three months ended ~~March 31,~~September 30, 2021, $4.2 million of comprehensive income attributable to noncontrolling interests was from discontinued operations. For the nine months ended September 30, 2022 and 2021, $179.1 million and ~~$5.0~~$12.0 million, respectively, of comprehensive income attributable to noncontrolling interests was from discontinued operations.

The accompanying notes are an integral part of the consolidated financial statements.

Table of Contents

iStar Inc.

Consolidated Statements of Changes in Equity

(In thousands)

(unaudited)


	iStar Inc. Shareholders' Equity
										Accumulated
				Common		Additional		Retained		Other
		Preferred		Stock at		Paid-In		Earnings		Comprehensive		Noncontrolling	Total
		Stock⁽¹⁾		Par		Capital		(Deficit)		Income (Loss)		Interests	Equity
Balance as of June 30, 2022	$	12	$	84	$	3,406,422	$	(1,774,069)	$	(17,872)	$	16,287	$	1,630,864
Dividends declared—preferred		—		—		—		(5,874)		—		—		(5,874)
Dividends declared—common ($0.125 per share)		—		—		—		(10,905)		—		—		(10,905)
Issuance of stock/restricted stock unit amortization, net⁽²⁾		—		—		1,262		—		—		1,077		2,339
Issuance of common stock in connection with 3.125% convertible notes⁽³⁾		—		3		50,277		—		—		—		50,280
Net income (loss)		—		—		—		18,005		—		(53)		17,952
Change in accumulated other comprehensive income (loss)		—		—		—		—		12,974		—		12,974
Balance as of September 30, 2022	$	12	$	87	$	3,457,961	$	(1,772,843)	$	(4,898)	$	17,311	$	1,697,630

Balance as of June 30, 2021	$	12	$	72	$	3,185,748	$	(2,338,454)	$	(35,824)	$	197,152	$	1,008,706
Dividends declared—preferred		—		—		—		(5,874)		—		—		(5,874)
Dividends declared—common ($0.125 per share)		—		—		—		(8,954)		—		—		(8,954)
Issuance of stock/restricted stock unit amortization, net⁽²⁾		—		—		1,158		—		—		1,107		2,265
Net income (loss)		—		—		—		127,730		—		3,264		130,994
Change in accumulated other comprehensive income (loss)		—		—		—		—		1,474		943		2,417
Repurchase of stock		—		(2)		(59,505)		—		—		—		(59,507)
Contributions from noncontrolling interests		—		—		—		—		—		169		169
Distributions to noncontrolling interests		—		—		—		—		—		(3,917)		(3,917)
Change to noncontrolling interest		—		—		—		—		—		(74)		(74)
Balance as of September 30, 2021	$	12	$	70	$	3,127,401	$	(2,225,552)	$	(34,350)	$	198,644	$	1,066,225

Table of Contents

iStar Inc. Shareholders' Equity













Accumulated




Common

Additional

Retained

Other

Preferred

Stock at

Paid-In

Earnings

Comprehensive

Noncontrolling

Total

Stock⁽¹⁾

Par

Capital

(Deficit)

Income (Loss)

Interests

Equity
Balance as of December 31, 2021

$
12

$
69

$
3,100,015

$
(2,227,213)

$
(21,587)

$
211,910

$
1,063,206
Dividends declared—preferred

—

—

—

(5,874)

—

—

(5,874)
Dividends declared—common ($0.125 per share)

—

—

—

(8,728)

—

—

(8,728)
Issuance of stock/restricted stock unit amortization, net⁽²⁾

—

—

650

—

—

1,350

2,000
Net income

—

—

—

616,729

—

179,071

795,800
Change in accumulated other comprehensive income (loss)

—

—

—

—

363

—

363
Contributions from noncontrolling interests

—

—

—

—

—

7,893

7,893
Distributions to noncontrolling interests

—

—

—

—

—

(69,710)

(69,710)
Balance as of March 31, 2022

$
12

$
69

$
3,100,665

$
(1,625,086)

$
(21,224)

$
330,514

$
1,784,950

Balance as of December 31, 2020

$
12

$
74

$
3,240,535

$
(2,316,972)

$
(52,680)

$
193,414

$
1,064,383
Impact from adoption of new accounting standards

—

—

(25,869)

15,850

—

—

(10,019)
Dividends declared—preferred

—

—

—

(5,874)

—

—

(5,874)
Dividends declared—common ($0.11 per share)

—

—

—

(8,236)

—

—

(8,236)
Issuance of stock/restricted stock unit amortization, net⁽²⁾

—

—

2,572

—

—

1,370

3,942
Net income

—

—

—

5,469

—

2,520

7,989
Change in accumulated other comprehensive income (loss)

—

—

—

—

10,822

2,458

13,280
Repurchase of stock

—

(1)

(12,376)

—

—

—

(12,377)
Contributions from noncontrolling interests

—

—

—

—

—

64

64
Distributions to noncontrolling interests

—

—

—

—

—

(2,145)

(2,145)
Balance as of March 31, 2021

$
12

$
73

$
3,204,862

$
(2,309,763)

$
(41,858)

$
197,681

$
1,051,007


	iStar Inc. Shareholders' Equity
										Accumulated
				Common		Additional		Retained		Other
		Preferred		Stock at		Paid-In		Earnings		Comprehensive		Noncontrolling	Total
		Stock⁽¹⁾		Par		Capital		(Deficit)		Income (Loss)		Interests	Equity
Balance as of December 31, 2021	$	12	$	69	$	3,100,015	$	(2,227,213)	$	(21,587)	$	211,910	$	1,063,206
Dividends declared—preferred		—		—		—		(17,622)		—		—		(17,622)
Dividends declared—common ($0.375 per share)		—		—		—		(30,131)		—		—		(30,131)
Issuance of stock/restricted stock unit amortization, net⁽²⁾		—		1		10,148		—		—		3,504		13,653
Issuance of common stock in connection with 3.125% convertible notes(3)		—		17		347,798		—		—		—		347,815
Net income		—		—		—		502,123		—		179,135		681,258
Change in accumulated other comprehensive income (loss)		—		—		—		—		16,689		—		16,689
Contributions from noncontrolling interests		—		—		—		—		—		7,893		7,893
Distributions to noncontrolling interests		—		—		—		—		—		(385,131)		(385,131)
Balance as of September 30, 2022	$	12	$	87	$	3,457,961	$	(1,772,843)	$	(4,898)	$	17,311	$	1,697,630

Balance as of December 31, 2020	$	12	$	74	$	3,240,535	$	(2,316,972)	$	(52,680)	$	193,414	$	1,064,383
Impact from adoption of new accounting standards		—		—		(25,869)		15,850		—		—		(10,019)
Dividends declared—preferred		—		—		—		(17,622)		—		—		(17,622)
Dividends declared—common ($0.36 per share)		—		—		—		(26,338)		—		—		(26,338)
Issuance of stock/restricted stock unit amortization, net⁽²⁾		—		—		4,929		—		—		2,645		7,574
Net income (loss)		—		—		—		119,530		—		8,037		127,567
Change in accumulated other comprehensive income (loss)		—		—		—		—		18,330		3,913		22,243
Repurchase of stock		—		(4)		(91,859)		—		—		—		(91,863)
Contributions from noncontrolling interests		—		—		—		—		—		1,026		1,026
Distributions to noncontrolling interests		—		—		(335)		—		—		(10,317)		(10,652)
Change to noncontrolling interest		—		—		—		—		—		(74)		(74)
Balance as of September 30, 2021	$	12	$	70	$	3,127,401	$	(2,225,552)	$	(34,350)	$	198,644	$	1,066,225

(1)	Refer to Note 13 for details on the Company’s Preferred Stock.

(2)	Net of payments for withholding taxes upon vesting of stock-based compensation.

(3)	Refer to Note 10 for details on the Company’s 3.125% convertible notes.

The accompanying notes are an integral part of the consolidated financial statements.

Table of Contents

iStar Inc.

Consolidated Statements of Cash Flows

(In thousands)

(unaudited)

For the Three Months Ended March 31,


2022

2021

Cash flows from operating activities:





Net income (loss)

$
795,800

$
7,989

Adjustments to reconcile net income (loss) to cash flows from operating activities:





Provision for (recovery of) loan losses

135

(3,794)

Provision for losses on net investment in leases

281

(1,601)

Impairment of assets

1,492

1,785

Depreciation and amortization

1,357

15,455

Non-cash interest income from sales-type leases

(1,580)

(9,388)

Stock-based compensation (income) expense

(12,427)

5,508

Amortization of discounts/premiums and deferred financing costs on debt obligations, net

2,930

2,016

Amortization of discounts/premiums and deferred interest on loans, net

(2,785)

(3,379)

Deferred interest on loans received

0

23,703

Earnings from equity method investments

(152,161)

(12,769)

Distributions from operations of other investments

16,429

10,598

Deferred operating lease income

(2,373)

(2,684)

Income from sales of real estate

(684,229)

(612)

Land development revenue in excess of cost of sales

(404)

(2,926)

Loss on early extinguishment of debt, net

42,836

0

Other operating activities, net

(9,940)

(3,917)

Changes in assets and liabilities:

Origination and fundings of loans receivable held for sale

0

(16,086)

Changes in accrued interest and operating lease income receivable

1,368

1,945

Changes in deferred expenses and other assets, net

(1,735)

1,776

Changes in accounts payable, accrued expenses and other liabilities

(25,618)

(17,414)

Cash flows used in operating activities

(30,624)

(3,795)

Cash flows from investing activities:





Originations and fundings of loans receivable, net

(4,000)

(50,670)

Capital expenditures on real estate assets

(741)

(648)

Capital expenditures on land and development assets

(4,803)

(4,134)

Acquisitions of real estate, net investments in leases and land assets

(28,309)

0

Repayments of and principal collections on loans receivable and other lending investments, net

4,612

109,926

Net proceeds from sales of loans receivable

96,202

79,560

Net proceeds from sales of real estate

1,981,599

2,967

Net proceeds from sales of land and development assets

14,407

30,801

Net proceeds from sales of net investment in leases

563,495

0

Net proceeds from net investment in leases

0

6,575

Distributions from other investments

46,073

20,032

Contributions to and acquisition of interest in other investments

(255,182)

(59,866)

Other investing activities, net

4,514

3,092

Cash flows provided by investing activities

2,417,867

137,635

Cash flows from financing activities:





Borrowings from debt obligations

50,000

25,000

Repayments and repurchases of debt obligations

(965,592)

(32,308)

Purchase of marketable securities in connection with the defeasance of mortgage notes payable

(252,571)

0

Preferred dividends paid

(5,874)

(5,874)

Common dividends paid

(8,956)

(8,216)

Repurchase of stock

0

(10,775)

Payments for deferred financing costs

0

(75)

Payments for withholding taxes upon vesting of stock-based compensation

(3,808)

(2,085)

Contributions from noncontrolling interests

7,893

64

Distributions to noncontrolling interests

(35,476)

(2,145)

Payments for debt prepayment or extinguishment costs

(15,608)

0

Cash flows used in financing activities

(1,229,992)

(36,414)

Effect of exchange rate changes on cash

3

(111)

Changes in cash, cash equivalents and restricted cash

1,157,254

97,315

Cash, cash equivalents and restricted cash at beginning of period

393,996

150,566

Cash, cash equivalents and restricted cash at end of period

$
1,551,250

$
247,881


	For the Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities:
Net income	$	681,258	$	127,567
Adjustments to reconcile net income (loss) to cash flows from operating activities:
Provision for (recovery of) loan losses		22,556		(7,613)
Provision for losses on net investment in leases		—		(1,735)
Impairment of assets		3,260		2,965
Depreciation and amortization		3,985		44,971
Non-cash interest income from sales-type leases		(1,748)		(22,243)
Stock-based compensation		(30,724)		23,300
Amortization of discounts/premiums and deferred financing costs on debt obligations, net		7,362		5,920
Amortization of discounts/premiums and deferred interest on loans, net		(6,615)		(11,730)
Deferred interest on loans received		4,738		24,394
Earnings from equity method investments		(229,351)		(114,675)
Distributions from operations of other investments		149,741		37,433
Deferred operating lease income		(2,169)		(7,874)
Income from sales of real estate		(685,180)		(28,433)
Land development revenue in excess of cost of sales		979		(10,429)
Loss on early extinguishment of debt, net		172,608		—
Other operating activities, net		(12,846)		(14,031)
Changes in assets and liabilities:
Origination and fundings of loans receivable held for sale		—		(42,000)
Changes in accrued interest and operating lease income receivable		2,552		5,259
Changes in deferred expenses and other assets, net		(15,308)		(9,186)
Changes in accounts payable, accrued expenses and other liabilities		(49,725)		(6,601)
Cash flows provided by (used in) operating activities		15,373		(4,741)
Cash flows from investing activities:
Originations and fundings of loans receivable, net		(5,831)		(71,921)
Capital expenditures on real estate assets		(1,090)		(5,835)
Capital expenditures on land and development assets		(15,993)		(15,603)
Acquisitions of real estate, net investments in leases and land assets		(36,730)		(42,000)
Repayments of and principal collections on loans receivable and other lending investments, net		90,615		226,065
Net proceeds from sales of loans receivable		145,583		122,609
Net proceeds from sales of real estate		1,982,254		125,666
Net proceeds from sales of land and development assets		51,580		154,094
Net proceeds from sales of net investment in leases		608,238		14,910
Net proceeds from sales of other investments		—		3,000
Distributions from other investments		161,275		34,926
Contributions to and acquisition of interest in other investments		(273,206)		(171,005)
Other investing activities, net		(62)		(1,184)
Cash flows provided by investing activities		2,706,633		373,722
Cash flows from financing activities:
Borrowings from debt obligations		50,000		25,000
Repayments and repurchases of debt obligations		(1,154,033)		(44,534)
Purchase of marketable securities in connection with the defeasance of mortgage notes payable		(252,571)		—
Preferred dividends paid		(17,622)		(17,622)
Common dividends paid		(30,224)		(26,149)
Repurchase of stock		—		(88,946)
Payments for deferred financing costs		—		(75)
Payments for withholding taxes upon vesting of stock-based compensation		(10,567)		(2,210)
Contributions from noncontrolling interests		7,893		233
Distributions to noncontrolling interests		(351,005)		(10,317)
Payments for debt prepayment or extinguishment costs		(16,676)		—
Cash flows used in financing activities		(1,774,805)		(164,620)
Effect of exchange rate changes on cash		(100)		(126)
Changes in cash, cash equivalents and restricted cash		947,101		204,235
Cash, cash equivalents and restricted cash at beginning of period		393,996		150,566
Cash, cash equivalents and restricted cash at end of period	$	1,341,097	$	354,801

Table of Contents

For the Three Months Ended March 31,

2022

2021

Reconciliation of cash and cash equivalents and restricted cash presented on the consolidated statements of cash flows

Cash and cash equivalents

$
1,500,203

$
193,852

Restricted cash included in deferred expenses and other assets, net

51,047

54,029

Total cash and cash equivalents and restricted cash

$
1,551,250

$
247,881

Supplemental disclosure of non-cash investing and financing activity:





Fundings and (repayments) of loan receivables and loan participations, net

$
—

$
(42,501)

Accrued repurchase of stock

—

1,802

Distributions to noncontrolling interests

34,467

—

Defeasance of mortgage notes payable

230,452

—

Marketable securities transferred in connection with the defeasance of mortgage notes payable

252,571

—

Accounts payable for capital expenditures on land and development and real estate assets

2,053

—

Assumption of mortgage by third party

62,825

—


	For the Nine Months Ended September 30,
	2022		2021
Reconciliation of cash and cash equivalents and restricted cash presented on the consolidated statements of cash flows
Cash and cash equivalents	$	1,335,722	$	298,886
Restricted cash included in deferred expenses and other assets, net		5,375		55,915
Total cash and cash equivalents and restricted cash	$	1,341,097	$	354,801
Supplemental disclosure of non-cash investing and financing activity:
Fundings and (repayments) of loan receivables and loan participations, net	$	—	$	(42,501)
Accounts payable for capital expenditures on land and development and real estate assets		2,258		1,125
Contributions to other investments		—		2,000
Distributions to noncontrolling interests		34,467		—
Defeasance of mortgage notes payable		230,452		—
Marketable securities transferred in connection with the defeasance of mortgage notes payable		252,571		—
Settlement of senior unsecured notes (refer to Note 10)		218,945		—
Accrued repurchase of stock		—		3,117
Assumption of mortgage by third party		62,825		—

The accompanying notes are an integral part of the consolidated financial statements.

iStar Inc.

Notes to Consolidated Financial Statements

(unaudited)

Table of Contents

Note 1—Business and Organization

Business—iStar Inc. (the “Company”) finances, invests in and develops real estate and real estate related projects as part of its fully-integrated investment platform. The Company also manages entities focused on ground lease investments (refer to Note 8). The Company has invested capital over the past two decades and is structured as a real estate investment trust (“REIT”) with a diversified portfolio focused on larger assets located in major metropolitan markets. The Company’s primary reportable business segments are net lease (refer to Note 3 - Net Lease Sale and Discontinued Operations), real estate finance, operating properties and land and development (refer to Note 17).

Organization—The Company began its business in 1993 through the management of private investment funds and became publicly traded in 1998. Since that time, the Company has grown through the origination of new investments and corporate acquisitions.

Merger with Safehold Inc.—On August 10, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Safehold Inc. (“SAFE”). The Merger Agreement provides that, subject to the terms and conditions thereof, SAFE will merge with and into the Company (the “Merger”). The surviving company of the Merger will be named Safehold Inc. (“New SAFE”) and its shares of common stock will trade on the New York Stock Exchange under the symbol “SAFE.” The Company expects that the Merger will close in the first quarter or second quarter of 2023.

As discussed further below, shortly before the closing of the Merger, the Company intends to separate its remaining legacy non-ground lease assets and businesses into a separate public company (“SpinCo”) by distributing to the Company’s stockholders, on a pro rata basis, the issued and outstanding equity interests of SpinCo (the “Spin-Off”).

Conditions to the Merger

The consummation of the Merger is subject to the satisfaction or waiver of certain closing conditions, including: (i) the approval of the Company’s stockholders, (ii) the approval of SAFE’s stockholders, (iii) completion of the Spin-Off, (iv) the approval of the shares of STAR Common Stock to be issued in the Merger for listing on the NYSE, (v) the effectiveness of a registration statement on Form S-4 registering the STAR Common Stock to be issued in the Merger, (vi) the absence of any temporary restraining order, injunction or other order of any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the reverse stock split or the Merger, (vii) generation of certain cash proceeds, (viii) the receipt of certain tax opinions by the Company and SAFE that the Merger will qualify as a reorganization under the Internal Revenue Code and that the Company and SAFE each qualifies as a REIT for federal income tax purposes, (ix) the accuracy of certain representations and warranties of the Company and SAFE contained in the Merger Agreement and the compliance by the parties with the covenants contained in the Merger Agreement (subject to customary materiality qualifiers), and (x) other conditions specified in the Merger Agreement.

Conditions to the Spin-Off

Completion of the Spin-Off is subject to: (i) completion of the documents for the Spin-Off related financings; (ii) the satisfaction or waiver of relevant conditions to the consummation of the Merger; (iii) effectiveness of a registration statement on Securities and Exchange Commission (“SEC”) Form 10; (iv) the absence of an injunction or law preventing the consummation of the Spin-Off, the distribution and the transactions related thereto; and (v) other customary closing conditions.

Other Merger related transactions

The Company has entered into an agreement (the “MSD Stock Purchase Agreement”) with MSD Partners, L.P. (“MSD Partners”) and SAFE under which the Company has agreed to sell and MSD Partners has agreed to buy 5,405,406 shares of the SAFE’s common stock owned by the Company for $200.0 million (the “MSD Stock Purchase”) shortly before the closing of the Merger. If the Merger Agreement is terminated for any reason, the parties’ obligations to

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Table of Contents

consummate the purchase and sale will also terminate. In addition to customary closing conditions, MSD Partners’ obligations to purchase SAFE’s common stock owned by the Company are subject to the condition that the closing of the MSD Caret Purchase (as defined below) will take place substantially concurrently with the closing of the MSD Stock Purchase. Upon closing of the transaction, MSD Partners will have a right to designate an observer to the board of directors of New SAFE, a preemptive right on future equity issuances (subject to certain exceptions) and registration rights. MSD Partners will be subject to a customary standstill and certain restrictions on sales of its New SAFE Common Stock.

MSD Partners has also subscribed to purchase 100,000 Caret units from SAFE for an aggregate purchase price of $20.0 million (the “MSD Caret Purchase”), conditioned on the closing of the Spin-Off and the Merger. MSD Partners’ obligations to purchase the Caret units are also subject to the closing of the MSD Stock Purchase and the implementation by SAFE of certain changes to its Caret program.

SpinCo will be capitalized in part with an 8.0%, four-year term loan from New SAFE having an initial principal amount of $100.0 million or such other amount as the parties may agree prior to the closing of the Merger, as well as up to $140.0 million of bank debt from Morgan Stanley Bank, N.A. which will be secured by $400 million in shares of SAFE common stock.

New SAFE will enter into a management agreement with SpinCo, under which it will continue to operate and pursue the orderly monetization of SpinCo’s assets. SpinCo will pay to New SAFE an annual management fee of $25.0 million in year one, $15.0 million in year two, $10.0 million in year three and $5.0 million in year four and 2.0% of the gross book value of SpinCo's assets, excluding shares of SAFE common stock, for each annual term thereafter. New SAFE and SpinCo will also enter into a governance agreement that will place certain restrictions on the transfer and voting of the shares of New SAFE owned by SpinCo, and a registration rights agreement under which New SAFE will agree to register such shares for resale in accordance with applicable securities laws.

The Company and SAFE have entered into a voting agreement pursuant to which the Company has agreed vote its shares representing 41.9% of the outstanding SAFE Common Stock to approve the Merger and take certain other actions, including voting against any alternative acquisition proposal or other proposal which could reasonably be expected to materially delay, postpone or materially adversely affect the consummation of the transactions contemplated by the Merger Agreement. In accordance with the terms of the existing stockholders’ agreement between SAFE and the Company, the remainder of the SAFE Common Stock owned by the Company will be voted in the same manner and proportion as the votes cast by the remaining shareholders of SAFE. The voting agreement and the obligations thereunder terminate upon the termination of the Merger Agreement in accordance with its terms.

As noted above, the Merger and related transactions are subject to a number of conditions, several of which are outside the Company's control; therefore, there can be no assurance that the Merger and related transactions will occur within the time frame currently expected by the parties, or at all. The foregoing descriptions of the Merger and the Merger Agreement and the related transactions and agreements do not purport to be complete and are subject to, and qualified in their entirety by, the full text of such agreements. Please see the Company's filings with the Securities and Exchange Commission for additional information, including copies of such agreements.

The Company has covenanted to redeem all of its outstanding preferred stock at the liquidation preference per share plus accrued and unpaid dividends and to retire all of its remaining senior unsecured notes in connection with the Merger. The Company’s trust preferred securities will remain outstanding at New SAFE.

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Table of Contents

Note 2—Basis of Presentation and Principles of Consolidation

Basis of Presentation—The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with the instructions to Form 10-Q and Article 10-01 of Regulation S-X for interim financial statements. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles in the United States of America (“GAAP”) for complete financial statements. These unaudited consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Annual Report”).

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

In the opinion of management, the accompanying consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the interim periods presented. Such operating results may not be indicative of the expected results for any other interim periods or the entire year. Certain prior year amounts have been reclassified in the Company’s consolidated financial statements and the related notes (refer to Note 3 – Net Lease Sale and Discontinued Operations) to conform to the current period presentation.

Principles of Consolidation—The consolidated financial statements include the financial statements of the Company, its wholly owned subsidiaries, controlled partnerships and VIEs for which the Company is the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation. The Company’s involvement with VIEs affects its financial performance and cash flows primarily through amounts recorded in “Net income from discontinued operations,” “Operating lease income,” “Interest income,” “Earnings from equity method investments,” “Real estate expense” and “Interest expense” in the Company’s consolidated statements of operations. The Company has provided no financial support to those VIEs that it was not previously contractually required to provide.

Consolidated VIEs—The Company consolidates VIEs for which it is considered the primary beneficiary. The liabilities of these VIEs are non-recourse to the Company and can only be satisfied from each VIE’s respective assets. The Company did not have any unfunded commitments related to consolidated VIEs as of ~~March 31,~~September 30, 2022 and ~~December 31,~~

811

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Table of Contents

December 31, 2021. The following table presents the assets and liabilities of the Company’s consolidated VIEs as of ~~March 31,~~September 30, 2022 and December 31, 2021 ($ in thousands):


	As of				As of
	March 31, 2022		December 31, 2021		September 30, 2022		December 31, 2021
ASSETS
Real estate
Real estate, at cost	$	93,592	$	93,477	$	93,940	$	93,477
Less: accumulated depreciation		(15,761)		(14,987)		(17,277)		(14,987)
Real estate, net		77,831		78,490		76,663		78,490
Real estate and other assets available and held for sale and classified as discontinued operations		—		886,845		—		886,845
Land and development, net		168,458		176,833		145,545		176,833
Cash and cash equivalents		730,820		23,908		33,768		23,908
Accrued interest and operating lease income receivable, net		541		—
Deferred operating lease income receivable, net		5		3		6		3
Deferred expenses and other assets, net		5,371		5,001		6,420		5,001
Total assets	$	983,026	$	1,171,081	$	262,402	$	1,171,081
LIABILITIES
Accounts payable, accrued expenses and other liabilities	$	28,529	$	24,744	$	25,078	$	24,744
Liabilities associated with real estate held for sale and classified as discontinued operations		—		493,739		146		493,739
Total liabilities		28,529		518,483		25,224		518,483

Unconsolidated VIEs—The Company has investments in VIEs where it is not the primary beneficiary and accordingly the VIEs have not been consolidated in the Company’s consolidated financial statements. As of ~~March 31,~~September 30, 2022, the Company’s maximum exposure to loss from these investments does not exceed the sum of the ~~$58.7~~$55.3 million carrying value of the investments, which are classified in “Other investments” on the Company’s consolidated balance sheets, and ~~$2.3~~$4.9 million of related unfunded commitments.

Note 3—Summary of Significant Accounting Policies

Net Lease Sale and Discontinued Operations—A discontinued operation represents: (i) a component of the Company or group of components that has been disposed of or is classified as held for sale in a single transaction and represents a strategic shift that has or will have a major effect on the Company’s operations and financial results or (ii) an acquired business that is classified as held for sale on the date of acquisition.

Net Lease Sale—In March 2022, the Company, through certain subsidiaries of and entities managed by the Company, closed on a definitive purchase and sale agreement to sell a portfolio of net lease properties owned and managed by such subsidiaries and entities to a third party for an aggregate gross sales price of approximately $3.07 billion and recognized a gain of $663.7 million in “Net income from discontinued operations” in the Company’s consolidated statements of operations. The Company refers to this transaction as the "Net Lease Sale" in this report. The Net Lease Sale is consistent with the Company’s stated corporate strategy which is to grow its Ground Lease and Ground Lease adjacent businesses (refer to Note 8) and simplify its portfolio through sales of other assets.

The portfolio sold consisted of office, entertainment and industrial properties located in the United States comprising approximately 18.3 million square feet. It included assets wholly-owned by the Company and assets owned by 2two joint ventures (see Net Lease Venture and Net Lease Venture II below) managed by the Company and in which it owned 51.9% ~~interests.~~interests. At the time of closing, the portfolio was encumbered by an aggregate of ~~$702~~$702.0 million of mortgage indebtedness, including indebtedness from equity method investments, which was repaid with proceeds from the sale. After repayment of the mortgage indebtedness and prepayment penalties, a senior term loan secured by certain of the assets (refer to Note 10), payments to terminate derivative contracts, payments to joint venture partners, and payments of promotes, transaction expenses and amounts due under employee incentive plans, the Company retained net cash proceeds of $1.2 billion from the transaction. In addition, as part of the transaction, the buyer sold three of the properties

912

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Table of Contents

~~of $1.2 billion from the transaction. In addition, as part of the transaction, the buyer sold 3 of the properties~~ to ~~Safehold Inc. (“SAFE”)~~SAFE for $122.0 million and entered into 3three Ground Leases with SAFE. ~~NaN~~Two net lease properties were sold to different third parties in the first quarter of 2022 and the Company’s net lease assets associated with its Ground Lease businesses were not included in the sale. The Company received net cash proceeds of $33.9 million from the sale of the 2two net lease properties and recognized a gain of $23.9 million in “Net income from discontinued operations” in the Company’s consolidated statements of operations.

Net Lease Venture—In February 2014, the Company partnered with a sovereign wealth fund to form a venture to acquire and develop net lease assets (the “Net Lease Venture”) and gave a right of first offer to the venture on all new net lease investments. The Company was responsible for sourcing new opportunities and managing the venture and its assets in exchange for a management fee and incentive fee. Several of the Company’s senior executives whose time was substantially devoted to the Net Lease Venture owned a total of 0.6% equity ownership in the venture via co-investment. These senior executives were also entitled to an amount equal to 50% of any incentive fee received based on the 47.5% external partner’s interest. Net Lease Venture was part of the Net Lease Sale. As of ~~March 31,~~September 30, 2022, ~~$316.6~~$3.1 million of “Noncontrolling interests” was attributable to the Net Lease Venture and represented proceeds from the Net Lease Sale that were not yet distributed to the Company’s partners in the venture as of ~~March 31,~~September 30, 2022.

Net Lease Venture II—In July 2018, the Company entered into a new venture (the “Net Lease Venture II”) with an investment strategy similar to the Net Lease Venture. The Company was responsible for managing the venture in exchange for a management fee and incentive fee. During the ~~three~~nine months ended ~~March 31,~~September 30, 2022, the Company recorded $0.4 million of management fees from Net Lease Venture II in “Net income from discontinued operations” in the Company’s consolidated statements of operations. During the three and nine months ended September 30, 2021, the Company recorded $0.4 million and ~~$0.4~~$1.2 million, respectively, of management fees from Net Lease Venture II in “Net income from discontinued operations” in the Company’s consolidated statements of operations. Net Lease Venture II was part of the Net Lease Sale. As of ~~March 31,~~September 30, 2022, ~~$216.3~~$2.0 million of “Real estate and other assets available and held for sale and classified as discontinued operations” was attributable to the Net Lease Venture II and represented proceeds from the Net Lease Sale that were not yet distributed to the Company as of ~~March 31,~~September 30, 2022.

Discontinued Operations—The Company’s net lease assets and liabilities ~~included in~~associated with the Net Lease Sale and the Company’s other 2two net lease assets are classified as “Real estate and other assets available and held for sale and classified as discontinued operations” and “Liabilities associated with real estate held for sale and classified as discontinued operations,” respectively, on the Company’s consolidated balance sheets as of September 30, 2022 and December 31, 2021. For the three months ended ~~March 31,~~September 30, 2021 and the nine months ended September 30, 2022 and 2021, the operations of such assets are classified in “Net income from discontinued operations” in the Company’s consolidated statements of operations.

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Notes to Consolidated Financial Statements (Continued)

(unaudited)

Table of Contents

The following table presents the Company’s consolidated assets and liabilities recorded in “Real estate and other assets available and held for sale and classified as discontinued operations” and “Liabilities associated with real estate held for sale and classified as discontinued operations,” respectively, on the Company’s consolidated balance sheets as of ~~March 31,~~September 30, 2022 and December 31, 2021 ($ in thousands).


	As of				As of
	March 31,		December 31,		September 30,		December 31,
	2022		2021		2022		2021
ASSETS
Real estate
Real estate, at cost	$	—	$	1,537,655	$	—	$	1,537,655
Less: accumulated depreciation		—		(271,183)		—		(271,183)
Total real estate, net		—		1,266,472		—		1,266,472
Net investment in leases		—		486,389		—		486,389
Loans receivable held for sale		—		48,675		—		48,675
Other investments		216,309		103,229		1,963		103,229
Finance lease right of use assets		—		150,099		—		150,099
Accrued interest and operating lease income receivable, net		1,018		2,997		491		2,997
Deferred operating lease income receivable, net		—		63,156		—		63,156
Deferred expenses and other assets, net		8,982		178,694		9,471		178,694
Total real estate and other assets available and held for sale and classified as discontinued operations	$	226,309	$	2,299,711	$	11,925	$	2,299,711

LIABILITIES
Accounts payable, accrued expenses and other liabilities	$	15,963	$	92,865	$	2,918	$	92,865
Finance lease liabilities		—		161,258		—		161,258
Debt obligations, net		—		714,296		—		714,296
Total liabilities associated with real estate held for sale and classified as discontinued operations	$	15,963	$	968,419	$	2,918	$	968,419

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Notes to Consolidated Financial Statements (Continued)

(unaudited)

Table of Contents

The transaction described above involving the Company's net lease business qualified for discontinued operations and the following table summarizes net income from discontinued operations for the three and nine months ended ~~March 31,~~September 30, 2022 and 2021 ($ in thousands):


	For the Three Months Ended March 31,				For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021		2022		2021
Revenues:
Operating lease income	$	35,596	$	42,513	$	—	$	40,660	$	35,596	$	123,925
Interest income		885		861		—		979		885		2,728
Interest income from sales-type leases		8,803		8,627		—		9,052		8,803		26,212
Other income		4,292		1,275		—		1,162		4,292		3,599
Total revenues		49,576		53,276		—		51,853		49,576		156,464
Costs and expenses:
Interest expense⁽¹⁾		7,484		10,754		—		10,776		7,484		32,306
Real estate expense		5,072		8,175		—		5,355		5,072		20,503
Depreciation and amortization⁽¹⁾		—		13,054		—		13,114		—		39,256
Recovery of loan losses		—		(152)
Recovery of losses on net investment in leases		—		(1,601)
Provision for (recovery of) loan losses						—		54		—		(202)
Provision for (recovery of) losses on net investment in leases						—		446		—		(2,200)
Impairment of assets(2)		1,492		1,528		—		758		1,492		2,286
Other expense⁽²⁾⁽³⁾		(5,669)		—		—		1,117		(5,669)		1,117
Total costs and expenses		8,379		31,758		—		31,620		8,379		93,066
Income from sales of real estate		683,738		—		—		—		683,738		2,114
Income from discontinued operations before earnings from equity method investments and other items		724,935		21,518		—		20,233		724,935		65,512
Earnings from equity method investments		127,129		1,001		—		1,414		127,129		4,014
Loss on early extinguishment of debt, net		(41,408)		—		—		—		(41,408)		—
Net income from discontinued operations before income taxes		810,656		22,519		—		21,647		810,656		69,526
Income tax expense		(12,968)		(33)		—		(33)		(12,968)		(111)
Net income from discontinued operations		797,688		22,486		—		21,614		797,688		69,415
Net (income) from discontinued operations attributable to noncontrolling interests		(179,089)		(2,564)		—		(3,254)		(179,089)		(8,092)
Net income from discontinued operations attributable to iStar Inc.	$	618,599	$	19,922	$	—	$	18,360	$	618,599	$	61,323

(1)

For the ~~three~~nine months ended ~~March 31,~~September 30, 2022, the Company recorded $1.3 million of “Interest expense” in its consolidated statements of operations from its Ground Leases with SAFE. For the three and nine months ended ~~March 31,~~September 30, 2021, the Company recorded $2.1 million and ~~$0.4~~$6.2 million, respectively, of “Interest expense” and $0.4 million and $1.1 million, respectively, of “Depreciation and amortization” in its consolidated statements of operations from its Ground Leases with SAFE.

(2)	During the nine months ended September 30, 2022 and 2021, the Company sold assets and recognized aggregate impairments of $1.5 million and $2.3 million, respectively.

(3)	Represents the reversal of other expenses recognized in connection with the settlement of interest rate hedges during the ~~three~~nine months ended ~~March 31,~~September 30, 2022.

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Table of Contents

The following table presents cash flows provided by operating activities and cash flows used in investing activities from discontinued operations for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 and 2021 ($ in thousands).:


	For the Three Months Ended March 31,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
Cash flows provided by operating activities	$	22,571	$	20,847	$	116,738	$	70,936
Cash flows provided by investing activities		2,553,349		566
Cash flows provided by (used in) investing activities						2,660,531		(12,145)

New Accounting Pronouncements

~~iStar Inc.~~

~~Notes~~—In March 2022, the Financial Accounting Standards Board issued Accounting Standards Update 2022-02, Financial Instruments—Credit Losses: Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”). ASU 2022-02 was issued to ~~Consolidated Financial Statements (Continued)~~

~~(unaudited)~~

~~Table~~eliminate troubled debt restructuring recognition and measurement guidance and required disclosure of ~~Contents~~gross write-offs by vintage for public business entities. ASU 2022-02 is effective for annual reporting periods beginning after December 15, 2022. Early adoption is permitted. Management is currently evaluating the impact of ASU 2022-02 and does not expect ASU 2022-02 to have a material impact on the Company’s consolidated financial statements.

Note 4—Real Estate

The Company’s real estate assets were comprised of the following ($ in thousands):


As of March 31, 2022
			As of
			September 30, 2022		December 31, 2021
Land, at cost	$	6,830	$	6,830	$	6,831
Buildings and improvements, at cost		106,849		104,889		106,679
Less: accumulated depreciation		(22,245)		(22,575)		(21,360)
Real estate, net		91,434		89,144		92,150
Real estate available and held for sale⁽¹⁾		301		1,283		301
Total real estate	$	91,735	$	90,427	$	92,451
As of December 31, 2021
Land, at cost	$	6,831
Buildings and improvements, at cost		106,679
Less: accumulated depreciation		(21,360)
Real estate, net		92,150
Real estate available and held for sale⁽¹⁾		301
Total real estate	$	92,451

(1)	As of ~~March 31,~~September 30, 2022 and December 31, 2021, the Company had ~~$0.3~~$1.3 million and $0.3 million, respectively, of residential homes/condominiums available for sale in its operating properties portfolio.

Dispositions—Refer to Note 3 - Net Lease Sale and Discontinued Operations.

Impairments—During the nine months ended September 30, 2022, the Company recognized an impairment of $1.8 million on an operating property based on the expected cash flows to be received.

Tenant Reimbursements—The Company receives reimbursements from tenants for certain facility operating expenses including common area costs, insurance, utilities and real estate taxes. Tenant expense reimbursements were ~~$0.7~~$0.9 million and $~~0.7~~2.4 million for the three and nine months ended ~~March 31,~~September 30, 2022, respectively, and$0.6 million and $2.0 million for the three and nine months ended September 30, 2021, respectively. These amounts are included in “Operating lease income” in the Company’s consolidated statements of operations.

Allowance for Doubtful Accounts—As of ~~March 31, 2022 and~~ December 31, 2021, the allowance for doubtful accounts related to real estate tenant receivables was $0.1 ~~million and $0.1 million, respectively.~~million. These amounts are included in “Accrued interest and operating lease income receivable, net” on the Company’s consolidated balance sheets.

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Table of Contents

Future Minimum Operating Lease Payments—Future minimum operating lease payments to be collected under non-cancelable operating leases, excluding customer reimbursements of expenses, in effect as of ~~March 31,~~September 30, 2022, are as follows by year ($ in thousands):


	Operating		Operating
Year	Properties		Properties
2022 (remaining nine months)	$	4,843
2022 (remaining three months)			$	1,649
2023		6,293		6,459
2024		6,195		6,348
2025		5,600		5,698
2026		5,125		5,200
Thereafter		4,361		4,413

Note 5—Net Investment in Leases

In June 2021, the Company acquired 2two parcels of land for $42.0 million each and simultaneously entered into 2two Ground Leases with the respective tenants. Each Ground Lease also provides for a leasehold improvement allowance up to a maximum of $83.0 million. The Company also concurrently entered into an agreement pursuant to which SAFE would

~~iStar Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~(unaudited)~~

~~Table of Contents~~

acquire the Ground Leases from the Company. If certain construction conditions are not met within a specified time period, SAFE will have 0no obligation to acquire the Ground Leases or fund the leasehold improvement allowances. The Company classified 1one of the Ground Leases as a sales-type lease and it iswas recorded in “Net investment in leases” on the Company’s consolidated balance ~~sheets. For~~sheet at the ~~three months ended March 31, 2022, the Company recognized $0.2 million~~time of ~~non-cash interest income in "Interest income from sales-type leases" in the Company’s consolidated statements of operations.~~acquisition. In January 2022, the Company sold the Ground Lease to an investment fund in which the Company owns a 53% noncontrolling interest (refer to Note 8 – Ground Lease Plus Fund).

~~NaN~~ One Ground Lease was entered into with the seller of the land and did not qualify for sale leaseback accounting, and as such, was accounted for as a financing transaction and $42.0 million was recorded in “Loans receivable held for sale” on the Company’s consolidated balance sheet at the time of acquisition. There can be no assurance that the conditions to closing will be satisfied and that SAFE will acquire the properties and Ground Leases from the Company. In January 2022, the Company sold the Ground Lease to the Ground Lease Plus Fund (refer to Note 8).

In January 2022, the Company entered into a commitment to acquire land for $36.0 million and simultaneously structured and entered into a Ground Lease as part of the Ground Lease tenant’s recapitalization of an existing multifamily property. ~~As of March 31, 2022, the~~The Company ~~had~~ funded ~~$28.2~~$34.6 million of ~~this commitment.~~its commitment and then, pursuant to an agreement with SAFE (refer to Note 8) ~~waived its right of first refusal on this investment but entered into an agreement with the Company pursuant to which SAFE would acquire the land~~ and ~~related Ground Lease when~~upon certain construction related conditions ~~are met.~~being met, sold the Ground Lease to SAFE in July 2022 for $36.0 million and recognized a gain of $1.0 million in “Income from sales of real estate” in its consolidated statements of operations.

The Company’s net investment in leases were comprised of the following as of ~~March 31,~~September 30, 2022 and December 31, 2021 ($ in thousands):


	March 31, 2022		December 31, 2021		September 30, 2022		December 31, 2021
Total undiscounted cash flows	$	356,338	$	524,712	$	—	$	524,712
Unguaranteed estimated residual value		21,750		42,000		—		42,000
Present value discount		(349,676)		(523,497)		—		(523,497)
Allowance for losses on net investment in leases		(281)		—
Net investment in leases⁽¹⁾	$	28,131	$	43,215	$	—	$	43,215

(1)	As of ~~March 31, 2022 and~~ December 31, 2021, the Company’s net investment in lease was current in its payment status and performing in accordance with the terms of the lease. ~~As of March 31, 2022, the risk rating on the Company’s net investment in leases was 1.0.~~

~~Dispositions—~~ During the three months ended March 31, 2021, the Company sold net lease assets for net proceeds of $6.6 million and recognized an aggregate impairment of $1.5 million in connection with the sales which is recorded in “Net income from discontinued operations” in the Company’s consolidated statements of operations.

~~Future Minimum Lease Payments under Sales-type Leases~~—Future minimum lease payments to be collected under sales-type leases, excluding lease payments that are not fixed and determinable, in effect as of March 31, 2022, are as follows by year ($ in thousands):

Amount
2022 (remaining nine months)

$
688
2023

934
2024

1,194
2025

1,240
2026

1,264
Thereafter

351,018
Total undiscounted cash flows

$
356,338

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Notes to Consolidated Financial Statements (Continued)

(unaudited)

Table of Contents

Allowance for Losses on Net Investment in Leases—Changes in the Company’s allowance for losses on net investment in leases for the three and nine months ended ~~March 31,~~September 30, 2022 and 2021 were as follows ($ in thousands):


	Three Months Ended				Three Months Ended				Nine Months Ended
	March 31, 2022		March 31, 2021		September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Allowance for losses on net investment in leases at beginning of period⁽¹⁾	$	—	$	10,871	$	380	$	9,005	$	—	$	10,871
Provision for (recovery of) losses on net investment in leases ⁽²⁾		281		(1,601)		(380)		131		—		(1,735)
Allowance for losses on net investment in leases at end of period⁽¹⁾	$	281	$	9,270	$	—	$	9,136	$	—	$	9,136

(1)	All 2021 amounts were for net investment in leases included in the Net Lease Sale (refer to Note 3 – Net Lease Sale and Discontinued Operations).

(2)

During the three and nine months ended ~~March 31,~~September 30, 2022, the Company recorded a provision for (recovery of) losses on net investment in leases of ~~$0.3~~($0.4) million and $0.0 million, respectively, due primarily to ~~the macroeconomic forecast on commercial real estate markets.~~asset sales. During the three and nine months ended ~~March 31,~~September 30, 2021, the Company recorded a ~~recovery of~~provision for (recovery of) losses on net investment in leases of ~~$1.6~~$0.1 million ~~(which is~~and ($1.7) million (both of which are included in “Net income from discontinued ~~operations’~~operations”), respectively. The provision for losses for the three months ended September 30, 2021 resulted from market changes since June 30, 2021 and the recovery of losses for the nine months ended September 30, 2021 was due primarily to asset sales and an improving macroeconomic forecast on commercial real estate markets since December 31, 2020.

Note 6—Land and Development

The Company’s land and development assets were comprised of the following ($ in thousands):


	As of				As of
	March 31,		December 31,		September 30,		December 31,
	2022		2021		2022		2021
Land and land development, at cost	$	288,460	$	297,621	$	259,732	$	297,621
Less: accumulated depreciation		(11,039)		(10,811)		(11,486)		(10,811)
Total land and development, net	$	277,421	$	286,810	$	248,246	$	286,810

Dispositions—During the ~~three~~nine months ended ~~March 31,~~September 30, 2022 and 2021, the Company sold land parcels and residential lots and units and recognized land development revenue of ~~$14.9~~$54.4 million and ~~$32.2~~$157.9 million, respectively. During the ~~three~~nine months ended ~~March 31,~~September 30, 2022 and 2021, the Company recognized land development cost of sales of ~~$14.5~~$55.4 million and ~~$29.3~~$147.5 million, respectively, from its land and development portfolio.

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(unaudited)

Table of Contents

Note 7—Loans Receivable and Other Lending Investments, net

The following is a summary of the Company’s loans receivable and other lending investments by class ($ in thousands):


	As of				As of
	March 31, 2022		December 31, 2021		September 30, 2022		December 31, 2021
Construction loans
Senior mortgages	$	186,094	$	184,643	$	133,468	$	184,643
Corporate/Partnership loans		0		618		—		618
Subtotal - gross carrying value of construction loans⁽¹⁾		186,094		185,261		133,468		185,261
Loans
Senior mortgages		14,724		14,965		—		14,965
Subordinate mortgages		12,670		12,457		13,107		12,457
Subtotal - gross carrying value of loans		27,394		27,422		13,107		27,422
Other lending investments
Held-to-maturity debt securities		98,419		96,838		32,938		96,838
Available-for-sale debt securities		24,864		28,092		—		28,092
Subtotal - other lending investments		123,283		124,930		32,938		124,930
Total gross carrying value of loans receivable and other lending investments		336,771		337,613		179,513		337,613
Allowance for loan losses		(4,932)		(4,769)		(2,890)		(4,769)
Total loans receivable and other lending investments, net	$	331,839	$	332,844	$	176,623	$	332,844

(1)	As of ~~March 31,~~September 30, 2022, 100% of gross carrying value of construction loans had completed construction.

Allowance for Loan Losses—Changes in the Company’s allowance for loan losses were as follows for the three months ended ~~March 31,~~September 30, 2022 and 2021 ($ in thousands):


		General Allowance										General Allowance
						Held to										Held to
		Construction				Maturity Debt		Specific				Construction				Maturity Debt		Specific
Three Months Ended March 31, 2022		Loans		Loans		Securities		Allowance		Total
Three Months Ended September 30, 2022												Loans		Loans		Securities		Allowance		Total
Allowance for loan losses at beginning of period		$	1,213	$	676	$	2,304	$	576	$	4,769	$	861	$	450	$	1,014	$	708	$	3,033
Provision for (recovery of) loan losses⁽¹⁾			39		(2)		111		15		163		(13)		(72)		(67)		9		(143)
Allowance for loan losses at end of period		$	1,252	$	674	$	2,415	$	591	$	4,932	$	848	$	378	$	947	$	717	$	2,890

Three Months Ended March 31, 2021
Three Months Ended September 30, 2021
Allowance for loan losses at beginning of period	��	$	6,541	$	1,643	$	3,093	$	743	$	12,020	$	1,640	$	1,619	$	2,393	$	590	$	6,242
(Recovery of) provision for loan losses⁽¹⁾			(3,648)		172		(408)		(76)		(3,960)
Provision for (recovery of) loan losses⁽¹⁾													(149)		(865)		145		50		(819)
Allowance for loan losses at end of period		$	2,893	$	1,815	$	2,685	$	667	$	8,060	$	1,491	$	754	$	2,538	$	640	$	5,423

(1)

During the three months ended ~~March 31,~~September 30, 2022 and 2021, the Company recorded a provision for (recovery of) loan losses of ~~$0.1~~($0.2) million and ($~~3.6)~~1.6) million, respectively, in its consolidated statements of operations. The ~~provision~~recovery in 2022 was due primarily to ~~accretion on~~ the ~~Company’s held-to-maturity debt security.~~repayment of loans during the three months ended September 30, 2022. The recovery in 2021 was due primarily to the repayment of loans during the three months ended ~~March 31,~~September 30, 2021 and an improving macroeconomic forecast on commercial real estate markets since ~~December 31, 2020.~~June 30, 2021. Of this amount, ~~$0.3~~$0.9 million related to a provision for loan losses for unfunded loan commitments and is recorded as a reduction to "Accounts payable, accrued expenses and other liabilities.”

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Notes to Consolidated Financial Statements (Continued)

(unaudited)

Table of Contents

Changes in the Company’s allowance for loan losses were as follows for the nine months ended September 30, 2022 and 2021 ($ in thousands):


	General Allowance
					Held to
	Construction				Maturity Debt		Specific
Nine Months Ended September 30, 2022	Loans		Loans		Securities		Allowance		Total
Allowance for loan losses at beginning of period	$	1,213	$	676	$	2,304	$	576	$	4,769
Provision for (recovery of) loan losses⁽¹⁾		(365)		(298)		23,643		141		23,121
Charge-offs		—		—		(25,000)		—		(25,000)
Allowance for loan losses at end of period	$	848	$	378	$	947	$	717	$	2,890

Nine Months Ended September 30, 2021
Allowance for loan losses at beginning of period	$	6,541	$	1,643	$	3,093	$	743	$	12,020
Recovery of loan losses⁽¹⁾		(5,050)		(889)		(555)		(103)		(6,597)
Allowance for loan losses at end of period	$	1,491	$	754	$	2,538	$	640	$	5,423

(1)

During the nine months ended September 30, 2022 and 2021, the Company recorded a provision for (recovery of) loan losses of $22.6 million and ($7.4) million, respectively, in its consolidated statements of operations. The provision in 2022 was due primarily to a $25.0 million charge-off on the Company’s held-to-maturity debt security, which is now recorded at its expected repayment proceeds. The recovery in 2021 was due primarily to the repayment of loans during the nine months ended September 30, 2021 and an improving macroeconomic forecast on commercial real estate markets since December 31, 2020. Of this amount, $0.9 million related to a recovery of credit losses for unfunded loan commitments and is recorded as a reduction to "Accounts payable, accrued expenses and other liabilities.”

The Company’s investment in loans and other lending investments and the associated allowance for loan losses were as follows as of ~~March 31,~~September 30, 2022 and December 31, 2021 ($ in thousands):


	Individually		Collectively				Individually		Collectively
	Evaluated for		Evaluated for				Evaluated for		Evaluated for
	Impairment⁽¹⁾		Impairment		Total		Impairment⁽¹⁾		Impairment		Total
As of March 31, 2022
As of September 30, 2022
Construction loans⁽²⁾	$	59,642	$	126,452	$	186,094	$	61,159	$	72,309	$	133,468
Loans⁽²⁾		0		27,394		27,394		—		13,107		13,107
Held-to-maturity debt securities		0		98,419		98,419		—		32,938		32,938
Available-for-sale debt securities⁽³⁾		0		24,864		24,864
Less: Allowance for loan losses		(591)		(4,341)		(4,932)		(717)		(2,173)		(2,890)
Total	$	59,051	$	272,788	$	331,839	$	60,442	$	116,181	$	176,623
As of December 31, 2021
Construction loans⁽²⁾	$	59,640	$	125,621	$	185,261	$	59,640	$	125,621	$	185,261
Loans⁽²⁾		0		27,422		27,422		—		27,422		27,422
Held-to-maturity debt securities		0		96,838		96,838		—		96,838		96,838
Available-for-sale debt securities⁽³⁾		0		28,092		28,092		—		28,092		28,092
Less: Allowance for loan losses		(576)		(4,193)		(4,769)		(576)		(4,193)		(4,769)
Total	$	59,064	$	273,780	$	332,844	$	59,064	$	273,780	$	332,844

(1)

The carrying value of this loan includes an ~~unamortized discount~~amortized exit fee of $0.8 million and $0.8 million as of ~~March 31,~~September 30, 2022 and December 31, 2021, respectively. The Company’s loans individually evaluated for impairment represent loans on non-accrual status and the unamortized amounts associated with these loans are not currently being amortized into income.

(2)	The carrying value of these loans includes unamortized discounts, premiums, deferred fees and costs totaling net ~~discounts~~premiums (discounts) of ~~$0.2~~$0.3 million and ~~$0.2~~($0.2) million as of ~~March 31,~~September 30, 2022 and December 31, 2021, respectively.

(3)

During the three and nine months ended September 30, 2022, the Company sold its available-for-sale securities and recognized a gain of $2.9 million, which is recorded in “Other income” in the Company’s consolidated statements of operations. Available-for-sale debt securities ~~are~~were evaluated for impairment under ASC 326-30 – Financial Instruments-Credit Losses.

Credit Characteristics—As part of the Company’s process for monitoring the credit quality of its loans, it performs a quarterly loan portfolio assessment and assigns risk ratings to each of its performing loans. Risk ratings, which range from 1 (lower risk) to 5 (higher risk), are based on judgments which are inherently uncertain, and there can be no assurance that actual performance will be similar to current expectation. The Company designates loans as non-performing at such time as: (1) interest payments become 90 days delinquent; (2) the loan has a maturity default; or (3) management determines it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan. All non-performing loans are placed on non-accrual status and income is only recognized in certain cases upon actual cash receipt.

1720

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Table of Contents

from 1 (lower risk) to 5 (higher risk), are based on judgments which are inherently uncertain, and there can be no assurance that actual performance will be similar to current expectation. The Company designates loans as non-performing at such time as: (1) interest payments become 90 days delinquent; (2) the loan has a maturity default; or (3) management determines it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan. All non-performing loans are placed on non-accrual status and income is only recognized in certain cases upon actual cash receipt.

The Company’s amortized cost basis in performing senior mortgages, corporate/partnership loans and subordinate mortgages, presented by year of origination and by credit quality, as indicated by risk rating, as of ~~March 31,~~September 30, 2022 were as follows ($ in thousands):


	Year of Origination														Year of Origination
	2022		2021		2020		2019		2018		Prior to 2018		Total		2022		2021		2020		2019		2018		Prior to 2018		Total
Senior mortgages
Risk rating
1.0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	—	$	—	$	—	$	—	$	—	$	—	$	—
1.5		0		0		0		0		0		0		0		—		—		—		—		—		—		—
2.0		0		0		0		0		11,899		0		11,899		—		—		—		—		—		—		—
2.5		0		0		0		0		52,336		0		52,336		—		—		—		—		—		—		—
3.0		0		0		0		0		62,912		2,826		65,738		—		—		—		—		65,559		—		65,559
3.5		0		0		0		0		11,203		0		11,203		—		—		—		—		6,750		—		6,750
4.0		0		0		0		0		0		0		0		—		—		—		—		—		—		—
4.5		0		0		0		0		0		0		0		—		—		—		—		—		—		—
5.0		0		0		0		0		0		0		0		—		—		—		—		—		—		—
Subtotal⁽¹⁾	$	0	$	0	$	0	$	0	$	138,350	$	2,826	$	141,176	$	—	$	—	$	—	$	—	$	72,309	$	—	$	72,309
Subordinate mortgages
Risk rating
1.0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	—	$	—	$	—	$	—	$	—	$	—	$	—
1.5		0		0		0		0		0		0		0		—		—		—		—		—		—		—
2.0		0		0		0		0		0		0		0		—		—		—		—		—		—		—
2.5		0		0		0		0		0		0		0		—		—		—		—		—		—		—
3.0		0		0		0		0		0		12,670		12,670		—		—		—		—		—		13,107		13,107
3.5		0		0		0		0		0		0		0		—		—		—		—		—		—		—
4.0		0		0		0		0		0		0		0		—		—		—		—		—		—		—
4.5		0		0		0		0		0		0		0		—		—		—		—		—		—		—
5.0		0		0		0		0		0		0		0		—		—		—		—		—		—		—
Subtotal	$	0	$	0	$	0	$	0	$	0	$	12,670	$	12,670	$	—	$	—	$	—	$	—	$	—	$	13,107	$	13,107
Total	$	0	$	0	$	0	$	0	$	138,350	$	15,496	$	153,846	$	—	$	—	$	—	$	—	$	72,309	$	13,107	$	85,416

(1)	As of ~~March 31,~~September 30, 2022, excludes ~~$59.6~~$61.2 million for 1one loan on non-accrual status.

The Company’s amortized cost basis in loans, aged by payment status and presented by class, was as follows ($ in thousands):


			Less Than		Greater								Less Than		Greater
			or Equal		Than		Total						or Equal		Than		Total
	Current		to 90 Days		90 Days		Past Due		Total		Current		to 90 Days		90 Days		Past Due		Total
As of March 31, 2022
As of September 30, 2022
Senior mortgages	$	141,176	$	0	$	59,642		59,642	$	200,818	$	72,309	$	—	$	61,159		61,159	$	133,468
Subordinate mortgages		12,670		0		0		0		12,670		13,107		—		—		—		13,107
Total	$	153,846	$	0	$	59,642	$	59,642	$	213,488	$	85,416	$	—	$	61,159	$	61,159	$	146,575
As of December 31, 2021
Senior mortgages	$	139,968	$	0	$	59,640		59,640	$	199,608	$	139,968	$	—	$	59,640		59,640	$	199,608
Corporate/Partnership loans		618		0		0		0		618		618		—		—		—		618
Subordinate mortgages		12,457		0		0		0		12,457		12,457		—		—		—		12,457
Total	$	153,043	$	0	$	59,640	$	59,640	$	212,683	$	153,043	$	—	$	59,640	$	59,640	$	212,683

1821

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Table of Contents

Impaired Loans—The Company’s impaired loan was as follows ($ in thousands):


	As of March 31, 2022						As of December 31, 2021						As of September 30, 2022						As of December 31, 2021
			Unpaid						Unpaid						Unpaid						Unpaid
	Amortized		Principal		Related		Amortized		Principal		Related		Amortized		Principal		Related		Amortized		Principal		Related
	Cost		Balance		Allowance		Cost		Balance		Allowance		Cost		Balance		Allowance		Cost		Balance		Allowance
With an allowance recorded:
Senior mortgages⁽¹⁾	$	59,642	$	58,892	$	(591)	$	59,640	$	58,888	$	(576)	$	61,159	$	60,409	$	(717)	$	59,640	$	58,888	$	(576)
Total	$	59,642	$	58,892	$	(591)	$	59,640	$	58,888	$	(576)	$	61,159	$	60,409	$	(717)	$	59,640	$	58,888	$	(576)

(1)

The Company has 1one non-accrual loan as of ~~March 31,~~September 30, 2022 and December 31, 2021 that is considered impaired and included in the table above. The Company did 0tnot record any interest income on impaired loans for the three and nine months ended ~~March 31,~~September 30, 2022 and 2021.

Loans receivable held for sale—In March 2021, the Company acquired land and simultaneously structured and entered into with the seller a Ground Lease on which a multi-family project will be constructed. The Company funded $16.1 million at closing and the Ground Lease documents provided for future funding obligations to the Ground Lease tenant of approximately $11.9 million of deferred purchase price and $52.0 million of leasehold improvement allowance upon achievement of certain milestones. At closing, the Company entered into an agreement with SAFE pursuant to which, subject to certain conditions being met, SAFE would acquire the ground lessor entity from the Company. The Company determined that the transaction did not qualify as a sale leaseback transaction and recorded the Ground Lease in “Loans receivable held for sale” on the Company’s consolidated balance sheet. Subsequent to closing, the Company funded approximately $6.0 million of the deferred purchase price to the Ground Lease tenant. The Company sold the ground lessor entity (and SAFE assumed all future funding obligations to the Ground Lease tenant) to SAFE in September 2021 for $22.1 million and recorded 0no gain or loss on the sale.

In June 2021, the Company acquired a parcel of land for $42.0 million and simultaneously entered into a Ground Lease (refer to Note 5). The Company also concurrently entered into an agreement pursuant to which SAFE would acquire the Ground Lease from the Company. The Ground Lease was entered into with the seller of the land and did not qualify for sale leaseback accounting, and as such, was accounted for as a financing transaction and $42.0 million was recorded in “Loans receivable held for sale” on the Company’s consolidated balance sheet at the time of acquisition. In January 2022, the Company sold its loan receivable held for sale to the Ground Lease Plus Fund (refer to Note 8).

Other lending investments—Other lending investments includes the following securities ($ in thousands):

Net



Net

Amortized

Unrealized

Estimated

Carrying

Face Value

Cost Basis

Gain

Fair Value

Value
As of March 31, 2022










Available-for-Sale Securities










Municipal debt securities

$
23,640

$
23,640

$
1,224

$
24,864

$
24,864
Held-to-Maturity Securities



Debt securities

100,000

98,419

—

98,419

98,419
Total

$
123,640

$
122,059

$
1,224

$
123,283

$
123,283
As of December 31, 2021










Available-for-Sale Securities










Municipal debt securities

$
23,855

$
23,855

$
4,237

$
28,092

$
28,092
Held-to-Maturity Securities



Debt securities

100,000

96,838

—

96,838

96,838
Total

$
123,855

$
120,693

$
4,237

$
124,930

$
124,930


					Net				Net
			Amortized		Unrealized		Estimated		Carrying
	Face Value		Cost Basis		Gain (Loss)		Fair Value		Value
As of September 30, 2022
Held-to-Maturity Securities
Debt securities⁽¹⁾	$	32,938	$	32,938	$	—	$	32,938	$	32,938
Total	$	32,938	$	32,938	$	—	$	32,938	$	32,938
As of December 31, 2021
Available-for-Sale Securities
Municipal debt securities	$	23,855	$	23,855	$	4,237	$	28,092	$	28,092
Held-to-Maturity Securities
Debt securities		100,000		96,838		—		96,838		96,838
Total	$	123,855	$	120,693	$	4,237	$	124,930	$	124,930

(1)

During the nine months ended September 30, 2022, the Company received a $40.0 million repayment, reduced the maturity date by nine months to December 30, 2022 and recorded a $25.0 million provision in ‘Provision for (recovery of) loan losses” in its consolidated statements of operations on its debt security.

1922

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Table of Contents

As of ~~March 31,~~September 30, 2022, the contractual maturities of the Company’s securities were as follows ($ in thousands):


	Held-to-Maturity Debt Securities				Available-for-Sale Debt Securities				Held-to-Maturity Debt Securities				Available-for-Sale Debt Securities
	Amortized		Estimated		Amortized		Estimated		Amortized		Estimated		Amortized		Estimated
	Cost Basis		Fair Value		Cost Basis		Fair Value		Cost Basis		Fair Value		Cost Basis		Fair Value
Maturities
Within one year	$	0	$	0	$	0	$	0	$	32,938	$	32,938	$	—	$	—
After one year through 5 years		98,419		98,419		0		0		—		—		—		—
After 5 years through 10 years		0		0		0		0		—		—		—		—
After 10 years		0		0		23,640		24,864		—		—		—		—
Total	$	98,419	$	98,419	$	23,640	$	24,864	$	32,938	$	32,938	$	—	$	—

Note 8—Other Investments

The Company’s other investments and its proportionate share of earnings (losses) from equity method investments were as follows ($ in thousands):


					Earnings (Losses) from								Earnings (Losses) from				Earnings (Losses) from
	Carrying Value				Equity Method Investments				Carrying Value				Equity Method Investments				Equity Method Investments
	as of				For the Three Months Ended				as of				For the Three Months Ended				For the Nine Months Ended
	March 31,		December 31,		March 31,				September 30,		December 31,		September 30,				September 30,
	2022		2021		2022		2021		2022		2021		2022		2021		2022		2021
Real estate equity investments
Safehold Inc. ("SAFE")⁽¹⁾	$	1,388,657	$	1,168,532	$	17,029	$	11,412
SAFE⁽¹⁾									$	1,459,476	$	1,168,532	$	42,800	$	73,475	$	74,549	$	94,590
Ground Lease Plus Fund		64,548		17,630		769		—		65,793		17,630		725		—		2,014		—
Other real estate equity investments(2)		43,441		44,349		3,611		(602)		33,808		44,349		12,365		11,965		19,749		9,902
Subtotal		1,496,646		1,230,511		21,409		10,810		1,559,077		1,230,511		55,890		85,440		96,312		104,492
Other strategic investments⁽²⁾⁽³⁾		29,373		66,770		3,623		958		46,191		66,770		1,907		2,355		5,910		6,169
Total	$	1,526,019	$	1,297,281	$	25,032	$	11,768	$	1,605,268	$	1,297,281	$	57,797	$	87,795	$	102,222	$	110,661

(1)

As of ~~March 31,~~September 30, 2022, the Company owned ~~40.1~~40.3 million shares of SAFE common stock which, based on the closing price of ~~$55.45~~$26.46 on ~~March 31,~~September 30, 2022, had a market value of ~~$2.2~~$1.1 billion. Pursuant to ASC 323-10-40-1, an equity method investor shall account for a share issuance by an investee as if the investor had sold a proportionate share of its investment. Any gain or loss to the investor resulting from an investee’s share issuance shall be recognized in earnings. For the three months ended ~~March 31,~~September 30, 2021, equity in earnings includes a dilution gain of $60.2 million resulting from a SAFE equity offering. For the nine months ended September 30, 2022 and 2021, equity in earnings includes dilution gains of $0.9 million and ~~$0.5~~$60.7 million, respectively, resulting from SAFE equity offerings.

(2)

During the three and nine months ended ~~March 31,~~September 30, 2022, one of the Company’s real estate equity investments closed on the sale of a multifamily property. The Company received a distribution of $15.9 million from the sale and recognized a gain of $11.5 million in “Earnings from equity method investments” in the Company’s consolidated statements of operations.

(3)

During the three and nine months ended September 30, 2021, the Company identified observable price changes in an equity security held by the Company as evidenced by orderly private issuances of similar securities by the same issuer. In accordance with ASC 321 – Investments – Equity Securities, the Company remeasured its equity investment at fair value and recognized a mark-to-market ~~gain~~gains of ~~$5.1~~$14.0 million and $19.1 million, respectively, in “Other income” in the Company’s consolidated statements of operations. The Company’s equity security was redeemed at its carrying value in the fourth quarter of 2021.

Safehold Inc.—Refer to Note 1 – Merger with Safehold Inc.

SAFE is a publicly-traded company formed by the Company primarily to acquire, own, manage, finance and capitalize ground leases. Ground leases generally represent ownership of the land underlying commercial real estate projects that is net leased by the fee owner of the land to the owners/operators of the real estate projects built thereon (“Ground Leases”). During the ~~three~~nine months ended ~~March 31,~~September 30, 2022, the Company purchased 0.2 million shares of SAFE's common stock for $10.5 million, for an average cost of $66.83 per share, in open market purchases made in accordance with Rules 10b5-1 and 10b-18 under the Securities and Exchange Act of 1934, as amended. In March 2022, the Company

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Table of Contents

acquired 3,240,000 shares of SAFE’s common stock in a private placement for $191.2 million. As of ~~March 31,~~September 30, 2022, the Company owned approximately ~~64.7%~~64.8% of SAFE’s common stock outstanding.

In January 2019, the Company purchased 12.5 million newly designated limited partnership units (the “Investor Units”) in SAFE’s operating partnership (“SAFE OP”), at a purchase price of $20.00 per unit, for a total purchase price of $250.0 million. In May 2019, after the approval of SAFE’s shareholders, the Investor Units were exchanged for shares of SAFE’s common stock on a ~~1-for-one~~one-for-one basis. Following the exchange, the Investor Units were retired.

~~iStar Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~(unaudited)~~

~~Table of Contents~~

In connection with the Company’s purchase of the Investor Units, it entered into a Stockholder’s Agreement with SAFE on January 2, 2019. The Stockholder’s Agreement:

●

limits the Company’s discretionary voting power to 41.9% of the outstanding voting power of SAFE’s common stock until its aggregate ownership of SAFE common stock is less than 41.9%;

●

~~subjects the Company to certain standstill provisions;~~ and

●

provides the Company certain preemptive rights.

A wholly-owned subsidiary of the Company is the external manager of SAFE and is entitled to a management fee. In addition, the Company is also the external manager of a venture in which SAFE is a member. Following are the key terms of the management agreement with SAFE:

●

The Company receives a fee equal to 1.0% of total SAFE equity (as defined in the management agreement) up to $1.5 billion; 1.25% of total SAFE equity (for incremental equity of $1.5 billion - $3.0 billion); 1.375% of total SAFE equity (for incremental equity of $3.0 billion - $5.0 billion); and 1.5% of total SAFE equity (for incremental equity over $5.0 billion);

●

Fee to be paid in cash or in shares of SAFE common stock, at the discretion of SAFE’s independent directors;

●

The stock is locked up for two years, subject to certain restrictions;

●

There is no additional performance or incentive fee;

●

The management agreement is non-terminable by SAFE through June 30, 2023, except for cause; and

●

Automatic annual renewals thereafter, subject to non-renewal upon certain findings by SAFE’s independent directors and payment of termination fee equal to 3three times the prior year’s management fee.

During the three months ended ~~March 31,~~September 30, 2022 and 2021, the Company recorded ~~$4.5~~$5.3 million and ~~$3.5~~$3.6 million, respectively, of management fees pursuant to its management agreement with SAFE. During the nine months ended September 30, 2022 and 2021, the Company recorded $15.0 million and $10.6 million, respectively, of management fees pursuant to its management agreement with SAFE.

The Company is also entitled to receive certain expense reimbursements, including for the allocable costs of its personnel that perform certain legal, accounting, due diligence tasks and other services that third-party professionals or outside consultants otherwise would perform. Historically, pursuant to the Company’s option under the management agreement, the Company has elected to not seek reimbursement for certain expenses. This historical election is not a waiver of reimbursement for similar expenses in future periods and the Company has started to elect to seek, and may further seek in the future, reimbursement of such additional expenses that it has not previously sought, including, without limitation, rent, overhead and certain personnel costs.

During the three months ended ~~March 31,~~September 30, 2022 and 2021, the Company recognized $3.1 million and $1.9 million, respectively, of expense reimbursements pursuant to its management agreement with SAFE. During the nine months ended

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Table of Contents

September 30, 2022 and 2021, the Company recognized $9.4 million and $5.6 million, respectively, of expense reimbursements pursuant to its management agreement with SAFE.

The Company has an exclusivity agreement with SAFE pursuant to which it agreed, subject to certain exceptions, that it will not acquire, originate, invest in, or provide financing for a third party’s acquisition of, a Ground Lease unless it has first offered that opportunity to SAFE and a majority of its independent directors has declined the opportunity.

Following is a list of investments that the Company has transacted with SAFE for the periods presented, all of which were approved by the Company’s and SAFE’s independent ~~directors, for the periods presented:~~directors:

~~iStar Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~(unaudited)~~

~~Table of Contents~~

In October 2017, the Company closed on a 99-year Ground Lease and a $80.5 million construction financing commitment to support the ground-up development of a to-be-built luxury multi-family project. The transaction included a combination of: (i) a newly created Ground Lease and a $7.2 million leasehold improvement allowance, which was fully funded; and (ii) an $80.5 million leasehold first mortgage. The Company sold the Ground Lease to SAFE in September 2020 for $34.0 million and in January 2021 sold the leasehold first mortgage to an entity in which the Company has a 53% noncontrolling equity interest (refer to “Other strategic investments” below) for $63.3 million.

In June 2020, Net Lease Venture II (see ~~below)~~Note 3) acquired the leasehold interest in an office laboratory property in Honolulu, HI and simultaneously entered into a 99-year Ground Lease with SAFE. In November 2021, the Company acquired the property from Net Lease Venture II. The Company paid $0.6 million to its partner to acquire its equity interest in the property and assumed a $44.4 million mortgage on the property. The Company sold the property in the first quarter of 2022. Prior to the sale, SAFE paid $0.3 million to terminate a purchase option that allowed the Company to purchase the land at the expiration of the Ground Lease.

In February 2021, the Company provided a $50.0 million loan to the ground lessee of a Ground Lease originated at SAFE. The loan was for the Ground Lease tenant’s recapitalization of a hotel property. The Company received $1.9 million of consideration from SAFE in connection with this transaction. The Company sold the loan in July 2021 and recorded 0no gain or loss on the sale.

In March 2021, the Company acquired land and simultaneously structured and entered into with the seller a Ground Lease on which a multi-family project will be constructed. At closing, the Company entered into an agreement with SAFE pursuant to which, subject to certain conditions being met, SAFE would acquire the ground lessor entity from the Company. The Company sold the ground lessor entity to SAFE in September 2021 and recognized 0no gain or loss on the sale (refer to Note 7 - Loans receivable held for sale). The Company also committed to provide a $75.0 million construction loan to the Ground Lease tenant. The Company received $2.7 million of consideration from SAFE in connection with this transaction. In September 2021, the construction loan commitment and the $2.7 million of consideration was transferred to the Loan Fund (refer to “Other strategic investments” below).

In June 2021, the Company sold to SAFE its rights under a purchase option agreement for $1.2 million. The Company had previously acquired such purchase option agreement from a third-party property owner for $1.0 million and incurred $0.2 million of expenses. Under the option agreement, upon certain conditions being met by an outside developer who may become the Ground Lease tenant, SAFE has the right to acquire for $215.0 million a property and hold a Ground Lease under approximately 1.1 million square feet of office space that may be developed on the property. ~~NaN~~No gain or loss was recognized by the Company as a result of the sale.

In June 2021, the Company and SAFE entered into 2two agreements pursuant to each of which SAFE would acquire land and a related Ground Lease originated by the Company when certain construction related conditions are met by a specified time period. The purchase price to be paid for each is $42.0 million, plus an amount necessary for the Company to achieve the greater of a 1.25x multiple and a 9% return on its investment. In addition, each Ground Lease provides for a leasehold improvement allowance up to a maximum of $83.0 million, which obligation would be assumed by SAFE upon acquisition. If certain construction conditions are not met within a specified time period, SAFE will have no obligation to acquire the Ground Leases or fund the leasehold improvement allowances. In January 2022, the Company

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Table of Contents

sold the Ground Leases to the Ground Lease Plus Fund (see below). There can be no assurance that the conditions to closing will be satisfied and that SAFE will acquire the properties and Ground Leases from the Ground Lease Plus Fund.

In November 2021, the Company and SAFE entered into an agreement pursuant to which SAFE would acquire land and a related Ground Lease originated by the Company when certain construction related conditions are met by a specified time period. The purchase price to be paid is $33.3 million, plus an amount necessary for the Company to achieve the greater of a 1.25x multiple and a 12% return on its investment. In addition, the Ground Lease provides for a leasehold improvement allowance up to a maximum of $51.8 million, which obligation would be assumed by SAFE upon acquisition. If certain construction conditions are not met within a specified time period, SAFE will have no obligation to acquire the Ground Lease or fund the leasehold improvement allowance. There can be no assurance that the conditions to

~~iStar Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~(unaudited)~~

~~Table of Contents~~

closing will be satisfied and that SAFE will acquire the land and Ground Lease from the Ground Lease Plus Fund (refer to Ground Lease Plus Fund below).

In December 2021, the Company’s partner in a venture recapitalized an existing multifamily property, which included a Ground Lease provided by SAFE. As part of the recapitalization, the Company’s partner acquired its 50% equity interest in the entity and the mezzanine loan held by the Company was repaid in full. During the three and nine months ended ~~March 31,~~September 30, 2021, the Company recorded $0.6 million and $1.7 million, respectively, of interest income on the mezzanine loan.

In January 2022, the Company and SAFE entered into an agreement pursuant to which SAFE would acquire land and a related Ground Lease originated by the Company when certain construction related conditions are met. The ~~purchase price~~Company sold the Ground Lease to ~~be paid is a maximum of~~SAFE in July 2022 for $36.0 million ~~(refer to Note 5), plus an amount necessary for~~when the ~~Company to achieve the greater~~construction related conditions were met and recognized a gain of ~~a 1.05x multiple and a 10% return on~~$1.0 million in “Income from sales of real estate” in its ~~investment. There can be no assurance that the conditions to closing will be satisfied and that SAFE will acquire the land and Ground Lease from the Company.~~consolidated statements of operations.

In February 2022, the Loan Fund (refer to Other Strategic Investments below) committed to provide a $130.0 million loan to the ground lessee of a Ground Lease originated at SAFE. The loan is for the Ground Lease tenant’s recapitalization of a life science ~~office~~ property. The Loan Fund received $9.0 million of consideration from SAFE in connection with this transaction.

In April 2022, the Company exchanged its 50% equity interest with a carrying value of $4.4 million in a venture that owned a hotel property for land underlying the property with an in-place Ground Lease valued at $9.0 million and recorded a gain of $4.6 million in “Earnings from equity method investments” in the consolidated statements of operations. Subsequently, the Company sold the Ground Lease on the land to SAFE for $9.0 million and did not recognize any gain or loss on the sale.

In June 2022, the Loan Fund (refer to Other Strategic Investments below) committed to provide a $105.0 million loan to the ground lessee of a Ground Lease originated at SAFE. The loan is for the Ground Lease tenant’s recapitalization of a mixed-use property. The Loan Fund received $5.0 million of consideration from SAFE in connection with this transaction.

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Table of Contents

Ground Lease Plus Fund—The Company formed and manages an investment fund that targets the origination and acquisition of Ground Leases for commercial real estate projects that are in a pre-development phase (the “Ground Lease Plus Fund”). The Company owns a 53% noncontrolling equity interest in the Ground Lease Plus Fund. The Company does not have a controlling interest in the Ground Lease Plus Fund due to the substantive participating rights of its partner and accounts for this investment as an equity method investment. In addition, the Ground Lease Plus Fund has first look rights through December 2023 on qualifying pre-development projects that SAFE has elected to not originate.

In November 2021, the Company acquired land for $33.3 million and simultaneously structured and entered into a Ground Lease on which a multi-family project will be constructed. In December 2021, the Company sold the Ground Lease to the Ground Lease Plus Fund and recognized no gain or loss on the sale. The Company and SAFE entered into an agreement pursuant to which SAFE would acquire the land and related Ground Lease from the Ground Lease Plus Fund when certain construction related conditions are met by a specified time period (refer to “Safehold Inc.” above).

In January 2022, the Company sold 2two Ground Leases to the Ground Lease Plus Fund (refer to Note 5) and recognized an aggregate $0.5 million of gains in “Income from sales of real estate” on the sale. The Company and SAFE entered into an agreement pursuant to which SAFE would acquire the land properties and related Ground Leases from the Ground Lease Plus Fund when certain construction related conditions are met by a specified time period (refer to “Safehold Inc.” above).

In November 2021, the Company acquired land for $33.3 million and simultaneously structured and entered into a Ground Lease on which a multi-family project will be constructed. In December 2021, the Company sold the Ground Lease to the Ground Lease Plus Fund and recognized 0 gain or loss on the sale. The Company and SAFE entered into an agreement pursuant to which SAFE would acquire the land and related Ground Lease from the Ground Lease Plus Fund when certain construction related conditions are met by a specified time period (refer to “Safehold Inc.” above).

Other real estate equity investments—As of ~~March 31,~~September 30, 2022, the Company’s other real estate equity investments include equity interests in real estate ventures ranging from 48% to 95%, comprised of investments of ~~$43.2~~$33.8 million in operating ~~properties and $0.2 million in land assets.~~properties. As of December 31, 2021, the Company’s other real estate equity investments included $43.3 million in operating properties and $1.1 million in land assets.

Other strategic investments—As of ~~March 31,~~September 30, 2022 and December 31, 2021, the Company also had investments in real estate related funds and other strategic investments in real estate entities.

In January 2021, the Company sold 2two loans for $83.4 million to a newly formed entity in which the Company owns a 53.0% noncontrolling equity interest (the “Loan Fund”). The Company did 0tnot recognize any gain or loss on the sales. In September 2021, the Company transferred a $75.0 million construction loan commitment to the Loan Fund. The Company does not have a controlling interest in the Loan Fund due to the substantive participating rights of its partner. The Company accounts for this investment as an equity method investment and receives a fixed annual fee in exchange for managing the entity.

~~iStar Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~(unaudited)~~

~~Table of Contents~~

In February 2022, the Loan Fund committed to provide a $130.0 million loan to the ground lessee of a Ground Lease originated at SAFE. The loan was for the Ground Lease tenant’s recapitalization of a life science ~~office~~ property.

In June 2022, the Loan Fund committed to provide a $105.0 million loan to the ground lessee of a Ground Lease originated at SAFE. The loan was for the Ground Lease tenant’s recapitalization of a mixed-use property.

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Table of Contents

Summarized investee financial information—The following table presents the investee level summarized financial information for the Company’s equity method investment that was significant as of ~~March 31,~~September 30, 2022 ($ in thousands):


	Revenues		Expenses		Net Income Attributable to Parent		Revenues		Expenses		Net Income Attributable to SAFE⁽¹⁾
For the Three Months Ended March 31, 2022
For the Nine Months Ended September 30, 2022
SAFE	$	60,363	$	37,732	$	24,873	$	196,943	$	136,517	$	113,628

For the Three Months Ended March 31, 2021
For the Nine Months Ended September 30, 2021
SAFE	$	43,507	$	27,174	$	16,908	$	135,001	$	88,585	$	51,844

(1)	Net Income Attributable to SAFE also includes gain on sale of net investment in leases, earnings from equity method investments, loss on early extinguishment of debt and selling profit from sales-type leases.

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Table of Contents

Note 9—Other Assets and Other Liabilities

Deferred expenses and other assets, net, consist of the following items ($ in thousands):⁽¹⁾


	As of				As of
	March 31, 2022		December 31, 2021		September 30, 2022		December 31, 2021
Intangible assets, net⁽²⁾	$	1,156	$	1,209
Other assets⁽²⁾					$	20,048	$	16,040
Operating lease right-of-use assets⁽³⁾						17,104		20,437
Restricted cash		51,047		54,395		5,375		54,395
Operating lease right-of-use assets⁽³⁾		19,349		20,437
Other assets⁽⁴⁾		19,444		16,040
Other receivables		3,648		5,054		4,962		5,054
Corporate furniture, fixtures and equipment, net⁽⁴⁾						1,575		1,852
Leasing costs, net⁽⁵⁾		789		818		646		818
Corporate furniture, fixtures and equipment, net⁽⁶⁾		1,832		1,852
Intangible assets, net⁽⁶⁾						334		1,209
Deferred financing fees, net		417		629		—		629
Deferred expenses and other assets, net	$	97,682	$	100,434	$	50,044	$	100,434

(1)	Certain items have been reclassified to “Real estate and other assets available and held for sale and classified as discontinued operations” (refer to Note 3).

(2)

~~Intangible~~Other assets ~~net~~primarily includes ~~above market and in-place lease~~prepaid expenses, deposits for certain real estate assets and ~~lease incentives related~~management fees and expense reimbursements due from SAFE (refer to the acquisition of real estate assets. Accumulated amortization on intangible assets, net was $9.2 million and $10.2 million as of March 31, 2022 and December 31, 2021, respectively. These intangible lease assets are amortized over the remaining term of the lease. ~~The amortization expense for in-place leases was $0.6~~ ~~million for the three months ended March 31, 2021.~~ This amount is included in “Depreciation and amortization” in the Company’s consolidated statements of operations. As of March 31, 2022, the weighted average remaining amortization period for the Company’s intangible assets was approximately 5.6 years.Note 8).

(3)

Right-of-use lease assets relate primarily to the Company’s leases of office space. Right-of use lease assets initially equal the lease liability. For operating leases, rent expense is recognized on a straight-line basis over the term of the lease and is recorded in “General and administrative” and “Real estate expense” in the Company’s consolidated statements of operations. During the three months ended ~~March 31,~~September 30, 2022 and 2021, the Company recognized $1.2 million and $1.2 million, respectively, in "General and administrative" and $0.1 million and $0.2 million, respectively, in "Real estate expense" in its consolidated statements of operations relating to operating leases. During the nine months ended September 30, 2022 and 2021, the Company recognized $3.6 million and $3.7 million, respectively, in "General and administrative" and $0.5 million and $0.5 million, respectively, in "Real estate expense" in its consolidated statements of operations relating to operating leases.

(4)

~~Other assets primarily includes prepaid expenses, deposits for certain real estate assets~~Accumulated depreciation on corporate furniture, fixtures and ~~management fees~~equipment was $12.2 million and ~~expense reimbursements due from SAFE (refer to Note 8).~~$14.8 million as of September 30, 2022 and December 31, 2021, respectively.

(5)	Accumulated amortization of leasing costs was ~~$0.9~~$0.5 million and $1.1 million as of ~~March 31,~~September 30, 2022 and December 31, 2021, respectively.

(6)

Intangible assets, net includes above market and in-place lease assets and lease incentives related to the acquisition of real estate assets. Accumulated ~~depreciation~~amortization on ~~corporate furniture, fixtures and equipment~~intangible assets, net was ~~$14.9~~$0.1 million and ~~$14.8~~$10.2 million as of ~~March 31,~~September 30, 2022 and December 31, 2021, respectively. These intangible lease assets are amortized over the remaining term of the lease. The amortization expense for in-place leases for the three and nine months ended September 30, 2021 was $0.3 million and $0.9 million, respectively. This amount is included in “Depreciation and amortization” in the Company’s consolidated statements of operations. As of September 30, 2022, the weighted average remaining amortization period for the Company’s intangible assets was approximately 5.2 years.

Accounts payable, accrued expenses and other liabilities consist of the following items ($ in thousands):


	As of
	September 30, 2022		December 31, 2021
Accrued expenses	$	70,428	$	151,810
Accrued interest payable		24,575		31,293
Other liabilities⁽¹⁾		26,867		30,362
Operating lease liabilities (see table above)		19,006		23,267
Accounts payable, accrued expenses and other liabilities	$	140,876	$	236,732

(1)	As of September 30, 2022 and December 31, 2021, other liabilities includes $21.0 million and $20.1 million, respectively, of deferred income. As of December 31, 2021, other liabilities includes $0.1 million of expected credit losses for unfunded loan commitments.

2429

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Table of Contents

~~Accounts payable, accrued expenses and other liabilities consist of the following items ($ in thousands):~~

As of

March 31, 2022

December 31, 2021

Other liabilities⁽¹⁾

$
35,565

30,362

Accrued expenses

115,461

151,810

Operating lease liabilities (see table above)

21,809

23,267

Accrued interest payable

26,051

31,293

Accounts payable, accrued expenses and other liabilities

$
198,886

$
236,732

~~(1)~~

As of March 31, 2022 and December 31, 2021, other liabilities includes $20.8 million and $20.1 million, respectively, of deferred income. As of March 31, 2022 and December 31, 2021, other liabilities includes $0.1 million and $0.1 million, respectively, of expected credit losses for unfunded loan commitments.

Note 10—Debt Obligations, net

The Company’s debt obligations were as follows ($ in thousands):


	Carrying Value as of				Stated		Scheduled	Carrying Value as of				Stated		Scheduled
	March 31, 2022		December 31, 2021		Interest Rates		Maturity Date	September 30, 2022		December 31, 2021		Interest Rates		Maturity Date
Secured credit facilities:
Revolving Credit Facility	$	0	$	0	LIBOR + 2.00	% ⁽¹⁾	September 2022	$	—	$	—	LIBOR + 2.00	% ⁽¹⁾	—
Senior Term Loan		0		491,875	LIBOR + 2.75	% ⁽²⁾	—		—		491,875	LIBOR + 2.75	% ⁽²⁾	—
Total secured credit facilities		0		491,875					—		491,875
Unsecured notes:
3.125% senior convertible notes⁽³⁾		287,500		287,500	3.125	%	September 2022		—		287,500	3.125	%	—
4.75% senior notes⁽⁴⁾		775,000		775,000	4.75	%	October 2024		753,561		775,000	4.75	%	October 2024
4.25% senior notes⁽⁵⁾		550,000		550,000	4.25	%	August 2025		501,997		550,000	4.25	%	August 2025
5.50% senior notes⁽⁶⁾		400,000		400,000	5.50	%	February 2026		346,906		400,000	5.50	%	February 2026
Total unsecured notes		2,012,500		2,012,500					1,602,464		2,012,500
Other debt obligations:
Trust preferred securities		100,000		100,000	LIBOR + 1.50	%	October 2035		100,000		100,000	LIBOR + 1.50	%	October 2035
Total debt obligations		2,112,500		2,604,375					1,702,464		2,604,375
Debt discounts and deferred financing costs, net		(28,248)		(32,201)					(21,756)		(32,201)
Total debt obligations, net⁽⁷⁾	$	2,084,252	$	2,572,174				$	1,680,708	$	2,572,174

(1)

The Revolving Credit Facility ~~bears~~accrued interest at the Company’s election of either: (i) a base rate, which is the greater of (a) prime, (b) federal funds plus 0.50% or (c) LIBOR plus 1.0% and subject to a margin ranging from 1.00% to 1.50%; or (ii) LIBOR subject to a margin ranging from 2.00% to 2.50%. ~~At maturity,~~The Company terminated the ~~Company may convert outstanding borrowings to a one year term loan which matures~~Revolving Credit Facility in ~~quarterly installments through September 2023.~~August 2022.

(2)	The loan accrued interest at the Company’s election of either: (i) a base rate, which is the greater of (a) prime, (b) federal funds plus 0.50% or (c) LIBOR plus 1.0% and subject to a margin of 1.75%; or (ii) LIBOR subject to a margin of 2.75%.

(3)

The Company’s 3.125% senior convertible fixed rate notes due September 2022 (“3.125% Convertible Notes”) are convertible at the option of the holders (refer to Note 18) at any time prior to the close of business on the business day immediately preceding September 15, 2022. The conversion rate as of March 31, 2022 was 72.3126 shares per $1,000 principal amount of 3.125% Convertible Notes, which equals a conversion price of $13.83 per share. The conversion rate is subject to adjustment from time to time for specified events. Upon conversion, the Company will pay or deliver, as the case may be, a combination of cash and shares of its common stock. During ~~both~~ the three months ended ~~March 31,~~September 30, 2022 and 2021, the Company recognized $0.3 million and $2.2 million, respectively, of contractual interest on the 3.125% Convertible Notes. During the nine months ended September 30, 2022 and 2021, the Company recognized $3.5 million and $6.7 million, respectively, of contractual interest on the 3.125% Convertible Notes.

(4)	The Company can prepay these senior notes without penalty beginning July 1, 2024.

(5)	The Company can prepay these senior notes without penalty beginning May 1, 2025.

(6)	The Company can prepay these senior notes without penalty beginning August 15, 2024.

(7)	The Company capitalized interest relating to development activities of $~~0.3~~0.4 million and $0.2 million during the three months ended ~~March 31,~~September 30, 2022 and 2021, respectively, and $1.1 million and $0.6 million during the nine months ended September 30, 2022 and 2021, respectively.

~~iStar Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~(unaudited)~~

~~Table of Contents~~

Future Scheduled Maturities—As of ~~March 31,~~September 30, 2022, future scheduled maturities of outstanding debt obligations are as follows ($ in thousands):

Unsecured Debt

Secured Debt

Total
2022 (remaining nine months)⁽¹⁾

$
287,500

$
0

$
287,500
2023

0

0

0
2024

775,000

0

775,000
2025

550,000

0

550,000
2026

400,000

0

400,000
Thereafter

100,000

0

100,000
Total principal maturities

2,112,500

0

2,112,500
Unamortized discounts and deferred financing costs, net

(28,248)

0

(28,248)
Total debt obligations, net

$
2,084,252

$
0

$
2,084,252

~~(1)~~

~~Refer to Note 18.~~


	Unsecured Debt		Secured Debt		Total
2022 (remaining three months)	$	—	$	—	$	—
2023		—		—		—
2024		753,561		—		753,561
2025		501,997		—		501,997
2026		346,906		—		346,906
Thereafter		100,000		—		100,000
Total principal maturities		1,702,464		—		1,702,464
Unamortized discounts and deferred financing costs, net		(21,756)		—		(21,756)
Total debt obligations, net	$	1,680,708	$	—	$	1,680,708

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Table of Contents

Senior Term Loan—The Company had a $650.0 million senior term loan (the “Senior Term Loan”) that accrued interest at LIBOR plus 2.75% per annum and matured in June 2023. The Senior Term Loan was secured by pledges of equity of certain subsidiaries that own a defined pool of assets. The Senior Term Loan permitted substitution of collateral, subject to overall collateral pool coverage and concentration limits, over the life of the facility. The Company repaid the Senior Term Loan in full in March 2022 using proceeds from the Net Lease Sale (refer to Note 3 - Net Lease Sale and Discontinued Operations). During the ~~three~~nine months ended ~~March 31,~~September 30, 2022, the Company incurred a “Loss on extinguishment of debt” of $1.4 million in connection with the repayment of the Senior Term Loan.

Revolving Credit Facility—The Company ~~has~~had a secured revolving credit facility with a maximum capacity of $350.0 million ~~that matures in~~and a maturity of September 2022 (the “Revolving Credit Facility”). The Company terminated the Revolving Credit Facility in August 2022. Outstanding borrowings under the Revolving Credit Facility ~~are~~were secured by pledges of the equity interests in the Company’s subsidiaries that own a defined pool of assets. Borrowings under this credit facility ~~bear~~accrued interest at a floating rate indexed to one of several base rates plus a margin which ~~adjusts~~adjusted upward or downward based upon the Company’s corporate credit rating, ranging from 1.0% to 1.5% in the case of base rate loans and from 2.0% to 2.5% in the case of LIBOR loans. In addition, there iswas an undrawn credit facility commitment fee that ranges from 0.25% to 0.45%, based on corporate credit ratings. At maturity, the Company may convert outstanding borrowings to a one year term loan which matures in quarterly installments through September 2023. As of March 31, 2022, based on the Company’s borrowing base of assets, the Company had the ability to draw $59.9 million without pledging any additional assets to the facility.

Unsecured Notes—As of ~~March 31,~~September 30, 2022, the Company has senior unsecured notes outstanding with varying fixed-rates and maturities ranging from ~~September 2022~~October 2024 to February 2026. In connection with the Net Lease Sale, in the fourth quarter 2021, the Company obtained the consents of holders of its outstanding 4.75% senior notes due 2024, 4.25% senior notes due 2025 and 5.50% senior notes due 2026 to certain amendments to the indentures governing the notes intended to align the indentures with the ~~potential~~ sale of the Company's net lease assets. The Company paid holders consent fees ranging from 0.75% to 1.00% of the principal amount of consenting notes, depending on the relevant series. The Company’s senior unsecured notes are interest only, are generally redeemable at the option of the Company and contain certain financial covenants (see below).

3.125% Senior Convertible Notes—In April 2022, the Company completed separate, privately-negotiated transactions with holders of $194 million aggregate principal amount of the Company's 3.125% Convertible Notes in which the noteholders exchanged their convertible notes with the Company for 13.75 million newly issued shares of the Company's common stock and aggregate cash payments of $14 million. The 3.125% Convertible Senior Notes received by the Company were retired. The Company recognized a net increase in shareholders’ equity of $180.6 million inclusive of a $118.1 million loss on extinguishment of debt in connection with these transactions.

In July and August 2022, the Company completed a series of privately-negotiated exchange transactions with holders of approximately $80.9 million aggregate principal amount of the Company's 3.125% Convertible Notes in which the noteholders exchanged their convertible notes with the Company for an aggregate of approximately 3.3 million newly issued shares of the Company's common stock and aggregate cash payments of approximately $43.6 million inclusive of accrued interest. The convertible notes received by the Company were retired. The Company recognized a net increase in shareholders’ equity of $38.2 million inclusive of a $12.1 million loss on extinguishment of debt in connection with these transactions.

In September 2022, the holders of approximately $11.7 million aggregate principal amount of the Company's 3.125% Convertible Notes executed their conversion rights under the notes and exchanged their convertible notes with the Company for an aggregate of approximately 92,011 newly issued shares of the Company's common stock and aggregate cash payments of approximately $11.7 million. The convertible notes received by the Company were retired. The Company also repaid $0.5 million principal amount of its 3.125% Convertible Notes for cash at maturity.

4.75% Senior Notes—In April 2022, the Company redeemed $7.1 million principal amount of its 4.75% senior notes due October 2024 for $7.2 million. The Company recognized a $0.2 million loss on extinguishment of debt in connection with these transactions. In July and August 2022, the Company redeemed an aggregate $14.4 million principal amount of its senior notes due October 2024 for $14.5 million. The Company recognized a $0.3 million net loss on extinguishment of debt in connection with these transactions.

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Table of Contents

5.50% Senior Notes—In June 2022, the Company redeemed $53.1 million principal amount of its 5.50% senior notes due February 2026 for $50.6 million. The Company recognized a $1.7 million net gain on extinguishment of debt in connection with these transactions.

4.25% Senior Notes— In August and September 2022, the Company redeemed an aggregate $48.0 million principal amount of its senior notes due August 2025 for $48.1 million. The Company recognized a $0.7 million loss on extinguishment of debt in connection with these transactions.

Debt Covenants—The Company’s outstanding unsecured debt securities contain corporate level covenants that include a covenant to maintain a ratio of unencumbered assets to unsecured indebtedness, as such terms are defined in the indentures governing the debt securities, of at least 1.3x and a covenant restricting certain incurrences of debt based on a fixed charge coverage ratio. If any of the Company’s covenants are breached and not cured within applicable cure periods, the breach could result in acceleration of its debt securities unless a waiver or modification is agreed upon with the requisite percentage of the bondholders.

~~iStar Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~(unaudited)~~

~~Table of Contents~~

The Company’s Revolving Credit Facility contains certain covenants, including covenants relating to collateral coverage, restrictions on fundamental changes, transactions with affiliates, matters relating to the liens granted to the lenders and the delivery of information to the lenders. The Revolving Credit Facility is secured by a borrowing base of assets and requires the Company to maintain both borrowing base asset value of at least 1.5x outstanding borrowings on the facility and a consolidated ratio of cash flow to fixed charges of at least 1.5x. The Revolving Credit Facility does not require that proceeds from the borrowing base be used to pay down outstanding borrowings provided the borrowing base asset value remains at least 1.5x outstanding borrowings on the facility. To satisfy this covenant, the Company has the option to pay down outstanding borrowings or substitute assets in the borrowing base. Under the Revolving Credit Facility the Company is permitted to pay dividends provided that no material default (as defined in the relevant agreement) has occurred and is continuing or would result therefrom and the Company remains in compliance with its financial covenants after giving effect to the dividend.

The Company’s Revolving Credit Facility contains cross default provisions that would allow the lenders to declare an event of default and accelerate the Company’s indebtedness to them if the Company fails to pay amounts due in respect of its other recourse indebtedness in excess of specified thresholds or if the lenders under such other indebtedness are otherwise permitted to accelerate such indebtedness for any reason. The indentures governing the Company’s unsecured public debt securities permit the bondholders to declare an event of default and accelerate the Company’s indebtedness to them if the Company’s other recourse indebtedness in excess of specified thresholds is not paid at final maturity or if such indebtedness is accelerated.

Note 11—Commitments and Contingencies

Unfunded Commitments—The Company generally funds construction and development loans and build-outs of space in real estate assets over a period of time if and when the borrowers and tenants meet established milestones and other performance criteria. The Company refers to these arrangements as Performance-Based Commitments. In addition, the Company has committed to invest capital in several real estate funds and other ventures. These arrangements are referred to as Strategic Investments.

As of ~~March 31,~~September 30, 2022, the maximum amount of fundings the Company may be required to make under each category, assuming all performance hurdles and milestones are met under the Performance-Based Commitments and that 100% of its capital committed to Strategic Investments is drawn down, are as follows ($ in thousands):


	Loans and Other								Loans and Other
	Lending		Real		Other				Lending		Real		Other
	Investments		Estate		Investments		Total		Investments		Estate		Investments		Total
Performance-Based Commitments	$	4,235	$	8,111	$	108,650	$	120,996	$	717	$	270	$	147,405	$	148,392
Strategic Investments		0		5,061		2,325		7,386		—		3,161		4,907		8,068
Total	$	4,235	$	13,172	$	110,975	$	128,382	$	717	$	3,431	$	152,312	$	156,460

2732

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Notes to Consolidated Financial Statements (Continued)

(unaudited)

Table of Contents

Other Commitments—Future minimum lease obligations under non-cancelable operating leases as of ~~March 31,~~September 30, 2022 are as follows ($ in thousands):⁽¹⁾


	Operating⁽¹⁾
2022 (remaining nine months)	$	4,929
2022 (remaining three months)			$	1,628
2023		6,295		6,295
2024		6,178		6,178
2025		6,166		6,166
2026		142		142
Thereafter		162		162
Total undiscounted cash flows		23,872		20,571
Present value discount⁽¹⁾		(2,063)		(1,565)
Lease liabilities	$	21,809	$	19,006

(1)

The lease liability equals the present value of the minimum rental payments due under the lease discounted at the rate implicit in the lease or the Company’s incremental secured borrowing rate for similar collateral. For operating leases, lease liabilities were discounted at the Company’s weighted average incremental secured borrowing rate for similar collateral estimated to be 4.7% and the weighted average remaining lease term is ~~4.4~~3.9 years. During the three months ended ~~March 31,~~September 30, 2022 and 2021, the Company made payments of ~~$1.7~~$1.6 million and $0.8 million, respectively, related to its operating leases and during the three months ended September 30, 2021 made payments of $1.3 million related to finance leases with SAFE. During the nine months ended September 30, 2022 and ~~$1.4~~2021, the Company made payments of $5.0 million and $2.1 million, respectively, related to its operating leases and $1.3 million and $4.1 million, respectively, related to finance leases with ~~SAFE~~ .SAFE.

Legal Proceedings—The Company and/or one or more of its subsidiaries is party to various pending litigation matters that are considered ordinary routine litigation incidental to the Company’s business as a finance and investment company focused on the commercial real estate industry, including foreclosure-related proceedings. The Company believes it is not a party to, nor are any of its properties the subject of, any pending legal proceeding that would have a material adverse effect on the Company’s consolidated financial statements.

Note 12—Derivatives

The Company’s use of derivative financial instruments has historically been limited to the utilization of interest rate swaps, interest rate caps and foreign exchange contracts. The principal objective of such financial instruments is to minimize the risks and/or costs associated with the Company’s operating and financial structure and to manage its exposure to interest rates and foreign exchange rates. The Company may have derivatives that are not designated as hedges because they do not meet the strict hedge accounting requirements. Although not designated as hedges, such derivatives are entered into to manage the Company’s exposure to interest rate movements and other identified risks.

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Notes to Consolidated Financial Statements (Continued)

(unaudited)

Table of Contents

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of September 30, 2022 and December 31, 2021 ($ in thousands):⁽¹⁾


	Derivative Liabilities
	Balance Sheet	Fair
As of September 30, 2022	Location	Value
Derivatives Designated in Hedging Relationships
Interest rate swaps	Liabilities associated with real estate held for sale and classified as discontinued operations	$	—
Total		$	—

As of December 31, 2021
Derivatives Designated in Hedging Relationships
Interest rate swaps	Liabilities associated with real estate held for sale and classified as discontinued operations	$	8,395
Total		$	8,395

(1)	Over the next 12 months, the Company expects that $2.4 million related to its proportionate share of cash flow hedges held by SAFE will be reclassified from “Accumulated other comprehensive income (loss)” as a decrease to earnings from equity method investments.

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Table of Contents

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of March 31, 2022 and December 31, 2021 ($ in thousands):⁽¹⁾

Derivative Liabilities

Balance Sheet

Fair
As of March 31, 2022

Location

Value
Derivatives Designated in Hedging Relationships

Interest rate swaps

Liabilities associated with real estate held for sale and classified as discontinued operations

$
0
Total



$
0

As of December 31, 2021




Derivatives Designated in Hedging Relationships




Interest rate swaps

Liabilities associated with real estate held for sale and classified as discontinued operations

$
8,395
Total



$
8,395

~~(1)~~

Over the next 12 months, the Company expects that $2.6 million related to its proportionate share of cash flow hedges held by SAFE will be reclassified from “Accumulated other comprehensive income (loss)” as a decrease to earnings from equity method investments.

The table below presents the effect of the Company’s derivative financial instruments, including the Company’s share of derivative financial instruments at certain of its equity method investments, in the consolidated statements of operations and the consolidated statements of comprehensive income (loss) ($ in thousands):

Amount of Gain

Location of Gain

(Loss) Recognized in

(Loss) Reclassified

Location of Gain

(Loss) Recognized in

(Loss) Reclassified

(Loss)

Accumulated Other

from Accumulated

(Loss)

Accumulated Other

from Accumulated

Derivatives Designated in

When Recognized in

Comprehensive

Other Comprehensive

When Recognized in

Comprehensive

Other Comprehensive

Hedging Relationships

Income

Income into Earnings

Income

Income into Earnings

For the Three Months Ended March 31, 2022

For the Three Months Ended September 30, 2022

Interest rate swaps

Earnings from equity method investments

2,755

(621)

Earnings from equity method investments

12,026

(562)

For the Three Months Ended March 31, 2021

For the Three Months Ended September 30, 2021

Interest rate swaps

Net income from discontinued operations

3,335

(2,104)

Net income from discontinued operations

273

(2,050)

Interest rate swaps

Earnings from equity method investments

8,638

(234)

Earnings from equity method investments

—

(633)

For the Nine Months Ended September 30, 2022

Interest rate swaps

Earnings from equity method investments

19,163

(1,763)

For the Nine Months Ended September 30, 2021

Interest rate swaps

Net income from discontinued operations

2,845

(6,183)

Interest rate swaps

Earnings from equity method investments

8,638

(1,324)

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Notes to Consolidated Financial Statements (Continued)

(unaudited)

Table of Contents

Note 13—Equity

Preferred Stock—The Company had the following series of Cumulative Redeemable Preferred Stock outstanding as of ~~March 31,~~September 30, 2022 and December 31, 2021:


				Cumulative Preferential Cash
				Dividends⁽¹⁾⁽²⁾
	Shares Issued
	and							Annual		Carrying
	Outstanding	Par		Liquidation		Rate per		Dividend		Value
Series	(in thousands)	Value		Preference⁽³⁾		Annum		per share		(in thousands)
D	4,000	$	0.001	$	25.00	8.00	%	$	2.00	$	89,041
G	3,200		0.001		25.00	7.65	%		1.91		72,664
I	5,000		0.001		25.00	7.50	%		1.88		120,785
Total	12,200									$	282,490

(1)

Holders of shares of the Series D, G and I preferred stock are entitled to receive dividends, when and as declared by the Company’s Board of Directors, out of funds legally available for the payment of dividends. Dividends are cumulative from the date of original issue and are payable quarterly in arrears on or before the 15th day of each March, June, September and December or, if not a business day, the next succeeding business day. Any dividend payable on the preferred stock for any partial dividend period will be computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends will be payable to holders of record as of the close of business on the first day of the calendar month in which the applicable dividend payment date falls or on another date designated by the Company’s Board of Directors for the payment of dividends that is not more than 30 nor less than 10 days prior to the dividend payment date.

(2)

The Company declared and paid dividends of ~~$2.0~~$6.0 million, ~~$1.5~~$4.6 million and ~~$2.3~~$7.0 million on its Series D, G and I Cumulative Redeemable Preferred Stock during both the ~~three~~nine months ended ~~March 31,~~September 30, 2022 and 2021. The character of the 2021 dividends was 100% capital gain distribution, of which 18.31% represented unrecaptured section 1250 gain.

(3)	The Company may, at its option, redeem the Series G and I Preferred Stock, in whole or in part, at any time and from time to time, for cash at a redemption price equal to 100% of the liquidation preference of $25.00 per share, plus accrued and unpaid dividends, if any, to the redemption date.

Dividends—To maintain its qualification as a REIT, the Company must annually distribute, at a minimum, an amount equal to 90% of its taxable income, excluding net capital gains, and must distribute 100% of its taxable income (including net capital gains) to eliminate corporate federal income taxes payable by the REIT. The Company has recorded NOLs and may record NOLs in the future, which may reduce its taxable income in future periods and lower or eliminate entirely the Company’s obligation to pay dividends for such periods in order to maintain its REIT qualification. As of December 31, ~~2020,~~2021, the Company had ~~$529.6~~$614.6 million of NOL carryforwards at the corporate REIT level that can generally be used to offset both ordinary taxable income and capital gain net income in future years. The NOL carryforwards will begin to expire in 2032 and will fully expire in 2036 if ~~unused. The amount~~unused, except for $154 million of NOL ~~carryforwards as of December 31, 2021 will be determined upon finalization of the Company’s 2021 tax return.~~which never expires. Because taxable income differs from cash flow from operations due to non-cash revenues and expenses (such as depreciation and certain asset impairments), in certain circumstances, the Company may generate operating cash flow in excess of its dividends, or alternatively, may need to make dividend payments in excess of operating cash flows. The Senior Term Loan ~~and the Revolving Credit Facility permit~~permits the Company to pay common dividends with no restrictions so long as the Company is not in default on any of its debt obligations. The Company declared common stock dividends of ~~$8.7~~$30.1 million, or ~~$0.125~~$0.375 per share, for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 and ~~$8.2~~$26.3 million, or ~~$0.11~~$0.36 per share, for the ~~three~~nine months ended ~~March 31,~~September 30, 2021. The character of the 2021 dividends was 100% capital gain distribution, of which 18.31% represented unrecaptured section 1250 gain.

Stock Repurchase Program—The Company may repurchase shares in negotiated transactions or open market transactions, including through one or more trading plans. The Company did not repurchase any shares of its common stock during the ~~three~~nine months ended ~~March 31,~~September 30, 2022. During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, the Company repurchased ~~0.7~~4.2 million shares of its outstanding common stock for ~~$12.4~~$91.9 million, for an average cost of ~~$17.20~~$21.70 per share. The Company is generally authorized to repurchase up to $50.0 million in shares of its common stock and in February 2022, the Company's Board of Directors authorized an increase to the stock repurchase program to $50.0 million. As of ~~March 31,~~September 30, 2022, the Company had remaining authorization to repurchase up to $50.0 million of common stock under its stock repurchase program.

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(unaudited)

Table of Contents

Accumulated Other Comprehensive Income (Loss)— “Accumulated other comprehensive income (loss)” reflected in the Company’s shareholders’ equity is comprised of the following ($ in thousands):


	As of				As of
	March 31, 2022		December 31, 2021		September 30, 2022		December 31, 2021
Unrealized gains on available-for-sale securities	$	1,224	$	4,237	$	—	$	4,237
Unrealized losses on cash flow hedges		(22,448)		(25,824)		(4,898)		(25,824)
Accumulated other comprehensive loss	$	(21,224)	$	(21,587)	$	(4,898)	$	(21,587)

Note 14—Stock-Based Compensation Plans and Employee Benefits

Stock-Based Compensation—The Company recorded stock-based compensation, ~~(income) expense,~~ including the expense related to performance incentive plans (see below), of ($~~12.4)~~0.4) million and ~~$5.5~~$3.0 million for the three months ended ~~March 31,~~September 30, 2022 and 2021, respectively, and ($30.7) million and $23.3 million for the nine months ended September 30, 2022 and 2021, respectively, in “General and administrative” in the Company’s consolidated statements of operations.

Performance Incentive Plans—The Company’s Performance Incentive Plans (“iPIP”) are designed to provide, primarily to senior executives and select professionals engaged in the Company’s investment activities, long-term compensation which has a direct relationship to the realized returns on investments included in the plans. Awards vest over six years, with 40% being vested at the end of the second year and 15% each year thereafter. As of ~~March 31,~~September 30, 2022, there are 5five iPIP Plans, each covering a two-year investment period beginning with the 2013-2014 Plan through the 2021-2022 Plan.

2019-2022 iPIP Plans—The Company’s 2019-2020 and 2021-2022 iPIP plans are equity-classified awards which are measured at the grant date fair value and recognized as compensation cost in “General and administrative” in the Company’s consolidated statements of operations and “Noncontrolling interests” in the Company’s consolidated statements of changes in equity over the requisite service period. Investments in the 2019-2022 iPIP plans are held by consolidated subsidiaries of the Company and have 2two ownership classes, class A units and class B units. The Company owns 100% of the class A units and the class B units were issued to employees as long-term compensation. Except for certain clawback provisions, participants can retain vested class B units upon their termination of employment with the Company. The class B units are entitled to distributions from the net cash realized from the investments in the plan after the Company, through its ownership of the class A units, has received a specified return on its invested capital and a return of its invested capital. Distributions on the class B units are also subject to reductions under a total shareholder return (“TSR”) adjustment. The fair value of the class B units was determined using a model that forecasts the underlying cash flows from the investments within the entity to which the class B units have ownership rights. During the ~~three~~nine months ended ~~March 31,~~September 30, 2022 and 2021, the Company recorded ~~$1.3~~$3.5 million and ~~$1.4~~$2.6 million, respectively, of expense related to the 2019-2022 iPIP plans. Distributions on the class B units are expected to be 50% in cash and 50% in shares of the Company’s common stock; provided, however, that (a) the cash portion will be increased if the Company does not have sufficient shares available under shareholder approved equity plans; and (b) if the principal remaining material asset in a plan is unsold SAFE shares, the Company may elect to distribute SAFE shares in lieu of cash and Company stock.

The following is a summary of the status of the Company’s equity-classified iPIP plans and changes during the ~~three~~nine months ended ~~March 31,~~September 30, 2022.


	iPIP Investment Pool		iPIP Investment Pool
	2019-2020	2021-2022	2019-2020	2021-2022
Points at beginning of period	95.20	84.75	95.20	84.75
Granted	0	7.95	—	7.95
Forfeited	0	(0.35)	—	(0.95)
Points at end of period	95.20	92.35	95.20	91.75

As of ~~March 31,~~September 30, 2022, investments with an aggregate gross book value of $764 million, including 26.7 million shares of SAFE common stock acquired by the Company, were attributable to the 2019-2020 Plan and investments with an

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Notes to Consolidated Financial Statements (Continued)

(unaudited)

Table of Contents

an aggregate gross book value of ~~$416~~$406 million, including 5.0 million shares of SAFE common stock acquired by the Company, were attributable to the 2021-2022 Plan.

2013-2018 iPIP Plans—The remainder of the Company’s iPIP plans, as shown in the table below, are liability-classified awards and are remeasured each reporting period at fair value until the awards are settled. Certain employees will be granted awards that entitle employees to receive the residual cash flows from the investments in the plans after the Company has received a specified return on its invested capital and a return of its invested capital. Awards are also subject to reductions under a TSR adjustment. The fair value of awards is determined using a model that forecasts the Company’s projected investment performance. Settlement of the awards will be 50% in cash and 50% in shares of the Company’s common stock or in shares of SAFE’s common stock owned by the Company.

The following is a summary of the status of the Company’s liability-classified iPIP plans and changes during the ~~three~~nine months ended ~~March 31,~~September 30, 2022.

iPIP Investment Pool


2013‑2014

2015‑2016

2017‑2018
Points at beginning of period

80.17

70.40

75.34
Granted

0

0

0
Points at end of period

80.17

70.40

75.34


	iPIP Investment Pool
	2013‑2014	2015‑2016⁽¹⁾	2017‑2018
Points at beginning of period	80.17	70.40	75.34
Granted	—	—	—
Points at end of period	80.17	70.40	75.34

(1)	As of September 30, 2022, all awards under the 2015-2016 Plan had been paid.

During the ~~three~~nine months ended ~~March 31,~~September 30, 2022, the Company recorded a ~~$16.0~~$39.0 million reduction of expense related to the 2013-2018 iPIP plans, primarily due to a decrease in the price per share of SAFE common stock. During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, the Company recorded ~~$2.4~~$15.0 million of expense related to the 2013-2018 iPIP plans.

As of ~~March 31,~~September 30, 2022, investments with an aggregate gross book value of $13 million were attributable to the 2013-2014 Plan and investments with an aggregate gross book value of ~~$277~~$236 million, including 7.6 million shares of SAFE common stock acquired by the Company, were attributable to the 2017-2018 Plan. As of ~~March 31,~~September 30, 2022 there were 0no investments attributable to the 2015-2016 Plan.

During the ~~three~~nine months ended ~~March 31,~~September 30, 2022, the Company made distributions to participants in the 2013-2014 investment pool. The iPIP participants received total distributions in the amount of $19.6 million as compensation, comprised of cash and 412,041 shares of the Company’s common stock with a fair value of $16.06 per share, which are fully-vested and issued under the 2009 LTIP. After deducting statutory minimum tax withholdings, a total of 215,657 shares of the Company’s common stock were issued.

During the nine months ended September 30, 2022, the Company made distributions to participants in the 2015-2016 investment pool. The iPIP participants received total distributions in the amount of $19.2 million as compensation, comprised of cash and 402,731 shares of the Company’s common stock with a fair value of $16.06 per share, which are fully-vested and issued under the 2009 LTIP. After deducting statutory minimum tax withholdings, a total of 193,416 shares of the Company’s common stock were issued.

During the nine months ended September 30, 2021, the Company made distributions to participants in the 2015-2016 investment pool. The iPIP participants received total distributions in the amount of ~~$2.8~~$3.2 million as compensation, comprised of cash and ~~86,807~~97,881 shares of the Company’s common stock with a fair value of ~~$17.72~~$17.65 per share, which are fully-vested and issued under the 2009 LTIP. After deducting statutory minimum tax withholdings, a total of ~~51,854~~57,920 shares of the Company’s common stock were issued.

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Table of Contents

As of ~~March 31,~~September 30, 2022 and December 31, 2021, the Company had accrued compensation costs relating to iPIP of ~~$102.4~~$45.1 million and $116.6 million, respectively, which are included in “Accounts payable, accrued expenses and other liabilities” on the Company’s consolidated balance sheets.

Long-Term Incentive Plan—The Company’s 2009 Long-Term Incentive Plan (the “2009 LTIP”) is designed to provide incentive compensation for officers, key employees, directors and advisors of the Company. The 2009 LTIP provides for awards of stock options, shares of restricted stock, phantom shares, restricted stock units, dividend equivalent rights and other share-based performance awards. All awards under the 2009 LTIP are made at the discretion of the Company’s Board of Directors or a committee of the Board of Directors. The Company’s shareholders approved the 2009 LTIP in 2009 and approved the performance-based provisions of the 2009 LTIP, as amended, in 2014. In May 2021, the Company’s shareholders approved an increase in the number of shares available for issuance under the 2009 LTIP from a maximum of 8.9 million to 9.9 million and extended the expiration date of the 2009 LTIP from May 2029 to May 2031.

As of ~~March 31,~~September 30, 2022, an aggregate of ~~2.8~~2.3 million shares remain available for issuance pursuant to future awards under the Company’s 2009 LTIP.

~~iStar Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~(unaudited)~~

~~Table of Contents~~

Restricted Stock Unit Activity—A summary of the Company’s stock-based compensation awards to certain employees in the form of long-term incentive awards for the ~~three~~nine months ended ~~March 31,~~September 30, 2022, is as follows (in thousands):


Nonvested at beginning of period		754
Granted		~~212~~221
Vested		~~(270)~~(316)
Forfeited		~~(4)~~(19)
Nonvested at end of period		~~692~~640

As of ~~March 31,~~September 30, 2022, there was ~~$9.4~~$6.5 million of total unrecognized compensation cost related to all unvested restricted stock units that are expected to be recognized over a weighted average remaining vesting/service period of ~~1.78~~1.33 years.

Directors’ Awards—During the ~~three~~nine months ended ~~March 31,~~September 30, 2022, the Company granted 38,953 restricted shares of common stock to non-employee Directors at a fair value of $16.33 at the time of grant for their annual equity awards and also issued ~~478~~2,193 common stock equivalents (“CSEs”) at a fair value of ~~$23.99~~$15.79 per CSE in respect of dividend equivalents on outstanding CSEs. As of ~~March 31,~~September 30, 2022, a combined total of ~~130,414~~132,896 CSEs and restricted shares of common stock granted to members of the Company’s Board of Directors remained outstanding under the Company’s Non-Employee Directors Deferral Plan, with an aggregate intrinsic value of ~~$3.1~~$1.2 million.

401(k) Plan— The Company made contributions of ~~$0.8~~$0.1 million and ~~$0.5~~$0.1 million for the three months ended ~~March 31,~~September 30, 2022 and 2021, respectively, and $1.0 million and $0.8 million for the nine months ended September 30, 2022 and 2021, respectively, to the Company’s 401(k) Plan.

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Table of Contents

Note 15—Earnings Per Share

The following table presents a reconciliation of income from operations used in the basic and diluted earnings per share (“EPS”) calculations ($ in thousands, except for per share data):


	For the Three Months Ended March 31,				For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021		2022		2021
Net loss from continuing operations	$	(1,888)	$	(14,497)
Net loss from continuing operations attributable to noncontrolling interests		18		44
Net income (loss) from continuing operations					$	17,952	$	109,380	$	(116,430)	$	58,152
Net (income) loss from continuing operations attributable to noncontrolling interests						53		(10)		(46)		55
Preferred dividends		(5,874)		(5,874)		(5,874)		(5,874)		(17,622)		(17,622)
Net loss from continuing operations and allocable to common shareholders for basic and diluted earnings per common share	$	(7,744)	$	(20,327)
Net income (loss) from continuing operations and allocable to common shareholders for basic and diluted earnings per common share					$	12,131	$	103,496	$	(134,098)	$	40,585

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(unaudited)

Table of Contents

For the Three Months Ended March 31,


2022

2021

Earnings allocable to common shares:





Numerator for basic and diluted earnings per share:





Net loss from continuing operations and allocable to common shareholders

$
(7,744)

$
(20,327)

Net income from discontinued operations

797,688

22,486

Net (income) from discontinued operations attributable to noncontrolling interests

(179,089)

(2,564)

Net income (loss) allocable to common shareholders

$
610,855

$
(405)

Denominator for basic and diluted earnings per share:





Weighted average common shares outstanding for basic and diluted earnings per common share

69,037

73,901

Basic and diluted earnings per common share:⁽¹⁾





Net loss from continuing operations and allocable to common shareholders

$
(0.11)

$
(0.28)

Net income from discontinued operations and allocable to common shareholders

8.96

0.27

Net income (loss) allocable to common shareholders

$
8.85

$
(0.01)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
Earnings allocable to common shares:
Numerator for basic and diluted earnings per share:
Net income (loss) from continuing operations and allocable to common shareholders	$	12,131	$	103,496	$	(134,098)	$	40,585
Net income from discontinued operations		—		21,614		797,688		69,415
Net (income) from discontinued operations attributable to noncontrolling interests		—		(3,254)		(179,089)		(8,092)
Net income allocable to common shareholders	$	12,131	$	121,856	$	484,501	$	101,908

Denominator for basic and diluted earnings per share:
Weighted average common shares outstanding for basic earnings per common share		85,458		71,299		78,706		72,675
Add: Effect of assumed shares issued under treasury stock method for restricted stock units		76		221		—		206
Add: Effect of convertible debt		333		8,967		—		5,521
Weighted average common shares outstanding for basic and diluted earnings per common share		85,867		80,487		78,706		78,402

Basic earnings per common share:⁽¹⁾
Net income (loss) from continuing operations and allocable to common shareholders	$	0.14	$	1.45	$	(1.70)	$	0.56
Net income from discontinued operations and allocable to common shareholders		—		0.26		7.86		0.84
Net income allocable to common shareholders	$	0.14	$	1.71	$	6.16	$	1.40

Diluted earnings per common share:⁽¹⁾
Net income (loss) from continuing operations and allocable to common shareholders	$	0.14	$	1.28	$	(1.70)	$	0.52
Net income from discontinued operations and allocable to common shareholders		—		0.23		7.86		0.78
Net income allocable to common shareholders	$	0.14	$	1.51	$	6.16	$	1.30

(1)

For the ~~three~~nine months ended ~~March 31,~~September 30, 2022, ~~and 2021, the effect of certain of~~ the Company’s restricted stock awards were anti-dilutive due to the Company having a net loss from continuing operations and allocable to common shareholders for the period. For the ~~three~~nine months ended ~~March 31,~~September 30, 2022, ~~and 2021, 8,829,274 and 2,893,787~~3,649,934 shares ~~respectively,~~ of the 3.125% Convertible Notes were antidilutive ~~based upon~~ due to the ~~conversion price~~Company having a net loss from continuing operations and allocable to common shareholders for ~~such periods.~~the period.

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Table of Contents

Note 16—Fair Values

Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at 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).

Certain of the Company’s assets and liabilities are recorded at fair value either on a recurring or non-recurring basis. Assets required to be marked-to-market and reported at fair value every reporting period are classified as being valued on a recurring basis. Assets not required to be recorded at fair value every period may be recorded at fair value if a specific provision or other impairment is recorded within the period to mark the carrying value of the asset to market as of the reporting date. Such assets are classified as being valued on a non-recurring basis.

~~iStar Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~(unaudited)~~

~~Table~~The Company did not have any assets or liabilities recorded at fair value as of ~~Contents~~

September 30, 2022. The following fair value hierarchy table summarizes the Company’s assets and liabilities recorded at fair value on a recurring ~~and non-recurring~~ basis by the above categories as of December 31, 2021 ($ in thousands):


	Fair Value Using								Fair Value Using
			Quoted								Quoted
			market		Significant						market		Significant
			prices in		other		Significant				prices in		other		Significant
			active		observable		unobservable				active		observable		unobservable
			markets		inputs		inputs				markets		inputs		inputs
	Total		(Level 1)		(Level 2)		(Level 3)		Total		(Level 1)		(Level 2)		(Level 3)
As of March 31, 2022
Recurring basis:
Available-for-sale securities⁽¹⁾	$	24,864	$	—	$	—	$	24,864
As of December 31, 2021
Recurring basis:
Derivative liabilities⁽¹⁾	$	8,395	$	—	$	8,395	$	—	$	8,395	$	—	$	8,395	$	—
Available-for-sale securities⁽¹⁾		28,092		—		—		28,092		28,092		—		—		28,092

(1)

The fair value of the Company’s derivatives are based upon widely accepted valuation techniques utilized by a third-party specialist using observable inputs such as interest rates and contractual cash flow and are classified as Level 2. The fair value of the Company’s available-for-sale securities (refer to Note 7) are based upon unadjusted third-party broker quotes and are classified as Level 33.

The following table summarizes changes in Level 3 available-for-sale securities reported at fair value on the Company’s consolidated balance sheets for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 and 2021 ($ in thousands):


	2022		2021		2022		2021
Beginning balance	$	28,092	$	25,274	$	28,092	$	25,274
Repayments		(215)		(200)
Purchases						—		3,375
Sales and Repayments						(26,752)		(201)
Realized gain recorded in other income						2,897		—
Unrealized losses recorded in other comprehensive income		(3,013)		(1,031)		(4,237)		(913)
Ending balance	$	24,864	$	24,043	$	—	$	27,535

3542

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Table of Contents

Fair values of financial instruments—The following table presents the carrying value and fair value for the Company’s financial instruments ($ in millions):


	As of March 31, 2022				As of December 31, 2021				As of September 30, 2022				As of December 31, 2021
	Carrying		Fair		Carrying		Fair		Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value		Value		Value		Value		Value
Assets
Net investment in leases (refer to Note 5)⁽¹⁾	$	28	$	28	$	43	$	43	$	—	$	—	$	43	$	43
Loans receivable and other lending investments, net⁽¹⁾		332		342		333		345		177		177		333		345
Loans receivable held for sale⁽¹⁾		0		0		43		43		—		—		43		43
Cash and cash equivalents⁽²⁾		1,500		1,500		340		340		1,336		1,336		340		340
Restricted cash⁽²⁾		51		51		54		54		5		5		54		54

Liabilities
Debt obligations, net⁽¹⁾⁽³⁾
Level 1		1,985		2,228		2,473		2,799		1,582		1,583		2,473		2,799
Level 3		99		101		99		104		99		99		99		104
Total debt obligations, net		2,084		2,329		2,572		2,903		1,681		1,682		2,572		2,903

(1)	The fair value of the Company’s net investment in leases, loans receivable and other lending investments, net, loans receivable held for sale and certain debt obligations 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. Restricted cash is recorded in “Deferred expenses and other assets, net” on the Company’s balance sheet. The fair value of the Company’s cash and cash equivalents and restricted cash are classified as Level 1 within the fair value hierarchy.

(3)

As of ~~March 31,~~September 30, 2022 and December 31, 2021, the fair value of the Company’s unsecured notes is classified as Level 1 in the fair value hierarchy. As of ~~March 31, 2022 and~~ December 31, 2021, the fair value of the Company’s 3.125% Senior Convertible Notes was ~~$497.5 million and~~ $527.5 million ~~respectively~~ (refer to Note ~~18)~~10).

Note 17—Segment Reporting

The Company has determined that it has 4four reportable segments based on how management reviews and manages its business. These reportable segments include: Net Lease, Real Estate Finance, Operating Properties and Land and Development. The Net Lease segment (refer to Note 3 - Net Lease Sale and Discontinued Operations) includes the Company’s investments in SAFE and its Ground Lease adjacent businesses (refer to Note 8). The Real Estate Finance segment includes all of the Company’s activities related to senior and mezzanine real estate loans and real estate related securities. The Operating Properties segment includes the Company’s activities and operations related to its commercial and residential properties. The Land and Development segment includes the Company’s activities related to its developable land portfolio.

The Company evaluates performance-based on the following financial measures for each segment. The Company’s segment information is as follows ($ in thousands):


	Net		Real Estate		Operating		Land and		Corporate/		Company		Net		Real Estate		Operating		Land and		Corporate/		Company
	Lease⁽¹⁾		Finance		Properties		Development		Other⁽²⁾		Total		Lease		Finance		Properties		Development		Other⁽¹⁾		Total
Three Months Ended March 31, 2022
Three Months Ended September 30, 2022
Operating lease income	$	—	$	—	$	2,974	$	135	$	—	$	3,109	$	—	$	—	$	3,340	$	84	$	—	$	3,424
Interest income		75		4,873		—		—		—		4,948		—		2,093		—		—		—		2,093
Interest income from sales-type leases		356		—		—		—		—		356		129		—		—		—		—		129
Other income		4,459		11		2,661		1,317		192		8,640		5,504		3,147		12,197		2,462		3,714		27,024
Land development revenue		—		—		—		14,900		—		14,900		—		—		—		15,087		—		15,087
Earnings from equity method investments		17,800		1,015		45		3,566		2,606		25,032
Earnings (losses) from equity method investments														43,525		1,329		11,515		850		578		57,797
Income from sales of real estate		492		—		—		—		—		492		951		—		—		—		—		951
Total revenue and other earnings		23,182		5,899		5,680		19,918		2,798		57,477		50,109		6,569		27,052		18,483		4,292		106,505
Real estate expense		(177)		—		(5,891)		(4,049)		—		(10,117)		(726)		—		(11,012)		(4,466)		—		(16,204)
Land development cost of sales		—		—		—		(14,496)		—		(14,496)		—		—		—		(16,778)		—		(16,778)
Other expense		(471)		(119)		—		(82)		(258)		(930)		489		(78)		—		(218)		(4,364)		(4,171)
Allocated interest expense		(16,215)		(3,140)		(1,341)		(4,243)		(4,304)		(29,243)		(13,049)		(1,713)		(1,122)		(1,915)		(4,865)		(22,664)
Allocated general and administrative⁽²⁾														(5,302)		(1,190)		(751)		(2,333)		(5,008)		(14,584)
Segment profit (loss)⁽³⁾													$	31,521	$	3,588	$	14,167	$	(7,227)	$	(9,945)	$	32,104

3643

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Table of Contents

Allocated general and administrative⁽³⁾

(5,016)

(1,124)

(478)

(2,255)

(4,929)

(13,802)
Segment profit (loss)⁽⁴⁾

$
1,303

$
1,516

$
(2,030)

$
(5,207)

$
(6,693)

$
(11,111)
Other significant items:












Provision for loan losses

$
—

$
135

$
—

$
—

$
—

$
135
Provision for losses on net investment in leases

281

—

—

—

—

281
Depreciation and amortization

—

—

986

228

143

1,357
Capitalized expenditures

(211)

—

220

4,922

—

4,931

Three Months Ended March 31, 2021

Operating lease income

$
—

$
—

$
4,837

$
94

$
—

$
4,931
Interest income

17

9,772

—

—

—

9,789
Interest income from sales-type leases

—

—

—

—

—

—
Other income

3,476

99

2,337

1,389

5,714

13,015
Land development revenue

—

—

—

32,249

—

32,249
Earnings (losses) from equity method investments

11,412

466

(3,747)

3,146

491

11,768
Income from sales of real estate

—

—

612

—

—

612
Total revenue and other earnings

14,905

10,337

4,039

36,878

6,205

72,364
Real estate expense

(458)

—

(3,799)

(4,462)

—

(8,719)
Land development cost of sales

—

—

—

(29,323)

—

(29,323)
Other expense

—

(64)

—

—

(189)

(253)
Allocated interest expense

(14,325)

(4,578)

(2,043)

(3,938)

(3,925)

(28,809)
Allocated general and administrative⁽³⁾

(5,937)

(1,459)

(660)

(2,428)

(5,447)

(15,931)
Segment profit (loss)⁽⁴⁾

$
(5,815)

$
4,236

$
(2,463)

$
(3,273)

$
(3,356)

$
(10,671)
Other significant items:












Recovery of loan losses

$
—

$
(3,642)

$
—

$
—

$
—

$
(3,642)
Impairment of assets

—

—

257

—

—

257
Depreciation and amortization

—

—

1,988

218

195

2,401
Capitalized expenditures

1,268

—

57

4,739

—

6,064

As of March 31, 2022












Real estate, net

$
—

$
—

$
91,434

$
—

$
—

$
91,434
Real estate available and held for sale

—

—

301

—

—

301
Total real estate

—

—

91,735

—

—

91,735
Real estate and other assets available and held for sale and classified as discontinued operations⁽¹⁾

226,309

—

—

—

—

226,309
Net investment in leases

28,131

—

—

—

—

28,131
Land and development, net

—

—

—

277,421

—

277,421
Loans receivable and other lending investments, net

—

331,839

—

—

—

331,839
Loan receivable held for sale

—

—

—

—

—

—
Other investments

1,453,205

4,627

43,251

190

24,746

1,526,019
Total portfolio assets

1,707,645

336,466

134,986

277,611

24,746

2,481,454
Cash and other assets

1,602,597
Total assets









$
4,084,051

As of December 31, 2021












Real estate, net

$
—

$
—

$
92,150

$
—

$
—

$
92,150
Real estate available and held for sale

—

—

301

—

—

301
Total real estate

—

—

92,451

—

—

92,451
Real estate and other assets available and held for sale and classified as discontinued operations⁽¹⁾

2,299,711

—

—

—

—

2,299,711
Net investment in leases

43,215

—

—

—

—

43,215
Land and development, net

—

—

—

286,810

—

286,810
Loans receivable and other lending investments, net

—

332,844

—

—

—

332,844
Loan receivable held for sale

43,215

—

—

—

—

43,215
Other investments

1,186,162

48,862

43,252

1,096

17,909

1,297,281
Total portfolio assets

$
3,572,303

$
381,706

$
135,703

$
287,906

$
17,909

4,395,527
Cash and other assets









445,007
Total assets









$
4,840,534

Other significant items:
Recovery of loan losses	$	—	$	(157)	$	—	$	—	$	—	$	(157)
Recovery of losses on net investment in leases		(380)		—		—		—		—		(380)
Depreciation and amortization		—		—		923		227		140		1,290
Capitalized expenditures		—		—		104		5,301		—		5,405

Three Months Ended September 30, 2021
Operating lease income	$	—	$	—	$	3,636	$	96	$	—	$	3,732
Interest income		651		6,321		—		—		—		6,972
Interest income from sales-type leases		526		—		—		—		—		526
Other income		3,605		1,095		16,869		3,189		14,275		39,033
Land development revenue		—		—		—		93,369		—		93,369
Earnings (losses) from equity method investments		73,475		872		1,129		10,836		1,483		87,795
Income from sales of real estate		—		—		25,611		—		—		25,611
Total revenue and other earnings		78,257		8,288		47,245		107,490		15,758		257,038
Real estate expense		(91)		—		(9,184)		(4,094)		—		(13,369)
Land development cost of sales		—		—		—		(87,380)		—		(87,380)
Other expense		(210)		(270)		—		(64)		(350)		(894)
Allocated interest expense		(15,691)		(3,331)		(1,641)		(3,679)		(4,353)		(28,695)
Allocated general and administrative⁽²⁾		(5,487)		(958)		(473)		(2,173)		(5,029)		(14,120)
Segment profit (loss) ⁽³⁾		56,778	$	3,729	$	35,947	$	10,100	$	6,026	$	112,580
Other significant non-cash items:
Recovery of loan losses	$	—	$	(1,610)	$	—	$	—	$	—	$	(1,610)
Recovery of losses on net investment in leases		(315)		—		—		—		—		(315)
Impairment of assets		—		—		421		—		—		421
Depreciation and amortization		—		—		1,385		228		129		1,742
Capitalized expenditures		—		—		121		7,416		—		7,537


Nine Months Ended September 30, 2022
Operating lease income	$	—	$	—	$	9,396	$	319	$	—	$	9,715
Interest income		75		11,187		—		—		—		11,262
Interest income from sales-type leases		861		—		—		—		—		861
Other income		15,185		3,185		22,452		5,097		5,626		51,545
Land development revenue		—		—		—		54,390		—		54,390
Earnings from equity method investments		76,563		3,112		15,233		4,516		2,798		102,222
Income from sales of real estate		1,443		—		—		—		—		1,443
Total revenue and other earnings		94,127		17,484		47,081		64,322		8,424		231,438
Real estate expense		(1,385)		—		(25,144)		(12,808)		—		(39,337)
Land development cost of sales		—		—		—		(55,369)		—		(55,369)
Other expense		(503)		(237)		—		(538)		(5,346)		(6,624)
Allocated interest expense		(42,426)		(7,049)		(3,602)		(8,903)		(14,076)		(76,056)
Allocated general and administrative⁽³⁾		(14,156)		(3,540)		(1,854)		(6,702)		(14,878)		(41,130)
Segment profit (loss)⁽⁴⁾	$	35,657	$	6,658	$	16,481	$	(19,998)	$	(25,876)	$	12,922
Other significant items:
Provision for loan losses	$	—	$	22,556	$	—	$	—	$	—	$	22,556
Impairment of assets		—		—		1,750		—		18		1,768
Depreciation and amortization		—		—		2,878		683		424		3,985
Capitalized expenditures		—		—		644		15,824		—		16,468

Nine Months Ended September 30, 2021
Operating lease income	$	—	$	—	$	13,177	$	279	$	—	$	13,456
Interest income		968		23,878		—		—		—		24,846
Interest income from sales-type leases		683		—		—		—		—		683
Other income		10,614		1,245		23,159		5,894		20,038		60,950
Land development revenue		—		—		—		157,936		—		157,936
Earnings (losses) from equity method investments		94,590		2,092		(5,553)		15,456		4,076		110,661
Income from sales of real estate		—		—		26,319		—		—		26,319
Total revenue and other earnings		106,855		27,215		57,102		179,565		24,114		394,851
Real estate expense		(562)		—		(19,238)		(13,604)		—		(33,404)
Land development cost of sales		—		—		—		(147,507)		—		(147,507)
Other expense		(210)		(422)		—		(64)		(662)		(1,358)
Allocated interest expense		(44,582)		(11,737)		(5,714)		(11,481)		(12,631)		(86,145)
Allocated general and administrative⁽³⁾		(17,544)		(3,659)		(1,797)		(6,968)		(15,686)		(45,654)
Segment profit (loss)⁽⁴⁾	$	43,957	$	11,397	$	30,353	$	(59)	$	(4,865)	$	80,783

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Table of Contents

Other significant items:
Recovery of loan losses	$	—	$	(7,411)	$	—	$	—	$	—	$	(7,411)
Provision for losses on net investment in leases		465		—		—		—		—		465
Impairment of assets		—		—		679		—		—		679
Depreciation and amortization		—		—		4,592		674		449		5,715
Capitalized expenditures		—		—		610		16,727		—		17,337

As of September 30, 2022
Real estate, net	$	—	$	—	$	89,144	$	—	$	—	$	89,144
Real estate available and held for sale		—		—		1,283		—		—		1,283
Total real estate		—		—		90,427		—		—		90,427
Real estate and other assets available and held for sale and classified as discontinued operations⁽¹⁾		11,925		—		—		—		—		11,925
Land and development, net		—		—		—		248,246		—		248,246
Loans receivable and other lending investments, net		—		176,623		—		—		—		176,623
Other investments		1,525,270		24,349		33,808		—		21,841		1,605,268
Total portfolio assets		1,537,195		200,972		124,235		248,246		21,841		2,132,489
Cash and other assets												1,389,643
Total assets											$	3,522,132

As of December 31, 2021
Real estate, net	$	—	$	—	$	92,150	$	—	$	—	$	92,150
Real estate available and held for sale		—		—		301		—		—		301
Total real estate		—		—		92,451		—		—		92,451
Real estate and other assets available and held for sale and classified as discontinued operations⁽¹⁾		2,299,711		—		—		—		—		2,299,711
Net investment in leases		43,215		—		—		—		—		43,215
Land and development, net		—		—		—		286,810		—		286,810
Loans receivable and other lending investments, net		—		332,844		—		—		—		332,844
Loan receivable held for sale		43,215		—		—		—		—		43,215
Other investments		1,186,162		48,862		43,252		1,096		17,909		1,297,281
Total portfolio assets	$	3,572,303	$	381,706	$	135,703	$	287,906	$	17,909		4,395,527
Cash and other assets												445,007
Total assets											$	4,840,534

(1)	Refer to Note 3 – Net Lease Sale and Discontinued Operations.

(2)

Corporate/Other represents all corporate level and unallocated items including any intercompany eliminations necessary to reconcile to consolidated Company totals. This caption also includes the Company’s joint venture investments and strategic investments that are not included in the other reportable segments above.

~~iStar Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~(unaudited)~~

~~Table of Contents~~

(3)

General and administrative excludes stock-based compensation ~~(income) expense~~ of ($~~12.4)~~0.4) million and $~~5.5~~3.0 million for the three months ended ~~March 31,~~September 30, 2022 and 2021, respectively, and ($30.7) million and $23.3 million for the nine months ended September 30, 2022 and 2021, respectively.

(4)	The following is a reconciliation of segment profit to net income (loss) ($ in thousands):


	For the Three Months Ended March 31,				For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021		2022		2021
Segment loss	$	(11,111)	$	(10,671)
Segment income					$	32,104	$	112,580	$	12,922	$	80,783
Less: (Provision for) recovery of loan losses		(135)		3,642		157		1,610		(22,556)		7,411
Less: Provision for losses on net investment in leases		(281)		0
Less: (Provision for) recovery of losses on net investment in leases						380		315		—		(465)
Less: Impairment of assets		0		(257)		—		(421)		(1,768)		(679)
Less: Stock-based compensation income (expense)		12,427		(5,508)		374		(3,001)		30,724		(23,300)
Less: Depreciation and amortization		(1,357)		(2,401)		(1,290)		(1,742)		(3,985)		(5,715)
Less: Income tax (expense) benefit		(3)		698		(564)		39		(567)		117
Less: Loss on early extinguishment of debt, net		(1,428)		0		(13,209)		—		(131,200)		—
Less: Net income from discontinued operations		797,688		22,486		—		21,614		797,688		69,415
Net income	$	795,800	$	7,989	$	17,952	$	130,994	$	681,258	$	127,567

~~Note 18—Subsequent Events~~

On April 8, 2022, the Company completed separate, privately-negotiated transactions with holders of $194 million aggregate principal amount of the Company's 3.125% Convertible Notes (refer to Note 10) in which the noteholders exchanged their convertible notes with the Company for 13.75 million newly issued shares of the Company's common stock and aggregate cash payments of $14 million. The 3.125% Convertible Senior Notes received by the Company were retired.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain statements in this report, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are included with respect to, among other things, iStar Inc.’s (the “Company’s”) current business plan, including the Merger with Safehold Inc. (“SAFE”) (refer to Note 1 to the consolidated financial statements), business strategy, portfolio management, prospects and liquidity. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results or outcomes to differ materially from those contained in the forward-looking statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. In assessing all forward-looking statements, readers are urged to read carefully all cautionary statements contained in this Form 10-Q and the uncertainties and risks described in Item 1A—"Risk Factors’’ in our 2021 Annual Report, all of which could affect our future results of operations, financial condition and liquidity. For purposes of Management’s Discussion and Analysis of Financial Condition and Results of Operations, the terms “we,” “our” and “us” refer to iStar Inc. and its consolidated subsidiaries, unless the context indicates otherwise.

The discussion below should be read in conjunction with our consolidated financial statements and related notes in this quarterly report on Form 10-Q and our 2021 Annual Report. These historical financial statements may not be indicative of our future performance.

Executive Overview

Merger with SAFE—In August 2022, we entered into a definitive agreement with SAFE for a tax-free, strategic combination that provides that, subject to the terms and conditions thereof, SAFE will merge with and into us (the “Merger”). We expect that the Merger will accelerate SAFE’s market leadership in the Ground Lease industry and will make SAFE the only internally-managed, pure-play Ground Lease company in the public markets. We expect that the Merger will close in the first quarter or second quarter of 2023. Refer to Note 1 to the consolidated financial statements for more information on the Merger.

Corporate Strategy. We continue to execute our stated corporate strategy which is to grow our Ground Lease and Ground Lease adjacent businesses and simplify our portfolio through sales of other assets. In March 2022, we, through certain subsidiaries of ours and entities managed by us, sold our portfolio of net lease assets for an aggregate gross sales price of $3.07 billion (the “Net Lease Sale”).

The portfolio sold consisted of office, entertainment and industrial properties located in the United States comprising approximately 18.3 million square feet. It included assets wholly-owned by us and assets owned by two joint ventures managed by us and in which we owned 51.9% interests. At the time of the sale, the portfolio was encumbered by an aggregate of ~~$702~~$702.0 million of mortgage indebtedness, including indebtedness of equity method investments, which was repaid with proceeds from the sale. After repayment of the mortgage indebtedness and prepayment penalties, repayment of our Senior Term Loan (refer to Note 10 to the consolidated financial statements), payments to terminate derivative contracts, payments to joint venture partners, and payments of promotes, transaction expenses and amounts due under employee incentive plans, we retained net cash proceeds of $1.2 billion from the transaction. Two net lease properties were not included in the sale but were sold to other third parties in the first quarter 2022. Our net lease assets associated with our Ground Lease businesses were not included in the sale.

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Portfolio Overview

As of ~~March 31,~~September 30, 2022, based on our book value, our total investment portfolio has the following property/collateral type and geographic characteristics ($ in thousands):


Property/Collateral	Net		Real Estate		Operating		Land &						% of		Net		Real Estate		Operating		Land &						% of
Types	Lease		Finance		Properties		Development		Corporate		Total		Total		Lease		Finance		Properties		Development		Corporate		Total		Total
Ground Leases	$	1,481,337	$	—	$	—	$	—	$	—	$	1,481,337	65.7	%	$	1,525,564	$	—	$	—	$	—	$	—	$	1,525,564	71.9	%
Land and Development		—		11,607		—		223,191		—		234,798	10.4	%		—		—		—		218,980		—		218,980	10.3	%
Multifamily																—		74,866		34,790		—		—		109,656	5.2	%
Hotel		—		108,362		67,712		—		—		176,074	7.8	%		—		44,720		62,308		—		—		107,028	5.0	%
Multifamily		—		72,151		38,837		—		—		110,988	4.9	%
Retail		—		61,807		13,600		8,340		—		83,747	3.7	%		—		60,442		12,481		8,340		—		81,263	3.8	%
Condominium		—		11,092		301		46,080		—		57,473	2.5	%		—		6,671		301		20,926		—		27,898	1.3	%
Office		—		46,583		—		—		—		46,583	2.1	%		—		14,274		—		—		—		14,274	0.7	%
Entertainment / Leisure		—		—		14,534		—		—		14,534	0.6	%
Other Property Types		—		24,863		—		—		24,747		49,610	2.2	%		—		—		14,355		—		21,840		36,195	1.7	%
Total	$	1,481,337	$	336,465	$	134,984	$	277,611	$	24,747	$	2,255,144	100.0	%	$	1,525,564	$	200,973	$	124,235	$	248,246	$	21,840	$	2,120,858	100.0	%
Percentage of Total		66%		15%		6%		12%		<1%		100%				72%		9%		6%		12%		1%		100%


	Net		Real Estate		Operating		Land &						% of		Net		Real Estate		Operating		Land &						% of
Geographic Region	Lease		Finance		Properties		Development		Corporate		Total		Total		Lease		Finance		Properties		Development		Corporate		Total		Total
Northeast	$	567,442	$	91,039	$	77,831	$	173,058	$	—	$	909,370	40.3	%	$	590,357	$	87,446	$	76,663	$	150,145	$	—	$	904,611	42.7	%
West		359,451		108,463		32,374		8,970		—		509,258	22.6	%		373,833		45,733		31,933		8,950		—		460,449	21.7	%
Mid-Atlantic		217,016		—		4,841		95,393		—		317,250	14.1	%		196,624		—		1,335		89,151		—		287,110	13.5	%
Southeast		154,800		29,868		4,414		190		—		189,272	8.4	%		186,660		29,133		—		—		—		215,793	10.2	%
Southwest		140,891		—		—		—		—		140,891	6.2	%		138,898		—		—		—		—		138,898	6.5	%
Central		41,737		11,092		15,524		—		—		68,353	3.0	%		39,192		6,671		14,304		—		—		60,167	2.8	%
Various		—		96,003		—		—		24,747		120,750	5.4	%		—		31,990		—		—		21,840		53,830	2.5	%
Total	$	1,481,337	$	336,465	$	134,984	$	277,611	$	24,747	$	2,255,144	100.0	%	$	1,525,564	$	200,973	$	124,235	$	248,246	$	21,840	$	2,120,858	100.0	%

Net Lease

Prior to the Net Lease Sale, our net lease business created stable cash flows through long-term net leases primarily to single tenants on our properties. We targeted mission-critical facilities leased on a long-term basis to tenants, offering structured solutions that combined our capabilities in underwriting, lease structuring, asset management and build-to-suit construction. Leases typically provide for expenses at the facility to be paid by the tenant on a triple net lease basis. Under a typical net lease agreement, the tenant agrees to pay a base monthly operating lease payment and most or all of the facility operating expenses (including taxes, utilities, maintenance and insurance).

After the Net Lease Sale, the net lease segment includes our Ground Lease investments made primarily through SAFE and our Ground Lease adjacent businesses.

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As of ~~March 31,~~September 30, 2022, our net lease portfolio consisted ~~primarily~~ of our equity method investments in SAFE and the Ground Lease Plus Fund. The table below provides certain statistics for our net lease portfolio.


	Wholly- Owned			SAFE			Ground Lease Plus Fund			SAFE			Ground Lease Plus Fund
Ownership %		100.0	%		64.7	%		53.0	%		64.8	%		53.0	%
Book value (millions)⁽¹⁾	$	28		$	1,389		$	65		$	1,459		$	66

% Leased		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Weighted average lease term (years)⁽²⁾		98.9			90.9			105.0			91.7			104.6
Weighted average yield⁽³⁾		5.2	%		4.9	%		5.7	%		4.4	%		5.7	%

(1)	~~Wholly-owned includes amounts recorded as net investment in leases (refer to Note 5 to~~Represents the ~~consolidated financial statements). SAFE includes its pro rata share~~book value of ~~its~~our unconsolidated equity method investments.

(2)	Weighted average lease term is calculated using GAAP rent and the initial maturity and does not include extension options. ~~SAFE includes~~Includes its pro rata share of its unconsolidated equity method investments.

(3)	Yield for SAFE is calculated over the trailing twelve months and excludes dilution gains (refer to Note 8 to the consolidated financial statements) ~~and~~, management fees earned by ~~us.~~us and a gain recognized by SAFE in connection with the sale of a Ground Lease.

SAFE—SAFE is a publicly-traded company that originates and acquires Ground Leases in order to generate attractive long-term risk-adjusted returns from its investments. We believe its business has characteristics comparable to a high-grade fixed income investment business, but with certain unique advantages. Relative to alternative fixed income investments generally, SAFE’s Ground Leases typically benefit from built-in growth derived from contractual rent escalators that may compound over the duration of the lease. These rent escalators may be based on fixed increases, a CPI lookback or a combination thereof, and may also include a participation in the gross revenues of the property. SAFE also has the opportunity to realize value from its right to regain possession of the buildings and other improvements on its land upon expiration or earlier termination of the lease at no additional cost. We believe that these features offer us the opportunity through our ownership in SAFE to realize superior risk-adjusted total returns when compared to certain alternative highly-rated investments. As of ~~March 31,~~September 30, 2022, we owned approximately ~~64.7%~~64.8% of SAFE’s common stock outstanding.

We account for our investment in SAFE as an equity method investment (refer to Note 8 to the consolidated financial statements). We act as SAFE’s external manager pursuant to a management agreement, and we have an exclusivity agreement with SAFE pursuant to which we agreed, subject to certain exceptions, that we will not acquire, originate, invest in, or provide financing for a third party’s acquisition of, a Ground Lease unless we have first offered that opportunity to SAFE and a majority of its independent directors has declined the opportunity.

Ground Lease Plus Fund—The Company formed and manages an investment fund that targets the origination and acquisition of Ground Leases for commercial real estate projects that are in a pre-development phase (the “Ground Lease Plus Fund”). We own a ~~53%~~53.0% noncontrolling interest in the Ground Lease Plus Fund. We do not have a controlling interest in the Ground Lease Plus Fund due to the substantive participating rights of our partner and account for this investment as an equity method investment. In addition, the Ground Lease Plus Fund has first look rights on qualifying pre-development projects through December 2023.

Real Estate Finance

Our real estate finance business targets sophisticated and innovative owner/operators of real estate and real estate related projects by providing one-stop capabilities that encompass financing alternatives ranging from full envelope senior loans to mezzanine and preferred equity capital positions. Our real estate finance portfolio consists of leasehold loans to Ground Lease tenants, including tenants of SAFE, senior mortgage loans that are secured by commercial and residential real estate assets where we are the first lien holder, subordinated mortgage loans that are secured by second lien or junior interests in commercial and residential real estate assets, and corporate/partnership loans, which represent mezzanine or subordinated loans to entities for which we do not have a lien on the underlying asset, but may have a pledge of underlying equity ownership of such assets. Our real estate finance portfolio includes Ground Leases, loans on stabilized and

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transitional properties and ground-up construction projects. In addition, we also own loans through equity method investments and have preferred equity investments and debt securities classified as other lending investments.

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The tables below shows certain statistics for our real estate finance portfolio ($ in thousands):


	March 31, 2022									September 30, 2022
									Allowance for									Allowance for
		Gross		Allowance					Loan Losses as		Gross		Allowance					Loan Losses as
	Number	Book		for Loan		Net Book		% of	a % of Gross	Number	Book		for Loan		Net Book		% of	a % of Gross
	of Loans	Value		Losses		Value		Total	Book Value	of Loans	Value		Losses		Value		Total	Book Value
Performing loans⁽¹⁾	7	$	153,846	$	(1,925)	$	151,921	45.8%	1.3%	4	$	85,416	$	(1,225)	$	84,191	47.7%	1.4%
Non-performing loans	1		59,642		(591)		59,051	17.8%	1.0%	1		61,159		(717)		60,442	34.2%	1.2%
Other lending investments	2		123,283		(2,416)		120,867	36.4%	2.0%	1		32,938		(948)		31,990	18.1%	2.9%
Total	10	$	336,771	$	(4,932)	$	331,839	100.0%	1.5%	6	$	179,513	$	(2,890)	$	176,623	100.0%	1.6%

(1)	As of ~~March 31,~~September 30, 2022, our performing loans had a weighted average maturity of ~~3.3~~5.7 years and, excluding one performing loan with a maturity of September 2057, had a weighted average maturity of ~~0.4~~0.3 years.


	December 31, 2021
									Allowance for
		Gross		Allowance					Loan Losses as
	Number	Book		for Loan		Net Book		% of	a % of Gross
	of Loans	Value		Losses		Value		Total	Book Value
Performing loans	8	$	153,043	$	(1,888)	$	151,155	45.4%	1.2%
Non-performing loans	1		59,640		(576)		59,064	17.7%	1.0%
Other lending investments	2		124,930		(2,305)		122,625	36.8%	1.8%
Total	11	$	337,613	$	(4,769)	$	332,844	100.0%	1.4%

Performing Loans—The table below summarizes our performing loans exclusive of allowances ($ in thousands):


	March 31, 2022		December 31, 2021		September 30, 2022		December 31, 2021
Senior mortgages	$	141,176	$	139,968	$	72,309	$	139,968
Corporate/Partnership loans		—		618		—		618
Subordinate mortgages		12,670		12,457		13,107		12,457
Total	$	153,846	$	153,043	$	85,416	$	153,043

Weighted average LTV		61%		60%		61%		60%
Yield - year to date⁽¹⁾		7.1%		7.5%		6.9%		8.4%

(1)	Yields presented are for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 and 2021 and represent the yields on performing loans and other lending investments.

Non-Performing Loans—We designate loans as non-performing at such time as: (1) interest payments become 90 days delinquent; (2) the loan has a maturity default; or (3) management determines it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan. All non-performing loans are placed on non-accrual status and income is only recognized in certain cases upon actual cash receipt. As of ~~March 31,~~September 30, 2022 and December 31, 2021, we had one non-performing loan with a carrying value of $60.4 million and $59.1 ~~million.~~million, respectively. We expect that our level of non-performing loans will fluctuate from period to period.

Allowance for Loan Losses—The allowance for loan losses was ~~$4.9~~$2.9 million as of ~~March 31,~~September 30, 2022, or ~~1.5%~~1.6% of total loans and other lending investments, compared to $4.8 million, or 1.4%, as of December 31, 2021. We expect that our level of Expected Losses will fluctuate from period to period. Due to the volatility of the commercial real estate market, the process of estimating collateral values and Expected Losses requires the use of significant judgment. We currently believe there is adequate collateral and allowances to support the carrying values of the loans and other lending investments.

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The allowance for loan losses includes an asset-specific component and a formula-based component. An asset-specific allowance is established for an impaired loan when the estimated fair value of the loan’s collateral less costs to sell is

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lower than the carrying value of the loan. As of ~~March 31,~~September 30, 2022 and December 31, 2021, asset-specific allowances were ~~$0.6~~$0.7 million and $0.6 million, respectively.

We estimate the formula-based component based on historical realized losses experienced within our portfolio and take into account current economic conditions affecting the commercial real estate market. In addition, we use third-party market data that includes forecasted economic trends, including unemployment rates.

The Expected Loss ~~increased~~decreased to ~~$4.3~~$2.2 million, or ~~1.6%~~1.8%, of performing loans and other lending investments as of ~~March 31,~~September 30, 2022, compared to $4.2 million, or 1.5%, of performing loans and other lending investments as of December 31, 2021. The ~~increase~~decrease was due primarily to the ~~accretion on our held-to-maturity security.~~repayment of loans during the nine months ended September 30, 2022.

Operating Properties

Our operating properties represent a pool of assets across a broad range of geographies and property types including hotel, multifamily, retail, condominium and entertainment/leisure properties. As of ~~March 31,~~September 30, 2022, the book value of our operating property portfolio, including the carrying value of our equity method investments, totaled ~~$135.0~~$124.2 million.

Land and Development

The following table presents a land and development portfolio rollforward for the ~~three~~nine months ended ~~March 31,~~September 30, 2022.


	Land and Development Portfolio Rollforward								Land and Development Portfolio Rollforward
	(in millions)								(in millions)
	Asbury Ocean								Asbury Ocean
	Club and								Club and
	Asbury Park		Magnolia		All		Total		Asbury Park		Magnolia		All		Total
	Waterfront		Green		Others		Segment		Waterfront		Green		Others		Segment
Beginning balance⁽¹⁾	$	137.8	$	95.8	$	53.2	$	286.8	$	137.8	$	95.8	$	53.2	$	286.8
Asset sales⁽²⁾		(9.7)		(3.4)		(0.5)		(13.6)		(35.6)		(16.6)		(0.6)		(52.8)
Capital expenditures		1.4		3.5		—		4.9		4.4		11.6		—		16.0
Other		—		(0.6)		(0.1)		(0.7)		—		(1.7)		(0.1)		(1.8)
Ending balance⁽¹⁾	$	129.5	$	95.3	$	52.6	$	277.4	$	106.6	$	89.1	$	52.5	$	248.2

(1)	As of ~~March 31, 2022, and~~ December 31, 2021, Total Segment excludes ~~$0.2 million and~~ $1.1 million ~~respectively,~~ of equity method investments.

(2)	Represents gross book value of the assets sold, rather than proceeds received.

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Results of Operations for the Three Months Ended ~~March 31,~~September 30, 2022 compared to the Three Months Ended ~~March 31,~~September 30, 2021


	For the Three Months Ended						For the Three Months Ended
	March 31,						September 30,
	2022		2021		$ Change		2022		2021		$ Change

	(in thousands)						(in thousands)
Operating lease income	$	3,109	$	4,931	$	(1,822)	$	3,424	$	3,732	$	(308)
Interest income		4,948		9,789		(4,841)		2,093		6,972		(4,879)
Interest income from sales-type leases		356		—		356		129		526		(397)
Other income		8,640		13,015		(4,375)		27,024		39,033		(12,009)
Land development revenue		14,900		32,249		(17,349)		15,087		93,369		(78,282)
Total revenue		31,953		59,984		(28,031)		47,757		143,632		(95,875)
Interest expense		29,243		28,809		434		22,664		28,695		(6,031)
Real estate expense		10,117		8,719		1,398		16,204		13,369		2,835
Land development cost of sales		14,496		29,323		(14,827)		16,778		87,380		(70,602)
Depreciation and amortization		1,357		2,401		(1,044)		1,290		1,742		(452)
General and administrative		1,375		21,439		(20,064)		14,210		17,121		(2,911)
Provision for (recovery of) loan losses		135		(3,642)		3,777
Provision for losses on net investment in leases		281		—		281
Recovery of loan losses								(157)		(1,610)		1,453
Recovery of losses on net investment in leases								(380)		(315)		(65)
Impairment of assets		—		257		(257)		—		421		(421)
Other expense		930		253		677		4,171		894		3,277
Total costs and expenses		57,934		87,559		(29,625)		74,780		147,697		(72,917)
Income from sales of real estate		492		612		(120)		951		25,611		(24,660)
Loss on early extinguishment of debt, net		(1,428)		—		(1,428)		(13,209)		—		(13,209)
Earnings from equity method investments		25,032		11,768		13,264		57,797		87,795		(29,998)
Income tax (expense) benefit		(3)		698		(701)		(564)		39		(603)
Net income from discontinued operations		797,688		22,486		775,202		—		21,614		(21,614)
Net income	$	795,800	$	7,989	$	787,811	$	17,952	$	130,994	$	(113,042)

Revenue—Operating lease income, which primarily includes income from commercial operating properties, decreased to ~~$3.1~~$3.4 million during the three months ended ~~March 31,~~September 30, 2022 from ~~$4.9~~$3.7 million for the same period in 2021. The decrease was primarily due to the sale of assets, partially offset by an increase in rent at certain of our properties.

Interest income decreased to ~~$4.9~~$2.1 million during the three months ended ~~March 31,~~September 30, 2022 from ~~$9.8~~$7.0 million for the same period in 2021. The decrease was due primarily to a decrease in ~~the average balance of~~ our ~~performing~~ loans and other lending investments which was $279 million for the three months ended March 31, 2022 and $526 million for the three months ended March 31, 2021. The weighted average yield on our performing loans and other lending investments was 7.1% and 7.5%, respectively, for the three months ended March 31, 2022 and 2021.portfolio.

Interest income from sales-type leases ~~was $0.4~~decreased to $0.1 million for the three months ended ~~March 31,~~September 30, 2022 from $0.5 million for the same period in 2021. The decrease~~and~~ resulted from the ~~acquisition~~sale of a Ground ~~Lease that was classified as a sales-type lease~~Leases in 2022 (refer to Note 5 to the consolidated financial statements).

Other income decreased to ~~$8.6~~$27.0 million during the three months ended ~~March 31,~~September 30, 2022 from ~~$13.0~~$39.0 million for the same period in 2021. Other income during the three months ended ~~March 31,~~September 30, 2022 consisted primarily of ~~management fees~~, income from our hotel properties, management fees, gains on the sale of available-for-sale securitiesand other ancillary income from our land and development projects and operating properties. Other income during the three months ended ~~March 31,~~September 30, 2021 consisted primarily of a mark-to-market ~~gain~~gains on an equity investment, management fees, income from our hotel properties, lease termination fees and other ancillary income from our land and development projects and loan ~~portfolio, income from our hotel properties, lease termination fees and interest income on our cash~~portfolio..

Land development revenue and cost of sales—During the three months ended ~~March 31,~~September 30, 2022, we sold land parcels and residential lots and units and recognized land development revenue of ~~$14.9~~$15.1 million which had associated cost of sales of ~~$14.5~~$16.8 million. During the three months ended ~~March 31,~~September 30, 2021, we sold residential lots and units and recognized land development revenue of ~~$32.2~~$93.4 million which had associated cost of sales of ~~$29.3~~$87.4 million. The decrease in 2022 was primarily due to a decrease in the size of our land and development portfolio.

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Costs and expenses—Interest expense ~~increased~~decreased to ~~$29.2~~$22.7 million during the three months ended ~~March 31,~~September 30, 2022 from ~~$28.8~~$28.7 million for the same period in 2021. ~~Our weighted average cost of debt~~The decrease in 2022 was ~~4.7% for~~primarily due to a decrease in the ~~three months ended March 31, 2022 compared to 4.5% for the three months ended March 31, 2021. The~~ average balance of our outstanding debt ~~was $2.51 billion for~~as we repaid our Senior Term Loan and certain unsecured notes in 2022 (refer to Note 10 to the ~~three months ended March 31, 2022 and $2.61 billion for the same period in 2021.~~consolidated financial statements).

Real estate expense increased to ~~$10.1~~$16.2 million during the three months ended ~~March 31,~~September 30, 2022 from ~~$8.7~~$13.4 million for the same period in 2021. The increase was primarily due to an increase in expenses at certain of our ~~hotel~~ operating properties that have increased operations from the prior ~~year, which was partially offset by asset sales.~~year.

Depreciation and amortization decreased to ~~$1.4~~$1.3 million during the three months ended ~~March 31,~~September 30, 2022 from ~~$2.4~~$1.7 million for the same period in 2021.

General and administrative expense includes payroll and related costs, performance-based compensation, public company costs and occupancy costs. ~~General~~We recognized general and administrative ~~expenses decreased to $1.4~~expense $14.2 million during the three months ended ~~March 31,~~September 30, 2022 ~~from $21.4~~versus $17.1 million of expense for the same period in 2021. The decrease ~~in 2022~~ was due primarily to a ~~$19.3~~$2.3 million decrease in performance-based ~~compensation.~~compensation, which was partially offset by severance costs for terminated employees. Our primary forms of performance-based compensation are our iPIP Plans and our annual bonus pool (refer to Note 14 to the consolidated financial statements for more information on the iPIP Plans). In addition, illustrative examples of our iPIP Plans may be found in our 2021 definitive proxy statement which is publicly available on the SEC’s website.

The ~~provision for~~recovery of loan losses was ~~$0.1~~$0.2 million for the three months ended ~~March 31,~~September 30, 2022 as compared to a recovery of loan losses of ~~$3.6~~$1.6 million for the same period in 2021. ~~The provision for loan losses for the three months ended March 31, 2022 resulted from the accretion on our held-to-maturity security.~~ The recovery of loan losses for the three months ended ~~March 31,~~September 30, 2022 resulted primarily from reversal of Expected Loss allowances on loans that repaid in full in the third quarter 2022. The recovery of loan losses for the three months ended September 30, 2021 resulted from the reversal of Expected Loss allowances on loans that repaid in full in the ~~first~~third quarter ~~2021 and from an improving macroeconomic forecast on commercial real estate markets since December 31, 2020.~~2021.

The ~~provision for~~recovery of losses on net investment in leases for the three months ended ~~March 31,~~September 30, 2022 resulted from the reversal of an allowance on a property that was sold during the three months ended September 30, 2022. The recovery of losses on net investment in leases for the three months ended September 30, 2021 resulted from a changing macroeconomic forecast on commercial real estate ~~markets.~~markets since June 30, 2021.

During the three months ended September 30, 2021, we recorded an aggregate impairment of $0.4 million on an operating property held for sale.

Other expense was ~~$0.9~~$4.2 million during the three months ended ~~March 31,~~September 30, 2022 and ~~$0.3~~$0.9 million for the same period in 2021. ~~Other~~The increase in other expenses for the three months ended ~~March 31,~~September 30, 2022 ~~consisted~~was due primarily ofto legal ~~costs.~~and consulting costs in connection with our Merger with SAFE (refer to Note 1 to the consolidated financial statements).

Income from sales of real estate—During the three months ended ~~March 31,~~September 30, 2022, we recorded ~~$0.5~~$1.0 million of income from sales of real estate from the sale of a Ground Lease to SAFE. During the three months ended September 30, 2021, we recorded $25.6 million of income from sales of real estate primarily from the sale of ~~Ground Leases. During the three months ended March 31, 2021,~~ ~~we recorded $0.6 million of income from sales of real estate from the sale of residential condominiums.~~an operating property.

Loss on early extinguishment of debt, net—During the three months ended ~~March 31,~~September 30, 2022, we incurred losses on early extinguishment of debt of ~~$1.4~~$13.2 million resulting from the ~~repayment~~redemption of our ~~senior term loan in connection with our Net Lease Sale~~unsecured notes (refer to Note 310 to the consolidated financial statements).

Earnings from equity method investments—Earnings from equity method investments ~~increased~~decreased to ~~$25.0~~$57.8 million during the three months ended ~~March 31,~~September 30, 2022 from ~~$11.8~~$87.8 million for the same period in 2021. During the three months ended ~~March 31,~~September 30, 2022, we recognized ~~$17.0~~$42.8 million of income from our equity method investment in SAFE, $11.5 million primarily from the sale of a multifamily property at one of our ventures and ~~$8.0~~$3.5 million of net aggregate income from our remaining equity method investments. During the three months ended ~~March 31,~~September 30, 2021, we recognized ~~$11.4~~$73.5 million of income from our equity method investment in SAFE (which included a dilution gain of $60.2

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million – refer to Note 8) and ~~$0.4~~ $14.3 million of net aggregate income from our remaining equity method ~~investments.~~investments, which included $10.5 million from one of our equity method investments resulting from our share of income from land sales.

Income tax (expense) benefit—We recorded an income tax provision of $0.6 million for the three months ended September 30, 2022 due primarily to additional state and local taxes related to the sale of our net lease assets. Income tax benefit of ~~$0.7 million~~$39 thousand was recorded for the three months ended ~~March 31, 2021~~ ~~and related primarily to refunds due us for alternative minimum taxes paid in prior periods~~September 30, 2021..

Net income from discontinued operations—In March 2022, we closed on the sale of the majority of our net lease properties owned directly and through ventures. Our net lease assets were comprised of office, entertainment and industrial properties located in the United States. Our net lease assets associated with our Ground Lease businesses were not included in the sale. Net income from discontinued operations represents the operating results from the net lease assets that are not

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associated with our Ground Lease businesses (refer to Note 3 to the consolidated financial statements - Net Lease Sale and Discontinued Operations).

Results of Operations for the Nine months Ended September 30, 2022 compared to the Nine months Ended September 30, 2021


	For the Nine Months Ended September 30,
	2022		2021		$ Change

	(in thousands)
Operating lease income	$	9,715	$	13,456	$	(3,741)
Interest income		11,262		24,846		(13,584)
Interest income from sales-type leases		861		683		178
Other income		51,545		60,950		(9,405)
Land development revenue		54,390		157,936		(103,546)
Total revenue		127,773		257,871		(130,098)
Interest expense		76,056		86,145		(10,089)
Real estate expense		39,337		33,404		5,933
Land development cost of sales		55,369		147,507		(92,138)
Depreciation and amortization		3,985		5,715		(1,730)
General and administrative		10,406		68,954		(58,548)
Provision for (recovery of) loan losses		22,556		(7,411)		29,967
Provision for losses on net investment in leases		—		465		(465)
Impairment of assets		1,768		679		1,089
Other expense		6,624		1,358		5,266
Total costs and expenses		216,101		336,816		(120,715)
Income from sales of real estate		1,443		26,319		(24,876)
Loss on early extinguishment of debt, net		(131,200)		—		(131,200)
Earnings from equity method investments		102,222		110,661		(8,439)
Income tax (expense) benefit		(567)		117		(684)
Net income from discontinued operations		797,688		69,415		728,273
Net income	$	681,258	$	127,567	$	553,691

Revenue—Operating lease income, which primarily includes income from commercial operating properties, decreased to $9.7 million during the nine months ended September 30, 2022 from $13.5 million for the same period in 2021. The decrease was primarily due to the sale of assets, partially offset by an increase in rent at certain of our properties.

Interest income decreased to $11.3 million during the nine months ended September 30, 2022 from $24.8 million for the same period in 2021. The decrease was due primarily to a decrease in our loans and other lending investments portfolio.

Interest income from sales-type leases increased to $0.9 million for the nine months ended September 30, 2022 from $0.7 million for the same period in 2021. The increase resulted from the acquisition of a Ground Lease that was classified as a sales-type lease which was partially offset by the sales of Ground Leases (refer to Note 5 to the consolidated financial statements).

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Other income increased to $51.5 million during the nine months ended September 30, 2022 from $60.9 million for the same period in 2021. Other income during the nine months ended September 30, 2022 consisted primarily of management fees, income from our hotel properties, gains on the sale of available-for-sale securities and other ancillary income from our land and development projects and operating properties. Other income during the nine months ended September 30, 2021 consisted primarily of mark-to-market gains on an equity investment, management fees, lease termination fees, other ancillary income from our operating properties, land and development projects and loan portfolio and income from our hotel properties.

Land development revenue and cost of sales—During the nine months ended September 30, 2022, we sold land parcels and residential lots and units and recognized land development revenue of $54.4 million which had associated cost of sales of $55.4 million. During the nine months ended September 30, 2021, we sold residential lots and units and recognized land development revenue of $157.9 million which had associated cost of sales of $147.5 million. The decrease in 2022 was primarily due to a decrease in the size of our land and development portfolio.

Costs and expenses—Interest expense decreased to $76.1 million during the nine months ended September 30, 2022 from $86.1 million for the same period in 2021. The decrease in 2022 was primarily due to a decrease in the average balance of our outstanding debt as we repaid our Senior Term Loan and certain unsecured notes in 2022 (refer to Note 10 to the consolidated financial statements).

Real estate expense increased to $39.3 million during the nine months ended September 30, 2022 from $33.4 million for the same period in 2021. The increase was primarily due to an increase in expenses at certain of our operating properties that have increased operations from the prior year, which was partially offset by asset sales.

Depreciation and amortization decreased to $4.0 million during the nine months ended September 30, 2022 from $5.7 million for the same period in 2021.

General and administrative expense includes payroll and related costs, performance-based compensation, public company costs and occupancy costs. We recognized general and administrative expense of $10.4 million during the nine months ended September 30, 2022 versus $69.0 million of expense for the same period in 2021. The decrease was due primarily to a $56.2 million decrease in performance-based compensation. Our primary forms of performance-based compensation are our iPIP Plans and our annual bonus pool (refer to Note 14 to the consolidated financial statements for more information on the iPIP Plans). In addition, illustrative examples of our iPIP Plans may be found in our 2021 definitive proxy statement which is publicly available on the SEC’s website.

The provision for loan losses was $22.6 million for the nine months ended September 30, 2022 as compared to a recovery of loan losses of $7.4 million for the same period in 2021. The provision for loan losses for the nine months ended September 30, 2022 resulted primarily from a $25.0 million provision on our held-to-maturity security, which is now recorded at its expected repayment proceeds. The recovery of loan losses for the nine months ended September 30, 2021 resulted from the reversal of Expected Loss allowances on loans that repaid in full during the period and from an improving macroeconomic forecast on commercial real estate markets since December 31, 2020.

The provision for losses on net investment in leases for the nine months ended September 30, 2021 resulted from the macroeconomic forecast on commercial real estate markets.

During the nine months ended September 30, 2022, we recognized an impairment of $1.8 million on an operating property based on the expected cash flows to be received. During the nine months ended September 30, 2021, we recorded an impairment of $0.7 million in connection with the sale of residential condominiums.

Other expense was $6.6 million during the nine months ended September 30, 2022 and $1.4 million for the same period in 2021. The increase in other expenses for the nine months ended September 30, 2022 was due primarily to legal and consulting costs in connection with our Merger with SAFE.

Income from sales of real estate—During the nine months ended September 30, 2022, we recorded $1.4 million of income from sales of real estate primarily from the sale of Ground Leases. During the nine months ended September 30,

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2021, we recorded $26.3 million of income from sales of real estate from the sale of an operating property and residential condominiums.

Loss on early extinguishment of debt, net—During the nine months ended September 30, 2022, we incurred losses on early extinguishment of debt of $131.2 million resulting from the redemption of our unsecured notes (refer to Note 3 and Note 10 to the consolidated financial statements) and the repayment of our senior term loan in connection with our Net Lease Sale.

Earnings from equity method investments—Earnings from equity method investments decreased to $102.2 million during the nine months ended September 30, 2022 from $110.7 million for the same period in 2021. During the nine months ended September 30, 2022, we recognized $74.5 million of income from our equity method investment in SAFE, $11.5 million primarily from the sale of a multifamily property at one of our venturers, $5.0 million primarily from the settlement of our interest in a venture and $11.2 million of net aggregate income from our remaining equity method investments. During the nine months ended September 30, 2021, we recognized $94.6 million of income from our equity method investment in SAFE (which included a dilution gain of $60.7 million – refer to Note 8) and $16.1 million of net aggregate income from our remaining equity method investments, which included $13.3 million from one of our equity method investments resulting from our share of income from land sales.

Income tax (expense) benefit—We recorded an income tax provision of $0.6 million for the nine months ended September 30, 2022 due primarily to state and local taxes related to the sale of our net lease assets. Income tax benefit of $0.1 million was recorded for the nine months ended September 30, 2021.

Adjusted Earnings

In 2019, we announced a new business strategy that would focus our management personnel and our investment resources primarily on scaling our Ground Lease platform. As part of this strategy, we accelerated the monetization of legacy assets and deployed a substantial portion of the proceeds into additional investments in SAFE and new loan and net lease originations relating to the Ground Lease business. Adjusted earnings is a non-GAAP metric management uses to assess our execution of this strategy and the performance of our operations.

Adjusted earnings is used internally as a supplemental performance measure adjusting for certain items to give management a view of income more directly derived from operating activities in the period in which they occur. Adjusted earnings is calculated as net income (loss) allocable to common shareholders, prior to the effect of depreciation and amortization, including our proportionate share of depreciation and amortization from equity method investments and excluding depreciation and amortization allocable to noncontrolling interests, stock-based compensation expense, the non-cash portion of loss on early extinguishment of debt and the liquidation preference recorded as a premium above book value on the redemption of preferred stock (“Adjusted Earnings”).

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Adjusted Earnings should be examined in conjunction with net income (loss) as shown in our consolidated statements of operations. Adjusted Earnings should not be considered as an alternative to net income (loss) (determined in accordance with generally accepted accounting principles in the United States of America (“GAAP”)), or to cash flows from operating activities (determined in accordance with GAAP), as a measure of our liquidity, nor is Adjusted Earnings indicative of funds available to fund our cash needs or available for distribution to shareholders. Rather, Adjusted Earnings is an additional measure we use to analyze our business performance because it excludes the effects of certain non-cash charges that we believe are not necessarily indicative of our operating performance. It should be noted that our manner of calculating Adjusted Earnings may differ from the calculations of similarly-titled measures by other companies.


	For the Three Months Ended March 31,				For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021		2022		2021

	(in thousands)				(in thousands)
Adjusted Earnings
Net income (loss) allocable to common shareholders	$	610,855	$	(405)
Net income allocable to common shareholders					$	12,131	$	121,856	$	484,501	$	101,908
Add: Depreciation and amortization		4,002		17,629		3,705		16,449		11,606		50,790
Add: Stock-based compensation (income) expense		(12,427)		5,508
Add: Stock-based compensation						(374)		3,001		(30,724)		23,300
Add: Non-cash portion of loss on early extinguishment of debt		5,109		—		13,051		—		136,464		—
Adjusted earnings allocable to common shareholders	$	607,539	$	22,732	$	28,513	$	141,306	$	601,847	$	175,998

Liquidity and Capital Resources

During the three months ended March 31, 2022, we received net proceeds from the Net Lease Sale of approximately $1.2 billion. We invested an aggregate $247 million in new investments, prior financing commitments and real estate development. Investments included $231 million in our Ground Lease businesses (including $202 million in shares of SAFE common stock) and $16 million of loan fundings and capital expenditures on legacy and strategic assets. These amounts are inclusive of fundings from our consolidated investments and our pro rata share from equity method investments.

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The following table outlines our capital expenditures on operating properties, net lease and land and development assets as reflected in our consolidated statements of cash flows for the three months ended March 31, 2022 and 2021, by segment ($ in thousands):

For the Three Months Ended March 31,


2022

2021

Operating Properties

$
239

$
96

Net Lease

502

552

Total capital expenditures on real estate assets

$
741

$
648

Land and Development

$
4,803

$
4,134

Total capital expenditures on land and development assets

$
4,803

$
4,134

As of ~~March 31,~~September 30, 2022, we had unrestricted cash of ~~$1.5 billion and $350 million of borrowing capacity available under the Revolving Credit Facility.~~$1.3 billion. Our primary cash uses over the next 12 months are expected to be repayment of our debt obligations (refer to Note 1 and Note 10 to the consolidated financial statements), redemption of our preferred stock (refer to Note 1 and Note 13 to the consolidated financial statements), funding of investments in our Ground Lease and Ground Lease adjacent businesses, ~~distributions to noncontrolling interests resulting from the Net Lease Sale (refer to Note 3 to the consolidated financial statements),~~ ~~repayment of debt obligations (refer to Note 10 to the consolidated financial statements),~~ capital expenditures on legacy assets, distributions to shareholders through dividends ~~and share repurchases~~ and funding ongoing business operations, including operating lease payments (refer to Note 11 to the consolidated financial statements). The amount we actually invest will depend on the closing of the Merger with SAFE, asset sales, the continuing impact of the COVID-19 pandemic, inflation, interest rate increases, market volatility and other macroeconomic factors on our business.

InBeginning in April 2022 and continuing through September 2022, we completed separate, privately-negotiated transactions with holders of ~~$194 million aggregate principal amount of~~ our 3.125% convertible notes ~~(refer to Note 18 to the consolidated financial statements)~~ in which the noteholders exchanged their convertible notes with us for ~~13.75 million~~ newly issued shares of our common stock and ~~aggregate~~ cash ~~payments of $14 million. Our remaining $94~~(refer to Note 10 to the consolidated financial statements). We also repaid $0.5 million ~~aggregate~~ principal amount of our 3.125% convertible notes ~~mature in September 2022, and we must repay them in a combination of~~for cash ~~and shares~~at maturity. We have covenanted to redeem all of our ~~common stock.~~outstanding preferred stock at the liquidation preference per share plus accrued and unpaid dividends and to retire all of our remaining senior unsecured notes in connection with the Merger. We also had approximately ~~$128.4~~$156.5 million of maximum unfunded commitments associated with our investments as of ~~March 31,~~September 30, 2022, of which we expect to fund the majority of over the next two years, assuming borrowers and tenants meet all milestones, performance hurdles and all other conditions to fundings (see “Unfunded Commitments” below). We also have approximately ~~$138.4~~$105.2 million principal amount of scheduled real estate finance maturities over the next 12 months, exclusive of any extension options that can be exercised by our borrowers.

We expect that we will be able to meet our liquidity requirements over the next 12 months and for the reasonably foreseeable future. Our capital sources to meet such cash requirements are expected to include cash on hand, including proceeds from the Net Lease Sale, Revolving Credit Facility borrowings, income from our portfolio, loan repayments from borrowers and proceeds from asset sales. We cannot predict with certainty the specific transactions we will undertake to generate sufficient liquidity to meet our obligations as they come due. We will adjust our plans as appropriate in response to changes in our expectations and changes in market conditions.

We also have amounts due under our liability-classified and equity-classified iPIP Plans. We currently estimate the total amount due under our iPIP Plans to be ~~$219~~$84 million, assuming SAFE is valued at a price of ~~$43.05~~$29.25 per share and our other assets perform with current underwriting expectations. Of this amount, ~~$114~~$59 million has been accrued in our financial statements (refer to Note 14 to the consolidated financial statements)~~, of which $39 million will be paid in cash and shares of our common stock in the second quarter of 2022 resulting from the Net Lease Sale.~~. Distributions on our iPIP Plans are expected to be 50% in cash and 50% in shares of our common stock; provided, however, that (a) the cash portion will be increased if we do not have sufficient shares available under shareholder approved equity plans; and (b) if the principal remaining material asset in a plan is unsold SAFE shares, we may elect to distribute SAFE shares in lieu of cash and our common stock. Additional information on our iPIP Plans can be found in our 2021 Annual Report and our 2021 Proxy Statement, both of which are available on our website.

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We expect that we will be able to meet our liquidity requirements over the next 12 months and for the reasonably foreseeable future. Our capital sources to meet such cash requirements are expected to include cash on hand, income from our portfolio, loan repayments from borrowers and proceeds from asset sales. We cannot predict with certainty the specific transactions we will undertake to generate sufficient liquidity to meet our obligations as they come due. We will adjust our plans as appropriate in response to changes in our expectations and changes in market conditions.

The following table outlines our cash flows provided by operating activities, cash flows used in investing activities and cash flows provided by financing activities for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 and 2021 ($ in thousands):


	For the Three Months Ended March 31,				For the Nine Months Ended September 30,
	2022		2021		2022		2021

Cash flows used in operating activities	$	(30,624)	$	(3,795)
Cash flows provided by (used in) operating activities					$	15,373	$	(4,741)
Cash flows provided by investing activities		2,417,867		137,635		2,706,633		373,722
Cash flows used in financing activities		(1,229,992)		(36,414)		(1,774,805)		(164,620)

The ~~decrease~~increase in cash flows provided by operating activities during 2022 was due primarily to an increase in distributions of earnings from other investments in 2022, which was partially offset by iPIP Plan payments and a decrease in the ~~collection~~amount of deferred interest on ~~loans.~~loans collected in 2022 versus 2021. The increases in cash flows provided by investing activities ~~and~~during 2022 was due primarily to the Net Lease Sale (refer to Note 3 to the consolidated financial statements). The increase in cash flows used in financing activities during 2022 was due primarily to the Net Lease Sale (refer to Note 3 to the consolidated financial statements). and settlements and repayments of our unsecured notes.

Debt Covenants—Our outstanding unsecured debt securities contain corporate level covenants that include a covenant to maintain a ratio of unencumbered assets to unsecured indebtedness, as such terms are defined in the indentures governing the debt securities, of at least 1.3x and a covenant restricting certain incurrences of debt based on a fixed charge coverage ratio. If any of our covenants are breached and not cured within applicable cure periods, the breach could result in acceleration of our debt securities unless a waiver or modification is agreed upon with the requisite percentage of the bondholders.

The Revolving Credit Facility contains certain covenants, including covenants relating to collateral coverage, restrictions on fundamental changes, transactions with affiliates, matters relating to the liens granted to the lenders and the delivery of information to the lenders. The Revolving Credit Facility is secured by a borrowing base of assets and requires us to maintain both borrowing base asset value of at least 1.5x outstanding borrowings on the facility and a consolidated ratio of cash flow to fixed charges of at least 1.5x. The Revolving Credit Facility does not require that proceeds from the borrowing base be used to pay down outstanding borrowings provided the borrowing base asset value remains at least 1.5x outstanding borrowings on the facility. To satisfy this covenant, we have the option to pay down outstanding borrowings or substitute assets in the borrowing base. Under the Revolving Credit Facility we are permitted to pay dividends provided that no material default (as defined in the relevant agreement) has occurred and is continuing or would result therefrom and we remain in compliance with our financial covenants after giving effect to the dividend. We declared common stock dividends of $8.7 million, or $0.125 per share, for the three months ended March 31, 2022.

Derivatives—Our use of derivative financial instruments, if necessary, has primarily been limited to the utilization of interest rate swaps, interest rate caps or other instruments to manage interest rate risk exposure and foreign exchange contracts to manage our risk to changes in foreign currencies. Refer to Note 12 to the consolidated financial statements.

Unfunded Commitments—We generally fund construction and development loans and build-outs of space in real estate assets over a period of time if and when the borrowers and tenants meet established milestones and other performance criteria. We refer to these arrangements as Performance-Based Commitments. In addition, we have

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committed to invest capital in several real estate funds and other ventures. These arrangements are referred to as Strategic Investments.

As of ~~March 31,~~September 30, 2022, the maximum amount of fundings we may be obligated to make under each category, assuming all performance hurdles and milestones are met under the Performance-Based Commitments and assuming that 100% of our capital committed to Strategic Investments is drawn down, are as follows (in thousands):


	Loans and Other								Loans and Other
	Lending				Other				Lending				Other
	Investments			Real Estate	Investments		Total		Investments			Real Estate	Investments		Total
Performance-Based Commitments	$	4,235	$	8,111	$	108,650	$	120,996	$	717	$	270	$	147,405	$	148,392
Strategic Investments		—		5,061		2,325		7,386		—		3,161		4,907		8,068
Total	$	4,235	$	13,172	$	110,975	$	128,382	$	717	$	3,431	$	152,312	$	156,460

Stock Repurchase Program—We may repurchase shares in negotiated transactions or open market transactions, including through one or more trading plans. During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, we repurchased ~~0.7~~4.2 million shares of our outstanding common stock for ~~$12.4~~$91.9 million, for an average cost of ~~$17.20~~$21.70 per share. We are generally authorized to repurchase up to $50.0 million in shares of our common stock and in February 2022, our board of directors authorized an increase to the stock repurchase program to $50.0 million. As of ~~March 31,~~September 30, 2022, we had remaining authorization to repurchase up to $50.0 million of common stock under our stock repurchase program.

Critical Accounting Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and judgments in certain circumstances that affect amounts reported as assets, liabilities, revenues and expenses. We have established detailed policies and control procedures intended to ensure that valuation methods, including any judgments made as part of such methods, are well controlled, reviewed and applied consistently from period to period. We base our estimates on historical corporate and industry experience and various other assumptions that we believe to be appropriate under the circumstances. For all of these estimates, we caution that future events rarely develop exactly as forecasted, and, therefore, routinely require adjustment.

For a discussion of our critical accounting policies, refer to Note 3 to the consolidated financial statements and our 2021 Annual Report.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market Risks

Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates, commodity prices and equity prices. In pursuing our business plan, the primary market risk to which we are exposed is interest rate risk. Our operating results will depend in part on the difference between the interest and related income earned on our assets and the interest expense incurred in connection with our interest-bearing liabilities. Changes in the general level of interest rates prevailing in the financial markets will affect the spread between our floating rate assets and liabilities subject to the net amount of floating rate assets/liabilities and the impact of interest rate floors and caps. Any significant compression of the spreads between interest-earning assets and interest-bearing liabilities could have a material adverse effect on us.

In the event of a significant rising interest rate environment or economic downturn, defaults could increase and cause us to incur additional credit losses which would adversely affect our liquidity and operating results. Such delinquencies or defaults would likely have a material adverse effect on the spreads between interest-earning assets and interest-bearing liabilities. In addition, an increase in interest rates could, among other things, reduce the value of our fixed-rate interest-bearing assets and our ability to realize gains from the sale of such assets.

Interest rates are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political conditions, and other factors beyond our control. We monitor the spreads between our interest-earning assets and interest-bearing liabilities and may implement hedging strategies to limit the effects of changes in interest rates on our operations, including engaging in interest rate swaps, interest rate caps and other interest rate-related derivative contracts. Such strategies are designed to reduce our exposure, on specific transactions or on a portfolio basis, to changes in cash flows as a result of interest rate movements in the market. We do not enter into derivative contracts for speculative purposes or as a hedge against changes in our credit risk or the credit risk of our borrowers.

While a REIT may utilize derivative instruments to hedge interest rate risk on its liabilities incurred to acquire or carry real estate assets without generating non-qualifying income, use of derivatives for other purposes will generate non-qualified income for REIT income test purposes. This includes hedging asset related risks such as credit and interest rate exposure on our loan assets. As a result, our ability to hedge these types of risks is limited. There can be no assurance that our profitability will not be materially adversely affected during any period as a result of changing interest rates.

The following table quantifies the potential changes in annual net income, assuming no change in our interest earning assets or interest bearing liabilities, should interest rates decrease ~~by 10 basis points~~ or increase by 10, 50 or 100 basis points, assuming no change in the shape of the yield curve (i.e., relative interest rates). The base interest rate scenario assumes the one-month LIBOR rate of ~~0.45%~~3.14% as of ~~March 31,~~September 30, 2022. Actual results could differ significantly from those estimated in the table.

Estimated Change In Net Income

($ in thousands)


Change in Interest Rates		Net Income⁽¹⁾
~~-10~~-100 Basis Points	$	~~(1,451)~~(13,114)
-50 Basis Points		(6,566)
-10 Basis Points		(1,313)
Base Interest Rate		—
+10 Basis Points		~~1,451~~1,313
+50 Basis Points		~~7,256~~6,566
+100 Basis Points		~~14,512~~13,131

(1)	As of ~~March 31,~~September 30, 2022, we have an overall net variable-rate asset position. In addition, as of ~~March 31,~~September 30, 2022, ~~$138.3~~$72.0 million of our floating rate loans have a weighted average interest rate floor of ~~2.1%~~2.2%.

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Item 4. Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The Company has formed a disclosure committee that is responsible for considering the materiality of information and determining the disclosure obligations of the Company on a timely basis. The disclosure committee reports directly to the Company’s Chief Executive Officer and Chief Financial Officer.

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the disclosure committee and other members of management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b) or Rule 15d-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective to provide reasonable assurance that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is: (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms; and (ii) accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding disclosure.

There have been no changes ~~during the last fiscal quarter~~ in the Company’s internal control over financial reporting during the period covered by this quarterly report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in the Company’s periodic reports.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company and/or one or more of its subsidiaries is party to various pending litigation matters that are considered ordinary routine litigation incidental to the Company’s business as a finance and investment company focused on the commercial real estate industry, including foreclosure-related proceedings. The Company believes it is not a party to, nor are any of its properties the subject of, any pending legal proceeding that would have a material adverse effect on the Company’s consolidated financial statements.

Item 1A. Risk Factors

The Merger and related transactions may not be completed on the terms or timeline currently contemplated, or at all.

The completion of the Merger and related transactions are subject to certain conditions, including: (i) the approval of SAFE’s stockholders, (ii) the approval of the Company’s stockholders, (iii) completion of the spin-off, (iv) the approval of the shares of New SAFE common stock to be issued in the Merger for listing on the NYSE, (v) the effectiveness of the registration statement on Form S-4 registering the New SAFE common stock to be issued in the Merger, (vi) the absence of any temporary restraining order, injunction or other order of any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the reverse stock split or the Merger, (vii) generation of certain cash proceeds and repayment of the Company’s senior unsecured notes and preferred stock, (viii) the receipt of certain tax opinions by the Company and SAFE that the Merger will qualify as a reorganization under the Internal Revenue Code and that the Company and SAFE each qualifies as a REIT for federal income tax purposes, (ix) the accuracy of certain representations and warranties of the Company and SAFE contained in the Merger agreement and the compliance by the parties with the covenants contained in the Merger agreement (subject to customary materiality qualifiers), and (x) certain other conditions specified in the Merger agreement. The proposed sale of shares of SAFE common stock by the Company to MSD Partners is also subject to certain closing conditions and if it did not close for any reason, the Company would have to identify new sources of funds in order to satisfy the condition to the Merger that the Company repay its senior unsecured notes and preferred stock. Neither the Company nor SAFE can provide assurances that the Merger and related transactions will be consummated on the terms or timeline currently contemplated, or at all.

Failure to complete the Merger and related transactions could adversely affect the stock prices and the future business and financial results of the Company and SAFE.

If the Merger and related transactions are not completed, the ongoing businesses of the Company or SAFE may be adversely affected and the Company and SAFE will be subject to numerous risks, including the following:

●

upon termination of the Merger agreement under specified circumstances, a termination fee of $63 million may be payable by either the Company or SAFE;

●

each of the Company and SAFE having to pay substantial costs relating to the Merger, such as legal, accounting, financial advisor, filing, printing and mailing fees and integration preparation costs that have already been incurred or will continue to be incurred until the closing of the Merger;

●

the management of each of the Company and SAFE focusing on the Merger instead of on pursuing other opportunities that could be beneficial to the companies, in each case, without realizing any of the benefits of having the Merger completed; and

●

reputational harm due to the adverse perception of any failure to successfully complete the Merger.

If the Merger and related transactions are not completed, neither the Company nor SAFE can assure their respective stockholders that these risks will not materialize or will not materially affect the business, financial results and stock prices of either the Company or SAFE.

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SAFE will have the option to internalize the Company's management if the Merger has not occurred by the outside date under the Merger agreement.

If the Merger agreement is terminated because the Merger has not occurred by September 30, 2023, SAFE will have the option under certain circumstances to terminate the existing external management agreement and internalize the Company's management, which may adversely affect the Company. If SAFE exercises its option under the Merger agreement to become internalized, it must pay the Company $100.0 million, of which up to $60.0 million may be paid in cash, at SAFE’s discretion, with the remainder being paid in shares of SAFE common stock, which is less than the $150.0 million of consideration that was allocated to the existing management agreement in the negotiations of the Merger. If SAFE exercises this option, the Company would become externally-managed by SAFE pursuant to a management agreement that SAFE and the Company have agreed to negotiate in good faith. These changes in the Company's management structure may adversely affect the Company and the market value of its securities.

The Merger agreement contains provisions that could discourage a potential competing acquirer of either the Company or SAFE or could result in any competing proposal being at a lower price than it might otherwise be.

The Merger agreement contains provisions that, subject to limited exceptions, restrict the ability of each of the Company and SAFE to, directly or indirectly, initiate, solicit, propose, knowingly encourage or facilitate competing third-party proposals to effect, among other things, a Merger, reorganization, share exchange, consolidation or the sale of 15% or more of the stock or consolidated net revenues, net income or total assets of the Company or SAFE. In addition, either the Company or SAFE generally has an opportunity to offer to modify the terms of the Merger agreement in response to any competing “superior proposal” (as defined in “the Merger Agreement”) that may be made to the other party before the special committee of the boards of directors of the Company or SAFE, as the case may be, may withdraw or modify its recommendation in response to such superior proposal or terminate the Merger agreement to enter into such superior proposal. In some circumstances, one of the parties will be required to pay a substantial termination fee to the other party.

These provisions could discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of the Company or SAFE from considering or proposing such an acquisition, even if it were prepared to pay consideration with a higher per share cash or market value than that market value proposed to be received or realized in the Merger, or might result in a potential competing acquirer proposing to pay a lower price than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable in certain circumstances under the Merger agreement. In addition, the Company's significant ownership interest and voting power in SAFE could discourage a potential competing acquirer for SAFE.

The pendency of the Merger and related transactions could adversely affect the business and operations of the Company and SAFE.

In connection with the pending Merger and related transactions, some tenants, vendors or other counterparties of each of the Company and SAFE may delay or defer decisions, which could adversely affect the revenues, earnings, funds from operations, cash flows and expenses of the Company and SAFE, regardless of whether the Merger is completed. Similarly, current and prospective employees of the Company and New SAFE may experience uncertainty about their future roles with New SAFE following the Merger and related transactions, which may materially adversely affect the ability of the Company to attract and retain key personnel during the pendency of the Merger and related transactions. In addition, due to interim operating covenants in the Merger agreement, each of the Company and SAFE may be unable (without the other party’s prior written consent), during the pendency of the Merger and related transactions, to pursue strategic transactions, undertake significant capital projects, undertake certain significant financing transactions and otherwise pursue other actions, even if such actions would prove beneficial.

There were no other material changes from the risk factors previously disclosed in our 2021 Annual Report.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

We did not purchase any shares of our common stock during the three months ended ~~March 31,~~September 30, 2022. As of ~~March 31,~~September 30, 2022, we had remaining authorization to repurchase up to $50.0 million of common stock under our stock repurchase program.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

INDEX TO EXHIBITS


Exhibit Number		Document Description
2.1		Merger Agreement, dated as of August 10, 2022, by and between iStar Inc. and Safehold Inc. (Schedules have been omitted pursuant to Item 601(b)(5) of Regulation S-K. STAR agrees to furnish supplementally to the SEC a copy of any omitted schedule upon request.) (incorporated by reference to Exhibit 2.1 of our Current Report on Form 8-K, filed August 11, 2022)
10.1		Voting Agreement, dated as of August 10, 2022, by and between iStar Inc. and Safehold Inc. (incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K, filed August 11, 2022)
10.2		Stock Purchase Agreement, dated August 10, 2022, by and among iStar Inc., Safehold Inc., MSD Partners, L.P. and, with respect to certain specified sections, MSD Capital, L.P. (incorporated by reference to Exhibit 10.2 of our Current Report on Form 8-K, filed August 11, 2022)
31.0		Certifications pursuant to Section 302 of the Sarbanes-Oxley Act.
32.0		Certifications pursuant to Section 906 of the Sarbanes-Oxley Act.
101*		The following financial information from the Company’s Quarterly Report on Form 10-Q for the period ended ~~March 31,~~September 30, 2022 is formatted in Inline XBRL (“eXtensible Business Reporting Language”): (i) the Consolidated Balance Sheets (unaudited) as of ~~March 31,~~September 30, 2022 and December 31, 2021, (ii) the Consolidated Statements of Operations (unaudited) for the three and nine months ended ~~March 31,~~September 30, 2022 and 2021, (iii) the Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three and nine months ended ~~March 31,~~September 30, 2022 and 2021, (iv) the Consolidated Statements of Changes in Equity (unaudited) for the three and nine months ended ~~March 31,~~September 30, 2022 and 2021, (v) the Consolidated Statements of Cash Flows (unaudited) for ~~three~~nine months ended ~~March 31,~~September 30, 2022 and 2021 and (vi) the Notes to the Consolidated Financial Statements (unaudited).
104		Cover Page Interactive Data File (formatted in iXBRL and contained in Exhibit 101)

In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 is deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Exchange Act of 1934 and otherwise is not subject to liability under these sections.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		iStar Inc. Registrant

Date:	~~May 4,~~November 3, 2022	/s/ JAY SUGARMAN
		Jay Sugarman
		Chairman of the Board of Directors and Chief
		Executive Officer (principal executive officer)




		iStar Inc. Registrant
Date:	~~May 4,~~November 3, 2022	/s/ BRETT ASNAS
		Brett Asnas
		Chief Financial Officer
		(principal financial officer)

RETT

		iStar Inc. Registrant
Date:	~~May 4,~~November 3, 2022	/s/ GARETT ROSENBLUM
		Garett Rosenblum
		Chief Accounting Officer

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	Amount
2022 (remaining nine months)	$	688
2023		934
2024		1,194
2025		1,240
2026		1,264
Thereafter		351,018
Total undiscounted cash flows	$	356,338


	iPIP Investment Pool
	2013‑2014	2015‑2016	2017‑2018
Points at beginning of period	80.17	70.40	75.34
Granted	0	0	0
Points at end of period	80.17	70.40	75.34

Allocated general and administrative⁽³⁾		(5,016)		(1,124)		(478)		(2,255)		(4,929)		(13,802)
Segment profit (loss)⁽⁴⁾	$	1,303	$	1,516	$	(2,030)	$	(5,207)	$	(6,693)	$	(11,111)
Other significant items:
Provision for loan losses	$	—	$	135	$	—	$	—	$	—	$	135
Provision for losses on net investment in leases		281		—		—		—		—		281
Depreciation and amortization		—		—		986		228		143		1,357
Capitalized expenditures		(211)		—		220		4,922		—		4,931

Three Months Ended March 31, 2021
Operating lease income	$	—	$	—	$	4,837	$	94	$	—	$	4,931
Interest income		17		9,772		—		—		—		9,789
Interest income from sales-type leases		—		—		—		—		—		—
Other income		3,476		99		2,337		1,389		5,714		13,015
Land development revenue		—		—		—		32,249		—		32,249
Earnings (losses) from equity method investments		11,412		466		(3,747)		3,146		491		11,768
Income from sales of real estate		—		—		612		—		—		612
Total revenue and other earnings		14,905		10,337		4,039		36,878		6,205		72,364
Real estate expense		(458)		—		(3,799)		(4,462)		—		(8,719)
Land development cost of sales		—		—		—		(29,323)		—		(29,323)
Other expense		—		(64)		—		—		(189)		(253)
Allocated interest expense		(14,325)		(4,578)		(2,043)		(3,938)		(3,925)		(28,809)
Allocated general and administrative⁽³⁾		(5,937)		(1,459)		(660)		(2,428)		(5,447)		(15,931)
Segment profit (loss)⁽⁴⁾	$	(5,815)	$	4,236	$	(2,463)	$	(3,273)	$	(3,356)	$	(10,671)
Other significant items:
Recovery of loan losses	$	—	$	(3,642)	$	—	$	—	$	—	$	(3,642)
Impairment of assets		—		—		257		—		—		257
Depreciation and amortization		—		—		1,988		218		195		2,401
Capitalized expenditures		1,268		—		57		4,739		—		6,064

As of March 31, 2022
Real estate, net	$	—	$	—	$	91,434	$	—	$	—	$	91,434
Real estate available and held for sale		—		—		301		—		—		301
Total real estate		—		—		91,735		—		—		91,735
Real estate and other assets available and held for sale and classified as discontinued operations⁽¹⁾		226,309		—		—		—		—		226,309
Net investment in leases		28,131		—		—		—		—		28,131
Land and development, net		—		—		—		277,421		—		277,421
Loans receivable and other lending investments, net		—		331,839		—		—		—		331,839
Loan receivable held for sale		—		—		—		—		—		—
Other investments		1,453,205		4,627		43,251		190		24,746		1,526,019
Total portfolio assets		1,707,645		336,466		134,986		277,611		24,746		2,481,454
Cash and other assets												1,602,597
Total assets											$	4,084,051

As of December 31, 2021
Real estate, net	$	—	$	—	$	92,150	$	—	$	—	$	92,150
Real estate available and held for sale		—		—		301		—		—		301
Total real estate		—		—		92,451		—		—		92,451
Real estate and other assets available and held for sale and classified as discontinued operations⁽¹⁾		2,299,711		—		—		—		—		2,299,711
Net investment in leases		43,215		—		—		—		—		43,215
Land and development, net		—		—		—		286,810		—		286,810
Loans receivable and other lending investments, net		—		332,844		—		—		—		332,844
Loan receivable held for sale		43,215		—		—		—		—		43,215
Other investments		1,186,162		48,862		43,252		1,096		17,909		1,297,281
Total portfolio assets	$	3,572,303	$	381,706	$	135,703	$	287,906	$	17,909		4,395,527
Cash and other assets												445,007
Total assets											$	4,840,534