Safehold Inc

approximately $1.1 billion of liquidity, which is further supported by the potential available capacity in our joint venture. Slide three provides a snapshot of our portfolio growth. In the third quarter, we funded a total of $58 million, including $33 million of ground lease fundings on new originations that have a 7.4% economic yield, $15 million of ground lease fundings on pre-existing commitments that have a 7.5% economic yield, and $10 million of existing leasehold loans that earn interest at an approximate rate of SOFR plus 499 basis points. At quarter end, our ground lease portfolio had 155 assets, including 92 multifamily properties, and has grown 21 times by both book value and estimated unrealized capital appreciation since our IPO. In total, the unrealized capital appreciation portfolio is comprised of approximately 37 million square feet of institutional quality commercial real estate, consisting of approximately 21,500 multifamily units, 12.6 million square feet of office, over 5,000 hotel keys, and 2 million square feet of life science and other property types. Continuing on slide four, let me detail our quarterly earnings results. For the third quarter, GAAP revenue was 96.2 million, net income was 29.3 million, and earnings per share was 41 cents. The increase in GAAP earnings year over year was primarily due to a non-recurring $6.8 million non-cash general provision taken one year ago. Excluding non-recurring items, Q3 earnings per share increased 4 cents year-over-year, or approximately 12%, primarily driven by new investment activity. On slide five, we detail our portfolio's yields. For GAAP earnings, the portfolio currently earns a 3.8% cash yield, up slightly from last quarter due to organic growth, higher yields on new investments, and a fair market value reset on one of our ground leases. Our annualized yield earns 5.4 percent and includes non-cash adjustments within rent, depreciation, and amortization, which is primarily from accounting methodology on IPO assets, but excludes all future contractual variable rent, such as fair market value resets, percentage rent, or CPI-based escalators, which are all significant economic drivers. On an economic basis, the portfolio generates a 5.9% economic yield, which is an IRR-based calculation that conforms with how we've underwritten these investments. This economic yield has additional upside, including periodic CPI lookbacks, which we have in 81% of our ground leases. Using the Federal Reserve's current long-term break-even inflation rate of 2.25%, the 5.9% economic yield increases to a 6.0% inflation-adjusted yield. That 6.0% inflation adjusted yield then increases to 7.5% after layering in an estimate for unrealized capital appreciation using Safehold's 84% ownership interest in Carrot at its most recent $2 billion valuation. We believe unrealized capital appreciation in our assets to be a significant source of value for the company that remains largely unrecognized by the market today. Turning to slide six, we highlight the diversification of our portfolio by location and underlying property type. Our top 10 markets by gross book value are called out on the right, representing approximately 65% of the portfolio. We include key metrics such as rent coverage and GLTV for each of these markets, and we have additional detail at the bottom of the page by region and property type. Portfolio GLTV, which is based on annual asset appraisals from CBRE, remained flat quarter over quarter at 52%. Portfolio rent coverage declined very slightly quarter over quarter from rounding up to 3.5 times previously to now rounding down to 3.4 times. Lastly, on slide seven, we provide an overview of our capital structure. At quarter end, we had approximately $4.8 billion of debt comprised of $2.2 billion of unsecured notes, $1.5 billion of non-recourse secured debt, $881 million drawn on our unsecured revolver, and 270 million of our pro rata share of debt on ground leases, which we own in joint ventures. Our weighted average debt maturity is approximately 19 years, and we have no maturities due until 2027. At quarter end, we had approximately 1.1 billion of cash and credit facility availability. We are rated A3 stable outlook by Moody's, A minus stable outlook by Fitch, and triple B plus positive outlook by S&P. We have benefited from an active hedging strategy and remain well hedged on our limited floating rate borrowings. Of the $881 million revolver balance outstanding, $500 million is swapped to fix SOFR at 3% through April 2028. We receive swap payments on a current cash basis each month, and for the third quarter, that produced cash interest savings of approximately $1.7 million that flowed through the P&L. We also have $250 million of long-term treasury locks at a weighted average rate of approximately 4.0%. current gain position of approximately 29 million which is currently recognized on the balance sheet but not the p l we are levered 2.0 times on a total debt to equity basis the effective interest rate on permanent debt is 4.2 percent and the portfolio's cash interest rate on permanent debt is 3.8 percent so to conclude we're encouraged by good traction in the affordable sector which we believe will help buoy origination volume while other sectors work their way back into the pipeline. And we have a strong balance sheet and liquidity position that we'll look to take advantage of to be more offensive with our customers. And with that, let me turn it back to Jay.

Thanks, Brad. I mentioned earlier our focus on finding ways to meet our customers' needs. Of course, it's also important for our customers to live up to their obligations. So let me provide a brief update on the Park Hotel Master Lease. We recently sent this tenant a lease termination notice for all five hotels governed by the master lease, and we'll be pursuing all our contractual rights under the lease. We believe the tenant has breached the master lease covenants and has not upheld their contractual obligations under the lease, which includes specific maintenance and operating standards. Because this is now active litigation, we are limited in what else we can say publicly. As I'm sure you understand, we can't provide assurance that we will prevail in litigation or that the future financial impacts will be positive. Okay, with that, let's go ahead and open it up for questions.

Thank you. To ask a question, please press star one at this time. We will take as many questions as time permits. Once again, please press star one to ask a question. We will pause a moment to assemble the roster. The first question comes from Ronald Camden with Morgan Stanley. Please proceed.