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spk07: It highlights what remains of our non-ground lease assets. These are the assets that will either be monetized or moved over to Spinco. In our real estate finance portfolio, during the quarter, we received proceeds from loan repayments and sales totaling $33 million and recognized $3 million of gains associated with these sales. Remaining in this portfolio is six loans carried at $177 million. We anticipate the majority of these loans to be repaid prior to merger closing. Regarding our legacy and strategic assets, we received 35 million of proceeds and distributions from asset sales during the quarter, which generated an additional 11 million of gains. What remains is a total of 394 million of carrying value, of which Asbury Park and Magnolia Green represent the two long-term assets, totaling 270 million, as well as 13 short-term assets, which total 124 million. In total during the quarter, I-Star generated 105 million of proceeds from asset sales, loan repayments, and a ground lease plus sale to Safehold. Slide 9 shows an overview of our corporate debt. Continuing on our strategy to simplify the balance sheet, reduce outstanding debt, and preserve cash, during the third quarter, I-Star extinguished a total of 155 million of debt, including 93 million of convertible notes and 62 million of open market purchases of our bonds. at a price close to par. At quarter end, we had approximately $1.7 billion of total outstanding debt with a weighted average maturity of 3.2 years. In conclusion, we continue to execute on our stated strategies to strengthen and streamline our portfolio. Additionally, we are also making significant progress in the business combination with Safehold and look forward to providing you more details as they unfold. With that, let me turn it back to Jack.
spk02: Thanks, Brett. I know a number of you have asked when the merger proxy is expected to be filed. There are a lot of documents in different parties in the mix, so it's been time-consuming to say the least, but I think we're nearing the home stretch on getting those documents filed. Now let's open it up for questions. Operator?
spk00: Thank you. Ladies and gentlemen, if you'd like to ask a question, please press Start 1 at this time. We will take as many questions as time permits and proceed in the order that you signal us. Once again, please press star one to ask a question. We will pause just a moment to assemble the roster. Thank you. Your first question is coming from Steven Laws of Raymond James. Steven, please ask your question.
spk06: Hi, good morning. Jay, I guess first maybe start with the asset sales. I think in the original announcement it was 400 million was the number provided. You know, when you look at the sales that took place this quarter, does that kind of all work against that number, or is there an update on how many more asset sales from here? And then kind of, you know, on that topic, you know, any sales in October, and is it anything chunky, or is it really just the loan payoffs and smaller assets?
spk02: Hey, Stephen, yeah, I think you got it right. We have, I think, about a dozen smaller operating assets we need to work through. Those are, as you might expect, processes where you market, you get bids, you've got to go through the process. Sometimes the top bid falls out, you go back. So that process is a bit frustrating, but the team continues to make progress. On the loan payoffs, yes, those are more chunky. We have better visibility on those. But again, this is a market that we take nothing for granted. So our team continues to work hard with our customers to make sure those get to the finish line. And then we, you know, one or two sizable assets that we're working on, but we can just feel by where the market is that our original timeframes are probably going to slip here.
spk06: You know, along those lines, kind of on the timing, you mentioned the proxy. Um, you know, as you look at, at the path, you know, I think it's a vote and maybe it'll take time for sec to review the documents, you know, can kind of lay down the layout, the path or timeframe, the events kind of up to end of Q1 or early Q2, as far as maybe a targeted closing. And is it correct that I think there's two extension options that actually could allow this to push through September 30th at the latest, if the market, you know, doesn't cooperate.
spk02: Yeah, you're right there. The real outside date is September 30th, and we continue to have a lot of time and effort going into trying to get this done by the end of the first quarter. Beginning of second quarter, there's some small penalties involved if we miss the first quarter and a little bit larger ones if we miss the second quarter. So a lot of motivation to try to get it done. Yeah, the process from here to the finish line is file the proxy, get the SEC comments, work through that process with them. There are multiple documents going at once, so we'll probably have some work to do with them. And then the asset sales in parallel are taking place. So, you know, we certainly believe that the timeframe works to get this done by the end of the first quarter, early second quarter.
spk06: Thanks for laying that out. Sounds like everybody will have a busy holiday on your side with all of that. Last question on the liabilities. You know, you retired, extinguished a lot of debt during the quarter converts. Can you talk about, you know, the pace of how you think about retiring debt, you know, how you look at relative attractiveness of what to retire first and kind of how we're going to see that shrink between now and closing?
spk02: Yeah, Brad, I don't know if you want to lay out how we've been looking at the market right now.
spk07: Sure, absolutely. Hey, Steven. Yeah, we definitely retired a decent amount in the third quarter opportunistically. I think as Jay alluded to, once we kind of get through our filings and get through our process, we'll continue to shrink down the balance. I think the bonds right now are trading slightly below par. um and we're uh earning a decent rate on our cash so i think the uh the arb there is a lot less than we just need to get through our process to kind of to the merger to shrink down that debt balance uh during the quarter we obviously took out the 93 million dollars of converts we were able to issue uh what is what is today quite a creative equity uh and then on the bonds uh we'll continue to look to get approvals to continue to shrink those balances as well.
spk06: Thanks for the color, Brett. Appreciate the comments this morning.
spk00: Thank you very much. Your next question is coming from Jade Romani. Apologies, KBW. Jade, your line is live.
spk01: Thank you very much. To follow up on the liabilities, the weighted average duration is 3.2 years. The weighted average Cost is 4.79%. Even excluding the troughs, the cost is between $4.75 and $5.50. Given the turmoil playing out today and recently in the capital markets and just extreme levels of interest rate volatility, wouldn't you choose to keep those liabilities and look at that as an asset?
spk03: Yeah, hey, Jay.
spk02: Definitely in a market like this, we're looking at all sources of capital and definitely those look attractive on their face. They do have a different covenant package given they said it's star and not safehold. So got to take that into account. As you saw, as part of the transaction, we are keeping the trumps in the system. So that definitely was a piece of paper, both from duration and where it sits in pricing that made sense. But, you know, I think ultimately it all has to line up to make sense, and we think the structure we've come up with is still the best. But definitely if the market continues to deteriorate, I'm sure the special committees will be taking that into consideration.
spk01: Thank you. So I guess just to put a finer point on that, Whose decision is it to repurchase and be buying back bonds? Is it management's decision or is it the special committee's decision?
spk02: That typically is a board decision, and we have authorizations that have to be approved by the board. The actual execution would obviously be in management's hands, but the... meaningful transaction like that would have board authorization.
spk01: Okay. On the ground lease side, are you all looking to do anything different? I see the appeal of offering a cash cost that's below where real estate investors can get a mortgage today. So clearly that is compelling for them. But what about on the SAFE and I-STAR investing side? Anything different to extract higher economics other than just, you know, repricing for where the bond market is today?
spk03: Marcos, do you want to give some thoughts on that?
spk08: Hey, Jay. So, yeah, I think you hit the nail on the head. There is obviously a shift going on in pricing. We're sort of balancing that with our customers' needs. As you can imagine, there's a little bit of a sticker shock going across the board, not just from, you know, our cost of capital, but ultimately the fee financing alternatives, you know, where to cap rates today in the market. I think you heard us on the safe call. Our expectation is there's going to be a slowdown given all of those dynamics. So we're trying to be clever and figure out how to meet our customers' needs and ultimately meet customers' you know, our needs and create value for our shareholders. So we're thinking about some different structures and alternatives. But as of right now, we've just moved out our base pricing.
spk01: Curious about how you're thinking of the office market. Is it a sector you're avoiding? That's an area where we're seeing the most extreme liquidity shortfall. A lot of the commercial mortgage rates have been booking surprisingly large loan loss provisions, even on office deals that are well-leased that they previously rated class or rated risk, rated two, class A type office deals. Those deals aren't even being able to refinance right now. So if you were positively inclined toward office, there could be a massive opportunity probably to step in there. Not sure how you feel. How do you feel about the office market?
spk08: I think we share the broad sentiment that there's You know, potentially a decent amount of value destruction in the office space. That's a broad generalization. As you know, Jade, that's asset-specific and market-specific, quality and ultimately demand in certain markets. And, you know, you can bifurcate that from San Francisco to one end to, you know, potentially some of the southeast and Sunbelt markets where there's probably better demand. I think we're being extremely selective on office. We are looking at it. Our rule of thumb is a little bit different. We've certainly hit values in our underwriting process. We look at alternative use. We look at land value. And ultimately, we look at where the land is. And so I would say for the right asset, for the right location, we will do some office transactions going forward.
spk01: Thank you very much.
spk00: Thank you. Your next question is coming from Matthew Howlett of B. Reilly. Matthew, please ask your question.
spk04: Oh, hey, everyone. Thanks for taking my question. Just on the sensitivity, I realize how dependent i-Star is on the price of a safe common stock. But just stripping that out, when you look at when you gave the number late in the merger, I think it was 18.45, or I should say it was at 43.45. If holding that constant, is anything, I mean, there's a lot of moving parts with IPED, with non-core assets, with debt repurchases. Does anything move one way or the other, you know, X the movement of safe share price?
spk02: Yeah, but I don't know if we've run, you know, an analysis since then that shows any kind of material variance. IPIP has clearly come down, but that is tied directly to safe share price at this point. A couple of the asset sales, I think you'll see some marginal degradation in realized values, but we're still seeing modest numbers relative to the overall scale of the transaction. So I think at this point, it's more a function of getting to the finish line, having as much cash as we have on the balance sheet is a bit of a negative drag. So having that run out longer is not good. So we're trying to move everything along as quickly as we can. But I'd say that that's probably the biggest delta we see is just the friction cost of waiting to close the transaction. We certainly hope to close by year end. I don't think that's uh, reasonable anymore. So, you know, the extra three months, four months, it does have a cost to us.
spk04: Gotcha. Okay. Now I understood, uh, certainly in this environment, but certainly, you know, I, I, um, it was pleased with the gains you had, you know, you know, the 11 million gains you had on, on, on the legacy stuff. And I guess that's my other question. You know, you look at spin co what's going to go in there. Ultimately, obviously it's dominated by Asbury and Magnolia green. I get a lot of questions about the potential of SpinCo. Clearly, it's going to take a while to monetize. There's going to be some expenses in there. Any update on... But then again, it's a drag. I mean, people don't want to give you full credit for the book value today on SpinCo. Any update on Asbury Park and Magnolia that's worth pointing out? And then I read an article on the trade brags that said you're developing apartments on Coney Island. Is that going to be SpinCo? I'm just curious... what you can give us an update on, on those two assets and spin co in general.
spk02: Yeah, I think, um, I think the rags do as good a job as they can, but, um, in that particular instance, we're actually selling the land to somebody who's doing the development. So, Oh, part of our liquid portfolio. Um, so we're not, not the developer there. Okay. Um, Marcus, anything specific? I mean, we continue to have a number of projects in process to sell to third parties in Asbury Park. Again, that's a fairly long development process that we have to shepherd for them. So certainly hopeful that short-term bumps in the road in the marketplace don't change long-term investment thesis around why Asbury is special and why these particular parcels we think fit very well into the buyer's strategic plan. So we're going to continue to execute that business plan. And Marcus, I think you have the latest on Magnolia Green.
spk08: Yeah, let me just give you some high-level color. In Q3, we sold eight units at Asbury Ocean Club. So we're sort of winding down on our inventory there, which is great. Asbury Ocean Club and the Asbury had their best two years from a rev par standpoint. So they're performing well. You know, as I think about the longer term picture for both Mag Green and Asbury, they're obviously susceptible to, you know, the rain environment we're in. So I do expect some slowdown in the monetization over the short term on those assets. But they're still plowing along, you know, through Q3 and the early days of Q4.
spk04: Great. Well, we'll look for an update and, you know, good luck with, I know it's a lot of work, good luck with getting everything closed. I think there's obviously a lot of potential and upside once you get through this, but appreciate all the hard work.
spk05: Thank you.
spk00: Thank you very much, Mr. Fuchs. We have no further questions.
spk05: Okay, thank you. If anyone should have any additional questions on today's earnings release, please feel free to contact me directly. Jenny, would you please give the conference call replay instructions again?
spk00: No problem. There will be a replay of the call beginning at 2 p.m. Eastern Time today. The replay is accessible on our website or by dialing 1-877-481-4010 with the confirmation code of 46958. Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.
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