|
(Mark One)
|
|
ý
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended March 31, 2018
|
|
OR
|
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from to
|
Maryland
(State or other jurisdiction of
incorporation or organization)
|
|
30-0971238
(I.R.S. Employer
Identification Number)
|
1114 Avenue of the Americas, 39
th
Floor
|
|
|
New York, NY
(Address of principal executive offices)
|
|
10036
(Zip code)
|
Large accelerated filer
o
|
|
Accelerated filer
o
|
|
Non-accelerated filer
ý
(Do not check if a
smaller reporting company)
|
|
Smaller reporting company
o
|
|
Emerging growth company
ý
|
|
|
|
Page
|
|
||
|
||
|
||
|
||
|
|
|
|
||
|
||
|
||
|
As of
|
||||||
|
March 31,
2018
|
|
December 31,
2017 |
||||
ASSETS
|
|
|
|
||||
Real estate
|
|
|
|
||||
Real estate, at cost
|
$
|
456,476
|
|
|
$
|
413,145
|
|
Less: accumulated depreciation
|
(5,754
|
)
|
|
(4,253
|
)
|
||
Total real estate, net
|
450,722
|
|
|
408,892
|
|
||
Real estate-related intangible assets, net
|
183,606
|
|
|
138,725
|
|
||
Total real estate, net and real estate-related intangible assets, net
|
634,328
|
|
|
547,617
|
|
||
Cash and cash equivalents
|
83,177
|
|
|
168,214
|
|
||
Restricted cash
|
957
|
|
|
1,656
|
|
||
Deferred ground and other lease income receivable, net
|
6,755
|
|
|
4,097
|
|
||
Deferred expenses and other assets, net
|
11,007
|
|
|
6,929
|
|
||
Total assets
|
$
|
736,224
|
|
|
$
|
728,513
|
|
LIABILITIES AND EQUITY
|
|
|
|
||||
Liabilities:
|
|
|
|
||||
Accounts payable, accrued expenses and other liabilities
|
$
|
7,585
|
|
|
$
|
7,545
|
|
Real estate-related intangible liabilities, net
|
57,804
|
|
|
57,959
|
|
||
Debt obligations, net
|
307,178
|
|
|
307,074
|
|
||
Total liabilities
|
372,567
|
|
|
372,578
|
|
||
Commitments and contingencies (refer to Note 7)
|
|
|
|
|
|
||
Equity:
|
|
|
|
||||
Safety, Income & Growth Inc. shareholders' equity:
|
|
|
|
||||
Common stock, $0.01 par value, 400,000 shares authorized, 18,190 shares issued and outstanding as of March 31, 2018 and December 31, 2017
|
182
|
|
|
182
|
|
||
Additional paid-in capital
|
366,227
|
|
|
364,919
|
|
||
Retained earnings (deficit)
|
(8,295
|
)
|
|
(9,246
|
)
|
||
Accumulated other comprehensive income (loss)
|
3,770
|
|
|
80
|
|
||
Total Safety, Income & Growth Inc. shareholders' equity
|
361,884
|
|
|
355,935
|
|
||
Noncontrolling interests
|
1,773
|
|
|
—
|
|
||
Total equity
|
363,657
|
|
|
355,935
|
|
||
Total liabilities and equity
|
$
|
736,224
|
|
|
$
|
728,513
|
|
|
For the Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
Revenues:
|
The Company
|
|
Predecessor
|
||||
Ground and other lease income
|
$
|
11,280
|
|
|
$
|
5,244
|
|
Other income
|
413
|
|
|
89
|
|
||
Total revenues
|
11,693
|
|
|
5,333
|
|
||
Costs and expenses:
|
|
|
|
||||
Interest expense
|
3,255
|
|
|
2,099
|
|
||
Real estate expense
(2)
|
354
|
|
|
151
|
|
||
Depreciation and amortization
|
2,270
|
|
|
787
|
|
||
General and administrative
|
2,032
|
|
|
1,012
|
|
||
Other expense
|
39
|
|
|
—
|
|
||
Total costs and expenses
|
7,950
|
|
|
4,049
|
|
||
Income from operations
|
3,743
|
|
|
1,284
|
|
||
Income from sales of real estate
|
—
|
|
|
508
|
|
||
Net income
|
3,743
|
|
|
1,792
|
|
||
Net income allocable to noncontrolling interests
|
(23
|
)
|
|
—
|
|
||
Net income allocable to Safety, Income & Growth Inc. common shareholders
|
$
|
3,720
|
|
|
$
|
1,792
|
|
|
|
|
|
||||
Per common share data:
|
|
|
|
||||
Net income
|
|
|
|
||||
Basic and diluted
|
$
|
0.20
|
|
|
N/A
|
|
|
Weighted average number of common shares:
|
|
|
|
||||
Basic and diluted
|
18,190
|
|
|
N/A
|
|
||
|
|
|
|
||||
Dividends declared per share
|
$
|
0.15
|
|
|
N/A
|
|
(1)
|
The combined statements of operations prior to April 14, 2017 represent the activity of Safety, Income & Growth Inc. Predecessor.
|
(2)
|
For the
three months
ended March 31, 2017, real estate expense includes reimbursable property taxes at one of the Company's properties of
$0.1 million
. For the
three months
ended
March 31, 2018
, real estate expense includes non-cash rent related to the amortization of a below market lease asset at one of the Company's hotel properties of
$0.2 million
.
|
|
For the Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
|
The Company
|
|
Predecessor
|
||||
Net income
|
$
|
3,743
|
|
|
$
|
1,792
|
|
Other comprehensive income:
|
|
|
|
||||
Cumulative-effect adjustment for cash flow hedges (refer to Note 3)
|
41
|
|
|
—
|
|
||
Reclassification of losses on derivatives into earnings
|
24
|
|
|
—
|
|
||
Unrealized gain on derivatives
|
3,625
|
|
|
415
|
|
||
Other comprehensive income
|
3,690
|
|
|
415
|
|
||
Comprehensive income
|
7,433
|
|
|
2,207
|
|
||
Comprehensive (income) attributable to noncontrolling interest
|
(23
|
)
|
|
—
|
|
||
Comprehensive income attributable to Safety, Income & Growth Inc.
|
$
|
7,410
|
|
|
$
|
2,207
|
|
(1)
|
The combined statements of comprehensive income prior to April 14, 2017 represent the activity of Safety, Income & Growth Inc. Predecessor.
|
|
|
Safety, Income & Growth Inc. Predecessor Equity
|
|
Common
Stock at
Par
|
|
Additional
Paid-In
Capital
|
|
Retained
Earnings
(Deficit)
|
|
Accumulated
Other
Comprehensive
Income
|
|
Noncontrolling Interests
|
|
Total
Equity
|
||||||||||||||
Predecessor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Balance as of December 31, 2016
|
|
$
|
154,091
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Net income
|
|
1,792
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Unrealized gain on cash flow hedge
|
|
415
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Net transactions with iStar Inc.
|
|
(221,845
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Balance as of March 31, 2017
|
|
(65,547
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
The Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Balance as of December 31, 2017
|
|
$
|
—
|
|
|
$
|
182
|
|
|
$
|
364,919
|
|
|
$
|
(9,246
|
)
|
|
$
|
80
|
|
|
$
|
—
|
|
|
$
|
355,935
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,720
|
|
|
—
|
|
|
23
|
|
|
3,743
|
|
|||||||
Contributions from iStar
|
|
—
|
|
|
—
|
|
|
1,308
|
|
|
—
|
|
|
—
|
|
|
|
|
1,308
|
|
||||||||
Dividends declared
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,728
|
)
|
|
—
|
|
|
—
|
|
|
(2,728
|
)
|
|||||||
Cumulative-effect adjustment for cash flow hedges (refer to Note 3)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(41
|
)
|
|
41
|
|
|
—
|
|
|
—
|
|
|||||||
Change in accumulated other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,649
|
|
|
—
|
|
|
3,649
|
|
|||||||
Contributions from noncontrolling interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,750
|
|
|
1,750
|
|
|||||||
Balance as of March 31, 2018
|
|
$
|
—
|
|
|
$
|
182
|
|
|
$
|
366,227
|
|
|
$
|
(8,295
|
)
|
|
$
|
3,770
|
|
|
$
|
1,773
|
|
|
$
|
363,657
|
|
|
For the Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
|
The Company
|
|
Predecessor
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
3,743
|
|
|
$
|
1,792
|
|
Adjustments to reconcile net income to cash flows from operating activities:
|
|
|
|
||||
Depreciation and amortization
|
2,270
|
|
|
787
|
|
||
Deferred ground and other lease income
|
(2,658
|
)
|
|
(1,112
|
)
|
||
Income from sales of real estate
|
—
|
|
|
(508
|
)
|
||
Amortization of real estate-related intangibles, net
|
469
|
|
|
103
|
|
||
Amortization of premium and deferred financing costs on debt obligations, net
|
347
|
|
|
3
|
|
||
Management fees and non-cash expense reimbursements to the Manager
|
1,308
|
|
|
—
|
|
||
Other operating activities
|
(43
|
)
|
|
—
|
|
||
Changes in assets and liabilities:
|
|
|
|
||||
Changes in ground and other lease income receivable, net
|
—
|
|
|
2,511
|
|
||
Changes in deferred expenses and other assets, net
|
(767
|
)
|
|
(312
|
)
|
||
Changes in accounts payable, accrued expenses and other liabilities
|
287
|
|
|
18
|
|
||
Cash flows provided by operating activities
|
4,956
|
|
|
3,282
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Acquisitions of real estate
|
(88,856
|
)
|
|
—
|
|
||
Proceeds from sales of real estate
|
—
|
|
|
508
|
|
||
Other investing activities
|
(733
|
)
|
|
(1,042
|
)
|
||
Cash flows used in investing activities
|
(89,589
|
)
|
|
(534
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Net transactions with iStar Inc.
|
—
|
|
|
(221,845
|
)
|
||
Proceeds from debt obligations
|
—
|
|
|
227,000
|
|
||
Payments for deferred financing costs
|
(125
|
)
|
|
(7,217
|
)
|
||
Dividends paid to common shareholders
|
(2,728
|
)
|
|
—
|
|
||
Payment of offering costs
|
—
|
|
|
(686
|
)
|
||
Contributions from noncontrolling interests
|
1,750
|
|
|
—
|
|
||
Cash flows used in financing activities
|
(1,103
|
)
|
|
(2,748
|
)
|
||
Changes in cash, cash equivalents and restricted cash
|
(85,736
|
)
|
|
—
|
|
||
Cash, cash equivalents and restricted cash at beginning of period
|
169,870
|
|
|
—
|
|
||
Cash, cash equivalents and restricted cash at end of period
|
$
|
84,134
|
|
|
$
|
—
|
|
Supplemental disclosure of non-cash investing and financing activity:
|
|
|
|
||||
Contribution from iStar Inc.
|
$
|
1,308
|
|
|
$
|
—
|
|
Dividends declared to common shareholders
|
2,728
|
|
|
—
|
|
||
Accrued finance costs
|
95
|
|
|
95
|
|
(1)
|
The combined statements of cash flows prior to April 14, 2017 represent the activity of Safety, Income & Growth Inc. Predecessor.
|
|
|
March 31, 2018
|
|
December 31, 2017
|
||||
Cash and cash equivalents
|
|
$
|
83,177
|
|
|
$
|
168,214
|
|
Restricted cash
(1)
|
|
957
|
|
|
1,656
|
|
||
Total cash, cash equivalents and restricted cash reported in the consolidated statements of cash flows
|
|
$
|
84,134
|
|
|
$
|
169,870
|
|
(1)
|
Restricted cash includes cash balances required to be maintained under certain of the Company's derivative transactions.
|
|
As of
|
||||||
|
March 31, 2018
|
|
December 31, 2017
|
||||
Land and land improvements, at cost
|
$
|
264,080
|
|
|
$
|
220,749
|
|
Buildings and improvements, at cost
|
192,396
|
|
|
192,396
|
|
||
Less: accumulated depreciation
|
(5,754
|
)
|
|
(4,253
|
)
|
||
Total real estate, net
|
$
|
450,722
|
|
|
$
|
408,892
|
|
Real estate-related intangible assets, net
|
183,606
|
|
|
138,725
|
|
||
Total real estate, net and real estate-related intangible assets, net
|
$
|
634,328
|
|
|
$
|
547,617
|
|
|
As of
|
||||||
|
March 31, 2018
|
|
December 31, 2017
|
||||
Above-market lease assets, net
(1)
|
$
|
119,789
|
|
|
$
|
77,197
|
|
In-place lease assets, net
(2)
|
37,531
|
|
|
35,744
|
|
||
Below-market lease asset, net
(3)
|
25,537
|
|
|
25,784
|
|
||
Other intangible assets, net
|
749
|
|
|
—
|
|
||
Real estate-related intangible assets, net
|
$
|
183,606
|
|
|
$
|
138,725
|
|
(1)
|
Above-market lease assets are recognized during business combinations when the present value of market rate rental cash flows over the term of a lease is less than the present value of the contractual in-place rental cash flows. Accumulated amortization on above-market lease assets was
$1.3 million
and
$0.9 million
as of
March 31, 2018
and
December 31, 2017
, respectively. The amortization of above-market lease assets decreased "Ground and other lease income" in the Company's consolidated statements of operations by
$0.4 million
for the
three months
ended
March 31, 2018
. Above-market lease assets are amortized over the term of the leases. The Company recorded
$43.0 million
of above-market lease assets in connection with
three
Ground Leases entered into during the three months ended March 31, 2018.
|
(2)
|
In-place lease assets are recognized during business combinations and are estimated based on the value associated with the costs avoided in originating leases comparable to the acquired in-place leases as well as the value associated with lost rental revenue during the assumed lease-up period. Accumulated amortization on in-place lease assets was
$2.9 million
and
$2.2 million
as of
March 31, 2018
and
December 31, 2017
, respectively. The amortization expense for in-place leases was
$0.7 million
for the
three months
ended
March 31, 2018
. This amount is included in "Depreciation and amortization" in the Company's consolidated statements of operations. In-place lease assets are amortized over the term of the leases.
|
(3)
|
Below-market lease asset, net resulted from the acquisition of the Initial Portfolio and relates to a property that is majority-owned by a third party and is ground leased to the Company. The Company is obligated to pay the owner of the property
$0.4 million
, subject to adjustment for changes in the CPI, per year through 2044; however, the Company's tenant at the property pays this expense directly under the terms of a master lease. Accumulated amortization on the below-market lease asset was
$0.9 million
and
$0.7 million
as of
March 31, 2018
and
December 31, 2017
, respectively. The amortization expense for the Company's below-market lease asset was
$0.2 million
for the
three months
ended
March 31, 2018
. This amount is included in "Real estate expense" in the Company's consolidated statements of operations. The below-market lease asset is amortized over the term of the lease.
|
Year
|
|
Amount
|
||
2018 (remaining nine months)
|
|
$
|
4,383
|
|
2019
|
|
5,843
|
|
|
2020
|
|
5,843
|
|
|
2021
|
|
5,843
|
|
|
2022
|
|
5,843
|
|
(1)
|
As of
March 31, 2018
, the weighted average amortization period for the Company's real estate-related intangible assets was approximately
72
years.
|
|
As of
|
||||||
|
March 31, 2018
|
|
December 31, 2017
|
||||
Below-market lease liabilities
(1)
|
$
|
57,804
|
|
|
$
|
57,959
|
|
Real estate-related intangible liabilities, net
|
$
|
57,804
|
|
|
$
|
57,959
|
|
(1)
|
Below-market lease liabilities are recognized during business combinations when the present value of market rate rental cash flows over the term of a lease exceeds the present value of the contractual in-place rental cash flows. Accumulated amortization on below-market lease liabilities was
$0.6 million
and
$0.4 million
as of
March 31, 2018
and
December 31, 2017
, respectively. The amortization of below-market lease liabilities increased "Ground and other lease income" in the Company's consolidated statements of operations by
$0.2 million
for the
three months
ended
March 31, 2018
.
|
|
|
Initial Portfolio
|
|
6200 Hollywood Blvd.
|
|
6201 Hollywood Blvd.
|
|
Total
|
||||||||
Assets
|
|
|
|
|
||||||||||||
Land and land improvements, at cost
|
|
$
|
73,472
|
|
|
$
|
68,140
|
|
|
$
|
72,836
|
|
|
$
|
214,448
|
|
Buildings and improvements, at cost
|
|
192,396
|
|
|
—
|
|
|
—
|
|
|
192,396
|
|
||||
Real estate
|
|
265,868
|
|
|
68,140
|
|
|
72,836
|
|
|
406,844
|
|
||||
Real estate-related intangible assets
|
|
124,017
|
|
|
5,500
|
|
|
3,258
|
|
|
132,775
|
|
||||
Other assets
|
|
1,174
|
|
|
—
|
|
|
—
|
|
|
1,174
|
|
||||
Total assets
|
|
$
|
391,059
|
|
|
$
|
73,640
|
|
|
$
|
76,094
|
|
|
$
|
540,793
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities
|
|
|
|
|
||||||||||||
Real estate-related intangible liabilities
|
|
$
|
50,644
|
|
|
$
|
—
|
|
|
$
|
7,734
|
|
|
$
|
58,378
|
|
Debt obligations
|
|
227,415
|
|
|
—
|
|
|
—
|
|
|
227,415
|
|
||||
Total liabilities
|
|
278,059
|
|
|
—
|
|
|
7,734
|
|
|
285,793
|
|
||||
Equity Purchase Price
|
|
$
|
113,000
|
|
(1)
|
$
|
73,640
|
|
|
$
|
68,360
|
|
|
$
|
255,000
|
|
(1)
|
The Company paid
$340.0 million
in total consideration to iStar for the Initial Portfolio, including the assumption of the 2017 Secured Financing.
|
Pro forma revenues
(1)
|
$
|
6,577
|
|
Pro forma net income
(1)(2)
|
1,406
|
|
(1)
|
The pro forma revenues and net income are presented for informational purposes only and may not be indicative of what the actual results of operations of the Company would have been assuming the transaction occurred on January 1, 2016, nor do they purport to represent the Company’s results of operations for future periods.
|
(2)
|
The combined statements of operations prior to April 14, 2017 represented the activity of the Predecessor and EPS was not applicable.
|
Year
|
|
Leases with CPI Based Escalations
|
|
Leases with Fixed Escalations
|
|
Leases with Revenue Participation
|
|
Total
|
||||||||
2018 (remaining nine months)
|
|
$
|
3,745
|
|
|
$
|
6,717
|
|
|
$
|
7,524
|
|
|
$
|
17,986
|
|
2019
|
|
4,993
|
|
|
9,054
|
|
|
10,032
|
|
|
24,079
|
|
||||
2020
|
|
4,993
|
|
|
9,180
|
|
|
10,032
|
|
|
24,205
|
|
||||
2021
|
|
4,993
|
|
|
9,315
|
|
|
10,032
|
|
|
24,340
|
|
||||
2022
|
|
4,993
|
|
|
9,443
|
|
|
10,032
|
|
|
24,468
|
|
|
As of
|
||||||
|
March 31, 2018
|
|
December 31, 2017
|
||||
Interest rate hedge assets
|
$
|
4,363
|
|
|
$
|
1,042
|
|
Purchase deposit
|
3,710
|
|
|
2,855
|
|
||
Deferred finance costs, net
(1)
|
2,340
|
|
|
2,490
|
|
||
Other assets
|
475
|
|
|
450
|
|
||
Leasing costs, net
|
119
|
|
|
92
|
|
||
Deferred expenses and other assets, net
|
$
|
11,007
|
|
|
$
|
6,929
|
|
(1)
|
Accumulated amortization of deferred finance costs was
$0.7 million
and
0.5 million
as of
March 31, 2018
and
December 31, 2017
, respectively.
|
|
As of
|
||||||
|
March 31, 2018
|
|
December 31, 2017
|
||||
Dividends declared and payable
|
$
|
2,728
|
|
|
$
|
2,728
|
|
Accounts payable
(1)
|
1,347
|
|
|
1,347
|
|
||
Other liabilities
(2)
|
1,038
|
|
|
621
|
|
||
Interest payable
|
993
|
|
|
660
|
|
||
Accrued expenses
(3)
|
948
|
|
|
1,285
|
|
||
Interest rate hedge liabilities
|
531
|
|
|
904
|
|
||
Accounts payable, accrued expenses and other liabilities
|
$
|
7,585
|
|
|
$
|
7,545
|
|
(1)
|
As of
March 31, 2018
and December 31, 2017, accounts payable includes accrued offering costs.
|
(2)
|
As of
March 31, 2018
and December 31, 2017, other liabilities includes
$0.1 million
and
$0.1 million
, respectively, due to the Manager for costs it paid on the Company's behalf.
|
(3)
|
As of
March 31, 2018
and
December 31, 2017
, accrued expenses primarily includes accrued legal expenses, audit expenses, deferred finance costs and recoverable real estate taxes paid by the Company and reimbursed by the tenant.
|
|
As of
|
|
Stated
Interest Rate |
|
Scheduled
Maturity Date (1) |
||||||
|
March 31, 2018
|
|
December 31, 2017
|
|
|
||||||
Secured credit financing:
|
|
|
|
|
|
|
|
||||
2017 Secured Financing
|
$
|
227,000
|
|
|
$
|
227,000
|
|
|
3.795%
|
|
April 2027
|
2017 Hollywood Mortgage
|
71,000
|
|
|
71,000
|
|
|
One-Month LIBOR plus 1.33%
|
|
January 2023
|
||
2017 Revolver
|
10,000
|
|
|
10,000
|
|
|
One-Month LIBOR plus 1.35%
|
|
June 2022
|
||
Total secured credit financing
|
308,000
|
|
|
308,000
|
|
|
|
|
|
||
Total debt obligations
|
308,000
|
|
|
308,000
|
|
|
|
|
|
||
Debt premium and deferred financing costs, net
|
(822
|
)
|
|
(926
|
)
|
|
|
|
|
||
Total debt obligations, net
|
$
|
307,178
|
|
|
$
|
307,074
|
|
|
|
|
|
(1)
|
Represents the extended maturity date for all debt obligations.
|
|
2017 Secured Financing
|
|
2017 Hollywood Mortgage
|
|
2017
Revolver
|
|
Total
|
||||||||
2018 (remaining nine months)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
2019
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
2020
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
2021
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
2022
|
—
|
|
|
—
|
|
|
10,000
|
|
|
10,000
|
|
||||
Thereafter
|
227,000
|
|
|
71,000
|
|
|
—
|
|
|
298,000
|
|
||||
Total principal maturities
|
227,000
|
|
|
71,000
|
|
|
10,000
|
|
|
308,000
|
|
||||
Debt premium and deferred financing costs, net
|
|
|
|
|
|
|
(822
|
)
|
|||||||
Total debt obligations, net
|
|
|
|
|
|
|
$
|
307,178
|
|
|
|
|
|
|
|
March 31, 2018
|
|
December 31, 2017
|
|
|
||||||
Derivative Type
|
|
Maturity
|
|
Notional Amount
|
|
Fair
Value
(2)
|
|
Balance Sheet
Location
|
||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest rate swap
|
|
October 2030
|
|
$
|
95,000
|
|
|
$
|
1,831
|
|
|
$
|
—
|
|
|
Deferred expenses and other assets, net
|
Interest rate swap
|
|
October 2020
|
|
95,000
|
|
|
1,622
|
|
|
798
|
|
|
Deferred expenses and other assets, net
|
|||
Interest rate swap
|
|
October 2030
|
|
10,000
|
|
|
352
|
|
|
98
|
|
|
Deferred expenses and other assets, net
|
|||
Interest rate swap
|
|
October 2030
|
|
22,000
|
|
|
286
|
|
|
—
|
|
|
Deferred expenses and other assets, net
|
|||
Interest rate swap
|
|
October 2020
|
|
10,000
|
|
|
211
|
|
|
128
|
|
|
Deferred expenses and other assets, net
|
|||
Interest rate cap
(3)
|
|
January 2021
|
|
71,000
|
|
|
61
|
|
|
18
|
|
|
Deferred expenses and other assets, net
|
|||
|
|
|
|
|
|
$
|
4,363
|
|
|
$
|
1,042
|
|
|
|
||
Liabilities
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest rate swap
|
|
October 2030
|
|
$
|
32,000
|
|
|
$
|
438
|
|
|
$
|
—
|
|
|
Accounts payable, accrued expenses and other liabilities
|
Interest rate swap
|
|
October 2030
|
|
25,000
|
|
|
79
|
|
|
—
|
|
|
Accounts payable, accrued expenses and other liabilities
|
|||
Interest rate swap
|
|
October 2020
|
|
32,000
|
|
|
14
|
|
|
—
|
|
|
Accounts payable, accrued expenses and other liabilities
|
|||
Interest rate swap
|
|
October 2030
|
|
95,000
|
|
|
—
|
|
|
619
|
|
|
Accounts payable, accrued expenses and other liabilities
|
|||
Interest rate swap
|
|
October 2030
|
|
22,000
|
|
|
—
|
|
|
285
|
|
|
Accounts payable, accrued expenses and other liabilities
|
|||
|
|
|
|
|
|
$
|
531
|
|
|
$
|
904
|
|
|
|
(1)
|
For the three months ended
March 31, 2018
, the Company recorded
$3.6 million
of unrealized gains in accumulated other comprehensive income (loss).
|
(2)
|
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 within the fair value hierarchy. Over the next
12
months, the Company expects that
$0.4 million
related to cash flow hedges will be reclassified from "Accumulated other comprehensive income (loss)" as a reduction to interest expense.
|
(3)
|
This derivative is not designated in a hedging relationship.
|
Derivatives Designated in Hedging Relationships
|
|
Location of Gain (Loss)
Recognized in Income
|
|
Amount of Gain (Loss) Recognized in Accumulated Other Comprehensive Income
|
|
Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Earnings
|
||||
Interest rate swaps
|
|
Interest expense
|
|
$
|
3,625
|
|
|
$
|
(24
|
)
|
|
|
Location of Gain or
(Loss) Recognized in
Income
|
|
Amount of Gain or (Loss) Recognized in Income
|
||
Derivatives not Designated in Hedging Relationships
|
|
|||||
Interest rate cap
|
|
Interest expense
|
|
$
|
43
|
|
Event
|
|
Date
|
|
Owner
|
|
# of shares
|
|
Price paid Per Share
|
|||
Initial capitalization
|
|
April 14, 2017
|
|
Third parties
|
|
2,875,000
|
|
|
$
|
20.00
|
|
Initial capitalization
|
|
April 14, 2017
|
|
iStar
|
|
2,775,000
|
|
|
20.00
|
|
|
Initial public offering
|
|
June 27, 2017
|
|
Third parties
|
|
10,250,000
|
|
|
20.00
|
|
|
Concurrent iStar placement
|
|
June 27, 2017
|
|
iStar
|
|
2,250,000
|
|
|
20.00
|
|
|
Issuance of shares to directors
|
|
June 27, 2017
|
|
Directors
|
|
40,000
|
|
|
—
|
|
|
Shares outstanding at June 27, 2017
|
|
|
|
|
|
18,190,000
|
|
|
|
|
Three Months Ended
March 31, 2018 |
||
Income from operations
|
$
|
3,743
|
|
Net (income) attributable to noncontrolling interests
|
(23
|
)
|
|
Income from operations attributable and allocable to common shareholders for basic and diluted earnings per common share
|
$
|
3,720
|
|
(1)
|
The combined statements of operations prior to April 14, 2017 represented the activity of the Predecessor and EPS was not applicable.
|
|
Three Months Ended
March 31, 2018 |
||
Earnings allocable to common shares:
|
|
||
Numerator for basic and diluted earnings per share:
|
|
||
Income from operations attributable to Safety, Income & Growth Inc. and allocable to common shareholders
|
$
|
3,720
|
|
|
|
||
Denominator for basic and diluted earnings per share:
|
|
||
Weighted average common shares outstanding for basic and diluted earnings per common share
|
18,190
|
|
|
|
|
||
Basic and diluted earnings per common share:
|
|
||
Net income attributable to Safety, Income & Growth Inc. and allocable to common shareholders
|
$
|
0.20
|
|
Manager
|
SFTY Manager, LLC, a wholly-owned subsidiary of iStar Inc.
|
Management Fee
|
Annual fee of 1.0% of total shareholder's equity (up to $2.5 billion)
Annual fee of 0.75% of total shareholder's equity (> $2.5 billion)
|
Management Fee Consideration
|
Payment will be made exclusively in the Company's common stock (valued at the greater of (i) the volume weighted average market price during the quarter for which the fee is being paid or (ii) the initial public offering price)
|
Lock-up
|
Restriction from selling common stock received for management fees for 2 years from the date of such issuance (restriction will terminate in the event of and effective with the termination of the management agreement)
|
Management Fee Waiver
|
No management fee paid to the Manager during the first year (through June 30, 2018)
|
Incentive Fee
|
None
|
Term
|
1 year
|
Renewal Provision
|
Annual renewal to be approved by majority of independent directors
|
Termination Fee
|
None
|
Property
Name
|
|
Location
|
|
Property
Type
|
|
Lease Expiration / As Extended
|
|
Rent Escalation Structure
|
Hollywood Blvd - North
|
|
Los Angeles, CA
|
|
Multi-Family
|
|
2104 / 2104
|
|
% of CPI
|
Hollywood Blvd - South
|
|
Los Angeles, CA
|
|
Multi-Family
|
|
2104 / 2104
|
|
% of CPI
|
Onyx on First
|
|
Washington, DC
|
|
Multi-Family
|
|
2117 / 2117
|
|
Fixed with Inflation Protection
|
The Buckler Apartments
|
|
Milwaukee, WI
|
|
Multi-Family
|
|
2112 / 2112
|
|
Fixed
|
One Ally Center
|
|
Detroit, MI
|
|
Office
|
|
2114 / 2174
|
|
Fixed with Inflation Protection
|
3333 LifeHope
|
|
Atlanta, GA
|
|
Office
|
|
2116 / 2176
|
|
Fixed
|
Northside Forsyth Medical Center
|
|
Atlanta, GA
|
|
Office
|
|
2115 / 2175
|
|
Fixed with Inflation Protection
|
NASA/JPSS Headquarters
|
|
Washington, DC
|
|
Office
|
|
2075 / 2105
|
|
Fixed
|
Pershing Point
|
|
Atlanta, GA
|
|
Office
|
|
2117 / 2124
|
|
Fixed with Inflation Protection
|
Regency Lakeview
|
|
Cary, NC
|
|
Office
|
|
2117 / 2122
|
|
Fixed with Inflation Protection
|
Doubletree Seattle Airport
(1)(2)
|
|
Seattle, WA
|
|
Hospitality
|
|
2025 / 2035
|
|
% Rent
|
Hilton Salt Lake
(1)
|
|
Salt Lake City, UT
|
|
Hospitality
|
|
2025 / 2035
|
|
% Rent
|
Doubletree Mission Valley
(1)
|
|
San Diego, CA
|
|
Hospitality
|
|
2025 / 2035
|
|
% Rent
|
Doubletree Durango
(1)
|
|
Durango, CO
|
|
Hospitality
|
|
2025 / 2035
|
|
% Rent
|
Doubletree Sonoma
(1)
|
|
San Francisco, CA
|
|
Hospitality
|
|
2025 / 2035
|
|
% Rent
|
Dallas Market Center - Sheraton Suites
|
|
Dallas, TX
|
|
Hospitality
|
|
2114 / 2114
|
|
Fixed
|
Dallas Market Center - Marriott Courtyard
|
|
Dallas, TX
|
|
Hospitality
|
|
2026 / 2066
|
|
% Rent
|
Lock Up Self Storage Facility
|
|
Minneapolis, MN
|
|
Industrial
|
|
2037 / 2037
|
|
Fixed
|
Total / Weighted Average
|
|
|
|
|
|
56 / 72 yrs
|
|
|
(1)
|
Property is part of the Park Hotels Portfolio and is subject to a single master lease.
|
(2)
|
A majority of the land underlying this property is owned by a third party and is ground leased to us through 2044 subject to changes in the CPI; however, our tenant at the property pays this cost directly to the third party.
|
|
For the Three Months Ended March 31,
|
|
|
|
|
|||||||||
|
2018
|
|
2017
|
|
$ Change
|
|
% Change
|
|||||||
|
(in thousands)
|
|
|
|||||||||||
|
The Company
|
|
Predecessor
|
|
|
|
|
|||||||
Ground and other lease income
|
$
|
11,280
|
|
|
$
|
5,244
|
|
|
$
|
6,036
|
|
|
>100%
|
|
Other income
|
413
|
|
|
89
|
|
|
324
|
|
|
>100%
|
|
|||
Total revenue
|
11,693
|
|
|
5,333
|
|
|
6,360
|
|
|
>100%
|
|
|||
Interest expense
|
3,255
|
|
|
2,099
|
|
|
1,156
|
|
|
55
|
%
|
|||
Real estate expense
(2)
|
354
|
|
|
151
|
|
|
203
|
|
|
>100%
|
|
|||
Depreciation and amortization
|
2,270
|
|
|
787
|
|
|
1,483
|
|
|
>100%
|
|
|||
General and administrative
|
2,032
|
|
|
1,012
|
|
|
1,020
|
|
|
>100%
|
|
|||
Other expense
|
39
|
|
|
—
|
|
|
39
|
|
|
100
|
%
|
|||
Total costs and expenses
|
7,950
|
|
|
4,049
|
|
|
3,901
|
|
|
96
|
%
|
|||
Income from sales of real estate
|
—
|
|
|
508
|
|
|
(508
|
)
|
|
(100
|
)%
|
|||
Net income
|
$
|
3,743
|
|
|
$
|
1,792
|
|
|
$
|
1,951
|
|
|
>100%
|
|
(1)
|
Operations prior to April 14, 2017 represent the activity of Safety, Income & Growth Inc. Predecessor. In addition, as a result of our acquisition of the Initial Portfolio from iStar, the periods subsequent to
April 14, 2017
are presented on a new basis of accounting pursuant to Accounting Standards Codification ("ASC") 805.
|
(2)
|
Real estate expense includes non-cash rent related to the amortization of a below market lease asset at one of our hotel properties.
|
|
|
For the Three Months Ended March 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Non-cash expenses
|
|
|
|
|
||||
Allocation from iStar
|
|
$
|
—
|
|
|
$
|
707
|
|
Stock-based compensation
(1)
|
|
—
|
|
|
215
|
|
||
Management fees
(2)
|
|
897
|
|
|
—
|
|
||
Expense reimbursements to the Manager
(2)
|
|
411
|
|
|
—
|
|
||
Subtotal - non-cash expenses
|
|
1,308
|
|
|
922
|
|
||
Cash expenses
|
|
|
|
|
||||
Public company and other costs
|
|
724
|
|
|
90
|
|
||
Subtotal - cash expenses
|
|
724
|
|
|
90
|
|
||
Total general and administrative expenses
|
|
$
|
2,032
|
|
|
$
|
1,012
|
|
(1)
|
For the three months ended March 31, 2017, stock-based compensation represents an allocation from iStar.
|
(2)
|
Waived through June 30, 2018.
|
|
For the Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in thousands)
|
||||||
Funds from Operations
|
The Company
|
|
Predecessor
|
||||
Net income allocable to Safety, Income & Growth Inc. common shareholders
|
$
|
3,720
|
|
|
$
|
1,792
|
|
Add: Depreciation and amortization
|
2,270
|
|
|
787
|
|
||
Less: Income from sales of real estate
|
—
|
|
|
(508
|
)
|
||
FFO allocable to Safety, Income & Growth Inc. common shareholders
|
$
|
5,990
|
|
|
$
|
2,071
|
|
|
|
|
|
||||
Adjusted Funds from Operations
|
|
|
|
||||
FFO allocable to Safety, Income & Growth Inc. common shareholders
|
$
|
5,990
|
|
|
$
|
2,071
|
|
Straight-line rental income
|
(2,658
|
)
|
|
(1,112
|
)
|
||
Amortization of real estate-related intangibles, net
|
469
|
|
|
103
|
|
||
Stock-based compensation
|
—
|
|
|
215
|
|
||
Non-cash management fees and expense reimbursements
|
1,308
|
|
|
—
|
|
||
Non-cash interest expense
|
347
|
|
|
226
|
|
||
Allocable share of noncontrolling interests' amortization of real estate-related intangibles and straight-line rental income
|
15
|
|
|
—
|
|
||
AFFO allocable to Safety, Income & Growth Inc. common shareholders
|
$
|
5,471
|
|
|
$
|
1,503
|
|
(1)
|
Operations prior to April 14, 2017 represent the activity of Safety, Income & Growth Inc. Predecessor.
|
|
For the Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in thousands)
|
||||||
EBITDA
|
The Company
|
|
Predecessor
|
||||
Net income allocable to Safety, Income & Growth Inc. common shareholders
|
$
|
3,720
|
|
|
$
|
1,792
|
|
Add: Interest expense
|
3,255
|
|
|
2,099
|
|
||
Add: Depreciation and amortization
|
2,270
|
|
|
787
|
|
||
EBITDA allocable to Safety, Income & Growth Inc. common shareholders
|
$
|
9,245
|
|
|
$
|
4,678
|
|
(1)
|
Operations prior to April 14, 2017 represent the activity of Safety, Income & Growth Inc. Predecessor.
|
|
Amounts Due By Period
|
||||||||||||||||||||||
|
Total
|
|
Less Than 1
Year |
|
1 - 3
Years |
|
3 - 5
Years |
|
5 - 10
Years |
|
After 10
Years |
||||||||||||
|
(in thousands)
|
||||||||||||||||||||||
Long-Term Debt Obligations
(1)
:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
2017 Secured Financing
|
$
|
227,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
227,000
|
|
|
$
|
—
|
|
2017 Hollywood Mortgage
|
71,000
|
|
|
—
|
|
|
—
|
|
|
71,000
|
|
|
—
|
|
|
—
|
|
||||||
2017 Revolver
|
10,000
|
|
|
—
|
|
|
—
|
|
|
10,000
|
|
|
—
|
|
|
—
|
|
||||||
Total principal maturities
|
308,000
|
|
|
—
|
|
|
—
|
|
|
81,000
|
|
|
227,000
|
|
|
—
|
|
||||||
Interest Payable
(2)
|
91,156
|
|
|
11,373
|
|
|
22,776
|
|
|
21,926
|
|
|
35,081
|
|
|
—
|
|
||||||
Purchase Commitments
(3)
|
33,959
|
|
|
—
|
|
|
33,959
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
$
|
433,115
|
|
|
$
|
11,373
|
|
|
$
|
56,735
|
|
|
$
|
102,926
|
|
|
$
|
262,081
|
|
|
$
|
—
|
|
(1)
|
Represents the extended maturity date for all debt obligations.
|
(2)
|
Interest payable does not include interest that may be payable under our derivatives.
|
(3)
|
Refer to Note 4 of the consolidated and combined financial statements.
|
Change in Interest Rates
|
|
Net Income
|
||
-100 Basis Points
|
|
$
|
(323
|
)
|
-50 Basis Points
|
|
(120
|
)
|
|
-10 Basis Points
|
|
(24
|
)
|
|
Base Interest Rate
|
|
—
|
|
|
+10 Basis Points
|
|
24
|
|
|
+ 50 Basis Points
|
|
120
|
|
|
+100 Basis Points
|
|
240
|
|
Exhibit
Number
|
Document Description
|
31.0
|
|
32.0
|
|
101*
|
The following financial information from the Company's Quarterly Report on Form 10-Q for the period ended March 31, 2018 is formatted in XBRL ("eXtensible Business Reporting Language"): (i) the Consolidated Balance Sheets as of March 31, 2018 (unaudited) and December 31, 2017, (ii) the Consolidated and Combined Statements of Operations (unaudited) for the three months ended March 31, 2018 and 2017, (iii) the Consolidated and Combined Statements of Comprehensive Income (Loss) (unaudited) for the three months ended March 31, 2018 and 2017, (iv) the Consolidated and Combined Statements of Changes in Equity (unaudited) for the three months ended March 31, 2018 and 2017, (v) the Consolidated and Combined Statements of Cash Flows (unaudited) for the three months ended March 31, 2018 and 2017 and (vi) the Notes to the Combined Financial Statements (unaudited).
|
*
|
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.
|
|
|
Safety, Income & Growth Inc.
Registrant
|
Date:
|
April 26, 2018
|
/s/ JAY SUGARMAN
|
|
|
Jay Sugarman
Chairman of the Board of Directors and Chief
Executive Officer (principal executive officer)
|
|
|
|
|
|
Safety, Income & Growth Inc.
Registrant
|
Date:
|
April 26, 2018
|
/s/ ANDREW C. RICHARDSON
|
|
|
Andrew C. Richardson
Interim
Chief Financial Officer (principal financial and accounting officer)
|
Date:
|
April 26, 2018
|
By:
|
|
/s/ JAY SUGARMAN
|
||
|
|
|
|
Name:
|
|
Jay Sugarman
|
|
|
|
|
Title:
|
|
Chief Executive Officer
|
Date:
|
April 26, 2018
|
By:
|
|
/s/ ANDREW C. RICHARDSON
|
||
|
|
|
|
Name:
|
|
Andrew C. Richardson
|
|
|
|
|
Title:
|
|
Interim Chief Financial Officer (principal financial and accounting officer)
|
Date:
|
April 26, 2018
|
By:
|
|
/s/ JAY SUGARMAN
|
||
|
|
|
|
Name:
|
|
Jay Sugarman
|
|
|
|
|
Title:
|
|
Chief Executive Officer
|
Date:
|
April 26, 2018
|
By:
|
|
/s/ ANDREW C. RICHARDSON
|
||
|
|
|
|
Name:
|
|
Andrew C. Richardson
|
|
|
|
|
Title:
|
|
Interim Chief Financial Officer (principal financial and accounting officer)
|