All right. Hey. Good afternoon. Thank you all for joining us. We are pleased to have with us today, Jay Sugarman, Chairman and CEO of Safehold. Safehold is a very unique company in the REIT landscape with a dominant position in the ground lease market, and with one of the best growth profiles across the sector. I'm going to turn it over to Jay for some introductory remarks, and then we'll open up for some questions. Jay?
Thanks, Haendel. Thanks, everybody, for joining us today. As most of you know, 3.5 years ago, Safehold created the modern ground lease industry. Everything we believed then, we believe even more strongly today. Except now we can actually show you some results of this unique, reinvented asset class that not only delivers significant benefits to property owners around the country, but also has, for the first time, made available to shareholders, given them access to one of the great wealth-creating asset classes in history. Let's just start with a quick rundown of where we are and where we're going. On page three, you can see performance has been strong, not just with the customers, but also from an earnings and financial metrics standpoint. Shareholders have liked what they've seen. We've been the number one performing REIT for the past 23 months.
We still believe we're in the early innings. This is a big opportunity. We think commercial real estate in the top 30 markets in our country is a multi-trillion-dollar market. We've seen since Labor Day our portfolio of pipeline deals really start to grow nicely. We're actually coming out with new products to meet our customers wherever they need us, from pre-construction, construction, completion, stabilization, financing, all the way to sale. We have products on the shelf that will meet all their needs, and as the market opens up again after COVID, we will be bringing those out and pulling them off the shelf to really give customers whatever they need, wherever they need it. For shareholders, I think this is an exciting time at Safehold.
We've built a model that is quite unusual in that it not only creates very accretive return on every asset it invests in, but it also has increasingly accretive capital costs. That combination makes every dollar of growth a very valuable and accretive dollar. We're also building up sizable capital appreciation. We'll talk about that in a minute. It's one of the hidden assets that you'll hear us begin to talk about in 2021. The story has continued to grow in our minds into what should be a very large and growing sector of the real estate industry. If you look on page four, I just want to talk a little bit about the customer side first. Can we go to page four?
If you look on the right-hand side, you can see why we think customers are attracted to this modern ground lease that has fixed all the blemishes and flaws of the old, outdated ground lease industry, and has really adopted the same mentality of the sale-leaseback for corporations that has existed for 20 years. We're creating a much more capital-efficient way for owners and operators of buildings to deploy their own capital, separating the land and the building. They're great at the building skill sets, leasing, managing, marketing, designing, buying, selling, financing, repositioning. That's where their capital and their returns should be generated. We're the better buyer for the passive bond-like returns of the land. By separating those, we think those customers can generate higher returns with less risk. It's a better capital solution. It's better capital efficiency.
It eliminates some friction costs that shouldn't be paid, so it's more cost-efficient. It wipes out a big chunk of maturity risk. This is a fundamentally the most powerful thing in real estate is if you can eliminate maturity risk, you lower your risk profile pretty significantly. We're taking that short-term debt maturity risk on a big chunk of their capital stack, moving it out 99 years. We see customers like that combination of benefits. We see it in our portfolio growth. We've gone from $300 million- $3 billion. Some very nice growth over the last 3.5 years, but we still think we're in the early innings of a multi-trillion-dollar opportunity. If you look on page five, you can see we cover most major food groups, office, multifamily, hospitality. We target the top 30 markets. These are generally high-quality buildings on high-quality land.
They're great candidates for what we provide in a modern ground lease. If you look on page six, that has translated into strong growth. Haendel mentioned we have some of the strongest growth metrics on a portfolio basis. Certainly, the growth on our revenue and EPS continues to increase, and we think that's a function of we're still early in really creating this modern ground lease industry. A lot of opportunity ahead of us. You'll hear us talk about some of the innovative ideas in 2021 about how we're going to capture even more of the marketplace. I think one of the things that's really been highlighted by COVID is the safety component of ground leases. We said it was one of the safest parts of the capital structure. Green Street said it was one of the safest parts of the real estate industry.
We've now got sort of proof positive. 100% of ground rents were paid during the pandemic across all asset types. It's not surprising when you look at where ground leases sit in the capital structure. If you line them up against the typical rating agency analysis of a pool of real estate, they sit in that sort of AAA with a little bit of AA, the ultra-high-grade credit part of the capital structure. This has really been proven during COVID and is something that makes ground leases very attractive to almost all kinds of investors, whoever you are. For us, it's the return profile for that risk that is the most exciting part. We tend to think of similar instruments trade similarly across markets.
If we are an ultra high-grade credit relative to CMBS or ABS, if we are a 99-year average maturity, where can we go in the financial world and find ultra high-grade, ultra long-term fixed income instruments? Well, the bond market shows you exactly what the market thinks the yield on that kind of cash flow should be. Right now, it's about 3.2%. There's several billion dollars of long-term bonds in that AA, AAA context that we track. Green Street Advisors confirmed our belief that this is the best comparable. When you look at that relevant benchmark and you see our pool of ground leases is generating hundreds of basis points higher yield to maturities and doing so consistently for 99 years, you create really extraordinary value as you build our ground lease portfolio of cash flows. We think of this as the fixed income component of ground leases.
When you value it's like a bond that you can buy at $1.00 that's immediately worth $2.00 on the dollar. Very powerful fixed income piece of ground leases that I think the market has begun to understand that math. It's relatively simple. You take our future cash flows, you discount them at the market benchmark. You're going to see that our assets are significantly more valuable based on that math. That math justifies the rise from $20 a share to the $65, $70 today. It's only one of three value components at Safehold, so we've spent most of our time getting people to understand that one. I think the market's starting to do a good job on that.
You can see here that growth, that recognition of this first piece of the value equation of what we're building has led us to follow on offerings at higher and higher prices. We recently did a top-up offering to continue to give us the dry powder to attack this market everywhere we want to attack it. We have been the top-performing REIT over the last 23 months. Again, we still think it's early innings. We think there's an even bigger, more exciting story to come. When we talk about growth, right now we've got a nice pipeline developing. COVID kind of shut everything down from March to Labor Day. Post Labor Day, we've seen fairly significant engagement, so feel pretty good about the way the pipeline's starting to gear up again.
I think one of the most important things for us to really think about is on page 11, where we talk about all the different places we can go with this now very experienced platform. We created the concept with a lot of very strong ideas about how this fit into the capital markets, the real estate markets, the financial markets. We knew there had never been a nationally scaled growing platform. We knew that the market needed a modern ground lease to really unlock value for building owners. We used what iStar has historically been an active player in the top 30 MSAs, and we kind of realized very quickly this was a big enough market opportunity that there needed to be a public company, a pure play public company, to really put this in front of investors and show them how valuable it could be.
For customers, we are out there with innovative ideas. I talked a little bit about some of those in the past, SafeStar, SAFE x SWAP, where we're really giving customers one-stop solutions. We're giving customers ways to exit bad, outdated ground leases and replace them with our modern ground lease. We're also going to give customers a way to work with us earlier and earlier in the life cycle of their real estate projects. Again, anywhere from pre-construction through development through construction, completion, stabilization, finance, anywhere you need us, we think ground leases can unlock value. Growth for us is highly accretive. We're generating above-market returns on that fixed income component we just showed you. Our cost of capital continues to go down over time as we get bigger, more diversified, as we scale, as we educate the lending community, our liability counterparts.
They too are starting to see the potential in this industry. They're being innovative with us, figuring out ways to take advantage of these ultra-safe long-term cash flows and create a liability structure that captures more value for us as we go forward. There's a third piece, and this is really critical. In 2018 and 2019, we focused on this fixed income rent stream piece of ground leases. When you do a ground lease, you not only get a rent stream, you also get an ownership interest in whatever's on top of the land at the end of the lease term. I think that's the real estate part of the portfolio that most of the market has either not understood or perhaps ignored. We've only said it's actually a very valuable asset. It is comparable to other real estate portfolios.
We know we're the owner of the economic value on top of the land. We know what the value of that is today, and we know what its growth rate is likely to be. If you know those three variables and you know the discount rate, you can figure out pretty quickly what something's worth. We think this pool of buildings that sit on top of our land are relatively easy to value. We have CBRE go out and do it for us over a four-quarter rolling timeframe. Today, it's over $5 billion. It started at $400 million. You can see that growth rate. We've really trying to help people in 2021 understand that we got excited about this business.
We decided to go all in on this business and build Safehold because we saw that as you built a growing ground lease business, not only do you have this really interesting fixed income component, but you have this really great real estate component. We've just started to help people understand it's relatively straightforward. We own whatever's on top of the land. We're going to show you how that looks compared to other portfolios, what our growth rate is, what the quality of our assets is, what the quality of our sponsors are in each of those buildings. I think you'll see in 2021, a recognition that this is a whole another layer of value that isn't reflected in the share price. It's over $5 billion today. We have 50 million+ shares. You can do that math.
It may be unrealized capital appreciation, but we have a very strong belief that we can realize it for shareholders because it looks and smells, and tastes just like other assets that people invest in and value. We are going to capture that value today in the form of Safehold share price or some other mechanism. I love this visual, and I'll finish with page 14. This is the portfolio of buildings on top of our land that we will be inheriting. We are the owners of all the economic appreciation building up. You can see what's happened over the past 3.5 years. This is really a spectacular portfolio. It has grown materially in value, and every time we do a new ground lease, we get to add another piece of that portfolio to the equation. We're growing quite quickly. It's high quality.
We have fantastic sponsors who work every day to make the buildings reach their highest and best use. Ultimately, as we all know in real estate, this is a business about highest and best use. As the landowner, we are rooting for every one of our sponsors to come up with new ideas to create more value, and we're helping them unlock the ability to do that. We're excited about where we are. We think we've had some good progress to date, certainly with customers and shareholders. We've been able to deliver something I think they value highly. I think in 2021, you'll see us start to talk about some of the even more exciting parts of the story now that people are getting more comfortable with what we've created.
Great. Well, thanks for that, Jay.
Yeah.
There are a few questions here I'm going to ask you. First, we've heard about competitive capital forming to focus on the ground lease space. How is Safehold prepared to take on future competition, and how does Safehold plan to innovate and stay ahead as the market leader in the industry you've created?
Yeah, we've got about a four-year head start on everybody. Believe me, we've learned a lot of nuances that are not obvious. I think people can copy our website. They can copy our presentations. They can't copy our knowledge. It was a steep learning curve for us. We have educated lots of the market, we haven't given away all our secrets. There's advantages to scale. There's certainly advantages to having effectively 100 people available working on this every day. This is not three people or four people trying to build a multi-billion-dollar business. I think we've got some significant scale advantages, economies of scale, significant IP advantages. We know things that other people are not going to know till they've done $5 billion of deals that we've already done.
We have ideas around how values are created here that I have never, to date, seen anybody even understand, let alone try to repeat. There's pieces of the puzzle that are truly the secret sauce that we still have. I'd say, just at the end, if it's a multi-trillion-dollar industry and people are trying to get in because they see that it will be such a big industry, there's room for more than one. We don't expect to have the entire $7 trillion playing field to ourselves. I feel pretty confident we've already established the dominant position. We did create almost all the intellectual property in this industry. We're creating the ecosystem that never existed. Others will certainly try to copy us, but I think they'll have a hard time actually doing exactly what we're doing.
Got it. Appreciate it. Can you also touch on Safehold's go-forward capital structure strategy? How are you able to raise accretive debt and equity on accretive assets? Safehold had a recent equity raise, and iStar was a large participant in that raise. What's your view on iStar's relationship in future raises?
Yeah. It's pretty exciting when you can generate well above market returns and watch your cost of capital decrease as you grow in size. Those two factors are tailwinds for our business. Every time we invest $1, we're creating lots of value for shareholders. This is the sweet part of the curve where growth is highly accretive. Our strategy is to keep enough dry powder around to make sure we can go wherever our customers need us, whenever they need us. iStar has perfect information. They know our plans. They know our thoughts. They have been a big buyer because they view it as, again, still early in the process. They are a buyer, not a seller, because they see that upside we've barely even scratched yet, and they're waiting, I think, to see a lot more recognition in the marketplace of that value.
Ultimately long-term, Haendel, I would say the architecture we have today between iStar and Safehold has been the right one to scale the business. Once Safehold reaches a sizable scale, I'm not sure it will still be the right one. Both parties have tremendous incentives to get that right in the future. iStar is the largest shareholder, wants nothing more than to unlock all the value available at Safehold. It's the 2/3 owner of any value creation. We see very much an alignment of interests of how can we grow this business, how can we stay dominant ahead of the market, how can we innovate together, how can we create better and better products for our customers? If we do that well, both parties, both companies are going to do exceptionally well.
Our focus right now continues to be focusing on our customers, helping them unlock value wherever they need us. With shareholders, to help them start transitioning from just the fixed income component of the ground lease portfolio to these other two very powerful value generators, the accretive growth you mentioned, the economies of scale we get as we grow. Then this real estate component, which frankly, I think on an individual ground lease is sort of less relevant. You can't really capture much value if you own a single residual. That's not the business we're in. We're creating an asset class. The entire ground lease sector with a growing portfolio is a very different animal than owning a single ground lease.
I think the opportunity for shareholders to invest for the first time in history in a growing portfolio of ground leases is still not understood enough. I think people understand great fortunes have been built off of individual ground leases. Wait till they understand what happens when you build a growing portfolio of ground leases. That's a story that's still yet to be told. That'll be the story of 2021.
Great. You've reviewed much of the upside that Safehold delivers to investors here, but what would you describe as the risk to the business that investors should be aware of?
Yeah, the question we always get is on the fixed income side, interest rates. What happens when rates go up? As we said, we reprice our origination pipeline every day. That's based on a spread to treasuries and our liability costs. Obviously, a significant increase in rate against a fixed book of cash flows or existing book would diminish that value somewhat. We've looked at it in lots of different ways. One is we finance ourselves with 30-year money, so we sort of neutralized a lot of the interest rate impact. That's very different than almost any other company I've seen out there. I also think, unless you have a viewpoint that interest rates are going to shockingly jump, small changes don't really change the value of the portfolio.
If you said, "Hey, I think the 30-year is going to go to 5%," I'd ask you the question that what happened to inflation? Because if it's also going up dramatically, there's a whole part of our portfolio, this $5.2 billion, that actually just got more valuable.
Great. A couple more from me and from the audience coming in. First, Safehold's value proposition is to improve cash-on-cash returns to the building owner while reducing risk by separating the building from the land into two distinct entities in the capital stack. What's been the general reception when negotiating with building owners or sourcing new deals, and how is that evolving in the wake of your increased acquisition activity and industry profile?
Yeah, look, we've gone through this three times in our careers, and we tried to reinvent the finance business back in the early 1990s by providing sort of layers of risk and reward that investors could choose from, instead of just saying, "Hey, the capital stack is one piece of debt and one piece of equity." It took a while for that to catch on, and when it did, I think it's now become common sort of usage in the industry. Same thing in net lease. We showed that net leases are really a combination of real estate but also corporate credit and capital markets. It took a while for that to catch on. Now that's pretty well understood. We think the same thing is happening in ground leases with our customers.
There is some skepticism from ground lease blowups in the past because these old ground leases were incredibly poorly written, improperly sized, improperly structured. Once you get a couple deals done, Haendel, and people see that it works, that it unlocks value, that the returns are higher. Our best day is when somebody shows us their pro forma and we can lay it up side by side with the exact same pro forma, but now with a more efficient capital structure separating the land and the building, and they go, "Wait, my IRRs are 300-500 basis points higher. I have less maturity risk, I've eliminated basically a 1/3 of the friction cost when I finance or sell assets. Of course, I want to do this. Let's try one. Let's do one." Once they do one, they go, "I like this. This is good.
Let's do more." The story is getting easier to tell because we have so many other peers or colleagues or competitors who have now worked with us. I will tell you, three years ago, people listened politely and said, "ground leases are poison. We don't do them." It became, "Okay, it's more interesting. I see you've done some deals with other people. Tell me more about it." Now it's more of a two-way conversation. Now it's, "Hey, I like the overall benefits. Can we tweak it a little bit to fit my particular need?" You mentioned innovations. That's really what we've been doing, is working with our customers to say, where's the next big way to help them? We're coming up with new ways, one-stop shopping and fix old ground leases and work with them earlier in the life cycle of real estate.
Those are all really conversations coming from a discussion with a customer who says, "I already get why this is better. I get why the same thing that happened in the corporate market is now going to happen in real estate, I believe. Can we make it fit my need more precisely?" That's where we are on the curve, that I think is going to expand this market more quickly as we go forward. We're not just saying, "Here's why ground leases work." We're saying, "Here's why we can make the ground lease work for your particular need." It's an exciting thing for our investment professionals who are out on the road. They can now sit with a customer on almost any product type in any situation and say, "We've done several deals just like yours. Here's how we can unlock value.
Great. We might have time for one more here. I guess over the last couple of years, Safehold's stock has been a bit higher beta, whereas the Safehold portfolio is lower beta and long-duration focused portfolio of assets, given 30-99-year ground leases. What message would you give to investors to the market to bring the separation of the portfolio and stock volatility closer together?
Well, remember that as I started, there's a difference between owning a single ground lease and building a ground lease ecosystem in an entirely new market segment. I'm not surprised that there's a difference between the safety and stability of the underlying ground lease and people trying to get their hands around, can you/will you be able to build a multi-billion-dollar company, maybe a $50 billion, $100 billion company? There are going to be ups and downs in how people perceive that. COVID obviously didn't impact our assets, but I think it impacted the growth of the business, and I think it impacted people's perceptions of how fast the adoption would take place. There are two different evaluations that need to go on. I think the assets have proven themselves incredibly stable, as you said.
I think our business, and you saw that follow-on chart, that directionally, we are going higher and bigger and the business is working. Can there be moments where some people are more bullish than others and some decide the stock has gone up too quickly? Sure. We don't worry ourselves about what's happening minute to minute, day to day. We think we're building an entirely new industry, I take some hope from the other industries we've studied. You can certainly look at the electric car industry. There were moments where people thought it had no future, people thought it was the only thing that mattered, it goes up and down. Directionally, you kind of know over long periods of time we're going to be driving electric cars. I have the same feeling about ground leases.
It may happen a little faster, it may happen a little slower, but ground leases are going to become part of the natural dialogue in real estate ownership going forward. That directional move is not going to change.
Fantastic. Well, Jay, thank you so much for your time and for your insights. Before everyone else jumps off the line here, I wanted to let you know that Jay will be hosting an interactive breakout session immediately following this presentation, the details of which are on the Safehold website. Thank you again, Jay, and thank you, everyone, for participating.
Thanks, everyone. Thanks, Haendel.