Good morning, and welcome to Safehold's conference call. If you need assistance during today's call, please press star zero. If you would like to ask a question, please press one zero. That's one zero to ask a question. As a reminder, today's conference is being recorded. At this time, for opening remarks and introductions, I would like to turn the conference over to Jason Fooks, Senior Vice President of Investor Relations and Marketing. Please go ahead, sir.
Good morning, everyone, and thank you for joining us today to review the transaction which we announced this morning. On the call today we have Jay Sugarman, Chairman and Chief Executive Officer, Marcos Alvarado, President and Chief Investment Officer, and Brett Asnas, Chief Financial Officer. The presentation that we plan to walk through can be found on our website at safeholdinc.com and clicking on the Investors link. There will be a replay of the conference call beginning at 12:30 P.M. Eastern Time today, and the dial-in for the replay is 866-207-1041, with the confirmation code of 3609137. Before I turn the call over to Jay, I'd like to remind everyone that statements in this earnings call which are not historical facts will be forward-looking.
Safehold's actual results may differ materially from these forward-looking statements and the risk factors that could cause these differences are and will be detailed in our SEC reports and filings that we make in connection with the proposed transaction. Safehold disclaims any intent or obligation to update these forward-looking statements except as expressly required by law. Now with that, I'd like to turn the call over to Chairman and CEO, Jay Sugarman. Jay?
Thanks, Jason. Good morning, everyone. It's been just over five years since we launched Safehold and created the modern ground lease industry. Since then, the platform has grown significantly to almost $6 billion and many important milestones have been met along the way. Today, we take another major step forward with this transformative transaction and set the foundation for the next exciting phase of growth for Safehold and the modern ground lease revolution. We prepared a deck. We'll go through it. Let's start on slide three. The headline is Safehold and iStar are combining to create the first, largest and only self-managed pure-play ground lease company in the public markets. We'll keep operating under the name Safehold Inc. For clarity on today's call, we'll sometimes refer to the new combined company as New Safehold. In simple terms, we're internalizing our management platform and diversifying our shareholder base.
This does three things. It gives New Safehold an in-house dedicated management team and control of the intellectual property related to the ground lease business. It allows us to capture meaningful savings as we continue to scale, giving us a more efficient and stable cost structure versus the external management structure. It enhances our access to capital, both debt and equity, by more than doubling our free flow, diversifying our shareholder base, and addressing some of the structural concerns we've heard from equity investors, credit investors, and the rating agencies. We're also very pleased to announce that concurrent with this transaction, MSD Partners will be making a large strategic investment in both Safehold and Caret. This is a strong signal about the future of our platform, and we're delighted to have such a respected investor join us for the next step in our progression.
All right, let's walk through the steps we'll take to execute the transaction on slide four. Let's first start with what Safehold will do. As I mentioned before, as a result of the transaction, Safehold will effectively acquire the management platform from iStar by issuing approximately 1.2 million new shares to iStar and assuming $100 million of iStar's LIBOR plus 1.50 trust preferreds due 2035, bringing the total internalization consideration to approximately $150 million. Second, Safehold will start building a fund management capability by acquiring iStar's GP interest in two ground lease ecosystem funds, the Ground Lease Plus and Leasehold Loan Funds, that have been funded to date by iStar and a sovereign wealth fund.
Safehold will also acquire iStar's LP interest in the funds, but we intend to sell those down to other investors while retaining the GP position. Third, we'll enter into certain transitional arrangements with iStar SpinCo, which we'll talk about SpinCo in a second. Specifically, Safehold will provide a well-collateralized term loan and be the external manager of SpinCo, earning management fees and interest over the next several years while SpinCo assets are monetized. Let's turn to iStar. Prior to the closing of this transaction, iStar will retire all its senior unsecured bonds and all of its preferred equity. New Safehold will not take on any of iStar's debt or preferred equity other than the $100 million of long-dated low-cost trust preferreds I mentioned earlier. iStar will also settle its long-term incentive plans, iPIP, using its shares of SAFE, further aligning management with Safehold's future success.
Thirdly, iStar will spin out all of its remaining non-ground lease assets as well as $400 million of SAFE stock into a separate publicly traded company, which for now we're referring to as SpinCo. As I mentioned, New Safehold will manage SpinCo and help facilitate the orderly monetization of these assets. In terms of ownership, today, iStar is a single shareholder, owns 65% of the outstanding shares of Safehold. After the transaction, SpinCo will own approximately 14% of New Safehold. The individual shareholders of iStar will own approximately 37%. MSD will own approximately 9%. Management will own approximately 6%. Safehold shareholders' interest will remain approximately the same at 34% of the combined company.
We're anticipating this transaction will close towards the end of the year or the first quarter of 2023, but we also have two 90-day extensions in the event they are needed. All right, let's turn to the benefits of the transaction on slide five. This is really the key to the transaction. Over the last five years, the existing architecture that we've created between Safehold and iStar was a competitive advantage in helping accelerate Safehold's early growth. Now the goal is to best position the platform going forward and create the corporate structure that will enable Safehold's ground lease business to grow to its full potential. We think this transaction achieved that goal. The net result is a better Safehold with a better corporate structure, better cost and economics, and a better debt equity profile.
In sum, a better-positioned company to continue to scale and expand our market-leading platform. Focusing on some of these key benefits, this structure enhances the governance of Safehold by more widely distributing share ownership and voting power, expanding the number of independent directors, and better aligning the management team. From an earnings perspective, the transaction will significantly lower the long-term cost structure of the business when compared to the projected cost it would incur under the external management structure. Lastly, this transaction will improve Safehold's ability to reach a broader universe of debt and equity investors. This might be one of the most impactful benefits. On the equity side, here's what happens. The free floats should potentially more than double with the distribution of a significant portion of iStar Safehold shares. The external structure concerns go away.
MSD Partners becomes one of our largest shareholders, and Carrick gets a major investment and a substantial mark. All of these are big positives. The impact on our debt profile is equally important. The transaction is addressing key ratings drivers which the agencies have laid out as the path to Safehold credit upgrades. As a result, Moody's this morning has put Safehold's credit on positive outlook, opening the door to a potential upgrade to become an A credit as we deliver on the benefits of the announced transaction. Let me finish up on slide six. Just noting the internalization will keep at the helm here the same management team that's been driving Safehold's success over the past five years.
Prior to the closing of the transaction, iStar will distribute to management a portion of its shares of SAFE and satisfy fully its long-term incentive plans, which will further enhance the alignment between management and New Safehold's success. We estimate that the board and the executive team will collectively own approximately 6% of the shares outstanding going forward. With that, let me turn it over to Marcos. Marcos?
Thanks, Jay. On slide seven, let's go into more detail with respect to the cost savings we will generate through this transaction. While Safehold's external management agreement with iStar was a key advantage during our first five years, we wanted to capture the economies of scale that kick in as we reach $10 billion in assets and beyond. Under the existing external management agreement, management fees and reimbursable expenses were likely to continue to grow at a sizable pace. By comparison, the internalized platform will realize meaningful go-forward G&A savings. As you can see on the slide, we presented illustrative model under identical acquisition and capitalization scenarios, showing how our costs may grow with our current external management agreement as compared to the net G&A costs with our new internalized agreement.
In year one, we expect to realize approximately $3 million of savings, and we expect that savings to grow to more than $25 million annually. Of course, as Safehold continues to scale beyond that, these savings would be expected to continue into the future. Net G&A costs are net of the management fees we receive for managing SpinCo. On slide eight, we highlight some of the agreements made to help transition New Safehold's cost structure through the internalization. Because we will be inheriting iStar's existing cost structure, including office leases, contracts, infrastructure, and the team necessary to manage the remaining assets of SpinCo, our immediate cost structure isn't in line with that of a pure-play ground lease company. Our models suggest a $10 billion ground lease company should have overhead of around $50-$55 million.
To get to that point, we will earn a management fee from SpinCo, which will help us transition to that level over the next few years. The chart here shows what our expected gross G&A will be over the next two years, and how net of the management fee our costs represent a steady transition. The higher first and second year costs also reflect higher stock-based compensation as New Safehold will put in place long-term incentive plans.
New Safehold will also make a $100 million term loan to SpinCo, secured by $350 million of real estate assets with a low LTV of less than 20% based on book value of the real estate and the market value of SAFE stock. The term loan has an attractive risk-adjusted return with an 8% current cash coupon and has added structural protection, which will sweep all cash flow that SpinCo has above its $50 million initial cash position as well as reserves. Moving on to slide nine. New Safehold will be in position to launch a new fund management business by acquiring iStar's 53% GP and LP interest in iStar's two ground lease ecosystem funds focused on Ground Lease Plus and leasehold loans. These vehicles create a proprietary tool for Safehold to serve our customers and expand the use of ground leases.
An advisor has been engaged to help us sell our LP interest to third-party investors, but retain our role as the GP with a minority stake. The Ground Lease Plus fund presently consists of three assets with a cost basis of $62 million, representing iStar's 53% ownership. The expected takeout timing for these assets with Safehold's ground leases is expected to be between 2023 and 2025 as these assets hit their milestones. The Leasehold Loan Fund is home for our SafeStar transactions, which is our product that provides customers a way to get their full capital structure needs in one place. This fund presently consists of four assets with a book value of $17 million and an unfunded commitment of approximately $150 million, representing iStar's pro rata 53% ownership.
The repayment timing for these loans is also expected between 2023 through 2025. Safehold will effectively pay $79 million in cash for these interests, representing the cost basis of the Ground Lease Plus fund and book basis of the leasehold loans. Plus, we will pay dollar for dollar for any additional fundings that iStar does prior to closing. As Jay mentioned earlier, the strategic investments MSD Partners is making in our company send a strong signal about our potential. Slide 10 recaps the two investments. First, concurrent with the closing, MSD will buy 100,000 units of Caret from Safehold for $200 per unit, implying a Caret valuation of $2 billion.
Notably, this valuation represents a premium to the prior Caret sale early, earlier this year of $1.75 billion and does not include the redemption option included in the February sale. With just over 63 million shares expected at New Safehold, the implied value of Caret to shareholders should now become much more transparent. In addition, MSD has negotiated to buy 5.4 million shares of SAFE stock from iStar for $200 million or $37 per share. Notably, because these shares are being sold directly by iStar, the sale is non-dilutive to Safehold shareholders. Following this transaction, MSD will become one of the largest investors in New Safehold and the largest third-party investor in Caret. MSD will have an observer right seat on the board of New Safehold and serve on the Caret advisory committee.
We are excited to welcome MSD as part of the Safehold family. With that, let me turn it over to Brett, who will talk about how the transaction will further enhance our equity and debt profile. Brett?
Thank you, Marcos. On slide 11, let me touch on the equity profile highlights of the transaction. As a result of the transaction, we expect to have addressed key obstacles that we had heard from equity investors. The small float, limited liquidity in the stock, and the concentrated ownership by iStar. This transaction addresses these concerns, potentially more than doubling the float and materially diversifying our ownership. Safehold shareholders' ownership in New Safehold will remain approximately the same at 34%, but iStar's 65% block will now be more widely held by individual iStar shareholders, SpinCo, MSD, and management. Combined with the governance enhancements and internalized management structure, we believe this transaction should meaningfully expand the universe of potential equity investors for New Safehold. On slide 12, you can see some of the commentary from the rating agencies which echo similar sentiments.
Following our announcement this morning, Moody's has put our credit on positive outlook, and this now creates a clear path for a single A rating in the future. Fitch has also noted that as we execute on what we have laid out, the benefits could lead to potential ratings momentum. We should also point out that this transaction will have very little impact on our already strong credit metrics. We have talked about the governance aspects of this transaction, which have been significantly altered, and we believe that this new architecture and continued ratings momentum positions us to expand the universe of potential credit investors for New Safehold. With that, I'll turn it back to Jay.
Thanks, Brett. Just to wrap up on slide 13, this transaction makes Safehold a better company. The combination further enhances our position as the preeminent ground lease company with better structure, better economics, and a better investor profile. We're very excited to take this next step and show off the full potential of what New Safehold can do. Now we'll be happy to answer any questions you guys have.
Ladies and gentlemen, to ask a question, please press one zero at this time. We will take as many questions as time permits. Once again, please press one zero to ask a question. Give me just a moment for the first question. That comes from the line of Rich Anderson, MBC. One moment.
From SMBC.
Go ahead.
I'm here. Thanks very much. You talked about the cost savings, and you illustrated it well in the slide deck. What is the broader impact to earnings per share on Safehold, you know, pre versus post-transaction when you take into consideration, you know, the issuance of the shares, the assumption of the preferred and so on? What's the bottom line impact that you see from an earnings perspective coming out of the gate here?
Yeah, Rich, I think, you know, depending on when the transaction closes will have some impact. Obviously, there's some friction costs to getting the transaction done. A little hard to nail down exactly the impacts in the near term. What we've tried to do is show the longer term impacts are quite substantial. We'll be refining, sort of depending on when the deal closes, the 2023 numbers. I think when we go out to 2024, 2025, and 2026, what's really driving the story here is this better profile on the debt side, wider availability on the equity side.
Candidly, having a you know very large strategic investor coming into the Caret side of the equation should help unlock some value, help us get our cost of capital and our share price where they should be, and that should drive significant growth in earnings on a go-forward basis. Let's see how long it takes to get through the SEC process. You know, the costs are not insubstantial to get this all closed up. Once we're through that, I think you'll start to see a pretty meaningful impact.
Speaking of MSD, they're making the investment in the two entities, Safehold and Caret. The Safehold investment's at a reasonable discount. 5.4 million shares at a $4-$5 discount per share is essentially over $20 million, which is somewhat equivalent to their investment in Caret. Can you dialogue around that, how much the discount offered for the Safehold share was kind of a prerequisite for them to make the Caret investment?
Hey, Rich, it's Marcos. When we shook hands with them, the price was very close to the 10-day VWAP. I don't think it accurately reflects kind of the transaction dynamics with MSD. The investments were independently negotiated. We view them as separate investments.
Okay. Fair enough.
Rich, there was no underwriter on the shares, but obviously Brett understands that there would be an underwriting discount available to them if they did it directly. I wouldn't look at this as like we offered the shares.
Okay, fair enough. Last question from me. On the SpinCo, you know, there any consideration given to not have $400 million of shares in there and just distribute that out and even improve the landscape of ownership better? Or do you feel like that kind of element of SpinCo was necessary because, you know, this entity may not trade very well coming out of the gate and perhaps needed something of clear value to in itself come, you know, as a publicly traded vehicle? I'm just curious if any consideration was given to the $400 million being in our SpinCo.
Yeah. I think you touched on a couple of good points. One is, yeah, just the critical mass, just having a handful of assets was probably not the best profile for SpinCo. Look, it's our job to monetize those assets and capture the upside we think still exists there. That's true for both the real estate assets, but it's also true for the Safehold shares. We obviously don't think the current market price reflects full value. We're building, you know, this entire transaction around a better Safehold. And we think that will benefit Star shareholders both directly and also through SpinCo. They'll have the indirect benefits. They're gonna get the benefits of the transaction one way or the other.
Okay, fair enough. Pretty much all.
Our next question comes from the line of Mizuho Securities. Haendel, please go ahead.
Hey there. Good morning. Jay, I guess I wanted to start with the Moody's positive outlook. You know, it sounds like there's certainly an expectation for an upgrade to A. I guess, what do you think they're waiting for in terms of the timeline, and how do you estimate the benefit to your cost of debt?
Hi, Haendel. Yeah, look, this is a big part of the transaction is putting the profile of Safehold, both in the equity world and the debt world, in the best position it can be. We think there is upside on both those sides of the equation, and we're really pleased that the rating agencies have already recognized that this transaction is going to be transformative. It takes away some of the last vestiges of concern that we have heard. It definitely opens a door and a pathway.
I think, you know, it would be unfair to say, you know, so until we get this transaction closed. We expect, you know, ratings changes, but I would definitely say, they laid out the case for why this is better, why it addresses some of the concerns head on. I think it puts the profile of the company, you know, squarely where we want it to be, which is on a path to single A ratings. From a cost perspective, you know, that is an important part of our business. We're still believe we're in the early innings of what we're building here at Safehold. I think ratings are a big part of that story.
We will, you know, like you, work very hard to get this transaction closed, set Safehold on its future path. I think having better ratings is certainly a big positive from our perspective.
Just a couple of quick ones on SpinCo. Like, you mentioned the $100 million loan, but the rate, but what's the term? Then any sense of the timing for the filing of the documents here related to the transaction? Any sense of when we should expect to see the filing? Thanks.
It's a four-year term on the loan. The low LTV loan helps wrap up the transaction. I think with the SEC process, you know, we're not only filing on behalf of SAFE and iStar, but also on behalf of the new SpinCo. We don't think it's a, you know, process we can fully predict the timing of, but we're gonna keep pushing as quickly as we can. We think the sooner, the better.
Great. Thank you.
Our next question comes from the line of Stephen Laws, Raymond James. Please go ahead.
Hi, good morning. You know, first, Jay, can you talk about in the SpinCo with the land development assets, and you've got the new management fee going to SAFE that declines over the next few years. You know, if there's extension on those developments or costs, can you talk about the risk or how the management fee is structured as you think about that? Or, you know, maybe another way to ask is, you know, how confident are you around monetizations and resolutions in the SpinCo assets?
Thanks, Steven. Yeah, look, we've spent the last couple of years, you know, winding through legacy assets, and the team has done a great job on that. I feel confident that'll continue. We've always said and highlighted that Asbury and Magnolia Green and maybe one or two other assets are both from a political standpoint and just a process standpoint, trickier to monetize at this point in time. We fully expect over the next couple of years to be able to extract a lot of value out of those. I would say, you know, in terms of where we're going, it feels to us like four years is plenty of time. There is a provision if there are assets left after that for a modest management fee to continue.
I think you'll hear from us, you know, our strong preference, goal, conviction is around having these all wrapped up in four years, if not sooner.
Great. On the Ground Lease Plus, you know, I guess that's technically a new product for SAFE, but I know you've been offering it through iStar. I don't know if there's been some constraint on growth with it being at iStar. You know, can you talk about the opportunities there, maybe, you know, any type of annual run rate volume expectations you expect for you know, ground leases on construction assets and how that, you know, can then feed the traditional business? Thanks.
Yeah. We like that product a lot. We've seen customers respond to it. It has been a little bit constrained. So we have a sovereign wealth partner who has helped build that business with us. We think there are other investors like them who would like to participate. So we're gonna work to bring in a new investor to take a fairly large LP interest, and then SAFE would just hold on and focus on the GP portion. You know, I think the opportunity set, Marcos, you know, we think it's reasonably large. It's not something we have really pushed that hard on, but we know customers have responded to it.
Yeah. I think we think about both the loans and the GL plus, you know, hopefully we could put out $200 million annually. Again, with our plan to syndicate down our LP interest and just retain the GP interest, it'll be a small portion of SAFE's go-forward balance sheet.
Great. Appreciate the comments as well.
Our next question comes from the line of Juliano Torii, Truist Securities. Please go ahead.
Thank you. Yeah, as a credit analyst, I definitely appreciate, you know, the effort to simplify the structure here. Now that you're going to have a more traditional, let's say, corporate structure, including internally managed business, how do you see your business being comparable to other real estate investment trust sectors? I am asking this because as much as your structure is innovative, of course, there is still, you know, the fact that you are a standalone in your sector. How do you see your business now going forward comparable to other different parts of the REIT sector, like retail, industrial, offices, and so on? Thank you.
Yeah. No, thanks for the question. You know, we are a large diversified player across the top 30 cities in the country. We think the addressable market for our business is upwards of $7 trillion. As you mentioned, we are the market leader and wanna be comparable to leaders in other sectors of the REIT world that have market caps of $25 billion, $50 billion, $100 billion. We think that kind of potential exists for Safehold in the modern ground lease sector. In terms of, you know, the simplification of the structure, hopefully it allows people to focus on the underlying values of the portfolio. We continue to stress the two separate components. One is, in effect, a ultra-high-grade cash flow stream, and we have given relevant benchmarks for how to value that.
We have a fairly large and growing portfolio of real estate we call UCA or Caret. For us, that is the second component of value, and certainly the Dell investment and hopefully in the future, other investors will help put a very strong mark on that that people can use to help value the two components of Safehold. You know, we don't have an NAV perspective, but we do have intrinsic value in each of those components that is very logically and rationally created. We think more and more investors will be able to do this simple math and see why we think the share price today is dramatically undervaluing the intrinsic value of the two components of the business.
Okay. Thank you.
Again, ladies and gentlemen, if you have any questions or comments, please press one then zero. We have a question from the line of Ki Bin Kim, Truist. Please go ahead.
Hey, thanks. This is Ki Bin. Good morning. On the SpinCo part of this transaction, I'm just curious, at this high level, why even have a SpinCo, and why include $400 million of Safehold stock in that SpinCo?
Yeah. Obviously from a Safehold perspective, not part of the go-forward Safehold story. From an iStar perspective, I think kinda what Rich said, which is the special committees wanted to create an entity that would have liquidity, that would have some ability to be at critical mass. I think the upside potential on the shares that are being created in the new Safehold, as well as the ability to wind down the process with some of the longer term legacy assets, in a vehicle that can stand on its own, with a strong balance sheet and strong asset base, you know, really helped the deal come together.
I'm sure all, you know, all the alternatives that were considered, you know, ultimately trying to find a measure of balance for the shareholders over iStar to get, you know, maximum returns with appropriate liquidity. I think this is probably the best solution to achieve both of those goals.
Okay. On the management, the iPIP program, I realize there's two, right? Within Safehold and within iStar. I'm just curious, what is the total shares being offered to or given to the management team as part of the internalization process? How does that compare to, at least on the Safehold side, the 3x the kind of trailing twelve-month annual management fee, and that should equal about, you know, $52 million.
Yeah. The iPIP program is only at iStar. It's been in place since the end of 2012. It reflects returns across all investments made since that time. I haven't looked recently, but those iPIP pools have generated, I think, typically north of 20% returns on a levered basis over the last decade. That value building up will be settled at the closing of this transaction in the form of SAFE shares. I think all told, it'll probably be in the range of 3.5 million shares out of the 42 million that iStar will own. I think it probably provides the best continuing alignment of interest. The board also has the ability to settle those in cash.
I think obviously settling in Safehold shares is a lot more aligning.
Just to go back to Rich's question on the MSD part of the transaction. I mean, the math is that they're getting a $30 million discount on Safehold shares. They're investing $20 million through Caret. I know it's not, maybe it wasn't intended this way, but they're investing $20 million through Caret. You know, but in effect, doesn't really have skin in the game, right, on the Caret side of it. Similar in vein with the Fifth Wall transaction where, you know, they had that put option. You know, one can argue that how much skin do they have in the game?
I'm just curious, like what other transactions are you considering to maybe prove out the value of the Caret program, whereby new investors might, you know, have a little bit more skin in the game?
Yeah. Look, at least with respect to this transaction, you know, we believe MSD thinks they have real skin in the game. Negotiated very hard for the Caret position. We were not willing to sell a lot of it there. So I don't think they believe what, you know, that the transaction is free. This was a material investment with a long-term belief that Caret is a substantial asset, a unique asset that has tremendous upside and value. Certainly, you know, that's the reason Safehold did the transaction. We did not sell shares to them from Safehold. The iStar transaction was negotiated at a point in time where the stock was more reflective of the price of $37.
Certainly, if you put an underwriter discount on where the stock traded in July, you're gonna get to that number. So I guess the characterization doesn't feel quite right to us to say, you know, somehow there was a discount price to today's price. Go back and look at July's price, put in any kind of underwriter's discount on it, and I think you'll see why the two separate transactions should be looked at that way. Certainly Dell is a sophisticated investor. We expect and have had conversations with other sophisticated investors that give us a lot of confidence that Caret is becoming a very, very meaningful asset in a lot of people's eyes. Whether those are the types of transactions that will translate into the full value, we're gonna take it step by step.
The first transaction was $1.75 billion with some downside protection, as you point out. This transaction has no downside protection. It is a straight investment at a slightly higher value, $2 billion. We would certainly hope in the future there'll be further transactions at higher values. At least at this point, we think we're on a very powerful path. We can tell you we think it's Caret is worth a lot more. Step by step, we will continue to point to that full valuation. Meanwhile, you know, we've seen Caret and UCA continue to grow fairly dramatically and we're very happy with the path we're on, and we have lots of conversations that suggest to us we're on a good place.
Okay. Thank you, Jay.
Thanks.
We have a question from the line of Richard Anderson, SMBC. Please go ahead.
Thanks. Just two follow-ups. Jay, I think you can fill in the blanks for me, but I missed the logic on the 37 for MSD shares. I'm looking at a Safehold stock chart, and it never gets anywhere near 37. I understand the related discounts and all that, but in July, you know, bottomed out in the 44 range. Are you saying the 37 is the appropriate discount to 44 at the time or is there a nuance that I'm missing that didn't occur to me when you were just speaking to that previous question?
Yeah. I'm not sure. I've seen the 30-day VWAP chart, so I'm not sure what number you're looking at, but I think we were.
Right.
40, $40 range and put an underwriter discount on that, you're getting the $37.
Okay. Well, I'll take it offline. The second follow-up is, I see. Sorry, what's that, Marc?
I was just saying in the middle of July, it was already at, like, 38, so.
Oh, Jason. Okay. I apologize for that. Second question, on the leverage, you show debt to book equity at 1.76, if I remember correctly in the slide deck, the post-transaction. To what degree are the rating agencies. It sounds like they're on board, but that presumes, you know, a debt to market cap, you know, well in excess of what the REIT average would be, you know, well over 50% if you look at it that way. To what degree do the rating agencies, you know, still allow for that metric as reasonable in consideration for the safety of the stream of ground leases?
Is there any change pre or post-transaction that will cause the rating agencies to look at you a little bit differently, you know, in consideration the fact that you're gonna have some noise out of the gate with the SpinCo and the costs and all that sort of stuff? Just wanted to get that perspective from you.
Hey, Rich. It's Brett. We've walked through the transaction with them. In those discussions, explained the timeline of the expectations of originations, capital raising, et cetera. Over time, you know, we expect to continue to stay in a sustained leverage position, you know, below 2x. That's what we've stated. You know, we started this business five years ago. It's what we've exhibited to date, and that's what we've said we'd do going forward. As far as your question on debt to market caps or comparatively to other REITs, I would say that, A, you know, we're the land underneath assets, so the asset risk profile is inherently different when talking about 0%-40% of an asset versus 0%-100% equity risk.
We are rated as a non-bank financial. I think the better comps, and if you look to their debt to equity profiles across towers, data centers, other lessors, those are probably more appropriate in terms of the actual businesses that they're running as opposed to us, since we're not a traditional equity REIT operating, owning, managing, designing real estate, that's not our business. I think the framework is really important to understand in how you're looking at the credit, which the agencies and investors are doing.
Yeah, fair enough. By the way, I was handed a relative short on that first, and so that's why it's sounding confused. Apologize for that, stupid question. Thanks for answering.
I wish it was at 44, Rich. It should be at 40 or back or 50, but we'll get there. Look, this is really about creating a better Safehold. You know, we think the stock is dramatically undervalued, even on the cash flow side, but you know, cash flow and Caret combined. You know, the focus of the deal was to create a go-forward company that can really realize the full potential and give more investors and creditors a chance to participate. We think this does that. But look, we're gonna work really hard to make sure by the time this closes that the share price reflects more fully the value.
Thank you.
At this time, there are no other questions in queue.
Okay, great. Thank you for joining us. If anyone should have additional questions on today's announcements, please feel free to contact me directly. Rafael, would you give the conference call replay instructions once again? Thanks.
Certainly. Ladies and gentlemen, this conference will be available for replay after 12:30 P.M. Eastern today through August 27, 2022 at midnight. You may access the AT&T replay system at any time by dialing 866-207-1041 and entering the access code of 3609137. Again, the phone number is 866-207-1041 and the access code is 3609137. That concludes our conference today. Thank you for your participation and for using AT&T conferencing service. You may now disconnect.