MSD Partners to Make Strategic Investments in Both Safehold and
Caret
NEW
YORK, Aug. 11, 2022 /PRNewswire/ -- Safehold
Inc. (NYSE: SAFE) and iStar Inc. (NYSE: STAR) jointly announced
today that the two companies have entered into a definitive
agreement for a tax-free, strategic combination that will
accelerate Safehold's market leadership in the ground lease
industry and make Safehold the only internally-managed, pure-play
ground lease company in the public markets.
Transaction Overview
- Internalization of manager: Under the terms of the
transaction Safehold will internalize iStar's management team /
intellectual property, replacing Safehold's external management
structure. As part of the combination, Safehold will effectively
assume iStar's $100 million in L+150
trust preferred securities due 2035 and Safehold will effectively
issue 1.2 million new SAFE shares to iStar. The combined company
("New Safehold") will not be taking on other indebtedness or
preferred equity from iStar.
- Ownership of New Safehold: Ownership of New Safehold
will remain largely proportionate to the ownership of Safehold
immediately prior to consummating this transaction and New Safehold
will continue to operate under the name Safehold Inc. Safehold
shareholders (other than iStar) are expected to own approximately
34% of New Safehold. iStar shareholders are expected to own
approximately 37% of New Safehold directly and 14% indirectly as a
result of the spin-off transaction discussed below. In conjunction
with the transaction, iStar has agreed to sell SAFE shares
representing 9% of SAFE shares outstanding to MSD Partners, L.P.
and, separately, to settle its long-term management incentive plan
obligations using its SAFE shares representing 6% of SAFE shares
outstanding.
- Spin-off transaction: Prior to the merger, iStar will
spin off to iStar shareholders a new publicly traded entity
("SpinCo") that will own all of its remaining non-ground lease
assets and $400 million of its SAFE
shares, enabling iStar shareholders to participate in the orderly
monetization of these assets over time. SpinCo will be managed by
New Safehold in exchange for a management fee.
Strategic Benefits for Go-Forward Ground Lease
Business
The transaction will enhance Safehold's ability to grow the
modern ground lease industry and unlock significant value creation
for all stakeholders.
Specifically, Safehold will be strengthened by:
- Better Structure: Enables Safehold to internalize with
the same management team who built the modern ground lease industry
over the past five years. It also enhances governance, widely
distributes voting power, and expands the number of independent
directors on the Board.
- Better Cost & Economics: Reduces Safehold go-forward
operating costs by an estimated $25
million annually by 2026 versus projected increasing
management fees and reimbursable costs in an externally managed
structure. It also enables Safehold to acquire iStar's interest in
the Ground Lease Plus and Leasehold Loan funds and provides for
transitional management fee revenue from SpinCo.
- Better Debt & Equity Profile: Expands SAFE's
universe of potential equity investors, given its new internalized
management structure and enhanced free float and liquidity profile.
It further enhances credit ratings momentum by directly addressing
key rating agency concerns related to governance.
"This transaction is an important step forward in our strategy
to significantly expand the use of modern ground leases in
commercial real estate and further extend Safehold's position as
the pre-eminent ground lease company," said Jay Sugarman, Chairman and CEO of iStar and
Safehold. "By unifying all parts of our ground lease business, we
will create an even stronger company, providing building owners and
developers with additional modern ground lease options to meet
their capital needs, generating sizable cost savings over time,
expanding our shareholder base to a much wider audience, and
enabling shareholders of both Safehold and iStar to participate in
the future growth of the modern ground lease sector they have
created."
"Since IPO, we have grown Safehold almost twenty-fold in size
and now have the opportunity to make the company even stronger and
expand our reach with customers, investors and credit providers,"
said Stefan Selig, member of
Safehold's Special Committee.
"iStar has been instrumental in supporting the growth of
Safehold and the modern ground lease business since Safehold's IPO
and we believe this strategic transaction is the best way for iStar
shareholders to capture the growing value of the business as it
scales in the future," stated Barry
Ridings, member of iStar's Special Committee. "iStar
shareholders will continue to be the beneficiaries of Safehold's
future success."
Strategic Investment
Concurrent with the closing of the transaction, MSD Partners
will make strategic investments in both Safehold and Caret,
establishing it as one of the largest shareholders of Safehold and
the largest third-party investor in Caret:
- iStar will sell 5.4 million shares of its SAFE holdings to MSD
Partners for $200 million,
representing a price of $37 per
share, and will use the proceeds to repay debt.
- Safehold will sell 100,000 units of Caret to MSD Partners for
$20 million, or $200 per unit, implying a total Caret valuation
of $2 billion. The Caret units have
no redemption options.
"We are delighted to support Safehold in executing this
strategic transaction and are very pleased to become major
shareholders of Safehold and Caret," said Coburn Packard, Partner at MSD Partners.
"This investment is perfectly aligned with MSD's strategy of
backing innovative, founder-led businesses in building long-term
value. We have deep respect for what the Safehold management
team has built and are excited about the potential to continue
growing the platform and unlocking its full value."
"Adding MSD Partners, a large, sophisticated and well-respected
investor, in both Safehold and Caret further demonstrates the
attractiveness of Safehold's business and the unique value
proposition of Safehold and Caret to Safehold shareholders," added
Marcos Alvarado, President and CIO
of iStar and Safehold.
SpinCo
iStar will contribute its remaining non-ground lease related
legacy assets, the largest of which are Asbury Park and Magnolia
Green, and approximately $400
million of its SAFE stock to SpinCo. By retaining certain
assets and pursuing their orderly monetization, SpinCo will enable
iStar shareholders to capture their potential upside value.
Additionally, SpinCo will be seeded with $50 million of cash and capitalized with a
$100 million 8.0%, four-year term
loan from New Safehold and up to $140
million of bank debt from Morgan Stanley Bank, N.A. which
will be secured by $400 million
shares of SAFE. iStar will distribute the equity interests in
SpinCo to iStar shareholders on a one-for-one basis.
New Safehold will enter into a management agreement with SpinCo,
under which it will continue to operate and pursue the orderly
monetization of SpinCo's assets. SpinCo will pay to New Safehold an
annual management fee of $25 million
in year one, $15 million in year two,
$10 million in year three and
$5 million in year four. This
agreement will provide New Safehold time to transition its overhead
and infrastructure costs.
Additional Information Related to the
Transaction
Prior to the closing of the transaction, iStar will undergo a
reverse stock split to reduce the number of iStar shares
outstanding to be equal to the number of SAFE shares owned by iStar
immediately prior to the merger. At closing, the shares of SAFE
owned by iStar will be retired and each share of SAFE not owned by
iStar will be exchanged for one share of common stock of New
Safehold.
In connection with the transaction, iStar intends to retire its
senior unsecured notes and cash out its preferred equity in the
combination transaction using cash on hand and proceeds from asset
sales and loan repayments. iStar will settle iPIP, its long-term
incentive plan, using a portion of its shares of SAFE. In addition,
Safehold will acquire iStar's interest in the Ground Lease Plus and
Leasehold Loan funds in cash for $79
million plus any future fundings prior to closing.
Based on recent stock prices, book values and estimates on the
pace of asset monetizations, each share of STAR would receive a
combined implied value of approximately $18.39, comprised of interests in SpinCo with a
book value of $6.48 per share and an
estimated 0.27 shares of SAFE, which had a closing price of
$43.45 on August 10, 2022.
The transaction is expected to close in late Q4 2022 or in Q1
2023, subject to satisfaction of closing conditions, including the
approval of both iStar and Safehold shareholders and completion of
the spin-off.
The transaction was unanimously approved by the independent
directors of iStar and Safehold based on the unanimous
recommendations of special committees of the respective boards
comprised solely of independent directors.
Advisors
Lazard is serving as lead financial advisor and Clifford Chance
US LLP is serving as legal advisor to iStar Inc. Morgan Stanley
& Co. LLC is also serving as a financial advisor to iStar
Inc.
J.P. Morgan is serving as exclusive financial advisor and
Kirkland & Ellis LLP is serving as legal advisor to the
Safehold special committee.
Presentation and Conference Calls
Each company has published a presentation that provides
additional details of the transaction on the Investor sections of
their respective websites, www.safeholdinc.com and
www.istar.com.
The Companies will each host separate conference calls this
morning, August 11, 2022, to discuss
the transaction.
Safehold will host its call beginning at 9:30 a.m. ET. This conference call will be
broadcast live and can be accessed by all interested parties in the
Investor section of its website, or by dialing (844) 867-6163 with
the access code of 1619818. The replay will be archived on the
website or can be accessed by dialing (866) 207-1041 with the
access code of 3609137.
iStar will host its call beginning at 11:00 a.m. ET. This conference call will be
broadcast live and can be accessed by all interested parties in the
Investor section of its website, or by dialing (844) 867-6163 with
the access code of 4335538. The replay will be archived on the
website or can be accessed by dialing (866) 207-1041 with the
access code of 7964771.
About Safehold
Safehold Inc. (NYSE: SAFE) is revolutionizing real estate
ownership by providing a new and better way for owners to unlock
the value of the land beneath their buildings. Having created the
modern ground lease industry in 2017, Safehold continues to help
owners of high quality multifamily, office, industrial,
hospitality, student housing, life science and mixed-use properties
generate higher returns with less risk. The Company, which is taxed
as a real estate investment trust (REIT) and is managed by its
largest shareholder, iStar Inc., seeks to deliver safe, growing
income and long-term capital appreciation to its shareholders.
Additional information on Safehold is available on its website at
www.safeholdinc.com.
About iStar
iStar Inc. (NYSE: STAR) is focused on reinventing the ground
lease sector, unlocking value for real estate owners throughout the
country by providing modern, more efficient ground leases on
institutional quality properties. As the founder, investment
manager and largest shareholder of Safehold Inc., the creator of
the modern ground lease industry, iStar is using its national
investment platform and its historic strengths in finance and net
lease to expand the use of modern ground leases within the
$7 trillion institutional commercial
real estate market. Recognized as a consistent innovator in the
real estate markets, iStar specializes in identifying and scaling
newly discovered opportunities and has completed more than
$40 billion of transactions over the
past two decades. Additional information on iStar is available on
its website at www.istar.com.
About MSD Partners
MSD Partners, L.P. is a leading investment firm focused on
maximizing long-term capital appreciation across its core areas of
investing expertise – Credit, Growth, Private Capital and Real
Estate. The Firm deploys capital on behalf of Dell Technologies
founder and CEO Michael Dell and his
family, as well as other like-minded, long-term-oriented investors.
In its real estate investments, MSD Partners maintains a
fundamental, value-oriented approach, seeking high-quality assets
and businesses with significant barriers to entry and strong
long-term growth characteristics. The Firm operates from offices in
New York, Santa Monica and West
Palm Beach. For further information about MSD Partners, please see
www.msdpartners.com.
Forward-Looking Statements
Certain matters discussed in this document may be
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. We have tried, whenever
possible, to identify these statements by using words like
"future," "anticipate," "intend," "plan," "estimate," "believe,"
"expect," "project," "forecast," "could," "would," "should,"
"will," "may," and similar expressions of future intent or the
negative of such terms. These statements are subject to a number of
risks and uncertainties that could cause results to differ
materially from those anticipated as of the date of this release.
Actual results may differ materially as a result of (1) the ability
to consummate the announced transactions on the expected terms and
within the anticipated time periods, or at all, which is dependent
on the parties' ability to satisfy certain closing conditions,
including the approval of SAFE's and STAR's stockholders,
completion of the Spin-Off, sales of assets and other factors; (2)
any delay or inability of New Safehold and/or SpinCo to realize the
expected benefits of the transactions; (3) changes in tax laws,
regulations, rates, policies or interpretations; (4) the value of
New Safehold shares to be issued in the transaction; (5) the value
of SpinCo's shares and liquidity in SpinCo's shares; (6) the risk
of unexpected significant transaction costs and/or unknown
liabilities; (7) potential litigation relating to the proposed
transactions; (8) the impact of actions taken by significant
stockholders; (9) the potential disruption to STAR's or SAFE's
respective businesses of diverted management attention, and the
unanticipated loss of key members of senior management or other
employees, in each case as a result of the announced transactions;
and (10) general economic and business conditions that could affect
New Safehold and SpinCo following the transactions. Risks that
could cause actual risks to differ from those anticipated as of the
date hereof include those discussed herein, those set forth in the
securities filings of STAR, including its most recently filed
Annual Report on Form 10-K, and those set forth in the securities
filings of SAFE, including its most recently filed Annual Report on
Form 10-K.
Each of STAR and SAFE also cautions the reader that undue
reliance should not be placed on any forward-looking statements,
which speak only as of the date of this release. Neither STAR
nor SAFE undertakes any duty or responsibility to update any of
these forward-looking statements to reflect events or circumstances
after the date of this report or to reflect actual outcomes.
Additional Information and Where You Can Find It
In connection with the proposed transactions, STAR will file
with the SEC a registration statement on Form S-4 that will include
a joint proxy statement of STAR and SAFE and that also will
constitute a prospectus for the shares of STAR Common Stock being
issued to SAFE's stockholders in the proposed Merger. In
addition, SpinCo will file with the SEC a Form 10 registration
statement that will register its common shares. STAR, SAFE
and SpinCo also may file other documents with the SEC regarding the
proposed transactions. This document is not a substitute for the
joint proxy statement/prospectus or Form 10 registration statement
or any other document which STAR, SAFE and SpinCo may file with the
SEC. INVESTORS AND SECURITY HOLDERS OF STAR AND SAFE, AS
APPLICABLE, ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS,
THE FORM 10 REGISTRATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTS
THAT ARE FILED OR WILL BE FILED WITH THE SEC, AS WELL AS ANY
AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN
THEIR ENTIRETY BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED TRANSACTIONS AND RELATED MATTERS.
Investors and security holders may obtain free copies of the joint
proxy statement/prospectus and the Form 10 registration statement
(when available) and other documents filed with the SEC by STAR,
SAFE and SpinCo through the web site maintained by the SEC at
www.sec.gov or by contacting the investor relations departments of
STAR or SAFE at the following:
iStar
Inc.
1114 Avenue of the
Americas
39th Floor
New York, NY
10036
Attention: Investor
Relations
|
Safehold
Inc.
1114 Avenue of the
Americas
39th Floor
New York, NY
10036
Attention: Investor
Relations
|
This document is for informational purposes only and shall not
constitute an offer to sell or the solicitation of an offer to buy
any securities, nor shall there be any sale of securities in any
jurisdiction in which such offer, solicitation or sale would be
unlawful prior to the registration or qualification under the
securities laws of any such jurisdiction. This document is not a
substitute for the prospectus or any other document that STAR, SAFE
or SpinCo may file with the SEC in connection with the proposed
transactions. No offering of securities shall be made, except by
means of a prospectus meeting the requirements of Section 10 of the
Securities Act of 1933, as amended.
Participants in the Solicitation
STAR, SAFE and their respective directors and executive officers
may be deemed to be participants in the solicitation of proxies in
respect of the proposed transactions. Information regarding STAR's
directors and executive officers, including a description of their
direct interests, by security holdings or otherwise, is contained
in STAR's definitive proxy statement for its 2022 annual meeting,
which is on file with the SEC. Information regarding SAFE's
directors and executive officers, including a description of their
direct interests, by security holdings or otherwise, is contained
in SAFE's definitive proxy statement for its 2022 annual meeting,
which is filed with the SEC. A more complete description will be
included in the registration statement on Form S-4, the joint proxy
statement/prospectus and the Form 10 registration statement.
Company Contact:
Jason Fooks
Senior Vice President
Investor Relations & Marketing
T 212.930.9400
E investors@safeholdinc.com or investors@istar.com
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SOURCE Safehold; iStar Inc.