Rating Action: Moody's assigns a first-time Baa1 long-term issuer rating to Safehold Operating Partnership LPGlobal Credit Research - 22 Mar 2021New York, March 22, 2021 -- Moody's Investors Service, ("Moody's") has assigned a first-time long-term issuer rating of Baa1 to Safehold Operating Partnership LP (Safehold). The outlook is stable.Safehold Operating Partnership LP is a wholly owned subsidiary of Safehold Inc. Moody's maintains a Baa1 backed long-term issuer rating on Safehold Inc. (holding company) reflecting Safehold's consolidated credit profile as well as Moody's expectation that, were senior unsecured notes ever issued by the holding company, the notes would be supported by subsidiary guarantees of any subsidiary that issued senior unsecured notes (and any related guarantees of such notes, if any), resulting in the senior unsecured notes issued by the holding company to have creditor protections that are indistinguishable from the Baa1 issuer rating on Safehold Operating Partnership LP. Absent such support, holding company senior notes would be rated one notch lower than senior notes of the rated subsidiaries, reflecting structural subordination.Assignments:..Issuer: Safehold Operating Partnership LP....LT Issuer Rating, Assigned Baa1Outlook Actions:..Issuer: Safehold Operating Partnership LP....Outlook, Assigned StableRATINGS RATIONALESafehold's Baa1 long-term issuer rating reflects its substantial equity cushion (45% tangible common equity to tangible managed assets as of 31 December 2020) and strong asset quality supported by favorable characteristics of the underlying assets, as well as its innovative ground lease structuring and the long-term nature of lease contracts. Safehold invests primarily in the top 30 US Metropolitan Statistical Areas (MSAs) where real estate properties have historically shown moderate appreciation in value over a long period of time, lending to urbanization trends.These credit strengths are tempered by the risks to creditors resulting from Safehold's limited operating history and high geographic and property concentrations. Despite its substantial exposure to office and hotel properties on the East and West Coasts, Safehold has received all of the payments owed from its customers and has not experienced any delinquencies from the onset of the COVID-19 pandemic.Moody's believes that debt-to-equity leverage will moderately increase from 1.2x at 31 December 2020 in the next 12 to 18 months as the company grows its asset base and considers that leverage could be vulnerable to swings if event risks materialize, given substantial portfolio concentrations. Additional credit challenges include the relatively nascent nature of the modernized ground leases market in the US, as well as Safehold's close relationship with iStar Inc. and reliance for resources elevating the governance risk.The stable outlook reflects Moody's expectation that Safehold's profits and cash flow will continue to demonstrate resilience through the COVID-19 pandemic and that the company will continue to benefit from opportunities to grow its presence in the commercial real estate market. Moody's also anticipates the exposure to hotel real estate will impact only earnings related to percentage rents on hotel revenue (currently a small portion of revenue). The stable outlook also anticipates that debt/equity leverage will only moderately increase as the company continues to grow in the next 12-18 months.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGThe rating could be upgraded if the company: (1) reduces governance risk, following a reduction in control from iStar, that could be evidenced by a material decrease in ownership interest, (2) increases geographic and tenant diversification, (3) demonstrates a long-term track record of profitable growth without materially increasing debt-to-tangible common equity leverage; and, (4) maintains strong liquidity and profitability. Moody's will also consider the competitive environment and the company's sustained competitive advantage at the time.The ratings could be downgraded if: (1) profitability declines, for example, due to loss of market share or unexpected losses, (2) ground lease contracts structuring weakens, (3) asset quality deteriorates. Acquisitions, shareholder distributions or other actions that would result in a debt-to-equity leverage higher than 1.75x on a sustained basis, or a deterioration in liquidity could also result in a ratings downgrade. Due to the fact that iStar's personnel act as the manager of Safehold and iStar has voting control of 41.9%, material adverse impacts to such personnel or iStar generally, could negatively impact Safehold's ratings.The principal methodology used in this rating was Finance Companies Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1187099. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.Founded in 2017, Safehold (NYSE: SAFE) develops, acquires and manages ground leases in the major urban areas in the U.S. with the largest concentration in Northeast (40%) and West (22%). Structured as an umbrella partnership real estate investment trust (UPREIT), Safehold managed approximately $3.2 billion in assets at 31 December 2020. Safehold is externally managed by iStar (NYSE: STAR), a real estate investment trust (REIT) which finances, invests in and develops real estate projects.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. 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Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.At least one ESG consideration was material to the credit rating action(s) announced and described above.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Inna Bodeck Vice President - Senior Analyst Financial Institutions Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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