"Over time , we expect SAFE's earnings and value growth will be driven by investment volumes ," Burrows said in a Wednesday note. The company owns, acquires and originates ground leases, and has stable cash flows through fixed payments and contractual rent increases. The average lease term for the ground leases are 92 years. Safehold is primarily exposed to land underlying offices, multifamily and hotel properties, the analyst noted.
As a result, there is little upside from marking leases to market; rather, internal growth should track rent bumps, according to Burrows. "At the end of the ground lease term, or in the event of a default , SAFE will own the building on top of the leased land," Burrows said. "The company originates ground leases at conservative 35-40% LTVs . We believe these terms limit downside risk to SAFE's cash flows.