Equity

12 Months Ended

Dec. 31, 2021

Equity [Abstract]

Equity

Note 11—Equity

Common Stock—The Company has one class of common stock outstanding. During the year ended December 31, 2021, iStar purchased 1.0 million shares of the Company’s common stock for $69.5 million, at an average

cost of $72.96 per share, pursuant to 10b5-1 plans (the “10b5-1 Plans") in accordance with Rules 10b5-1 and 10b-18 under the Securities and Exchange Act of 1934, as amended, under which it could buy shares of the Company’s common stock in the open market. In addition, in the fourth quarter of 2021 iStar purchased 24,108 shares of the Company’s common stock for $1.8 million in an open market transaction. iStar has also purchased shares of the Company’s common stock through private placements with the Company in connection with the Company’s public offerings. In September 2021, the Company sold 2,530,000 shares of its common stock in a public offering for gross proceeds of $192.3 million. Concurrently with the public offering, the Company sold $50.0 million in shares, or 657,894 shares, of its common stock to iStar in a private placement. The Company incurred approximately $8.0 million of offering costs in connection with these transactions which were recorded as a reduction to additional paid-in capital. As of December 31, 2021, iStar owned 64.6% of the Company’s common stock; however, its discretionary voting power is limited to 41.9% as a result of limitations on its voting power contained in a stockholder’s agreement entered into in connection with its purchase of newly designated limited partnership units (the “Investor Units”) in January 2019. In May 2019, after approval of the Company’s shareholders, the Investor Units were exchanged for shares of the Company’s common stock on a one-for-one basis.

In February 2021, the Company and its affiliates, entered into an at-the-market equity offering (the “ATM”) pursuant to which the Company may sell shares of its common stock up to an aggregate purchase price of $250.0 million. Through December 31, 2021, the Company sold 12,881 shares at an average net price of $81.45 per share, paid $15,977 of offering costs and raised $1.0 million of net proceeds pursuant to the ATM. Proceeds from the ATM were used for general corporate purposes. As of December 31, 2021, the Company had $248.9 million of aggregate purchase price remaining under its ATM.

Equity Plans—During the third quarter 2018, the Company adopted an equity incentive plan providing for grants of interests (called “Caret Units”) in a subsidiary of the Operating Partnership intended to constitute profits interests within the meaning of relevant Internal Revenue Service guidance. The Company’s shareholders approved the plan in the second quarter of 2019. Grants under the plan are subject to graduated vesting based on time and hurdles of the Company’s common stock price. Once a particular stock price hurdle is met, a portion of the awards become vested, but remain subject to being forfeited, in part, if additional time-based service conditions are not satisfied. The awards generally entitle plan participants to cash distributions of up to 15%, in the aggregate, of the capital appreciation above the Company’s investment basis on its Ground Lease assets received upon the sale of a Ground Lease, the sale of a combined property and certain non-recourse mortgage debt refinancings of a Ground Lease. The Company owns the remaining 85% of the Caret Units (refer to Note 14). At the time of plan adoption, awards with an aggregate fair value of $1.4 million were granted to the Company’s non-management directors and employees of the Manager and will be recognized over a period of four years. As of December 31, 2021, all stock price hurdles were achieved and each outstanding award is fully vested. In February 2020 and March 2020, the Company granted awards with an aggregate grant date fair value of $0.5 million and $0.1 million, respectively, to employees of the Manager. The awards granted in February 2020 will cliff vest in December 2022 and the awards granted in March 2020, which were granted to one employee of the Manager, will vest over three years upon satisfaction of continuing service conditions. As of December 31, 2021, 12% of the awards granted in March 2020 had vested and 88% of the awards were forfeited. During the years ended December 31, 2021, 2020 and 2019, the Company recognized $0.5 million, $0.5 million and $0.4 million, respectively, in expense from Caret Units and it is recorded in "General and administrative" in the Company’s consolidated statements of operations and "Noncontrolling interests" on the Company’s consolidated balance sheet.

In August 2021, in order to ensure that the interests of the non-management directors are best aligned with the interests of the Company’s common shareholders, each of the non-management directors (or, in the case of two directors, their affiliated trusts to which the Caret Units had been issued) entered into agreements to exchange their Caret Units that were granted at the time of plan adoption into shares of the Company’s common stock. Effective December 1, 2021, each non-management director (or, in the case of two directors, their affiliated trusts to which the Caret Units had been issued) exchanged 3,750 Caret Units for 2,546 shares of the Company’s common stock. The Company’s board of directors approved the exchanges having considered the report of a leading independent valuation firm.

The Company adopted the 2017 Equity Incentive Plan to provide equity incentive opportunities to members of the Manager’s management team and employees who perform services for the Company, the Company’s non-management directors, advisers, consultants and other personnel. The 2017 Equity Incentive Plan provides for grants of stock options, shares of restricted common stock, phantom shares, dividend equivalent rights and other equity-based awards, including

long-term incentive plan units. In the second quarter 2019, the Company issued 40,000 fully-vested shares under the 2017 Equity Incentive Plan at $27.19 per share to its directors who are not employees of the Manager or iStar in consideration for their annual services as directors with an aggregate grant date fair value of $1.1 million. In the second quarter 2020, the Company issued 22,000 fully-vested shares with a fair value of $1.0 million, or $46.94 per share, to its directors who are not employees of the Manager or iStar in consideration for their annual services as directors. In the second quarter of 2021, the Company issued 16,000 fully-vested shares with a fair value of $1.1 million, or $69.86 per share, to its directors who are not employees of the Manager or iStar in consideration for their annual services as directors. In the first quarter 2019, the Company granted 25,000 restricted stock units with a fair value of $0.5 million, or $19.15 per share, under the 2017 Equity Incentive Plan to an employee of the Manager, representing the right to receive 25,000 shares. The restricted stock units vested in January 2022. Dividends will accrue as and when dividends are declared by the Company on shares of its common stock, but will not be paid unless and until the restricted stock units vest and are settled. As of December 31, 2021, an aggregate of 724,500 shares remain available for issuance pursuant to future awards under the 2017 Equity Incentive Plan. During the years ended December 31, 2021, 2020 and 2019, the Company recognized $1.3 million, $1.2 million and $1.2 million, respectively, in stock-based compensation expense related to the 2017 Equity Incentive Plan, which is classified within "General and administrative" in the Company’s consolidated statements of operations.

Accumulated Other Comprehensive Income (Loss)—Accumulated other comprehensive income (loss) consists of net unrealized gains (losses) on the Company’s derivative transactions.

Noncontrolling Interests—Noncontrolling interests includes unrelated third-party equity interests in ventures that are consolidated in the Company’s consolidated financial statements and Caret Units that have been granted to employees of the Company’s Manager.

Dividends—The Company elected to be taxed as a REIT beginning with its taxable year ended December 31, 2017. To qualify as a REIT, the Company must annually distribute, at a minimum, an amount equal to 90% of its taxable income, excluding net capital gains, and must distribute 100% of its taxable income (including net capital gains) to eliminate corporate federal income taxes payable by the REIT. Because taxable income differs from cash flow from operations due to non-cash revenues and expenses (such as depreciation and other items), in certain circumstances, the Company may generate operating cash flow in excess of its dividends, or alternatively, may need to make dividend payments in excess of operating cash flows. During the year ended December 31, 2021, the Company declared cash dividends on its common stock of $37.0 million, or $0.67224 per share. Dividends paid in 2021 were a return of capital for tax reporting purposes. During the year ended December 31, 2020, the Company declared cash dividends on its common stock of $33.2 million, or $0.6427 per share. Dividends paid in 2020 were a return of capital for tax reporting purposes. During the year ended December 31, 2019, the Company declared cash dividends on its common stock of $21.4 million, or $0.618 per share. Dividends paid in 2019 consisted of ordinary income of $0.0699 per share and a return of capital of $0.5421 per share for tax reporting purposes. In addition, during the year ended December 31, 2019, the Company declared cash distributions to iStar for its Investor Units of $1.9 million, or $0.15 per Investor Unit.