The one goal of Safehold (NYSE:SAFE) is to develop a portfolio of floor leases and to revenue from doing so. Safehold owns the land and leases it to some business enterprise through a floor lease.

Their floor leases are like supercharged lengthy bonds. Lengthy bonds usually characteristic a set coupon that’s paid out for a really very long time. Because of this, when rates of interest and therefore low cost charges rise, the Internet Current Worth, or NPV, of lengthy bonds drops considerably.

The Safehold floor leases have escalating coupons. The escalators embody each a set element, nominally 2%, and a CPI-lookback adjustment that can seize a lot of the value inflation. The CPI-lookback adjustment could also be important over the a long time, however we ignore it right here for simplicity.

Let’s examine the lower in NPV of a protracted bond with that of a floor lease (or bond) having 2% escalators on the annual funds. Suppose they’ve the identical NPV when the related low cost charge is 3%. That is the lower in NPV as low cost charge will increase:

For a rise in low cost charge from 3% to five%, which is what we’ve got seen for AAA bonds, the NPV of such bonds drops about 1.6x. In distinction, the NPV of the safety with the escalators drops 2x. If the comparative consequence doesn’t appear apparent to you, then my suggestion is that you simply go determine it out earlier than studying additional.

The Safehold floor lease funds are extraordinarily safe. If one valued them at a 3% low cost charge in early 2022, as Safehold advocated and with which quite a lot of analysts agreed, then their NPV (and the SAFE value) ought to have dropped 2x from there to right here.

As a substitute, the value of SAFE has dropped 3.5x. However the firm didn’t collapse, as one would possibly see for such a big value drop.

As a substitute, they’ve grown their portfolio and internalized their administration since. And their money flows will develop steadily from right here.

With this value motion, both SAFE was overvalued in early 2022, or it’s undervalued now, or each. Right here we have a look at the valuation right this moment, with some new perspective as is described beneath.

I describe Safehold as a RINO (REIT In Title Solely) as a result of they don’t personal any revenue-generating elements of actual property.

Because of this, they’ve close to zero working bills and nil capital bills. These information will matter after we get to the low cost charges that apply to their property, in a while.

The current article doesn’t focus on the latest announcement of an fairness elevate by Safehold. I mentioned right here why it is rather more likely to be accretive to per-share Internet Current Worth, or NPV. To this point, they’ve made an accretive use of these funds by paying down some high-rate revolver debt.

Present or near-term money flows, which I mentioned right here, are additionally not our focus right this moment. We can be involved with long-term revenues and prices and what these are price. We briefly focus on different elements that add worth beneath.

I had additionally hoped to incorporate materials on valuing the much-maligned Caret items, however this text is just too lengthy even with out that. That materials is obtainable right here.

My foremost focus right this moment would be the worth and future of the present portfolio, as of June 30, 2023.

The Safehold Portfolio

Since Safehold has $6.2B unfold throughout their 134 leases, the typical worth of land plus buildings exceeds $110M. These are huge buildings or developments.

Till 2021, Safehold didn’t have an investment-grade credit standing and needed to depend on mortgage debt. The properties acquired earlier than which have non-recourse mortgages.

The properties acquired extra just lately are unencumbered and the newer debt is unsecured. Right now their credit score scores are BBB+ or equal, with constructive outlooks.

The present portfolio is distributed throughout the highest 30 MSAs within the US and some extra areas. It contains 15.5 Msf (million sq. ft) of Multifamily, 12.6 Msf of Workplace, and 5.8 Msf of Lodge, Life Science, and Different.

Right here is the distribution of the whole property and the unsecured property. Within the desk “GLTV” is Safehold jargon for Floor Lease To Worth, unrelated to LTV for the Mortgage To Worth ratio.

With GLTV focused at 40% and debt focused to be 2/3 of that, the ratio of loans to complete property worth runs close to 25%. Quoting Investor Relations:

… the 25% look-through LTV is a major motive we’ve been in a position to procure enticing debt over time. The lender’s look-through LTV may be very low which provides nice consolation on a principal foundation, and key income-based ratios for lenders resembling debt yields and curiosity protection ratios enhance dramatically from our compounding floor hire will increase.

Safehold exhibits this comparability with typical asset-backed securities. The situation within the capital stack of the Safehold floor leases is analogous to that of the AAA stack for Asset-Backed securities.

Whereas one may push the analogy too far, the outcomes from S&P International about that AAA tranche appear price noting. For U.S. Asset Backed Securities, the default charge of the AAA tranche was zero from 1986 by 2020 and the AA tranche was solely non-zero in 2002. Extra broadly, for US structured credit score general one has this:

Now a interval like 2007 by 2010 could be a once-in-a-century occasion. However suppose it occurs as soon as each 20 years. The evaluation beneath makes use of 10-year cumulative default charges. Such a charge of 1.8% is per 3% losses over 20 years.

For comparability, that’s higher than an A- efficiency for company bonds. We are going to tie this again in later.

Comparability to Fairness REITs

Fairness REITs present a extra direct comparability that highlights the relative safety of floor leases. Challenged durations in property markets result in important decreases in Internet Asset Worth. This has penalties for inventory costs as we’ve got been seeing these days in Workplace REITs.

The debt of these REITs is low threat, usually being at 40% Mortgage-To-Worth, however they’re uncovered to 100% of any declines in property values. In distinction, the Safehold fairness is barely uncovered to declines in worth above 60%. We illustrate this right here:

The pink curve exhibits the NAV for an fairness REIT that operates at a typical LTV of 40%. As Property Worth (proven on the abscissa) drops, NAV drops with it, going by zero at a drop of 60%. The curve for a typical private-equity-funded constructing, with its larger leverage, is steeper.

This pink curve offers a part of the reason for why typical REIT inventory costs are so risky. The drop in NAV is almost twice the drop in property values.

The inexperienced curve exhibits the worth of the fairness tranche Safehold owns, at 40% of the preliminary Property Worth. The related debt is unsecured and impartial. (Beneath most situations, the Safehold floor lease is price greater than the preliminary worth of the land, however for simplicity, we ignore that right here.)

The worth of that possession tranche stays the identical till the Property Worth has dropped by 60%. A modest drawdown in Property Worth can produce a extreme hit to the NAV of an fairness REIT however go away the worth owned by Safehold unaffected.

[Note: in general I am not a fan of NAV for equity REITs, as NAV cannot be established with good accuracy. The secure and very long-term cash flows of Safehold make NAV more certain for them, but one still has the uncertainty discussed below related to what actual default rates will be.]

High quality of Floor Lease Earnings

I used to be lucky to have the chance just lately to have a prolonged and fruitful dialogue with Julian Lin, an writer who has lengthy questioned the valuation of SAFE by me and others. I thank him for taking the time for that.

Our focus was on making an attempt to know why we noticed SAFE so in a different way. One takeaway for me was that the query of the particular credit score high quality of the bottom leases Safehold writes is foundational to establishing worth.

Inexperienced Avenue has expressed the opinion that the standard is on the AAA stage. Julian was having none of that (as I understood him). Let’s discover this topic.

Whereas the scores businesses use many standards in assessing credit score high quality, the underside line result’s a default charge. Let’s have a look at how that happens for floor leases, earlier than contemplating the implications of varied attainable charges.

The trail to default

Some readers level to an instance, like this one, the place a constructing sells for lower than 60% of its earlier worth, after which appear to assume they’ve disproven the Safehold mannequin. The factor is, whereas one counterexample is ample to disprove a proposed Regulation of the Universe in physics, no one is claiming that Safehold will see zero defaults.

Ending up with a floor lease default is a multi-step course of. The context is that there’s a tenant of Safehold who owns the constructing on the land and a lender for that proprietor. Typical numbers for a $100M constructing could be a $40M floor lease, a $36M mortgage, and $24M of fairness invested at 60% leverage on the constructing.

By far the commonest origin of defaults is an incapacity to refinance at the moment mortgage worth. This occurs solely when a mortgage turns into due.

Quoting a latest article relating to a observe from Moody’s:

CompStak, an American lease knowledge supplier cited within the report, signifies that the typical workplace lease nonetheless has 5.1 years remaining on it. In different phrases, the upper market emptiness charges and decrease rents won’t be mirrored in particular workplace money flows for a while.

The truth that mortgage phrases are at the very least a number of years significantly reduces the fraction of properties which have points refinancing annually as long as instances are dangerous.

So step one towards ground-lease default is that the worth of the constructing is depressed when the mortgage matures in order that the proprietor must make investments extra fairness to get again to 60% leverage.

The proprietor chooses to not make investments the extra fairness to roll their mortgage. However that’s solely generally closing. Quoting

… business actual property lawyer Natalia Sishodia stated … she had at the very least three shoppers within the metropolis prepared at hand over their buildings to lenders, however they didn’t in the long run after understanding compromises with the banks. “In the event that they don’t they might find yourself with this business areas and this isn’t one thing banks actually wish to do,” she stated.

That stated, we’ve got seen the keys to some high-profile, class-A buildings handed again to the lender by Brookfield and different outstanding buyers. Some house owners won’t be able to make passable offers with their lenders.

In such instances, the lender will try to promote the constructing at an economically smart value to a brand new proprietor. They may need concessions on the bottom lease rents and would possibly get them. That facet is ignored right here however could possibly be allowed for through the use of a considerably larger default charge beneath.

If the worth of the whole property has dropped 60%, kind of, then the lender will hand the keys to Safehold and stroll away. At that time, Safehold may have a paper loss on the property.

If this had been to occur too usually, lenders would seemingly start to cost larger charges on buildings with floor leases, in response to the chance. Elevated curiosity funds on the constructing mortgage wouldn’t change the primary benefit of floor leases, which is decreased capital necessities, producing elevated return on fairness. A quantitative instance is discovered right here.

Now return to our property in default on the bottom lease due to a collapse in market worth. My guess is that Safehold would then promote the property for no matter they will get and ebook the loss (for the standard unencumbered instances).

We have a look at fashions of the lack of income from defaults beneath. As well as, the lack of the property will influence their general ratio of unencumbered property to unsecured debt. The covenants on the Safehold credit score revolvers require that they keep this ratio above 1.33.

Right now the ratio is close to 1.8. Even if that Safehold had 10% of their properties default throughout some excessive nationwide disaster, it could solely lower to about 1.6.

It’s default charge that issues

Some readers additionally say dire issues about class-B and class-C workplace buildings right this moment, as if this ensures that the Safehold floor leases will fail in large numbers. In distinction, different readers, conscious of the steps simply described, provide the opinion that such defaults can be fairly uncommon.

You must make up your personal thoughts about seemingly charges. To your consideration here’s a latest dialogue from Joseph J. Ori, the Govt, Managing Director of Paramount Capital Corp., a CRE Advisory Agency, reported by GlobeSt. and price quoting at size:

The CRE trade has been dealt a giant blow with eleven rate of interest hikes since March 2022 and a federal funds charge that jumped from 0.0% to five.25%. The common CRE property’s worth has slid by about 25% as a result of [the resulting] larger price of capital. This can be a dangerous state of affairs for the trade; nonetheless, it doesn’t imply that the CRE market within the U.S. will crash, much like the Nice Recession, which lasted from 2007 to 2012 when property values had been down 50% on common.

Regardless that values are down, most properties are nonetheless producing sufficient money move to pay the annual debt and different prices like tenant enhancements, leasing commissions and capital enhancements. A lot of the properties which can be in misery had been bought at ultra-low cap charges throughout the previous few years or are situated within the high-crime Gateway cities with excessive vacancies and outmigration of companies. Lots of the consumers of those properties used floating charge debt to amass the property with none rate of interest safety through the use of an rate of interest swap or charge collar. The fast enhance in rates of interest since March 2022 has made it extraordinarily tough for these house owners to cowl the annual debt service on the property. At the moment, nearly all of misery within the CRE trade is concentrated in workplace properties situated within the Gateway cities and consumers who overpaid and didn’t put together for the rate of interest threat from the usage of floating charge debt.

Nevertheless, the general misery within the CRE market shouldn’t be at harmful ranges as many pundits have been claiming over the last yr. There’s a complete of $4.5 trillion in CRE loans excellent per the Mortgage Bankers Affiliation of America, of which the business banks/thrifts personal 38% or $1.7 trillion. The misery stage right this moment is barely about 2.0% of the whole loans excellent or $90 billion, which is a explanation for concern, however not Armageddon as many have claimed. If the Federal Reserve does enhance the federal funds charge farther from 5.25% to between 5.50% and 6.0%, then I consider the default charge will double to 4.0% or $180 billion, a major quantity, however nonetheless not a crash or CRE despair. There can be a whole lot of properties in default however not sufficient to create an financial crash. Throughout the Nice Recession, the default charge for CRE loans was over 10.0%, which was a secular crash within the trade.

(There’s some ambiguity across the that means of “CRE” in that quote. Inexperienced Avenue discovered the lower in common property worth throughout all sectors through the Nice Recession as about half that quoted above.)

We should always emphasize once more {that a} default on a regular CRE mortgage doesn’t suggest a default on the bottom lease. More often than not it won’t.

As well as, Safehold targets “infill areas that sit inside financial, technological, academic, and cultural facilities.” The implication is that default charges can be smaller than these one would see from randomly distributed properties.

Context from Bonds for Defaults

Per Moody’s, the ten-year cumulative default charge for AAA debt has been 0.68% over the previous century. Compounding this the default charge for a 99-year lease remains to be lower than 7%.

This might correspond to about 10 of the present 134 floor leases that Safehold has. That may be a charge of about one per decade.

In distinction, the default charge equivalent to BB+ bonds is 8.5%. That will suggest about 11 per decade of the present 134. Here’s a desk of present knowledge spanning related credit score scores:

[Notes: The first row shows the 2116 MIT AAA bond. Otherwise, I sourced the data using the Fidelity list of bonds and Moody’s 1983-2021 default rates for equivalent ratings.

The 1920-2021 rates are only available for the full tier without the “plus” or “minus”, and these variations matter significantly. The AAA tier defaulted much more often from 1920 to 1983 than it has since. There is less relative disparity for the other ratings.]

The way in which I have a look at that is that with 10% of CRE loans in default through the Nice Recession, the fraction of CRE loans for which there could be a ground-lease default is likely to be one thing like 1% or 3%. (That is additionally roughly per the outcomes from U.S. structured finance summarized above.) So Safehold would possibly lose 1 to 4 leases from such a interval.

Such durations don’t happen as soon as a decade, although, it’s extra like as soon as each 20 years. And there have been solely two durations since 1900 that had been broad sufficient by geography and sector that they could produce comparable ranges of misery throughout the complete Safehold portfolio.

So maybe Inexperienced Avenue can be proper and will probably be 1 per decade, or maybe will probably be 2 per decade. Or perhaps you assume will probably be extra. We are going to have a look at the implications for the complete vary proven within the earlier desk.

Rents vs. Defaults Over Time

We all know that the portfolio of present floor leases is producing simply over $200M of hire per yr. We all know that these escalate at 2% (and we’re ignoring CPI-based changes, which can be important over time).

I modeled the longer term by making use of some cumulative default charge as soon as per decade. The attitude is that defaults will happen in clumps throughout anxious instances, with gentle misery showing about as soon as a decade.

Doing this will get one this projection for the rents from the prevailing portfolio:

We see that the rents from the present portfolio, absent inflation changes, would exceed $1.4B per yr by yr 99. For BBB+ default charges close to 3 defaults per decade, which appears outdoors of affordable to me, the rents would exceed $1.2B.

That stated, the decrease two curves correspond to six and 11 defaults per decade. Whereas pinning down a exact quantity is tough, it appears clear to me from studying that the default charge throughout the final century, throughout the broad actual property sectors and areas consultant of the Safehold portfolio, is way beneath the 5% per decade that corresponds to the inexperienced curve.

Prices

Now flip to prices. There are solely two important price classes for Safehold. These are curiosity prices and G&A prices.

Take curiosity prices first. The fixed-rate debt within the present portfolio, at 3.31%, prices about $108M per yr. The $500M time period mortgage has a five-year swap to three%, costing $15M for now, however finally needing long-term financing.

The remaining $400M (after latest reductions) on the revolver right this moment is at ~6%, costing about $24M. However there are hedges in place that can enable it to get replaced by everlasting debt at an efficient charge of three.47%.

My modeling of the floating charge debt successfully assumed a 4% charge for 23 years. After that, all the present debt was taken to be refinanced at 5%. The general story doesn’t change considerably if one will increase that refinancing charge to 7% or considerably extra.

As to G&A, Safehold argues that it doesn’t make sense to depend their G&A towards present money flows as a result of its goal is primarily to help portfolio progress. In impact, they’re funding these prices with the debt and fairness raised to develop the portfolio. My earlier evaluation argued that that is smart.

However nonetheless, there are public firm prices and the price of operating the portfolio shouldn’t be zero. This was set at a continuing $10M per yr. It is going to enhance with inflation but additionally be unfold over a a lot bigger portfolio as near-term progress ought to strategy 25% per yr. (For those who like one other mannequin these calculations usually are not laborious to do.)

Evaluating Funds Obtainable for Distribution, or FAD, as rents much less curiosity prices much less $10M, one will get this for future money flows:

[Some of the Safehold debt is structured with smaller early interest payments and larger ones later. When I model this, the net present value of the cash flows increases for the structured debt. I did not attempt to include that here.]

What That is Value

What we care about now shouldn’t be the rents or curiosity in 2122. It’s the Internet Current Worth or NPV of all the longer term money flows. This can also precisely be considered because the Internet Asset Worth or NAV of the portfolio.

Listed below are the NPV outcomes for every of the above curves, as a perform of low cost charges, with some markers to be defined.

Alongside the underside, the dots present the approximate median low cost charges (i.e., complete return yields) equivalent to the indicated credit score scores. Above every such dot, there’s a dot alongside the curve for that credit standing, representing the NPV right this moment for that credit standing and the corresponding low cost charge.

For a default charge equivalent to 1 to three leases per decade, the NPV or NAV is within the $40 to $50 vary, greater than double the present inventory value. (Even charging all of the G&A towards present money earnings, there may be nonetheless substantial upside at this stage of defaults.) In distinction, if the default charge can be close to 10 leases per decade, the present value could be close to NAV.

Once we transfer from evaluating NAV to in search of honest worth, we ask whether or not there are different components within the enterprise that demand a reduced or elevated inventory value relative to NAV. We are able to have a look at the positives and negatives right here.

Positives: We might enhance the honest worth above this NAV for these causes: 1. We anticipate inflation to extend costs at an annual charge above 2% in order that the CPI lookbacks would enhance the rents. 2. We anticipate the corporate to develop accretively. 3. We see sources of worth (i.e. Caret items) past what we’ve got analyzed.

Negatives: We might lower the honest worth beneath NAV for these causes:

1. We anticipate earnings and thus NAV to lower. 2. We see different sources of threat to their mannequin. 3. We mistrust administration a lot that we predict them more likely to destroy shareholder worth even with out figuring out how.

In my opinion, I do see all these positives as important. However NAV for the prevailing portfolio is to this point above the inventory value that they don’t appear well worth the phrases for now.

Apart from defaults, coated above, I’d like to listen to specifics from readers involved about negatives no 1 and a pair of. Observe that leverage is mentioned subsequent.

As to detrimental quantity 3, it’s clear from feedback that some buyers positively are on this camp. We are able to go away it to them to protest within the feedback if they need.

Leverage

In my discussions with Julian, he additionally expressed concern in regards to the giant leverage Safehold has. One facet of leverage is mortgage to worth, mentioned above. However I consider his foremost concern was primarily centered on ratios like Debt/EBITDA.

Why can we care about Debt/EBITDA? As a result of it signifies how readily debt may be decreased. The extra variable EBITDA is, the extra dangerous Debt turns into.

That is a part of why commodity-producing firms search Debt/EBITDA close to 1 and why their market values endure as they develop. EBITDA is kind of unsure for them.

Cheap Debt/EBITDA ranges are bigger for firms that maintain laborious property, whose revenues are a lot steadier. Authors unfamiliar with REITs or midstreams are sometimes horrified by their Debt/EBITDA ranges close to 5.

For regular fairness REITs, EBITDA may be impacted throughout tough instances. Examples: NNN REIT (NNN) noticed EBITDA drop a complete of 5% throughout the Nice Recession and a pair of% in 2020. AvalonBay (AVB) noticed a drop of two% within the Nice Recession and seven% throughout the pandemic.

For Safehold for 2024, EBITDA correct can be within the $200M ballpark with debt about $4000M. So Debt/EBITDA is round 20, which might be extraordinarily excessive for an fairness REIT.

There are two causes this isn’t tremendously dangerous. The primary is that the Safehold revenues are far safer than these of extraordinary fairness REITs. The second is that over a long time, even in instances of very giant default charges, these revenues will far exceed the curiosity funds.

Suppose default charges had been on the BBB- stage, which appears far too giant to me, and that one refinanced all of the debt in a yr when rates of interest had been 7.5%. Then one would have three years when rates of interest had been up to a couple % above rents. However the debt maturities are in actuality fairly unfold out over time and rates of interest are impossible to be at or above 7.5% greater than briefly.

In brief, the regular, very safe, rising revenues mixed with mounted rates of interest of very lengthy and spread-out maturities is why the extent of Debt/EBITDA Safehold has doesn’t concern me. You must determine whether or not it considerations you.

Multiples

One can view safety values typically by the lens of multiples on money flows. Fairness REITs, for instance, are sometimes priced close to 20x FFO, the place FFO is Funds From Operations.

Let’s begin by wanting on the coupon multiples (i.e. NPV / preliminary coupon) for the 99-year securities we mentioned at first of the article. The primary had a set coupon and the second had one which escalated at 2% per yr.

Suppose the constant-coupon safety paid 5% of face worth, giving it a a number of of 20x. The escalating coupon one would have a a number of of about 32x.

The purpose is that every one securities shouldn’t have the identical a number of. That will make no sense.

Even so, it’s common for authors to make use of commonplace multiples. Trapping Worth, or TV, used this strategy for SAFE right here, stating “The primary base case right here is that SAFE will commerce at 20X FFO sooner or later.”

We are able to use the framework for locating NPV above to take a look at earnings multiples for varied low cost charges. Here’s a desk of the ratio of NPV to 2024 FAD utilizing the designated low cost charges.

The columns with gray headers within the desk correspond to curves within the determine displaying NPV above. These are labeled by the credit standing and the variety of defaults per decade.

The NPV multiples equivalent to the dots on the NPV curves above type the diagonal entries right here. They lower from the ballpark of 45x for the instances that make sense to me to 20x or a bit extra for the very excessive default charges.

FFO doesn’t make a lot sense to me for this RINO, and Safehold doesn’t report it. But when we discover the FFO by the usual calculation, subtracting all of the G&A, then for 2024 will probably be about 60% of the FAD discovered above.

To get the FFO a number of all the way down to the 20x stage beneficial by TV, the NPV a number of has to go to 12x and the low cost charge has to go to 12% for many default charges. Such instances are shaded yellow within the desk. Only a few bonds are seen by the market as dangerous sufficient to demand a 12% low cost charge.

This results in a particular query for the skeptics who view “20x FFO” as an affordable valuation: Why do you assume the longer term money flows are so unsure right here that they should be discounted at a charge above 10%?

Takeaways

Reviewing the above, it appears to me that there are two key parts. First, the present Safehold portfolio will produce giant money flows even towards the belief of considerable default charges.

Second, it is smart to worth these money flows like lengthy bonds somewhat than like fairness REITs. A key distinction is that fairness REIT portfolios are uncovered to 100% of losses in property worth whereas the Safehold portfolio is way much less uncovered.

For the time being, SAFE is especially an intermediate-term (or longer) upside play on two theses. One thesis, which in my opinion will play out quickly, is the approaching drop in curiosity and low cost charges.

The second thesis, whose timing shouldn’t be predictable, will play out when the market comes to know and mirror extra of the worth right here. I’ve to wonder if it could be more practical for Safehold to arrange itself as a car holding their bond-like floor leases, somewhat than as a REIT.

Many retail REIT buyers will discover SAFE of no curiosity, as they search present dividends from their investments. However there truly is a marketplace for lengthy bonds.

Buyers in lengthy bonds ought to discover SAFE extremely interesting, each due to the escalating revenue and due to the potential for progress with minimal draw back threat. Plus some buyers topic to excessive taxes may purchase SAFE as a supply of long-term capital positive factors producing low taxable revenue.

I might additionally wish to thank Safehold administration, who’ve been not simply unusually however remarkably keen to debate particulars. They seemingly would argue, with justification, that the presentation right here produces outcomes which can be far too detrimental. One facet is that the CPI-lookback changes, ignored right here, are more likely to be important.

The underside line is that this. Until one assumes default charges and low cost charges that appear far out of line to me, and regardless of the conservative assumptions used right here, the inventory is now priced far beneath honest worth for present low cost charges.

After all, if rates of interest and thus low cost charges rise farther from right here, the honest worth of SAFE will drop. And since Mr. Market is in a funk about this inventory, its value seemingly will too. As at all times for SAFE or for any lengthy bond, rising charges are a risk to market valuations.