• In early February 2026, Morgan Stanley downgraded Safehold Inc., pointing to tenant litigation, fee income uncertainty linked to Star Holdings, slow origination activity, and a high dividend payout ratio as key concerns.
• This shift in analyst stance raises questions about the stability of Safehold’s earnings mix and the timing of value realization from its Caret interests.
• Next, we’ll examine how these concerns around tenant litigation and earnings quality may reshape Safehold’s broader investment narrative for investors.

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What Is Safehold's Investment Narrative?

To own Safehold today, you need to believe that its ground lease model and embedded Caret interests can still create long-term value despite a mixed track record and slower forecast growth than the broader market. The big near term catalysts remain progress on new originations, clearer disclosure around Caret monetization and confirmation that the balance sheet and dividend are sustainable given interest coverage constraints and a high payout ratio. Morgan Stanley’s early February 2026 downgrade puts a sharper spotlight on exactly those weak points, especially tenant litigation, fee income linked to Star Holdings and the risk that the current dividend is running ahead of true earnings power. With the stock having rebounded in recent months but long term returns still deeply underwater, this reassessment of risk could matter more than the rating label itself.

However, the dividend’s coverage and related litigation exposure are issues investors should not overlook. Safehold's shares have been on the rise but are still potentially undervalued by 11%. Find out what it's worth.

Exploring Other Perspectives

Four Simply Wall St Community fair value estimates cluster between US$14 and US$28, showing how far opinions can stretch. Set against recent concerns over dividend coverage and tenant litigation, that spread underlines why some investors focus on balance sheet resilience as much as upside potential.

Explore 4 other fair value estimates on Safehold - why the stock might be worth as much as 92% more than the current price!

Build Your Own Safehold Narrative

Disagree with this assessment? Create your own narrative in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Safehold research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.
• Our free Safehold research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Safehold's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.