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05/03/2016

iStar Announces First Quarter 2016 Results

 

- Adjusted income allocable to common shareholders was $3 million, or $0.04 per diluted common share.
- Repurchased 5.8 million shares of common stock during the first quarter.
- Company repaid $261 million of bonds with cash on hand and issued $275 million of new notes to refinance other 2016 maturities.

NEW YORK, May 3, 2016 /PRNewswire/ -- iStar (NYSE: STAR) today reported results for the first quarter ended March 31, 2016.

First Quarter 2016 Results

iStar reported adjusted income allocable to common shareholders for the first quarter of $3.1 million, or $0.04 per diluted common share, versus $8.5 million, or $0.10 per diluted common share for the first quarter 2015.

Adjusted income represents net income computed in accordance with GAAP, prior to the effects of certain non-cash items. Please see the financial tables that follow the text of this press release for the Company's calculations of adjusted income and reconciliation to GAAP net income (loss).

Net income (loss) allocable to common shareholders for the first quarter was $(21.2) million, or $(0.27) per diluted common share, compared to a loss of $(22.6) million, or $(0.26) per diluted common share for the first quarter 2015.

Capital Markets

The Company continued its stock repurchase activity, completing open market purchases during the first quarter of 5.8 million shares for $58.1 million or an average of $9.94 per share.

In March, the Company repaid its $261.4 million of 5.875% Senior Unsecured Notes at maturity using available cash. In addition, in March the Company issued $275.0 million of 6.50% Senior Unsecured Notes due July 2021. Proceeds from the offering were used to repay $5.0 million of the Company's secured revolving facility, pay related financing costs and, subsequent to the end of the quarter, repay in full its $265.0 million of Senior Unsecured Notes due July 2016.

The Company's weighted average cost of debt for the first quarter was 5.5%. The Company's leverage was 2.2x at the end of the quarter, within the Company's targeted range of 2.0x – 2.5x. Please see the financial tables that follow the text of this press release for a calculation of the Company's leverage.

Investment Activity

During the quarter, iStar funded a total of $147.8 million associated with new investments, prior financing commitments and ongoing development. In addition, the portfolio generated $131.8 million of repayments and sales over the same period.

At March 31, the Company had $591.2 million of unrestricted cash, of which the Company used $265.0 million subsequent to the end of the quarter to repay in full its Senior Unsecured Notes due July 2016.

Portfolio Overview

At March 31, 2016, the Company's portfolio totaled $5.11 billion, which is gross of $468.5 million of accumulated depreciation and $36.6 million of general loan loss reserves.

Real Estate Finance

At March 31, 2016, the Company's real estate finance portfolio totaled $1.67 billion, gross of general loan loss reserves. The portfolio included $1.61 billion of performing loans with a weighted average maturity of 2.2 years. The performing loans were comprised of 59% first mortgages / senior loans and 41% mezzanine / subordinated debt. The performing loans had a weighted average last dollar loan-to-value ratio of 68% and generated an 8.5% yield for the quarter. The Company invested $94.3 million and received $79.7 million of proceeds within its real estate finance portfolio during the quarter.

At March 31, 2016, the Company's non-performing loans (NPLs) had a carrying value of $68.3 million. The Company recorded a $1.5 million provision for loan losses during the quarter. At March 31, 2016, loan loss reserves totaled $109.7 million, comprised of $36.6 million of general reserves and $73.1 million of asset specific reserves.

Net Lease

At the end of the quarter, iStar's net lease portfolio totaled $1.55 billion, gross of $382.5 million of accumulated depreciation. During the quarter, the Company sold net lease assets for proceeds of $10.6 million and recorded gains of $4.9 million.

The Company's net lease portfolio totaled 18 million square feet across 33 states. Occupancy for the portfolio was 96.6% at the end of the quarter, with a weighted average remaining lease term of 14.6 years. The net lease portfolio generated an unleveraged yield of 7.9% for the quarter.

Operating Properties

At the end of the quarter, iStar's operating properties portfolio totaled $702.5 million, gross of $79.7 million of accumulated depreciation, and was comprised of $570.8 million of commercial and $131.7 million of residential real estate properties. During the quarter, the Company invested $18.2 million within its operating properties portfolio and received $25.5 million of proceeds from sales.

Commercial Operating Properties

The Company's commercial operating properties represent a diverse pool of assets across a broad range of geographies and collateral types including office, retail and hotel properties. These properties generated $26.0 million of revenue offset by $18.6 million of expenses during the quarter. iStar generally seeks to reposition these assets with the objective of maximizing their values through the infusion of capital and/or intensive asset management efforts resulting in value realization upon sale.

At the end of the quarter, the Company had $140.9 million of stabilized commercial operating properties that were 85% leased and generated an unleveraged yield of 8.5% for the quarter. The remainder of the commercial operating portfolio was comprised of $429.9 million of transitional properties that were 66% leased and generated an unleveraged yield of 3.5% for the quarter. iStar is actively working to lease up and stabilize these properties.

During the quarter, the Company executed commercial operating property leases covering approximately 400,000 square feet.

Residential Operating Properties

At the end of the quarter, the residential operating portfolio was comprised of condominium units generally located within luxury projects in major U.S. cities. During the quarter, iStar sold 19 condominium units, resulting in $19.7 million of proceeds and recorded $5.1 million of income. In addition, the Company recorded $2.6 million of expenses on its condominiums, primarily associated with carry costs.

Land & Development

At the end of the quarter, the Company's land & development portfolio totaled $1.13 billion, with seven projects in production, 10 in development and 13 in the pre-development phase. These projects are collectively entitled for approximately 30,000 lots and units.

For the quarter, the Company's land and development portfolio generated $14.9 million of revenues, offset by $11.6 million of cost of sales, plus $6.7 million of earnings from land development equity method investments. This resulted in total gross margin and earnings from equity method investments of $10.0 million compared to $4.0 million for the same period last year.  During the quarter, the Company invested $34.2 million in its land portfolio.

The Company has continued to make progress on its land development portfolio, highlighted by two high-profile projects:

Coney Island Concert Hall and Amphitheater

Construction is nearing completion on iStar's 5,000-seat concert amphitheater and public park along the boardwalk in Coney Island.  In addition, work continues on the renovation of the historic Childs building, transforming it into a 60,000 square foot bar, restaurant and event space adjacent to the amphitheater that will serve as a year round anchor to the on-going Coney Island renaissance.  Upon completion, iStar will enter into a long-term operating lease with the city, and has partnered with Live Nation and Brooklyn Sports and Entertainment to provide full year programming and management. Currently over 40 concerts and events have already been booked for this summer, including kick-off concerts featuring Sting, Peter Gabriel and Ziggy Marley. The opening of the amphitheater, park and Childs building are part of the Company's larger strategy to accelerate development on its adjacent land holdings, currently targeted for over one million square feet of residential housing.

The Asbury at Asbury Park

Construction is also nearing completion on The Asbury, iStar's highly anticipated 110-room hotel/multi-venue adult playground in Asbury Park, NJ.  The Asbury includes an outdoor movie theater and nightclub on two separate roof decks, indoor and outdoor event spaces, an integrated lobby bar, lounge and gameroom and an outdoor biergarten and pool party space. The Asbury represents an important milestone in iStar's plan to accelerate Asbury Park's rebirth as one of the great beach cities on the East Coast, and is a key amenity for the approximately 30 acres of ocean and waterfront land iStar controls, capable of supporting over two thousand new residential units.

Annual Meeting

The Company will host its Annual Meeting of Shareholders at the Harvard Club of New York City, located at 35 West 44th Street, New York, New York 10036 on Wednesday, May 18, 2016 at 9:00 a.m. ET. All shareholders are cordially invited to attend.

*     *     *

iStar (NYSE: STAR) finances, invests in and develops real estate and real estate related projects as part of its fully-integrated investment platform. Building on over two decades of experience and more than $35 billion of transactions, iStar brings uncommon capabilities and new ways of thinking to commercial real estate and adapts its investment strategy to changing market conditions. The Company is structured as a real estate investment trust ("REIT"), with a diversified portfolio focused on larger assets located in major metropolitan markets.

iStar will hold a quarterly earnings conference call at 10:00 a.m. ET today, May 3, 2016. This conference call will be broadcast live over the internet and can be accessed by all interested parties through iStar's website, www.istar.com. To listen to the live call, please go to the website's "Investor" section at least 15 minutes prior to the start of the call to register, download and install any necessary audio software. For those who are not available to listen to the live broadcast, a replay will be available shortly after the call on iStar's website.

Note: Statements in this press release which are not historical fact may be deemed forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although iStar believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, the Company can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from iStar's expectations include general economic conditions and conditions in the commercial real estate and credit markets, the Company's ability to generate liquidity and to repay indebtedness as it comes due, additional loan loss provisions, the amount and timing of asset sales, changes in NPLs, repayment levels, the Company's ability to make new investments, the Company's ability to maintain compliance with its debt covenants, the Company's ability to generate income and gains from operating properties and land and other risks detailed from time to time in iStar SEC reports.

iStar logo.

 

 

iStar
Consolidated Statements of Operations

(In thousands)
(unaudited)

 
   

Three Months
Ended March 31,

   

2016

 

2015

REVENUES

       

Operating lease income

 

$

54,937

   

$

59,139

 

Interest income

 

33,219

   

34,896

 

Other income

 

11,541

   

10,564

 

Land development revenue

 

14,947

   

8,258

 

   Total revenues

 

$

114,644

   

$

112,857

 

COST AND EXPENSES

       

Interest expense

 

$

57,021

   

$

54,632

 

Real estate expense

 

34,305

   

39,634

 

Land development cost of sales

 

11,575

   

6,891

 

Depreciation and amortization

 

14,708

   

18,501

 

General and administrative(1)

 

23,102

   

20,753

 

Provision for (recovery of) loan losses

 

1,506

   

4,293

 

Impairment of assets

 

   

 

Other expense

 

740

   

2,123

 

   Total costs and expenses

 

$

142,957

   

$

146,827

 

   Income (loss) before other items

 

$

(28,313)

   

$

(33,970)

 

Income from sales of real estate

 

10,458

   

21,156

 

Earnings from equity method investments

 

8,267

   

6,547

 

Income tax (expense) benefit

 

414

   

(5,878)

 

Loss on early extinguishment of debt

 

(125)

   

(168)

 

   Net income (loss)

 

$

(9,299)

   

$

(12,313)

 

Net (income) loss attributable to noncontrolling interests

942

   

1,841

 

   Net income (loss) attributable to iStar

 

$

(8,357)

   

$

(10,472)

 

Preferred dividends

 

(12,830)

   

(12,830)

 

Net (income) loss allocable to HPU holders and Participating Security holders(2)

   

749

 

   Net income (loss) allocable to common shareholders

 

$

(21,187)

   

$

(22,553)

 
 
               

(1) For the three months ended March 31, 2016 and 2015, includes $4,577 and $3,238 of stock-based compensation expense, respectively.

(2) HPU Holders were current and former Company employees who purchased high performance common stock units under the Company's High Performance Unit Program. On August 13, 2015, the Company repurchased and retired 100% of the outstanding HPU shares through an exchange offer. Participating Security holders are non-employee directors who hold common stock equivalents and restricted stock awards granted under the Company's LTIP who are eligible to participate in dividends.

 

 

iStar

Earnings Per Share Information

(In thousands, except per share data)

(unaudited)

 
   

Three Months
Ended March 31,

   

2016

 

2015

EPS INFORMATION FOR COMMON SHARES

       

Income (loss) from continuing operations attributable to iStar(1)(2)

Basic and Diluted

 

$

(0.27)

   

$

(0.26)

 

Net income (loss)

       

Basic and Diluted

 

$

(0.27)

   

$

(0.26)

 

Adjusted income

       

Basic and Diluted

 

$

0.04

   

$

0.10

 

Weighted average shares outstanding

       

Basic

 

77,060

   

85,497

 

Diluted (for net income per share)

 

77,060

   

85,497

 

Diluted (for adjusted income per share)

 

77,428

   

97,454

 

Common shares outstanding at end of period

 

75,441

   

85,520

 
 
                 

(1) Including preferred dividends, net (income) loss attributable to noncontrolling interests and income from sales of real estate.

(2) On August 13, 2015, the Company repurchased and retired 100% of the outstanding high performance unit (HPU) shares through an exchange offer.

 

 

iStar

Consolidated Balance Sheets

(In thousands)

(unaudited)

 
 

As of

 

As of

 

March 31, 2016

 

December 31, 2015

ASSETS

     
       

Real estate

     

Real estate, at cost

$

2,040,779

   

$

2,050,541

 

Less: accumulated depreciation

(462,179)

   

(456,558)

 

Real estate, net

$

1,578,600

   

$

1,593,983

 

Real estate available and held for sale

132,395

   

137,274

 
 

$

1,710,995

   

$

1,731,257

 

Land and development, net

1,024,434

   

1,001,963

 

Loans receivable and other lending investments, net

1,637,387

   

1,601,985

 

Other investments

233,990

   

254,172

 

Cash and cash equivalents

591,181

   

711,101

 

Accrued interest and operating lease income receivable, net

16,020

   

18,436

 

Deferred operating lease income receivable

98,861

   

97,421

 

Deferred expenses and other assets, net

179,310

   

181,457

 

Total assets

$

5,492,178

   

$

5,597,792

 
       

LIABILITIES AND EQUITY

     
       

Accounts payable, accrued expenses and other liabilities

$

202,963

   

$

214,835

 

Loan participations payable, net

154,111

   

152,086

 

Debt obligations, net

4,110,730

   

4,118,823

 

Total liabilities

$

4,467,804

   

$

4,485,744

 
       

Redeemable noncontrolling interests

$

8,981

   

$

10,718

 
       

Total iStar shareholders' equity

$

980,109

   

$

1,059,112

 

Noncontrolling interests

35,284

   

42,218

 

Total equity

$

1,015,393

   

$

1,101,330

 
       

Total liabilities and equity

$

5,492,178

   

$

5,597,792

 

 

 

iStar
Segment Analysis

(In thousands)
(unaudited)

 

FOR THE THREE MONTHS ENDED MARCH 31, 2016

           
 

Real
Estate
Finance

 

Net
Lease

 

Operating
Properties

 

Land &
Dev

 

Corporate
/ Other

 


Total

Operating lease income

$

   

$

35,750

   

$

19,081

   

$

106

   

$

   

$

54,937

 

Interest income

33,219

   

   

   

   

   

33,219

 

Other income

1,297

   

80

   

7,344

   

1,065

   

1,755

   

11,541

 

Land development revenue

   

   

   

14,947

   

   

14,947

 

Earnings from equity method
investments

   

946

   

(142)

   

6,661

   

802

   

8,267

 

Income from sales of real
estate

   

4,928

   

5,530

   

   

   

10,458

 

Total revenue and other earnings

$

34,516

   

$

41,704

   

$

31,813

   

$

22,779

   

$

2,557

   

$

133,369

 

Real estate expense

   

(4,508)

   

(21,120)

   

(8,677)

   

   

(34,305)

 

Land development cost of sales

   

   

   

(11,575)

   

   

(11,575)

 

Other expense

86

   

   

   

   

(826)

   

(740)

 

Allocated interest expense

(14,702)

   

(16,236)

   

(6,620)

   

(8,359)

   

(11,104)

   

(57,021)

 

Allocated general and administrative(1)

(3,831)

   

(4,296)

   

(1,870)

   

(3,270)

   

(5,258)

   

(18,525)

 

Segment profit (loss)

$

16,069

   

$

16,664

   

$

2,203

   

$

(9,102)

   

$

(14,631)

   

$

11,203

 
 
                           

(1) Excludes $4,577 of stock-based compensation expense.

 

AS OF MARCH 31, 2016

                     
 

Real
Estate
Finance

 

Net
Lease

 

Operating
Properties

 

Land &
Dev

 

Corporate
/ Other

 


Total

Real estate

                     

Real estate, at cost

$

   

$

1,481,989

   

$

558,790

   

$

   

$

   

$

2,040,779

 

Less: accumulated depreciation

   

(382,501)

   

(79,678)

   

   

   

(462,179)

 

Real estate, net

$

   

$

1,099,488

   

$

479,112

   

$

   

$

   

$

1,578,600

 

Real estate available and held for sale

   

717

   

131,678

   

   

   

132,395

 

Total real estate

$

   

$

1,100,205

   

$

610,790

   

$

   

$

   

$

1,710,995

 

Land and development, net

   

   

   

1,024,434

   

   

1,024,434

 

Loans receivable and other
lending investments, net

1,637,387

   

   

   

   

   

1,637,387

 

Other investments

   

68,043

   

12,033

   

96,173

   

57,741

   

233,990

 

Total portfolio assets

$

1,637,387

   

$

1,168,248

   

$

622,823

   

$

1,120,607

   

$

57,741

   

$

4,606,806

 

Cash and other assets

                   

885,372

 

   Total assets

                   

$

5,492,178

 

 

 

iStar

Supplemental Information

(In thousands)

(unaudited)

 
   

Three Months
Ended March 31,

   

2016

 

2015

ADJUSTED INCOME (1)

       

Reconciliation of Net Income to Adjusted Income

       

Net income (loss) allocable to common shareholders

 

$

(21,187)

   

$

(22,553)

 

Add: Depreciation and amortization

 

17,172

   

20,072

 

Add: Provision for (recovery of) loan losses

 

1,506

   

4,293

 

Add: Impairment of assets

 

915

   

4,337

 

Add: Stock-based compensation expense

 

4,577

   

3,238

 

Add: Loss on early extinguishment of debt

 

125

   

168

 

Less: HPU/Participating Security allocation

 

(2)

   

(1,032)

 

Adjusted income allocable to common shareholders

 

$

3,106

   

$

8,523

 
 
               

(1) Adjusted Income (loss) allocable to common shareholders should be examined in conjunction with net income (loss) as shown in the Consolidated Statements of Operations. This non-GAAP financial measure should not be considered as an alternative to net income (determined in accordance with GAAP) as an indicator of the Company's performance, or to cash flows from operating activities (determined in accordance with GAAP) as a measure of the Company's liquidity, nor is it indicative of funds available to fund the Company's cash needs or available for distribution to shareholders. It should be noted that the Company's manner of calculating this non-GAAP financial measure may differ from the calculations of similarly-titled measures by other companies. Management considers this non-GAAP financial measure as supplemental information to net income in analyzing the performance of our underlying business. Depreciation and amortization includes our proportionate share of depreciation and amortization expense relating to equity method investments and excludes the portion of depreciation and amortization expense allocable to non-controlling interests. Impairment of assets includes impairments on cost and equity method investments recorded in other income and earnings from equity method investments, respectively.

 

 

iStar

Supplemental Information

(In thousands)

(unaudited)

 
 

Twelve Months Ended
March 31, 2016

OPERATING STATISTICS

 
   

Expense Ratio

 

General and administrative expenses - trailing twelve months (A)

$

83,626

 

Average total assets (B)

$

5,611,742

 

Expense Ratio (A) / (B)

1.5

%

   
 

As of

 

March 31, 2016

Leverage

 

Book debt

$

4,110,730

 

Less: Cash and cash equivalents

(591,181)

 

Net book debt (C)

$

3,519,549

 
   

Book equity

$

1,015,393

 

Add: Accumulated depreciation and amortization(1)

524,010

 

Add: General loan loss reserves

36,600

 

Sum of book equity, accumulated D&A and general loan loss reserves (D)

$

1,576,003

 

Leverage (C) / (D)

2.2x

 
   

UNENCUMBERED ASSETS / UNSECURED DEBT

 
   

Unencumbered assets (E)(2)

$

4,583,979

 

Unsecured debt (F)

$

3,334,722

 

Unencumbered Assets / Unsecured Debt (E) / (F)

1.4x

 
 
       

(1) Accumulated depreciation and amortization includes iStar's proportionate share of accumulated depreciation and amortization relating to equity method investments.

(2) Unencumbered assets are calculated in accordance with the indentures governing the Company's unsecured debt securities.

 

 

iStar

Supplemental Information

(In thousands)

(unaudited)

 
       

As of

       

March 31, 2016

UNFUNDED COMMITMENTS

         
           

Performance-based commitments

     

$

789,220

 

Strategic investments

     

45,978

 

Discretionary fundings

     

5,000

 

Total Unfunded Commitments

     

$

840,198

 
           

LOAN RECEIVABLE CREDIT STATISTICS

As of

 

March 31, 2016

 

December 31, 2015

           

Carrying value of NPLs /

         

As a percentage of total carrying value of loans

$

68,349

 

4.3

%

 

$

60,327

 

3.9

%

           

Total reserve for loan losses /

         

As a percentage of total gross carrying value of loans(1)

$

109,671

 

6.4

%

 

$

108,165

 

6.6

%

 
                     

(1) Gross carrying value represents iStar's carrying value of loans, gross of loan loss reserves.

 

 

iStar

Supplemental Information

(In millions)

(unaudited)

 

PORTFOLIO STATISTICS AS OF MARCH 31, 2016(1)

                         

Property Type

 

Real
Estate
Finance

 

Net Lease

 

Operating
Properties

 

Land &
Dev

 

Total

 

% of

Total

Land & Development

 

$

45

   

$

   

$

   

$

1,127

   

$

1,172

   

23

%

Office / Industrial

 

157

   

847

   

133

   

   

1,137

   

22

%

Mixed Use / Collateral

 

580

   

   

257

   

   

837

   

16

%

Hotel

 

349

   

137

   

55

   

   

541

   

11

%

Entertainment / Leisure

 

   

501

   

   

   

501

   

10

%

Condominium

 

270

   

   

132

   

   

402

   

8

%

Retail

 

67

   

57

   

126

   

   

250

   

5

%

Other Property Types

 

206

   

9

   

   

   

215

   

4

%

Strategic Investments

 

   

   

   

   

57

   

1

%

Total

 

$

1,674

   

$

1,551

   

$

703

   

$

1,127

   

$

5,112

   

100

%

                         

Geography

 

Real
Estate
Finance

 

Net Lease

 

Operating
Properties

 

Land &
Dev

 

Total

 

% of
Total

Northeast

 

$

1,006

   

$

383

   

$

   

$

251

   

$

1,640

   

32

%

West

 

84

   

402

   

58

   

364

   

908

   

18

%

Southeast

 

135

   

235

   

276

   

147

   

793

   

16

%

Mid-Atlantic

 

169

   

139

   

151

   

204

   

663

   

13

%

Southwest

 

53

   

170

   

146

   

149

   

518

   

10

%

Central

 

164

   

80

   

58

   

5

   

307

   

6

%

Various

 

63

   

142

   

14

   

7

   

226

   

4

%

Strategic Investments

 

   

   

   

   

57

   

1

%

Total

 

$

1,674

   

$

1,551

   

$

703

   

$

1,127

   

$

5,112

   

100

%

 
                         

(1) Based on carrying value of the Company's total investment portfolio, gross of accumulated depreciation and general loan loss reserves.

 

 

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SOURCE iStar

Company Contacts: David M. DiStaso, Chief Financial Officer; Jason Fooks, Vice President of Investor Relations & Marketing; 1114 Avenue of the Americas, New York, NY 10036, (212) 930-9400, investors@istar.com