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11/03/2016

iStar Announces Third Quarter 2016 Results

                                           - Net income grew to $0.44 per diluted common share from a loss of $(0.07) in the third quarter of last year.

- Adjusted income grew to $0.47 per diluted common share from $0.25 in the third quarter of last year.

NEW YORK, Nov. 3, 2016 /PRNewswire/ -- iStar (NYSE: STAR) today reported results for the third quarter ended September 30, 2016.

Third Quarter 2016 Results

iStar reported net income allocable to common shareholders for the third quarter of $46.3 million, or $0.44 per diluted common share and $0.65 per basic common share. This compares favorably to a loss of $(6.1) million, or $(0.07) per diluted and basic common share for the third quarter 2015.

Adjusted income allocable to common shareholders for the third quarter was $49.1 million, or $0.47 per diluted common share and $0.69 per basic common share. This represents over a 70% increase from the $27.3 million, or $0.25 per diluted common share and $0.32 per basic common share reported for the third 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).

Investment Activity

During the quarter, the Company originated $301.1 million of new investments bringing total originations year to date to $459.3 million. During the quarter, iStar funded a total of $165.5 million associated with new investments, prior financing commitments and ongoing development across its four segments, bringing the total fundings year to date to $489.4 million. In addition, the portfolio generated $262.2 million of repayments and sales during the quarter, bringing total proceeds received to $854.5 million year to date.

3Q'16 Investing Activity

                 

 

$ in millions

 

Real Estate
Finance

 

Net
Lease

 

Operating
Properties

 

Land &
Dev

 

Corporate
/ Other

 

Total

Originated

$83.0

 

$218.1

 

   

   

   

$301.1

Invested

$85.4

 

$36.5

 

$15.9

   

$27.5

   

$0.2

   

$165.5

Proceeds received

$49.1

 

$78.8

 

$85.8

   

$42.5

   

$6.0

   

$262.2

Note: Originated represents total commitments on new investments made during the quarter. Invested represents
fundings on new investments / prior commitments and capital expenditures associated with existing assets during the
quarter.  Net lease originations represent the total property value, gross of joint venture partner participations and
financings.

New originations within our real estate finance portfolio are expected to generate a weighted average unlevered IRR of 11.9%, while the net lease originations within our net lease fund are expected to generate a 10.3% IRR on our equity contributions.(1)

Portfolio Overview

At September 30, 2016, the Company's portfolio totaled $4.83 billion, which is gross of $412.1 million of accumulated depreciation and $21.2 million of general loan loss reserves.

 

_______________________

(1) IRRs are based on contractual investment terms such as coupon, rent and term. The Company makes assumptions
as to the pace of fundings, timing of construction and residual value of real estate at the end of the lease term. The
net lease joint venture can elect to take on leverage and the Company makes assumptions as to the amount of debt and
the cost of debt the venture will take on. While the Company believes its assumptions are reasonable, they are
dependent on future real estate market conditions, capital market conditions and interest rates. No assurance can be
made that the Company's assumptions will reflect actual results.

A summary of quarterly activity is below:

Portfolio Rollforward

                     

$ in millions

 

Real
Estate

Finance

 

Net
Lease

 

Operating
Properties

 

Land &
Dev

 

Corporate
/ Other

 

Total

Net book value (6/30/16)

$

1,568.5

   

$

1,149.7

   

$

493.2

   

$

1,134.9

   

$

58.9

   

$

4,405.2

 

Investments
(Fundings / CapEx)

85.4

   

36.5

   

15.9

   

27.5

   

0.2

   

165.5

 

Asset transfers between
segments

(9.1)

   

   

36.3

   

(27.2)

   

   

 

Principal received / basis
sold

(49.1)

   

(74.1)

   

(56.5)

   

(37.0)

   

(9.0)

   

(225.7)

 

Other

36.5

   

(6.9)

   

(1.8)

   

16.8

   

3.3

   

47.9

 

Net book value (9/30/16)

1,632.2

   

1,105.2

   

487.1

   

1,115.0

   

53.4

   

4,392.9

 

Add: Accumulated
depreciation and general
loan loss reserves

21.2

   

362.3

   

42.9

   

6.9

   

   

433.3

 

Gross book value (9/30/16)

$

1,653.4

   

$

1,467.5

   

$

530.0

   

$

1,121.9

   

$

53.4

   

$

4,826.2

 

Note: Gross book value is based on carrying value of the Company's total investment portfolio, gross of accumulated depreciation and
general loan loss reserves and includes the Company's pro rata share of equity method investments.

Real Estate Finance

iStar's real estate finance business targets sophisticated and innovative investors by providing one-stop capabilities that encompass financial alternatives ranging from full envelope senior loans to custom-tailored mezzanine and preferred equity capital positions.

At September 30, 2016, the Company's real estate finance portfolio totaled $1.65 billion, gross of general loan loss reserves. The portfolio is categorized into iStar 3.0 loans, made post January 1, 2008, and legacy loans, which were all made prior to December 31, 2007.

The following table summarizes statistics for our real estate finance portfolio:

Real Estate Finance Statistics

             

$ in millions

 

iStar 3.0

 

Legacy

 

Q3'16

Q2'16

Q3'15

 

Q3'16

Q2'16

Q3'15

Gross book value

$

1,365.9

 

$

1,306.2

 

$

1,141.8

   

$

287.5

 

$

299.2

 

$

476.6

 

% of total loan portfolio

83%

 

81%

 

71%

   

17%

 

19%

 

29%

 
               

Performing loans

$

1,365.9

 

$

1,306.2

 

$

1,141.8

   

$

65.0

 

$

219.7

 

$

394.0

 

Non-performing loans

$

 

$

 

$

   

$

222.5

 

$

79.5

 

$

82.6

 

% Performing / Non-performing

100% / 0%

 

100% / 0%

 

100% / 0%

   

23% / 77%

 

73% / 27%

 

83% / 17%

 
               

First mortgages / senior loans

72%

 

70%

 

64%

   

44%

 

43%

 

32%

 

Mezzanine / subordinated debt

28%

 

30%

 

36%

   

56%

 

57%

 

68%

 

Total

100%

 

100%

 

100%

   

100%

 

100%

 

100%

 
               

Wtd. avg. LTV

61.5%

 

61.5%

 

59.5%

   

89.9%

 

90.1%

 

90.8%

 

Weighted avg. risk rating

2.61

 

3.08

 

2.93

   

4.30

 

3.88

 

3.73

 

Note: Gross book value represents the carrying value of iStar's loans, gross of general reserves. Risk rating and LTVs based on
performing loans. Risk rating scale based on 1 as lowest risk and 5 as highest risk. See the "Loan Receivable Credit Statistics" table
for additional detail on the Company's NPL and specific reserves.

The $1.43 billion of performing loans had a weighted average maturity of 1.6 years and generated a 9.1% unlevered yield for the quarter.

At September 30, 2016, the Company's non-performing loans (NPLs) were exclusively derived from its legacy loan portfolio with a carrying value of $222.5 million, up from $79.5 million in the second quarter. The $143.0 million sequential increase was related to a loan, secured in part by pledges of equity in a portfolio of hotels and recourse to the borrower, which ceased paying current interest after the borrower and most of its related entities filed for bankruptcy protection during the third quarter.  

Net Lease

iStar's net lease business seeks to create stable cash flows through long-term leases to single tenants on its properties.  The Company targets mission-critical facilities leased on a long-term basis to tenants, offering structured solutions that combine iStar's capabilities in underwriting, lease structuring, asset management and build-to-suit construction. The Company invests in new net lease investments primarily through its net lease joint venture, in which iStar holds a 52% interest. The joint venture has a right of first offer on any new net lease investments that iStar sources.

At the end of the quarter, iStar's net lease portfolio totaled $1.47 billion, gross of $362.3 million of accumulated depreciation.

Net Lease Portfolio Overview

 

$ in millions

Wholly owned assets

$1,364.1

Joint venture investments (1)

103.4

Total

$1,467.5

(1) Represents iStar's 52% interest within its net lease
joint venture.

During the quarter, the Company's net lease JV closed on two new transactions totaling $218.1 million. The venture funded $68.6 million during the quarter, of which iStar contributed $35.9 million. The Company's interest and commitment to JV deals within the fund is 52% of equity.

Same store net operating income for the net lease portfolio was $31.1 million for the quarter versus $29.7 million for same quarter last year. This quarter, the Company executed leases on net lease assets totaling approximately 190,000 square feet. In addition, the Company received $78.8 million of sales proceeds from its net lease portfolio and recorded gains of $6.6 million.

Net Lease Statistics

 

Q3'16

Q2'16

Q3'15

Square feet (000s)

17,022

 

17,348

 

18,174

 

% Leased

99%

 

98%

 

96%

 

Wtd. avg. lease term (yrs)

14.6

 

14.6

 

14.8

 

Yield

8.2%

 

8.2%

 

7.8%

 

Operating Properties

At the end of the quarter, iStar's operating property portfolio totaled $530.0 million, gross of $42.9 million of accumulated depreciation, and was comprised of $428.5 million of commercial and $101.5 million of residential real estate properties. During the quarter, the Company invested $15.9 million within its operating properties portfolio and received $85.8 million of proceeds from sales. These sales generated $27.8 million of gains.

     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 $25.6 million of revenue offset by $18.9 million of expenses during the quarter. At the end of the quarter, the Company had $243.8 million of stabilized assets and $184.7 million of transitional assets. 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. The Company has made significant progress on this goal, having either stabilized or sold approximately $350 million of its transitional operating properties over the past year.

Commercial Operating Property Statistics

       

$ in millions

 

Stabilized Operating

Transitional Operating

 

Total

 

Q3'16

Q2'16

Q3'15

 

Q3'16

Q2'16

Q3'15

 

Q3'16

Q2'16

Q3'15

Gross book value

$243.8

$149.3

$111.8

 

$184.7

$277.8

$461.3

 

$428.5

$427.1

$573.1

% of total

57%

35%

20%

 

43%

65%

80%

 

100%

100%

100%

Occupancy

86%

86%

87%

 

55%

63%

59%

 

72%

73%

68%

Yield

8.4%

8.2%

7.8%

 

2.4%

3.2%

2.7%

 

5.9%

4.6%

3.7%

During the quarter, the Company sold one stabilized (mixed-use) and two transitional (office and retail) commercial operating properties for $70.2 million of proceeds, recognizing $23.4 million of gains. The sales were executed at a weighted average trailing twelve month cap rate of 5.6%.

As a result of successful leasing activity, the Company reclassified four transitional properties as stabilized this quarter. In addition, the Company migrated two completed projects from its land & development portfolio, The Asbury hotel and 1000 South Clark, into its stabilized and transitional commercial operating properties portfolios, respectively, this quarter.

     Residential Operating Properties

At the end of the quarter, the $101.5 million residential operating portfolio was comprised of 58 condominium units generally located within luxury projects in major U.S. cities.

Residential Operating Property Statistics
(excluding fractional units)

$ in millions

 

Q3'16

Q2'16

Q3'15

Condominium units sold

11

 

55

 

21

 

Proceeds

$15.4

 

$38.7

 

$24.4

 

Income

$4.6

 

$14.3

 

$6.8

 
             

Land & Development

At the end of the quarter, the Company's land & development portfolio totaled $1.12 billion, with eight projects in production, nine in development and 14 in the pre-development phase. These projects are collectively entitled for approximately 30,000 lots and units.

Land & Development Portfolio Overview as of 9/30/16

     

 

$ in millions

 

MPCs

 

Waterfront

 

Urban / Infill

 

Total

 

# of projects

11

 

6

 

14

 

31

 
         

In production

$190.1

 

$138.9

 

$55.2

 

$384.2

 

In development

252.0

 

135.4

 

21.6

 

409.0

 

Pre-development

226.4

 

7.6

 

94.7

 

328.7

 

Gross book value

$668.5

 

$281.9

 

$171.5

 

$1,121.9

 
         

Land & Development Activity for 3Q'16

Land development revenue

$10.2

 

$8.3

 

$13.1

 

$31.6

 

Land development cost of sales

(7.7)

 

(4.0)

 

(10.3)

 

(22.0)

 

Gross margin

$2.5

 

$4.3

 

$2.8

 

$9.6

 

Earnings from land development
equity method investments

0.1

 

6.2

 

15.5

 

21.8

 

Total

$2.6

 

$10.5

 

$18.3

 

$31.4

 
         

Capital expenditures / Contributions

$16.2

 

$5.9

 

$5.4

 

$27.5

 

iStar and its joint venture partner closed on a $145.0 million refinancing of 1000 South Clark, a 469-unit multifamily project located in Chicago's South Loop neighborhood. The refinancing resulted in the repayment of iStar's $38.9 million mezzanine loan on 1000 South Clark, an $18.3 million equity distribution to iStar resulting in a reduction of the asset's basis to zero and $15.8 million of earnings from equity method investments. Post refinancing, the Company's equity interest in the joint venture is 50%. At the end of the quarter, the Company moved the asset into its transitional commercial operating properties portfolio.

In addition, the Company reclassified The Asbury, the recently completed $45 million boutique hotel anchoring iStar's Asbury Park Waterfront development, as a stabilized commercial operating property.

Capital Markets

The Company is capitalized with debt, preferred stock and common equity.

The Company's weighted average cost of debt for the third quarter was 5.6%. The Company's leverage was 2.1x at the end of the quarter, within the Company's targeted range of 2.0x – 2.5x.

Leverage at 9/30/16

$ in millions

 

Book Debt

$3,749.9

   

Book equity (1)

$1,071.5

 

Less: Cash and cash equivalents

(547.5)

   

Add: Accumulated depreciation and
amortization (1)

461.7

 

Net book debt (A)

$3,202.4

   

Add: General loan loss reserves

21.2

 
     

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

$1,554.4

 
         
     

Leverage (A) / (B)

2.1x

 

(1) Includes $699.7 million of preferred equity.

 

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

The Company upsized its 2016 Secured Term Loan by $50.0 million during the quarter, bringing the outstanding balance to $500 million. Proceeds from the upsize were used to repay outstanding borrowings under our revolving credit facility, leaving the $250 million facility fully undrawn.

During the quarter, the Company repurchased at par $21.8 million of its 1.5% convertible notes due in November, which equates to a reduction of 1.3 million diluted shares.

Shares Outstanding

in millions

 
   

Q3'16

Q2'16

Q3'15

Basic shares outstanding at end of period

71.2

 

71.9

 

85.2

 

3.0% convertible notes / strike of $11.77 (if converted) (1)

17.0

 

17.0

 

17.0

 

1.5% convertible notes / strike of $17.29 (if converted) (1)

10.3

 

11.6

 

11.6

 

4.5% Series J conv. preferred / strike of $12.79 (if converted)

15.6

 

15.6

 

15.6

 

Other securities

0.8

 

0.8

 

0.8

 

Diluted shares outstanding at end of period

114.9

 

116.9

 

130.2

 

(1) Matures November 15, 2016

     

Liquidity

At the end of the quarter, iStar had a combined $797.5 million of unrestricted cash and available capacity on its revolving credit facility. The Company expects to maintain larger liquidity balances in anticipation of retiring up to $378.3 million of remaining convertible bonds due on November 15, 2016. Aside from these convertible bonds, the Company has an additional $374.7 million of debt maturities over the next four quarters.

Liquidity at 9/30/16

 

$ in millions

Unrestricted cash

$547.5

Revolving credit facility capacity

$250.0

Total liquidity

$797.5

 

*     *     *

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, November 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 September 30,

 

Nine Months
Ended September 30,

   

2016

 

2015

 

2016

 

2015

REVENUES

               

Operating lease income

 

$

51,414

   

$

55,699

   

$

160,869

   

$

170,990

 

Interest income

 

32,258

   

33,599

   

99,877

   

102,224

 

Other income

 

13,442

   

16,888

   

35,080

   

40,214

 

Land development revenue

 

31,554

   

14,301

   

74,389

   

29,101

 

Total revenues

 

$

128,668

   

$

120,487

   

$

370,215

   

$

342,529

 

COST AND EXPENSES

               

Interest expense

 

$

55,105

   

$

56,880

   

$

168,173

   

$

167,336

 

Real estate expense

 

35,335

   

35,154

   

105,078

   

111,143

 

Land development cost of sales

 

22,004

   

10,686

   

50,842

   

22,828

 

Depreciation and amortization

 

13,002

   

15,787

   

42,184

   

49,804

 

General and administrative(1)

 

19,666

   

21,181

   

62,433

   

62,520

 

(Recovery of) provision for loan losses

 

(14,955)

   

7,500

   

(12,749)

   

30,944

 

Impairment of assets

 

8,741

   

3,916

   

11,753

   

5,590

 

Other expense

 

819

   

3,334

   

4,741

   

6,345

 

Total costs and expenses

 

$

139,717

   

$

154,438

   

$

432,455

   

$

456,510

 

Income (loss) before other items

 

$

(11,049)

   

$

(33,951)

   

$

(62,240)

   

$

(113,981)

 

Income from sales of real estate

 

34,444

   

26,511

   

88,387

   

66,021

 

Earnings from equity method investments

 

26,540

   

10,572

   

74,254

   

25,904

 

Income tax benefit (expense)

 

8,256

   

2,893

   

9,859

   

(3,796)

 

Loss on early extinguishment of debt

 

(36)

   

(67)

   

(1,618)

   

(279)

 

Net income (loss)

 

$

58,155

   

$

5,958

   

$

108,642

   

$

(26,131)

 

Net (income) loss attributable to noncontrolling
interests

967

   

706

   

(6,915)

   

3,176

 

Net income (loss) attributable to iStar

 

$

59,122

   

$

6,664

   

$

101,727

   

$

(22,955)

 

Preferred dividends

 

(12,830)

   

(12,830)

   

(38,490)

   

(38,490)

 

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

   

94

   

(27)

   

1,627

 

Net income (loss) allocable to common shareholders

 

$

46,292

   

$

(6,072)

   

$

63,210

   

$

(59,818)

 

________________________________________________________________

(1) For the three months ended September 30, 2016 and 2015, includes $1,434 and $2,881 of stock-based compensation expense,
respectively.  For the nine months ended September 30, 2016 and 2015, includes $7,644 and $10,066 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 September 30,

 

Nine Months
Ended September 30,

   

2016

 

2015

 

2016

 

2015

EPS INFORMATION FOR COMMON SHARES

               

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

       

  Basic

 

$

0.65

   

$

(0.07)

   

$

0.85

   

$

(0.70)

 

  Diluted

 

$

0.44

   

$

(0.07)

   

$

0.66

   

$

(0.70)

 

Net income (loss)

               

  Basic

 

$

0.65

   

$

(0.07)

   

$

0.85

   

$

(0.70)

 

  Diluted

 

$

0.44

   

$

(0.07)

   

$

0.66

   

$

(0.70)

 

Adjusted income

               

  Basic

 

$

0.69

   

$

0.32

   

$

1.48

   

$

0.49

 

  Diluted

 

$

0.47

   

$

0.25

   

$

1.06

   

$

0.44

 

Weighted average shares outstanding

               

  Basic

 

71,210

   

85,766

   

74,074

   

85,602

 

  Diluted (for net income per share)

 

115,666

   

85,766

   

118,590

   

85,602

 

  Diluted (for adjusted income per share)

 

115,666

   

130,368

   

118,590

   

130,200

 

Common shares outstanding at end of period

 

71,176

   

85,179

   

71,176

   

85,179

 

_____________________________________________

(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

 

September 30, 2016

 

December 31, 2015

ASSETS

     
       

Real estate

     

Real estate, at cost

$

1,779,819

   

$

2,050,541

 

Less: accumulated depreciation

(405,209)

   

(456,558)

 

Real estate, net

$

1,374,610

   

$

1,593,983

 

Real estate available and held for sale

101,488

   

137,274

 
 

$

1,476,098

   

$

1,731,257

 

Land and development, net

1,022,106

   

1,001,963

 

Loans receivable and other lending investments, net

1,632,186

   

1,601,985

 

Other investments

262,496

   

254,172

 

Cash and cash equivalents

547,510

   

711,101

 

Accrued interest and operating lease income receivable,
net

12,720

   

18,436

 

Deferred operating lease income receivable

94,405

   

97,421

 

Deferred expenses and other assets, net

190,493

   

181,457

 

Total assets

$

5,238,014

   

$

5,597,792

 
       

LIABILITIES AND EQUITY

     
       

Accounts payable, accrued expenses and other liabilities

$

204,272

   

$

214,835

 

Loan participations payable, net

205,781

   

152,086

 

Debt obligations, net

3,749,873

   

4,118,823

 

Total liabilities

$

4,159,926

   

$

4,485,744

 
       

Redeemable noncontrolling interests

$

6,601

   

$

10,718

 
       

Total iStar shareholders' equity

$

1,025,140

   

$

1,059,112

 

Noncontrolling interests

46,347

   

42,218

 

Total equity

$

1,071,487

   

$

1,101,330

 
       

Total liabilities and equity

$

5,238,014

   

$

5,597,792

 

 

 

iStar

Segment Analysis

(In thousands)

(unaudited)

 

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2016

           
 

Real
Estate

Finance

 

Net
Lease

 

Operating
Properties

 

Land &
Dev

 

Corporate
/ Other

 

Total

Operating lease income

$

   

$

36,901

   

$

14,407

   

$

106

   

$

   

$

51,414

 

Interest income

32,258

   

   

   

   

   

32,258

 

Other income

1,052

   

412

   

10,793

   

658

   

527

   

13,442

 

Land development revenue

   

   

   

31,554

   

   

31,554

 

Earnings from equity method
investments

   

723

   

630

   

21,841

   

3,346

   

26,540

 

Income from sales of real
estate

   

6,629

   

27,815

   

   

   

34,444

 

Total revenue and other
earnings

$

33,310

   

$

44,665

   

$

53,645

   

$

54,159

   

$

3,873

   

$

189,652

 

Real estate expense

   

(4,799)

   

(21,129)

   

(9,407)

   

   

(35,335)

 

Land development cost of
sales

   

   

   

(22,004)

   

   

(22,004)

 

Other expense

(794)

   

   

   

   

(25)

   

(819)

 

Allocated interest expense

(14,544)

   

(16,330)

   

(5,110)

   

(9,013)

   

(10,108)

   

(55,105)

 

Allocated general and
administrative(1)

(3,995)

   

(4,526)

   

(1,502)

   

(3,495)

   

(4,714)

   

(18,232)

 

Segment profit (loss)

$

13,977

   

$

19,010

   

$

25,904

   

$

10,240

   

$

(10,974)

   

$

58,157

 

____________________________________________________________

(1) Excludes $1,434 of stock-based compensation expense.

 

 

AS OF SEPTEMBER 30, 2016

                     
 

Real
Estate

Finance

 

Net
Lease

 

Operating
Properties

 

Land &
Dev

 

Corporate
/ Other

 

Total

Real estate

                     

Real estate, at cost

$

   

$

1,364,069

   

$

415,750

   

$

   

$

   

$

1,779,819

 

Less: accumulated
depreciation

   

(362,293)

   

(42,916)

   

   

   

(405,209)

 

Real estate, net

$

   

$

1,001,776

   

$

372,834

   

$

   

$

   

$

1,374,610

 

Real estate available
and held for sale

   

   

101,488

   

   

   

101,488

 

Total real estate

$

   

$

1,001,776

   

$

474,322

   

$

   

$

   

$

1,476,098

 

Land and development,
net

   

   

   

1,022,106

   

   

1,022,106

 

Loans receivable and other
lending investments, net

1,632,186

   

   

   

   

   

1,632,186

 

Other investments

   

103,468

   

12,747

   

92,885

   

53,396

   

262,496

 

Total portfolio assets

$

1,632,186

   

$

1,105,244

   

$

487,069

   

$

1,114,991

   

$

53,396

   

$

4,392,886

 

Cash and other assets

                   

845,128

 

Total assets

                   

$

5,238,014

 

 

 

iStar

Supplemental Information

(In thousands)

(unaudited)

 
   

Three Months
Ended September 30,

 

Nine Months
Ended September 30,

   

2016

 

2015

 

2016

 

2015

ADJUSTED INCOME (1)

               

Reconciliation of Net Income to Adjusted Income

               

Net income (loss) allocable to common shareholders

 

$

46,292

   

$

(6,072)

   

$

63,210

   

$

(59,818)

 

Add: Depreciation and amortization

 

15,598

   

17,560

   

50,107

   

54,925

 

Add: (Recovery of) provision for loan losses

 

(14,955)

   

7,500

   

(12,749)

   

30,944

 

Add: Impairment of assets

 

8,741

   

6,398

   

12,668

   

12,409

 

Add: Stock-based compensation expense

 

1,434

   

2,881

   

7,644

   

10,066

 

Add: Loss on early extinguishment of debt

 

36

   

67

   

1,618

   

279

 

Less: Losses on charge-offs and dispositions

 

(8,039)

   

(517)

   

(12,602)

   

(3,713)

 

Less: HPU/Participating Security allocation

 

   

(516)

   

(21)

   

(2,778)

 

Adjusted income allocable to common shareholders

 

$

49,107

   

$

27,301

   

$

109,875

   

$

42,314

 

_________________________________________________________

(1) Adjusted Income 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)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. Effective in the second quarter 2016, we modified our presentation of Adjusted
Income to include losses on charge-offs and dispositions of previously impaired or reserved assets to provide a more
informative metric for investors to help evaluate our operating performance. Losses on charge-offs and dispositions
represents the impact of charge-offs and dispositions realized during the period. These charge-offs and dispositions were
taken on assets that were initially acquired prior to 2008 that were previously impaired for GAAP and reflected in net income
but not Adjusted Income.

 

 

iStar

Supplemental Information

(In thousands)

(unaudited)

 
       

Twelve Months Ended
September 30, 2016

OPERATING STATISTICS

         
           

Expense Ratio

         

General and administrative expenses - trailing twelve months (A)

   

$

81,190

 

Average total assets (B)

     

$

5,436,035

 

Expense Ratio (A) / (B)

     

1.5%

 
           
       

As of

       

September 30, 2016

UNENCUMBERED ASSETS / UNSECURED DEBT

         
           

Unencumbered assets (C)(1)

     

$

4,133,574

 

Unsecured debt (D)

     

$

3,047,972

 

Unencumbered Assets / Unsecured Debt (C) / (D)

     

 

1.4x

 
         

UNFUNDED COMMITMENTS

         
           

Performance-based commitments(2)

     

$

495,042

 

Strategic investments

     

45,823

 

Discretionary fundings

     

 

Total Unfunded Commitments

     

$

540,865

 
           

LOAN RECEIVABLE CREDIT STATISTICS

As of

 

September 30, 2016

 

December 31, 2015

           

Carrying value of NPLs /

         

As a percentage of total carrying value of loans

$

222,484

 

14.2%

   

$

60,327

 

3.9%

 
           

Total reserve for loan losses /

         

As a percentage of total gross carrying value of loans(3)

$

95,416

 

5.7%

   

$

108,165

 

6.6%

 

___________________________________________

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

(2) Excludes $212.1 million of commitments on loan participations sold that are not the obligation of the Company
but are consolidated on the Company's balance sheet.

(3) 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 SEPTEMBER 30, 2016(1)

                         

Property Type

 

Real
Estate
Finance

 

Net
Lease

 

Operating
Properties

 

Land &
Dev

 

Total

 

% of
Total

Land & Development

 

$

48

   

$

   

$

   

$

1,122

   

$

1,170

   

24%

Office / Industrial

 

164

   

767

   

25

   

   

956

   

20%

Mixed Use / Collateral

 

503

   

   

176

   

   

679

   

14%

Hotel

 

343

   

136

   

104

   

   

583

   

12%

Entertainment / Leisure

 

   

494

   

   

   

494

   

10%

Condominium

 

326

   

   

101

   

   

427

   

9%

Retail

 

64

   

57

   

124

   

   

245

   

5%

Other Property Types

 

205

   

14

   

   

   

219

   

5%

Strategic Investments

 

   

   

   

   

53

   

1%

Total

 

$

1,653

   

$

1,468

   

$

530

   

$

1,122

   

$

4,826

   

100%

                         

Geography

 

Real
Estate
Finance

 

Net
Lease

 

Operating
Properties

 

Land &
Dev

 

Total

 

% of
Total

Northeast

 

$

970

   

$

382

   

$

45

   

$

233

   

$

1,630

   

34%

West

 

103

   

317

   

39

   

367

   

826

   

17%

Southeast

 

129

   

236

   

162

   

154

   

681

   

14%

Mid-Atlantic

 

168

   

151

   

68

   

217

   

604

   

13%

Southwest

 

51

   

160

   

139

   

146

   

496

   

10%

Central

 

164

   

80

   

62

   

   

306

   

6%

Various

 

68

   

142

   

15

   

5

   

230

   

5%

Strategic Investments

 

   

   

   

   

53

   

1%

Total

 

$

1,653

   

$

1,468

   

$

530

   

$

1,122

   

$

4,826

   

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 Contact: Jason Fooks, Vice President of Investor Relations & Marketing, 1114 Avenue of the Americas, New York, NY 10036, (212) 930-9400, investors@istar.com