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04/29/2015

iStar Financial Announces First Quarter 2015 Results

 

- Adjusted income allocable to common shareholders grew to $9 million, versus a $(6) million loss for the first quarter of 2014.
- Originated $274 million of new investments.
- Closed on a new $250 million revolving credit facility.
- iStar to host an investor presentation on June 10th during NAREIT's REITWeek 2015.

NEW YORK, April 29, 2015 /PRNewswire/ -- iStar Financial Inc. (NYSE: STAR) today reported results for the first quarter ended March 31, 2015.

First Quarter 2015 Results

iStar reported adjusted income allocable to common shareholders for the first quarter of $8.5 million, or $0.10 per diluted common share, compared to a loss of $(5.5) million, or $(0.07) per diluted common share for the first quarter 2014.

Adjusted income represents net income computed in accordance with GAAP, prior to the effects of certain non-cash items, primarily including depreciation, loan loss provisions, impairments, stock-based compensation and gain/loss on early extinguishment of debt. Please see the financial tables that follow the text of this press release for the Company's calculations of adjusted income (loss) as well as reconciliations to GAAP net income (loss).

Net income (loss) allocable to common shareholders for the first quarter was $(22.6) million, or $(0.26) per diluted common share, compared to a loss of $(26.6) million, or $(0.31) per diluted common share for the first quarter 2014.

Investment Activity

iStar committed to new investments totaling $274.0 million during the first quarter, of which it funded $163.2 million. In addition, the Company funded $61.5 million associated with ongoing developments and prior financing commitments. This resulted in total fundings during the quarter of $224.7 million.

iStar generated $207.4 million of total proceeds from repayments and sales during the first quarter, ending the quarter with $625.4 million of available cash.

Portfolio Overview

At March 31, 2015, the Company's portfolio totaled $5.20 billion, which is gross of $452.4 million of accumulated depreciation and $38.0 million of general loan loss reserves.

Real Estate Finance

At March 31, 2015, the Company's real estate finance portfolio totaled $1.58 billion, gross of general loan loss reserves.  The portfolio included $1.51 billion of performing loans with a weighted average maturity of 2.6 years. The performing loans were comprised of $776.5 million of first mortgages / senior loans and $734.5 million of mezzanine / subordinated debt. The performing loans had a weighted average last dollar loan-to-value ratio of 70% and generated a 9.5% yield for the quarter. During the quarter, the Company invested $188.0 million and received $40.6 million of proceeds within its real estate finance portfolio.

At March 31, 2015, the Company's non-performing loans (NPLs) had a carrying value of $64.8 million. At March 31, 2015, loan loss reserves totaled $102.8 million, comprised of $38.0 million of general reserves and $64.8 million of asset specific reserves.

Net Lease

At the end of the quarter, iStar's net lease portfolio totaled $1.68 billion, gross of $370.8 million of accumulated depreciation.

The Company's net lease portfolio totaled 19 million square feet across 33 states. Occupancy for the portfolio was 95.9% at the end of the quarter, with a weighted average remaining lease term of 14.6 years. The occupied assets generated an unleveraged yield of 7.6% and the total net lease portfolio generated an unleveraged yield of 7.3% for the quarter.

Operating Properties

At the end of the quarter, the Company's operating properties portfolio totaled $731.7 million, gross of $72.8 million of accumulated depreciation, and was comprised of $598.8 million of commercial and $132.9 million of residential real estate properties. During the quarter, the Company invested $13.9 million within its operating properties portfolio and received $143.7 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 $31.1 million of revenue offset by $22.5 million of expenses during the quarter. iStar generally seeks to reposition or redevelop these assets with the objective of maximizing their values through the infusion of capital and/or intensive asset management efforts.

At the end of the quarter, the Company had $108.1 million of stabilized commercial operating properties that were 88% leased and generated an unleveraged yield of 8.2% for the quarter. The remainder of the commercial operating portfolio was comprised of $490.7 million of transitional properties that were 56% 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 123,000 square feet.

During the quarter, a partnership, of which the Company owns 90%, sold a leasehold interest in One Detroit Center, a transitional commercial operating property in Detroit, MI, and received $93.5 million in net proceeds. The partnership retained its fee interest in the land, entering into a 99-year ground lease in conjunction with the sale. The partnership will receive an initial annual rent of $2.5 million under the ground lease, which provides for fixed and inflation-based rental increases during the term of the lease.

"We utilized a structure that is fairly uncommon for the Detroit market to solve our objective of capturing full value for this landmark property, while at the same time allowing us to retain a significant economic interest in the asset with a senior position and very long duration," said Jay Sugarman, iStar's chairman and chief executive officer. "The value created through this transaction serves as a prime example of our operating properties strategy."

Residential Operating Properties

At the end of the quarter, the residential operating portfolio was comprised of 263 condominium units, generally located within luxury condominium projects in major U.S. cities. During the quarter, the Company sold 69 condominium units, resulting in $49.9 million of proceeds and recorded $18.6 million of income, offset by $4.9 million of expenses.

Land

At the end of the quarter, the Company's land portfolio totaled $1.11 billion, gross of accumulated depreciation, and was comprised of 11 master planned community projects, 14 urban infill land parcels and six waterfront land parcels located throughout the United States.

Master planned communities represent large-scale residential projects that the Company will entitle, plan and/or develop. These projects are currently entitled for approximately 25,000 lots. The remainder of the Company's land includes infill and waterfront parcels located in and around major cities that the Company intends to sell itself or in partnership with commercial real estate developers. These projects are currently entitled for approximately 6,000 residential and hotel units, and select projects include commercial, retail and office uses.

The Company's land portfolio generated $9.1 million of revenue, offset by $6.9 million of land development cost of sales. In addition, it generated $2.6 million of earnings from its land equity method investments. For the same period last year, the Company reported $4.6 million of revenue, offset by $3.7 million of cost of sales.

At March 31, 2015, the Company had seven land projects in production, 12 in development and 12 in the pre-development phase. During the quarter, the Company invested $21.8 million in its land  portfolio across 10 projects. As the Company continues to invest and build value in its land portfolio, it expects to move additional projects into production in the coming year and grow its land revenues.

Capital Markets

During the quarter, the Company entered into a new $250.0 million revolving credit facility with JPMorgan, Bank of America Merrill Lynch and Barclays. Based on the Company's current credit ratings, the new facility bears interest at a rate of LIBOR plus 2.75%. The facility's interest rate  would decrease by up to 50 basis points should the Company's credit ratings be upgraded by Moody's or Standard & Poor's. The revolving credit facility matures in March 2018, at which time the Company has the option to convert any outstanding balance into a term loan that would mature in March 2019.  The new credit facility is initially secured by a borrowing base of $438.3 million.

During the quarter, the Company repaid $10.3 million on its 2012 Secured Credit Facility, bringing the remaining balance to $348.2 million at March 31, 2015. The facility matures in March 2017.

The Company's weighted average cost of debt for the first quarter was 5.5%, down from 5.6% for the first quarter of last year. The Company's leverage was 2.1x at March 31, 2015, at the low end of 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.

The Company repurchased 44,000 shares of its common stock during the quarter at an average price of $12.66 per share. The Company has remaining authorization to repurchase $28.5 million of its common stock.

Annual Meeting

The Company will host its Annual Meeting of Shareholders at the Sofitel Hotel, located at 45 West 44th Street, New York, New York 10036 on Wednesday, May 20, 2015 at 9:00 a.m. ET. All shareholders are cordially invited to attend.

[Financial Tables to Follow]

*                   *                *

iStar Financial Inc. (NYSE: STAR) is a fully-integrated finance and investment company focused on the commercial real estate industry. The Company provides custom-tailored investment capital to high-end private and corporate owners of real estate and invests directly across a range of real estate sectors. The Company, which is taxed as a real estate investment trust ("REIT"), has invested more than $35 billion over the past two decades. Additional information on iStar Financial is available on the Company's website at www.istarfinancial.com.

iStar Financial Inc.

Logo - http://photos.prnewswire.com/prnh/20130708/NY43293LOGO

iStar Financial will hold a quarterly earnings conference call at 10:00 a.m. ET today, April 29, 2015. This conference call will be broadcast live over the Internet and can be accessed by all interested parties through iStar Financial's website, www.istarfinancial.com, under the "Investor Relations" section. To listen to the live call, please go to the website's "Investor Relations" 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 the iStar Financial 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 Financial Inc. 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 Financial'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, actual results of condominium sales meeting our expectations, the Company's ability to generate income and gains from operating properties and land and other risks detailed from time to time in iStar Financial Inc.'sSEC reports.

 

 

iStar Financial Inc.

Consolidated Statements of Operations

(In thousands)

(unaudited)

 
   

Three Months
Ended March 31,

   

2015

 

2014

REVENUES

       

Operating lease income

 

$

59,139

   

$

62,108

 

Interest income

 

34,896

   

27,914

 

Other income

 

10,564

   

14,584

 

Land development revenue

 

8,258

   

4,143

 

Total revenues

 

$

112,857

   

$

108,749

 

COST AND EXPENSES

       

Interest expense

 

$

54,632

   

$

57,456

 

Real estate expense

 

39,634

   

42,613

 

Land development cost of sales

 

6,891

   

3,654

 

Depreciation and amortization

 

18,501

   

18,613

 

General and administrative(1)

 

20,753

   

19,788

 

Provision for (recovery of) loan losses

 

4,293

   

(3,400)

 

Impairment of assets

 

   

2,979

 

Other expense

 

2,123

   

221

 

Total costs and expenses

 

$

146,827

   

$

141,924

 

Income (loss) before earnings from equity method investments and other items

 

$

(33,970)

   

$

(33,175)

 

Loss on early extinguishment of debt

 

(168)

   

(1,180)

 

Earnings from equity method investments

 

6,547

   

3,177

 

Income (loss) from continuing operations before income taxes

 

$

(27,591)

   

$

(31,178)

 

Income tax (expense) benefit

 

(5,878)

   

507

 

Income (loss) from continuing operations

 

$

(33,469)

   

$

(30,671)

 

Income from sales of real estate

 

21,156

   

16,494

 

Net income (loss)

 

$

(12,313)

   

$

(14,177)

 

Net (income) loss attributable to noncontrolling interests

 

1,841

   

(454)

 

Net income (loss) attributable to iStar Financial Inc.

 

$

(10,472)

   

$

(14,631)

 

Preferred dividends

 

(12,830)

   

(12,830)

 

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

 

749

   

889

 

Net income (loss) allocable to common shareholders

 

$

(22,553)

   

$

(26,572)

 
   

(1) For the three months ended March 31, 2015 and 2014, includes $3,238 and $2,075 of stock-based compensation expense, respectively.

 

(2) HPU Holders are current and former Company employees who purchased high performance common stock units under the Company's High Performance Unit Program. Participating Security holders are non-employee directors who hold common stock equivalents and retricted stock awards granted under the Company's LTIP who are eligible to participate in dividends.

 

 


 

iStar Financial Inc.

Earnings Per Share Information

(In thousands, except per share data)

(unaudited)

 
   

Three Months
Ended March 31,

   

2015

 

2014

EPS INFORMATION FOR COMMON SHARES

       

Income (loss) from continuing operations(1)

Basic and diluted

 

$

(0.26)

   

$

(0.31)

 

Net income (loss)

       

Basic and diluted

 

$

(0.26)

   

$

(0.31)

 

Adjusted income (loss)

       

Basic and diluted

 

$

0.10

   

$

(0.07)

 

Weighted average shares outstanding

       

Basic

 

85,497

   

84,819

 

Diluted (for net income per share)

 

85,497

   

84,819

 

Diluted (for adjusted income per share)

 

97,454

   

84,819

 

Common shares outstanding at end of period

 

85,520

   

84,855

 
         

EPS INFORMATION FOR HPU SHARES

       

Income (loss) from continuing operations(1)

Basic and diluted

 

$

(49.93)

   

$

(59.27)

 

Net income (loss)

       

Basic and diluted

 

$

(49.93)

   

$

(59.27)

 

Weighted average shares outstanding

       

Basic and diluted

 

15

   

15

 
   

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

 

 

 

iStar Financial Inc.

Consolidated Balance Sheets

(In thousands)

(unaudited)

 
 

As of

 

As of

 

March 31, 2015

 

December 31, 2014

ASSETS

     
       

Real estate

     

Real estate, at cost

$

2,988,670

   

$

3,145,563

 

Less: accumulated depreciation

(452,397)

   

(468,849)

 

Real estate, net

$

2,536,273

   

$

2,676,714

 

Real estate available and held for sale

292,608

   

285,982

 
 

$

2,828,881

   

$

2,962,696

 

Loans receivable and other lending investments, net

1,537,846

   

1,377,843

 

Other investments

341,549

   

354,119

 

Cash and cash equivalents

625,352

   

472,061

 

Accrued interest and operating lease income receivable, net

18,450

   

16,367

 

Deferred operating lease income receivable

96,279

   

98,262

 

Deferred expenses and other assets, net

204,223

   

181,785

 

Total assets

$

5,652,580

   

$

5,463,133

 
       

LIABILITIES AND EQUITY

     
       

Accounts payable, accrued expenses and other liabilities

$

158,251

   

$

180,902

 

Debt obligations, net

4,261,528

   

4,022,684

 

Total liabilities

$

4,419,779

   

$

4,203,586

 
       

Redeemable noncontrolling interests

$

13,203

   

$

11,199

 
       

Total iStar Financial Inc. shareholders' equity

$

1,169,113

   

$

1,197,092

 

Noncontrolling interests

50,485

   

51,256

 

Total equity

$

1,219,598

   

$

1,248,348

 
       

Total liabilities and equity

$

5,652,580

   

$

5,463,133

 

 

iStar Financial Inc.

       

Segment Analysis

       

(In thousands)

       

(unaudited)

       
         

FOR THE THREE MONTHS ENDED MARCH 31, 2015

           
 

Real Estate
Finance

 

Net
Lease

 

Operating Properties

 

Land

 

Corporate / Other

 


Total

Operating lease income

$

   

$

36,339

   

$

22,614

   

$

186

   

$

   

$

59,139

 

Interest income

34,896

   

   

   

   

   

34,896

 

Other income

48

   

3

   

8,876

   

633

   

1,004

   

10,564

 

Land development revenue

   

   

   

8,258

   

   

8,258

 

Earnings (loss) from equity method investments

   

1,633

   

535

   

2,609

   

1,770

   

6,547

 

Income from sales of real estate

   

3,527

   

17,629

   

   

   

21,156

 

Total revenue and other earnings

$

34,944

   

$

41,502

   

$

49,654

   

$

11,686

   

$

2,774

   

$

140,560

 

Real estate expense

   

(5,270)

   

(27,424)

   

(6,940)

   

   

(39,634)

 

Land development cost of sales

   

   

   

(6,891)

   

   

(6,891)

 

Other expense

1

   

   

   

   

(2,124)

   

(2,123)

 

Allocated interest expense

(14,235)

   

(16,835)

   

(7,668)

   

(7,544)

   

(8,350)

   

(54,632)

 

Allocated general and administrative(1)

(3,094)

   

(3,761)

   

(1,828)

   

(2,793)

   

(6,039)

   

(17,515)

 

Segment profit (loss)

$

17,616

   

$

15,636

   

$

12,734

   

$

(12,482)

   

$

(13,739)

   

$

19,765

 
                 

(1) Excludes $3,238 of stock-based compensation expense.

               
                       
                       
                       
                       

AS OF MARCH 31, 2015

                     
 

Real Estate
Finance

 

Net
Lease

 

Operating Properties

 

Land

 

Corporate / Other

 


Total

Real estate

                     

Real estate, at cost

$

   

$

1,548,255

   

$

579,512

   

$

860,903

   

$

   

$

2,988,670

 

Less: accumulated depreciation

   

(370,818)

   

(72,822)

   

(8,757)

   

   

(452,397)

 

Real estate, net

$

   

$

1,177,437

   

$

506,690

   

$

852,146

   

$

   

$

2,536,273

 

Real estate available and held for sale

   

11,307

   

139,853

   

141,448

   

   

292,608

 

Total real estate

$

   

$

1,188,744

   

$

646,543

   

$

993,594

   

$

   

$

2,828,881

 

Loans receivable and other lending investments, net

1,537,846

   

   

   

   

   

1,537,846

 

Other investments

   

124,464

   

12,291

   

108,892

   

95,902

   

341,549

 

Total portfolio assets

$

1,537,846

   

$

1,313,208

   

$

658,834

   

$

1,102,486

   

$

95,902

   

$

4,708,276

 

Cash and other assets

                   

944,304

 

Total assets

                   

$

5,652,580

 

 

iStar Financial Inc.

Supplemental Information

(In thousands)

(unaudited)

 
   

Three Months
Ended March 31,

   

2015

   

2014

 

ADJUSTED INCOME

       

Reconciliation of Net Income to Adjusted Income

       

Net income (loss) allocable to common shareholders

 

$

(22,553)

   

$

(26,572)

 

Add: Depreciation and amortization

 

20,072

   

18,895

 

Add: Provision for (recovery of) loan losses

 

4,293

   

(3,400)

 

Add: Impairment of assets

 

4,337

   

2,979

 

Add: Stock-based compensation expense

 

3,238

   

2,075

 

Add: Loss on early extinguishment of debt

 

168

   

1,180

 

Less: HPU/Participating Security allocation

 

(1,032)

   

(703)

 

Adjusted income (loss) allocable to common shareholders(1)

 

$

8,523

   

$

(5,546)

 
   

(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 believes that it is useful to consider Adjusted Income because the adjustments are non-cash items that do not necessarily reflect an actual change in the long-term economic value or performance of our assets. 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 Financial Inc.

Supplemental Information

(In thousands)

(unaudited)

 
 

Three Months Ended

March 31, 2015

OPERATING STATISTICS

 
   

Expense Ratio

 

General and administrative expenses - annualized (A)

$

83,012

 

Average total assets (B)

$

5,557,857

 

Expense Ratio (A) / (B)

1.5

%

   
 

As of

 

March 31, 2015

Leverage

 

Book debt

$

4,261,528

 

Less: Cash and cash equivalents

(625,352)

 

Net book debt (C)

$

3,636,176

 
   

Book equity

$

1,219,598

 

Add: Accumulated depreciation and amortization(1)

497,598

 

Add: General loan loss reserves

38,000

 

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

$

1,755,196

 

Leverage (C) / (D)

 

2.1x

 
   

UNENCUMBERED ASSETS / UNSECURED DEBT

 
   

Unencumbered assets (E)(2)

$

4,867,190

 

Unsecured debt (F)

$

3,426,890

 

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

 

1.4x

 
 

(1) Accumulated depreciation and amortization includes our 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 Financial Inc.

Supplemental Information

(In thousands)

(unaudited)

 
       

As of

       

March 31, 2015

UNFUNDED COMMITMENTS

         
           

Performance-based commitments

     

$

639,515

 

Strategic investments

     

45,762

 

Discretionary fundings

     

18,065

 

Total Unfunded Commitments

     

$

703,342

 
           

LOAN RECEIVABLE CREDIT STATISTICS

As of

 

March 31, 2015

 

December 31, 2014

           

Carrying value of NPLs /

         

As a percentage of total carrying value of loans

$

64,750

 

4.8

%

 

$

65,047

 

5.5

%

           

Asset specific reserves for loan losses /

         

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

$

64,783

 

47.3

%

 

$

64,990

 

46.5

%

           

Total reserve for loan losses /

         

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

$

102,783

 

7.1

%

 

$

98,490

 

7.6

%

   

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

 

 

iStar Financial Inc.

Supplemental Information

(In millions)

(unaudited)

 

PORTFOLIO STATISTICS AS OF MARCH 31, 2015(1)

                         

Property Type

 

Real Estate Finance

 

Net Lease

 

Operating Properties

 

Land

 

Total

 

% of

Total

Office / Industrial

 

$

161

   

$

913

   

$

180

   

$

   

$

1,254

   

24.1

%

Land

 

28

   

   

   

1,111

   

1,139

   

21.9

%

Mixed Use / Mixed Collateral

 

445

   

   

245

   

   

690

   

13.3

%

Entertainment / Leisure

 

   

568

   

   

   

568

   

10.9

%

Hotel

 

331

   

136

   

54

   

   

521

   

10.0

%

Condominium

 

212

   

   

133

   

   

345

   

6.6

%

Other Property Types

 

288

   

10

   

   

   

298

   

5.7

%

Retail

 

111

   

57

   

120

   

   

288

   

5.6

%

Strategic Investments

 

   

   

   

   

96

   

1.9

%

Total

 

$

1,576

   

$

1,684

   

$

732

   

$

1,111

   

$

5,199

   

100.0

%

                         

Geography

 

Real Estate Finance

 

Net Lease

 

Operating Properties

 

Land

 

Total

 

% of
Total

Northeast

 

$

796

   

$

389

   

$

1

   

$

199

   

$

1,385

   

26.6

%

West

 

81

   

426

   

78

   

397

   

982

   

18.9

%

Mid-Atlantic

 

323

   

143

   

137

   

194

   

797

   

15.3

%

Southeast

 

80

   

255

   

279

   

151

   

765

   

14.7

%

Southwest

 

131

   

234

   

185

   

148

   

698

   

13.4

%

Central

 

112

   

93

   

50

   

9

   

264

   

5.1

%

Various

 

27

   

142

   

2

   

13

   

184

   

3.6

%

International

 

26

   

2

   

   

   

28

   

0.5

%

Strategic Investments

 

   

   

   

   

96

   

1.9

%

Total

 

$

1,576

   

$

1,684

   

$

732

   

$

1,111

   

$

5,199

   

100.0

%

                         
       

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

     

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/istar-financial-announces-first-quarter-2015-results-300074144.html

SOURCE iStar Financial Inc.

David M. DiStaso, Chief Financial Officer, Jason Fooks, Investor Relations, (212) 930-9400, investors@istarfinancial.com