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iStar Financial Announces 35% Earnings Increase
NEW YORK, July 25 /PRNewswire/ -- iStar Financial Inc. (NYSE: SFI) reported that adjusted earnings for the quarter ended June 30, 2000 increased 35% to $0.66 per diluted common share, from $0.49 per diluted share for the quarter ended June 30, 1999. Adjusted earnings for the second quarter 2000 totaled $57.1 million, up 108% from $27.5 million for second quarter 1999. Adjusted earnings represent GAAP net income before depreciation and amortization. Net income allocable to common shareholders for the second quarter grew to $44.6 million, or $0.52 per diluted common share, compared with $24.6 million, or $0.43 per diluted share, in the same period of 1999.
iStar Financial announced that during the second quarter, it closed five new financing commitments totaling $241.2 million, $238.2 million of which was funded during the quarter. In addition, the Company funded $14.2 million under five pre-existing commitments and received $41.4 million in principal repayments. iStar Financial's recent transactions continue to reflect the Company's core business strategy of originating and acquiring large-balance, structured financing transactions secured by high-quality commercial real estate assets in major metropolitan markets across the United States.
Selected Income Statement Data
(In thousands, except per share amounts)
Three Months Ended June 30, 2000 1999 Net investment income $68,358 $35,174 Other income 3,827 3,525 Non-interest expense (18,756) (8,816) Net income before minority interest and gain on sale $53,429 $29,883 Minority interest (41) -- Gain on sale of net lease assets 441 -- Preferred dividends (9,227) (5,308) Net income allocable to common shareholders $44,602 $24,575 Per basic share(A) $0.52 $0.46 Per diluted share $0.52 $0.43 Adjusted earnings allocable to common shareholders(B) $57,144 $27,488 Per basic share $0.67 $0.52 Per diluted share $0.66 $0.49 Dividends $0.60 $0.43
(A) For the quarter ended June 30, 1999, net income per basic common share excludes 1% of net income allocable to iStar Financial's class B shares. On November 4, 1999, the class B shares were exchanged for common shares in connection with the Company's acquisition of TriNet Corporate Realty Trust and related transactions. As a result, the Company now has a single class of common shares outstanding.
(B) Adjusted earnings excludes gain on sale of net lease assets.
Selected Balance Sheet Data
As of As of June 30, 2000 Dec. 31, 1999 (unaudited) Loans and other lending investments, net $2,253,655 $2,003,506 Real estate subject to operating leases, net 1,653,512 1,714,284 Total assets 4,041,585 3,813,552 Debt obligations 2,138,060 1,901,204 Total liabilities 2,195,904 2,009,644 Total shareholders' equity 1,843,116 1,801,343
In the second quarter of 2000, iStar Financial generated $241.2 million in new financing commitments in five separate transactions. The Company also funded an additional $14.2 million under five pre-existing financing commitments. Jay Sugarman, iStar Financial's chairman and chief executive officer, stated, "This quarter, we continued to generate strong earnings growth with no credit losses. With over $80 million of new credit tenant lease (CTL) transactions, we are beginning to see the fruits of our acquisition of the ACRE Partners credit lease investment platform, which we completed in the first quarter of this year. We look forward to benefiting from an increasing pipeline of CTL transactions, which provides us with a growth engine that is complementary to our core lending businesses."
Credit Tenant Leasing
During the second quarter of 2000, the Company executed seven new leases, lease extensions and early lease renewals on 1,043,091 square feet of office and industrial facilities. Of these transactions, three leases (totaling 463,242 square feet) represented renewals of leases expiring in 2000, and two leases (totaling 467,939 square feet) represented early renewals of existing leases expiring in 2001 and thereafter.
Mr. Sugarman commented, "Our team continues to proactively manage the credit tenant lease portfolio to create value and reduce real estate risk. By extending lease maturities on the existing asset base and focusing our origination efforts on long-term net lease transactions, we play to our strengths in corporate credit underwriting and reduce our exposure to real estate market conditions." The combined weighted average lease term for second quarter CTL investment and leasing transactions was 13.8 years.
Since announcing in June 1999 its agreement to acquire TriNet, the Company has increased the weighted average term of the combined net lease portfolio to 8.3 years through new long-term leasing transactions and early lease renewals. As of June 30, 2000, the net lease portfolio was 96.4% leased. Excluding a vacant facility which is currently under contract for sale, the portfolio was 98.6% leased.
Non-Core Asset Dispositions
During the second quarter, the Company made further progress on its previously announced plan to sell approximately $200 million of non-core net lease assets acquired in conjunction with the TriNet transaction. Since announcing the TriNet transaction, the Company has sold or contracted to sell approximately $170 million of such assets. Consistent with its focus on long-term, corporate lease financing transactions, the weighted average remaining lease term on the non-core assets sold or under contract was 1.9 years.
The Company used the net proceeds from the sales to reduce the balance on its revolving credit facilities. Assets sold in the second quarter included:
In May, the Company completed the inaugural offering under its proprietary matched funding program, iStar Asset Receivables ("STARS"), Series 2000-1. The Company issued $896 million of investment grade bonds collateralized by approximately $1.2 billion of its first mortgage, second mortgage and mezzanine loan assets. The maturities of the bonds issued match fund the maturities of the loan assets financed under the program. The weighted average interest rate on the investment grade bonds was LIBOR + 0.92%.
The STARS transaction was accounted for as an on-balance sheet financing, resulting in the underlying assets remaining on the Company's books and the issued bonds recorded as debt. A portion of the proceeds was used to reduce the outstanding balances under iStar Financial's credit facilities and repay approximately $200 million of term loans. The STARS securitization structure provides the Company with the ability to issue future series of bonds upon the contribution of additional collateral to the program.
In June, the Company closed a $60 million term loan secured by a corporate lending investment it originated in the first quarter of 2000. This new debt replaces a $30 million interim facility, and effectively match funds the expected weighted average maturity of the underlying corporate loan asset.
Subsequent to quarter end, iStar Financial also successfully upsized one of its unsecured credit facilities to $100 million by syndicating $50 million to a major commercial bank. This facility has a two-year primary term and a one-year extension at the Company's option, and bears interest at LIBOR plus 2.00% to 2.25%, depending upon certain conditions.
Spencer B. Haber, iStar Financial's executive vice president -- finance and chief financial officer, commented, "With the completion of this quarter's financing transactions, we have match funded the majority of our structured finance business, addressed our remaining 2000 debt maturities, and taken the next step forward in optimizing the right side of our balance sheet to drive future earnings growth. The Company's balance sheet is also highly match funded in terms of interest rate risk, and we have substantial excess liquidity available to fund future new business originations."
Mr. Haber continued, "STARS represents an important milestone for iStar Financial, providing us with a replenishable source of attractively-priced capital with which to match fund our lending business. In addition, this quarter, we added two leading money-center banks to the Company's growing group of term lenders and credit facility participants. Our funding initiatives now turn to refinancing 2001 debt maturities and further educating the rating agencies as to the strength of our corporate credit."
During the second quarter of 2000, iStar Financial funded its origination and acquisition activities with operating cash flow, excess liquidity generated by the STARS transaction, new term loans, and borrowings under all four of its revolving credit facilities. At June 30, the Company had $452.5 million outstanding under more than $1.6 billion of total credit facilities. iStar Financial's consolidated ratio of book value debt to shareholders' equity was 1.2x as of June 30, 2000, based on debt obligations of $2.1 billion and shareholders' equity of $1.8 billion.
On July 3, 2000, iStar Financial declared a regular quarterly cash dividend of $0.60 per common share for the quarter ended June 30, 2000. This dividend represents a 40% increase over the $0.43 dividend paid for second quarter 1999. The second quarter 2000 dividend, which is payable on July 31, 2000 to holders of record as of July 17, 2000, represents approximately 90% of basic adjusted earnings per share for the second quarter. In addition, on July 21, 2000, iStar Financial's Board of Directors elected H. Cabot Lodge as a director, consistent with the previously announced terms of the Company's acquisition of ACRE Partners.
iStar Financial is the leading publicly traded finance company focused on the commercial real estate industry. The Company, which is taxed as a real estate investment trust, provides structured mortgage, mezzanine and lease financing through its origination, acquisition and servicing platform. The Company's mission is to maximize risk-adjusted returns on equity by providing innovative and value-added financing solutions to private and corporate owners of real estate nationwide.
iStar Financial will hold a conference call for investment professionals at 11:00 a.m. Eastern time today, July 25, 2000. This conference call will be broadcast live over the Internet and can be accessed by all interested parties through iStar Financial's Web site, www.istarfinancial.com, under the "investor information" section. To listen to the live call, please go to the Web site's "investor information" 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 Web site.
iStar Financial Inc.
Consolidated Income Statements
(In thousands, except per share amounts)
Three Months Three Months Ended Ended June 30, June 30, 2000 1999 Revenue: Interest income $66,864 $52,007 Operating lease income 47,223 3,723 Other income 3,827 3,525 Total revenue 117,914 59,255 Costs and expenses: Interest expense 42,770 20,556 Property operating costs 2,959 -- Depreciation and amortization 8,862 1,365 General and administrative 7,808 1,185 Provision for possible credit losses 1,500 1,250 Stock option compensation expense 586 -- Advisory fees -- 5,016 Total costs and expenses 64,485 29,372 Net income before minority interest and gain on sale 53,429 29,883 Minority interest (41) -- Gain on sale of net lease assets 441 -- Net income $53,829 $29,883 Preferred dividends (9,227) (5,308) Net income allocable to common shareholders $44,602 $24,575 Net income per common share: Basic(A) $0.52 $0.46 Diluted $0.52 $0.43 Weighted average common shares outstanding: Basic 85,281 52,471 Diluted 85,990 56,602
(A) For the quarter ended June 30, 1999, net income per basic common share excludes 1% of net income allocable to iStar Financial's class B shares. On November 4, 1999, the class B shares were exchanged for common shares in connection with the Company's acquisition of TriNet and related transactions. As a result, the Company now has a single class of common shares outstanding.
iStar Financial Inc.
Consolidated Income Statements
(In thousands, except per share amounts)
Three Months Ended Three Months Ended June 30, 2000 June 30, 1999 ADJUSTED EARNINGS PER SHARE: Net income before gain on sale(A) $53,388 $29,883 Real estate depreciation 8,862 1,365 Joint venture depreciation 832 169 Amortization 3,054 1,379 Preferred dividends (9,227) (5,308) Net income allocable to Class B shares (B) -- (275) Adjusted earnings allocable to common shareholders: Basic(B) $56,909 $27,213 Diluted $57,144 $27,488 Adjusted earnings per common share: Basic $0.67 $0.52 Diluted $0.66 $0.49 Weighted average common shares outstanding: Basic 85,281 52,471 Diluted 86,363 56,602
(A) Net income before gain on sale of net lease assets.
(B) For the quarter ended June 30, 1999, net income allocable to class B shares represents 1% of net income allocable to iStar Financial's class B shares. On November 4, 1999, the class B shares were exchanged for common shares in connection with the Company's acquisition of TriNet and related transactions. As a result, the Company now has a single class of common shares outstanding.
iStar Financial Inc. Consolidated Balance Sheets (In thousands)
As of As of June 30, 2000 Dec. 31, 1999 (unaudited) ASSETS Loans and other lending investments, net $2,253,655 $2,003,506 Real estate subject to operating leases, net 1,653,512 1,714,284 Cash and cash equivalents 32,718 34,408 Restricted cash 16,138 10,195 Marketable securities 95 4,344 Accrued interest and operating lease income receivable 18,392 16,211 Deferred operating lease income receivable 5,637 1,147 Other assets 61,438 29,457 Total assets $4,041,585 $3,813,55 LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable and other liabilities $52,619 $54,773 Dividends payable 5,225 53,667 Debt obligations: Unsecured senior notes 354,983 353,520 Unsecured revolving credit facilities 121,700 186,700 Secured revolving credit facilities 330,809 762,936 Secured term loans 409,204 559,288 iStar Asset Receivables secured notes 857,015 -- Other debt obligations 64,349 38,760 Total liabilities $2,195,904 $2,009,644 Minority interest 2,565 2,565 Shareholders' equity 1,843,116 1,801,343 Total liabilities and shareholders' equity $4,041,585 $3,813,552 iStar Financial Inc. Supplemental Information (as of and for the three-month period ended June 30, 2000) (In thousands) (unaudited)
SECOND QUARTER 2000 PERFORMANCE STATISTICS Return on Average Book Assets 6.7% Return on Average Book Equity 15.5% Efficiency Ratio (Corporate Overhead/Revenues) 7.1% SECOND QUARTER CREDIT STATISTICS EBITDA/GAAP Interest 2.6x EBITDA/Fixed Charges (A) 2.1x Debt/Book Equity 1.2x
(A) Fixed charges include interest expense and preferred dividends.
SECOND QUARTER 2000 FINANCING VOLUME SUMMARY STATISTICS
LOAN ORIGINATIONS Total/ CREDIT Floating Weighted TENANT Fixed Rate Rate Average LEASING Amount Committed $7,000 $152,573 $159,573 $81,598 Amount Funded $11,248 $159,592 $170,840 $81,598 Weighted Average GAAP Yield 16.14% 9.29% 9.74% 11.77% Weighted Average All-In Spread/Margin (basis points) (A) +987 +284 -- +577 Weighted Average Maturity (years) 3.7 3.6 3.6 20.0 First $ Loan-to-Value Ratio 0.0% 2.5% 2.4% N/A Last $ Loan-to-Value Ratio 54.7% 65.4% 64.6% N/A
(A) Based on average one-month LIBOR and average interpolated U.S. Treasury rates during the quarter.
UNFUNDED COMMITMENTS Number of Loans with Unfunded Commitments 6 Discretionary Commitments $11,153 Non-Discretionary Commitments 29,021 Total Unfunded Commitments $40,174 Estimated Funding Period Approx. 3 years iStar Financial Inc. Supplemental Information (as of and for the three-month period ended June 30, 2000) (In thousands) (unaudited)
PORTFOLIO STATISTICS AS OF JUNE 30, 2000 Security Type $ % First Mortgages $1,007 25.7% Second Mortgages 513 13.1% Corporate/Partnership Loans/Other 744 19.0% Net Leases 1,653 42.2% Total $3,917 100.0% Collateral Type $ % Office $1,936 49.5% Industrial/R&D 374 9.5% Retail 285 7.3% Hotel 651 16.6% Mixed Use 151 3.8% Apartment/Residential 196 5.0% Homebuilder/Land 145 3.7% Resort/Entertainment 179 4.6% Total $3,917 100.0% Product Line $ % Structured Finance $1,034 26.4% Portfolio Finance 366 9.4% Loan Acquisition 535 13.6% Corporate Lending 329 8.4% Credit Tenant Leasing 1,653 42.2% Total $3,917 100.0% Collateral Location $ % West $1,377 35.2% Southwest 72 1.8% South 644 16.6% Central 238 6.1% North Central 75 1.9% Northeast 663 16.9% Mid-Atlantic 256 6.5% Southeast 417 10.7% Northwest 175 4.5% Total $3,917 100.0%
SOURCE iStar Financial Inc.
CONTACT: Spencer B. Haber, Exec. Vice President and CFO, 212-930-9400, or Lianne A. Merchant, Vice Presidnet, Investor Relations, 212-930-9400, both of iStar Financial Inc./
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