-- Net income (loss) allocable to common shareholders for the second quarter 2012 was ($59) million or ($0.70) per diluted common share.
-- During the quarter, the Company issued $275 million of 9.0% senior unsecured notes due 2017.
-- Company retired $640 million of debt during the second quarter and had $707 million of cash, including cash reserved for debt repayment, at June 30, 2012.
-- During the quarter, the Company sold a portfolio of 12 net lease assets for $130 million in net proceeds and recorded a gain of $25 million from the transaction.
NEW YORK, July 27, 2012 /PRNewswire/-- iStar Financial Inc. (NYSE: SFI) today reported results for the second quarter ended June 30, 2012.
Second Quarter 2012 Results
iStar reported net income (loss) allocable to common shareholders for the second quarter of ($59.0) million, or ($0.70) per diluted common share, compared to ($35.5) million, or ($0.38) per diluted common share, for the second quarter 2011.
Adjusted income (loss) allocable to common shareholders for the second quarter was ($1.4) million, compared to ($1.9) million for the second quarter 2011. Adjusted income (loss) represents net income computed in accordance with GAAP, prior to the effects of certain non-cash items, including depreciation, loan loss provisions and impairments.
Adjusted EBITDA for the quarter was $106.6 million, compared to $102.7 million for the same period last year. Please see the financial tables that follow the text of this press release for the Company's calculation of adjusted EBITDA and adjusted income, as well as a reconciliation to GAAP net income (loss).
During the second quarter, the Company generated $555.4 million of proceeds from its portfolio, comprised of $185.8 million in principal repayments, $117.0 million primarily from residential unit sales of other real estate owned (OREO) assets, $136.2 million from sales of net lease assets, $57.0 million from loan sales and $59.4 million from other investments. Additionally, the Company funded a total of $39.7 million of investments and capital expenditures.
As previously announced, during the quarter the Company issued $275.0 million of 9.0% senior unsecured notes due 2017. Proceeds from the new issuance will be used to refinance unsecured debt maturing in 2012. During the quarter, the Company repaid $90.3 million of its 5.5% senior unsecured notes due June 2012 and repurchased $191.5 million of its senior convertible unsecured notes due October 2012.
The Company repaid $225.7 million on the A-1 tranche of its 2011 secured credit facility, bringing the remaining outstanding balance to $646.1 million at the end of the quarter. The Company has satisfied all minimum amortization requirements on the A-1 tranche of its 2011 secured credit facility prior to the payment of any remaining balance at maturity in June 2013.
The Company also repaid $81.4 million on the A-1 tranche of its 2012 secured credit facility, bringing the remaining outstanding balance to $328.6 million at the end of the quarter. Based on the total amount repaid, the Company has exceeded the minimum cumulative amortization on the A-1 tranche of its 2012 secured credit facility of $41.0 million required to be paid before December 31, 2012.
In addition, the Company repurchased 809,720 shares of its outstanding common stock during the quarter for an average price of $5.69 per share. At the end of the quarter, the Company had remaining authority to repurchase up to $16.0 million of shares under its share repurchase program.
The Company's leverage was 2.5x at June 30, 2012, an improvement from 2.7x in the prior quarter. Please see the financial tables that follow the text of this press release for a calculation of the Company's leverage. The Company's weighted average effective cost of debt for the second quarter was 6.5%. At the end of the quarter, cash and cash equivalents, including cash reserved for repayment of indebtedness, totaled $706.9 million.
At June 30, 2012, the Company's total portfolio had a carrying value of $6.31 billion, gross of general loan loss reserves. The portfolio was comprised of $2.36 billion of loans and other lending investments, $1.55 billion of net lease assets, $1.97 billion of owned real estate and $427.5 million of other investments.
At June 30, 2012, the Company's $1.72 billion of performing loans and other lending investments had a weighted average last dollar loan-to-value ratio of 74.1% and a weighted average maturity of 2.7 years. The performing loans consisted of 50.9% floating rate loans that generated a weighted average effective yield for the quarter of 6.7%, or approximately 668 basis points over the average one-month LIBOR rate for the quarter, and 49.1% fixed rate loans that generated a weighted average effective yield for the quarter of 8.6%. The weighted average risk rating of the Company's performing loans improved to 3.16, from 3.27 in the prior quarter. Included in the performing loan balance were $75.0 million of watch list assets, compared to $169.8 million in the prior quarter.
At June 30, 2012, the Company's non-performing loans (NPLs) had a carrying value of $639.0 million, net of $491.3 million of specific reserves. This compares to $662.7 million, net of $477.2 million of specific reserves, at the end of the prior quarter.
For the second quarter, the Company recorded $26.5 million in loan loss provision versus $17.5 million in the prior quarter. At June 30, 2012, loan loss reserves totaled $563.8 million or 19.8% of total gross carrying value of loans. This compares to loan loss reserves of $567.2 million or 18.0% of total gross carrying value of loans at March 31, 2012.
At the end of the quarter, the Company's $1.55 billion of net lease assets, net of $342.2 million of accumulated depreciation, were 91.0% leased with a weighted average remaining lease term of 12.2 years. The weighted average risk rating of the Company's net lease assets was 2.70, versus 2.63 in the prior quarter. During the quarter, the Company sold a portfolio of 12 net lease assets for $130.5 million in net proceeds and recorded a gain of $24.8 million from the transaction. Certain of the properties were subject to a $50.8 million secured term loan that was repaid in full at closing with a portion of the net sales proceeds. During the quarter, the Company recorded $6.2 million of impairments within its net lease asset portfolio. The Company's occupied net lease assets generated a weighted average effective yield of 9.3% and the total net lease assets generated a weighted average effective yield of 8.4% for the quarter.
At the end of the quarter, the Company's $1.97 billion owned real estate portfolio was comprised of $722.2 million of OREO and $1.25 billion of real estate held for investment (REHI). The Company's OREO assets are considered held for sale based on management's current intention to market and sell the assets in the near term, while management's current intent and strategy is to hold, operate or develop its REHI assets over a longer term.
During the quarter, the Company took title to properties with a carrying value of $45.4 million. The Company's owned real estate portfolio generated $28.1 million of combined revenue and income from sales of residential property units, offset by $22.4 million of net expenses for the quarter. In addition, the Company funded $18.9 million of capital expenditures associated with its owned real estate portfolio.
iStar Financial Inc. (NYSE: SFI) 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 http://www.istarfinancial.com/.
iStar Financial will hold a quarterly earnings conference call at 10:00 a.m. ET today, July 27, 2012. This conference call will be broadcast live over the Internet and can be accessed by all interested parties through iStar Financial's website, http://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 Inc.'s expectations include 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 (including OREO assets), increases in NPLs, repayment levels, the Company's ability to reduce its indebtedness, the Company's ability to maintain compliance with its debt covenants, economic conditions, the availability of liquidity for commercial real estate transactions and other risks detailed from time to time in iStar Financial Inc.'s SEC reports.)
SOURCE iStar Financial Inc.
iStar Financial Inc., David M. DiStaso, Chief Financial Officer, or Jason Fooks, Investor Relations, +1-212-930-9400