- Adjusted income (loss) allocable to common shareholders for the third quarter 2012 was ($26) million.
- Net income (loss) allocable to common shareholders for the third quarter 2012 was ($72) million or ($0.86) per diluted common share.
- Subsequent to quarter end, the Company completed a new $1.8 billion, five-year secured term loan to refinance its 2011 A-1 / A-2 facilities.
- In connection with the new financing, the Company's corporate family rating was upgraded by Moody's to B2 and its long-term issuer credit rating was affirmed by S&P at B+.
NEW YORK, Oct. 26, 2012 /PRNewswire/ -- iStar Financial Inc. (NYSE: SFI) today reported results for the third quarter ended September 30, 2012.
Third Quarter 2012 Results
iStar reported net income (loss) allocable to common shareholders for the third quarter of ($71.8) million, or ($0.86) per diluted common share, compared to ($62.2) million, or ($0.71) per diluted common share, for the third quarter 2011. Results in the prior year period included a one-time $22.2 million gain from discontinued operations associated with a net lease asset portfolio sale.
Adjusted income (loss) allocable to common shareholders for the third quarter was ($26.0) million, compared to ($19.0) million for the third 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 $76.6 million, compared to $83.1 million for the same period last year. Please see the financial tables that follow the text of this press release for the Company's calculations of adjusted income and adjusted EBITDA, as well as reconciliations to GAAP net income (loss).
During the third quarter, iStar generated $318.0 million of proceeds from its portfolio, comprised of $157.9 million in principal repayments, $79.5 million of residential unit sales, $67.1 million from sales of owned real estate assets and $13.4 million from other investments. Additionally, the Company funded a total of $28.4 million in new and existing investments.
"We have continued to execute our corporate strategy to reduce overall debt levels, maximize the value of our existing portfolio and access the capital markets in order to position ourselves for increased investment activity," said Jay Sugarman, iStar's chairman and chief executive officer. "We are pleased with our overall progress in these areas as we head into 2013."
During the quarter, iStar repaid $147.7 million on the A-1 tranche of its 2011 secured credit facility, bringing the outstanding balance to $498.3 million at the end of the quarter. The balance of the A-2 tranche of the 2011 secured credit facility at the end of the quarter was $1.45 billion.
On October 15, the Company closed on a new $1.82 billion senior secured credit facility due October 15, 2017, the proceeds of which were used to refinance the remaining balances of the 2011 A-1 / A-2 secured credit facilities. The transaction enabled iStar to unencumber certain liquid assets and provided long-term financing on a substantial portion of the Company's portfolio.
In response to the new financing, Moody's Investor Service upgraded iStar's corporate family rating to B2 and senior unsecured credit rating to B3. In addition, Moody's assigned a B1 rating to the new senior secured term loan and upgraded the A-1 and A-2 tranches of the Company's 2012 senior secured facilities to Ba3 and B1, respectively. In addition, Standard & Poor's affirmed both iStar's long-term issuer credit rating and its senior unsecured rating at B+ and assigned a BB- rating on the new senior secured term loan.
During the quarter, the Company closed on a $54.5 million secured, 10-year term loan, the proceeds of which was used to refinance existing debt on one net lease asset. The new loan bears interest at a rate of 4.85% versus 6.41% for the refinanced loan.
The Company also repaid $66.4 million on the A-1 tranche of its 2012 secured credit facility during the quarter, bringing the remaining outstanding balance to $262.3 million at September 30, 2012. Based on the total amount repaid, the Company has already exceeded the minimum cumulative amortization on the A-1 tranche of its 2012 secured credit facility of $123.0 million required to be paid before December 31, 2013. The balance of the A-2 tranche of the 2012 secured credit facility at the end of the quarter was $470.0 million.
The Company's leverage was 2.5x at September 30, 2012, unchanged from 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 third quarter was 6.5%. At the end of the quarter, cash and cash equivalents, including cash reserved for repayment of indebtedness, totaled $739.3 million.
Subsequent to quarter end, the Company repaid the remaining $460.7 million balance of its senior unsecured convertible notes due October 1, 2012 at maturity with cash.
At September 30, 2012, the Company's total portfolio had a carrying value of $6.00 billion, gross of general loan loss reserves. The portfolio was comprised of $2.16 billion of loans, $1.54 billion of net lease assets, $1.88 billion of owned real estate and $419.6 million of other investments.
At September 30, 2012, the Company's $1.52 billion of performing loans had a weighted average last dollar loan-to-value ratio of 70.8% and a weighted average maturity of 2.9 years. The performing loans consisted of 46% floating rate loans that generated a weighted average effective yield for the quarter of 6.4%, or approximately 638 basis points over the average one-month LIBOR rate for the quarter, and 54% fixed rate loans that generated a weighted average effective yield for the quarter of 8.5%. The weighted average risk rating of the Company's performing loans improved to 3.08 from 3.16 in the prior quarter. Included in the performing loan balance were $18.8 million of watch list assets, decreasing from $75.0 million in the prior quarter.
At September 30, 2012, the Company's non-performing loans (NPLs) had a carrying value of $639.9 million, net of $490.6 million of specific reserves. This compares to $639.0 million, net of $491.3 million of specific reserves, at the end of the prior quarter.
For the third quarter, the Company recorded $16.8 million in loan loss provision versus $26.5 million in the prior quarter. At September 30, 2012, loan loss reserves totaled $543.5 million or 20.4% of total gross carrying value of loans. This compares to loan loss reserves of $563.8 million or 19.8% of total gross carrying value of loans at June 30, 2012.
At the end of the quarter, the Company's $1.54 billion of net lease assets, net of $352.7 million of accumulated depreciation, were 91.3% leased with a weighted average remaining lease term of 12.0 years. The weighted average risk rating of the Company's net lease assets was 2.70, unchanged from the prior quarter. The Company's occupied net lease assets generated a weighted average effective yield of 9.6% and the total net lease assets generated a weighted average effective yield of 8.6% for the quarter.
At the end of the quarter, the Company's $1.88 billion owned real estate portfolio was comprised of $985.5 million of operating commercial real estate assets and $896.1 million of land assets. A portion of these assets have been classified as other real estate owned (OREO), based on management's current intention to market and sell the assets in the near term, while the remainder are considered real estate held for investment (REHI), based on management's current intention and strategy to hold, operate or develop the assets over a longer term.
The Company's owned real estate portfolio generated $29.9 million of combined revenue and income from sales of residential property units, offset by $24.5 million of net expenses for the quarter.
[Financial Tables to Follow]
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 www.istarfinancial.com.
iStar Financial will hold a quarterly earnings conference call at 10:00 a.m. ET today, October 26, 2012. 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 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.
David M. DiStaso, Chief Financial Officer, or Jason Fooks, Investor Relations, both of iStar Financial Inc., +1-212-930-9400, firstname.lastname@example.org