Skip to content
Open Search Panel
Toggle Menu
<< Back to News
04/29/2015

iStar Financial Announces First Quarter 2015 Results

Earnings Report

- 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.'s SEC 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

<< Back to News