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02/25/2016

iStar Announces Fourth Quarter and Fiscal Year 2015 Results

Earnings Report

Full year adjusted income allocable to common shareholders was $84 million, or $0.81 per diluted common share
Quarterly adjusted income allocable to common shareholders was $39 million, or $0.34 per diluted common share
Current unrestricted cash balance is approximately $650 million
Repurchased 9.2 million shares since the beginning of the fourth quarter through February 24th

NEW YORK, Feb. 25, 2016 /PRNewswire/ -- iStar (NYSE: STAR) today reported results for the fourth quarter and fiscal year ended December 31, 2015.

Fourth Quarter 2015 Results

iStar reported adjusted income allocable to common shareholders for the fourth quarter of $38.5 million, or $0.34 per diluted common share, an increase from $28.3 million, or $0.26 per diluted common share for the fourth quarter 2014.

Adjusted income represents net income computed in accordance with GAAP, prior to the effects of certain non-cash items. Please see the financial tables that follow the text of this press release for the Company's calculations of adjusted income and reconciliation to GAAP net income (loss).

Net income allocable to common shareholders for the fourth quarter was $7.7 million, or $0.09 per diluted common share, compared to a loss of $(13.3) million, or $(0.16) per diluted common share for the fourth quarter 2014.

Fiscal Year 2015 Results

iStar reported adjusted income allocable to common shareholders for the year ended December 31, 2015 of $84.0 million, or $0.81 per diluted common share, compared to $109.4 million, or $1.00 per diluted common share for the year ended December 31, 2014.

"We took a cautious view in the fourth quarter regarding new investments, opting to  maintain a significant cash balance. At the same time, we exceeded our adjusted income goals by realizing upon the work and value created within our development businesses," said Jay Sugarman, iStar's chairman and chief executive officer.

Net income (loss) allocable to common shareholders for the year was $(52.7) million, or  $(0.62) per diluted common share, compared to $(33.7) million, or $(0.40) per diluted common share for the year ended December 31, 2014.

Capital Markets

The Company continued its stock repurchase activity, completing open market purchases of 9.2 million shares for $102.1 million from the beginning of the fourth quarter through February 24th. Since the beginning of 2015 to date, iStar repurchased 12.5 million shares, net, of common stock and common stock equivalents, or 14.2% of outstanding iStar common equity, for an aggregate of $132.2 million at an average price of $10.59 per share.

On February 15, 2016, the Board of Directors authorized a new $50 million stock repurchase program.

The Company's weighted average cost of debt for the fourth quarter was 5.4%, down from 5.5% for the fourth quarter of last year. The Company's leverage was 2.1x at December 31, 2015, 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.

Investment Activity

iStar funded a total of $92.5 million during the quarter associated with new investments, prior financing commitments and ongoing development, bringing total fundings for the year to $662.5 million.

iStar generated $223.0 million of repayments and sales during the fourth quarter, bringing total proceeds for the year to $971.2 million.

The Company's current balance of unrestricted cash is approximately $650 million.

Portfolio Overview

At December 31, 2015, the Company's portfolio totaled $5.09 billion, which is gross of $462.6 million of accumulated depreciation and $36.0 million of general loan loss reserves.

Real Estate Finance

At December 31, 2015, the Company's real estate finance portfolio totaled $1.64 billion, gross of general loan loss reserves. The portfolio included $1.58 billion of performing loans with a weighted average maturity of 2.3 years. The performing loans were comprised of 56% first mortgages / senior loans and 44% mezzanine / subordinated debt. The performing loans had a weighted average last dollar loan-to-value ratio of 67% and generated an 8.3% yield for the quarter. The Company invested $43.1 million and received $62.9 million of proceeds within its real estate finance portfolio during the quarter.

At December 31, 2015, the Company's non-performing loans (NPLs) had a carrying value of $60.3 million, down from $82.6 million in the third quarter. The Company recorded a $5.6 million provision for loan losses during the quarter. At December 31, 2015, loan loss reserves totaled $108.2 million, comprised of $36.0 million of general reserves and $72.2 million of asset specific reserves.

Net Lease

At the end of the quarter, iStar's net lease portfolio totaled $1.56 billion, gross of $377.4 million of accumulated depreciation. During the quarter, the Company received $61.4 million of sales proceeds from its net lease portfolio and recorded $24.5 million of gains associated with these sales.

The Company's net lease portfolio totaled 18 million square feet across 33 states. Occupancy for the portfolio was 96.4% at the end of the quarter, with a weighted average remaining lease term of 14.9 years. The net lease portfolio generated an unleveraged yield of 8.4% for the quarter.

Operating Properties

At the end of the quarter, iStar's operating properties portfolio totaled $709.0 million, gross of $79.1 million of accumulated depreciation, and was comprised of $571.8 million of commercial and $137.2 million of residential real estate properties. During the quarter, the Company invested $23.3 million within its operating properties portfolio and received $19.7 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 $26.3 million of revenue offset by $19.5 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 $123.8 million of stabilized commercial operating properties that were 89% leased and generated an unleveraged yield of 8.8% for the quarter. The remainder of the commercial operating portfolio was comprised of $448.0 million of transitional properties that were 65% leased and generated an unleveraged yield of 2.8% 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 83,000 square feet.

Residential Operating Properties

At the end of the quarter, the residential operating portfolio was comprised of condominium units generally located within luxury projects in major U.S. cities. During the quarter, iStar sold 19 condominium units, resulting in $14.6 million of proceeds and recorded $3.6 million of income, offset by $2.5 million of expenses.

Land & Development

At the end of the quarter, the Company's land & development portfolio totaled $1.11 billion, with seven projects in production, 10 in development and 13 in the pre-development phase. These projects are collectively entitled for approximately 30,000 lots and units.

For the quarter, the Company's land and development portfolio generated $71.1 million of revenues, offset by $44.6 million of cost of sales, plus $3.0 million from land development equity method investments. This resulted in total gross margin and earnings from equity method investments of $29.5 million compared $15.7 million for the same period last year.  During the quarter, the Company invested $25.1 million in its land portfolio.

For the year, the Company's gross margin and earnings from equity method investments grew to $49.5 million from $17.3 million in the prior year.

"We are beginning to realize the embedded value in our land portfolio and development efforts over the past few years as sales and profitability grew significantly year-over-year," said Sugarman. "We look forward to continuing our efforts to unlock the value in our land portfolio during 2016."

*               *                *

iStar (NYSE: STAR) finances, invests in and develops real estate and real estate related projects as part of its fully-integrated investment platform. Building on over two decades of experience and more than $35 billion of transactions, iStar brings uncommon capabilities and new ways of thinking to commercial real estate and adapts its investment strategy to changing market conditions. The Company is structured as a real estate investment trust ("REIT"), with a diversified portfolio focused on larger assets located in major metropolitan markets.

iStar logo.

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

iStar will hold a quarterly earnings conference call at 10:00 a.m. ET today, February 25, 2016. This conference call will be broadcast live over the internet and can be accessed by all interested parties through iStar's website, www.istar.com. To listen to the live call, please go to the website's "Investor" 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 iStar's 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 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'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, the Company's ability to generate income and gains from operating properties and land and other risks detailed from time to time in iStar SEC reports.

 

 

iStar
Consolidated Statements of Operations

(In thousands)

(unaudited)




Three Months
Ended December 31,


Twelve Months
Ended December 31,



2015


2014


2015


2014

REVENUES









Operating lease income


$

58,730



$

59,334



$

229,720



$

243,100


Interest income


32,463



28,565



134,687



122,704


Other income


9,718



18,780



49,931



81,033


Land development revenue


71,114



3,271



100,216



15,191


  Total revenues


$

172,025



$

109,950



$

514,554



$

462,028


COST AND EXPENSES









Interest expense


$

57,302



$

55,073



$

224,639



$

224,483


Real estate expense


35,607



38,937



146,750



163,389


Land development cost of sales


44,554



2,812



67,382



12,840


Depreciation and amortization


15,443



18,414



65,247



73,571


General and administrative(1)


18,757



18,780



81,277



88,287


Provision for (recovery of) loan losses


5,623



5,151



36,567



(1,714)


Impairment of assets


4,934



12,893



10,524



34,634


Other expense


29



1,433



6,374



6,340


  Total costs and expenses


$

182,249



$

153,493



$

638,760



$

601,830


  Income (loss) before other items


$

(10,224)



$

(43,543)



$

(124,206)



$

(139,802)


Income from sales of real estate


27,794



28,478



93,816



89,943


Earnings from equity method investments


6,249



18,057



32,153



94,905


Income tax expense


(3,843)



(4,531)



(7,639)



(3,912)


Loss on early extinguishment of debt


(2)



(416)



(281)



(25,369)


  Net income (loss)


$

19,974



$

(1,955)



$

(6,157)



$

15,765


Net (income) loss attributable to noncontrolling interests


546



1,071



3,722



704


  Net income (loss) attributable to iStar


$

20,520



$

(884)



$

(2,435)



$

16,469


Preferred dividends


(12,830)



(12,830)



(51,320)



(51,320)


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


(5)



442



1,080



1,129


  Net income (loss) allocable to common shareholders


$

7,685



$

(13,272)



$

(52,675)



$

(33,722)






(1) For the three months ended December 31, 2015 and 2014, includes $1,947 and $4,770 of stock-based compensation expense, respectively.  For the twelve months ended December 31, 2015 and 2014, includes $12,013 and $13,314 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. During the twelve months ended December 31, 2015, the Company repurchased and retired 100% of the outstanding HPU shares through an exchange offer. Participating Security holders are non-employee directors who hold common stock equivalents and restricted stock awards granted under the Company's LTIP who are eligible to participate in dividends.




 

 

iStar

Earnings Per Share Information

(In thousands, except per share data)

(unaudited)




Three Months
Ended December 31,


Twelve Months
Ended December 31,



2015


2014


2015


2014

EPS INFORMATION FOR COMMON SHARES









Income (loss) from continuing operations attributable to iStar(1)(2)





Basic


$

0.09



$

(0.16)



$

(0.62)



$

(0.40)


Diluted


$

0.09



$

(0.16)



$

(0.62)



$

(0.40)


Net income (loss)









Basic


$

0.09



$

(0.16)



$

(0.62)



$

(0.40)


Diluted


$

0.09



$

(0.16)



$

(0.62)



$

(0.40)


Adjusted income









Basic


$

0.46



$

0.33



$

0.99



$

1.29


Diluted


$

0.34



$

0.26



$

0.81



$

1.00


Weighted average shares outstanding









Basic


83,162



85,188



84,987



85,031


Diluted (for net income per share)


83,581



85,188



84,987



85,031


Diluted (for adjusted income per share)


127,775



129,954



129,589



129,789


Common shares outstanding at end of period


81,109



85,191



81,109



85,191















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


(2) During the twelve months ended December 31, 2015, the Company repurchased and retired 100% of the outstanding HPU shares through an exchange offer.  A portion of income during the twelve months ended December 31, 2015 and in all periods during 2014 is allocable to HPU holders.

 

 


 

 

iStar

Consolidated Balance Sheets

(In thousands)

(unaudited)

 



As of


As of


December 31,
2015


December 31,
2014

ASSETS








Real estate




Real estate, at cost

$

2,050,541



$

2,276,913


Less: accumulated depreciation

(456,558)



(460,482)


Real estate, net

$

1,593,983



$

1,816,431


Real estate available and held for sale

137,274



167,303



$

1,731,257



$

1,983,734


Land and development

1,001,963



978,962


Loans receivable and other lending investments, net

1,601,985



1,377,843


Other investments

254,172



354,119


Cash and cash equivalents

711,101



472,061


Accrued interest and operating lease income receivable, net

18,436



16,367


Deferred operating lease income receivable

97,421



98,262


Deferred expenses and other assets, net

206,557



181,785


Total assets

$

5,622,892



$

5,463,133






LIABILITIES AND EQUITY








Accounts payable, accrued expenses and other liabilities

$

214,835



$

180,902


Loan participations payable, net

152,326




Debt obligations, net

4,143,683



4,022,684


Total liabilities

$

4,510,844



$

4,203,586






Redeemable noncontrolling interests

$

10,718



$

11,199






Total iStar shareholders' equity

$

1,059,112



$

1,197,092


Noncontrolling interests

42,218



51,256


Total equity

$

1,101,330



$

1,248,348






Total liabilities and equity

$

5,622,892



$

5,463,133


 

 

 

iStar

Segment Analysis

(In thousands)

(unaudited)

 


FOR THE THREE MONTHS ENDED DECEMBER 31, 2015








Real
Estate
Finance


Net
Lease


Operating
Properties


Land &
Dev


Corporate
/ Other



Total

Operating lease income

$



$

39,982



$

18,599



$

149



$



$

58,730


Interest income

32,463











32,463


Other income

903



225



7,568



56



966



9,718


Land development revenue







71,114





71,114


Earnings from equity method investments



951



361



2,964



1,973



6,249


Income from sales of real estate



24,497



3,297







27,794


Total revenue and other earnings

$

33,366



$

65,655



$

29,825



$

74,283



$

2,939



$

206,068


Real estate expense



(5,590)



(22,076)



(7,941)





(35,607)


Land development cost of sales







(44,554)





(44,554)


Other expense

(32)









3



(29)


Allocated interest expense

(14,281)



(16,378)



(6,565)



(8,402)



(11,676)



(57,302)


Allocated general and administrative(1)

(3,378)



(3,923)



(1,690)



(2,729)



(5,090)



(16,810)


Segment profit (loss)

$

15,675



$

39,764



$

(506)



$

10,657



$

(13,824)



$

51,766

















(1) Excludes $1,947 of stock-based compensation expense.

 

 

iStar

Segment Analysis

(In thousands)

(unaudited)



FOR THE TWELVE MONTHS ENDED DECEMBER, 2015








Real
Estate
Finance


Net
Lease


Operating
Properties


Land &
Dev


Corporate
/ Other



Total

Operating lease income

$



$

151,481



$

77,454



$

785



$



$

229,720


Interest income

134,687











134,687


Other income

9,737



357



34,637



1,219



3,981



49,931


Land development revenue







100,216





100,216


Earnings from equity method investments



5,221



1,663



16,683



8,586



32,153


Income from sales of real estate



40,082



53,734







93,816


Total revenue and other earnings

$

144,424



$

197,141



$

167,488



$

118,903



$

12,567



$

640,523


Real estate expense



(21,855)



(95,888)



(29,007)





(146,750)


Land development cost of sales







(67,382)





(67,382)


Other expense

(2,291)









(4,083)



(6,374)


Allocated interest expense

(57,109)



(66,504)



(28,014)



(32,087)



(40,925)



(224,639)


Allocated general and administrative(1)

(13,128)



(15,569)



(6,988)



(11,488)



(22,091)



(69,264)


Segment profit (loss)

$

71,896



$

93,213



$

36,598



$

(21,061)



$

(54,532)



$

126,114





(1) Excludes $12,013 of stock-based compensation expense.

 

 

AS OF DECEMBER 31, 2015













Real
Estate
Finance


Net
Lease


Operating
Properties


Land &
Dev


Corporate

 / Other



Total

Real estate












Real estate, at cost

$



$

1,489,895



$

560,646



$



$



$

2,050,541


Less: accumulated depreciation



(377,416)



(79,142)







(456,558)


Real estate, net

$



$

1,112,479



$

481,504



$



$



$

1,593,983


Real estate available and held for sale





137,274







137,274


Total real estate

$



$

1,112,479



$

618,778



$



$



$

1,731,257


Land and development







1,001,963





1,001,963


Loans receivable and other lending investments, net

1,601,985











1,601,985


Other investments



69,096



11,124



100,419



73,533



254,172


Total portfolio assets

$

1,601,985



$

1,181,575



$

629,902



$

1,102,382



$

73,533



$

4,589,377


Cash and other assets











1,033,515


Total assets











$

5,622,892


 

 

 

iStar

Supplemental Information

(In thousands)

(unaudited)

 




Three Months
Ended December 31,


Twelve Months
Ended December 31,



2015


2014


2015


2014

ADJUSTED INCOME (1)









Reconciliation of Net Income to Adjusted Income









Net income (loss) allocable to common shareholders


$

7,685



$

(13,272)



$

(52,675)



$

(33,722)


Add: Depreciation and amortization


17,207



19,763



72,132



76,287


Add: Provision for (recovery of) loan losses


5,623



5,151



36,567



(1,714)


Add: Impairment of assets


6,100



12,893



18,509



34,634


Add: Stock-based compensation expense


1,947



4,770



12,013



13,314


Add: Loss on early extinguishment of debt


2



416



281



25,369


Less: HPU/Participating Security allocation


(21)



(1,386)



(2,850)



(4,791)


Adjusted income allocable to common shareholders


$

38,543



$

28,335



$

83,977



$

109,377




 (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

Supplemental Information

(In thousands)

(unaudited)

 



Twelve Months
Ended December
31, 2015

OPERATING STATISTICS




Expense Ratio


General and administrative expenses (A)

$

81,277


Average total assets (B)

$

5,610,953


Expense Ratio (A) / (B)

1.4

%




As of


December 31, 2015

Leverage


Book debt

$

4,143,683


Less: Cash and cash equivalents

(711,101)


Net book debt (C)

$

3,432,582




Book equity

$

1,101,330


Add: Accumulated depreciation and amortization(1)

514,801


Add: General loan loss reserves

36,000


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

$

1,652,131


Leverage (C) / (D)

2.1x



UNENCUMBERED ASSETS / UNSECURED DEBT




Unencumbered assets (E)(2)

$

4,681,809


Unsecured debt (F)

$

3,321,125


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

1.4x


(1) Accumulated depreciation and amortization includes iStar's 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
Supplemental Information
(In thousands)
(unaudited)






As of





December 31, 2015

UNFUNDED COMMITMENTS












Performance-based commitments




$

728,000


Strategic investments




45,940


Discretionary fundings




5,000


Total Unfunded Commitments




$

778,940








LOAN RECEIVABLE CREDIT STATISTICS

As of


December 31, 2015


December 31, 2014







Carrying value of NPLs /






As a percentage of total carrying value of loans

$

60,327


3.9

%


$

65,047


5.5

%







Total reserve for loan losses /






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

$

108,165


6.6

%


$

98,490


7.6

%


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

 

 

 

iStar
Supplemental Information
(In millions)
(unaudited)


PORTFOLIO STATISTICS AS OF DECEMBER 31, 2015(1)














Property Type


Real
Estate
Finance


Net
Lease


Operating
Properties


Land &
Dev


Total


% of

Total

Land & Development


$

45



$



$



$

1,108



$

1,153



23

%

Office / Industrial


154



854



136





1,144



22

%

Mixed Use / Collateral


546





257





803



16

%

Hotel


349



136



55





540



11

%

Entertainment / Leisure




502







502



10

%

Condominium


250





137





387



8

%

Retail


78



58



124





260



5

%

Other Property Types


216



9







225



4

%

Strategic Investments










74



1

%

Total


$

1,638



$

1,559



$

709



$

1,108



$

5,088



100

%














Geography


Real
Estate
Finance


Net
Lease


Operating
Properties


Land
& Dev


Total


% of
Total

Northeast


$

928



$

383



$



$

229



$

1,540



30

%

West


78



410



58



357



903



18

%

Southeast


136



235



277



152



800



16

%

Mid-Atlantic


227



140



142



203



712



14

%

Southwest


53



169



143



150



515



10

%

Central


155



80



58



6



299



6

%

Various


61



142



31



11



245



5

%

Strategic Investments










74



1

%

Total


$

1,638



$

1,559



$

709



$

1,108



$

5,088



100

%







(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-announces-fourth-quarter-and-fiscal-year-2015-results-300226150.html

SOURCE iStar

David M. DiStaso, Chief Financial Officer, Jason Fooks, Vice President of Investor Relations & Marketing, 1114 Avenue of the Americas, New York, NY 10036 (212) 930-9400, investors@istar.com

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