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05/03/2016

iStar Announces First Quarter 2016 Results

Earnings Report

- Adjusted income allocable to common shareholders was $3 million, or $0.04 per diluted common share.
- Repurchased 5.8 million shares of common stock during the first quarter.
- Company repaid $261 million of bonds with cash on hand and issued $275 million of new notes to refinance other 2016 maturities.

NEW YORK, May 3, 2016 /PRNewswire/ -- iStar (NYSE: STAR) today reported results for the first quarter ended March 31, 2016.

First Quarter 2016 Results

iStar reported adjusted income allocable to common shareholders for the first quarter of $3.1 million, or $0.04 per diluted common share, versus $8.5 million, or $0.10 per diluted common share for the first quarter 2015.

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 (loss) allocable to common shareholders for the first quarter was $(21.2) million, or $(0.27) per diluted common share, compared to a loss of $(22.6) million, or $(0.26) per diluted common share for the first quarter 2015.

Capital Markets

The Company continued its stock repurchase activity, completing open market purchases during the first quarter of 5.8 million shares for $58.1 million or an average of $9.94 per share.

In March, the Company repaid its $261.4 million of 5.875% Senior Unsecured Notes at maturity using available cash. In addition, in March the Company issued $275.0 million of 6.50% Senior Unsecured Notes due July 2021. Proceeds from the offering were used to repay $5.0 million of the Company's secured revolving facility, pay related financing costs and, subsequent to the end of the quarter, repay in full its $265.0 million of Senior Unsecured Notes due July 2016.

The Company's weighted average cost of debt for the first quarter was 5.5%. The Company's leverage was 2.2x at the end of the quarter, within 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

During the quarter, iStar funded a total of $147.8 million associated with new investments, prior financing commitments and ongoing development. In addition, the portfolio generated $131.8 million of repayments and sales over the same period.

At March 31, the Company had $591.2 million of unrestricted cash, of which the Company used $265.0 million subsequent to the end of the quarter to repay in full its Senior Unsecured Notes due July 2016.

Portfolio Overview

At March 31, 2016, the Company's portfolio totaled $5.11 billion, which is gross of $468.5 million of accumulated depreciation and $36.6 million of general loan loss reserves.

Real Estate Finance

At March 31, 2016, the Company's real estate finance portfolio totaled $1.67 billion, gross of general loan loss reserves. The portfolio included $1.61 billion of performing loans with a weighted average maturity of 2.2 years. The performing loans were comprised of 59% first mortgages / senior loans and 41% mezzanine / subordinated debt. The performing loans had a weighted average last dollar loan-to-value ratio of 68% and generated an 8.5% yield for the quarter. The Company invested $94.3 million and received $79.7 million of proceeds within its real estate finance portfolio during the quarter.

At March 31, 2016, the Company's non-performing loans (NPLs) had a carrying value of $68.3 million. The Company recorded a $1.5 million provision for loan losses during the quarter. At March 31, 2016, loan loss reserves totaled $109.7 million, comprised of $36.6 million of general reserves and $73.1 million of asset specific reserves.

Net Lease

At the end of the quarter, iStar's net lease portfolio totaled $1.55 billion, gross of $382.5 million of accumulated depreciation. During the quarter, the Company sold net lease assets for proceeds of $10.6 million and recorded gains of $4.9 million.

The Company's net lease portfolio totaled 18 million square feet across 33 states. Occupancy for the portfolio was 96.6% at the end of the quarter, with a weighted average remaining lease term of 14.6 years. The net lease portfolio generated an unleveraged yield of 7.9% for the quarter.

Operating Properties

At the end of the quarter, iStar's operating properties portfolio totaled $702.5 million, gross of $79.7 million of accumulated depreciation, and was comprised of $570.8 million of commercial and $131.7 million of residential real estate properties. During the quarter, the Company invested $18.2 million within its operating properties portfolio and received $25.5 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 $26.0 million of revenue offset by $18.6 million of expenses during the quarter. iStar generally seeks to reposition these assets with the objective of maximizing their values through the infusion of capital and/or intensive asset management efforts resulting in value realization upon sale.

At the end of the quarter, the Company had $140.9 million of stabilized commercial operating properties that were 85% leased and generated an unleveraged yield of 8.5% for the quarter. The remainder of the commercial operating portfolio was comprised of $429.9 million of transitional properties that were 66% 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 400,000 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 $19.7 million of proceeds and recorded $5.1 million of income. In addition, the Company recorded $2.6 million of expenses on its condominiums, primarily associated with carry costs.

Land & Development

At the end of the quarter, the Company's land & development portfolio totaled $1.13 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 $14.9 million of revenues, offset by $11.6 million of cost of sales, plus $6.7 million of earnings from land development equity method investments. This resulted in total gross margin and earnings from equity method investments of $10.0 million compared to $4.0 million for the same period last year.  During the quarter, the Company invested $34.2 million in its land portfolio.

The Company has continued to make progress on its land development portfolio, highlighted by two high-profile projects:

Coney Island Concert Hall and Amphitheater

Construction is nearing completion on iStar's 5,000-seat concert amphitheater and public park along the boardwalk in Coney Island.  In addition, work continues on the renovation of the historic Childs building, transforming it into a 60,000 square foot bar, restaurant and event space adjacent to the amphitheater that will serve as a year round anchor to the on-going Coney Island renaissance.  Upon completion, iStar will enter into a long-term operating lease with the city, and has partnered with Live Nation and Brooklyn Sports and Entertainment to provide full year programming and management. Currently over 40 concerts and events have already been booked for this summer, including kick-off concerts featuring Sting, Peter Gabriel and Ziggy Marley. The opening of the amphitheater, park and Childs building are part of the Company's larger strategy to accelerate development on its adjacent land holdings, currently targeted for over one million square feet of residential housing.

The Asbury at Asbury Park

Construction is also nearing completion on The Asbury, iStar's highly anticipated 110-room hotel/multi-venue adult playground in Asbury Park, NJ.  The Asbury includes an outdoor movie theater and nightclub on two separate roof decks, indoor and outdoor event spaces, an integrated lobby bar, lounge and gameroom and an outdoor biergarten and pool party space. The Asbury represents an important milestone in iStar's plan to accelerate Asbury Park's rebirth as one of the great beach cities on the East Coast, and is a key amenity for the approximately 30 acres of ocean and waterfront land iStar controls, capable of supporting over two thousand new residential units.

Annual Meeting

The Company will host its Annual Meeting of Shareholders at the Harvard Club of New York City, located at 35 West 44th Street, New York, New York 10036 on Wednesday, May 18, 2016 at 9:00 a.m. ET. All shareholders are cordially invited to attend.

*     *     *

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 will hold a quarterly earnings conference call at 10:00 a.m. ET today, May 3, 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 logo.

 

 

iStar
Consolidated Statements of Operations

(In thousands)
(unaudited)




Three Months
Ended March 31,



2016


2015

REVENUES





Operating lease income


$

54,937



$

59,139


Interest income


33,219



34,896


Other income


11,541



10,564


Land development revenue


14,947



8,258


   Total revenues


$

114,644



$

112,857


COST AND EXPENSES





Interest expense


$

57,021



$

54,632


Real estate expense


34,305



39,634


Land development cost of sales


11,575



6,891


Depreciation and amortization


14,708



18,501


General and administrative(1)


23,102



20,753


Provision for (recovery of) loan losses


1,506



4,293


Impairment of assets





Other expense


740



2,123


   Total costs and expenses


$

142,957



$

146,827


   Income (loss) before other items


$

(28,313)



$

(33,970)


Income from sales of real estate


10,458



21,156


Earnings from equity method investments


8,267



6,547


Income tax (expense) benefit


414



(5,878)


Loss on early extinguishment of debt


(125)



(168)


   Net income (loss)


$

(9,299)



$

(12,313)


Net (income) loss attributable to noncontrolling interests

942



1,841


   Net income (loss) attributable to iStar


$

(8,357)



$

(10,472)


Preferred dividends


(12,830)



(12,830)


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



749


   Net income (loss) allocable to common shareholders


$

(21,187)



$

(22,553)











(1) For the three months ended March 31, 2016 and 2015, includes $4,577 and $3,238 of stock-based compensation expense, respectively.

(2) HPU Holders were current and former Company employees who purchased high performance common stock units under the Company's High Performance Unit Program. On August 13, 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 March 31,



2016


2015

EPS INFORMATION FOR COMMON SHARES





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

Basic and Diluted


$

(0.27)



$

(0.26)


Net income (loss)





Basic and Diluted


$

(0.27)



$

(0.26)


Adjusted income





Basic and Diluted


$

0.04



$

0.10


Weighted average shares outstanding





Basic


77,060



85,497


Diluted (for net income per share)


77,060



85,497


Diluted (for adjusted income per share)


77,428



97,454


Common shares outstanding at end of period


75,441



85,520












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

(2) On August 13, 2015, the Company repurchased and retired 100% of the outstanding high performance unit (HPU) shares through an exchange offer.

 

iStar

Consolidated Balance Sheets

(In thousands)

(unaudited)



As of


As of


March 31, 2016


December 31, 2015

ASSETS








Real estate




Real estate, at cost

$

2,040,779



$

2,050,541


Less: accumulated depreciation

(462,179)



(456,558)


Real estate, net

$

1,578,600



$

1,593,983


Real estate available and held for sale

132,395



137,274



$

1,710,995



$

1,731,257


Land and development, net

1,024,434



1,001,963


Loans receivable and other lending investments, net

1,637,387



1,601,985


Other investments

233,990



254,172


Cash and cash equivalents

591,181



711,101


Accrued interest and operating lease income receivable, net

16,020



18,436


Deferred operating lease income receivable

98,861



97,421


Deferred expenses and other assets, net

179,310



181,457


Total assets

$

5,492,178



$

5,597,792






LIABILITIES AND EQUITY








Accounts payable, accrued expenses and other liabilities

$

202,963



$

214,835


Loan participations payable, net

154,111



152,086


Debt obligations, net

4,110,730



4,118,823


Total liabilities

$

4,467,804



$

4,485,744






Redeemable noncontrolling interests

$

8,981



$

10,718






Total iStar shareholders' equity

$

980,109



$

1,059,112


Noncontrolling interests

35,284



42,218


Total equity

$

1,015,393



$

1,101,330






Total liabilities and equity

$

5,492,178



$

5,597,792


 

iStar
Segment Analysis
(In thousands)
(unaudited)


FOR THE THREE MONTHS ENDED MARCH 31, 2016








Real
Estate
Finance


Net
Lease


Operating
Properties


Land &
Dev


Corporate
/ Other



Total

Operating lease income

$



$

35,750



$

19,081



$

106



$



$

54,937


Interest income

33,219











33,219


Other income

1,297



80



7,344



1,065



1,755



11,541


Land development revenue







14,947





14,947


Earnings from equity method
investments



946



(142)



6,661



802



8,267


Income from sales of real
estate



4,928



5,530







10,458


Total revenue and other earnings

$

34,516



$

41,704



$

31,813



$

22,779



$

2,557



$

133,369


Real estate expense



(4,508)



(21,120)



(8,677)





(34,305)


Land development cost of sales







(11,575)





(11,575)


Other expense

86









(826)



(740)


Allocated interest expense

(14,702)



(16,236)



(6,620)



(8,359)



(11,104)



(57,021)


Allocated general and administrative(1)

(3,831)



(4,296)



(1,870)



(3,270)



(5,258)



(18,525)


Segment profit (loss)

$

16,069



$

16,664



$

2,203



$

(9,102)



$

(14,631)



$

11,203

















(1) Excludes $4,577 of stock-based compensation expense.

 

AS OF MARCH 31, 2016













Real
Estate
Finance


Net
Lease


Operating
Properties


Land &
Dev


Corporate
/ Other



Total

Real estate












Real estate, at cost

$



$

1,481,989



$

558,790



$



$



$

2,040,779


Less: accumulated depreciation



(382,501)



(79,678)







(462,179)


Real estate, net

$



$

1,099,488



$

479,112



$



$



$

1,578,600


Real estate available and held for sale



717



131,678







132,395


Total real estate

$



$

1,100,205



$

610,790



$



$



$

1,710,995


Land and development, net







1,024,434





1,024,434


Loans receivable and other
lending investments, net

1,637,387











1,637,387


Other investments



68,043



12,033



96,173



57,741



233,990


Total portfolio assets

$

1,637,387



$

1,168,248



$

622,823



$

1,120,607



$

57,741



$

4,606,806


Cash and other assets











885,372


   Total assets











$

5,492,178


 

 

iStar

Supplemental Information

(In thousands)

(unaudited)




Three Months
Ended March 31,



2016


2015

ADJUSTED INCOME (1)





Reconciliation of Net Income to Adjusted Income





Net income (loss) allocable to common shareholders


$

(21,187)



$

(22,553)


Add: Depreciation and amortization


17,172



20,072


Add: Provision for (recovery of) loan losses


1,506



4,293


Add: Impairment of assets


915



4,337


Add: Stock-based compensation expense


4,577



3,238


Add: Loss on early extinguishment of debt


125



168


Less: HPU/Participating Security allocation


(2)



(1,032)


Adjusted income allocable to common shareholders


$

3,106



$

8,523











(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 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
March 31, 2016

OPERATING STATISTICS




Expense Ratio


General and administrative expenses - trailing twelve months (A)

$

83,626


Average total assets (B)

$

5,611,742


Expense Ratio (A) / (B)

1.5

%




As of


March 31, 2016

Leverage


Book debt

$

4,110,730


Less: Cash and cash equivalents

(591,181)


Net book debt (C)

$

3,519,549




Book equity

$

1,015,393


Add: Accumulated depreciation and amortization(1)

524,010


Add: General loan loss reserves

36,600


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

$

1,576,003


Leverage (C) / (D)

2.2x




UNENCUMBERED ASSETS / UNSECURED DEBT




Unencumbered assets (E)(2)

$

4,583,979


Unsecured debt (F)

$

3,334,722


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





March 31, 2016

UNFUNDED COMMITMENTS












Performance-based commitments




$

789,220


Strategic investments




45,978


Discretionary fundings




5,000


Total Unfunded Commitments




$

840,198








LOAN RECEIVABLE CREDIT STATISTICS

As of


March 31, 2016


December 31, 2015







Carrying value of NPLs /






As a percentage of total carrying value of loans

$

68,349


4.3

%


$

60,327


3.9

%







Total reserve for loan losses /






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

$

109,671


6.4

%


$

108,165


6.6

%













(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 MARCH 31, 2016(1)














Property Type


Real
Estate
Finance


Net Lease


Operating
Properties


Land &
Dev


Total


% of

Total

Land & Development


$

45



$



$



$

1,127



$

1,172



23

%

Office / Industrial


157



847



133





1,137



22

%

Mixed Use / Collateral


580





257





837



16

%

Hotel


349



137



55





541



11

%

Entertainment / Leisure




501







501



10

%

Condominium


270





132





402



8

%

Retail


67



57



126





250



5

%

Other Property Types


206



9







215



4

%

Strategic Investments










57



1

%

Total


$

1,674



$

1,551



$

703



$

1,127



$

5,112



100

%














Geography


Real
Estate
Finance


Net Lease


Operating
Properties


Land &
Dev


Total


% of
Total

Northeast


$

1,006



$

383



$



$

251



$

1,640



32

%

West


84



402



58



364



908



18

%

Southeast


135



235



276



147



793



16

%

Mid-Atlantic


169



139



151



204



663



13

%

Southwest


53



170



146



149



518



10

%

Central


164



80



58



5



307



6

%

Various


63



142



14



7



226



4

%

Strategic Investments










57



1

%

Total


$

1,674



$

1,551



$

703



$

1,127



$

5,112



100

%















(1) Based on carrying value of the Company's total investment portfolio, gross of accumulated depreciation and general loan loss reserves.

 

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

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/istar-announces-first-quarter-2016-results-300261689.html

SOURCE iStar

Company Contacts: 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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