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02/24/2017

iStar Announces Fiscal Year 2016 Results

Earnings Report

NEW YORK, Feb. 24, 2017 /PRNewswire/ -- iStar (NYSE: STAR) today reported results for the fiscal year ended December 31, 2016.

2016 Highlights

  • Company exceeded its target of 50% year-over-year earnings growth.
  • Net income (loss) for the fiscal year was $0.55 per diluted common share, versus $(0.62) for the prior year.
  • Adjusted income for the fiscal year was $1.15 per diluted common share, versus $0.35 for the prior year.
  • Originated $692 million of investments within the real estate finance and net lease portfolios.
  • Monetized operating properties for $377 million, generating $109 million of income.
  • Achieved target entitlement on approximately 90% of land portfolio.
  • Ended the year with $749 million of liquidity.
  • Reduced diluted shares outstanding by 38 million shares or 30% via stock buybacks and repayment of convertible bonds.
  • Added as a constituent to the MSCI US REIT Index (RMZ).
  • Hired Geoffrey Jervis in the newly created role of COO and CFO.

Fiscal Year 2016 Results

iStar grew net income (loss) allocable to common shareholders for the year by over 100% to $44.0 million, or $0.55 per diluted common share, compared to $(52.7) million, or $(0.62) per diluted common share for the year ended December 31, 2015.

The Company's management uses adjusted income as an internal performance measure and supplies it to investors as a supplemental non-GAAP performance measure. Management believes that adjusted income provides a useful measure of income because it excludes the effects of certain non-cash charges that management believes are not necessarily indicative of iStar's operating performance and it includes the effect of gains or losses on investments when realized. In addition, the Board of Directors determines compensation in part based upon adjusted income. Adjusted income represents net income (loss) computed in accordance with GAAP, prior to the effects of certain non-cash items. The calculation of adjusted income and reconciliation to GAAP net income is presented in the financial tables that follow the text of this press release.

In the second quarter of 2016, the Company modified its presentation of adjusted income to reflect the effect of gains and losses on certain non-cash charge-offs and dispositions on book value gross of loan loss reserves and impairments.

The Company also exceeded its 50% year-over-year growth target for adjusted income per share. Adjusted income allocable to common shareholders for the year ended December 31, 2016 was $1.15 per diluted common share, or $112.6 million, net of a $14.8 million loss associated with the modified definition of adjusted income. This compares to adjusted income allocable to common shareholders for the year ended December 31, 2015 of $0.35 per diluted common share, or $29.7 million, net of a $55.4 million loss associated with the modified definition of adjusted income.

Fourth Quarter 2016 Results

iStar reported net income (loss) allocable to common shareholders for the fourth quarter of $(19.3) million, or $(0.27) per diluted common share, versus $7.7 million, or $0.09 per diluted common share for the fourth quarter 2015. 

Adjusted income (loss) allocable to common shareholders for the fourth quarter was $2.7 million, or $0.04 per diluted common share, versus $(13.2) million, or $(0.16) per diluted common share for the fourth quarter 2015.

"We made progress this year," said Jay Sugarman, iStar's chairman and chief executive officer. "We made investments in attractive real estate finance and net lease opportunities throughout the year and, during the second and third quarters, advanced on our goal of strategically monetizing certain assets within our operating portfolio. During the year, we also reached several value-creating milestones in our land portfolio. Transaction-driven earnings continue to be material to our results, which also means that earnings can be lumpy quarter to quarter. We expect this to continue in 2017 as we make further progress in transitioning our portfolio towards assets that generate recurring income streams."

Earnings Guidance

iStar announced net income and adjusted income per share guidance for the fiscal year 2017. The Company currently targets net income per diluted common share of approximately $0.65 and adjusted income per diluted common share of approximately $1.50 per share in 2017. This guidance assumes that general macro economic conditions continue to remain favorable. Please see the financial tables that follow the text of this press release for a reconciliation from GAAP net income guidance to adjusted income guidance.

Investment Activity

During the fourth quarter of 2016, the Company originated $202.5 million of new investments bringing total originations for the year to $691.8 million. During the quarter, iStar funded a total of $283.8 million associated with new investments, prior financing commitments and ongoing development across its four segments, bringing the total fundings for the year to $767.3 million. In addition, the portfolio generated $426.5 million of repayments and sales during the quarter, bringing total proceeds received to $1.28 billion for the year.

 

Investing Activity












$ in millions


Real

Estate
Finance


Net
Lease


Operating

Properties


Land &

Dev


Corporate

/ Other



Total

Q4'16












Originations

$169.8


$32.7





$202.5

Fundings

$197.1


$43.0


$15.2


$28.2


$0.3


$283.8

Proceeds received

$302.3


$13.6


$34.0


$58.2


$18.4


$426.5













FY'16












Originations

$432.0


$259.8





$691.8

Fundings

$474.0


$86.9


$69.9


$135.9


$0.6


$767.3

Proceeds received

$614.2


$123.4


$377.2


$134.8


$32.1


$1,281.7

Note: Originations represent total commitments on new investments made during the quarter. Fundings represent capital expenditures and fundings on new investments and existing assets during the quarter. Net lease originations represent the total value of originations by iStar and by its net lease joint venture in which the Company owns a 52% interest.

































 

New real estate finance investments originated in the fourth quarter are expected to generate a weighted average unlevered IRR of 10.2% over the life of the investments, while the net lease originations made in the fourth quarter are expected to generate a 9.4% IRR on our equity contributions over the term of the leases.(1)

New real estate finance investments originated in 2016 are expected to generate a weighted average unlevered IRR of 11.0% over the life of the investments, while the net lease originations made in 2016 are expected to generate a 9.3% IRR on our equity contributions over the term of the leases.(1)

_______________________

(1) IRRs are based on contractual investment terms such as coupon, rent and term. The Company makes assumptions as to the pace of fundings, timing of construction and residual value of real estate at the end of the lease term. The net lease joint venture can elect to take on leverage and the Company makes assumptions as to the amount of debt and the cost of debt the venture will take on. The net lease IRR includes the Company's estimate of the value of the residual at the end of the lease term. While the Company believes its assumptions are reasonable, they are dependent on future real estate market conditions, capital market conditions,  interest rates and decisions by iStar and its joint venture partner. No assurance can be made that the Company's assumptions will reflect actual results.

Portfolio Overview

At December 31, 2016, the Company's portfolio totaled $4.63 billion, which is gross of $421.4 million of accumulated depreciation and $23.3 million of general loan loss reserves.

A summary of quarterly activity is below:

 

Portfolio Rollforward












$ in millions


Real

Estate
Finance


Net
Lease


Operating

Properties


Land &

Dev


Corporate

/ Other



Total

Net book value (9/30/16)

$

1,632.2



$

1,105.2



$

487.1



$

1,115.0



$

53.4



$

4,392.9


Investments(1)

197.1



27.3



12.8



20.4



0.3



257.9


Asset transfers between segments

(31.5)





96.7



(65.2)






Principal received / basis sold(2)

(302.3)



(17.5)



(31.1)



(38.1)



(21.4)



(410.4)


Other(3)

(45.1)



(5.5)



(3.3)



(1.7)



1.0



(54.6)


Net book value (12/31/16)

1,450.4



1,109.5



562.2



1,030.4



33.3



4,185.8


Add: Accumulated

depreciation and general loan

loss reserves

23.3



368.7



46.2



6.5





444.7


Gross book value (12/31/16)

$

1,473.7



$

1,478.2



$

608.4



$

1,036.9



$

33.3



$

4,630.5


Note: The table above include the Company's pro rata share of equity method investments.

(1) Includes fundings, capital expenditures, accruals, and deferred capitalized interest on loans.

(2) Includes repayment of deferred interest on loans.

(3) Real Estate Finance activity primarily represents repayment of a loan participation that was consolidated on iStar's balance sheet.

Real Estate Finance

iStar's real estate finance business targets sophisticated and innovative investors by providing one-stop capabilities that encompass financial alternatives ranging from full envelope senior loans to custom-tailored mezzanine and preferred equity capital positions.

At December 31, 2016, the Company's real estate finance portfolio totaled $1.47 billion. The portfolio is categorized into iStar 3.0 loans, made post January 1, 2008, and legacy loans, which were all made on or prior to December 31, 2007.

The following table summarizes statistics for our real estate finance portfolio:

Real Estate Finance Statistics








$ in millions


iStar 3.0


Legacy


Q4'16

Q3'16

Q4'15


Q4'16

Q3'16

Q4'15

Gross book value

$

1,223.5


$

1,365.9


$

1,195.8



$

250.3


$

287.5


$

442.2


% of total loan portfolio

83%


83%


73%



17%


17%


27%










Performing loans

$

1,223.5


$

1,365.9


$

1,195.8



$

58.6


$

65.0


$

381.9


Non-performing loans

$


$


$



$

191.7


$

222.5


$

60.3


% Performing / Non-performing

100% / 0%


100% / 0%


100% / 0%



23% / 77%


23% / 77%


86% / 14%










First mortgages / senior loans

74%


72%


66%



38%


44%


32%


Mezzanine / subordinated debt

26%


28%


34%



62%


56%


68%


Total

100%


100%


100%



100%


100%


100%










Wtd. avg. LTV (1)

64.1%


61.5%


60.0%



61.4%


65.4%


90.2%


Unlevered yield (1)

8.9%


9.0%


8.8%



8.5%


9.1%


6.9%


Wtd. avg. maturity (years) (1)

2.1


1.6


2.1



1.8


1.9


2.7


Weighted avg. risk rating (1)

3.07


2.61


2.93



2.20


2.36


3.50


Note: Gross book value represents the carrying value of iStar's loans, gross of general reserves. Risk rating scale based on 1 as lowest risk and 5 as highest risk. Risk ratings are based on internal metrics developed by management. They reflect management's current assessment and are not intended to predict outcomes. Actual performance of the assets may differ materially from management's current assessment of risk. See the "Loan Receivable Credit Statistics" table for additional detail on the Company's NPL and specific reserves.

(1) Includes performing loans only.

 

At December 31, 2016, the Company's non-performing loans (NPLs) were exclusively derived from its legacy loan portfolio and had a carrying value of $191.7 million, down from $222.5 million in the third quarter. The decline was primarily related to taking title to a parcel of land in downtown Chicago, IL.

Our remaining NPLs include a $144.7 million loan secured in part by pledges of equity in a portfolio of hotels and is recourse to the borrower. The borrower ceased paying current interest after it filed for bankruptcy protection during the third quarter.

Net Lease

iStar's net lease business seeks to create stable cash flows through long-term leases to single tenants on its properties.  The Company targets mission-critical facilities leased on a long-term basis to tenants, offering structured solutions that combine iStar's capabilities in underwriting, lease structuring, asset management and build-to-suit construction. Since 2014, the Company has invested in new net lease investments primarily through its net lease joint venture with a sovereign wealth fund.

At the end of the year, iStar's net lease portfolio totaled $1.48 billion, gross of $368.7 million of accumulated depreciation.

Net Lease Portfolio Overview


$ in millions


Wholly owned assets held for investment

$1,384.3


Wholly owned assets available and held for sale

1.2


Joint venture investments (1)

92.7


Total

$1,478.2


(1) Represents iStar's 52% interest in its net lease joint venture, which is an equity method investment. The venture's carrying value of total assets was $511.3 million
















 

During the quarter, the Company closed a new sale-leaseback in which it acquired two office/industrial campuses in Texas and Oklahoma for $32.7 million, or a 7.75% going in cap rate, and leased them back to an investment grade tenant for a 15-year term. The Company obtained an amortizing $19.6 million, 15-year non-recourse senior loan financing on the asset at a fixed interest rate of 3.875%. The Company intends to contribute this investment to its net lease joint venture. The Company's interest and commitment to deals within the joint venture fund is 52% of equity.

In addition, the Company recorded a gain of $5.2 million during the quarter associated with the sale of one asset.

 

Net Lease Statistics


Q4'16

Q3'16

Q4'15

Square feet (000s)

17,214


17,022


17,807


% Leased

98%


99%


96%


Wtd. avg. lease term (years)

14.7


14.6


14.9


Same store NOI (millions) (1)

$33.2


$31.1


$31.9


Yield

9.1%


8.2%


8.4%


(1) Same store net operating income includes net lease assets owned on or prior to January 1, 2015 and were in service through December 31, 2016.


















 

Operating Properties

At the end of the year, iStar's operating property portfolio totaled $608.4 million, gross of $46.2 million of accumulated depreciation, and was comprised of $525.9 million of commercial and $82.5 million of residential real estate properties. During the quarter, the Company invested $15.2 million within its operating properties portfolio and received $34.0 million of proceeds from sales. These sales generated $5.1 million of gains.

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 $21.0 million of revenue offset by $17.5 million of expenses during the quarter. At the end of the year, the Company had $337.2 million of stabilized assets and $188.7 million of transitional assets. iStar generally seeks to reposition transitional assets with the objective of maximizing their values through the infusion of capital and intensive asset management efforts. The Company made significant progress on this goal, having either stabilized or sold approximately $450 million of operating properties including land developments repositioned into operating properties in 2016.

 

Commercial Operating Property Statistics





$ in millions


Stabilized Operating

Transitional Operating


Total


Q4'16

Q3'16

Q4'15


Q4'16

Q3'16

Q4'15


Q4'16

Q3'16

Q4'15

Gross book value

$337.2

$243.8

$123.8


$188.7

$184.7

$448.0


$525.9

$428.5

$571.8

% of total

64%

57%

22%


36%

43%

78%


100%

100%

100%

Occupancy

86%

86%

89%


54%

55%

65%


74%

72%

74%

Yield

8.5%

8.4%

8.8%


1.5%

2.4%

2.8%


5.5%

5.9%

4.4%



































 

Residential Operating Properties

At the end of the year, the $82.5 million residential operating portfolio was comprised of 48 condominium units generally located within luxury projects in major U.S. cities.

 

Residential Operating Property Statistics

(excluding fractional units)

$ in millions


Q4'16

Q3'16

Q4'15

Condominium units sold

11

11

12

Proceeds

$22.9

$15.4

$13.9

Income

$2.9

$4.6

$3.3

















 

Land & Development

At the end of the year, the Company's land & development portfolio totaled $1.04 billion, with eight projects in production, nine in development and 14 in the pre-development phase. These projects are collectively entitled for approximately 15,000 lots and units.

 

Land & Development Portfolio Overview


$ in millions

Wholly owned assets held for investment

$952.1

Joint venture investments

84.8

Total

$1,036.9







 

The Company's asset management efforts and capital investment have transformed its land portfolio from land that was only 20% properly positioned when it took ownership to a portfolio with approximately 90% of land properly positioned at the end of the year.

Land & Development Portfolio by Type





$ in millions



Master

Planned

Communities


Waterfront


Urban / Infill


Total


# of projects

10


6


15


31







In production

$181.6


$139.7


$53.6


$374.9


In development

257.2


138.5


3.6


399.3


Pre-development

130.5


7.6


124.6


262.7


Gross book value

$569.3


$285.8


$181.8


$1,036.9







Land & Development Activity for Q4'16

Land development revenue

$8.0



$6.0


$14.0


Land development cost of sales

(6.9)



(4.3)


(11.2)


Gross margin

$1.1



$1.7


$2.8


Income from sales of real estate



8.8


8.8


Earnings from land development equity method investments

0.1


2.5


(3.8)


(1.2)


Total

$1.2


$2.5


$6.7


$10.4







Capital expenditures / Contributions

$14.5


$1.3


$4.6


$20.4


During the quarter, the Company transferred Grand Vista, which represented 8.8% of its land & development portfolio, into its stabilized operating property portfolio after successfully signing a lease with a Fortune 100 company covering the full use of the site.  The lease has a 5-year term, with one three-year extension. Based on the terms of the lease, the initial net operating income of the property will be $7.5 million per year, versus $(0.3) million of annual net operating loss at the property prior to the lease signing.

In addition, iStar sold Artesia, a 30-acre land and development project in Scottsdale, AZ for $36.0 million to a newly formed 50/50 venture between iStar and Meritage Homes. iStar recognized $8.8 million of income from sales of real estate reflecting the share of the interest sold to a third party. Both venture partners contributed $7.0 million to the venture and iStar provided the venture with a $27.0 million senior loan. The venture will seek to develop new communities at the mixed-use project, including more than 500 luxury condominiums and townhouses, a private 10-acre recreational park with running and walking trails, resort-style pools and a 20,000-square-foot community clubhouse. The two-, three- and four-bedroom residences are expected to be priced from the low $400,000s to more than $1 million.

As previously discussed, iStar acquired, via deed-in-lieu, title to an infill land asset in downtown Chicago, IL which had previously served as collateral for a loan held by the Company.

Capital Markets and Balance Sheet

The Company is capitalized with unsecured and secured debt, preferred equity and common equity.

 

Capital Structure

$ in millions

Secured debt

$738.6

Unsecured debt

$2,651.3

Preferred equity (A)

$699.7

Common equity (B)

$316.9

Total equity (A) + (B)

$1,016.6



Accumulated depreciation and amortization and
general loan loss reserves (1) (C)

$497.0

Adjusted common equity (B) + (C)

$813.9

Adjusted total equity (A) + (B) + (C)

$1,513.6

Note: Represents carrying value.


(1) Accumulated depreciation and amortization includes iStar's proportionate share of accumulated depreciation and amortization relating to equity method investments.





 

During the quarter, the Company retired $378.3 million of convertible unsecured notes at maturity with $369 million of cash and 815,000 shares of common stock. Along with the $21.8 million of convertible unsecured notes that were repurchased in the third quarter, the Company reduced its diluted share count by 27.7 million shares during the year.

In addition, the Company repurchased 10.2 million shares of its common stock during the year for $98.4 million, or an average price of $9.67 per share. Combined with the convertible notes that were repaid, the Company reduced its fully diluted shares outstanding in 2016 by 37.9 million or 30.1%.  As of December 31, 2016, the Company had remaining authorization to repurchase up to $50.0 million of common stock available to repurchase under its stock repurchase program.

 

Shares Outstanding

in millions



Q4'16

Q3'16

Q2'16

Q1'16

Q4'15

Basic shares outstanding at end of period

72.0


71.2


71.9


75.4


81.1


3.0% convertible notes / strike of $11.77 (if converted) (1)


17.0


17.0


17.0


17.0


1.5% convertible notes / strike of $17.29 (if converted) (1)


10.3


11.6


11.6


11.6


4.5% Series J conv. preferred / strike of $12.79 (if converted)

15.6


15.6


15.6


15.6


15.6


Other securities

0.7


0.8


0.8


0.8


0.8


Diluted shares outstanding at end of period

88.3


114.9


116.9


120.4


126.1


(1) Matured on November 15, 2016


































 

During the quarter, the Company arranged a new $170 million delayed draw secured term loan with Bank of America Merrill Lynch and J.P. Morgan. The facility bears interest at an initial rate of LIBOR + 1.50%. At the end of the year, the Company had not yet drawn on the facility.

Subsequent to year end, the Company repriced its $500 million senior secured credit facility. The credit facility was repriced at par and bears interest at an annual rate of LIBOR + 3.75% with a 1.00% LIBOR floor, a 75 basis point reduction from the prior rate of LIBOR + 4.50% with a 1.00% LIBOR floor. Call protection was extended for six months. All other terms of the facility, including its June 2020 maturity and 1.25x required collateral coverage, remained the same.

The Company's weighted average cost of debt for the fourth quarter was 5.7%. The Company's leverage was 2.0x at the end of the quarter, within the Company's targeted range of 2.0x – 2.5x.

 

Leverage at 12/31/16

$ in millions

Book debt

$3,389.9


Book equity (1)

$

1,016.6


Less: Cash and cash equivalents

(328.7)


Add: Accumulated depreciation and amortization (2)

473.7

Net book debt (A)

$3,061.2


Add: General loan loss reserves

23.3




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

$1,513.6










Leverage (A) / (B)

2.0x


(1) Includes $699.7 million of preferred equity.

(2) Accumulated depreciation and amortization includes iStar's proportionate share of accumulated depreciation and amortization relating to equity method investments.  



















 

Liquidity

At the end of the year, iStar had unrestricted cash and combined capacity on its credit facilities of $748.7 million.

 

Liquidity at 12/31/16


$ in millions

Unrestricted cash

$328.7

Revolving credit facility capacity

$250.0

Delayed draw term loan

$170.0

Total liquidity

$748.7




 

On November 30th, iStar was added as a constituent to the MSCI US REIT Index (RMZ), reflecting its hybrid business model and highly diversified portfolio. The inclusion in the high-profile index will make iStar's investment platform more visible and allow it to reach a broader pool of potential investors.

*     *     *

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, February 24, 2017. 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,




2016



2015



2016



2015


REVENUES









Operating lease income


$

52,149



$

58,730



$

213,018



$

229,720


Interest income


29,276



32,463



129,153



134,687


Other income


11,435



9,718



46,515



49,931


Land development revenue


13,951



71,114



88,340



100,216


Total revenues


$

106,811



$

172,025



$

477,026



$

514,554


COST AND EXPENSES









Interest expense


$

53,225



$

57,302



$

221,398



$

224,639


Real estate expense


33,344



35,607



138,422



146,750


Land development cost of sales


11,166



44,554



62,007



67,382


Depreciation and amortization


12,145



15,443



54,329



65,247


General and administrative(1)


21,594



18,757



84,027



81,277


(Recovery of) provision for loan losses


235



5,623



(12,514)



36,567


Impairment of assets


2,731



4,934



14,484



10,524


Other expense


1,142



29



5,883



6,374


Total costs and expenses


$

135,582



$

182,249



$

568,036



$

638,760


Income (loss) before other items


$

(28,771)



$

(10,224)



$

(91,010)



$

(124,206)


Income from sales of real estate


16,910



27,794



105,296



93,816


Earnings from equity method investments


3,095



6,249



77,349



32,153


Income tax benefit (expense)


306



(3,843)



10,166



(7,639)


Loss on early extinguishment of debt


(1)



(2)



(1,619)



(281)


Net income (loss)


$

(8,461)



$

19,974



$

100,182



$

(6,157)


Net (income) loss attributable to noncontrolling interests

2,039



546



(4,876)



3,722


Net income (loss) attributable to iStar


$

(6,422)



$

20,520



$

95,306



$

(2,435)


Preferred dividends


(12,830)



(12,830)



(51,320)



(51,320)


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



(5)



(14)



1,080


Net income (loss) allocable to common shareholders


$

(19,252)



$

7,685



$

43,972



$

(52,675)





(1) For the three months ended December 31, 2016 and 2015, includes $3,245 and $1,947 of stock-based compensation expense, respectively.  For the twelve months ended December 31, 2016 and 2015, includes $10,889 and $12,013 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
Supplemental Information
(In thousands, except per share data)
(unaudited)




Three Months
Ended December 31,


Twelve Months
Ended December 31,



2016


2015


2016


2015

ADJUSTED INCOME (1)









Reconciliation of Net Income to Adjusted Income









Net income (loss) allocable to common shareholders


$

(19,252)



$

7,685



$

43,972



$

(52,675)


Add: Depreciation and amortization


14,341



17,207



64,447



72,132


Add: (Recovery of) provision for loan losses


235



5,623



(12,514)



36,567


Add: Impairment of assets


6,331



6,100



18,999



18,509


Add: Stock-based compensation expense


3,245



1,947



10,889



12,013


Add: Loss on early extinguishment of debt


1



2



1,619



281


Less: Losses on charge-offs and dispositions


(2,225)



(51,723)



(14,827)



(55,437)


Less: HPU/Participating Security allocation






(23)



(1,706)


Adjusted income allocable to common shareholders


$

2,676



$

(13,159)



$

112,562



$

29,684





(1) Adjusted Income 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) 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. Effective in the second quarter 2016, the Company modified its presentation of Adjusted Income to include losses on charge-offs and dispositions of previously impaired or reserved assets to provide a more informative metric for investors to help evaluate our operating performance. Losses on charge-offs and dispositions represents the impact of charge-offs and dispositions realized during the period. These charge-offs and dispositions were taken on assets that were previously impaired for GAAP and reflected in net income but not in Adjusted Income.

 

Reconciliation of Adjusted Income per Share Guidance
to Net Income per Share Guidance



For the Year Ending


December 31, 2017

Targeted Net Income per Diluted Common Share

$0.65



Add: Depreciation and amortization

$0.67 - $0.75

Add: Other non-cash adjustments

$0.51 - $0.59

Less: Losses on charge-offs and dispositions

($0.36) - ($0.44)



Targeted Adjusted Income per Diluted Common Share

$1.50

 


 

iStar
Earnings Per Share Information
(In thousands, except per share data)
(unaudited)




Three Months
Ended December 31,


Twelve Months
Ended December 31,



2016


2015


2016


2015

EPS INFORMATION FOR COMMON SHARES









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










Basic


$

(0.27)



$

0.09



$

0.60



$

(0.62)


Diluted


$

(0.27)



$

0.09



$

0.55



$

(0.62)


Net income (loss)









Basic


$

(0.27)



$

0.09



$

0.60



$

(0.62)


Diluted


$

(0.27)



$

0.09



$

0.55



$

(0.62)


Adjusted income









Basic


$

0.04



$

(0.16)



$

1.53



$

0.35


Diluted


$

0.04



$

(0.16)



$

1.15



$

0.35


Weighted average shares outstanding









Basic


71,603



83,162



73,453



84,987


Diluted (for net income per share)


71,603



83,581



98,467



84,987


Diluted (for adjusted income per share)


72,038



83,162



114,102



85,395


Common shares outstanding at end of period


72,042



81,109



72,042



81,109





(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


December 31, 2016


December 31, 2015

ASSETS








Real estate




Real estate, at cost

$

1,906,592



$

2,050,541


Less: accumulated depreciation

(414,840)



(456,558)


Real estate, net

$

1,491,752



$

1,593,983


Real estate available and held for sale

83,764



137,274



$

1,575,516



$

1,731,257


Land and development, net

945,565



1,001,963


Loans receivable and other lending investments, net

1,450,439



1,601,985


Other investments

214,406



254,172


Cash and cash equivalents

328,744



711,101


Accrued interest and operating lease income receivable, net

14,775



18,436


Deferred operating lease income receivable

96,420



97,421


Deferred expenses and other assets, net

199,649



181,457


Total assets

$

4,825,514



$

5,597,792






LIABILITIES AND EQUITY








Accounts payable, accrued expenses and other liabilities

$

211,570



$

214,835


Loan participations payable, net

159,321



152,086


Debt obligations, net

3,389,908



4,118,823


Total liabilities

$

3,760,799



$

4,485,744






Redeemable noncontrolling interests

$

5,031



$

10,718






Total iStar shareholders' equity

$

1,016,564



$

1,059,112


Noncontrolling interests

43,120



42,218


Total equity

$

1,059,684



$

1,101,330






Total liabilities and equity

$

4,825,514



$

5,597,792


 

 

iStar
Segment Analysis
(In thousands)
(unaudited)


FOR THE THREE MONTHS ENDED DECEMBER 31, 2016















Real

Estate
Finance


Net
Lease


Operating

Properties


Land &

Dev


Corporate

/ Other



Total

Operating lease income

$



$

38,765



$

13,277



$

107



$



$

52,149


Interest income

29,276











29,276


Other income

1,986



709



7,864



281



595



11,435


Land development revenue







13,951





13,951


Earnings from equity method investments



953



2,299



(1,177)



1,020



3,095


Income from sales of real estate



5,242



2,867



8,801





16,910


Total revenue and other earnings

$

31,262



$

45,669



$

26,307



$

21,963



$

1,615



$

126,816


Real estate expense



(5,024)



(19,358)



(8,962)





(33,344)


Land development cost of sales







(11,166)





(11,166)


Other expense

(1,086)









(56)



(1,142)


Allocated interest expense

(13,910)



(16,850)



(5,577)



(8,848)



(8,040)



(53,225)


Allocated general and administrative(1)

(3,699)



(4,450)



(1,564)



(3,601)



(5,035)



(18,349)


Segment profit (loss)

$

12,567



$

19,345



$

(192)



$

(10,614)



$

(11,516)



$

9,590





(1) Excludes $3,245 of stock-based compensation expense.

 

 

iStar
Segment Analysis
(In thousands)
(unaudited)


FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2016















Real

Estate
Finance


Net
Lease


Operating

Properties


Land &

Dev


Corporate

/ Other



Total

Operating lease income

$



$

148,002



$

64,593



$

423



$



$

213,018


Interest income

129,153











129,153


Other income

4,658



1,633



33,216



3,170



3,838



46,515


Land development revenue







88,340





88,340


Earnings from equity method investments



3,567



33,863



30,012



9,907



77,349


Income from sales of real estate



21,138



75,357



8,801





105,296


Total revenue and other earnings

$

133,811



$

174,340



$

207,029



$

130,746



$

13,745



$

659,671


Real estate expense



(19,058)



(82,401)



(36,963)





(138,422)


Land development cost of sales







(62,007)





(62,007)


Other expense

(2,719)









(3,164)



(5,883)


Allocated interest expense

(57,787)



(65,880)



(23,156)



(34,888)



(39,687)



(221,398)


Allocated general and administrative(1)

(15,311)



(17,585)



(6,574)



(13,693)



(19,975)



(73,138)


Segment profit (loss)

$

57,994



$

71,817



$

94,898



$

(16,805)



$

(49,081)



$

158,823





(1) Excludes $10,889 of stock-based compensation expense.

 

 


AS OF DECEMBER 31, 2016













Real

Estate
Finance


Net
Lease


Operating

Properties


Land &

Dev


Corporate

/ Other



Total

Real estate












Real estate, at cost

$



$

1,384,255



$

522,337



$



$



$

1,906,592


Less: accumulated depreciation



(368,665)



(46,175)







(414,840)


Real estate, net

$



$

1,015,590



$

476,162



$



$



$

1,491,752


Real estate available and held for sale



1,284



82,480







83,764


Total real estate

$



$

1,016,874



$

558,642



$



$



$

1,575,516


Land and development, net







945,565





945,565


Loans receivable and other lending investments, net

1,450,439











1,450,439


Other investments



92,669



3,583



84,804



33,350



214,406


Total portfolio assets

$

1,450,439



$

1,109,543



$

562,225



$

1,030,369



$

33,350



$

4,185,926


Cash and other assets











639,588


Total assets











$

4,825,514


 

 


iStar
Supplemental Information
(In thousands)
(unaudited)






Twelve Months Ended

December 31, 2016

OPERATING STATISTICS












Expense Ratio






General and administrative expenses - trailing twelve months (A)



$

84,027


Average total assets (B)




$

5,272,579


Expense Ratio (A) / (B)




1.6%












As of





December 31, 2016

UNENCUMBERED ASSETS / UNSECURED DEBT












Unencumbered assets (C)(1)




$

3,777,656


Unsecured debt (D)




$

2,669,772


Unencumbered Assets / Unsecured Debt (C) / (D)





1.4x






UNFUNDED COMMITMENTS












Performance-based commitments(2)




$

406,477


Strategic investments




45,540


Total Unfunded Commitments




$

452,017








LOAN RECEIVABLE CREDIT STATISTICS

As of


December 31, 2016


December 31, 2015







Carrying value of NPLs /






As a percentage of total carrying value of loans

$

191,696


14.0%



$

60,327


3.9%








Total reserve for loan losses /






As a percentage of total gross carrying value of loans(3)

$

85,545


5.9%



$

108,165


6.6%








(1) Unencumbered assets are calculated in accordance with the indentures governing the Company's unsecured debt securities.

(2) Excludes $158.7 million of commitments on loan participations sold that are not the obligation of the Company but are consolidated on the Company's balance sheet.

(3) 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, 2016(1)














Property Type


Real

Estate

Finance


Net Lease


Operating Properties


Land &

Dev


Total


% of

Total

Office / Industrial


$

168



$

772



$

122



$



$

1,062



23

%

Land & Development








1,037



1,037



22

%

Hotel


333



136



108





577



12

%

Entertainment / Leisure




490







490



11

%

Mixed Use / Collateral


292





171





463



10

%

Condominium


381





82





463



10

%

Other Property Types


237



23







260



6

%

Retail


63



57



125





245



5

%

Strategic Investments










34



1

%

Total


$

1,474



$

1,478



$

608



$

1,037



$

4,631



100

%














Geography


Real

Estate

Finance


Net Lease


Operating Properties


Land &

Dev


Total


% of
Total

Northeast


$

790



$

380



$

47



$

234



$

1,451



31

%

West


87



305



38



362



792



17

%

Southeast


127



235



150



157



669



15

%

Mid-Atlantic


168



153



54



219



594



13

%

Southwest


77



184



239



28



528



11

%

Central


151



79



66



32



328



7

%

Various


74



142



14



5



235



5

%

Strategic Investments










34



1

%

Total


$

1,474



$

1,478



$

608



$

1,037



$

4,631



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-fiscal-year-2016-results-300413143.html

SOURCE iStar

Company Contact: 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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