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iStar Financial Announces Record Financing Volume
|NEW YORK, Apr 25, 2002 /PRNewswire-FirstCall via COMTEX/ --|
* Total financing volume grows to record level of $391.0 million. * Return on equity reaches 18.1%. * Adjusted earnings per diluted share increases to $0.73 from $0.71 for first quarter 2001. * Quarterly dividend rises to $0.63 per share.iStar Financial Inc. (NYSE: SFI) reported that adjusted earnings for the quarter ended March 31, 2002 increased to $0.73 per diluted common share, up from $0.71 per diluted common share for the quarter ended March 31, 2001. Adjusted earnings for first quarter 2002 increased to $65.7 million on a diluted basis, from $61.7 million for first quarter 2001. Adjusted earnings represent GAAP net income before depreciation and amortization. Net income allocable to common shareholders for the first quarter grew to $47.9 million, or $0.53 per diluted common share, compared with $45.4 million, or $0.52 per diluted share, in the first quarter of 2001.
In the first quarter of 2002, iStar Financial achieved a return on average book assets of 6.6% and a return on average common book equity of 18.1%, while leverage remained at 1.4x book equity. Net investment income for the quarter ended March 31, 2002 increased to $69.3 million, from $66.8 million for the first quarter of 2001. Net investment income represents interest and operating lease revenue less interest expense and operating costs for corporate tenant lease assets.
iStar Financial announced that during the first quarter, it closed ten new financing commitments for a total of $338.0 million, of which $328.0 million was funded during the quarter. In addition, the Company funded $52.8 million under four pre-existing commitments and received $126.4 million in principal repayments. The Company's recent transactions continue to reflect its core business strategy of originating structured financing transactions for owners of high-quality commercial real estate assets and leading corporations across the United States.
Jay Sugarman, iStar Financial's chairman and chief executive officer, stated, "This quarter, we capitalized on favorable market conditions for our sophisticated financing expertise, generating record financing volume in a diverse mix of transactions for leading borrowers and corporate customers. Our transactions this quarter included our second and third forays into the U.S. government-backed credit tenant lease market, which we expect to be a source of attractive risk-adjusted returns as we continue to diversify and grow our product offerings. We remain very pleased with both the quality and breadth of our investment pipeline going into the second quarter."
Selected Income Statement Data (In thousands, except per share amounts) (unaudited) Three Months Ended March 31, 2002 2001 Net investment income $69,347 $66,840 Other income 7,735 6,183 Non-interest expense (19,931) (17,520) Net income before minority interest $57,151 $55,503 Minority interest $(40) $(95) Gain on sale of corporate tenant lease assets -- 555 One-time effect of a change in accounting principle -- (282) Extraordinary loss - early extinguishment of debt -- (1,037) Preferred dividends (9,227) (9,227) Net income allocable to common shareholders $47,884 $45,417 Per basic share $0.55 $0.53 Per diluted share $0.53 $0.52 Adjusted earnings allocable to common shareholders (1) $65,738 $61,722 Per basic share $0.75 $0.72 Per diluted share $0.73 $0.71 Dividends per common share $0.6300 $0.6125 (1) Adjusted earnings represent GAAP net income to common shareholders before depreciation and amortization, and exclude gains on sale of corporate tenant lease assets, the one-time effect of a change in accounting principle and extraordinary loss on early extinguishment of debt. Selected Balance Sheet Data (In thousands) (unaudited) As of As of March 31, 2002 December 31, 2001 Loans and other lending investments, net $2,471,709 $2,377,763 Corporate tenant lease assets, net 1,994,805 1,841,800 Total assets 4,644,410 4,378,560 Debt obligations 2,687,670 2,495,369 Total liabilities 2,771,355 2,588,132 Total shareholders' equity 1,870,406 1,787,778Transaction Volume
In the first quarter of 2002, iStar Financial generated $338.0 million in new financing commitments in ten separate transactions. The Company also funded an additional $52.8 million under four pre-existing financing commitments and received $126.4 million in loan repayments. Mr. Sugarman commented, "Along with corporate tenant leasing, we continue to find attractive risk/return in our corporate lending business. Corporate lending accounted for two of our largest financings this quarter. In addition to being secured by real estate collateral, both of these transactions are fully recourse to our corporate borrowers, in one case a leading private institutional investment fund and in the other, one of the largest public apartment companies in the country."
During the quarter, the weighted average first dollar and last dollar loan-to-value ratio on new loan commitments and follow-on fundings was 30.7% and 58.7%, respectively. This ratio represents the average beginning and ending points for the Company's lending exposure in the aggregate capitalization of the underlying properties or companies it finances. In its corporate leasing business, the Company's new investments this quarter include three transactions with a weighted average lease term of 16.4 years.
During the first quarter of 2002, iStar Financial extended the final maturity on a $500 million credit facility to August 2005 from August 2003. Spencer B. Haber, iStar Financial's president and chief financial officer, stated, "Our capital resources, liquidity and balance sheet position are extremely strong. We now have only approximately $200 million of debt maturing between now and January 2005, excluding our proprietary STARs debt program, which is match funded against specific assets." At March 31, 2002, the Company had $1.1 billion outstanding under $2.2 billion of total credit facilities.
During the first quarter, the Company added another highly respected financial services research analyst to the growing group of firms covering iStar Financial. Mr. Haber added, "With coverage from nine equity research analysts and a significant number of new institutional investors joining our shareholder base, the market has started to recognize our Company's compelling performance and return potential. We look forward to continuing our proactive approach to generating additional investor interest in our Company in the coming quarters."
Consistent with the Securities and Exchange Commission's Regulation FD, iStar Financial comments on earnings expectations within the context of its regular earnings press releases. The Company currently expects diluted adjusted EPS for the second quarter, third quarter and fiscal year 2002 of $0.74, $0.76 and $3.00 to $3.02, respectively, excluding a non-cash charge of approximately $0.17 per share related to the performance-based vesting of 500,000 restricted shares granted under its long-term incentive plan and tied to overall shareholder performance (as measured by the Company's total rate of return). No additional restricted shares tied to shareholder performance can be earned through December 31, 2003. After giving effect to the charge, the Company expects diluted adjusted EPS of $0.67, $0.66 and $2.83 to $2.85, respectively, for the second quarter, third quarter and fiscal year 2002.
The Company reiterates its prior guidance for 2003 diluted adjusted EPS of $3.38 to $3.43.
Credit Risk Management
At March 31, 2002, first mortgages, corporate tenant leases and corporate financing transactions collectively comprised 83.5% of the Company's asset base. The weighted average first and last dollar loan-to-value ratio for all structured finance assets (senior and junior loans) was 32.0% and 67.7%, respectively. The weighted average debt service coverage, based on 2002 budgeted cash flow and current interest rates, was 2.2x at March 31, 2002.
At quarter end, the Company's corporate tenant lease assets were 96.9% leased with a weighted average remaining lease term of 9.1 years. Lease expirations for the remainder of 2002 and 2003 represent just 1.1% and 3.7% of annualized total revenue for first quarter 2002. At quarter end, 81% of the Company's corporate lease customers were public companies (or subsidiaries of public companies).
The Company establishes loss reserves based on a quarterly bottom-up review of each of its assets, as well as using top-down guidance from industry-wide loss data and market trends. On a quarterly basis, the Company conducts a comprehensive credit review, resulting in an individual risk rating assigned to each asset. Attendance at the quarterly review sessions is mandatory for each of the Company's professional employees. These quarterly meetings are designed to enable management to evaluate and proactively manage asset-specific credit issues and identify credit trends on a portfolio-wide basis as an "early warning system."
During the risk ratings review, each asset is assigned a risk rating from "one" to "five," with a "one" indicating superior credit quality, a "two" signifying better than average credit quality, "three" as an average rating, a "four" indicating that management time and attention is required, and a "five" denoting a problem asset. In addition to the ratings system, the Company maintains a "watch list" of assets which require highly pro-active asset management to preserve their current ratings.
Based upon the Company's first quarter 2002 review, the weighted average risk rating of the Company's structured finance assets held steady at 2.77 from last quarter's rating of 2.75. The weighted average risk rating for corporate tenant lease assets at the end of the first quarter also remained essentially unchanged at 2.78 from the prior quarter's rating of 2.77.
For the first quarter, the Company removed one corporate tenant lease asset from its watch list and added another to the list. As a result, the Company currently has three loans and two corporate tenant lease assets on its watch list, with a combined book value of $140.8 million as of March 31, 2002. The Company is currently comfortable that it has adequate collateral to support the book value for each of the watch list assets.
At quarter end, accumulated loan loss reserves, cash deposits on corporate tenant leases, and corporate tenant lease depreciation represented approximately 3.02% of the gross book value of the Company's investments (loans and operating leases). As of March 31, 2002, the Company had two assets on non-accrual status with an aggregate gross book value of $5.9 million, or 0.13% of the gross book value of the Company's investments. In addition to these reserves, the Company has asset-specific cash reserves, deposits and letters of credit totaling $165.3 million (6.63% of gross book value) for its loans and $79.3 million (3.80% of gross book value) for its corporate tenant leases. The Company typically requires these reserves and letters of credit to be funded and/or posted at the closing of a transaction in accounts in which the Company has a security interest. These reserve figures do not include additional reserves posted by borrowers for tax and insurance payments on properties collateralizing the Company's loans.
Timothy J. O'Connor, iStar Financial's chief operating officer, stated, "We continue to be pleased with the credit quality of our assets and the performance of our borrowers and lessees, although we remain vigilant given the lagging nature of commercial real estate markets relative to the overall economy. The diversity of our asset base and the combined depth of our transaction-specific and on-balance sheet reserves have served us well during the past year. As the economy recovers this year, we look forward to continuing to demonstrate the credit strength inherent in our business model, collateral and customer base through the business cycle."
On April 1, 2002, iStar Financial increased its regular quarterly cash dividend to $0.63 per common share for the quarter ended March 31, 2002. The first quarter 2002 dividend, which is payable on April 29, 2002 to holders of record as of April 15, 2002, represents approximately 84.0% of basic adjusted earnings per share for the first quarter.
The Company will host its annual shareholders' meeting at the Sofitel Hotel, located at 45 West 44th Street, New York, New York, 10036 on Wednesday, May 29, 2002 at 8:30 a.m. EST. All shareholders are cordially invited to attend.
iStar Financial is the largest publicly-traded finance company focused exclusively on the commercial real estate industry. The Company provides structured financing to private and corporate owners of real estate nationwide, including senior and junior mortgage debt, corporate mezzanine and subordinated capital, and corporate net lease financing. The Company, which is taxed as a real estate investment trust, seeks to deliver superior risk- adjusted returns on equity to shareholders by providing innovative and value- added financing solutions to its customers.
iStar Financial will hold a quarterly earnings conference call at 11:00 a.m. EST today, April 25, 2002. This conference call will be broadcast live over the Internet and can be accessed by all interested parties through iStar Financial's Web site, http://www.istarfinancial.com, under the "investor relations" section. To listen to the live call, please go to the Web site's "investor relations" section at least 15 minutes prior to the start of the call to register, download and install any necessary audio software. For those who are not available to listen to the live broadcast, a replay will be available shortly after the call on the iStar Financial Web site. (Note: Statements in this press release which are not historical fact may be deemed forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although iStar Financial Inc. believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, the Company can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from iStar Financial Inc.'s expectations include completion of pending investments, continued ability to originate new investments, the availability and cost of capital for future investments, competition within the finance and real estate industries, economic conditions, and other risks detailed from time to time in iStar Financial Inc.'s SEC reports.)
iStar Financial Inc. Consolidated Income Statements (In thousands, except per share amounts) (unaudited) Three Months Ended March 31, 2002 2001 Revenue: Interest income $55,876 $66,913 Operating lease income 58,185 49,523 Other income 7,735 6,183 Total revenue 121,796 122,619 Costs and expenses: Interest expense 41,689 46,360 Operating costs - corporate tenant lease assets 3,025 3,236 Depreciation and amortization 10,653 8,808 General and administrative 6,617 6,102 Provision for loan losses 1,750 1,750 Stock-based compensation expense 911 860 Total costs and expenses 64,645 67,116 Net income before minority interest 57,151 55,503 Minority interest (40) (95) Gain on sale of corporate tenant lease assets -- 555 One-time effect of a change in accounting principle -- (282) Extraordinary loss - early extinguishment of debt -- (1,037) Net income $57,111 $54,644 Preferred dividends (9,227) (9,227) Net income allocable to common shareholders $47,884 $45,417 Net income per common share: Basic $0.55 $0.53 Diluted $0.53 $0.52 Weighted average common shares outstanding: Basic 87,724 85,833 Diluted 89,691 87,149 iStar Financial Inc. Consolidated Income Statements (In thousands, except per share amounts) (unaudited) Three Months Ended March 31, 2002 2001 ADJUSTED EARNINGS PER SHARE: Net income $57,111 $54,644 Add: Depreciation 10,653 8,808 Add: Joint venture depreciation and amortization 1,217 951 Add: Amortization 5,735 5,542 Add: One-time effect of a change in accounting principle -- 282 Add: Extraordinary loss - early extinguishment of debt -- 1,037 Less: Preferred dividends (9,227) (9,227) Less: Gain on sale of corporate tenant lease assets -- (555) Adjusted earnings allocable to common shareholders: Basic $65,489 $61,482 Diluted $65,738 $61,722 Adjusted earnings per common share: Basic $0.75 $0.72 Diluted $0.73 $0.71 Weighted average common shares outstanding: Basic 87,724 85,833 Diluted 90,063 87,522 iStar Financial Inc. Consolidated Balance Sheets (In thousands) (unaudited) As of As of March 31, 2002 December 31, 2001 ASSETS Loans and other lending investments, net $2,471,709 $2,377,763 Corporate tenant lease assets, net 1,994,805 1,841,800 Cash and cash equivalents 9,016 15,670 Restricted cash 29,702 17,852 Accrued interest and operating lease income receivable 26,229 26,688 Deferred operating lease income receivable 25,023 21,195 Deferred expenses and other assets 87,926 77,592 Total assets $4,644,410 $4,378,560 LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable and other liabilities $78,460 $87,538 Dividends payable 5,225 5,225 Debt obligations: Unsecured senior notes 610,290 609,302 Unsecured revolving credit facilities - - Secured revolving credit facilities 1,088,215 900,546 Secured term loans 527,028 506,613 iStar Asset Receivables secured notes 446,838 462,373 Other debt obligations 15,299 16,535 Total liabilities $2,771,355 $2,588,132 Minority interest 2,649 2,650 Shareholders' equity 1,870,406 1,787,778 Total liabilities and shareholders' equity $4,644,410 $4,378,560 iStar Financial Inc. Supplemental Information (In thousands) (unaudited) PERFORMANCE STATISTICS Return on Average Book Assets Three Months Ended March 31, 2002 Adjusted Basic Earnings to Common Shareholders $65,489 Add: Preferred Dividends 9,227 Adjusted Basic Earnings before Preferred Dividends $74,716 Adjusted Basic Earnings before Preferred Dividends - Annualized (A) $298,864 Average Total Book Assets (B) $4,511,485 Return on Average Book Assets (A) / (B) 6.6% Return on Average Common Book Equity Adjusted Basic Earnings to Common Shareholders $65,489 Adjusted Basic Earnings to Common - Annualized (C) $261,956 Average Total Book Equity $1,829,092 Less: Book Value of Preferred Equity (382,000) Average Common Book Equity (D) $1,447,092 Return on Average Common Book Equity (C) / (D) 18.1% Efficiency Ratio General & Administrative Expenses $6,617 Add: Stock-Based Compensation Expense 911 Total Corporate Overhead (E) $7,528 Total Revenue (F) $121,796 Efficiency Ratio (E) / (F) 6.2% CREDIT STATISTICS Book Debt / Equity Book Debt (A) $2,687,670 Total Book Equity (B) $1,870,406 Book Debt / Book Equity (A) / (B) 1.4x iStar Financial Inc. Supplemental Information (In thousands) (unaudited) CREDIT STATISTICS (cont.) Three Months Ended Interest Coverage March 31, 2002 EBITDA (1) (A) $109,493 GAAP Interest Expense (B) $41,689 EBITDA / GAAP Interest Expense (A) / (B) 2.6x Fixed Charge Coverage EBITDA (1) (C) $109,493 GAAP Interest Expense $41,689 Add: Preferred Dividends 9,227 Total Fixed Charges (D) $50,916 EBITDA / Fixed Charges (C) / (D) 2.2x FINANCING VOLUME SUMMARY STATISTICS Three Months Ended March 31, 2002 LOAN ORIGINATIONS Total/ Floating Weighted CORPORATE Fixed Rate Rate Average LEASING Amount Committed $100,940 $200,004 $300,944 $89,835 Weighted Average GAAP Yield 16.15% 6.87% 9.98% 10.69% Weighted Average All-In Spread/Margin (basis points) (2) + 1,233 + 502 -- + 549 Weighted Average First $ Loan-to-Value Ratio 57.1% 17.3% 30.7% -- Weighted Average Last $ Loan-to-Value Ratio 64.1% 55.9% 58.7% -- UNFUNDED COMMITMENTS Number of Loans with Unfunded Commitments 9 Discretionary Commitments $41,446 Non-Discretionary Commitments 118,769 Total Unfunded Commitments $160,215 Estimated Weighted Average Funding Period Approximately 1.0 years (1) EBITDA is calculated as total revenue minus the sum of general and administrative expenses, provision for loan losses, stock-based compensation expense and operating costs on corporate tenant lease assets. (2) Based on average quarterly one-month LIBOR (floating-rate loans) and U.S. Treasury rates (fixed-rate loans and corporate leasing transactions) during the quarter. iStar Financial Inc. Supplemental Information (In millions) (unaudited) PORTFOLIO STATISTICS AS OF MARCH 31, 2002 (1) Security Type $ % First Mortgages $1,330 29.1% Second Mortgages 396 8.6% Corporate/Partnership Loans/Other 769 16.8% Corporate Tenant Leases 2,085 45.5% Total $4,580 100.0% Collateral Type $ % Office $2,136 46.7% Industrial/R&D 594 13.0% Retail 221 4.8% Hotel (Lending) 538 11.7% Hotel (Investment-Grade CTL) 271 5.9% Mixed Use 218 4.8% Apartment/Residential 235 5.1% Conference/Entertainment 343 7.4% Homebuilder/Land 16 0.4% Various 8 0.2% Total $4,580 100.0% Product Line $ % Structured Finance $1,134 24.8% Corporate Finance 624 13.6% Portfolio Finance 374 8.2% Loan Acquisition 362 7.9% Corporate Tenant Leasing 2,086 45.5% Total $4,580 100.0% Collateral Location $ % West $1,365 29.8% Southwest 75 1.6% South 713 15.6% Central 388 8.5% North Central 83 1.8% Northeast 860 18.8% Mid-Atlantic 390 8.5% Southeast 432 9.4% Northwest 251 5.5% Various 23 0.5% Total $4,580 100.0% (1) Figures presented prior to loan loss reserves and accumulated depreciation.SOURCE iStar Financial Inc.
CONTACT: Spencer B. Haber, President & Chief Financial Officer, Andrew C. Richardson, Senior Vice President, Capital Markets, or Erin C. Hart, Associate, Investor Relations, all of iStar Financial Inc., +1-212-930-9400 URL: http://www.istarfinancial.com http://www.prnewswire.com
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