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04/25/2002

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          1,787,778
Transaction 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.

Capital Markets

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."

Other Developments

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
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