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| 07/27/2006 |
iStar Financial Announces Second Quarter 2006 Results |
- Second quarter new financing commitments total $1.63 billion in 29
separate transactions.
- Adjusted earnings per diluted common share were $0.91 for the second
quarter 2006, up 9.6% year-over-year.
- Total revenues reach record $236.8 million for the second quarter 2006.
- Company increases full year 2006 adjusted earnings per diluted common
share guidance to $3.45 - $3.55.
NEW YORK, July 27 /PRNewswire-FirstCall/ -- iStar Financial Inc. (NYSE: SFI), the leading publicly traded finance company focused on the commercial real estate industry, today reported second quarter 2006 results. iStar Financial reported adjusted earnings for the quarter ended June 30, 2006 of $0.91 per diluted common share versus $0.83 per diluted common share for the second quarter 2005. Adjusted earnings allocable to common shareholders for the second quarter 2006 were $103.9 million on a diluted basis, compared to $94.5 million for the second quarter 2005. Adjusted earnings represents net income computed in accordance with GAAP, adjusted for preferred dividends, depreciation, depletion, amortization and gain (loss) from discontinued operations. Net income allocable to common shareholders for the second quarter was $78.0 million, or $0.68 per diluted common share, compared to $66.5 million, or $0.58 per diluted common share, for the second quarter 2005. Net investment income for the quarter was $111.3 million, compared to $95.2 million for the second quarter of 2005, primarily due to year-over-year growth of the Company's loan portfolio. Net investment income represents interest income, operating lease income and equity in earnings from joint ventures, less interest expense, operating costs for corporate tenant lease assets and loss on early extinguishment of debt. Included in this quarter's earnings was an early termination fee associated with a multi-asset lease within the Company's corporate tenant lease portfolio, which was partially offset by an impairment charge related to certain assets within the lease. The net effect was a one-time positive impact to earnings of $4.0 million, or $0.035 per diluted common share for the quarter. The impaired assets are classified as "Assets held for sale" on the Company's balance sheet. The Company announced that during the second quarter, it closed 29 new financing commitments, for a total of $1.63 billion, up 57% year-over-year. Of that amount, $709 million was funded during the second quarter. In addition, the Company funded $140 million under pre-existing commitments and received $481 million in principal repayments. Additionally, the Company completed the sale of a non-core office and warehouse facility for $12.8 million net of costs, resulting in a net book gain of approximately $2.4 million. Cumulative repeat customer business totaled $9.9 billion at June 30, 2006. For the quarter ended June 30, 2006, the Company generated return on average common book equity of 20.9%. The Company's debt to book equity plus accumulated depreciation/depletion and loan loss reserves, all as determined in accordance with GAAP, was 2.2x at quarter end. As of June 30, 2006, the Company's weighted average GAAP yield on its structured finance assets and corporate tenant lease assets was 10.38% and 9.66%, respectively. The Company's net finance margin, calculated as the rate of return on assets less the cost of debt, was 3.38% for the quarter. Capital Markets Summary During the second quarter, the Company completed an amendment to its existing $1.5 billion unsecured revolving credit facility. The new five-year facility was increased to $2.2 billion; it carries an interest rate of LIBOR + 0.525%, down from LIBOR + 0.70% in the prior facility and an annual facility fee of 12.5 bps, down from 15.0 bps. The Company said that 35 financial institutions, including seven new participants, participated in the new, multicurrency facility. As of June 30, 2006, the Company had $905 million outstanding under $2.7 billion in credit facilities. Consistent with its match funding policy under which a one percentage point change in interest rates cannot impact adjusted earnings by more than 2.5%, as of June 30, 2006, a 100 basis point increase in rates would have decreased the Company's adjusted earnings by 0.13%. Earnings Guidance Consistent with the Securities and Exchange Commission's Regulation FD and Regulation G, iStar Financial comments on earnings expectations within the context of its regular earnings press releases. The Company expects diluted adjusted earnings per share for the fiscal year 2006 of $3.45 - $3.55, and diluted GAAP earnings per share for the fiscal year 2006 of $2.50 - $2.60, based on expected net asset growth of approximately $1.5 billion. The Company continues to expect to fund its net asset growth with a combination of unsecured notes and equity. Risk Management At June 30, 2006, first mortgages, participations in first mortgages, senior loans and corporate tenant lease investments collectively comprised 88.2% of the Company's asset base versus 87.9% in the prior quarter. The Company's loan portfolio consisted of 56.2% floating rate and 43.8% fixed rate loans, with a weighted average maturity of 4.1 years. The weighted average first and last dollar loan-to-value ratio for all structured finance assets was 13.6% and 64.1%, respectively. At quarter end, the Company's corporate tenant lease assets were 95.8% leased with a weighted average remaining lease term of 10.6 years. At June 30, 2006, the weighted average risk ratings of the Company's structured finance and corporate tenant lease assets were 2.67 and 2.38, respectively. At quarter end, accumulated loan loss reserves and other asset-specific credit protection represented an aggregate of approximately 5.61% of the gross book value of the Company's loans. In addition, cash deposits, letters of credit, allowances for doubtful accounts and accumulated depreciation relating to corporate tenant lease assets represented 11.97% of the gross book value of the Company's corporate tenant lease assets at quarter end. At June 30, 2006, the Company's non-performing loan assets (NPLs) represented 0.32% of total assets. NPLs represent loans on non-accrual status and repossessed real estate collateral. At June 30, 2006, the Company had two loans on non-accrual and no repossessed assets. In addition, two assets were removed and one asset was added to the watch list this quarter, with watch list assets representing 0.16% of total assets at June 30, 2006. Dividend On July 3, 2006, iStar Financial declared a regular quarterly dividend of $0.77. The second quarter dividend will be payable on July 31, 2006 to shareholders of record on July 17, 2006. [Financial Tables to Follow] iStar Financial Inc. is the leading publicly traded finance company focused on the commercial real estate industry. The Company primarily provides custom tailored financing to high end private and corporate owners of real estate, including senior and mezzanine real estate debt, senior and mezzanine corporate capital, corporate net lease financing and equity. The Company, which is taxed as a real estate investment trust ("REIT"), seeks to deliver strong dividends and 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 10:00 a.m. EDT today, July 27, 2006. This conference call will be broadcast live over the Internet and can be accessed by all interested parties through iStar Financial's website, www.istarfinancial.com, under the "Investor Relations" section. To listen to the live call, please go to the website'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 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 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 mix of originations between structured finance and corporate tenant lease assets, repayment levels, the timing of receipt of prepayment penalties, the availability and cost of capital for future investments, competition within the finance and real estate industries, economic conditions, loss experience and other risks detailed from time to time in iStar Financial Inc.'s SEC reports.)
Selected Income Statement Data
(In thousands)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
Net investment income $111,336 $95,177 $221,557 $187,222
Other income 18,561 14,265 32,826 26,870
Non-interest expense (41,831) (32,583) (81,103) (68,287)
Minority interest in consolidated
entities (821) (74) (1,069) (280)
Income from continuing operations $87,245 $76,785 $172,211 $145,525
Income from discontinued operations 901 1,547 1,739 3,126
Gain from discontinued operations 2,353 407 4,536 407
Preferred dividend requirements (10,580) (10,580) (21,160) (21,160)
Net income allocable to common
shareholders and HPU holders (1) $79,919 $68,159 $157,326 $127,898
(1) HPU holders are Company employees who purchased high performance
common stock units under the Company's High Performance Unit Program.
Selected Balance Sheet Data
(In thousands)
As of As of
June 30, 2006 December 31, 2005
(unaudited)
Loans and other lending investments, net $5,338,334 $4,661,915
Corporate tenant lease assets, net 3,098,797 3,115,361
Other investments 250,266 240,470
Total assets 9,250,518 8,532,296
Debt obligations 6,471,721 5,859,592
Total liabilities 6,652,450 6,052,114
Total shareholders' equity 2,553,535 2,446,671
iStar Financial Inc.
Consolidated Statements of Operations
(In thousands, except per share amounts)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
Revenue:
Interest income $135,075 $105,869 $261,124 $197,487
Operating lease income 83,154 76,511 166,373 151,571
Other income 18,561 14,265 32,826 26,870
Total revenue 236,790 196,645 460,323 375,928
Costs and Expenses:
Interest expense 101,351 81,654 194,885 150,605
Operating costs - corporate
tenant lease assets 6,309 5,544 12,108 11,066
Depreciation and amortization 19,407 17,776 38,547 35,227
General and administrative (1) 20,424 14,807 39,556 30,810
Provision for loan losses 2,000 - 3,000 2,250
Loss on early
extinguishment of debt - - - -
Total costs and expenses 149,491 119,781 288,096 229,958
Income from continuing
operations before other items 87,299 76,864 172,227 145,970
Equity in earnings from
joint ventures 767 (5) 1,053 (165)
Minority interest in
consolidated entities (821) (74) (1,069) (280)
Income from continuing operations 87,245 76,785 172,211 145,525
Income from discontinued
operations 901 1,547 1,739 3,126
Gain from discontinued operations 2,353 407 4,536 407
Net income 90,499 78,739 178,486 149,058
Preferred dividends (10,580) (10,580) (21,160) (21,160)
Net income allocable to common
shareholders and HPU holders $79,919 $68,159 $157,326 $127,898
Net income per common share:
Basic (2) $0.69 $0.59 $1.36 $1.11
Diluted (3) (4) $0.68 $0.58 $1.34 $1.10
Weighted average common shares
outstanding:
Basic 113,282 112,624 113,263 112,050
Diluted 114,404 113,801 114,381 113,241
(1) For the three months ended June 30, 2006 and 2005, includes $1,747 and
$641 of stock-based compensation expense. For the six months ended
June 30, 2006 and 2005, includes $2,950 and $1,283 of stock-based
compensation expense.
(2) For the three months ended June 30, 2006 and 2005, excludes $1,953 and
$1,675 of net income allocable to HPU holders, respectively. For the
six months ended June 30, 2006 and 2005, excludes $3,846 and $3,159 of
net income allocable to HPU holders, respectively.
(3) For the three months ended June 30, 2006 and 2005, excludes $1,935 and
$1,659 of net income allocable to HPU holders, respectively. For the
six months ended June 30, 2006 and 2005, excludes $3,811 and $3,126 of
net income allocable to HPU holders, respectively.
(4) For the three months ended June 30, 2006, includes $28 of joint
venture income. For the six months ended June 30, 2006, includes $56
of joint venture income.
iStar Financial Inc.
Reconciliation of Adjusted Earnings to GAAP Net Income
(In thousands, except per share amounts)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
ADJUSTED EARNINGS: (1)
Net income $90,499 $78,739 $178,486 $149,058
Add: Depreciation, depletion
and amortization 20,021 18,381 41,033 36,531
Add: Joint venture income 30 33 60 75
Add: Joint venture depreciation
and amortization 2,724 2,707 5,448 2,842
Add: Amortization of deferred
financing costs 6,155 7,975 12,268 15,501
Less: Preferred dividends (10,580) (10,580) (21,160) (21,160)
Less: Gain from discontinued
operations (2,353) (407) (4,536) (407)
Adjusted earnings allocable to common
shareholders and HPU holders:
Basic $106,466 $96,815 $211,539 $182,365
Diluted $106,496 $96,848 $211,599 $182,440
Adjusted earnings per common share:
Basic: (2) $0.92 $0.84 $1.82 $1.59
Diluted: (3) $0.91 $0.83 $1.81 $1.57
Weighted average common shares
outstanding:
Basic 113,282 112,624 113,263 112,050
Diluted 114,404 113,853 114,381 113,292
Common shares outstanding at
end of period:
Basic 113,303 112,704 113,303 112,704
Diluted 114,438 113,926 114,438 113,926
(1) Adjusted earnings should be examined in conjunction with net income as
shown in the Consolidated Statements of Operations. Adjusted earnings
should not be considered as an alternative to net income (determined
in accordance with GAAP) as an indicator of the Company's performance,
or to cash flows from operating activities (determined in accordance
with GAAP) as a measure of the Company's liquidity, nor is this
measure indicative of funds available to fund the Company's cash needs
or available for distribution to shareholders. Rather, adjusted
earnings is an additional measure the Company uses to analyze how its
business is performing. It should be noted that the Company's manner
of calculating adjusted earnings may differ from the calculations of
similarly-titled measures by other companies.
(2) For the three months ended June 30, 2006 and 2005, excludes $2,602 and
$2,380 of net income allocable to HPU holders, respectively. For the
six months ended June 30, 2006 and 2005, excludes $5,171 and $4,504 of
net income allocable to HPU holders, respectively.
(3) For the three months ended June 30, 2006 and 2005, excludes $2,578 and
$2,356 of net income allocable to HPU holders, respectively. For the
six months ended June 30, 2006 and 2005, excludes $5,124 and $4,457 of
net income allocable to HPU holders, respectively.
iStar Financial Inc.
Consolidated Balance Sheets
(In thousands)
As of As of
June 30, 2006 December 31, 2005
(unaudited)
ASSETS
Loans and other lending investments, net $5,338,334 $4,661,915
Corporate tenant lease assets, net 3,098,797 3,115,361
Other investments 250,266 240,470
Investments in joint ventures 196,686 202,128
Assets held for sale 16,021 -
Cash and cash equivalents 78,171 115,370
Restricted cash 51,701 28,804
Accrued interest and operating lease
income receivable 53,094 32,166
Deferred operating lease income receivable 68,859 76,874
Deferred expenses and other assets 89,386 50,005
Goodwill 9,203 9,203
Total assets $9,250,518 $8,532,296
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable, accrued expenses
and other liabilities $180,729 $192,522
Debt obligations:
Unsecured senior notes 5,038,699 4,108,477
Unsecured revolving credit facilities 905,157 1,242,000
Secured term loans 429,878 411,144
Other debt obligations 97,987 97,971
Total liabilities 6,652,450 6,052,114
Minority interest in consolidated entities 44,533 33,511
Shareholders' equity 2,553,535 2,446,671
Total liabilities
and shareholders' equity $9,250,518 $8,532,296
iStar Financial Inc.
Supplemental Information
(In thousands)
(unaudited)
PERFORMANCE STATISTICS
Three Months Ended
Net Finance Margin June 30, 2006
Weighted average GAAP yield of loan
and CTL investments 10.09%
Less: Cost of debt (6.71%)
Net Finance Margin (1) 3.38%
Return on Average Common Book Equity
Adjusted basic earnings allocable to
common shareholders and HPU holders (2) $106,466
Adjusted basic earnings allocable to
common shareholders and HPU holders -
Annualized (A) $425,864
Average total book equity $2,547,961
Less: Average book value of preferred equity (506,176)
Average common book equity (B) $2,041,785
Return on Average Common Book Equity (A)/(B) 20.9%
Efficiency Ratio
General and administrative expenses (C) $20,424
Total revenue (D) $236,790
Efficiency Ratio (C)/(D) 8.6%
(1) Weighted average GAAP yield is the annualized sum of interest income
and operating lease income (excluding other income), divided by the
sum of average gross corporate tenant lease assets, average loans and
other lending investments, average SFAS No. 141 purchase intangibles
and average assets held for sale over the period. Cost of debt is the
annualized sum of interest expense and operating costs-corporate
tenant lease assets, divided by the average gross debt obligations
over the period. Operating lease income and operating costs-corporate
tenant lease assets exclude SFAS No. 144 adjustments from
discontinued operations of $895 and $52, respectively. The Company
does not consider net finance margin to be a measure of the Company's
liquidity or cash flows. It is one of several measures that
management considers to be an indicator of the profitability of its
operations.
(2) Adjusted earnings should be examined in conjunction with net income as
shown in the Consolidated Statements of Operations. Adjusted earnings
should not be considered as an alternative to net income (determined
in accordance with GAAP) as an indicator of the Company's performance,
or to cash flows from operating activities (determined in accordance
with GAAP) as a measure of the Company's liquidity, nor is this
measure indicative of funds available to fund the Company's cash needs
or available for distribution to shareholders. Rather, adjusted
earnings is an additional measure the Company uses to analyze how its
business is performing. It should be noted that the Company's manner
of calculating adjusted earnings may differ from the calculations of
similarly-titled measures by other companies.
iStar Financial Inc.
Supplemental Information
(In thousands)
(unaudited)
CREDIT STATISTICS
Three Months Ended
June 30, 2006
Book debt (A) $6,471,721
Book equity $2,553,535
Add: Accumulated depreciation/depletion and loan loss reserves 385,859
Sum of book equity, accumulated depreciation/depletion and
loan loss reserves (B) $2,939,394
Book Debt / Sum of Book Equity, Accumulated
Depreciation/Depletion and Loan Loss Reserves (A)/(B) 2.2x
Ratio of Earnings to Fixed Charges 1.9x
Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends 1.7x
Interest Coverage
EBITDA (1) (C) $211,871
GAAP interest expense (D) $101,351
EBITDA / GAAP Interest Expense (C)/(D) 2.1x
Fixed Charge Coverage
EBITDA (1) (C) $211,871
GAAP interest expense 101,351
Add: Preferred dividends 10,580
Total GAAP interest expense and preferred dividends (E) $111,931
EBITDA / GAAP Interest Expense and
Preferred Dividends (C)/(E) 1.9x
RECONCILIATION OF NET INCOME TO EBITDA
Net income $90,499
Add: GAAP interest expense 101,351
Add: Depreciation, depletion and amortization 20,021
EBITDA (1) $211,871
(1) EBITDA should be examined in conjunction with net income as shown in
the Consolidated Statements of Operations. EBITDA should not be
considered as an alternative to net income (determined in accordance
with GAAP) as an indicator of the Company's performance, or to cash
flows from operating activities (determined in accordance with GAAP)
as a measure of the Company's liquidity, nor is this measure
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 EBITDA may differ from the
calculations of similarly-titled measures by other companies.
iStar Financial Inc.
Supplement Information
(In thousands)
(unaudited)
FINANCING VOLUME SUMMARY STATISTICS (1)
Three Months Ended June 30, 2006 LOAN ORIGINATIONS
Total/
Floating Weighted CORPORATE
Fixed Rate Rate Average LEASING
Amount funded $293,068 $414,928 $707,996 -
Weighted average GAAP yield 9.75% 9.66% 9.69% N/A
Weighted average all-in
spread/margin (basis points) (2) 473 456 - N/A
Weighted average first
$ loan-to-value ratio 5.7% 21.7% 15.1% N/A
Weighted average last
$ loan-to-value ratio 72.2% 73.1% 72.7% N/A
UNFUNDED COMMITMENTS
Number of assets with unfunded commitments 85
Discretionary commitments $51,318
Non-discretionary commitments 2,000,022
Total unfunded commitments $2,051,340
Estimated weighted average funding period Approximately 3.9 years
UNENCUMBERED ASSETS $8,796,046
RISK MANAGEMENT STATISTICS
(weighted average risk rating)
2006 2005
June 30, March 31, December 31, September 30, June 30,
Structured
Finance Assets 2.67 2.71 2.63 2.60 2.52
Corporate Tenant
Lease Assets 2.38 2.42 2.38 2.36 2.36
(1=lowest risk; 5=highest risk)
(1) Excludes other investments.
(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 thousands, except per share amounts)
(unaudited)
LOANS AND OTHER LENDING INVESTMENTS CREDIT STATISTICS
As of
June 30, 2006 December 31, 2005
Carrying value of non-performing loans /
As a percentage of total assets $29,294 0.32% $35,291 0.41%
Reserve for loan losses /
As a percentage of total assets $49,876 0.54% $46,876 0.55%
As a percentage of non-performing loans 170% 133%
Six Months Ended Year Ended
June 30, 2006 December 31, 2005
Net charge-offs /
As a percentage of total assets $0 0.00% $0 0.00%
RECONCILIATION OF DILUTED ADJUSTED EPS
GUIDANCE TO DILUTED GAAP EPS GUIDANCE (1)
Year Ended
December 31, 2006
Earnings per diluted common share guidance $2.50 - $2.60
Add: Depreciation, depletion and amortization
per diluted common share $0.85 - $1.05
Adjusted earnings per diluted common share guidance $3.45 - $3.55
(1) Adjusted earnings should be examined in conjunction with net income as
shown in the Consolidated Statements of Operations. Adjusted earnings
should not be considered as an alternative to net income (determined
in accordance with GAAP) as an indicator of the Company's performance,
or to cash flows from operating activities (determined in accordance
with GAAP) as a measure of the Company's liquidity, nor is this
measure indicative of funds available to fund the Company's cash needs
or available for distribution to shareholders. Rather, adjusted
earnings is an additional measure the Company uses to analyze how its
business is performing. It should be noted that the Company's manner
of calculating adjusted earnings may differ from the calculations of
similarly-titled measures by other companies.
iStar Financial Inc.
Supplemental Information
(In millions)
(unaudited)
PORTFOLIO STATISTICS AS OF JUNE 30, 2006 (1)
Security Type $ %
Corporate Tenant Leases $3,490 38.4 %
First Mortgages / Senior Loans 4,537 49.9
Mezzanine / Subordinated Debt 851 9.3
Other Investments 218 2.4
Total $9,096 100.0 %
Collateral Type
Office (CTL) $1,645 18.1 %
Industrial / R&D 1,347 14.8
Retail 1,198 13.2
Apartment / Residential 925 10.2
Other 874 9.6
Entertainment / Leisure 862 9.5
Mixed Use / Mixed Collateral 843 9.3
Hotel 769 8.4
Office (Lending) 633 6.9
Total $9,096 100.0 %
Collateral Location
West $2,025 22.3 %
Northeast 1,562 17.2
Southeast 1,351 14.9
Various 899 9.9
Mid-Atlantic 756 8.3
Central 619 6.8
South 540 5.9
Southwest 466 5.1
International 340 3.7
North Central 335 3.7
Northwest 203 2.2
Total $9,096 100.0 %
(1) Figures presented prior to loan loss reserves, accumulated
depreciation and impact of statement of Financial Accounting Standards
No. 141 "Business Combinations."
SOURCE iStar Financial Inc. |
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