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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________________________________________
FORM 10-Q
(Mark One)
 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2016
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to            
Commission File No. 1-15371
_______________________________________________________________________________
iStar Inc.
(Exact name of registrant as specified in its charter)
Maryland
(State or other jurisdiction of
incorporation or organization)
 
95-6881527
(I.R.S. Employer
Identification Number)
1114 Avenue of the Americas, 39th Floor
 
 
New York, NY
(Address of principal executive offices)
 
10036
(Zip code)
Registrant's telephone number, including area code: (212) 930-9400
_______________________________________________________________________________
Indicate by check mark whether the registrant: (i) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports); and (ii) has been subject to such filing requirements for the past 90 days. Yes ý    No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý    No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ý
 
Accelerated filer o
 
Non-accelerated filer o
 (Do not check if a
smaller reporting company)
 
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o    No ý
As of August 2, 2016, there were 71,176,421 shares, $0.001 par value per share, of iStar Inc. common stock outstanding.
 

Table of Contents

TABLE OF CONTENTS

 
 
Page
 
 
 

 

 
 


Table of Contents

PART I. CONSOLIDATED FINANCIAL INFORMATION
Item 1.    Financial Statements
iStar Inc.
Consolidated Balance Sheets
(In thousands, except per share data)
 
As of
 
June 30, 2016 (unaudited)
 
December 31,
2015
ASSETS
 
 
 
Real estate
 
 
 
Real estate, at cost
$
1,862,382

 
$
2,050,541

Less: accumulated depreciation
(426,462
)
 
(456,558
)
Real estate, net
1,435,920

 
1,593,983

Real estate available and held for sale
126,070

 
137,274

Total real estate
1,561,990

 
1,731,257

Land and development, net
1,046,013

 
1,001,963

Loans receivable and other lending investments, net
1,568,439

 
1,601,985

Other investments
228,756

 
254,172

Cash and cash equivalents
521,363

 
711,101

Accrued interest and operating lease income receivable, net
13,999

 
18,436

Deferred operating lease income receivable, net
95,767

 
97,421

Deferred expenses and other assets, net
173,070

 
181,457

Total assets
$
5,209,397

 
$
5,597,792

LIABILITIES AND EQUITY
 
 
 
Liabilities:
 
 
 
Accounts payable, accrued expenses and other liabilities
$
212,826

 
$
214,835

Loan participations payable, net
186,854

 
152,086

Debt obligations, net
3,770,643

 
4,118,823

Total liabilities
4,170,323

 
4,485,744

Commitments and contingencies (refer to Note 11)
—

 
—

Redeemable noncontrolling interests (refer to Note 5)
7,621

 
10,718

Equity:
 
 
 
iStar Inc. shareholders' equity:
 
 
 
Preferred Stock Series D, E, F, G and I, liquidation preference $25.00 per share (refer to Note 13)
22

 
22

Convertible Preferred Stock Series J, liquidation preference $50.00 per share (refer to Note 13)
4

 
4

Common Stock, $0.001 par value, 200,000 shares authorized, 71,891 and 81,109 shares issued and outstanding as of June 30, 2016 and December 31, 2015, respectively
72

 
81

Additional paid-in capital
3,599,335

 
3,689,330

Retained earnings (deficit)
(2,608,530
)
 
(2,625,474
)
Accumulated other comprehensive income (loss) (refer to Note 13)
(5,340
)
 
(4,851
)
Total iStar Inc. shareholders' equity
985,563

 
1,059,112

Noncontrolling interests
45,890

 
42,218

Total equity
1,031,453

 
1,101,330

Total liabilities and equity
$
5,209,397

 
$
5,597,792

The accompanying notes are an integral part of the consolidated financial statements.

1
Table of Contents

iStar Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
(unaudited)
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
Revenues:
 
 
 
 
 
 
 
Operating lease income
$
54,518

 
$
56,152

 
$
109,455

 
$
115,291

Interest income
34,400

 
33,729

 
67,620

 
68,625

Other income
10,097

 
12,761

 
21,637

 
23,325

Land development revenue
27,888

 
6,543

 
42,835

 
14,801

Total revenues
126,903

 
109,185

 
241,547

 
222,042

Costs and expenses:
 
 
 
 
 
 
 
Interest expense
56,047

 
55,824

 
113,068

 
110,456

Real estate expense
35,438

 
36,355

 
69,743

 
75,989

Land development cost of sales
17,262

 
5,252

 
28,838

 
12,142

Depreciation and amortization
14,474

 
15,516

 
29,182

 
34,017

General and administrative
19,665

 
20,586

 
42,768

 
41,340

Provision for loan losses
700

 
19,151

 
2,206

 
23,444

Impairment of assets
3,012

 
1,674

 
3,012

 
1,674

Other expense
3,182

 
888

 
3,922

 
3,011

Total costs and expenses
149,780

 
155,246

 
292,739

 
302,073

Income (loss) before earnings from equity method investments and other items
(22,877
)
 
(46,061
)
 
(51,192
)
 
(80,031
)
Loss on early extinguishment of debt, net
(1,457
)
 
(44
)
 
(1,582
)
 
(212
)
Earnings from equity method investments
39,447

 
8,785

 
47,714

 
15,332

Income (loss) from continuing operations before income taxes
15,113

 
(37,320
)
 
(5,060
)
 
(64,911
)
Income tax benefit (expense)
1,190

 
(811
)
 
1,604

 
(6,688
)
Income (loss) from continuing operations
16,303

 
(38,131
)
 
(3,456
)
 
(71,599
)
Income from sales of real estate
43,484

 
18,355

 
53,943

 
39,511

Net income (loss)
59,787

 
(19,776
)
 
50,487

 
(32,088
)
Net (income) loss attributable to noncontrolling interests
(8,825
)
 
629

 
(7,883
)
 
2,470

Net income (loss) attributable to iStar Inc. 
50,962

 
(19,147
)
 
42,604

 
(29,618
)
Preferred dividends
(12,830
)
 
(12,830
)
 
(25,660
)
 
(25,660
)
Net (income) loss allocable to HPU holders and Participating Security holders(1)(2)
(20
)
 
1,027

 
(11
)
 
1,776

Net income (loss) allocable to common shareholders
$
38,112

 
$
(30,950
)
 
$
16,933

 
$
(53,502
)
Per common share data:
 
 
 
 
 
 
 
Income (loss) attributable to iStar Inc. from continuing operations:
 
 
 
 
 
 
 
Basic
$
0.52

 
$
(0.36
)
 
$
0.22

 
$
(0.63
)
Diluted
$
0.37

 
$
(0.36
)
 
$
0.22

 
$
(0.63
)
Net income (loss) attributable to iStar Inc.:
 
 
 
 
 
 
 
Basic
$
0.52

 
$
(0.36
)
 
$
0.22

 
$
(0.63
)
Diluted
$
0.37

 
$
(0.36
)
 
$
0.22

 
$
(0.63
)
Weighted average number of common shares:
 
 
 
 
 
 
 
Basic
73,984

 
85,541

 
75,522

 
85,519

Diluted
118,510

 
85,541

 
104,431

 
85,519

Per HPU share data(1):
 
 
 
 
 
 
 
Income (loss) attributable to iStar Inc. from continuing operations - basic and diluted
$
—

 
$
(68.47
)
 
$
—

 
$
(118.40
)
Net income (loss) attributable to iStar Inc. - basic and diluted
$
—

 
$
(68.47
)
 
$
—

 
$
(118.40
)
Weighted average number of HPU shares - basic and diluted
—

 
15

 
—

 
15

_______________________________________________________________________________
(1)
All of the Company's outstanding High Performance Units ("HPUs") were repurchased and retired on August 13, 2015 (refer to Note 15).
(2)
Participating Security holders are non-employee directors who hold common stock equivalents ("CSEs") and restricted stock awards granted under the Company's Long Term Incentive Plans that are eligible to participate in dividends (refer to Note 14 and Note 15).

The accompanying notes are an integral part of the consolidated financial statements.

2
Table of Contents

iStar Inc.
Consolidated Statements of Comprehensive Income (Loss)
(In thousands)
(unaudited)
 
For the Three Months Ended June 30,
 
For the Six Months
Ended June 30,
 
2016
 
2015
 
2016
 
2015
Net income (loss)
$
59,787

 
$
(19,776
)
 
$
50,487

 
$
(32,088
)
Other comprehensive income (loss):
 
 
 
 
 
 
 
Reclassification of (gains)/losses on available-for-sale securities into earnings upon realization(1)
—

 
—

 
—

 
(2,531
)
Reclassification of (gains)/losses on cash flow hedges into earnings upon realization(2)
118

 
200

 
375

 
350

Unrealized gains/(losses) on available-for-sale securities
446

 
(63
)
 
465

 
(638
)
Unrealized gains/(losses) on cash flow hedges
(357
)
 
144

 
(1,319
)
 
(801
)
Unrealized gains/(losses) on cumulative translation adjustment
30

 
129

 
(10
)
 
(115
)
Other comprehensive income (loss)
237

 
410


(489
)
 
(3,735
)
Comprehensive income (loss)
60,024

 
(19,366
)
 
49,998

 
(35,823
)
Comprehensive (income) loss attributable to noncontrolling interests
(8,825
)
 
629

 
(7,883
)
 
2,470

Comprehensive income (loss) attributable to iStar Inc. 
$
51,199

 
$
(18,737
)
 
$
42,115

 
$
(33,353
)
_______________________________________________________________________________
(1)
Reclassified to "Other income" in the Company's consolidated statements of operations.
(2)
Reclassified to "Interest expense" in the Company's consolidated statements of operations are $23 and $183 for the three and six months ended June 30, 2016, respectively, and $84 and $119 for the three and six months ended June 30, 2015, respectively. Reclassified to "Earnings from equity method investments" in the Company's consolidated statements of operations are $95 and $192 for the three and six months ended June 30, 2016, respectively, and $116 and $231 for the three and six months ended June 30, 2015, respectively.

The accompanying notes are an integral part of the consolidated financial statements.

3

iStar Inc.
Consolidated Statements of Changes in Equity
For the Six Months Ended June 30, 2016 and 2015
(In thousands)
(unaudited)




 
 
iStar Inc. Shareholders' Equity
 
 
 
 
 
 
Preferred
Stock(1)
 
Preferred Stock Series J(1)
 
HPU's(4)
 
Common
Stock at
Par
 
Additional
Paid-In
Capital
 
Retained
Earnings
(Deficit)
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Noncontrolling
Interests
 
Total
Equity
Balance as of December 31, 2015
 
$
22

 
$
4

 
$
—

 
$
81

 
$
3,689,330

 
$
(2,625,474
)
 
$
(4,851
)
 
$
42,218

 
$
1,101,330

Dividends declared—preferred
 
—

 
—

 
—

 
—

 
—

 
(25,660
)
 
—

 
—

 
(25,660
)
Issuance of stock/restricted stock unit amortization, net
 
—

 
—

 
—

 
—

 
1,371

 
—

 
—

 
—

 
1,371

Net income (loss) for the period(2)
 
—

 
—

 
—

 
—

 
—

 
42,604

 
—

 
10,520

 
53,124

Change in accumulated other comprehensive income (loss)
 
—

 
—

 
—

 
—

 
—

 
—

 
(489
)
 
—

 
(489
)
Repurchase of stock
 
—

 
—

 
—

 
(9
)
 
(91,826
)
 
—

 
—

 
—

 
(91,835
)
Change in additional paid in capital attributable to redeemable noncontrolling interest
 
—

 
—

 
—

 
—

 
460

 
—

 
—

 
—

 
460

Contributions from noncontrolling interests
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
444

 
444

Change in noncontrolling interest(3)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(7,292
)
 
(7,292
)
Balance as of June 30, 2016
 
$
22

 
$
4

 
$
—

 
$
72

 
$
3,599,335

 
$
(2,608,530
)
 
$
(5,340
)
 
$
45,890

 
$
1,031,453

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of December 31, 2014
 
$
22

 
$
4

 
$
9,800

 
$
85

 
$
3,744,621

 
$
(2,556,469
)
 
$
(971
)
 
$
51,256

 
$
1,248,348

Dividends declared—preferred
 
—

 
—

 
—

 
—

 
—

 
(25,660
)
 
—

 
—

 
(25,660
)
Issuance of stock/restricted stock unit amortization, net
 
—

 
—

 
—

 
—

 
3,671

 
—

 
—

 
—

 
3,671

Net income (loss) for the period(2)
 
—

 
—

 
—

 
—

 
—

 
(29,618
)
 
—

 
(710
)
 
(30,328
)
Change in accumulated other comprehensive income (loss)
 
—

 
—

 
—

 
—

 
—

 
—

 
(3,735
)
 
—

 
(3,735
)
Repurchase of stock
 
—

 
—

 
—

 
—

 
(561
)
 
—

 
—

 
—

 
(561
)
Change in additional paid in capital attributable to redeemable noncontrolling interest
 
—

 
—

 
—

 
—

 
(3,248
)
 
—

 
—

 
—

 
(3,248
)
Contributions from noncontrolling interests
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
115

 
115

Distributions to noncontrolling interests
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(4,637
)
 
(4,637
)
Balance as of June 30, 2015
 
$
22

 
$
4

 
$
9,800

 
$
85

 
$
3,744,483

 
$
(2,611,747
)
 
$
(4,706
)
 
$
46,024

 
$
1,183,965

_______________________________________________________________________________
(1)
Refer to Note 13 for details on the Company's Preferred Stock.
(2)
For the six months ended June 30, 2016 and 2015, net income (loss) shown above excludes $(2,637) and $(1,760) of net loss attributable to redeemable noncontrolling interests.
(3)
Includes a payment to acquire a noncontrolling interest (refer to Note 5).
(4)
All of the Company's outstanding HPUs were repurchased and retired on August 13, 2015 (refer to Note 15).
The accompanying notes are an integral part of the consolidated financial statements.

4
Table of Contents

iStar Inc.
Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
 
For the Six Months Ended June 30,
 
2016
 
2015
Cash flows from operating activities:
 
 
 
Net income (loss)
$
50,487

 
$
(32,088
)
Adjustments to reconcile net income (loss) to cash flows from operating activities:
 
 
 
Provision for loan losses
2,206

 
23,444

Impairment of assets
3,012

 
1,674

Depreciation and amortization
29,182

 
34,017

Payments for withholding taxes upon vesting of stock-based compensation
(1,203
)
 
(1,683
)
Non-cash expense for stock-based compensation
6,211

 
7,186

Amortization of discounts/premiums and deferred financing costs on debt obligations, net
8,901

 
8,275

Amortization of discounts/premiums on loans, net
(7,237
)
 
(4,977
)
Deferred interest on loans, net
4,631

 
(32,840
)
Earnings from equity method investments
(47,714
)
 
(15,332
)
Distributions from operations of other investments
31,479

 
7,843

Deferred operating lease income
(4,993
)
 
(3,700
)
Income from sales of real estate
(53,943
)
 
(39,511
)
Land development revenue in excess of cost of sales
(13,997
)
 
(2,659
)
Loss on early extinguishment of debt, net
1,582

 
212

Debt discount on repayments of debt obligations
(5,369
)
 
(498
)
Other operating activities, net
2,651

 
2,540

Changes in assets and liabilities:
 
 
 
Changes in accrued interest and operating lease income receivable, net
4,436

 
351

Changes in deferred expenses and other assets, net
1,677

 
5,293

Changes in accounts payable, accrued expenses and other liabilities
(13,052
)
 
(21,321
)
Cash flows used in operating activities
(1,053
)
 
(63,774
)
Cash flows from investing activities:
 
 
 
Originations and fundings of loans receivable, net
(158,262
)
 
(267,245
)
Capital expenditures on real estate assets
(35,674
)
 
(33,210
)
Capital expenditures on land and development assets
(58,961
)
 
(42,050
)
Acquisitions of real estate assets
(3,915
)
 
—

Repayments of and principal collections on loans receivable and other lending investments, net
202,014

 
74,989

Net proceeds from sales of loans receivable
—

 
5,595

Net proceeds from sales of real estate
247,956

 
209,142

Net proceeds from sales of land and development assets
33,660

 
14,745

Net proceeds from sales of other investments
39,810

 
—

Distributions from other investments
8,632

 
67,358

Contributions to other investments
(8,283
)
 
(7,449
)
Changes in restricted cash held in connection with investing activities
3,220

 
(14,359
)
Deposits paid to escrow account, net
—

 
(25,180
)
Other investing activities, net
(5,677
)
 
15,308

Cash flows provided by (used in) investing activities
264,520

 
(2,356
)
Cash flows from financing activities:
 
 
 
Borrowings from debt obligations
646,401

 
374,000

Repayments of debt obligations
(991,184
)
 
(247,055
)
Proceeds from loan participations payable
22,844

 
138,075

Preferred dividends paid
(25,660
)
 
(25,660
)
Repurchase of stock
(90,481
)
 
(561
)
Payments for deferred financing costs
(8,003
)
 
(2,255
)
Other financing activities, net
(7,144
)
 
(5,771
)
Cash flows (used in) provided by financing activities
(453,227
)
 
230,773

Effect of exchange rate changes on cash
22

 
432

Changes in cash and cash equivalents
(189,738
)
 
165,075

Cash and cash equivalents at beginning of period
711,101

 
472,061

Cash and cash equivalents at end of period
$
521,363

 
$
637,136

The accompanying notes are an integral part of the consolidated financial statements.

5
Table of Contents
iStar Inc.
Notes to Consolidated Financial Statements
(unaudited)





Note 1—Business and Organization

Business—iStar Inc. (the "Company"), doing business as "iStar," finances, invests in and develops real estate and real estate related projects as part of its fully-integrated investment platform. The Company has invested more than $35 billion over the past two decades and is structured as a real estate investment trust ("REIT") with a diversified portfolio focused on larger assets located in major metropolitan markets. The Company's primary business segments are real estate finance, land and development, net lease and operating properties (refer to Note 17).

Organization—The Company began its business in 1993 through the management of private investment funds and became publicly traded in 1998. Since that time, the Company has grown through the origination of new investments, as well as through corporate acquisitions.

Note 2—Basis of Presentation and Principles of Consolidation
Basis of Presentation—The accompanying unaudited consolidated financial statements have been prepared in conformity with the instructions to Form 10-Q and Article 10-01 of Regulation S-X for interim financial statements. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles in the United States of America ("GAAP") for complete financial statements. These unaudited consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2015, as amended on Form 10-K/A on March 9, 2016 (the "2015 Annual Report").
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
In the opinion of management, the accompanying consolidated financial statements contain all adjustments, consisting of normal recurring adjustments necessary for a fair statement of the results for the interim periods presented. Such operating results may not be indicative of the expected results for any other interim periods or the entire year. Certain prior year amounts have been reclassified in the consolidated financial statements and the related notes to conform to the 2016 presentation.
During the year ended December 31, 2015, the Company determined that its classification of common shares repurchased under its share repurchase programs should be classified as a reduction to common stock for the par amount of the common stock repurchased and additional paid in capital and included as shares unissued within the consolidated financial statements. The Company previously classified common shares repurchased under its share repurchase programs as treasury stock. The misclassification eliminates treasury stock and results in corresponding reductions of common stock and additional paid-in capital, which results in no change in total equity within the consolidated balance sheets and consolidated statements of changes in equity. All repurchased shares previously reported as treasury stock will now be reported as unissued common stock. The change has no impact on the previously reported consolidated statements of operations, consolidated statements of comprehensive income or consolidated statements of cash flows. The Company evaluated the impact of this correction on previously issued financial statements and concluded they were not materially misstated. In order to conform previous financial statements with the current period, the Company elected to revise previously issued financial statements each time such financial statements are filed. The accompanying consolidated statements of changes in equity balances as of June 30, 2015 have been revised as follows:
 
 
As Reported
 
Change
 
As Adjusted
 
 
(in thousands)
June 30, 2015
 
 
 
 
 
 
Additional paid-in capital
 
$
4,007,937

 
$
(263,454
)
 
$
3,744,483

Common stock
 
146

 
(61
)
 
85

Treasury stock, at cost
 
(263,515
)
 
263,515

 
—

Total
 
3,744,568

 
—

 
3,744,568


6
Table of Contents
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)


Principles of Consolidation—The consolidated financial statements include the financial statements of the Company, its wholly owned subsidiaries, controlled partnerships and variable interest entities ("VIEs") for which the Company is the primary beneficiary. All significant intercompany balances and transactions have been eliminated in consolidation. The Company's involvement with VIEs affects its financial performance and cash flows primarily through amounts recorded in "Operating lease income," "Interest income," "Earnings from equity method investments," "Real estate expense" and "Interest expense" in the Company's consolidated statements of operations. The Company has not provided financial support to those VIEs that it was not previously contractually required to provide.    
Consolidated VIEs—The Company consolidates VIEs for which it is considered the primary beneficiary. As of June 30, 2016, the total assets of these consolidated VIEs were $397.2 million and total liabilities were $69.0 million. The classifications of these assets are primarily within "Land and development" and "Real estate, net" on the Company's consolidated balance sheets. The classifications of liabilities are primarily within "Accounts payable, accrued expenses and other liabilities" on the Company's consolidated balance sheets. The liabilities of these VIEs are non-recourse to the Company and can only be satisfied from each VIE's respective assets. The Company did not have any unfunded commitments related to consolidated VIEs as of June 30, 2016.

Unconsolidated VIEs—The Company has investments in VIEs where it is not the primary beneficiary and accordingly the VIEs have not been consolidated in the Company's consolidated financial statements. As of June 30, 2016, the Company's maximum exposure to loss from these investments does not exceed the sum of the $86.2 million carrying value of the investments, which are classified in "Other investments" and "Loans receivable and other lending investments, net" on the Company's consolidated balance sheets, and $48.2 million of related unfunded commitments.

Note 3—Summary of Significant Accounting Policies

In accordance with the adoption of Accounting Standards Update ("ASU") 2015-03, Simplifying the Presentation of Debt Issuance Costs ("ASU 2015-03") the Company presents debt issuance costs as a deduction from the carrying value of "Debt obligations, net" and "Loan participations payable, net" on the Company's consolidated balance sheets, which is consistent with the presentation of debt discounts. These costs were previously recorded in "Deferred expenses and other assets, net" on the Company's consolidated balance sheets. As a result, as of December 31, 2015, "Deferred expenses and other assets, net" excludes $25.1 million of debt issuance costs and "Debt obligations, net" and "Loan participations payable, net" are presented net of debt issuance costs of $24.9 million and $0.2 million, respectively. Debt issuance costs associated with revolving-debt arrangements are recorded in "Deferred expenses and other assets, net" on the Company's consolidated balance sheets.
On January 1, 2016, the Company adopted ASU 2015-02, Amendments to the Consolidation Analysis ("ASU 2015-02") which modified the analysis it must perform to determine whether it should consolidate certain types of entities. The guidance does not amend the existing disclosure requirements for VIEs or voting interest entities ("VOEs"). The guidance, however, modified the requirements to qualify under the VOE model. The adoption did not have a material impact on the Company's consolidated financial statements.
On January 1, 2016, the Company adopted ASU 2014-16, Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share is More Akin to Debt or to Equity ("ASU 2014-16") which eliminated the diversity in practice for the accounting for hybrid financial instruments issued in the form of a share. ASU 2014-16 requires management to consider all terms and features, whether stated or implied, of a hybrid instrument when determining whether the nature of the instrument is more akin to a debt instrument or an equity instrument. Embedded derivative features, which are accounted for separately from host contracts, should also be considered in the analysis of the hybrid instrument. The adoption did not have a material impact on the Company's consolidated financial statements.
As of June 30, 2016, the remainder of the Company's significant accounting policies, which are detailed in the Company's 2015 Annual Report, have not changed materially.
New Accounting Pronouncements—In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-13, Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments ("ASU 2016-13") which was issued to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments held by a reporting entity. This amendment replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for interim and annual reporting periods beginning after

7
Table of Contents
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)


December 15, 2019. Early adoption is permitted for interim and annual reporting periods beginning after December 15, 2018. Management is evaluating the impact of the guidance on the Company's consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation: Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09") which was issued to simplify several aspects of the accounting for share-based payment transactions, including income tax, classification of awards as either equity or liabilities and classification on the statement of cash flows. ASU 2016-09 is effective for interim and annual reporting periods beginning after December 15, 2016. Early adoption is permitted. Management is evaluating the impact of the guidance on the Company's consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases ("ASU 2016-02"), which requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases. For operating leases, a lessee will be required to do the following: (i) recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position; (ii) recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis and (iii) classify all cash payments within operating activities in the statement of cash flows. The accounting applied by a lessor is largely unchanged from that applied under previous GAAP. ASU 2016-02 is effective for interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. Management is evaluating the impact of the guidance on the Company's consolidated financial statements.
In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01"), which addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. ASU 2016-01 is effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is not permitted. Management is evaluating the impact of the guidance on the Company's consolidated financial statements.
In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern ("ASU 2014-15") which requires management to evaluate whether there is substantial doubt that the Company is able to continue operating as a going concern within one year after the date the financial statements are issued or available to be issued. If there is substantial doubt, additional disclosure is required, including the principal condition or event that raised the substantial doubt, the Company's evaluation of the condition or event in relation to its ability to meet its obligations and the Company's plan to alleviate (or, which is intended to alleviate) the substantial doubt. ASU 2014-15 is effective for interim and annual reporting periods beginning after December 15, 2016. Early adoption is permitted. Management does not believe the guidance will have a material impact on the Company's consolidated financial statements.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers ("ASU 2014-09") which supersedes existing industry-specific guidance, including ASC 360-20, Real Estate Sales. The new standard is principles-based and requires more estimates and judgment than current guidance. Certain contracts with customers, including lease contracts and financial instruments and other contractual rights, are not within the scope of the new guidance. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers - Deferral of the Effective Date, to defer the effective date of ASU 2014-09 by one year. ASU 2014-09 is now effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted beginning January 1, 2017. Management is evaluating the impact of the guidance on the Company's consolidated financial statements.

8
Table of Contents
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)


Note 4—Real Estate
The Company's real estate assets were comprised of the following ($ in thousands):
 
Net Lease
 
Operating
Properties
 
Total
As of June 30, 2016
 
 
 
 
 
Land and land improvements, at cost
$
305,424

 
$
115,306

 
$
420,730

Buildings and improvements, at cost
1,159,014

 
282,638

 
1,441,652

Less: accumulated depreciation
(382,613
)
 
(43,849
)
 
(426,462
)
Real estate, net
1,081,825

 
354,095

 
1,435,920

Real estate available and held for sale (1)
—

 
126,070

 
126,070

Total real estate
$
1,081,825

 
$
480,165

 
$
1,561,990

As of December 31, 2015
 
 
 
 
 
Land and land improvements, at cost
$
306,172

 
$
133,275

 
$
439,447

Buildings and improvements, at cost
1,183,723

 
427,371

 
1,611,094

Less: accumulated depreciation
(377,416
)
 
(79,142
)
 
(456,558
)
Real estate, net
1,112,479

 
481,504

 
1,593,983

Real estate available and held for sale (1)
—

 
137,274

 
137,274

Total real estate
$
1,112,479

 
$
618,778

 
$
1,731,257

_______________________________________________________________________________
(1)
As of June 30, 2016 and December 31, 2015, the Company had $110.0 million and $137.3 million, respectively, of residential properties available for sale in its operating properties portfolio.

Real Estate Available and Held for Sale—During the six months ended June 30, 2016, the Company transferred one net lease asset with a carrying value of $0.7 million and one commercial operating property with a carrying value of $16.1 million to held for sale due to executed contracts with third parties. During the six months ended June 30, 2015, the Company transferred net lease assets with a carrying value of $8.2 million to held for sale due to executed contracts with third parties and one commercial operating property with a carrying value of $2.9 million to held for investment due to a change in business strategy.

Acquisitions—During the six months ended June 30, 2016, the Company acquired land for $3.9 million and simultaneously entered into a 99 year ground lease with the seller. During the six months ended June 30, 2015, the Company acquired, via deed-in-lieu, title to a residential operating property which had a total fair value of $13.4 million and previously served as collateral for loans receivable held by the Company. No gain or loss was recorded in connection with this transaction.
Dispositions—During the six months ended June 30, 2016 and 2015, the Company sold residential condominiums for total net proceeds of $59.2 million and $91.3 million, respectively, and recorded income from sales of real estate totaling $18.8 million and $30.9 million, respectively. During the six months ended June 30, 2016 and 2015, the Company sold net lease assets for net proceeds of $30.2 million and $25.6 million, respectively, resulting in gains of $9.2 million and $8.6 million, respectively. During the six months ended June 30, 2016, the Company also sold three commercial operating properties for net proceeds of $158.9 million resulting in gains of $25.9 million. The gains are recorded in "Income from sales of real estate" in the Company's consolidated statements of operations.
During the six months ended June 30, 2015, the Company, through a consolidated entity, sold a leasehold interest in a commercial operating property for net proceeds of $93.5 million and simultaneously entered into a ground lease with an initial term of 99 years. In connection with this transaction, the Company recorded a lease incentive asset of $38.1 million, which is included in "Deferred expenses and other assets, net" on the Company's consolidated balance sheets, and deferred a gain of $5.3 million, which is included in "Accounts payable, accrued expenses and other liabilities" on the Company's consolidated balance sheets. In December 2015, the Company acquired the noncontrolling interest in the entity for $6.4 million.
Impairments—During the six months ended June 30, 2016, the Company recorded an impairment of $3.0 million on a residential operating property resulting from a slowdown in the local condominium real estate market. During the six months

9
Table of Contents
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)


ended June 30, 2015, the Company recorded an impairment of $1.7 million on a commercial operating property resulting from a change in business strategy.
Tenant Reimbursements—The Company receives reimbursements from tenants for certain facility operating expenses including common area costs, insurance, utilities and real estate taxes. Tenant expense reimbursements were $5.9 million and $12.2 million for the three and six months ended June 30, 2016, respectively, and $6.7 million and $13.7 million for the three and six months ended June 30, 2015, respectively. These amounts are included in "Operating lease income" in the Company's consolidated statements of operations.
Allowance for Doubtful Accounts—As of June 30, 2016 and December 31, 2015, the allowance for doubtful accounts related to real estate tenant receivables was $1.0 million and $1.9 million, respectively, and the allowance for doubtful accounts related to deferred operating lease income was $1.3 million and $1.5 million as of June 30, 2016 and December 31, 2015, respectively.. These amounts are included in "Accrued interest and operating lease income receivable, net" and "Deferred operating lease income receivable, net," respectively, on the Company's consolidated balance sheets.
Note 5—Land and Development

The Company's land and development assets were comprised of the following ($ in thousands):
 
As of
 
June 30,
 
December 31,
 
2016
 
2015
Land and land development, at cost
$
1,052,745

 
$
1,007,995

Less: accumulated depreciation
(6,732
)
 
(6,032
)
Total land and development, net
$
1,046,013

 
$
1,001,963


Acquisitions—In February 2016, the Company acquired an additional 7.2% interest in a consolidated entity for $7.2 million. The Company owns 92.2% of the entity as of June 30, 2016.

Dispositions—During the six months ended June 30, 2016 and 2015, the Company sold residential lots and units and recognized land development revenue of $42.8 million and $14.8 million, respectively, from its land and development portfolio. For the six months ended June 30, 2016 and 2015, the Company recognized land development cost of sales of $28.8 million and $12.1 million, respectively, from its land and development portfolio.

In April 2015, the Company transferred a land asset to a purchaser at a stated price of $16.1 million, as part of an agreement to construct an amphitheater, for which the Company received immediate payment of $5.3 million, with the remainder to be received upon completion of the development project. Due to the Company's continuing involvement in the project, no sale was recognized and the proceeds were recorded as unearned revenue in "Accounts payable, accrued expenses and other liabilities" on the Company's consolidated balance sheets (refer to Note 7).

Redeemable Noncontrolling Interest—The Company has a majority interest in a strategic venture that provides the third party minority partner an option to redeem its interest at fair value. The Company has reflected the partner's noncontrolling interest in this venture as a component of redeemable noncontrolling interest within its consolidated balance sheets. Changes in fair value are being accreted over the term from the date of issuance of the redemption option to the earliest redemption date using the interest method. As of June 30, 2016 and December 31, 2015, this interest had a carrying value of $4.8 million and $7.2 million, respectively. As of June 30, 2016 and December 31, 2015, this interest had an estimated redemption value of $0.6 million and $9.2 million, respectively.

10
Table of Contents
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)


Note 6—Loans Receivable and Other Lending Investments, net

The following is a summary of the Company's loans receivable and other lending investments by class ($ in thousands):
 
As of
Type of Investment
June 30,
2016
 
December 31,
2015
Senior mortgages
$
1,030,475

 
$
975,915

Corporate/Partnership loans
562,986

 
643,270

Subordinate mortgages
25,413

 
28,676

Total gross carrying value of loans
1,618,874

 
1,647,861

Reserves for loan losses
(110,371
)
 
(108,165
)
Total loans receivable, net
1,508,503

 
1,539,696

Other lending investments—securities
59,936

 
62,289

Total loans receivable and other lending investments, net
$
1,568,439

 
$
1,601,985


In June 2015, the Company received a loan with a fair value of $146.7 million as a non-cash paydown on a $196.6 million loan and reduced the principal balance by the fair value. The loan received has been recorded as a loan receivable and is included in "Loans receivable and other lending investments, net" on the Company’s consolidated balance sheet. In connection with the transaction, the Company recorded a provision for loan losses of $25.9 million on the original loan resulting in a remaining balance of $24.0 million. In October 2015, the Company received full payment of the remaining balance of the original $196.6 million loan.

During the six months ended June 30, 2015, the Company sold a loan with a carrying value of $5.5 million. No gain or loss was recognized as a result of the transaction.

Reserve for Loan Losses—Changes in the Company's reserve for loan losses were as follows ($ in thousands):
 
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
 
2016
 
2015
 
2016
 
2015
Reserve for loan losses at beginning of period
 
$
109,671

 
$
102,783

 
$
108,165

 
$
98,490

Provision for loan losses(1)
 
700

 
19,151

 
2,206

 
23,444

Reserve for loan losses at end of period
 
$
110,371

 
$
121,934

 
$
110,371

 
$
121,934

_______________________________________________________________________________
(1)
For the three and six months ended June 30, 2015 the provision for loan losses includes recoveries of previously recorded asset-specific loan loss reserves of $0.3 million and $0.6 million, respectively.

11
Table of Contents
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)



The Company's recorded investment in loans (comprised of a loan's carrying value plus accrued interest) and the associated reserve for loan losses were as follows ($ in thousands):
 
Individually
Evaluated for
Impairment(1)
 
Collectively
Evaluated for
Impairment(2)
 
Total
As of June 30, 2016
 
 
 
 
 
Loans
$
152,855

 
$
1,474,066

 
$
1,626,921

Less: Reserve for loan losses
(73,371
)
 
(37,000
)
 
(110,371
)
Total(3)
$
79,484

 
$
1,437,066

 
$
1,516,550

As of December 31, 2015
 
 
 
 
 
Loans
$
132,492

 
$
1,524,347

 
$
1,656,839

Less: Reserve for loan losses
(72,165
)
 
(36,000
)
 
(108,165
)
Total(3)
$
60,327

 
$
1,488,347

 
$
1,548,674

_______________________________________________________________________________
(1)
The carrying value of these loans include unamortized discounts, premiums, deferred fees and costs totaling net discounts of $0.2 million as of June 30, 2016 and December 31, 2015. The Company's loans individually evaluated for impairment primarily represent loans on non-accrual status and therefore, the unamortized amounts associated with these loans are not currently being amortized into income.
(2)
The carrying value of these loans include unamortized discounts, premiums, deferred fees and costs totaling net discounts of $2.9 million and $8.2 million as of June 30, 2016 and December 31, 2015,
(3)
The Company's recorded investment in loans as of June 30, 2016 and December 31, 2015 includes accrued interest of $8.0 million and $9.0 million, respectively, which are included in "Accrued interest and operating lease income receivable, net" on the Company's consolidated balance sheets. As of June 30, 2016 and December 31, 2015, excludes $59.9 million and $62.3 million, respectively, of securities that are evaluated for impairment under ASC 320.

Credit Characteristics—As part of the Company's process for monitoring the credit quality of its loans, it performs a quarterly loan portfolio assessment and assigns risk ratings to each of its performing loans. Risk ratings, which range from 1 (lower risk) to 5 (higher risk), are based on judgments which are inherently uncertain and there can be no assurance that actual performance will be similar to current expectation. The Company designates loans as non-performing at such time as: (1) the loan becomes 90 days delinquent; (2) the loan has a maturity default; or (3) management determines it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan. All non-performing loans are placed on non-accrual status and income is only recognized in certain cases upon actual cash receipt.

The Company's recorded investment in performing loans, presented by class and by credit quality, as indicated by risk rating, was as follows ($ in thousands):
 
As of June 30, 2016
 
As of December 31, 2015
 
Performing
Loans
 
Weighted
Average
Risk Ratings
 
Performing
Loans
 
Weighted
Average
Risk Ratings
Senior mortgages
$
898,957

 
3.06

 
$
853,595

 
2.96

Corporate/Partnership loans
561,211

 
3.30

 
641,713

 
3.37

Subordinate mortgages
13,898

 
3.00

 
29,039

 
3.64

  Total
$
1,474,066

 
3.15

 
$
1,524,347

 
3.15



12
Table of Contents
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)


The Company's recorded investment in loans, aged by payment status and presented by class, were as follows ($ in thousands):
 
Current
 
Less Than
and Equal
to 90 Days
 
Greater
Than
90 Days(1)
 
Total
Past Due
 
Total
As of June 30, 2016
 
 
 
 
 
 
 
 
 
Senior mortgages
$
908,723

 
$
—

 
$
126,474

 
$
126,474

 
$
1,035,197

Corporate/Partnership loans
544,098

 
22,158

 
—

 
22,158

 
566,256

Subordinate mortgages
25,468

 
—

 
—

 
—

 
25,468

Total
$
1,478,289

 
$
22,158

 
$
126,474

 
$
148,632

 
$
1,626,921

As of December 31, 2015
 
 
 
 
 
 
 
 
 
Senior mortgages
$
864,099

 
$
—

 
$
116,250

 
$
116,250

 
$
980,349

Corporate/Partnership loans
647,451

 
—

 
—

 
—

 
647,451

Subordinate mortgages
29,039

 
—

 
—

 
—

 
29,039

Total
$
1,540,589

 
$
—

 
$
116,250

 
$
116,250

 
$
1,656,839

_______________________________________________________________________________
(1)
As of June 30, 2016, the Company had five loans which were greater than 90 days delinquent and were in various stages of resolution, including legal proceedings, environmental concerns and foreclosure-related proceedings, and ranged from 1.0 to 8.0 years outstanding. As of December 31, 2015, the Company had four loans which were greater than 90 days delinquent and were in various stages of resolution, including legal proceedings, environmental concerns and foreclosure-related proceedings, and ranged from 1.0 to 7.0 years outstanding.

Impaired Loans—The Company's recorded investment in impaired loans, presented by class, were as follows ($ in thousands)(1):
 
As of June 30, 2016
 
As of December 31, 2015
 
Recorded
Investment
 
Unpaid
Principal
Balance
 
Related
Allowance
 
Recorded
Investment
 
Unpaid
Principal
Balance
 
Related
Allowance
With no related allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
Senior mortgages
$
9,217

 
$
9,200

 
$
—

 
$
—

 
$
—

 
$
—

Subordinate mortgages
11,570

 
11,553

 
—

 
—

 
—

 
—

Subtotal
20,787

 
20,753

 
—

 
—

 
—

 
—

With an allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
Senior mortgages
127,023

 
125,886

 
(70,833
)
 
126,754

 
125,776

 
(69,627
)
Corporate/Partnership loans
5,045

 
5,042

 
(2,538
)
 
5,738

 
5,738

 
(2,538
)
Subtotal
132,068

 
130,928

 
(73,371
)
 
132,492

 
131,514

 
(72,165
)
Total
$
152,855

 
$
151,681

 
$
(73,371
)
 
$
132,492

 
$
131,514

 
$
(72,165
)
____________________________________________________________
(1)
All of the Company's non-accrual loans are considered impaired and included in the table above.


13
Table of Contents
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)


The Company's average recorded investment in impaired loans and interest income recognized, presented by class, were as follows ($ in thousands):
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
With no related allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Senior mortgages
$
9,150

 
$
111

 
$
—

 
$
—

 
$
6,100

 
$
111

 
$
—

 
$
—

Subordinate mortgages
5,785

 
—

 
—

 
—

 
3,857

 
—

 
—

 
—

Subtotal
14,935

 
111

 
—

 
—

 
9,957

 
111

 
—

 
—

With an allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Senior mortgages
126,978

 
—

 
130,016

 
17

 
126,903

 
—

 
130,226

 
34

Corporate/Partnership loans
5,224

 
—

 
28,301

 
3

 
5,396

 
—

 
21,876

 
12

Subtotal
132,202

 
—

 
158,317

 
20

 
132,299

 
—

 
152,102

 
46

Total
$
147,137

 
$
111

 
$
158,317

 
$
20

 
$
142,256

 
$
111

 
$
152,102

 
$
46


Securities—Other lending investments—securities includes the following ($ in thousands):
 
Face Value
 
Amortized Cost Basis
 
Net Unrealized Gain (Loss)
 
Estimated Fair Value
 
Net Carrying Value
As of June 30, 2016
 
 
 
 
 
 
 
 
 
Available-for-Sale Securities
 
 
 
 
 
 
 
 
 
Municipal debt securities
$
5,365

 
$
5,365

 
$
616

 
$
5,981

 
$
5,981

Held-to-Maturity Securities
 
 
 
 
 
 
 
 
 
Debt securities
54,324

 
53,955

 
—

 
54,270

 
53,955

Total
$
59,689

 
$
59,320

 
$
616

 
$
60,251

 
$
59,936

As of December 31, 2015
 
 
 
 
 
 
 
 
 
Available-for-Sale Securities
 
 
 
 
 
 
 
 
 
Municipal debt securities
$
1,010

 
$
1,010

 
$
151

 
$
1,161

 
$
1,161

Held-to-Maturity Securities
 
 
 
 
 
 
 
 
 
Debt securities
54,549

 
61,128

 
—

 
61,199

 
61,128

Total
$
55,559

 
$
62,138

 
$
151

 
$
62,360

 
$
62,289



14
Table of Contents
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)


Note 7—Other Investments

The Company's other investments and its proportionate share of earnings (losses) from equity method investments were as follows ($ in thousands):
 
 
 
Equity in Earnings (Losses)
 
Carrying Value as of
 
For the Three Months Ended June 30,
 
For the Six Months
Ended June 30,
 
June 30, 2016
 
December 31, 2015
 
2016
 
2015
 
2016
 
2015
Other real estate equity investments(1)
$
74,381

 
$
81,452

 
$
28,600

 
$
(337
)
 
$
26,898

 
$
(1,638
)
iStar Net Lease I LLC ("Net Lease Venture")
67,895

 
69,096

 
944

 
1,666

 
1,890

 
3,299

Other investments(2)
58,922

 
73,525

 
4,723

 
2,357

 
5,525

 
4,053

Marina Palms, LLC ("Marina Palms")
27,558

 
30,099

 
5,180

 
5,099

 
13,401

 
9,618

Total other investments
$
228,756

 
254,172

 
$
39,447

 
$
8,785

 
$
47,714

 
$
15,332

_______________________________________________________________________________
(1)
In June 2016, a majority-owned consolidated subsidiary of the Company sold its interest in a real estate equity method investment for net proceeds of $39.8 million and recognized a gain of $31.5 million, of which $10.1 million of the gain was attributable to the noncontrolling interest.
(2)
In conjunction with the sale of the Company's interests in Oak Hill Advisors, L.P. in 2011, the Company retained a share of the carried interest related to various funds. During the three and six months ended June 30, 2016, the Company recognized $0.5 million and $3.7 million, respectively, of carried interest income. During the three and six months ended June 30, 2015, the Company recognized $0.7 million and $2.2 million, respectively, of carried interest income.

Other real estate equity investments—As of June 30, 2016, the Company's other real estate equity investments included equity interests in real estate ventures ranging from 19% to 85%, comprised of investments of $13.1 million in operating properties and $59.2 million in land assets. As of December 31, 2015, the Company's other real estate equity investments included $11.1 million in operating properties and $64.0 million in land assets.
In addition, during 2014 the Company contributed land to a newly formed unconsolidated entity in which the Company received an equity interest of 85.7%. This entity is a VIE and the Company does not have controlling interest due to shared control of the entity with its partner. As of June 30, 2016 and December 31, 2015, the Company had a recorded equity interest of $2.1 million and $6.3 million, respectively. Additionally, the Company committed to provide $45.7 million of mezzanine financing to the entity. As of June 30, 2016, the loan balance was $35.6 million and is included in "Loans receivable and other lending investments, net" on the Company's consolidated balance sheets. During the three and six months ended June 30, 2016, the Company recorded $1.2 million and $2.4 million of interest income, respectively, and $1.0 million and $1.6 million for the three and six months ended June 30, 2015, respectively, relating to this loan.
Net Lease Venture—In February 2014, the Company partnered with a sovereign wealth fund to form a new unconsolidated entity in which the Company has an equity interest of approximately 51.9%. This entity is not a VIE and the Company does not have controlling interest due to the substantive participating rights of its partner. The partners plan to contribute up to an aggregate $500 million of equity to acquire and develop net lease assets over time. The Company is responsible for sourcing new opportunities and managing the venture and its assets in exchange for a promote and management fee. Several of the Company's senior executives whose time is substantially devoted to the net lease venture own a total of 0.6% equity ownership in the venture via co-investment. These senior executives are also entitled to an amount equal to 50% of any promote payment received based on the 47.5% partner's interest. As of June 30, 2016 and December 31, 2015, the venture's carrying value of total assets was $414.2 million and $400.2 million, respectively. During the three and six months ended June 30, 2016, the Company recorded $0.4 million and $0.8 million of management fees, respectively, and $0.4 million and $0.8 million for the three and six months ended June 30, 2015, respectively, from the Net Lease Venture which are included in "Other income" in the Company's consolidated statements of operations. In June 2015, the venture placed ten year non-recourse financing of $120.0 million on one of its net lease assets. Net proceeds from the financing were distributed to its members of which the Company received approximately $61.2 million.
Other investments—As of June 30, 2016, the Company also had smaller investments in real estate related funds and other strategic investments in several other entities that were accounted for under the equity method or cost method. As of June 30, 2016 and December 31, 2015, the carrying value of the Company's cost method investments was $1.4 million and $1.5 million, respectively. During the six months ended June 30, 2015, the Company sold available-for-sale securities for proceeds of $7.3

15
Table of Contents
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)


million for gains of $2.5 million, which are included in "Other income" in the Company's consolidated statements of operations. The amount reclassified out of accumulated other comprehensive income into earnings was determined based on the specific identification method.
Marina Palms—As of June 30, 2016, the Company owned a 47.5% equity interest in Marina Palms, a residential condominium development. This entity is not a VIE and the Company does not have controlling interest due to shared control of the entity with its partner. As of June 30, 2016 and December 31, 2015, the venture's carrying value of total assets was $207.6 million and $278.5 million, respectively.
Summarized investee financial information—The following table presents the investee level summarized financial information of the Company's equity method investments, which were significant subsidiaries for the six months ended June 30, 2016 and 2015 ($ in thousands):
 
Revenues
 
Expenses
 
Net Income Attributable to Parent Entities
For the Six Months Ended June 30, 2016
 
 
 
 
 
Marina Palms
$
87,494

 
$
(47,764
)
 
$
39,730

 
 
 
 
 
 
For the Six Months Ended June 30, 2015
 
 
 
 
 
Marina Palms
$
71,852

 
$
(45,523
)
 
$
26,329


Note 8—Other Assets and Other Liabilities
Deferred expenses and other assets, net, consist of the following items ($ in thousands):
 
As of
 
June 30, 2016
 
December 31, 2015
Intangible assets, net(1)
$
64,345

 
$
71,446

Other receivables(2)
37,345

 
22,557

Other assets(3)
30,258

 
36,999

Restricted cash
22,722

 
26,657

Leasing costs, net(4)
13,362

 
19,393

Corporate furniture, fixtures and equipment, net(5)
5,038

 
4,405

Deferred expenses and other assets, net
$
173,070

 
$
181,457

_______________________________________________________________________________
(1)
Intangible assets, net includes above market and in-place lease assets related to the acquisition of real estate assets. This balance also includes a lease incentive asset of $38.1 million (refer to Note 4). Accumulated amortization on intangible assets, net was $30.1 million and $37.3 million as of June 30, 2016 and December 31, 2015, respectively. The amortization of above market leases and lease incentive assets decreased operating lease income in the Company's consolidated statements of operations by $1.2 million and $2.4 million for the three and six months ended June 30, 2016, respectively, and $1.4 million and $3.7 million for the three and six months ended June 30, 2015, respectively. These intangible lease assets are amortized over the term of the lease. The amortization expense for in-place leases was $0.6 million and $1.1 million for the three and six months ended June 30, 2016, respectively, and $0.7 million and $2.2 million for the three and six months ended June 30, 2015, respectively. These amounts are included in "Depreciation and amortization" in the Company's consolidated statements of operations.
(2)
As of June 30, 2016, includes $1.7 million of receivables related to the sale of properties that was received in July.
(3)
As of December 31, 2015, includes a $7.0 million receivable related to the sale of a land and development asset in 2015 that was recognized in land development revenue during the three and six months ended June 30, 2016.
(4)
Accumulated amortization of leasing costs was $7.6 million and $9.8 million as of June 30, 2016 and December 31, 2015, respectively.
(5)
Accumulated depreciation on corporate furniture, fixtures and equipment was $8.6 million and $8.1 million as of June 30, 2016 and December 31, 2015, respectively.


16
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iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)


Accounts payable, accrued expenses and other liabilities consist of the following items ($ in thousands):
 
As of
 
June 30, 2016
 
December 31, 2015
Other liabilities(1)
$
81,822

 
$
80,332

Accrued expenses(2)
71,235

 
68,937

Accrued interest payable
49,876

 
55,081

Intangible liabilities, net(3)
9,893

 
10,485

Accounts payable, accrued expenses and other liabilities(4)
$
212,826

 
$
214,835

_______________________________________________________________________________
(1)
As of June 30, 2016 and December 31, 2015, "Other liabilities" includes $20.9 million and $14.5 million, respectively, related to profit sharing arrangements with developers for properties sold. As of June 30, 2016 and December 31, 2015, includes $4.6 million and $4.4 million, respectively, associated with "Real estate available and held for sale" on the Company's consolidated balance sheets. As of June 30, 2016 and December 31, 2015, "Other liabilities" also includes $6.3 million and $6.6 million, respectively, related to tax increment financing bonds which were issued by government entities to fund development within two of the Company's land projects. The amount represents tax assessments associated with each project, which will decrease as the Company sells units. As of June 30, 2016 and December 31, 2015, includes $2.3 million and $0.9 million, respectively, related to share repurchases that settled in July 2016 and January 2016, respectively. As of December 31, 2015, includes $6.0 million of deferred income in connection with the sale of a land and development asset in 2015. Of this amount, $7.0 million and $1.0 million were recognized in land development revenue and land development cost of sales, respectively, during the three and six months ended June 30, 2016. As of June 30, 2016, includes $0.8 million of deferred financing costs that had not yet been paid in cash. As of December 31, 2015, includes $5.7 million of deferred revenue in connection with the sale of a land and development asset in 2015 that was recognized in land development revenue during the six months ended June 30, 2016.
(2)
As of June 30, 2016 and December 31, 2015, accrued expenses includes $2.1 million and $5.3 million, respectively, associated with "Real estate available and held for sale" on the Company's consolidated balance sheets.
(3)
Intangible liabilities, net includes below market lease liabilities related to the acquisition of real estate assets. Accumulated amortization on below market leases was $6.8 million and $6.6 million as of June 30, 2016 and December 31, 2015, respectively. The amortization of below market leases increased operating lease income in the Company's consolidated statements of operations by $0.3 million and $0.6 million for the three and six months ended June 30, 2016, respectively, and $0.4 million and $0.7 million for the three and six months ended June 30, 2015, respectively. As of June 30, 2016, intangible liabilities includes $0.5 million associated with “Real estate available and held for sale" on the Company’s consolidated balance sheet.
(4)
As of June 30, 2016 and December 31, 2015, includes $30.4 million and $26.2 million, respectively, of capital expenditures that had not yet been paid in cash.

Deferred tax assets and liabilities of the Company's taxable REIT subsidiaries were as follows ($ in thousands):
 
As of
 
June 30, 2016
 
December 31, 2015
Deferred tax assets (liabilities)
$
52,362

 
$
53,910

Valuation allowance
(52,362
)
 
(53,910
)
Net deferred tax assets (liabilities)
$
—

 
$
—


Note 9—Loan Participations Payable, net

During the six months ended June 30, 2016, the Company transferred to a third party a $50.0 million senior loan commitment that it had previously originated. The Company had not funded the senior loan commitment prior to transfer. The transferee is responsible for funding the $50.0 million senior loan commitment, which bears interest at a rate of LIBOR + 4.50% with a LIBOR floor of 0.43%.
During the six months ended June 30, 2016, the Company transferred to a third party a $169.0 million senior loan commitment that it had previously originated. The Company had funded $22.8 million of the senior loan prior to transfer and received net proceeds of $22.7 million upon transfer. The transferee is responsible for funding the remaining $146.2 million of the senior loan commitment, which bears interest at a rate of LIBOR + 5.00% with a LIBOR floor of 0.50%. The Company is entitled to receive interest from the transferee at a rate of 3.0% on the funded balance. For the six months ended June 30, 2016, the transferee funded $5.6 million directly to the borrower.
During the six months ended June 30, 2015, the Company transferred to a third party a $100.0 million junior loan participation in a $250.0 million mezzanine loan commitment that it had previously originated. The Company had funded $38.9 million of the junior loan prior to transfer and received proceeds of $38.9 million upon transfer. The transferee is responsible for funding the remaining $61.1 million under the junior loan commitment, which bears interest at a rate of 5.90%. The Company will fund these

17
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iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)


commitments if the transferee defaults. For the six months ended June 30, 2016 and 2015, the transferee funded an additional $6.7 million and $3.4 million, respectively, directly to the borrower. As of June 30, 2016, the balance of the loan was $59.7 million.
During the six months ended June 30, 2015, the Company transferred to a third party a $100.0 million senior loan participation in a $220.2 million senior loan commitment that it had previously originated. The transferred participation bears interest at a rate of LIBOR+ 3.50% with a LIBOR floor of 0.25%. The Company had fully funded the $100.0 million transferred participation prior to transfer and received net proceeds of $99.2 million.
These transfers of financial assets did not meet the sales criteria established under ASC Topic 860 and have been accounted for as loan participations payable as of June 30, 2016 and December 31, 2015, with balances, net of discounts and debt issuance costs, of $186.9 million and $152.1 million, respectively. As of June 30, 2016 and December 31, 2015, the corresponding loan receivable balances were $186.6 million and $153.0 million, respectively, and are included in "Loans receivable and other lending investments, net" on the Company's consolidated balance sheets. The principal and interest due on these loan participations payable are paid from cash flows of the corresponding loans receivable, which serve as collateral for the participations.

18
Table of Contents
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)


Note 10—Debt Obligations, net

As of June 30, 2016 and December 31, 2015, the Company's debt obligations were as follows ($ in thousands):
 
Carrying Value as of
 
Stated
Interest Rates
 
Scheduled
Maturity Date
 
June 30, 2016
 
December 31, 2015
 
 
Secured credit facilities and term loans:
 
 
 
 
 
 
 
2015 $250 Million Secured Revolving Credit Facility
$
50,000

 
$
250,000

 
LIBOR + 2.75%

(1) 
March 2018
2016 Senior Secured Credit Facility
450,000

 
—

 
LIBOR + 4.50%

(2) 
July 2020
Term loans collateralized by net lease assets
235,016

 
239,547

 
4.85% - 7.26%

(3) 
Various through 2026
2012 Secured Tranche A-2 Facility
—

 
339,717

 
LIBOR + 5.75%

(4) 
—
Total secured credit facilities and term loans
735,016

 
829,264

 
 

 
 
Unsecured notes:
 
 
 
 
 
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