ISTAR INC. NEW YORK, April 29, 2015 /PRNewswire/ -- iStar Financial Inc. (NYSE: STAR) today reported results for the first quarter ended March 31, 2015.
First Quarter 2015 Results
iStar reported adjusted income allocable to common shareholders for the first quarter of $8.5 million, or $0.10 per diluted common share, compared to a loss of $(5.5) million, or $(0.07) per diluted common share for the first quarter 2014.
Adjusted income represents net income computed in accordance with GAAP, prior to the effects of certain non-cash items, primarily including depreciation, loan loss provisions, impairments, stock-based compensation and gain/loss on early extinguishment of debt. Please see the financial tables that follow the text of this press release for the Company's calculations of adjusted income (loss) as well as reconciliations to GAAP net income (loss).
Net income (loss) allocable to common shareholders for the first quarter was $(22.6) million, or $(0.26) per diluted common share, compared to a loss of $(26.6) million, or $(0.31) per diluted common share for the first quarter 2014.
Investment Activity
iStar committed to new investments totaling $274.0 million during the first quarter, of which it funded $163.2 million. In addition, the Company funded $61.5 million associated with ongoing developments and prior financing commitments. This resulted in total fundings during the quarter of $224.7 million.
iStar generated $207.4 million of total proceeds from repayments and sales during the first quarter, ending the quarter with $625.4 million of available cash.
Portfolio Overview
At March 31, 2015, the Company's portfolio totaled $5.20 billion, which is gross of $452.4 million of accumulated depreciation and $38.0 million of general loan loss reserves.
Real Estate Finance
At March 31, 2015, the Company's real estate finance portfolio totaled $1.58 billion, gross of general loan loss reserves. The portfolio included $1.51 billion of performing loans with a weighted average maturity of 2.6 years. The performing loans were comprised of $776.5 million of first mortgages / senior loans and $734.5 million of mezzanine / subordinated debt. The performing loans had a weighted average last dollar loan-to-value ratio of 70% and generated a 9.5% yield for the quarter. During the quarter, the Company invested $188.0 million and received $40.6 million of proceeds within its real estate finance portfolio.
At March 31, 2015, the Company's non-performing loans (NPLs) had a carrying value of $64.8 million. At March 31, 2015, loan loss reserves totaled $102.8 million, comprised of $38.0 million of general reserves and $64.8 million of asset specific reserves.
Net Lease
At the end of the quarter, iStar's net lease portfolio totaled $1.68 billion, gross of $370.8 million of accumulated depreciation.
The Company's net lease portfolio totaled 19 million square feet across 33 states. Occupancy for the portfolio was 95.9% at the end of the quarter, with a weighted average remaining lease term of 14.6 years. The occupied assets generated an unleveraged yield of 7.6% and the total net lease portfolio generated an unleveraged yield of 7.3% for the quarter.
Operating Properties
At the end of the quarter, the Company's operating properties portfolio totaled $731.7 million, gross of $72.8 million of accumulated depreciation, and was comprised of $598.8 million of commercial and $132.9 million of residential real estate properties. During the quarter, the Company invested $13.9 million within its operating properties portfolio and received $143.7 million of proceeds from sales.
Commercial Operating Properties
The Company's commercial operating properties represent a diverse pool of assets across a broad range of geographies and collateral types including office, retail and hotel properties. These properties generated $31.1 million of revenue offset by $22.5 million of expenses during the quarter. iStar generally seeks to reposition or redevelop these assets with the objective of maximizing their values through the infusion of capital and/or intensive asset management efforts.
At the end of the quarter, the Company had $108.1 million of stabilized commercial operating properties that were 88% leased and generated an unleveraged yield of 8.2% for the quarter. The remainder of the commercial operating portfolio was comprised of $490.7 million of transitional properties that were 56% leased and generated an unleveraged yield of 3.5% for the quarter. iStar is actively working to lease up and stabilize these properties. During the quarter, the Company executed commercial operating property leases covering approximately 123,000 square feet.
During the quarter, a partnership, of which the Company owns 90%, sold a leasehold interest in One Detroit Center, a transitional commercial operating property in Detroit, MI, and received $93.5 million in net proceeds. The partnership retained its fee interest in the land, entering into a 99-year ground lease in conjunction with the sale. The partnership will receive an initial annual rent of $2.5 million under the ground lease, which provides for fixed and inflation-based rental increases during the term of the lease.
"We utilized a structure that is fairly uncommon for the Detroit market to solve our objective of capturing full value for this landmark property, while at the same time allowing us to retain a significant economic interest in the asset with a senior position and very long duration," said Jay Sugarman, iStar's chairman and chief executive officer. "The value created through this transaction serves as a prime example of our operating properties strategy."
Residential Operating Properties
At the end of the quarter, the residential operating portfolio was comprised of 263 condominium units, generally located within luxury condominium projects in major U.S. cities. During the quarter, the Company sold 69 condominium units, resulting in $49.9 million of proceeds and recorded $18.6 million of income, offset by $4.9 million of expenses.
Land
At the end of the quarter, the Company's land portfolio totaled $1.11 billion, gross of accumulated depreciation, and was comprised of 11 master planned community projects, 14 urban infill land parcels and six waterfront land parcels located throughout the United States.
Master planned communities represent large-scale residential projects that the Company will entitle, plan and/or develop. These projects are currently entitled for approximately 25,000 lots. The remainder of the Company's land includes infill and waterfront parcels located in and around major cities that the Company intends to sell itself or in partnership with commercial real estate developers. These projects are currently entitled for approximately 6,000 residential and hotel units, and select projects include commercial, retail and office uses.
The Company's land portfolio generated $9.1 million of revenue, offset by $6.9 million of land development cost of sales. In addition, it generated $2.6 million of earnings from its land equity method investments. For the same period last year, the Company reported $4.6 million of revenue, offset by $3.7 million of cost of sales.
At March 31, 2015, the Company had seven land projects in production, 12 in development and 12 in the pre-development phase. During the quarter, the Company invested $21.8 million in its land portfolio across 10 projects. As the Company continues to invest and build value in its land portfolio, it expects to move additional projects into production in the coming year and grow its land revenues.
Capital Markets
During the quarter, the Company entered into a new $250.0 million revolving credit facility with JPMorgan, Bank of America Merrill Lynch and Barclays. Based on the Company's current credit ratings, the new facility bears interest at a rate of LIBOR plus 2.75%. The facility's interest rate would decrease by up to 50 basis points should the Company's credit ratings be upgraded by Moody's or Standard & Poor's. The revolving credit facility matures in March 2018, at which time the Company has the option to convert any outstanding balance into a term loan that would mature in March 2019. The new credit facility is initially secured by a borrowing base of $438.3 million.
During the quarter, the Company repaid $10.3 million on its 2012 Secured Credit Facility, bringing the remaining balance to $348.2 million at March 31, 2015. The facility matures in March 2017.
The Company's weighted average cost of debt for the first quarter was 5.5%, down from 5.6% for the first quarter of last year. The Company's leverage was 2.1x at March 31, 2015, at the low end of the Company's targeted range of 2.0x - 2.5x. Please see the financial tables that follow the text of this press release for a calculation of the Company's leverage.
The Company repurchased 44,000 shares of its common stock during the quarter at an average price of $12.66 per share. The Company has remaining authorization to repurchase $28.5 million of its common stock.
Annual Meeting
The Company will host its Annual Meeting of Shareholders at the Sofitel Hotel, located at 45 West 44th Street, New York, New York 10036 on Wednesday, May 20, 2015 at 9:00 a.m. ET. All shareholders are cordially invited to attend.
[Financial Tables to Follow]
* * *
iStar Financial Inc. (NYSE: STAR) is a fully-integrated finance and investment company focused on the commercial real estate industry. The Company provides custom-tailored investment capital to high-end private and corporate owners of real estate and invests directly across a range of real estate sectors. The Company, which is taxed as a real estate investment trust ("REIT"), has invested more than $35 billion over the past two decades. Additional information on iStar Financial is available on the Company's website at www.istarfinancial.com.
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iStar Financial will hold a quarterly earnings conference call at 10:00 a.m. ET today, April 29, 2015. 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's expectations include general economic conditions and conditions in the commercial real estate and credit markets, the Company's ability to generate liquidity and to repay indebtedness as it comes due, additional loan loss provisions, the amount and timing of asset sales, changes in NPLs, repayment levels, the Company's ability to make new investments, the Company's ability to maintain compliance with its debt covenants, actual results of condominium sales meeting our expectations, the Company's ability to generate income and gains from operating properties and land and other risks detailed from time to time in iStar Financial Inc.'s SEC reports.
iStar Financial Inc.
Consolidated Statements of Operations
(In thousands)
(unaudited)
Three Months
Ended March 31,
---------------
2015 2014
---- ----
REVENUES
Operating lease income $59,139 $62,108
Interest income 34,896 27,914
Other income 10,564 14,584
Land development revenue 8,258 4,143
----- -----
Total revenues $112,857 $108,749
-------- --------
COST AND EXPENSES
Interest expense $54,632 $57,456
Real estate expense 39,634 42,613
Land development cost of sales 6,891 3,654
Depreciation and amortization 18,501 18,613
General and administrative(1) 20,753 19,788
Provision for (recovery of) loan
losses 4,293 (3,400)
Impairment of assets - 2,979
Other expense 2,123 221
----- ---
Total costs and expenses $146,827 $141,924
Income (loss) before earnings
from equity method investments
and other items $(33,970) $(33,175)
Loss on early extinguishment of
debt (168) (1,180)
Earnings from equity method
investments 6,547 3,177
Income (loss) from continuing
operations before income taxes $(27,591) $(31,178)
Income tax (expense) benefit (5,878) 507
Income (loss) from continuing
operations $(33,469) $(30,671)
Income from sales of real estate 21,156 16,494
Net income (loss) $(12,313) $(14,177)
Net (income) loss attributable
to noncontrolling interests 1,841 (454)
----- ----
Net income (loss) attributable
to iStar Financial Inc. $(10,472) $(14,631)
Preferred dividends (12,830) (12,830)
Net (income) loss allocable to
HPU holders and Participating
Security holders(2) 749 889
Net income (loss) allocable to
common shareholders $(22,553) $(26,572)
======== ========
(1) For the three months ended March 31, 2015 and 2014, includes $3,238 and $2,075 of stock-based compensation expense,
respectively.
(2) HPU Holders are current and former Company employees who purchased high performance common stock units under the Company's
High Performance Unit Program. Participating Security holders are non-employee directors who hold common stock equivalents and
retricted stock awards granted under the Company's LTIP who are eligible to participate in dividends.
iStar Financial Inc.
Earnings Per Share Information
(In thousands, except per share data)
(unaudited)
Three Months
Ended March 31,
---------------
2015 2014
---- ----
EPS INFORMATION FOR COMMON
SHARES
Income (loss) from continuing operations(1)
Basic and diluted $(0.26) $(0.31)
Net income (loss)
Basic and diluted $(0.26) $(0.31)
Adjusted income (loss)
Basic and diluted $0.10 $(0.07)
Weighted average shares
outstanding
Basic 85,497 84,819
Diluted (for net income per
share) 85,497 84,819
Diluted (for adjusted income per
share) 97,454 84,819
Common shares outstanding at end
of period 85,520 84,855
EPS INFORMATION FOR HPU SHARES
Income (loss) from continuing operations(1)
Basic and diluted $(49.93) $(59.27)
Net income (loss)
Basic and diluted $(49.93) $(59.27)
Weighted average shares
outstanding
Basic and diluted 15 15
(1) Including preferred dividends, net (income) loss from noncontrolling interests and income from sales of real estate.
iStar Financial Inc.
Consolidated Balance Sheets
(In thousands)
(unaudited)
As of As of
March 31, 2015 December 31, 2014
-------------- -----------------
ASSETS
Real estate
Real
estate,
at
cost $2,988,670 $3,145,563
Less:
accumulated
depreciation (452,397) (468,849)
-------- --------
Real
estate,
net $2,536,273 $2,676,714
Real
estate
available
and
held
for
sale 292,608 285,982
------- -------
$2,828,881 $2,962,696
Loans
receivable
and
other
lending
investments,
net 1,537,846 1,377,843
Other
investments 341,549 354,119
Cash
and
cash
equivalents 625,352 472,061
Accrued
interest
and
operating
lease
income
receivable,
net 18,450 16,367
Deferred
operating
lease
income
receivable 96,279 98,262
Deferred
expenses
and
other
assets,
net 204,223 181,785
------- -------
Total
assets $5,652,580 $5,463,133
LIABILITIES AND EQUITY
Accounts
payable,
accrued
expenses
and
other
liabilities $158,251 $180,902
Debt
obligations,
net 4,261,528 4,022,684
Total
liabilities $4,419,779 $4,203,586
Redeemable
noncontrolling
interests $13,203 $11,199
Total
iStar
Financial
Inc.
shareholders'
equity $1,169,113 $1,197,092
Noncontrolling
interests 50,485 51,256
Total
equity $1,219,598 $1,248,348
Total
liabilities
and
equity $5,652,580 $5,463,133
========== ==========
iStar Financial Inc.
Segment Analysis
(In thousands)
(unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2015
Real Estate Net Operating
Properties Land Corporate / Other
Finance Lease Total
------- ----- -----
Operating lease income $ - $36,339 $22,614 $186 $ - $59,139
Interest income 34,896 - - - - 34,896
Other income 48 3 8,876 633 1,004 10,564
Land development revenue - - - 8,258 - 8,258
Earnings (loss) from equity method
investments - 1,633 535 2,609 1,770 6,547
Income from sales of real estate - 3,527 17,629 - - 21,156
Total revenue and other earnings $34,944 $41,502 $49,654 $11,686 $2,774 $140,560
Real estate expense - (5,270) (27,424) (6,940) - (39,634)
Land development cost of sales - - - (6,891) - (6,891)
Other expense 1 - - - (2,124) (2,123)
Allocated interest expense (14,235) (16,835) (7,668) (7,544) (8,350) (54,632)
Allocated general and administrative(1) (3,094) (3,761) (1,828) (2,793) (6,039) (17,515)
------ ------ ------ ------ ------ -------
Segment profit (loss) $17,616 $15,636 $12,734 $(12,482) $(13,739) $19,765
======= ======= ======= ======== ======== =======
(1) Excludes $3,238 of stock-based compensation expense.
AS OF MARCH 31, 2015
Real Estate Net Operating
Properties Land Corporate / Other
Finance Lease Total
------- ----- -----
Real estate
Real estate, at cost $ - $1,548,255 $579,512 $860,903 $ - $2,988,670
Less: accumulated depreciation - (370,818) (72,822) (8,757) - (452,397)
--- -------- ------- ------ --- --------
Real estate, net $ - $1,177,437 $506,690 $852,146 $ - $2,536,273
Real estate available and held for sale - 11,307 139,853 141,448 - 292,608
--- ------ ------- ------- --- -------
Total real estate $ - $1,188,744 $646,543 $993,594 $ - $2,828,881
Loans receivable and other lending
investments, net 1,537,846 - - - - 1,537,846
Other investments - 124,464 12,291 108,892 95,902 341,549
--- ------- ------ ------- ------ -------
Total portfolio assets $1,537,846 $1,313,208 $658,834 $1,102,486 $95,902 $4,708,276
========== ========== ======== ========== =======
Cash and other assets 944,304
-------
Total assets $5,652,580
==========
iStar Financial Inc.
Supplemental Information
(In thousands)
(unaudited)
Three Months
Ended March 31,
---------------
2015 2014
---- ----
ADJUSTED INCOME
Reconciliation of Net Income to
Adjusted Income
-------------------------------
Net income (loss) allocable to
common shareholders $(22,553) $(26,572)
Add: Depreciation and amortization 20,072 18,895
Add: Provision for (recovery of)
loan losses 4,293 (3,400)
Add: Impairment of assets 4,337 2,979
Add: Stock-based compensation
expense 3,238 2,075
Add: Loss on early extinguishment of
debt 168 1,180
Less: HPU/Participating Security
allocation (1,032) (703)
------ ----
Adjusted income (loss) allocable to
common shareholders(1) $8,523 $(5,546)
====== =======
(1) Adjusted Income (loss) allocable to common shareholders should be examined in conjunction with net income (loss) as shown in the
Consolidated Statements of Operations. This non-GAAP financial measure should not be considered as an alternative to net income
(determined in accordance with GAAP) 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 it indicative of funds available to fund the
Company's cash needs or available for distribution to shareholders. It should be noted that the Company's manner of calculating
this non-GAAP financial measure may differ from the calculations of similarly-titled measures by other companies. Management
believes that it is useful to consider Adjusted Income because the adjustments are non-cash items that do not necessarily reflect
an actual change in the long-term economic value or performance of our assets. Management considers this non-GAAP financial
measure as supplemental information to net income in analyzing the performance of our underlying business. Depreciation and
amortization includes our proportionate share of depreciation and amortization expense relating to equity method investments and
excludes the portion of depreciation and amortization expense allocable to non-controlling interests. Impairment of assets
iStar Financial Inc.
Supplemental Information
(In thousands)
(unaudited)
Three Months Ended
March 31, 2015
--------------
OPERATING STATISTICS
Expense Ratio
-------------
General and
administrative
expenses -
annualized (A) $83,012
Average total
assets (B) $5,557,857
Expense Ratio (A)
/(B) 1.5%
As of
March 31, 2015
--------------
Leverage
--------
Book debt $4,261,528
Less: Cash and
cash equivalents (625,352)
--------
Net book debt (C) $3,636,176
Book equity $1,219,598
Add: Accumulated
depreciation and
amortization(1) 497,598
Add: General loan
loss reserves 38,000
------
Sum of book
equity,
accumulated
depreciation and
general loan loss
reserves (D) $1,755,196
Leverage (C) / (D) 2.1x
UNENCUMBERED ASSETS / UNSECURED DEBT
Unencumbered
assets (E)(2) $4,867,190
Unsecured debt (F) $3,426,890
Unencumbered Assets /
Unsecured Debt (E) /(F) 1.4x
(1) Accumulated depreciation and amortization includes our
proportionate share of accumulated depreciation and amortization
relating to equity method investments.
(2) Unencumbered assets are calculated in accordance with the
indentures governing the Company's unsecured debt securities.
iStar Financial Inc.
Supplemental Information
(In thousands)
(unaudited)
As of
March 31, 2015
--------------
UNFUNDED COMMITMENTS
Performance-based commitments $639,515
Strategic investments 45,762
Discretionary fundings 18,065
------
Total Unfunded Commitments $703,342
LOAN RECEIVABLE CREDIT
STATISTICS As of
-----
March 31, 2015 December 31, 2014
-------------- -----------------
Carrying value of NPLs /
As a percentage of total
carrying value of loans $64,750 4.8% $65,047 5.5%
Asset specific reserves for loan losses /
As a percentage of gross
carrying value of
impaired loans(1) $64,783 47.3% $64,990 46.5%
Total reserve for loan losses /
As a percentage of total
gross carrying value of
loans(1) $102,783 7.1% $98,490 7.6%
(1) Gross carrying value represents iStar's carrying value of loans, gross of loan loss reserves.
iStar Financial Inc.
Supplemental Information
(In millions)
(unaudited)
PORTFOLIO STATISTICS AS OF MARCH 31, 2015(1)
Property Type Real Estate Net Lease Operating
Finance Properties Land Total % of
Total
--- -----
Office / Industrial $161 $913 $180 $ - $1,254 24.1%
Land 28 - - 1,111 1,139 21.9%
Mixed Use / Mixed Collateral 445 - 245 - 690 13.3%
Entertainment / Leisure - 568 - - 568 10.9%
Hotel 331 136 54 - 521 10.0%
Condominium 212 - 133 - 345 6.6%
Other Property Types 288 10 - - 298 5.7%
Retail 111 57 120 - 288 5.6%
Strategic Investments - - - - 96 1.9%
--- --- --- --- ---
Total $1,576 $1,684 $732 $1,111 $5,199 100.0%
====== ====== ==== ====== ====== =====
Geography Real Estate Net Lease Operating
Finance Properties Land Total % of
Total
--- -----
Northeast $796 $389 $1 $199 $1,385 26.6%
West 81 426 78 397 982 18.9%
Mid-Atlantic 323 143 137 194 797 15.3%
Southeast 80 255 279 151 765 14.7%
Southwest 131 234 185 148 698 13.4%
Central 112 93 50 9 264 5.1%
Various 27 142 2 13 184 3.6%
International 26 2 - - 28 0.5%
Strategic Investments - - - - 96 1.9%
--- --- --- --- ---
Total $1,576 $1,684 $732 $1,111 $5,199 100.0%
====== ====== ==== ====== ====== =====
(1) Based on carrying value of the Company's total investment portfolio, gross of accumulated depreciation and general loan loss reserves.
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SOURCE iStar Financial Inc.
