iStar Announces Fiscal Year 2016 Results

Investing Activity

$ in millions

Real

EstateFinance

NetLease

Operating

Properties

Land &

Dev

Corporate

/ Other

Total

Q4'16

Originations

$169.8

$32.7

—

—

—

$202.5

Fundings

$197.1

$43.0

$15.2

$28.2

$0.3

$283.8

Proceeds received

$302.3

$13.6

$34.0

$58.2

$18.4

$426.5

FY'16

Originations

$432.0

$259.8

—

—

—

$691.8

Fundings

$474.0

$86.9

$69.9

$135.9

$0.6

$767.3

Proceeds received

$614.2

$123.4

$377.2

$134.8

$32.1

$1,281.7

Note: Originations represent total commitments on new investments made during the quarter. Fundings represent capital expenditures and fundings on new investments and existing assets during the quarter. Net lease originations represent the total value of originations by iStar and by its net lease joint venture in which the Company owns a 52% interest.

_______________________

Portfolio Rollforward

$ in millions

Real

EstateFinance

NetLease

Operating

Properties

Land &

Dev

Corporate

/ Other

Total

Net book value (9/30/16)

$

1,632.2

$

1,105.2

$

487.1

$

1,115.0

$

53.4

$

4,392.9

Investments(1)

197.1

27.3

12.8

20.4

0.3

257.9

Asset transfers between segments

(31.5)

—

96.7

(65.2)

—

—

Principal received / basis sold(2)

(302.3)

(17.5)

(31.1)

(38.1)

(21.4)

(410.4)

Other(3)

(45.1)

(5.5)

(3.3)

(1.7)

1.0

(54.6)

Net book value (12/31/16)

1,450.4

1,109.5

562.2

1,030.4

33.3

4,185.8

Add: Accumulated

depreciation and general loan

loss reserves

23.3

368.7

46.2

6.5

—

444.7

Gross book value (12/31/16)

$

1,473.7

$

1,478.2

$

608.4

$

1,036.9

$

33.3

$

4,630.5

Note: The table above include the Company's pro rata share of equity method investments.

(1) Includes fundings, capital expenditures, accruals, and deferred capitalized interest on loans.

(2) Includes repayment of deferred interest on loans.

(3) Real Estate Finance activity primarily represents repayment of a loan participation that was consolidated on iStar's balance sheet.

Real Estate Finance Statistics

$ in millions

iStar 3.0

Legacy

Q4'16

Q3'16

Q4'15

Q4'16

Q3'16

Q4'15

Gross book value

$

1,223.5

$

1,365.9

$

1,195.8

$

250.3

$

287.5

$

442.2

% of total loan portfolio

83%

83%

73%

17%

17%

27%

Performing loans

$

1,223.5

$

1,365.9

$

1,195.8

$

58.6

$

65.0

$

381.9

Non-performing loans

$

—

$

—

$

—

$

191.7

$

222.5

$

60.3

% Performing / Non-performing

100% / 0%

100% / 0%

100% / 0%

23% / 77%

23% / 77%

86% / 14%

First mortgages / senior loans

74%

72%

66%

38%

44%

32%

Mezzanine / subordinated debt

26%

28%

34%

62%

56%

68%

Total

100%

100%

100%

100%

100%

100%

Wtd. avg. LTV (1)

64.1%

61.5%

60.0%

61.4%

65.4%

90.2%

Unlevered yield (1)

8.9%

9.0%

8.8%

8.5%

9.1%

6.9%

Wtd. avg. maturity (years) (1)

2.1

1.6

2.1

1.8

1.9

2.7

Weighted avg. risk rating (1)

3.07

2.61

2.93

2.20

2.36

3.50

Note: Gross book value represents the carrying value of iStar's loans, gross of general reserves. Risk rating scale based on 1 as lowest risk and 5 as highest risk. Risk ratings are based on internal metrics developed by management. They reflect management's current assessment and are not intended to predict outcomes. Actual performance of the assets may differ materially from management's current assessment of risk. See the "Loan Receivable Credit Statistics" table for additional detail on the Company's NPL and specific reserves.

(1) Includes performing loans only.

Net Lease Portfolio Overview

$ in millions

Wholly owned assets held for investment

$1,384.3

Wholly owned assets available and held for sale

1.2

Joint venture investments (1)

92.7

Total

$1,478.2

(1) Represents iStar's 52% interest in its net lease joint venture, which is an equity method investment. The venture's carrying value of total assets was $511.3 million

Q4'16

Q3'16

Q4'15

Square feet (000s)

17,214

17,022

17,807

% Leased

98%

99%

96%

Wtd. avg. lease term (years)

14.7

14.6

14.9

Same store NOI (millions) (1)

$33.2

$31.1

$31.9

Yield

9.1%

8.2%

8.4%

(1) Same store net operating income includes net lease assets owned on or prior to January 1, 2015 and were in service through December 31, 2016.

Commercial Operating Property Statistics

$ in millions

Stabilized Operating

Total

Q4'16

Q3'16

Q4'15

Q4'16

Q3'16

Q4'15

Q4'16

Q3'16

Q4'15

Gross book value

$337.2

$243.8

$123.8

$188.7

$184.7

$448.0

$525.9

$428.5

$571.8

% of total

64%

57%

22%

36%

43%

78%

100%

100%

100%

Occupancy

86%

86%

89%

54%

55%

65%

74%

72%

74%

Yield

8.5%

8.4%

8.8%

1.5%

2.4%

2.8%

5.5%

5.9%

4.4%

Residential Operating Property Statistics

(excluding fractional units)

$ in millions

Q4'16

Q3'16

Q4'15

Condominium units sold

11

11

12

Proceeds

$22.9

$15.4

$13.9

Income

$2.9

$4.6

$3.3

Land & Development Portfolio Overview

$ in millions

Wholly owned assets held for investment

$952.1

Joint venture investments

84.8

Total

$1,036.9

Land & Development Portfolio by Type

$ in millions

Master

Planned

Communities

Waterfront

Urban / Infill

Total

# of projects

10

6

15

31

In production

$181.6

$139.7

$53.6

$374.9

In development

257.2

138.5

3.6

399.3

Pre-development

130.5

7.6

124.6

262.7

Gross book value

$569.3

$285.8

$181.8

$1,036.9

Land & Development Activity for Q4'16

Land development revenue

$8.0

—

$6.0

$14.0

Land development cost of sales

(6.9)

—

(4.3)

(11.2)

Gross margin

$1.1

—

$1.7

$2.8

Income from sales of real estate

—

—

8.8

8.8

Earnings from land development equity method investments

0.1

2.5

(3.8)

(1.2)

Total

$1.2

$2.5

$6.7

$10.4

Capital expenditures / Contributions

$14.5

$1.3

$4.6

$20.4

Capital Structure

$ in millions

Secured debt

$738.6

Unsecured debt

$2,651.3

Preferred equity (A)

$699.7

Common equity (B)

$316.9

Total equity (A) + (B)

$1,016.6

Accumulated depreciation and amortization and general loan loss reserves (1) (C)

$497.0

Adjusted common equity (B) + (C)

$813.9

Adjusted total equity (A) + (B) + (C)

$1,513.6

Note: Represents carrying value.

(1) Accumulated depreciation and amortization includes iStar's proportionate share of accumulated depreciation and amortization relating to equity method investments.

Shares Outstanding

in millions

Q4'16

Q3'16

Q2'16

Q1'16

Q4'15

Basic shares outstanding at end of period

72.0

71.2

71.9

75.4

81.1

3.0% convertible notes / strike of $11.77 (if converted) (1)

—

17.0

17.0

17.0

17.0

1.5% convertible notes / strike of $17.29 (if converted) (1)

—

10.3

11.6

11.6

11.6

4.5% Series J conv. preferred / strike of $12.79 (if converted)

15.6

15.6

15.6

15.6

15.6

Other securities

0.7

0.8

0.8

0.8

0.8

Diluted shares outstanding at end of period

88.3

114.9

116.9

120.4

126.1

(1) Matured on November 15, 2016

Leverage at 12/31/16

$ in millions

Book debt

$3,389.9

Book equity (1)

$

1,016.6

Less: Cash and cash equivalents

(328.7)

Add: Accumulated depreciation and amortization (2)

473.7

Net book debt (A)

$3,061.2

Add: General loan loss reserves

23.3

Sum of book equity, accumulated D&A and general loan loss reserves (B)

$1,513.6

Leverage (A) / (B)

2.0x

(1) Includes $699.7 million of preferred equity.

(2) Accumulated depreciation and amortization includes iStar's proportionate share of accumulated depreciation and amortization relating to equity method investments.  

Liquidity at 12/31/16

$ in millions

Unrestricted cash

$328.7

Revolving credit facility capacity

$250.0

Delayed draw term loan

$170.0

Total liquidity

$748.7

iStarConsolidated Statements of Operations(In thousands)(unaudited)

Three MonthsEnded December 31,

Twelve MonthsEnded December 31,

2016

2015

2016

2015

REVENUES

Operating lease income

$

52,149

$

58,730

$

213,018

$

229,720

Interest income

29,276

32,463

129,153

134,687

Other income

11,435

9,718

46,515

49,931

Land development revenue

13,951

71,114

88,340

100,216

Total revenues

$

106,811

$

172,025

$

477,026

$

514,554

COST AND EXPENSES

Interest expense

$

53,225

$

57,302

$

221,398

$

224,639

Real estate expense

33,344

35,607

138,422

146,750

Land development cost of sales

11,166

44,554

62,007

67,382

Depreciation and amortization

12,145

15,443

54,329

65,247

General and administrative(1)

21,594

18,757

84,027

81,277

(Recovery of) provision for loan losses

235

5,623

(12,514)

36,567

Impairment of assets

2,731

4,934

14,484

10,524

Other expense

1,142

29

5,883

6,374

Total costs and expenses

$

135,582

$

182,249

$

568,036

$

638,760

Income (loss) before other items

$

(28,771)

$

(10,224)

$

(91,010)

$

(124,206)

Income from sales of real estate

16,910

27,794

105,296

93,816

Earnings from equity method investments

3,095

6,249

77,349

32,153

Income tax benefit (expense)

306

(3,843)

10,166

(7,639)

Loss on early extinguishment of debt

(1)

(2)

(1,619)

(281)

Net income (loss)

$

(8,461)

$

19,974

$

100,182

$

(6,157)

Net (income) loss attributable to noncontrolling interests

2,039

546

(4,876)

3,722

Net income (loss) attributable to iStar

$

(6,422)

$

20,520

$

95,306

$

(2,435)

Preferred dividends

(12,830)

(12,830)

(51,320)

(51,320)

Net (income) loss allocable to HPU holders and Participating Security holders(2)

—

(5)

(14)

1,080

Net income (loss) allocable to common shareholders

$

(19,252)

$

7,685

$

43,972

$

(52,675)

(1) For the three months ended December 31, 2016 and 2015, includes $3,245 and $1,947 of stock-based compensation expense, respectively.  For the twelve months ended December 31, 2016 and 2015, includes $10,889 and $12,013 of stock-based compensation expense, respectively.

(2) HPU Holders were current and former Company employees who purchased high performance common stock units under the Company's High Performance Unit Program. On August 13, 2015, the Company repurchased and retired 100% of the outstanding HPU shares through an exchange offer. Participating Security holders are non-employee directors who hold common stock equivalents and restricted stock awards granted under the Company's LTIP who are eligible to participate in dividends.

iStarSupplemental Information(In thousands, except per share data)(unaudited)

Three MonthsEnded December 31,

Twelve MonthsEnded December 31,

2016

2015

2016

2015

ADJUSTED INCOME (1)

Reconciliation of Net Income to Adjusted Income

Net income (loss) allocable to common shareholders

$

(19,252)

$

7,685

$

43,972

$

(52,675)

Add: Depreciation and amortization

14,341

17,207

64,447

72,132

Add: (Recovery of) provision for loan losses

235

5,623

(12,514)

36,567

Add: Impairment of assets

6,331

6,100

18,999

18,509

Add: Stock-based compensation expense

3,245

1,947

10,889

12,013

Add: Loss on early extinguishment of debt

1

2

1,619

281

Less: Losses on charge-offs and dispositions

(2,225)

(51,723)

(14,827)

(55,437)

Less: HPU/Participating Security allocation

—

—

(23)

(1,706)

Adjusted income allocable to common shareholders

$

2,676

$

(13,159)

$

112,562

$

29,684

(1) Adjusted Income 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) 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 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 includes impairments on cost and equity method investments recorded in other income and earnings from equity method investments, respectively. Effective in the second quarter 2016, the Company modified its presentation of Adjusted Income to include losses on charge-offs and dispositions of previously impaired or reserved assets to provide a more informative metric for investors to help evaluate our operating performance. Losses on charge-offs and dispositions represents the impact of charge-offs and dispositions realized during the period. These charge-offs and dispositions were taken on assets that were previously impaired for GAAP and reflected in net income but not in Adjusted Income.

Reconciliation of Adjusted Income per Share Guidanceto Net Income per Share Guidance

For the Year Ending

December 31, 2017

Targeted Net Income per Diluted Common Share

$0.65

Add: Depreciation and amortization

$0.67 - $0.75

Add: Other non-cash adjustments

$0.51 - $0.59

Less: Losses on charge-offs and dispositions

($0.36) - ($0.44)

Targeted Adjusted Income per Diluted Common Share

$1.50

iStarEarnings Per Share Information(In thousands, except per share data)(unaudited)

Three MonthsEnded December 31,

Twelve MonthsEnded December 31,

2016

2015

2016

2015

EPS INFORMATION FOR COMMON SHARES

Income (loss) from continuing operations attributable to iStar(1)(2)

Basic

$

(0.27)

$

0.09

$

0.60

$

(0.62)

Diluted

$

(0.27)

$

0.09

$

0.55

$

(0.62)

Net income (loss)

Basic

$

(0.27)

$

0.09

$

0.60

$

(0.62)

Diluted

$

(0.27)

$

0.09

$

0.55

$

(0.62)

Adjusted income

Basic

$

0.04

$

(0.16)

$

1.53

$

0.35

Diluted

$

0.04

$

(0.16)

$

1.15

$

0.35

Weighted average shares outstanding

Basic

71,603

83,162

73,453

84,987

Diluted (for net income per share)

71,603

83,581

98,467

84,987

Diluted (for adjusted income per share)

72,038

83,162

114,102

85,395

Common shares outstanding at end of period

72,042

81,109

72,042

81,109

(1) Including preferred dividends, net (income) loss attributable to noncontrolling interests and income from sales of real estate.

(2) On August 13, 2015, the Company repurchased and retired 100% of the outstanding high performance unit (HPU) shares through an exchange offer.

iStarConsolidated Balance Sheets(In thousands)(unaudited)

As of

As of

December 31, 2016

December 31, 2015

ASSETS

Real estate

Real estate, at cost

$

1,906,592

$

2,050,541

Less: accumulated depreciation

(414,840)

(456,558)

Real estate, net

$

1,491,752

$

1,593,983

Real estate available and held for sale

83,764

137,274

$

1,575,516

$

1,731,257

Land and development, net

945,565

1,001,963

Loans receivable and other lending investments, net

1,450,439

1,601,985

Other investments

214,406

254,172

Cash and cash equivalents

328,744

711,101

Accrued interest and operating lease income receivable, net

14,775

18,436

Deferred operating lease income receivable

96,420

97,421

Deferred expenses and other assets, net

199,649

181,457

Total assets

$

4,825,514

$

5,597,792

LIABILITIES AND EQUITY

Accounts payable, accrued expenses and other liabilities

$

211,570

$

214,835

Loan participations payable, net

159,321

152,086

Debt obligations, net

3,389,908

4,118,823

Total liabilities

$

3,760,799

$

4,485,744

Redeemable noncontrolling interests

$

5,031

$

10,718

Total iStar shareholders' equity

$

1,016,564

$

1,059,112

Noncontrolling interests

43,120

42,218

Total equity

$

1,059,684

$

1,101,330

Total liabilities and equity

$

4,825,514

$

5,597,792

iStarSegment Analysis(In thousands)(unaudited)

FOR THE THREE MONTHS ENDED DECEMBER 31, 2016

Real

EstateFinance

NetLease

Operating

Properties

Land &

Dev

Corporate

/ Other

Total

Operating lease income

$

—

$

38,765

$

13,277

$

107

$

—

$

52,149

Interest income

29,276

—

—

—

—

29,276

Other income

1,986

709

7,864

281

595

11,435

Land development revenue

—

—

—

13,951

—

13,951

Earnings from equity method investments

—

953

2,299

(1,177)

1,020

3,095

Income from sales of real estate

—

5,242

2,867

8,801

—

16,910

Total revenue and other earnings

$

31,262

$

45,669

$

26,307

$

21,963

$

1,615

$

126,816

Real estate expense

—

(5,024)

(19,358)

(8,962)

—

(33,344)

Land development cost of sales

—

—

—

(11,166)

—

(11,166)

Other expense

(1,086)

—

—

—

(56)

(1,142)

Allocated interest expense

(13,910)

(16,850)

(5,577)

(8,848)

(8,040)

(53,225)

Allocated general and administrative(1)

(3,699)

(4,450)

(1,564)

(3,601)

(5,035)

(18,349)

Segment profit (loss)

$

12,567

$

19,345

$

(192)

$

(10,614)

$

(11,516)

$

9,590

(1) Excludes $3,245 of stock-based compensation expense.

iStarSegment Analysis(In thousands)(unaudited)

FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2016

Real

EstateFinance

NetLease

Operating

Properties

Land &

Dev

Corporate

/ Other

Total

Operating lease income

$

—

$

148,002

$

64,593

$

423

$

—

$

213,018

Interest income

129,153

—

—

—

—

129,153

Other income

4,658

1,633

33,216

3,170

3,838

46,515

Land development revenue

—

—

—

88,340

—

88,340

Earnings from equity method investments

—

3,567

33,863

30,012

9,907

77,349

Income from sales of real estate

—

21,138

75,357

8,801

—

105,296

Total revenue and other earnings

$

133,811

$

174,340

$

207,029

$

130,746

$

13,745

$

659,671

Real estate expense

—

(19,058)

(82,401)

(36,963)

—

(138,422)

Land development cost of sales

—

—

—

(62,007)

—

(62,007)

Other expense

(2,719)

—

—

—

(3,164)

(5,883)

Allocated interest expense

(57,787)

(65,880)

(23,156)

(34,888)

(39,687)

(221,398)

Allocated general and administrative(1)

(15,311)

(17,585)

(6,574)

(13,693)

(19,975)

(73,138)

Segment profit (loss)

$

57,994

$

71,817

$

94,898

$

(16,805)

$

(49,081)

$

158,823

AS OF DECEMBER 31, 2016

Real

EstateFinance

NetLease

Operating

Properties

Land &

Dev

Corporate

/ Other

Total

Real estate

Real estate, at cost

$

—

$

1,384,255

$

522,337

$

—

$

—

$

1,906,592

Less: accumulated depreciation

—

(368,665)

(46,175)

—

—

(414,840)

Real estate, net

$

—

$

1,015,590

$

476,162

$

—

$

—

$

1,491,752

Real estate available and held for sale

—

1,284

82,480

—

—

83,764

Total real estate

$

—

$

1,016,874

$

558,642

$

—

$

—

$

1,575,516

Land and development, net

—

—

—

945,565

—

945,565

Loans receivable and other lending investments, net

1,450,439

—

—

—

—

1,450,439

Other investments

—

92,669

3,583

84,804

33,350

214,406

Total portfolio assets

$

1,450,439

$

1,109,543

$

562,225

$

1,030,369

$

33,350

$

4,185,926

Cash and other assets

639,588

Total assets

$

4,825,514

iStarSupplemental Information(In thousands)(unaudited)

Twelve Months Ended

December 31, 2016

OPERATING STATISTICS

Expense Ratio

General and administrative expenses - trailing twelve months (A)

$

84,027

Average total assets (B)

$

5,272,579

Expense Ratio (A) / (B)

1.6%

As of

December 31, 2016

UNENCUMBERED ASSETS / UNSECURED DEBT

Unencumbered assets (C)(1)

$

3,777,656

Unsecured debt (D)

$

2,669,772

Unencumbered Assets / Unsecured Debt (C) / (D)

1.4x

UNFUNDED COMMITMENTS

Performance-based commitments(2)

$

406,477

Strategic investments

45,540

Total Unfunded Commitments

$

452,017

LOAN RECEIVABLE CREDIT STATISTICS

As of

December 31, 2016

December 31, 2015

Carrying value of NPLs /

As a percentage of total carrying value of loans

$

191,696

14.0%

$

60,327

3.9%

Total reserve for loan losses /

As a percentage of total gross carrying value of loans(3)

$

85,545

5.9%

$

108,165

6.6%

(1) Unencumbered assets are calculated in accordance with the indentures governing the Company's unsecured debt securities.

(2) Excludes $158.7 million of commitments on loan participations sold that are not the obligation of the Company but are consolidated on the Company's balance sheet.

(3) Gross carrying value represents iStar's carrying value of loans, gross of loan loss reserves.

iStarSupplemental Information(In millions)(unaudited)

PORTFOLIO STATISTICS AS OF DECEMBER 31, 2016(1)

Property Type

Real

Estate

Finance

Net Lease

Operating Properties

Land &

Dev

Total

% of

Total

Office / Industrial

$

168

$

772

$

122

$

—

$

1,062

23

%

Land & Development

—

—

—

1,037

1,037

22

%

Hotel

333

136

108

—

577

12

%

Entertainment / Leisure

—

490

—

—

490

11

%

Mixed Use / Collateral

292

—

171

—

463

10

%

Condominium

381

—

82

—

463

10

%

Other Property Types

237

23

—

—

260

6

%

Retail

63

57

125

—

245

5

%

Strategic Investments

—

—

—

—

34

1

Total

$

1,474

$

1,478

$

608

$

1,037

$

4,631

100

Geography

Real

Estate

Finance

Net Lease

Operating Properties

Land &

Dev

Total

% ofTotal

Northeast

$

790

$

380

$

47

$

234

$

1,451

31

%

West

87

305

38

362

792

17

%

Southeast

127

235

150

157

669

15

%

Mid-Atlantic

168

153

54

219

594

13

%

Southwest

77

184

239

28

528

11

%

Central

151

79