iStar Announces Second Quarter 2016 Results

NEW YORK, Aug. 4, 2016 /PRNewswire/ -- iStar (NYSE: STAR) today reported results for the second quarter ended June 30, 2016.

Second Quarter 2016 Results

iStar reported net income allocable to common shareholders for the second quarter of $38.1 million, or $0.37 per diluted common share, compared to a loss of $(31.0) million, or $(0.36) per diluted common share for the second quarter 2015.

Adjusted income allocable to common shareholders for the second quarter was $61.1 million, or $0.56 per diluted common share, an increase from $9.1 million, or $0.11 per diluted common share for the second quarter 2015.

Adjusted income represents net income computed in accordance with GAAP, prior to the effects of certain non-cash items. Please see the financial tables that follow the text of this press release for the Company's calculations of adjusted income and reconciliation to GAAP net income (loss).

Investment Activity

During the quarter, iStar funded a total of $118.0 million associated with new investments, prior financing commitments and ongoing development. In addition, the portfolio generated $461.0 million of repayments and sales over the same period.

Portfolio Overview

At June 30, 2016, the Company's portfolio totaled $4.88 billion, which is gross of $433.2 million of accumulated depreciation and $37.0 million of general loan loss reserves.

Real Estate Finance

iStar's real estate finance business targets sophisticated and innovative investors by providing one-stop capabilities that encompass financial alternatives ranging from full envelope senior loans to large scale mezzanine and preferred equity capital positions.

At June 30, 2016, the Company's real estate finance portfolio totaled $1.61 billion, gross of general loan loss reserves. The portfolio included $1.53 billion of performing loans with a weighted average maturity of 2.2 years.

iStar invested $63.9 million and received $183.1 million of proceeds within its real estate finance portfolio during the quarter. During the quarter, the Company sold, at par, participations in two first mortgage investments totaling $219.0 million of commitments, of which the Company had funded $22.8 million at sale.

At June 30, 2016, the Company's non-performing loans (NPLs) had a carrying value of $79.5 million. The Company recorded a $0.7 million provision for loan losses for the quarter.

Net Lease

iStar's net lease business seeks to create stable cash flows through long-term leases to single tenants on its properties. The Company targets corporate customers with mission-critical facilities, offering solutions that combine iStar's capabilities in underwriting, lease structuring, asset management and build-to-suit construction.

At the end of the quarter, iStar's net lease portfolio totaled $1.53 billion, gross of $382.6 million of accumulated depreciation.

During the quarter, the Company sold net lease assets for proceeds of $20.3 million and recorded gains of $4.3 million.

Operating Properties

At the end of the quarter, iStar's operating property portfolio totaled $537.1 million, gross of $43.8 million of accumulated depreciation, and was comprised of $427.1 million of commercial and $110.0 million of residential real estate properties. During the quarter, the Company invested $17.2 million within its operating properties portfolio and received $231.9 million of proceeds from sales, recognizing $60.5 million of gains net of non-controlling interest.

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 $24.4 million of revenue offset by $18.6 million of expenses during the quarter. iStar generally seeks to reposition these assets with the objective of maximizing their values through the infusion of capital and/or intensive asset management efforts resulting in value realization upon sale.

During the quarter, the Company sold two commercial operating properties for $153.1 million of proceeds, recognizing $25.1 million of gains. Over the past twelve months, these properties generated net operating income of $6.6 million. In addition, the Company sold its interest in a venture that held a commercial operating property for $39.8 million and generated $31.5 million of earnings from equity method investments of which $10.1 million is attributable to noncontrolling interests.

"The gains we recognized through this quarter's sales serve as a good example of our maximizing value as we monetize our operating properties," said Jay Sugarman, iStar's Chairman and Chief Executive Officer. "The proceeds generated will allow us to recycle capital into higher return opportunities."

During the quarter, the Company executed commercial operating property leases covering approximately 115,000 square feet.

Residential Operating Properties

At the end of the quarter, the residential operating portfolio was comprised of condominium units generally located within luxury projects in major U.S. cities.

Land & Development

At the end of the quarter, the Company's land & development portfolio totaled $1.14 billion, with eight projects in production, 10 in development and 12 in the pre-development phase. These projects are collectively entitled for approximately 30,000 lots and units.

The Company has recently completed construction on two projects within its land & development portfolio:

One PalmThe Company and its partner completed construction of One Palm, a Class A multifamily rental and hotel development in Sarasota, FL. The project includes 138 rental apartments, which are 100% occupied. In addition, the 139-key hotel has averaged occupancy of 77% since opening. iStar projects a first year cash-on-cash return of 24% on its $10.0 million basis. The Company reclassified the asset as a commercial operating property during the second quarter.

1000 South ClarkThe Company and its partner completed construction of 1000 South Clark, a 29-story, 469-unit, luxury multifamily development in downtown Chicago. Tenants began moving into the building in April and 242 leases have been signed with stabilization expected by early next year.

In addition, the Company completed significant phases within two of its land & development assets:

Ford AmphitheaterThe Company completed construction of the Ford Amphitheater and adjoining public park at the Coney Island Boardwalk. The venue hosted its first concert at the end of June, and has over 40 events scheduled. Construction work continues at the historic Childs building, which will include 20,000 square feet of bar, restaurant and event space adjacent to the amphitheater. The amphitheater serves as an integral part of the Company's future plans at Coney Island, where it owns an additional four acres of developable land.

The AsburyThe Company celebrated the grand opening of The Asbury, an innovative, 110-key hotel, on Memorial Day weekend, marking the first new hotel to open in Asbury Park, NJ in 50 years. The hotel hosts numerous venues, including several unique bars, a rooftop nightclub, open-air movie theater, gameroom, biergarten and resort-style pool. Mentioned as part of Travel + Leisure's Best Places to Travel in 2016, The Asbury is a key element of the Company's plan to develop its additional 30 acres along the oceanfront at Asbury Park.

"We're pleased to see momentum continue to build within our land & development portfolio as evidenced by the completion of these four high-profile projects and the receipt of $25 million in sales proceeds," said Geoffrey Jervis, iStar's Chief Operating Officer and Chief Financial Officer. "These proceeds will be redeployed into new investments in future periods."

Capital Markets

During the quarter, iStar entered into a new $450 million senior secured credit facility due July 1, 2020.  The new term loan bears interest at a rate of LIBOR plus 4.5% with a 1.0% LIBOR floor and was issued at 99.0% of par. Proceeds from the new facility were used to refinance the $323 million balance of the Company's 7.0% Secured Term Loan due March 2017, partially pay down outstanding borrowings on its Secured Revolving Credit Facility and pay related transaction costs. Outstanding borrowings under the new facility were initially collateralized 1.25x.

Separately, the Company repaid $265 million of unsecured notes due July 1, 2016 during the second quarter using proceeds from its unsecured notes offering completed in March.

The Company's weighted average cost of debt for the second quarter was 5.6%. The Company's leverage was 2.1x at the end of the quarter, within 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 continued its stock repurchase activity, completing open market purchases during the second quarter of 3.6 million shares for $33.7 million or an average of $9.30 per share. This brings total shares of common stock and common stock equivalents repurchased over the past twelve months to 16.7 million, or 19% of shares outstanding. The Company had 71.9 million shares outstanding at the end of the quarter. During the quarter, the Board of Directors approved an increase in the stock repurchase program to $50.0 million. The repurchase program authorizes the Company to repurchase its common stock from time to time in the open market, through privately negotiated transactions and through one or more trading plans.

At the end of the quarter, iStar had $721.4 million of unrestricted cash and available capacity on its revolving credit facility. The Company expects to maintain larger liquidity balances in anticipation of retiring up to $400.0 million of convertible bonds due in November.

Personnel

During the quarter, the Company welcomed Geoffrey G. Jervis into the newly created role of Chief Operating Officer and Chief Financial Officer. Mr. Jervis brings with him an extensive background in corporate and real estate finance, strategic planning, risk and operations management, and public REIT accounting. Prior to joining iStar, he served as Chief Financial Officer at Stag Industrial, Chief Financial Officer at Blackstone Mortgage Trust and Chief Financial Officer at Capital Trust.

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iStar (NYSE: STAR) finances, invests in and develops real estate and real estate related projects as part of its fully-integrated investment platform. Building on over two decades of experience and more than $35 billion of transactions, iStar brings uncommon capabilities and new ways of thinking to commercial real estate and adapts its investment strategy to changing market conditions. The Company is structured as a real estate investment trust ("REIT"), with a diversified portfolio focused on larger assets located in major metropolitan markets.

iStar will hold a quarterly earnings conference call at 10:00 a.m. ET today, August 4, 2016. This conference call will be broadcast live over the internet and can be accessed by all interested parties through iStar's website, www.istar.com. To listen to the live call, please go to the website's "Investor" 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 iStar's 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 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'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, the Company's ability to generate income and gains from operating properties and land and other risks detailed from time to time in iStar SEC reports.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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SOURCE iStar