iStar Announces Fourth Quarter and Fiscal Year 2015 Results

Full year adjusted income allocable to common shareholders was $84 million, or $0.81 per diluted common share

Quarterly adjusted income allocable to common shareholders was $39 million, or $0.34 per diluted common share

Current unrestricted cash balance is approximately $650 million

Repurchased 9.2 million shares since the beginning of the fourth quarter through February 24th

25 Feb, 2016, 07:00 ET from iStar

NEW YORK, Feb. 25, 2016 /PRNewswire/ -- iStar (NYSE: STAR) today reported results for the fourth quarter and fiscal year ended December 31, 2015.

Fourth Quarter 2015 Results

iStar reported adjusted income allocable to common shareholders for the fourth quarter of $38.5 million, or $0.34 per diluted common share, an increase from $28.3 million, or $0.26 per diluted common share for the fourth quarter 2014.

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).

Net income allocable to common shareholders for the fourth quarter was $7.7 million, or $0.09 per diluted common share, compared to a loss of $(13.3) million, or $(0.16) per diluted common share for the fourth quarter 2014.

Fiscal Year 2015 Results

iStar reported adjusted income allocable to common shareholders for the year ended December 31, 2015 of $84.0 million, or $0.81 per diluted common share, compared to $109.4 million, or $1.00 per diluted common share for the year ended December 31, 2014.

"We took a cautious view in the fourth quarter regarding new investments, opting to  maintain a significant cash balance. At the same time, we exceeded our adjusted income goals by realizing upon the work and value created within our development businesses," said Jay Sugarman, iStar's chairman and chief executive officer.

Net income (loss) allocable to common shareholders for the year was $(52.7) million, or  $(0.62) per diluted common share, compared to $(33.7) million, or $(0.40) per diluted common share for the year ended December 31, 2014.

Capital Markets

The Company continued its stock repurchase activity, completing open market purchases of 9.2 million shares for $102.1 million from the beginning of the fourth quarter through February 24th. Since the beginning of 2015 to date, iStar repurchased 12.5 million shares, net, of common stock and common stock equivalents, or 14.2% of outstanding iStar common equity, for an aggregate of $132.2 million at an average price of $10.59 per share.

On February 15, 2016, the Board of Directors authorized a new $50 million stock repurchase program.

The Company's weighted average cost of debt for the fourth quarter was 5.4%, down from 5.5% for the fourth quarter of last year. The Company's leverage was 2.1x at December 31, 2015, 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.

Investment Activity

iStar funded a total of $92.5 million during the quarter associated with new investments, prior financing commitments and ongoing development, bringing total fundings for the year to $662.5 million.

iStar generated $223.0 million of repayments and sales during the fourth quarter, bringing total proceeds for the year to $971.2 million.

The Company's current balance of unrestricted cash is approximately $650 million.

Portfolio Overview

At December 31, 2015, the Company's portfolio totaled $5.09 billion, which is gross of $462.6 million of accumulated depreciation and $36.0 million of general loan loss reserves.

Real Estate Finance

At December 31, 2015, the Company's real estate finance portfolio totaled $1.64 billion, gross of general loan loss reserves. The portfolio included $1.58 billion of performing loans with a weighted average maturity of 2.3 years. The performing loans were comprised of 56% first mortgages / senior loans and 44% mezzanine / subordinated debt. The performing loans had a weighted average last dollar loan-to-value ratio of 67% and generated an 8.3% yield for the quarter. The Company invested $43.1 million and received $62.9 million of proceeds within its real estate finance portfolio during the quarter.

At December 31, 2015, the Company's non-performing loans (NPLs) had a carrying value of $60.3 million, down from $82.6 million in the third quarter. The Company recorded a $5.6 million provision for loan losses during the quarter. At December 31, 2015, loan loss reserves totaled $108.2 million, comprised of $36.0 million of general reserves and $72.2 million of asset specific reserves.

Net Lease

At the end of the quarter, iStar's net lease portfolio totaled $1.56 billion, gross of $377.4 million of accumulated depreciation. During the quarter, the Company received $61.4 million of sales proceeds from its net lease portfolio and recorded $24.5 million of gains associated with these sales.

The Company's net lease portfolio totaled 18 million square feet across 33 states. Occupancy for the portfolio was 96.4% at the end of the quarter, with a weighted average remaining lease term of 14.9 years. The net lease portfolio generated an unleveraged yield of 8.4% for the quarter.

Operating Properties

At the end of the quarter, iStar's operating properties portfolio totaled $709.0 million, gross of $79.1 million of accumulated depreciation, and was comprised of $571.8 million of commercial and $137.2 million of residential real estate properties. During the quarter, the Company invested $23.3 million within its operating properties portfolio and received $19.7 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 $26.3 million of revenue offset by $19.5 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 $123.8 million of stabilized commercial operating properties that were 89% leased and generated an unleveraged yield of 8.8% for the quarter. The remainder of the commercial operating portfolio was comprised of $448.0 million of transitional properties that were 65% leased and generated an unleveraged yield of 2.8% 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 83,000 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. During the quarter, iStar sold 19 condominium units, resulting in $14.6 million of proceeds and recorded $3.6 million of income, offset by $2.5 million of expenses.

Land & Development

At the end of the quarter, the Company's land & development portfolio totaled $1.11 billion, with seven projects in production, 10 in development and 13 in the pre-development phase. These projects are collectively entitled for approximately 30,000 lots and units.

For the quarter, the Company's land and development portfolio generated $71.1 million of revenues, offset by $44.6 million of cost of sales, plus $3.0 million from land development equity method investments. This resulted in total gross margin and earnings from equity method investments of $29.5 million compared $15.7 million for the same period last year.  During the quarter, the Company invested $25.1 million in its land portfolio.

For the year, the Company's gross margin and earnings from equity method investments grew to $49.5 million from $17.3 million in the prior year.

"We are beginning to realize the embedded value in our land portfolio and development efforts over the past few years as sales and profitability grew significantly year-over-year," said Sugarman. "We look forward to continuing our efforts to unlock the value in our land portfolio during 2016."

*               *                *

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.

Logo - http://photos.prnewswire.com/prnh/20130708/NY43293LOGO

iStar will hold a quarterly earnings conference call at 10:00 a.m. ET today, February 25, 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.

 

 

iStar Consolidated Statements of Operations

(In thousands)

(unaudited)

Three Months Ended December 31,

Twelve Months Ended December 31,

2015

2014

2015

2014

REVENUES

Operating lease income

$

58,730

$

59,334

$

229,720

$

243,100

Interest income

32,463

28,565

134,687

122,704

Other income

9,718

18,780

49,931

81,033

Land development revenue

71,114

3,271

100,216

15,191

  Total revenues

$

172,025

$

109,950

$

514,554

$

462,028

COST AND EXPENSES

Interest expense

$

57,302

$

55,073

$

224,639

$

224,483

Real estate expense

35,607

38,937

146,750

163,389

Land development cost of sales

44,554

2,812

67,382

12,840

Depreciation and amortization

15,443

18,414

65,247

73,571

General and administrative(1)

18,757

18,780

81,277

88,287

Provision for (recovery of) loan losses

5,623

5,151

36,567

(1,714)

Impairment of assets

4,934

12,893

10,524

34,634

Other expense

29

1,433

6,374

6,340

  Total costs and expenses

$

182,249

$

153,493

$

638,760

$

601,830

  Income (loss) before other items

$

(10,224)

$

(43,543)

$

(124,206)

$

(139,802)

Income from sales of real estate

27,794

28,478

93,816

89,943

Earnings from equity method investments

6,249

18,057

32,153

94,905

Income tax expense

(3,843)

(4,531)

(7,639)

(3,912)

Loss on early extinguishment of debt

(2)

(416)

(281)

(25,369)

  Net income (loss)

$

19,974

$

(1,955)

$

(6,157)

$

15,765

Net (income) loss attributable to noncontrolling interests

546

1,071

3,722

704

  Net income (loss) attributable to iStar

$

20,520

$

(884)

$

(2,435)

$

16,469

Preferred dividends

(12,830)

(12,830)

(51,320)

(51,320)

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

(5)

442

1,080

1,129

  Net income (loss) allocable to common shareholders

$

7,685

$

(13,272)

$

(52,675)

$

(33,722)

(1) For the three months ended December 31, 2015 and 2014, includes $1,947 and $4,770 of stock-based compensation expense, respectively.  For the twelve months ended December 31, 2015 and 2014, includes $12,013 and $13,314 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. During the twelve months ended December 31, 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.

 

 

iStar

Earnings Per Share Information

(In thousands, except per share data)

(unaudited)

Three Months Ended December 31,

Twelve Months Ended December 31,

2015

2014

2015

2014

EPS INFORMATION FOR COMMON SHARES

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

Basic

$

0.09

$

(0.16)

$

(0.62)

$

(0.40)

Diluted

$

0.09

$

(0.16)

$

(0.62)

$

(0.40)

Net income (loss)

Basic

$

0.09

$

(0.16)

$

(0.62)

$

(0.40)

Diluted

$

0.09

$

(0.16)

$

(0.62)

$

(0.40)

Adjusted income

Basic

$

0.46

$

0.33

$

0.99

$

1.29

Diluted

$

0.34

$

0.26

$

0.81

$

1.00

Weighted average shares outstanding

Basic

83,162

85,188

84,987

85,031

Diluted (for net income per share)

83,581

85,188

84,987

85,031

Diluted (for adjusted income per share)

127,775

129,954

129,589

129,789

Common shares outstanding at end of period

81,109

85,191

81,109

85,191

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

(2) During the twelve months ended December 31, 2015, the Company repurchased and retired 100% of the outstanding HPU shares through an exchange offer.  A portion of income during the twelve months ended December 31, 2015 and in all periods during 2014 is allocable to HPU holders.

 

 

 

 

iStar

Consolidated Balance Sheets

(In thousands)

(unaudited)

 

As of

As of

December 31, 2015

December 31, 2014

ASSETS

Real estate

Real estate, at cost

$

2,050,541

$

2,276,913

Less: accumulated depreciation

(456,558)

(460,482)

Real estate, net

$

1,593,983

$

1,816,431

Real estate available and held for sale

137,274

167,303

$

1,731,257

$

1,983,734

Land and development

1,001,963

978,962

Loans receivable and other lending investments, net

1,601,985

1,377,843

Other investments

254,172

354,119

Cash and cash equivalents

711,101

472,061

Accrued interest and operating lease income receivable, net

18,436

16,367

Deferred operating lease income receivable

97,421

98,262

Deferred expenses and other assets, net

206,557

181,785

Total assets

$

5,622,892

$

5,463,133

LIABILITIES AND EQUITY

Accounts payable, accrued expenses and other liabilities

$

214,835

$

180,902

Loan participations payable, net

152,326

Debt obligations, net

4,143,683

4,022,684

Total liabilities

$

4,510,844

$

4,203,586

Redeemable noncontrolling interests

$

10,718

$

11,199

Total iStar shareholders' equity

$

1,059,112

$

1,197,092

Noncontrolling interests

42,218

51,256

Total equity

$

1,101,330

$

1,248,348

Total liabilities and equity

$

5,622,892

$

5,463,133

 

 

 

iStar

Segment Analysis

(In thousands)

(unaudited)

 

FOR THE THREE MONTHS ENDED DECEMBER 31, 2015

Real Estate Finance

Net Lease

Operating Properties

Land & Dev

Corporate / Other

Total

Operating lease income

$

$

39,982

$

18,599

$

149

$

$

58,730

Interest income

32,463

32,463

Other income

903

225

7,568

56

966

9,718

Land development revenue

71,114

71,114

Earnings from equity method investments

951

361

2,964

1,973

6,249

Income from sales of real estate

24,497

3,297

27,794

Total revenue and other earnings

$

33,366

$

65,655

$

29,825

$

74,283

$

2,939

$

206,068

Real estate expense

(5,590)

(22,076)

(7,941)

(35,607)

Land development cost of sales

(44,554)

(44,554)

Other expense

(32)

3

(29)

Allocated interest expense

(14,281)

(16,378)

(6,565)

(8,402)

(11,676)

(57,302)

Allocated general and administrative(1)

(3,378)

(3,923)

(1,690)

(2,729)

(5,090)

(16,810)

Segment profit (loss)

$

15,675

$

39,764

$

(506)

$

10,657

$

(13,824)

$

51,766

(1) Excludes $1,947 of stock-based compensation expense.

 

 

iStar

Segment Analysis

(In thousands)

(unaudited)

FOR THE TWELVE MONTHS ENDED DECEMBER, 2015

Real Estate Finance

Net Lease

Operating Properties

Land & Dev

Corporate / Other

Total

Operating lease income

$

$

151,481

$

77,454

$

785

$

$

229,720

Interest income

134,687

134,687

Other income

9,737

357

34,637

1,219

3,981

49,931

Land development revenue

100,216

100,216

Earnings from equity method investments

5,221

1,663

16,683

8,586

32,153

Income from sales of real estate

40,082

53,734

93,816

Total revenue and other earnings

$

144,424

$

197,141

$

167,488

$

118,903

$

12,567

$

640,523

Real estate expense

(21,855)

(95,888)

(29,007)

(146,750)

Land development cost of sales

(67,382)

(67,382)

Other expense

(2,291)

(4,083)

(6,374)

Allocated interest expense

(57,109)

(66,504)

(28,014)

(32,087)

(40,925)

(224,639)

Allocated general and administrative(1)

(13,128)

(15,569)

(6,988)

(11,488)

(22,091)

(69,264)

Segment profit (loss)

$

71,896

$

93,213

$

36,598

$

(21,061)

$

(54,532)

$

126,114

(1) Excludes $12,013 of stock-based compensation expense.

 

 

AS OF DECEMBER 31, 2015

Real Estate Finance

Net Lease

Operating Properties

Land & Dev

Corporate

 / Other

Total

Real estate

Real estate, at cost

$

$

1,489,895

$

560,646

$

$

$

2,050,541

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

137,274

137,274

Total real estate

$

$

1,112,479

$

618,778

$

$

$

1,731,257

Land and development

1,001,963

1,001,963

Loans receivable and other lending investments, net

1,601,985

1,601,985

Other investments

69,096

11,124

100,419

73,533

254,172

Total portfolio assets

$

1,601,985

$

1,181,575

$

629,902

$

1,102,382

$

73,533

$

4,589,377

Cash and other assets

1,033,515

Total assets

$

5,622,892

 

 

 

iStar

Supplemental Information

(In thousands)

(unaudited)

 

Three Months Ended December 31,

Twelve Months Ended December 31,

2015

2014

2015

2014

ADJUSTED INCOME (1)

Reconciliation of Net Income to Adjusted Income

Net income (loss) allocable to common shareholders

$

7,685

$

(13,272)

$

(52,675)

$

(33,722)

Add: Depreciation and amortization

17,207

19,763

72,132

76,287

Add: Provision for (recovery of) loan losses

5,623

5,151

36,567

(1,714)

Add: Impairment of assets

6,100

12,893

18,509

34,634

Add: Stock-based compensation expense

1,947

4,770

12,013

13,314

Add: Loss on early extinguishment of debt

2

416

281

25,369

Less: HPU/Participating Security allocation

(21)

(1,386)

(2,850)

(4,791)

Adjusted income allocable to common shareholders

$

38,543

$

28,335

$

83,977

$

109,377

 (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 includes impairments on cost and equity method investments recorded in other income and earnings from equity method investments, respectively.

 

 

 

 

iStar

Supplemental Information

(In thousands)

(unaudited)

 

Twelve Months Ended December 31, 2015

OPERATING STATISTICS

Expense Ratio

General and administrative expenses (A)

$

81,277

Average total assets (B)

$

5,610,953

Expense Ratio (A) / (B)

1.4

%

As of

December 31, 2015

Leverage

Book debt

$

4,143,683

Less: Cash and cash equivalents

(711,101)

Net book debt (C)

$

3,432,582

Book equity

$

1,101,330

Add: Accumulated depreciation and amortization(1)

514,801

Add: General loan loss reserves

36,000

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

$

1,652,131

Leverage (C) / (D)

2.1x

UNENCUMBERED ASSETS / UNSECURED DEBT

Unencumbered assets (E)(2)

$

4,681,809

Unsecured debt (F)

$

3,321,125

Unencumbered Assets / Unsecured Debt (E) / (F)

1.4x

(1) Accumulated depreciation and amortization includes iStar's 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 Supplemental Information (In thousands) (unaudited)

As of

December 31, 2015

UNFUNDED COMMITMENTS

Performance-based commitments

$

728,000

Strategic investments

45,940

Discretionary fundings

5,000

Total Unfunded Commitments

$

778,940

LOAN RECEIVABLE CREDIT STATISTICS

As of

December 31, 2015

December 31, 2014

Carrying value of NPLs /

As a percentage of total carrying value of loans

$

60,327

3.9

%

$

65,047

5.5

%

Total reserve for loan losses /

As a percentage of total gross carrying value of loans(1)

$

108,165

6.6

%

$

98,490

7.6

%

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

 

 

 

iStar Supplemental Information (In millions) (unaudited)

PORTFOLIO STATISTICS AS OF DECEMBER 31, 2015(1)

Property Type

Real Estate Finance

Net Lease

Operating Properties

Land & Dev

Total

% of

Total

Land & Development

$

45

$

$

$

1,108

$

1,153

23

%

Office / Industrial

154

854

136

1,144

22

%

Mixed Use / Collateral

546

257

803

16

%

Hotel

349

136

55

540

11

%

Entertainment / Leisure

502

502

10

%

Condominium

250

137

387

8

%

Retail

78

58

124

260

5

%

Other Property Types

216

9

225

4

%

Strategic Investments

74

1

%

Total

$

1,638

$

1,559

$

709

$

1,108

$

5,088

100

%

Geography

Real Estate Finance

Net Lease

Operating Properties

Land & Dev

Total

% of Total

Northeast

$

928

$

383

$

$

229

$

1,540

30

%

West

78

410

58

357

903

18

%

Southeast

136

235

277

152

800

16

%

Mid-Atlantic

227

140

142

203

712

14

%

Southwest

53

169

143

150

515

10

%

Central

155

80

58

6

299

6

%

Various

61

142

31

11

245

5

%

Strategic Investments

74

1

%

Total

$

1,638

$

1,559

$

709

$

1,108

$

5,088

100

%

(1) Based on carrying value of the Company's total investment portfolio, gross of accumulated depreciation and general loan loss reserves.

 

 

SOURCE iStar



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