iStar Financial Announces Fourth Quarter And Fiscal Year-End 2008 Results
- Total revenues were
- Company records
- Adjusted earnings (loss) allocable to common shareholders for the fourth quarter and fiscal year were
- Net income (loss) allocable to common shareholders for the fourth quarter and fiscal year were (
Fourth Quarter 2008 Results
iStar reported adjusted earnings (loss) allocable to common shareholders for the quarter of
Net income (loss) allocable to common shareholders for the fourth quarter was (
Results for the quarter included
Net investment income for the quarter was
During the quarter, the Company funded a total of
The Company's equity represented 24.2% of total capitalization at quarter end versus 23.4% at the end of the prior quarter. The Company's leverage, calculated as book debt net of unrestricted cash and cash equivalents, divided by the sum of book equity, accumulated depreciation and loan loss reserves, each as determined in accordance with GAAP, was 3.1x at
The Company's net finance margin, calculated as the rate of return on assets less the cost of debt, was 2.15% for the quarter. Excluding the impact of the amortization of the Fremont portfolio purchase discount, the Company's net finance margin was 1.99% for the quarter, versus 2.74% in the prior quarter.
Fiscal Year 2008 Results
Adjusted earnings (loss) allocable to common shareholders for the year ended
Net income (loss) allocable to common shareholders for the year ended
Results for fiscal year 2008 included
Net investment income and total revenue were
The Company is currently working with members of its existing bank group and has received the requisite consents and commitments for a new secured facility and restructuring of existing bank facilities. The Company expects that, if completed, its principal amount of the new secured facility would be between
If completed, the new secured facility would mature in
The new secured facility and the restructuring of the existing facilities are currently expected to close in March. However, they are subject to closing conditions including the negotiation of definitive documents. There can be no assurance that these transactions will be completed in this timeframe or at all.
As of
During the quarter, the Company repurchased
Risk Management
At
The weighted average last dollar loan-to-value ratio for all structured finance assets was 75.8%. At quarter end, the Company's corporate tenant lease assets were 95.2% leased with a weighted average remaining lease term of 11.9 years. At
As of
During the quarter, the Company sold two NPLs with managed asset value of
At the end of the fourth quarter, the Company had 28 loans on its watch list representing
At the end of the fourth quarter, the Company had 11 assets classified as OREO with a book value of
During the quarter, the Company recorded
At
The Company's total loss coverage, defined as the combination of loan loss reserves of
Summary of Fremont Contributions to Quarterly Results
At the end of the fourth quarter, the Fremont portfolio, including additional fundings made during the quarter, had a managed asset value of
At the end of the fourth quarter, the value of the A-participation interest in the portfolio was
During the fourth quarter, iStar funded
At
Earnings Guidance and Dividend Expectations
Given the continued uncertainty in the market, the Company will not be providing guidance for fiscal year 2009 at this time.
The Company's Board of Directors has concluded that the Company has already paid out 100% of its 2008 taxable income. As a result, the Company will not pay a fourth quarter cash dividend on its common shares. For the year, the Company has paid a total of
[Financial Tables to Follow]
* * *
(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
Selected Income Statement Data
(In thousands)
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
2008 2007 2008 2007
---- ---- ---- ----
Net investment income (1) $435,395 $218,516 $981,880 $685,953
Other income 9,144 20,530 97,851 99,938
Non-interest expense (2) (477,404) (315,960) (1,642,656) (580,868)
Minority interest in
consolidated entities (78) 514 991 816
Gain on sale of joint venture
interest, net of minority
interest - - 261,659 -
-------- -------- --------- --------
Income (loss) from continuing
operations (32,943) (76,400) (300,275) 205,839
Income from discontinued
operations 1,455 6,546 15,715 25,287
Gain from discontinued
operations, net of minority
interest 18,971 9 87,769 7,832
Preferred dividends (10,580) (10,580) (42,320) (42,320)
-------- -------- --------- --------
Net income (loss) allocable to
common shareholders and HPU
holders (3) ($23,097) ($80,425) ($239,111) $196,638
======== ======== ========= ========
(1) Includes interest income, operating lease income, earnings (loss) from
equity method investments and gain (loss) on early extinguishment of
debt, less interest expense and operating costs for corporate tenant
lease assets.
(2) Includes depreciation and amortization, general and administrative
expenses, provision for loan losses, impairments and other expense.
(3) HPU holders are Company employees who purchased high performance
common stock units under the Company's High Performance Unit Program.
Selected Balance Sheet Data
(In thousands)
(unaudited) As of As of
December 31, 2008 December 31, 2007
----------------- -----------------
Loans and other lending
investments, net $10,586,644 $10,949,354
Corporate tenant lease
assets, net 3,044,811 3,309,866
Other investments 447,318 856,609
Total assets 15,296,748 15,848,298
Debt obligations 12,516,023 12,399,558
Total liabilities 12,870,515 12,894,869
Total shareholders' equity 2,389,380 2,899,481
iStar Financial Inc.
Consolidated Statements of Operations
(In thousands, except per share amounts)
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
2008 2007 2008 2007
---- ---- ---- ----
REVENUES
Interest income $199,201 $308,128 $947,661 $998,008
Operating lease income 81,564 81,622 318,600 314,740
Other income 9,144 20,530 97,851 99,938
-------- -------- --------- ---------
Total revenues 289,909 410,280 1,364,112 1,412,686
-------- -------- --------- ---------
COSTS AND EXPENSES
Interest expense 161,153 186,643 660,284 627,720
Operating costs - corporate
tenant lease assets 8,401 7,894 23,575 28,926
Depreciation and amortization 24,734 24,442 97,368 86,223
General and administrative (1) 34,765 36,950 159,096 165,128
Provision for loan losses 252,020 113,000 1,029,322 185,000
Impairment of goodwill - - 39,092 -
Impairment of other assets 149,972 144,184 295,738 144,184
Other expense 15,913 (2,616) 22,040 333
-------- -------- --------- ---------
Total costs and expenses 646,958 510,497 2,326,515 1,237,514
-------- -------- --------- ---------
Income (loss) from
continuing operations
before other items (357,049) (100,217) (962,403) 175,172
Gain on early
extinguishment of debt 323,027 225 392,943 225
Gain on sale of joint
venture interest, net of
minority interest - - 261,659 -
Earnings (loss) from
equity method investments 1,157 23,078 6,535 29,626
Minority interest
in consolidated entities (78) 514 991 816
-------- -------- --------- ---------
Income (loss) from continuing
operations (32,943) (76,400) (300,275) 205,839
Income from discontinued
operations 1,455 6,546 15,715 25,287
Gain from discontinued
operations, net of
minority interest 18,971 9 87,769 7,832
-------- -------- --------- ---------
Net income (loss) (12,517) (69,845) (196,791) 238,958
Preferred dividend
requirements (10,580) (10,580) (42,320) (42,320)
-------- -------- --------- ---------
Net income (loss) allocable
to common shareholders
and HPU holders ($23,097) ($80,425) ($239,111) $196,638
======== ======== ========= =========
Net income (loss) per
common share
Basic ($0.18) ($0.62) ($1.78) $1.52
Diluted (2) ($0.18) ($0.62) ($1.78) $1.51
Net income (loss)
per HPU share
Basic (3) ($34.80) ($116.93) ($336.33) $287.93
Diluted (2)(4) ($34.80) ($116.47) ($336.33) $285.00
(1) For the three months ended December 31, 2008 and 2007, includes
$5,817 and $5,549 of stock-based compensation expense, respectively.
For the years ended December 31, 2008 and 2007, includes $23,542 and
$17,601 of stock-based compensation expense, respectively.
(2) For the year ended December 31, 2007 , includes the allocable share of
$85 joint venture income.
(3) For the three months ended December 31, 2008 and 2007, ($522 ) and
($1,754 ) of net income (loss) is allocable to HPU holders,
respectively. For the years ended December 31, 2008 and 2007, ($5,045 )
and $4,319 of net income (loss) is allocable to HPU holders,
respectively.
(4) For the three months ended December 31, 2008 and 2007, ($522 ) and
($1,747 ) of net income (loss) is allocable to HPU holders,
respectively. For the years ended December 31, 2008 and 2007, ($5,045 )
and $4,275 of net income (loss) is allocable to HPU holders,
respectively.
iStar Financial Inc.
Earnings Per Share Information
(In thousands, except per share amounts)
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
2008 2007 2008 2007
---- ---- ---- ----
EPS INFORMATION FOR COMMON SHARES
Income (loss) from continuing
operations per common share (1)
Basic ($0.34) ($0.67) ($2.56) $1.26
Diluted (2) ($0.34) ($0.67) ($2.56) $1.26
Net income (loss) per common share
Basic ($0.18) ($0.62) ($1.78) $1.52
Diluted (2) ($0.18) ($0.62) ($1.78) $1.51
Weighted average common shares
outstanding
Basic 122,809 127,267 131,153 126,801
Diluted 122,809 127,798 131,153 127,792
EPS INFORMATION FOR HPU SHARES
Income (loss) from continuing
operations per HPU share (1)
Basic ($65.60) ($126.46) ($482.46) $239.60
Diluted (2) ($65.60) ($125.94) ($482.46) $237.07
Net income (loss) per HPU share (3)
Basic ($34.80) ($116.93) ($336.33) $287.93
Diluted (2) ($34.80) ($116.47) ($336.33) $285.00
Weighted average HPU shares
outstanding
Basic and diluted 15 15 15 15
(1) For the three months ended December 31, 2008 and 2007, excludes
preferred dividends of $10,580 . For the years ended December 31, 2008
and 2007, excludes preferred dividends of $42,320 .
(2) For the year ended December 31, 2007 , includes the allocable share of
$85 of joint venture income.
(3) As more fully explained in the Company's quarterly SEC filings, three
plans of the Company's HPU program vested in December 2002 , December
2003 and December 2004 . Each of the respective plans contain 5 HPU
shares. Cumulatively, these 15 shares were entitled to ($522 ) and
($1,754 ) of net income (loss) for the three months ended December 31,
2008 and 2007, respectively, and ($5,045 ) and $4,319 of net income
(loss) for the years ended December 31, 2008 and 2007, respectively.
On a diluted basis, these cumulative 15 shares were entitled to ($522 )
and ($1,747 ) of net income (loss) for the three months ended December
31, 2008 and 2007, respectively, and ($5,045 ) and $4,275 of net income
(loss) for the years ended December 31, 2008 and 2007, respectively.
iStar Financial Inc.
Reconciliation of Adjusted Earnings to GAAP Net Income
(In thousands, except per share amounts)
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
2008 2007 2008 2007
---- ---- ---- ----
ADJUSTED EARNINGS (1)
Net income (loss) ($12,517) ($69,845) ($196,791) $238,958
Add: Depreciation, depletion
and amortization 24,596 28,254 102,745 99,427
Add: Joint venture depreciation,
depletion and amortization 1,953 9,834 14,466 40,826
Add: Amortization of
deferred financing costs 9,907 8,145 43,800 28,367
Add: Impairment of goodwill
and intangible assets 9,069 - 60,618 -
Less: Hedge ineffectiveness, net 9,533 (3,183) 7,427 (239)
Less: Gain from discontinued
operations, net of minority
interest (18,971) (9) (87,769) (7,832)
Less: Gain on sale of joint
venture interest, net of
minority interest - - (261,659) (1,572)
Less: Preferred dividends (10,580) (10,580) (42,320) (42,320)
------- ------- ------- -------
Adjusted earnings (loss) allocable
to common shareholders and HPU
holders:
Basic $12,990 ($37,384) ($359,483) $355,615
Diluted $12,992 ($37,384) ($359,483) $355,707
Adjusted earnings (loss) per
common share:
Basic (2) $0.10 ($0.29) ($2.68) $2.74
Diluted (3) $0.10 ($0.29) ($2.68) $2.72
Weighted average common
shares outstanding:
Basic 122,809 127,267 131,153 126,801
Diluted 123,800 127,798 131,153 127,792
Common shares outstanding
at end of period:
Basic 105,457 133,929 105,457 133,929
Diluted 105,457 134,465 105,457 134,465
(1) Adjusted earnings should be examined in conjunction with net income as
shown in the Consolidated Statements of Operations. Adjusted earnings
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 this
measure indicative of funds available to fund the Company's cash needs
or available for distribution to shareholders. Rather, adjusted
earnings is an additional measure the Company uses to analyze how its
business is performing. It should be noted that the Company's manner
of calculating adjusted earnings may differ from the calculations of
similarly-titled measures by other companies.
(2) For the three months ended December 31, 2008 and 2007, excludes $293
and ($816 ) of net income (loss) allocable to HPU holders,
respectively. For the years ended December 31, 2008 and 2007,
excludes ($7,461 ) and $7,799 of net income (loss) allocable to HPU
holders, respectively.
(3) For the three months ended December 31, 2008 and 2007, excludes $291
and ($812 ) of net income (loss) allocable to HPU holders,
respectively. For the years ended December 31, 2008 and 2007,
excludes ($7,461 ) and $7,730 of net income (loss) allocable to HPU
holders, respectively.
iStar Financial Inc.
Consolidated Balance Sheets
(In thousands)
As of As of
December 31, 2008 December 31, 2007
----------------- -----------------
(unaudited)
ASSETS
Loans and other lending investments, net $10,586,644 $10,949,354
Corporate tenant lease assets, net 3,044,811 3,309,866
Other investments 447,318 856,609
Other real estate owned 242,505 128,558
Assets held for sale - 74,335
Cash and cash equivalents 496,537 104,507
Restricted cash 155,965 32,977
Accrued interest and operating lease
income receivable, net 87,151 121,405
Deferred operating lease income receivable 116,793 102,135
Deferred expenses and other assets, net 114,838 125,274
Goodwill 4,186 43,278
----------- -----------
Total assets $15,296,748 $15,848,298
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable, accrued expenses
and other liabilities $354,492 $495,311
Debt obligations:
Unsecured senior notes 7,218,160 7,916,853
Unsecured revolving credit facilities 3,281,273 2,681,174
Secured revolving credit facility 306,867 -
Interim financing facility - 1,289,811
Secured term loans 1,611,650 413,682
Other debt obligations 98,073 98,038
----------- -----------
Total liabilities 12,870,515 12,894,869
Minority interest in consolidated entities 36,853 53,948
Shareholders' equity 2,389,380 2,899,481
----------- -----------
Total liabilities and
shareholders' equity $15,296,748 $15,848,298
=========== ===========
iStar Financial Inc.
Supplemental Information
(In thousands)
(unaudited)
PERFORMANCE STATISTICS Three Months Ended
December 31, 2008
-----------------
Net Finance Margin
------------------
Weighted average GAAP yield of loan and CTL investments 7.44%
Less: Cost of debt 5.29%
----------
Net Finance Margin (1) 2.15%
Net Finance Margin Excluding Amortization of Discount
on Fremont Loans 1.99%
Return on Average Common Book Equity
------------------------------------
Average total book equity $2,421,731
Less: Average book value of preferred equity (506,176)
----------
Average common book equity (A) $1,915,555
Net income (loss) allocable to common
shareholders and HPU holders ($23,097)
Net income (loss) allocable to common
shareholders and HPU holders - Annualized (B) ($92,388)
Return on Average Common Book Equity (B) / (A) (4.8%)
Adjusted basic earnings (loss) allocable to
common shareholders and HPU holders (2) $12,990
Adjusted basic earnings (loss) allocable to
common shareholders and HPU holders - Annualized (C) $51,960
Adjusted Return on Average Common Book Equity (C) / (A) 2.7%
Expense Ratio
-------------
General and administrative expenses (3) (D) $34,693
Total revenue (3) (E) $291,731
Expense Ratio (D) / (E) 11.9%
(1) Weighted average GAAP yield is the annualized sum of interest income
and operating lease income, divided by the sum of average gross
corporate tenant lease assets, average loans and other lending
investments, average SFAS No. 141 purchase intangibles and average
assets held for sale over the period. Cost of debt is the annualized
sum of interest expense and operating costs-corporate tenant lease
assets, divided by the average gross debt obligations over the period.
Operating lease income and operating costs-corporate tenant lease
assets exclude SFAS No. 144 adjustments from discontinued operations
of $1,822 and $127 , respectively. The Company does not consider net
finance margin to be a measure of the Company's liquidity or cash
flows. It is one of several measures that management considers to be
an indicator of the profitability of its operations.
(2) Adjusted earnings should be examined in conjunction with net income
(loss) as shown in the Consolidated Statements of Operations. Adjusted
earnings should not be considered as an alternative to net income
(loss) (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 this measure indicative of funds available to fund
the Company's cash needs or available for distribution to
shareholders. Rather, adjusted earnings is an additional measure the
Company uses to analyze how its business is performing. It should be
noted that the Company's manner of calculating adjusted earnings may
differ from the calculations of similarly-titled measures by other
companies.
(3) Total revenue and general and administrative expenses exclude SFAS
No. 144 adjustments from discontinued operations of $1,822 and ($72 ),
respectively.
iStar Financial Inc.
Supplemental Information
(In thousands)
(unaudited)
CREDIT STATISTICS Three Months Ended
December 31, 2008
-----------------
Book debt, net of unrestricted cash (A) $12,019,486
Book equity 2,389,380
Add: Accumulated depreciation and loan loss reserves 1,456,371
-----------
Sum of book equity, accumulated depreciation and
loan loss reserves (B) $3,845,751
Leverage (1) (A) / (B) 3.1x
Ratio of Earnings (Loss) to Fixed Charges 0.8x
Ratio of Earnings (Loss) to Fixed Charges and
Preferred Stock Dividends 0.8x
Covenant Calculation of Fixed Charge Coverage Ratio (2) 2.7x
Interest Coverage
-----------------
EBITDA (3) (C) $175,185
GAAP interest expense (D) 161,153
EBITDA / GAAP Interest Expense (3) (C) / (D) 1.1x
RECONCILIATION OF NET INCOME TO EBITDA (3)
Net income (loss) ($12,517)
Add: GAAP interest expense 161,153
Add: Depreciation, depletion and amortization 24,596
Add: Joint venture depreciation, depletion and amortization 1,953
-----------
EBITDA (3) $175,185
(1) Leverage is calculated by dividing book debt net of unrestricted cash
by the sum of book equity, accumulated depreciation and loan loss
reserves.
(2) This measure, which is a trailing twelve-month calculation and
excludes the effect of impairment charges and other non-cash items, is
consistent with covenant calculations included in the Company's
unsecured credit facilities; therefore, we believe it is a useful
measure for investors to consider.
(3) EBITDA should be examined in conjunction with net income (loss) as
shown in the Consolidated Statements of Operations. EBITDA should not
be considered as an alternative to net income (loss) (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 this measure
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 EBITDA may differ from the
calculations of similarly-titled measures by other companies.
iStar Financial Inc.
Supplemental Information
(In thousands)
(unaudited)
FINANCING VOLUME SUMMARY STATISTICS
Three Months Ended
December 31, 2008 LOAN ORIGINATIONS
------------------------------
Total/
Floating Weighted CORPORATE OTHER
Fixed Rate Rate Average LEASING INVESTMENTS
---------- -------- -------- --------- -----------
Amount funded $23,216 $622,458 $645,674 $9,411 $28,152
Weighted average
GAAP yield 5.91% 7.37% 7.31% 11.78% N/A
Weighted average
all-in spread/margin
(basis points) (1) 568 665 661 N/A N/A
Weighted average
first $ loan-to-value
ratio 45.07% 0.86% 2.36% N/A N/A
Weighted average
last $ loan-to-value
ratio 84.39% 75.10% 75.42% N/A N/A
UNFUNDED COMMITMENTS
Number of assets with unfunded commitments 194
Discretionary commitments $163,393
Non-discretionary commitments 2,263,966
-------------------
Total unfunded commitments $2,427,359
Estimated weighted average funding period Approximately 2.1 years
UNENCUMBERED ASSETS / UNSECURED DEBT
Unencumbered assets (A) $13,540,138
Unsecured debt (B) $10,612,225
Unencumbered Assets / Unsecured Debt (A) / (B) 1.3x
RISK MANAGEMENT STATISTICS
(weighted average
risk rating) 2008 2007
--------------------------------------------- ------------
December 31, September 30, June 30, March 31, December 31,
------------ ------------- -------- --------- ------------
Structured
Finance Assets
(principal risk) 3.53 3.41 3.28 3.12 3.07
Corporate Tenant
Lease Assets 2.58 2.55 2.55 2.51 2.50
(1=lowest risk; 5=highest risk)
(1) Represents spread over base rate LIBOR (floating-rate loans) and
interpolated U.S. Treasury rates (fixed-rate loans) during the
quarter.
iStar Financial Inc.
Supplemental Information
(In thousands, except per share amounts)
(unaudited)
LOANS AND OTHER LENDING INVESTMENTS CREDIT STATISTICS
As of
------------------------------------
December 31, 2008 December 31, 2007
----------------- -----------------
Value of non-performing loans (1) /
As a percentage of total managed
loans $3,458,157 27.48% $1,193,669 8.71%
Reserve for loan losses /
As a percentage of total managed
loans $976,788 7.76% $217,910 1.59%
As a percentage of non-performing
loans (1) 28.25% 18.26%
(1) Non-performing loans include iStar's book value and Fremont's
A-participation interest on the associated assets.
iStar Financial Inc.
Supplemental Information
(In millions)
(unaudited)
PORTFOLIO STATISTICS December 31, 2008 (1)
Asset Type
----------
First Mortgages / Senior Loans $10,670 68.4%
Corporate Tenant Leases 3,597 23.1
Mezzanine / Subordinated Debt 893 5.7
Other Investments 434 2.8
------- -----
Total $15,594 100.0%
======= =====
Property / Collateral Type
--------------------------
Apartment / Residential $4,244 27.2%
Land 2,359 15.1
Office 1,895 12.1
Industrial / R&D 1,489 9.5
Retail 1,348 8.7
Entertainment / Leisure 967 6.2
Corporate - Real Estate 868 5.6
Hotel 821 5.3
Mixed Use / Mixed Collateral 641 4.1
Other 582 3.7
Corporate - Non-Real Estate 380 2.5
------- -----
Total $15,594 100.0%
======= =====
Geography
---------
West $3,581 23.0%
Northeast 2,843 18.2
Southeast 2,659 17.1
Mid-Atlantic 1,672 10.7
Central 927 6.0
Southwest 923 5.9
Various 892 5.7
International 797 5.1
South 515 3.3
Northcentral 435 2.8
Northwest 350 2.2
------- -----
Total $15,594 100.0%
======= =====
(1) Figures presented prior to loan loss reserves, accumulated
depreciation and impact of Statement of Financial Accounting Standards
No. 141, "Business Combinations."
SOURCE
CONTACT:
Chief Financial Officer,
or
Senior Vice President - Investor Relations,
both of
+1-212-930-9400
Web Site: http://www.istarfinancial.com
(SFI)