iStar Financial Announces Third Quarter 2008 Results
Thursday October 30, 7:00 am ET
- Total revenues were $341 million; up 5.3% from the prior quarter.
- Company records $411 million of loan loss provision during the quarter.
- Adjusted earnings (loss) for the quarter was ($285.9) million for common shareholders or ($2.15) per diluted common share.
- Net income (loss) allocable to common shareholders was ($305.8) million or ($2.30) per diluted common share for the quarter.
- Company updates full year 2008 adjusted earnings per diluted common share guidance to ($3.50) - ($3.00) and diluted GAAP earnings per share of ($2.50) - ($2.00).
NEW YORK, Oct. 30 /PRNewswire-FirstCall/ -- iStar Financial Inc. (NYSE: SFI - News), a leading publicly traded finance company focused on the commercial real estate industry, today reported results for the third quarter ended September 30, 2008.
iStar reported adjusted earnings (loss) for the quarter of ($2.15) per diluted common share, compared with $1.07 for the third quarter 2007. Adjusted earnings (loss) allocable to common shareholders for the third quarter 2008 were ($285.9) million, compared with $135.7 million for the third quarter 2007. Adjusted earnings (loss) represent net income computed in accordance with GAAP, adjusted primarily for preferred dividends, depreciation, depletion, amortization, impairments of goodwill and intangible assets, and gain (loss) from discontinued operations.
Net income (loss) allocable to common shareholders for the third quarter was ($305.8) million, or ($2.30) per diluted common share, compared to $93.0 million, or $0.73 per diluted common share for the third quarter 2007. Please see the financial tables that follow the text of this press release for a detailed reconciliation of adjusted earnings to GAAP net income.
Results this quarter included $411.1 million of loan loss provisions, $88.1 million of impairments, $68.3 million of gains associated with the early extinguishment of debt and $20.0 million of gains from the sale of four corporate tenant lease (CTL) assets. Gains on the sale of CTLs are excluded from adjusted earnings, but included in net income.
Net investment income for the quarter was $215.0 million, compared to $220.2 million for the third quarter 2007. Net investment income represents 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.
During the quarter, the Company funded a total of $737.0 million under new and pre-existing commitments and received $678.8 million in gross principal repayments. Of the gross principal repayments, $283.0 million was utilized to pay down the A-participation interest associated with the Fremont portfolio. During the quarter, the Company closed four new financing commitments for a total of $60.8 million, of which it funded $8.6 million.
The Company's equity represented 23.4% of total capitalization at quarter end versus 24.1% 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 3.3x at September 30, 2008 versus 3.1x at June 30, 2008.
The Company's net finance margin, calculated as the rate of return on assets less the cost of debt, was 2.99% for the quarter. Excluding the impact of the amortization of the Fremont portfolio purchase discount, the Company's net finance margin was 2.74% for the quarter, versus 2.75% in the prior quarter.
As of September 30, 2008, a one percentage point increase in short-term rates, excluding the impact of interest floors in certain loan assets, would have increased the Company's adjusted earnings by 0.27%, which is consistent with its match funding policy.
Capital Markets
As of September 30, 2008, the Company had $877.7 million of cash and available capacity under $3.7 billion in revolving credit facilities versus $1.4 billion at the end of the prior quarter. The Company is currently in compliance with all of its bank and bond covenants.
During the quarter, the Company repurchased approximately 2.4 million shares of its common stock pursuant to its existing repurchase program. The Company currently has remaining authority to repurchase up to $44.2 million of shares under the previously authorized $50 million share repurchase program.
Risk Management
At September 30, 2008, first mortgages, participations in first mortgages, senior loans and corporate tenant lease investments collectively comprised 90.7% of the Company's asset base, versus 89.2% in the prior quarter. The Company's loan portfolio consisted of 79.2% floating rate and 20.8% fixed rate loans, with a weighted average maturity of 2.6 years.
The weighted average last dollar loan-to-value ratio for all structured finance assets was 75.0%. At quarter end, the Company's corporate tenant lease assets were 94.8% leased with a weighted average remaining lease term of 12.0 years. At September 30, 2008, the weighted average risk ratings of the Company's structured finance and corporate tenant lease assets were 3.41 and 2.55, respectively, versus 3.28 and 2.55, respectively, in the prior quarter.
As of September 30, 2008, 51 of the Company's 377 total loans were on non-performing loan (NPL) status. These loans represent $2.5 billion or 19.4% of total managed loans, compared to 39 loans representing $1.3 billion or 10.5% of total managed loans in the prior quarter. Managed asset and loan values represent iStar's book value plus the A-participation interest associated with the Fremont portfolio. The Company's total managed loan value at quarter end was $12.8 billion. The Company's policy is to stop the accrual of interest on loans placed on NPL status.
During the quarter, the Company resolved three NPLs with a managed asset value of $71.1 million and sold two NPLs for $38.7 million. The three resolved NPLs are currently performing assets.
At the end of the third quarter, the Company had 29 loans on its watch list representing $1.3 billion or 10.2% of total managed loans, compared to 30 loans representing $1.5 billion or 11.4% of total managed loans in the prior quarter. Assets on the Company's watch list are all performing loans.
At the end of the third quarter, the Company had 10 assets classified as other real estate owned (OREO) with a book value of $277.2 million. The Company recorded $36.2 million of non-cash impairment charges on five OREO assets. During the quarter, the Company took title to three properties that served as collateral on its loans, resulting in $25.1 million of charge-offs against the Company's reserve for loan losses. All of the loans were previously on NPL status and had a managed asset value of $81.1 million prior to the Company receiving title to the properties. Of the three assets added to OREO, one asset was sold during the quarter for total net proceeds of $11.5 million, which represented a slight premium to book value.
During the quarter, the Company recorded $51.9 million of non-cash impairment charges associated with five credits in its Corporate Loan and Debt portfolio and its Other Investments.
At September 30, 2008, the Company had $832.7 million in loan loss reserves versus $460.1 million at June 30, 2008. During the third quarter, the Company recorded $411.1 million in loan loss provision, reflecting the severe deterioration in the overall credit markets and its impact on the portfolio as determined in the Company's regular quarterly risk ratings review process performed following the end of the quarter.
The Company's total loss coverage, defined as the combination of loan loss reserves of $832.7 million and remaining unamortized purchase discount from the Fremont acquisition of $75.6 million, was $908.2 million or 7.1% of total managed loans at the end of the third quarter. This compares to total loss coverage of $554.3 million or 4.3% of total managed loans in the prior quarter.
Summary of Fremont Contributions to Quarterly Results
At the end of the third quarter, the Fremont portfolio, including additional fundings made during the quarter, had a managed asset value of $4.3 billion consisting of 152 loans versus $4.5 billion consisting of 178 loans at the end of the second quarter 2008.
At the end of the third quarter, the value of the A-participation interest in the portfolio was $1.6 billion versus $1.9 billion on June 30, 2008. The book value of iStar's B-participation interest at the end of the third quarter was $2.7 billion versus $2.6 billion on June 30, 2008. During the quarter, iStar received $404.2 million in principal repayments, of which the Company retained 30%. The balance of principal repayments was paid to the A-participation interest. The weighted average maturity of the Fremont portfolio is nine months.
During the third quarter, iStar funded $275.1 million of commitments related to the portfolio. Unfunded commitments at the end of the third quarter were $0.9 billion, of which the Company expects to fund approximately $0.7 billion based upon its comprehensive review of the portfolio. This compares to unfunded commitments of $1.2 billion at the end of the prior quarter.
At September 30, 2008, there were 29 Fremont loans on NPL status with a managed asset value of $777.8 million versus 26 loans at the prior quarter end, with $683.0 million of managed asset value. In addition, there were 14 loans on the Company's watch list with a managed asset value of $578.1 million versus 14 loans at the prior quarter end, with $411.8 million of managed asset value.
Earnings Guidance and Dividend Expectations
Consistent with the Securities and Exchange Commission's Regulation FD and Regulation G, iStar Financial comments on earnings expectations within the context of its regular earnings press releases.
For fiscal year 2008, the Company expects diluted adjusted earnings per common share of ($3.50) - ($3.00), and diluted GAAP earnings per common share of ($2.50) - ($2.00).
As announced earlier in the quarter, the Company said that it would not pay a third quarter dividend. The Board of Directors will meet at the end of the fourth quarter to consider whether any dividend will be paid for the fourth quarter. Based upon current estimates for taxable income for the full-year 2008, the Company does not expect to pay a dividend for the fourth quarter 2008.
[Financial Tables to Follow]
* * *
iStar Financial Inc. is a leading publicly traded finance company focused on the commercial real estate industry. The Company primarily provides custom-tailored investment capital to high-end private and corporate owners of real estate, including senior and mezzanine real estate debt, senior and mezzanine corporate capital, as well as corporate net lease financing and equity. The Company, which is taxed as a real estate investment trust ("REIT"), seeks to deliver strong dividends and superior risk-adjusted returns on equity to shareholders by providing innovative and value added financing solutions to its customers.
iStar Financial will hold a quarterly earnings conference call at 10:00 a.m. ET today, October 30, 2008. 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 Inc.'s expectations include completion of pending investments, continued ability to originate new investments, the mix of originations between structured finance and corporate tenant lease assets, repayment levels, the timing of receipt of prepayment penalties, the availability and cost of capital for future investments, competition within the finance and real estate industries, economic conditions, loss experience and other risks detailed from time to time in iStar Financial Inc.'s SEC reports.)
Selected Income Statement Data
(In thousands)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
---- ---- ---- ----
Net investment income (1) $214,985 $220,164 $551,047 $466,306
Other income 22,922 19,271 88,707 84,855
Non-interest expense (2) (560,808) (139,439) (1,166,776) (266,188)
Minority interest in consolidated
entities 502 (277) 1,069 302
Gain on sale of joint venture
interest, net of minority
interest - - 261,659 -
--------- ------- --------- --------
Income (loss) from continuing
operations (322,399) 99,719 (264,294) 285,275
Income from discontinued
operations 688 4,880 11,222 15,705
Gain from discontinued
operations, net of minority
interest 19,955 1,045 68,798 7,823
Preferred dividends (10,580) (10,580) (31,740) (31,740)
--------- ------- --------- --------
Net income (loss) allocable
to common shareholders and
HPU holders (3) ($312,336) $95,064 ($216,014) $277,063
========= ======= ========= ========
(1) Includes interest income, operating lease income and earnings (loss)
from equity method investments, less interest expense, operating costs
for corporate tenant lease assets and gain (loss) on early
extinguishment of debt.
(2) Includes depreciation and amortization, general and administrative
expenses, provision for loan losses, impairments and other expenses.
(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)
As of As of
September 30, 2008 December 31, 2007
------------------ -----------------
(unaudited)
Loans and other lending investments, net $10,744,047 $10,949,354
Corporate tenant lease assets, net $3,143,697 $3,309,866
Other investments $527,760 $856,609
Total assets $15,923,976 $15,848,298
Debt obligations $13,060,499 $12,399,558
Total liabilities $13,408,688 $12,894,869
Total shareholders' equity $2,454,082 $2,899,481
iStar Financial Inc.
Consolidated Statements of Operations
(In thousands, except per share amounts)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
---- ---- ---- ----
REVENUES
Interest income $237,006 $316,829 $748,460 $689,836
Operating lease income 81,440 81,859 242,008 237,975
Other income 22,922 19,271 88,707 84,855
--------- ------- --------- --------
Total revenues 341,368 417,959 1,079,175 1,012,666
--------- ------- --------- --------
COSTS AND EXPENSES
Interest expense 168,040 173,376 499,131 441,095
Operating costs - corporate
tenant lease assets 5,647 7,746 15,583 21,555
Depreciation and amortization 24,827 23,244 73,973 63,061
General and administrative (1) 37,736 51,246 124,516 128,178
Provision for loan losses 411,142 62,000 777,302 72,000
Impairments of goodwill - - 39,092 -
Impairments of other assets 88,075 - 145,766 -
Other expense (972) 2,949 6,127 2,949
--------- ------- --------- --------
Total costs and expenses 734,495 320,561 1,681,490 728,838
--------- ------- --------- --------
Income (loss) from continuing
operations before other items (393,127) 97,398 (602,315) 283,828
Gain on early extinguishment
of debt 68,321 - 69,916 -
Gain on sale of joint venture
interest, net of minority
interest - - 261,659 -
Earnings (loss) from equity
method investments 1,905 2,598 5,377 1,145
Minority interest in
consolidated entities 502 (277) 1,069 302
--------- ------- --------- --------
Income (loss) from continuing
operations (322,399) 99,719 (264,294) 285,275
Income from discontinued
operations 688 4,880 11,222 15,705
Gain from discontinued
operations, net of
minority interest 19,955 1,045 68,798 7,823
--------- ------- --------- --------
Net income (loss) (301,756) 105,644 (184,274) 308,803
Preferred dividend
requirements (10,580) (10,580) (31,740) (31,740)
--------- ------- --------- --------
Net income (loss) allocable
to common shareholders and
HPU holders ($312,336) $95,064 ($216,014) $277,063
========= ======= ========= ========
Net income (loss) per common share
Basic ($2.30) $0.74 ($1.58) $2.14
Diluted (2) ($2.30) $0.73 ($1.58) $2.12
Net income (loss) per HPU share
Basic (3) ($434.47) $139.07 ($301.53) $404.87
Diluted (2) (4) ($434.47) $138.07 ($301.53) $401.47
(1) For the three months ended September 30, 2008 and 2007, includes
$4,884 and $3,786 of stock-based compensation expense, respectively.
For the nine months ended September 30, 2008 and 2007, includes
$17,725 and $12,051 of stock-based compensation expense, respectively.
(2) For the three months ended September 30, 2007, includes the allocable
share of $29 of joint venture income. For the nine months ended
September 30, 2007, includes the allocable share of $85 of joint
venture income.
(3) For the three months ended September 30, 2008 and 2007, ($6,517) and
$2,086 of net income (loss) is allocable to HPU holders, respectively.
For the nine months ended September 30, 2008 and 2007, ($4,523) and
$6,073 of net income (loss) is allocable to HPU holders, respectively.
(4) For the three months ended September 30, 2008 and 2007, ($6,517) and
$2,071 of net income (loss) is allocable to HPU holders, respectively.
For the nine months ended September 30, 2008 and 2007, ($4,523) and
$6,022 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 Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
---- ---- ---- ----
EPS INFORMATION FOR COMMON SHARES
Income (loss) from continuing operations
per common share (1)
Basic ($2.46) $0.69 ($2.16) $1.96
Diluted (2) ($2.46) $0.68 ($2.16) $1.94
Net income (loss) per common share
Basic ($2.30) $0.74 ($1.58) $2.14
Diluted (2) ($2.30) $0.73 ($1.58) $2.12
Weighted average common shares
outstanding
Basic 133,199 126,488 133,955 126,644
Diluted 133,199 127,508 133,955 127,782
EPS INFORMATION FOR HPU SHARES
Income (loss) from continuing
operations per HPU share (1)
Basic ($463.13) $130.41 ($412.19) $370.54
Diluted (2) ($463.13) $129.47 ($412.19) $367.41
Net income (loss) per HPU share (3)
Basic ($434.47) $139.07 ($301.53) $404.87
Diluted (2) ($434.47) $138.07 ($301.53) $401.47
Weighted average HPU shares outstanding
Basic 15 15 15 15
Diluted 15 15 15 15
(1) For the three months ended September 30, 2008 and 2007, excludes
preferred dividends of $10,580. For the nine months ended September
30, 2008 and 2007, excludes preferred dividends of $31,740.
(2) For the three months ended September 30, 2007, includes the allocable
share of $29 of joint venture income. For the nine months ended
September 30, 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 ($6,517) and
$2,086 of net income (loss) for the three months ended September 30,
2008 and 2007, respectively, and ($4,523) and $6,073 for the nine
months ended September 30, 2008 and 2007, respectively. On a diluted
basis, these cumulative 15 shares were entitled to ($6,517) and $2,071
of net income (loss) for the three months ended September 30, 2008 and
2007, respectively, and ($4,523) and $6,022 of net income (loss) for
the nine months ended September 30, 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 Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
---- ---- ---- ----
ADJUSTED EARNINGS (1)
Net income (loss) ($301,756) $105,644 ($184,274) $308,803
Add: Depreciation, depletion and
amortization 24,448 25,928 78,149 71,172
Add: Joint venture income - 31 - 92
Add: Joint venture depreciation,
depletion and amortization 1,943 10,407 12,513 30,992
Add: Amortization of deferred
financing costs 15,120 7,065 33,893 20,222
Add: Impairments of goodwill and
intangible assets - - 51,549 -
Less: Hedge ineffectiveness, net (1,256) 2,944 (2,106) 2,944
Less: Preferred dividends (10,580) (10,580) (31,740) (31,740)
Less: Gain from discontinued
operations, net of minority
interest (19,955) (1,045) (68,798) (7,823)
Less: Gain on sale of joint venture
interest, net of minority interest - (1,572) (261,659) (1,572)
------ ------ -------- ------
Adjusted earnings (loss) allocable
to common shareholders and HPU
holders:
Basic ($292,036) $138,791 ($372,473) $392,998
Diluted ($292,036) $138,822 ($372,473) $393,090
Adjusted earnings (loss) per
common share:
Basic (2) ($2.15) $1.07 ($2.72) $3.04
Diluted (3) ($2.15) $1.07 ($2.72) $3.01
Weighted average common shares
outstanding:
Basic 133,199 126,488 133,955 126,644
Diluted 133,199 127,508 133,955 127,782
Common shares outstanding at end
of period:
Basic 132,043 126,272 132,043 126,272
Diluted 132,043 127,282 132,043 127,282
(1) 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.
(2) For the three months ended September 30, 2008 and 2007, excludes
($6,093) and $3,046 of net income (loss) allocable to HPU holders,
respectively. For the nine months ended September 30, 2008 and 2007,
excludes ($7,754) and $8,615 of net income (loss) allocable to HPU
holders, respectively.
(3) For the three months ended September 30, 2008 and 2007, excludes
($6,093) and $3,023 of net income (loss) allocable to HPU holders,
respectively. For the nine months ended September 30, 2008 and 2007,
excludes ($7,754) and $8,542 of net income (loss) allocable to HPU
holders, respectively.
iStar Financial Inc.
Consolidated Balance Sheets
(In thousands)
As of As of
September 30, 2008 December 31, 2007
------------------ -----------------
(unaudited)
ASSETS
Loans and other lending investments, net $10,744,047 $10,949,354
Corporate tenant lease assets, net 3,143,697 3,309,866
Other investments 527,760 856,609
Other real estate owned 277,232 128,558
Assets held for sale 3,657 74,335
Cash and cash equivalents 779,472 104,507
Restricted cash 59,329 32,977
Accrued interest and operating lease income
receivable 89,200 121,405
Deferred operating lease income receivable 114,748 102,135
Deferred expenses and other assets 180,648 125,274
Goodwill 4,186 43,278
----------- -----------
Total assets $15,923,976 $15,848,298
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable, accrued expenses and other
liabilities $348,189 $495,311
Debt obligations:
Unsecured senior notes 7,788,210 7,916,853
Unsecured revolving credit facilities 3,184,448 2,681,174
Secured revolving credit facility 350,000 -
Interim financing facility - 1,289,811
Secured term loans 1,639,777 413,682
Other debt obligations 98,064 98,038
----------- -----------
Total liabilities 13,408,688 12,894,869
Minority interest in consolidated entities 61,206 53,948
Shareholders' equity 2,454,082 2,899,481
----------- -----------
Total liabilities and shareholders'
equity $15,923,976 $15,848,298
=========== ===========
iStar Financial Inc.
Supplemental Information
(In thousands)
(unaudited)
PERFORMANCE STATISTICS Three Months Ended
September 30, 2008
------------------
Net Finance Margin
------------------
Weighted average GAAP yield of loan and CTL investments 8.44%
Less: Cost of debt 5.45%
----------
Net Finance Margin (1) 2.99%
Net Finance Margin Excluding Amortization of Discount on
Fremont Loans 2.74%
Return on Average Common Book Equity
------------------------------------
Average total book equity $2,675,728
Less: Average book value of preferred equity (506,176)
----------
Average common book equity (A) $2,169,552
Net income (loss) allocable to common shareholders and HPU
holders ($312,336)
Net income (loss) allocable to common shareholders and HPU
holders - Annualized (B) ($1,249,344)
Return on Average Common Book Equity (B) / (A) (57.6%)
Adjusted basic earnings (loss) allocable to common
shareholders and HPU holders (2) ($292,036)
Adjusted basic earnings (loss) allocable to common
shareholders and HPU holders - Annualized © ($1,168,144)
Adjusted Return on Average Common Book Equity © / (A) (53.8%)
Expense Ratio
-------------
General and administrative expenses (D) $37,736
Total revenue (E) $341,368
Expense Ratio (D) / (E) 11.1%
(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 $870 and $54, 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.
iStar Financial Inc.
Supplemental Information
(In thousands)
(unaudited)
CREDIT STATISTICS Three Months Ended
September 30, 2008
------------------
Book debt, net of unrestricted cash (A) $12,281,027
Book equity $2,454,082
Add: Accumulated depreciation and loan loss reserves 1,305,761
----------
Sum of book equity, accumulated depreciation and loan
loss reserves (B) $3,759,843
Leverage (1) (A)/(B) 3.3x
Ratio of Earnings (Loss) to Fixed Charges (0.9x)
Ratio of Earnings (Loss) to Fixed Charges and Preferred
Stock Dividends (0.8x)
Interest Coverage
-----------------
EBITDA (2) © ($107,325)
GAAP interest expense (D) $168,040
EBITDA / GAAP Interest Expense (2) ©/(D) (0.6x)
Covenant Calculation of Fixed Charge Coverage Ratio (3) 2.4x
RECONCILIATION OF NET INCOME TO EBITDA (2)
Net income (loss) ($301,756)
Add: GAAP interest expense 168,040
Add: Depreciation, depletion and amortization 24,448
Add: Joint venture depreciation, depletion and amortization 1,943
----------
EBITDA (2) ($107,325)
(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) 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.
(3) 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.
iStar Financial Inc.
Supplemental Information
(In thousands)
(unaudited)
Three Months Ended
September 30, 2008 LOANS
---------------------------
Total/ CORPORATE
Floating Weighted TENANT OTHER
Fixed Rate Rate Average LEASING INVESTMENTS
---------- ------- ------- ------- -----------
Amount funded $35,800 $680,353 $716,153 $11,231 $9,657
Weighted average yield 10.73% 7.73% 7.88% 11.26% N/A
Weighted average all-in
spread/margin (bps) (1) 843 408 429 N/A N/A
Weighted average first
$ loan-to-value ratio 50.28% 1.14% 3.60% N/A N/A
Weighted average last
$ loan-to-value ratio 84.46% 78.13% 78.44% N/A N/A
UNFUNDED COMMITMENTS
Number of assets with unfunded commitments 216
Discretionary commitments $423,251
Non-discretionary commitments 2,866,172
-----------
Total unfunded commitments $3,289,423
Estimated weighted average funding period Approximately 2.0 years
UNENCUMBERED ASSETS / UNSECURED DEBT
Unencumbered assets (A) $14,041,706
Unsecured debt (B) $11,151,264
Unencumbered Assets / Unsecured Debt (A)/(B) 1.3x
RISK MANAGEMENT STATISTICS
(weighted average risk rating)
2008 2007
-------------------------------- --------------------------
September 30, June 30, March 31, December 31, September 30,
------------- -------- --------- ------------ -------------
Structured
finance assets
(principal risk) 3.41 3.28 3.12 3.07 2.92
Corporate tenant
lease assets 2.55 2.55 2.51 2.50 2.48
(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
-------------------------------------
September 30, 2008 December 31, 2007
------------------ -----------------
Value of non-performing loans (1) /
As a percentage of total managed
loans $2,477,888 19.35% $1,193,669 8.71%
Reserve for loan losses /
As a percentage of total managed
loans $832,663 6.50% $217,910 1.59%
As a percentage of non-performing
loans (1) 33.60% 18.26%
RECONCILIATION OF DILUTED GAAP EPS GUIDANCE
TO DILUTED ADJUSTED EPS GUIDANCE (2)
Year Ending
December 31, 2008
-----------------
Earnings per diluted common share guidance ($2.50) - ($2.00)
Less: Gains, depreciation and other adjustments, net $0.50 - $1.50
-----------------
Adjusted earnings per diluted common share guidance ($3.50) - ($3.00)
(1) Non-performing loans include iStar's book value and the Fremont
A-participation interest on the associated assets.
(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.
iStar Financial Inc.
Supplemental Information
(In millions)
(unaudited)
PORTFOLIO STATISTICS September 30, 2008 (1)
Security Type
-------------
First Mortgages / Senior Loans $10,644 67.3%
Corporate Tenant Leases 3,701 23.4
Mezzanine / Subordinated Debt 933 5.9
Other Investments 548 3.4
------- -----
Total $15,826 100.0%
======= =====
Collateral Type
---------------
Apartment / Residential $3,893 24.6%
Land 2,239 14.1
Office (CTL) 1,746 11.0
Industrial / R&D 1,470 9.3
Retail 1,414 8.9
Corporate - Real Estate 1,041 6.6
Entertainment / Leisure 979 6.2
Hotel 949 6.0
Other 861 5.4
Mixed Use / Mixed Collateral 614 3.9
Corporate - Non-Real Estate 372 2.4
Office (Lending) 248 1.6
------- -----
Total $15,826 100.0%
======= =====
Collateral Location
-------------------
West $3,520 22.2%
Northeast 2,822 17.8
Southeast 2,717 17.2
Mid-Atlantic 1,672 10.6
Various 1,067 6.7
Central 948 6.0
Southwest 916 5.8
International 867 5.5
South 541 3.4
Northcentral 439 2.8
Northwest 317 2.0
------- -----
Total $15,826 100.0%
======= =====
(1) Figures presented prior to loan loss reserves, accumulated
depreciation and impact of Statement of Financial Accounting Standards
No. 141, "Business Combinations."
Source: iStar Financial Inc.