STAR-06.30.14-8-KPressRelease


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
_______________________________________________________________________________
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): July 29, 2014
 
_______________________________________________________________________________
 
iSTAR FINANCIAL INC.
(Exact name of registrant as specified in its charter)
 
Maryland
 
1-15371
 
95-6881527
(State or other jurisdiction of
incorporation)
 
(Commission File
Number)
 
(IRS Employer
Identification Number)
 
1114 Avenue of the Americas, 39th Floor
New York, New York
 
10036
(Address of principal executive offices)
 
(Zip Code)
 
Registrant’s telephone number, including area code:  (212) 930-9400
 _______________________________________________________________________________

N/A
(Former name or former address, if changed since last report.)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 






ITEM 2.02                                  Results of Operations and Financial Condition.
 
On July 29, 2014, iStar Financial Inc. issued an earnings release announcing its financial results for the second quarter ended June 30, 2014.  A copy of the earnings release is attached as Exhibit 99.1 hereto and incorporated herein by reference.
 
The information in this Current Report, including the exhibit hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section.  The information in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, unless it is specifically incorporated by reference therein.

ITEM 9.01                                  Financial Statements and Exhibits.
 
Exhibit 99.1                              Earnings Release.



1




SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
 
 
iSTAR FINANCIAL INC.
 
 
 
 
 
 
 
 
Date:
July 29, 2014
By:
/s/ Jay Sugarman
 
 
 
Jay Sugarman
 
 
 
Chairman and Chief Executive Officer
 
 
 
 
 
 
 
 
Date:
July 29, 2014
By:
/s/ David DiStaso
 
 
 
David DiStaso
 
 
 
Chief Financial Officer


2



EXHIBIT INDEX
 
Exhibit
Number
 
Description
 
 
 
99.1

 
Earnings Release.


3


Exhibit 99.1
 
 
 
 
iStar Financial Inc.
 
 
1114 Avenue of the Americas
 
 
New York, NY 10036
News Release
 
(212) 930-9400
 
investors@istarfinancial.com
 
 
 
COMPANY CONTACTS
 
NYSE: STAR
 
 
 
David M. DiStaso
 
Jason Fooks
Chief Financial Officer
 
Investor Relations

iStar Financial Announces Second Quarter 2014 Results

Adjusted income grew to $28.9 million, or $0.34 per diluted common share.
Refinanced $1.3 billion of secured debt with longer term unsecured bonds, unencumbering $2.0 billion of high quality assets and enhancing the Company's liquidity profile.
Funded $167 million of investments during the quarter.

NEW YORK - July 29, 2014 - iStar Financial Inc. (NYSE: STAR) today reported results for the second quarter ended June 30, 2014.

Second Quarter 2014 Results

iStar reported adjusted income allocable to common shareholders for the second quarter of $28.9 million, or $0.34 per diluted common share, compared to $4.4 million, or $0.05 per diluted common share for the second quarter 2013.

Adjusted income (loss) represents net income (loss) computed in accordance with GAAP, prior to the effects of certain non-cash items, primarily including depreciation, loan loss provisions, impairments, stock-based compensation and gain/loss on early extinguishment of debt. Please see the financial tables that follow the text of this press release for the Company’s calculations of adjusted income (loss) as well as reconciliations to GAAP net income (loss).

Net income (loss) allocable to common shareholders for the second quarter was $(16.2) million, or $(0.19) per diluted common share, compared to $(26.0) million, or $(0.31) per diluted common share for the second quarter 2013.


1


Capital Markets

During the quarter, the Company issued at par $1.32 billion of unsecured notes comprised of $550 million of 4.00% Senior Notes due November 2017 and $770 million of 5.00% Senior Notes due July 2019. Proceeds from the offering, together with cash on hand, were used to fully extinguish the Company's 2013 Secured Credit Facility. As a result, the Company expensed previously incurred costs associated with the secured facility, recording a $22.8 million loss on early extinguishment of debt for the quarter.

"This transaction supports our long-term strategy of becoming primarily an unsecured borrower, which provides us added financial flexibility," said iStar chief financial officer David DiStaso. "Secured debt now represents only 16% of our total debt, down from 49% prior to this refinancing."
 
The transaction allowed iStar to unencumber $2.0 billion of collateral, primarily comprised of net lease assets and performing loans. Further, it enhances the Company's liquidity profile by enabling iStar to retain 100% of proceeds from asset repayments and sales associated with these previously encumbered assets.

The Company's only remaining secured credit facility is its 2012 Secured Credit Facility. During the quarter, the Company repaid $26.2 million on this facility, bringing the remaining balance to $391.9 million at June 30, 2014.

The Company’s weighted average cost of debt for the second quarter was 5.5%, an improvement from 5.6% for the first quarter of 2014. The Company’s leverage was 2.1x at June 30, 2014, unchanged from the prior quarter and at the low end of the Company’s targeted range of 2.0x2.5x. Please see the financial tables that follow the text of this press release for a calculation of the Company’s leverage.

Investment Activity

During the second quarter, iStar funded a total of $167.1 million of investments, comprised of $117.0 million of new originations and $50.1 million associated with ongoing developments and prior financing commitments.

iStar generated $170.2 million of proceeds from its portfolio during the second quarter, which included $115.5 million from repayments and sales of loans within its real estate finance portfolio, $48.0 million from sales of operating properties and $6.7 million of proceeds across other segments.

In addition, the Company recognized $23.4 million of earnings from equity method investments during the second quarter from one of its strategic investments.

At the end of the second quarter, iStar had $356.5 million of cash, which will be used primarily to fund future investment activity.


2


Portfolio Overview

At June 30, 2014, the Company’s portfolio totaled $5.27 billion, which is gross of $443.4 million of accumulated depreciation and $30.6 million of general loan loss reserves.

Real Estate Finance

At June 30, 2014, the Company’s real estate finance portfolio totaled $1.49 billion, gross of general loan loss reserves.

The portfolio included $1.39 billion of performing loans with a weighted average last dollar loan-to-value ratio of 71% and a weighted average maturity of 2.4 years. The performing loans included $726.9 million of first mortgages / senior loans and $666.2 million of mezzanine / subordinated debt. The performing loans generated a weighted average effective yield for the quarter of 8.5%, which excludes $5.0 million of income recognized in the second quarter related to the amortization of a discount associated with the pending payoff of a loan.

At June 30, 2014, the Company’s non-performing loans (NPLs) had a carrying value of $94.0 million, which represents a 54% reduction from $203.2 million at the end of the first quarter. Resolutions during the quarter included the sales of NPLs for which the Company recognized $19.0 million of gains relative to their carrying value, as well as receipt of title to certain properties.

For the second quarter, the Company recorded a $2.8 million reversal of its loan loss provision, compared to a provision for loan losses of $5.0 million in the second quarter of 2013. At June 30, 2014, loan loss reserves totaled $137.9 million, or 9.8% of the total value of loans.

Net Lease

At the end of the quarter, iStar’s net lease portfolio totaled $1.65 billion, gross of $352.4 million of accumulated depreciation. The Company’s net lease portfolio totaled 20 million square feet across 33 states. Occupancy for the portfolio was 94.4% at the end of the quarter, with a weighted average remaining lease term of 11.2 years. The occupied assets generated an unleveraged yield of 8.2% and the total net lease portfolio generated an unleveraged yield of 7.7% for the quarter.

Operating Properties

At the end of the quarter, the Company’s operating properties portfolio totaled $992.1 million, gross of $86.7 million of accumulated depreciation, and was comprised of $764.9 million of commercial and $227.2 million of residential real estate properties. During the quarter, the Company funded $12.8 million of capital expenditures on its operating properties.


3


Commercial Operating
 
The Company’s commercial operating properties represent a diverse pool of assets across a broad range of geographies and collateral types such as office, retail and hotel properties. These properties generated $28.8 million of revenue offset by $21.1 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 $132.9 million of stabilized commercial operating properties that were 82% leased and generated an unleveraged weighted average yield of 9.0% for the quarter.

The remaining commercial operating properties were 62% leased and generated an unleveraged weighted average yield of 3.1% 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 32,000 square feet.

Residential Operating

At the end of the quarter, the residential operating portfolio was comprised of 584 condominium units, generally located within luxury condominium projects in major U.S. cities. The Company’s strategy is to continue selling its remaining condominium inventory and to maximize net proceeds. During the quarter, the Company sold 112 condominium units, resulting in $48.0 million of proceeds and recorded $19.7 million of income, offset by $7.8 million of expenses.

Land

At the end of the quarter, the Company’s land portfolio totaled $1.00 billion, gross of accumulated depreciation, and was comprised of 11 master planned community projects, 11 urban infill land parcels and six waterfront land parcels located throughout the United States. During the quarter, the Company invested $25.2 million in its land portfolio through capital expenditures.

Master planned communities represent large-scale residential projects that the Company will entitle, plan and/or develop. These projects are currently entitled for approximately 25,000 lots. The remainder of the Company’s land includes infill and waterfront parcels located in and around major cities that the Company will develop, sell to or partner with commercial real estate developers. These projects are currently entitled for approximately 6,000 residential units, and select projects include commercial, retail and office uses.

At June 30, 2014, the Company had six land projects in production, 10 in development and 12 in the pre-development phase.

During the quarter, the Company contributed a land parcel to a newly formed venture with a Chicago-based developer for the development of 1000 South Clark Street, a new luxury multifamily project in the South Loop of Chicago. The 469-unit building's convenient location will offer residents access to a wide array of shopping, restaurants, cultural attractions and Chicago's central business district, while at the same time providing a highly-amenitized resort lifestyle.

4



In Asbury Park, the Company announced that it has received final approval for the K. Hovnanian® project, “South Grand.” The project will consist of 28 luxury townhomes, situated directly between the City's urban downtown and the beach. South Grand is the newest residential project in the Asbury Park Waterfront, and marks another step forward in the rebuilding of this iconic beachfront community along the Jersey shore. iStar has already begun general infrastructure work around the project site, and is expected to start delivering finished townhome lots in the fall.







5






[Financial Tables to Follow]

* * *

iStar Financial Inc. (NYSE: STAR) is a fully-integrated finance and investment company focused on the commercial real estate industry. The Company provides custom-tailored investment capital to high-end private and corporate owners of real estate and invests directly across a range of real estate sectors. The Company, which is taxed as a real estate investment trust (“REIT”), has invested more than $35 billion over the past two decades. Additional information on iStar Financial is available on the Company's website at www.istarfinancial.com.

iStar Financial will hold a quarterly earnings conference call at 10:00 a.m. ET today, July 29, 2014. 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’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, increases in NPLs, the Company's ability to reduce NPLs, repayment levels, the Company's ability to make new investments, the Company’s ability to maintain compliance with its debt covenants, actual results of condominium sales meeting our expectations, the Company’s ability to generate income and gains from non-performing loans, operating properties and land and other risks detailed from time to time in iStar Financial Inc.’s SEC reports.


6


iStar Financial Inc.
Consolidated Statements of Operations
(In thousands)
(unaudited)
 
Three Months
Ended June 30,
 
Six Months
Ended June 30,
 
2014
 
2013
 
2014
 
2013
REVENUES
 
 
 
 
 
 
 
Operating lease income
$
60,967

 
$
57,112

 
$
123,075

 
$
115,128

Interest income
35,127

 
29,682

 
63,041

 
54,349

Other income
29,262

 
13,125

 
43,846

 
24,544

Land sales revenue
4,487

 

 
8,630

 

Total revenues
$
129,843

 
$
99,919

 
$
238,592

 
$
194,021

COST AND EXPENSES
 
 
 
 
 
 
 
Interest expense
$
56,530

 
$
69,157

 
$
113,986

 
$
140,723

Real estate expense
40,554

 
36,981

 
83,167

 
74,815

Land cost of sales
3,611

 

 
7,265

 

Depreciation and amortization
18,822

 
17,330

 
37,435

 
34,653

General and administrative(1)
26,623

 
20,876

 
46,411

 
42,723

Provision for (recovery of) loan losses
(2,792
)
 
5,020

 
(6,192
)
 
15,226

Impairment of assets
3,300

 

 
6,279

 

Other expense
4,690

 
146

 
4,911

 
5,770

Total costs and expenses
$
151,338

 
$
149,510

 
$
293,262

 
$
313,910

Income (loss) before earnings from equity method investments and other items
$
(21,495
)
 
$
(49,591
)
 
$
(54,670
)
 
$
(119,889
)
Loss on early extinguishment of debt
(23,587
)
 
(15,242
)
 
(24,767
)
 
(24,784
)
Earnings from equity method investments
24,093

 
8,323

 
27,270

 
30,001

Income (loss) from continuing operations before income taxes
$
(20,989
)
 
$
(56,510
)
 
$
(52,167
)
 
$
(114,672
)
Income tax (expense) benefit
215

 
(429
)
 
722

 
(4,504
)
Income (loss) from continuing operations
$
(20,774
)
 
$
(56,939
)
 
$
(51,445
)
 
$
(119,176
)
Income (loss) from discontinued operations

 
(57
)
 

 
1,186

Gain from discontinued operations

 
8,279

 

 
13,323

Income from sales of residential property
17,180

 
34,319

 
33,674

 
58,016

Net income (loss)
$
(3,594
)
 
$
(14,398
)
 
$
(17,771
)
 
$
(46,651
)
Net (income) loss attributable to noncontrolling interests
(325
)
 
311

 
(779
)
 
500

Net income (loss) attributable to iStar Financial Inc.
$
(3,919
)
 
$
(14,087
)
 
$
(18,550
)
 
$
(46,151
)
Preferred dividends
(12,830
)
 
(12,780
)
 
(25,660
)
 
(23,360
)
Net (income) loss allocable to HPU holders and Participating Security holders(2)
542

 
866

 
1,431

 
2,247

Net income (loss) allocable to common shareholders
$
(16,207
)
 
$
(26,001
)
 
$
(42,779
)
 
$
(67,264
)
_______________________________________________________________________________
(1) For the three months ended June 30, 2014 and 2013, includes $3,196 and $4,719 of stock-based compensation expense, respectively. For the six months ended June 30, 2014 and 2013, includes $5,271 and $9,921 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. Participating Security holders are Company employees and directors who hold unvested restricted stock units, restricted stock awards and common stock equivalents granted under the Company's LTIP who are eligible to participate in dividends.

7


iStar Financial Inc.
Earnings Per Share Information
(In thousands, except per share data)
(unaudited)
 
Three Months
Ended June 30,
 
Six Months
Ended June 30,
 
2014
 
2013
 
2014
 
2013
EPS INFORMATION FOR COMMON SHARES
 
 
 
 
 
 
 
Income (loss) attributable to iStar Financial Inc. from continuing operations(1)
Basic and diluted
$
(0.19
)
 
$
(0.40
)
 
$
(0.50
)
 
$
(0.95
)
Net income (loss) attributable to iStar Financial Inc.
 
 
 
 
 
 
 
Basic and diluted
$
(0.19
)
 
$
(0.31
)
 
$
(0.50
)
 
$
(0.79
)
Adjusted income (loss)
 
 
 
 
 
 
 
Basic and diluted
$
0.34

 
$
0.05

 
$
0.27

 
$
0.05

Weighted average shares outstanding
 
 
 
 
 
 
 
Basic and diluted
84,916

 
85,125

 
84,868

 
84,975

Common shares outstanding at end of period
85,153

 
85,373

 
85,153

 
85,373

 
 
 
 
 
 
 
 
EPS INFORMATION FOR HPU SHARES
 
 
 
 
 
 
 
Income (loss) attributable to iStar Financial Inc. from continuing operations(1)
Basic and diluted
$
(36.13
)
 
$
(75.41
)
 
$
(95.40
)
 
$
(181.07
)
Net income (loss) attributable to iStar Financial Inc.
 
 
 
 
 
 
 
Basic and diluted
$
(36.13
)
 
$
(57.74
)
 
$
(95.40
)
 
$
(149.81
)
Weighted average shares outstanding
 
 
 
 
 
 
 
Basic and diluted
15

 
15

 
15

 
15

_______________________________________________________________________________
(1) Including preferred dividends, net (income) loss from noncontrolling interests and income from sales of residential property.

8


iStar Financial Inc.
Consolidated Balance Sheets
(In thousands)
(unaudited)
 
As of
 
As of
 
June 30, 2014
 
December 31, 2013
ASSETS
 
 
 
 
 
 
 
Real estate
 
 
 
Real estate, at cost
$
3,184,770

 
$
3,220,634

Less: accumulated depreciation
(443,380
)
 
(424,453
)
Real estate, net
$
2,741,390

 
$
2,796,181

Real estate available and held for sale
354,814

 
360,517

 
$
3,096,204

 
$
3,156,698

Loans receivable and other lending investments, net
1,456,407

 
1,370,109

Other investments
241,561

 
207,209

Cash and cash equivalents
356,513

 
513,568

Restricted cash
24,147

 
48,769

Accrued interest and operating lease income receivable, net
14,335

 
14,941

Deferred operating lease income receivable
97,170

 
92,737

Deferred expenses and other assets, net
187,148

 
237,980

Total assets
$
5,473,485

 
$
5,642,011

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
 
 
 
Accounts payable, accrued expenses and other liabilities
$
136,850

 
$
170,831

Debt obligations, net
4,082,511

 
4,158,125

Total liabilities
$
4,219,361

 
$
4,328,956

 
 
 
 
Redeemable noncontrolling interests
$
11,433

 
$
11,590

 
 
 
 
Total iStar Financial Inc. shareholders' equity
$
1,186,905

 
$
1,243,260

Noncontrolling interests
55,786

 
58,205

Total equity
$
1,242,691

 
$
1,301,465

 
 
 
 
Total liabilities and equity
$
5,473,485

 
$
5,642,011


9


iStar Financial Inc.
Segment Analysis
(In thousands)
(unaudited)

FOR THE THREE MONTHS ENDED JUNE 30, 2014
 
 
 
 
 
 
 
Real Estate
Finance
 
Net
Lease
 
Operating Properties
 
Land
 
Corporate / Other
 

Total
Operating lease income
$

 
$
37,674

 
$
23,117

 
$
176

 
$

 
$
60,967

Interest income
35,127

 

 

 

 

 
35,127

Other income
19,043

 
519

 
7,874

 
143

 
1,683

 
29,262

Land sales revenues

 

 

 
4,487

 

 
4,487

Total revenue
$
54,170

 
$
38,193

 
$
30,991

 
$
4,806

 
$
1,683

 
$
129,843

Earnings (loss) from equity method investments

 
862

 
731

 
(151
)
 
22,651

 
24,093

Income from sales of residential property

 

 
17,180

 

 

 
17,180

Revenue and other earnings
$
54,170

 
$
39,055

 
$
48,902

 
$
4,655

 
$
24,334

 
$
171,116

Real estate expense

 
(5,520
)
 
(28,929
)
 
(6,105
)
 

 
(40,554
)
Land cost of sales

 

 

 
(3,611
)
 

 
(3,611
)
Other expense
(303
)
 

 

 

 
(4,387
)
 
(4,690
)
Allocated interest expense
(15,858
)
 
(18,009
)
 
(10,229
)
 
(7,294
)
 
(5,140
)
 
(56,530
)
Allocated general and administrative(1)
(4,444
)
 
(5,183
)
 
(3,078
)
 
(4,224
)
 
(6,498
)
 
(23,427
)
Segment profit (loss)
$
33,565

 
$
10,343

 
$
6,666

 
$
(16,579
)
 
$
8,309

 
$
42,304

AS OF JUNE 30, 2014
 
 
 
 
 
 
 
 
 
 
 
 
Real Estate
Finance
 
Net
Lease
 
Operating Properties
 
Land
 
Corporate / Other
 

Total
Real estate
 

 
 

 
 

 
 

 
 

 
 

Real estate, at cost
$

 
$
1,611,446

 
$
744,212

 
$
829,112

 
$

 
$
3,184,770

Less: accumulated depreciation

 
(352,418
)
 
(86,747
)
 
(4,215
)
 

 
(443,380
)
Real estate, net
$

 
$
1,259,028

 
$
657,465

 
$
824,897

 
$

 
$
2,741,390

Real estate available and held for sale

 

 
232,771

 
122,043

 

 
354,814

Total real estate
$

 
$
1,259,028

 
$
890,236

 
$
946,940

 
$

 
$
3,096,204

Loans receivable and other lending investments, net
1,456,407

 

 

 

 

 
1,456,407

Other investments

 
33,740

 
15,097

 
49,367

 
143,357

 
241,561

Total portfolio assets
$
1,456,407

 
$
1,292,768

 
$
905,333

 
$
996,307

 
$
143,357

 
$
4,794,172

Cash and other assets
 
 
 
 
 
 
 
 
 
 
679,313

Total assets
 
 
 
 
 
 
 
 
 
 
$
5,473,485

_______________________________________________________________________________
(1) Excludes $3,196 of stock-based compensation expense.

10


iStar Financial Inc.
Supplemental Information
(In thousands)
(unaudited)
 
Three Months
Ended June 30,
 
Six Months
Ended June 30,
 
2014
 
2013
 
2014
 
2013
ADJUSTED INCOME
 
 
 
 
 
 
 
Reconciliation of Net Income to Adjusted Income
 
 
 
 
 
 
 
Net income (loss) allocable to common shareholders
$
(16,207
)
 
$
(26,001
)
 
$
(42,779
)
 
$
(67,264
)
Add: Depreciation and amortization
19,291

 
17,400

 
38,187

 
34,854

Add: Provision for loan losses
(2,792
)
 
5,020

 
(6,192
)
 
15,226

Add: Impairment of assets
3,300

 
550

 
6,279

 
518

Add: Stock-based compensation expense
3,196

 
4,719

 
5,271

 
9,921

Add: Loss on early extinguishment of debt
23,587

 
3,728

 
24,767

 
13,270

Less: HPU/Participating Security allocation
(1,507
)
 
(1,013
)
 
(2,211
)
 
(2,385
)
Adjusted income (loss) allocable to common shareholders(1)
$
28,868

 
$
4,403

 
$
23,322

 
$
4,140

_______________________________________________________________________________
(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 and impairment of assets exclude adjustments from discontinued operations of $70 and $427, respectively, for the three months ended June 30, 2013 and $201 and $395, respectively, for the six months ended June 30, 2013. 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. For the three and six months ended June 30, 2013, loss on early extinguishment of debt excludes the portion of losses paid in cash of $11,514.

11


iStar Financial Inc.
Supplemental Information
(In thousands)
(unaudited)
 
Six Months Ended June 30, 2014
OPERATING STATISTICS
 
 
 
Expense Ratio
 
General and administrative expenses - annualized (A)
$
92,822

Average total assets (B)
$
5,534,404

Expense Ratio (A) / (B)
1.7
%
 
 
 
As of
 
June 30, 2014
Leverage
 
Book debt
$
4,082,511

Less: Cash and cash equivalents
(356,513
)
Net book debt (C)
$
3,725,998

 
 
Book equity
$
1,242,691

Add: Accumulated depreciation and amortization
494,378

Add: General loan loss reserves
30,600

Sum of book equity, accumulated depreciation and general loan loss reserves (D)
$
1,767,669

Leverage (C) / (D)
2.1x

 
 
UNENCUMBERED ASSETS / UNSECURED DEBT
 
 
 
Unencumbered assets (E)(1)
$
5,085,370

Unsecured debt (F)
$
3,426,890

Unencumbered Assets / Unsecured Debt (E) / (F)
1.5x

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

12


iStar Financial Inc.
Supplemental Information
(In thousands)
(unaudited)
 
 
 
 
As of
 
 
 
 
June 30, 2014
UNFUNDED COMMITMENTS
 
 
 
 
 
 
 
 
 
 
 
Performance-based commitments
 
 
 
$
304,526
 
Strategic investments
 
 
 
46,362
 
Discretionary fundings
 
 
 
5,000
 
Total Unfunded Commitments
 
 
 
$
355,888
 
 
 
 
 
 
 
LOAN RECEIVABLE CREDIT STATISTICS
As of
 
June 30, 2014
 
December 31, 2013
 
 
 
 
 
 
Carrying value of NPLs /
 
 
 
 
 
As a percentage of total carrying value of loans
$
93,960

7.4
%
 
$
203,604

16.6
%
 
 
 
 
 
 
Impaired loan asset specific reserves for loan losses /
 
 
 
 
 
As a percentage of gross carrying value of impaired loans(1)
$
107,304

33.3
%
 
$
348,004

46.3
%
 
 
 
 
 
 
Total reserve for loan losses /
 
 
 
 
 
As a percentage of total gross carrying value of loans(1)
$
137,904

9.8
%
 
$
377,204

23.5
%
_______________________________________________________________________________
(1) Gross carrying value represents iStar's carrying value of loans, gross of loan loss reserves.


13



iStar Financial Inc.
Supplemental Information
(In millions)
(unaudited)
PORTFOLIO STATISTICS AS OF JUNE 30, 2014(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
Property Type
 
Real Estate Finance
 
Net Lease
 
Operating Properties
 
Land
 
Total
 
% of
Total
Office / Industrial
 
$
109

 
$
967

 
$
351

 
$

 
$
1,427

 
27.1
%
Land
 
66

 

 

 
1,000

 
1,066

 
20.3
%
Mixed Use / Mixed Collateral
 
502

 

 
242

 

 
744

 
14.1
%
Entertainment / Leisure
 

 
475

 

 

 
475

 
9.0
%
Hotel
 
254

 
136

 
54

 

 
444

 
8.4
%
Retail
 
176

 
57

 
118

 

 
351

 
6.7
%
Condominium
 
120

 

 
227

 

 
347

 
6.6
%
Other Property Types
 
260

 
10

 

 

 
270

 
5.1
%
Strategic Investments
 

 

 

 

 
144

 
2.7
%
Total
 
$
1,487

 
$
1,645

 
$
992

 
$
1,000

 
$
5,268

 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Geography
 
Real Estate Finance
 
Net Lease
 
Operating Properties
 
Land
 
Total
 
% of
Total
Northeast
 
$
607

 
$
375

 
$
155

 
$
197

 
$
1,334

 
25.4
%
West
 
89

 
412

 
173

 
359

 
1,033

 
19.6
%
Southeast
 
281

 
237

 
287

 
99

 
904

 
17.2
%
Mid-Atlantic
 
174

 
177

 
142

 
186

 
679

 
12.9
%
Southwest
 
121

 
220

 
183

 
134

 
658

 
12.5
%
Central
 
90

 
67

 
49

 
9

 
215

 
4.1
%
Northwest
 
23

 
81

 
3

 
16

 
123

 
2.3
%
International
 
92

 

 

 

 
92

 
1.7
%
Various
 
10

 
76

 

 

 
86

 
1.6
%
Strategic Investments
 

 

 

 

 
144

 
2.7
%
Total
 
$
1,487

 
$
1,645

 
$
992

 
$
1,000

 
$
5,268

 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
_______________________________________________________________________________
(1) Based on carrying value of the Company's total investment portfolio, gross of accumulated depreciation and general loan loss reserves.


14