- First quarter new financing commitments total $663 million in 16
separate transactions. NEW YORK, April 25 /PRNewswire-FirstCall/ --
iStar Financial Inc. (NYSE: SFI), the leading publicly traded
finance company focused on the commercial real estate industry,
today reported first quarter 2006 results. iStar Financial reported
adjusted earnings for the quarter ended March 31, 2006 of $0.90 per
diluted common share versus $0.74 per diluted common share for the
first quarter 2005. Adjusted earnings allocable to common
shareholders for the first quarter 2006 were $102.6 million on a
diluted basis, compared to $83.5 million for the first quarter
2005. Adjusted earnings represents net income computed in
accordance with GAAP, adjusted for preferred dividends,
depreciation, depletion, amortization and gain (loss) from
discontinued operations. Net income allocable to common
shareholders for the first quarter was $75.6 million, or $0.66 per
diluted common share, compared with $58.3 million, or $0.52 per
diluted common share, for the first quarter 2005. Net investment
income for the quarter was $111.2 million, compared to $93.0
million for the first quarter of 2005, primarily due to
year-over-year growth of the Company's balance sheet. Net
investment income represents interest income, operating lease
income and equity in earnings from joint ventures, less interest
expense, operating costs for corporate tenant lease assets and loss
on early extinguishment of debt, in each case as computed in
accordance with GAAP. The Company announced that during the first
quarter, it closed 16 new financing commitments, for a total of
$663 million, of which $611 million was funded during the quarter.
In addition, the Company funded $206 million under pre-existing
commitments and received $474 million in principal repayments. Two
transactions this quarter were sourced by the Company's recently
established iStar Europe subsidiary. Cumulative repeat customer
business totaled $9.2 billion at March 31, 2006. For the quarter
ended March 31, 2006, the Company generated return on average
common book equity of 21.1%. The Company's debt to book equity plus
accumulated depreciation/depletion and loan loss reserves, as
determined in accordance with GAAP, was 2.1x for the first quarter.
Capital Markets Summary As previously announced, the Company issued
$500 million of 5.65% senior unsecured notes due 2011 and $500
million of 5.875% senior unsecured notes due 2016 during the first
quarter 2006. In addition, the Company extended the final maturity
date on its secured credit facility by two years to January 2008
and reduced its maximum principal amount to $500 million from $700
million. Also during the first quarter 2006, Fitch Ratings upgraded
the Company's senior unsecured debt rating to 'BBB' from 'BBB-' and
its preferred stock rating to 'BB+' from 'BB.' In addition, Moody's
Investors Service upgraded the Company's senior unsecured ratings
to 'Baa2' from 'Baa3' and its preferred stock rating to 'Ba1' from
'Ba2' and Standard and Poor's Ratings upgraded the Company's
long-term unsecured senior debt rating to 'BBB' from 'BBB-' and its
preferred stock rating to 'BB+' from 'BB.' As of March 31, 2006,
the Company had $538 million outstanding under $2.0 billion in
credit facilities. Consistent with its match funding policy under
which a one percentage point change in interest rates cannot impact
adjusted earnings by more than 2.5%, as of March 31, 2006, a 100
basis point increase in rates would have increased the Company's
adjusted earnings by 1.20%. Earnings Guidance 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. The Company
continues to expect diluted adjusted earnings per share for the
fiscal year 2006 of $3.35 - $3.50, and diluted GAAP earnings per
share for the fiscal year 2006 of $2.35 - $2.50, based on expected
net asset growth of approximately $1.5 billion. The Company expects
to fund its net asset growth with a combination of unsecured notes
and equity. Risk Management At March 31, 2006, first mortgages,
participations in first mortgages, senior loans and corporate
tenant lease financing collectively comprised 87.9% of the
Company's asset base versus 86.1% in the prior quarter. The
Company's loan portfolio consisted of 58% floating rate and 42%
fixed rate loans, with a weighted average maturity of 4.0 years.
The weighted average first and last dollar loan-to-value ratio for
all structured finance assets was 13.9% and 63.0%, respectively. At
quarter end, the Company's corporate tenant lease assets were 95.7%
leased with a weighted average remaining lease term of 11.0 years.
As of March 31, 2006, the Company's weighted average GAAP yield on
its structured finance assets and corporate tenant lease assets was
10.36% and 9.75%, respectively. The company's net finance margin,
calculated as the rate of return on assets less the cost of debt,
improved to 3.59% from 3.26% in the prior quarter. At March 31,
2006, the weighted average risk ratings of the Company's structured
finance and corporate tenant lease assets were 2.71 and 2.42,
respectively. At quarter end, accumulated loan loss reserves and
other asset-specific credit protection represented an aggregate of
approximately 5.8% of the gross book value of the Company's loans.
In addition, cash deposits, letters of credit, allowances for
doubtful accounts and accumulated depreciation relating to
corporate tenant lease assets represented 11.9% of the gross book
value of the Company's corporate tenant lease assets at quarter
end. At March 31, 2006, the Company's non-performing loan assets
(NPLs) represented 0.35% of total assets. NPLs represent loans on
non-accrual status and repossessed real estate collateral. At March
31, 2006, the Company had two loans on non-accrual and no
repossessed assets. In addition, one asset was removed and one
asset was added to the watch list this quarter, with watch list
assets representing 0.71% of total assets at March 31, 2006. Other
Developments Earlier this quarter, the Company's subsidiary,
TimberStar, led the acquisition of approximately 900,000 acres of
forestland and related assets in Arkansas, Louisiana and Texas from
International Paper Co. for approximately $1.17 billion. Through
TimberStar, the Company has committed to provide approximately $468
million of capital to a venture to fund the purchase. Due to
significant interest from a number of equity sponsors, the Company
has elected to syndicate part of its capital commitment, which,
will ultimately reduce the Company's investment in the venture to
approximately $150 - $175 million. The acquisition is expected to
close during the third quarter 2006. TimberStar seeks to acquire a
geographically diverse portfolio of timberlands that generate
attractive cash-on-cash yields and capital appreciation. It is
focused on creating partnerships with high-quality customers
through long-term supply agreements. Prior to the pending purchase
of the assets from International Paper, the Company's TimberStar
subsidiary had invested approximately $150 million in its timber
portfolio. Dividend and Annual Meeting On April 3, 2006, iStar
Financial declared a regular quarterly dividend of $0.77. The first
quarter dividend will be payable on April 28, 2006 to shareholders
of record on April 14, 2006. The Company will host its Annual
Meeting of Shareholders at The Harvard Club of New York City,
located at 35 West 44th Street, New York, New York 10036 on
Wednesday, May 31, 2006 at 9:00 am local time. All shareholders are
cordially invited to attend. iStar Financial Inc. is the leading
publicly traded finance company focused on the commercial real
estate industry. The Company primarily provides custom tailored
financing to high end private and corporate owners of real estate,
including senior and mezzanine real estate debt, senior and
mezzanine corporate capital, and corporate net lease financing. 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. EDT today,
April 25, 2006. This conference call will be broadcast live over
the Internet and can be accessed by all interested parties through
iStar Financial's website, http://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 March 31, 2006 2005 Net investment income $111,180
$92,985 Other income 14,265 12,604 Non-interest expense (39,535)
(35,878) Minority interest in consolidated entities (248) (205)
Income from continuing operations $85,662 $69,506 Income from
discontinued operations 142 813 Gain from discontinued operations
2,182 - Preferred dividend requirements (10,580) (10,580) Net
income allocable to common shareholders and HPU holders (1) $77,406
$59,739 (1) 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 March 31, 2006 December 31, 2005 (unaudited) Loans and other
lending investments, net $4,974,891 $4,661,915 Corporate tenant
lease assets, net 3,123,970 3,115,361 Other investments 254,506
240,470 Total assets 8,860,874 8,532,296 Debt obligations 6,122,828
5,859,592 Total liabilities 6,284,882 6,052,114 Total shareholders'
equity 2,542,386 2,446,671 iStar Financial Inc. Consolidated
Statements of Operations (In thousands, except per share amounts)
(unaudited) Three Months Ended March 31, 2006 2005 Revenue:
Interest income $126,048 $91,618 Operating lease income 84,319
76,125 Other income 14,265 12,604 Total revenue 224,632 180,347
Costs and Expenses: Interest expense 93,533 68,951 Operating costs
- corporate tenant lease assets 5,940 5,647 Depreciation and
amortization 19,402 17,625 General and administrative (1) 19,133
16,003 Provision for loan losses 1,000 2,250 Loss on early
extinguishment of debt - - Total costs and expenses 139,008 110,476
Income from continuing operations before other items 85,624 69,871
Equity in earnings from joint ventures 286 (160) Minority interest
in consolidated entities (248) (205) Income from continuing
operations 85,662 69,506 Income from discontinued operations 142
813 Gain from discontinued operations 2,182 - Net income 87,986
70,319 Preferred dividends (10,580) (10,580) Net income allocable
to common shareholders and HPU holders $77,406 $59,739 Net income
per common share: Basic (2) $0.67 $0.52 Diluted (3) (4) $0.66 $0.52
Weighted average common shares outstanding: Basic 113,243 111,469
Diluted 114,357 112,674 (1) For the three months ended March 31,
2006 and 2005, includes $1,204 and $642 of stock-based compensation
expense. (2) For the three months ended March 31, 2006 and 2005,
excludes $1,893 and $1,483 of net income allocable to HPU holders,
respectively. (3) For the three months ended March 31, 2006 and
2005, excludes $1,875 and $1,468 of net income allocable to HPU
holders, respectively. (4) For the three months ended March 31,
2006, includes $28 of joint venture income. iStar Financial Inc.
Reconciliation of Adjusted Earnings to GAAP Net Income (In
thousands, except per share amounts) (unaudited) Three Months Ended
March 31, 2006 2005 ADJUSTED EARNINGS: (1) Net income $87,986
$70,319 Add: Depreciation, depletion and amortization 21,012 18,150
Add: Joint venture income 30 42 Add: Joint venture depreciation and
amortization 2,724 135 Add: Amortization of deferred financing
costs 6,113 7,526 Less: Preferred dividends (10,580) (10,580) Less:
Gain from discontinued operations (2,182) - Adjusted earnings
allocable to common shareholders and HPU holders: Basic $105,073
$85,550 Diluted $105,103 $85,592 Adjusted earnings per common
share: Basic: (2) $0.91 $0.75 Diluted: (3) $0.90 $0.74 Weighted
average common shares outstanding: Basic 113,243 111,469 Diluted
114,357 112,747 Common shares outstanding at end of period: Basic
113,268 111,494 Diluted 114,375 112,764 (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 March 31, 2006 and 2005, excludes
$2,569 and $2,124 of net income allocable to HPU holders,
respectively. (3) For the three months ended March 31, 2006 and
2005, excludes $2,545 and $2,102 of net income allocable to HPU
holders, respectively. iStar Financial Inc. Consolidated Balance
Sheets (In thousands) As of As of March 31, 2006 December 31, 2005
(unaudited) ASSETS Loans and other lending investments, net
$4,974,891 $4,661,915 Corporate tenant lease assets, net 3,123,970
3,115,361 Other investments 254,506 240,470 Investments in joint
ventures 198,990 202,128 Cash and cash equivalents 74,243 115,370
Restricted cash 37,580 28,804 Accrued interest and operating lease
income receivable 45,504 32,166 Deferred operating lease income
receivable 72,875 76,874 Deferred expenses and other assets 69,112
50,005 Goodwill 9,203 9,203 Total assets $8,860,874 $8,532,296
LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable, accrued
expenses and other liabilities $162,054 $192,522 Debt obligations:
Unsecured senior notes 5,092,868 4,108,477 Unsecured revolving
credit facilities 538,035 1,242,000 Secured revolving credit
facilities - - Secured term loans 393,947 411,144 Other debt
obligations 97,978 97,971 Total liabilities 6,284,882 6,052,114
Minority interest in consolidated entities 33,606 33,511
Shareholders' equity 2,542,386 2,446,671 Total liabilities and
shareholders' equity $8,860,874 $8,532,296 iStar Financial Inc.
Supplemental Information (In thousands) (unaudited) PERFORMANCE
STATISTICS Three Months Ended Net Finance Margin March 31, 2006
Weighted average GAAP yield of loan and CTL investments 10.11%
Less: Cost of debt (6.52%) Net Finance Margin (1) 3.59% Return on
Average Common Book Equity Adjusted basic earnings allocable to
common shareholders and HPU holders (2) $105,073 Adjusted basic
earnings allocable to common shareholders and HPU holders -
Annualized (A) $420,293 Average total book equity $2,494,528 Less:
Average book value of preferred equity (506,176) Average common
book equity (B) $1,988,352 Return on Average Common Book Equity
(A)/(B) 21.1% Efficiency Ratio General and administrative expenses
(C) $19,133 Total revenue (D) $224,632 Efficiency Ratio (C)/(D)
8.5% (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 $165 and ($8),
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 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.
iStar Financial Inc. Supplemental Information (In thousands)
(unaudited) CREDIT STATISTICS Three Months Ended March 31, 2006
Book debt (A) $6,122,828 Book equity $2,542,386 Add: Accumulated
depreciation/depletion and loan loss reserves 365,924 Sum of book
equity, accumulated depreciation/depletion and loan loss reserves
(B) $2,908,310 Book Debt / Sum of Book Equity, Accumulated
Depreciation/Depletion and Loan Loss Reserves (A)/(B) 2.1x Ratio of
Earnings to Fixed Charges 1.9x Ratio of Earnings to Fixed Charges
and Preferred Stock Dividends 1.7x Interest Coverage EBITDA (1) (C)
$202,819 GAAP interest expense (D) $93,533 EBITDA / GAAP Interest
Expense (C)/(D) 2.2x Fixed Charge Coverage EBITDA (1) (C) $202,819
GAAP interest expense $93,533 Add: Preferred dividends 10,580 Total
GAAP interest expense and preferred dividends (E) $104,113 EBITDA /
GAAP Interest Expense and Preferred Dividends (C)/(E) 1.9x
RECONCILIATION OF NET INCOME TO EBITDA Net income $87,986 Add: GAAP
interest expense 93,533 Add: Depreciation, depletion and
amortization 21,300 EBITDA (1) $202,819 (1) EBITDA should be
examined in conjunction with net income as shown in the
Consolidated Statements of Operations. EBITDA 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. 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 (1)
Three Months Ended March 31, 2006 LOAN ORIGINATIONS Total/ Floating
Weighted CORPORATE Fixed Rate Rate Average LEASING Amount funded
$281,632 $308,448 $590,081 $10,424 Weighted average GAAP yield
11.26% 9.63% 10.41% 8.74% Weighted average all-in spread/margin
(basis points) (2) 672 502 - 415 Weighted average first $ loan-
to-value ratio 8.6% 14.6% 11.8% N/A Weighted average last $
loan-to- value ratio 65.7% 57.8% 61.6% N/A UNFUNDED COMMITMENTS
Number of assets with unfunded commitments 54 Discretionary
commitments $34,996 Non-discretionary commitments 1,275,058 Total
unfunded commitments $1,310,054 Estimated weighted average funding
period Approximately 4.5 years UNENCUMBERED ASSETS $8,460,448 RISK
MANAGEMENT STATISTICS 2006 2005 (weighted average risk rating)
March 31, Dec. 31, Sept. 30, June 30, March 31, Structured Finance
Assets 2.71 2.63 2.60 2.52 2.71 Corporate Tenant Lease Assets 2.42
2.38 2.36 2.36 2.36 (1=lowest risk; 5=highest risk) (1) Excludes
other investments. (2) Based on average quarterly one-month LIBOR
(floating-rate loans) and U.S. Treasury rates (fixed-rate loans and
corporate leasing transactions during the quarter. iStar Financial
Inc. Supplemental Information (In thousands, except per share
amounts) (unaudited) LOANS AND OTHER LENDING INVESTMENTS CREDIT
STATISTICS As of March 31, 2006 December 31, 2005 $ % $ % Carrying
value of non-performing loans/ As a percentage of total assets
$30,971 0.35% $35,291 0.41% Reserve for loan losses/ As a
percentage of total assets $47,876 0.54% $46,876 0.55% As a
percentage of non-performing loans 155% 133% RECONCILIATION OF
DILUTED ADJUSTED EPS GUIDANCE TO DILUTED GAAP EPS GUIDANCE (1) Year
Ended December 31, 2006 Earnings per diluted common share guidance
$2.35 - $2.50 Add: Depreciation, depletion and amortization per
diluted common share $0.85 - $1.15 Adjusted earnings per diluted
common share guidance $3.35 - $3.50 (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.
iStar Financial Inc. Supplemental Information (In millions)
(unaudited) PORTFOLIO STATISTICS AS OF MARCH 31, 2006 (1) Security
Type $ % Corporate Tenant Leases $3,483 40.0% First Mortgages /
Senior Loans 4,177 47.9 Mezzanine / Subordinated Debt 846 9.7 Other
Investments 212 2.4 Total $8,718 100.0% Collateral Type Office
(CTL) $1,653 19.0% Industrial / R&D 1,355 15.5 Office (Lending)
571 6.6 Entertainment / Leisure 913 10.4 Hotel (Lending) 444 5.1
Mixed Use / Mixed Collateral 977 11.2 Apartment / Residential 598
6.9 Retail 1,226 14.0 Hotel (CTL) 268 3.1 Other 713 8.2 Total
$8,718 100.0% Collateral Location West $2,101 24.1% Northeast 1,571
18.0 Southeast 1,205 13.8 Central 627 7.2 Mid-Atlantic 732 8.4
Various 910 10.4 South 589 6.8 Southwest 463 5.3 North Central 319
3.7 Northwest 201 2.3 Total $8,718 100.0% (1) Figures presented
prior to loan loss reserves, accumulated depreciation and impact of
statement of Financial Accounting Standards No. 141 ("SFAS No.
141") "Business Combinations." DATASOURCE: iStar Financial Inc.
CONTACT: Catherine D. Rice, Chief Financial Officer, or Andrew G.
Backman, Vice President - Investor Relations, both of iStar
Financial, +1-212-930-9400 Web site: http://www.istarfinancial.com/
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