iStar Inc.
Consolidated Balance Sheets
(In thousands, except per share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
As of
|
|
March 31,
2019
|
|
December 31,
2018
|
ASSETS
|
|
|
|
Real estate
|
|
|
|
Real estate, at cost
|
$
|
1,873,642
|
|
|
$
|
2,076,333
|
|
Less: accumulated depreciation
|
(252,638
|
)
|
|
(305,314
|
)
|
Real estate, net
|
1,621,004
|
|
|
1,771,019
|
|
Real estate available and held for sale
|
253,336
|
|
|
22,551
|
|
Total real estate
|
1,874,340
|
|
|
1,793,570
|
|
Land and development, net
|
616,350
|
|
|
598,218
|
|
Loans receivable and other lending investments, net
|
894,846
|
|
|
988,224
|
|
Other investments
|
521,999
|
|
|
304,275
|
|
Cash and cash equivalents
|
315,407
|
|
|
931,751
|
|
Accrued interest and operating lease income receivable, net
|
11,723
|
|
|
10,669
|
|
Deferred operating lease income receivable, net
|
68,712
|
|
|
98,302
|
|
Deferred expenses and other assets, net
|
368,036
|
|
|
289,268
|
|
Total assets
|
$
|
4,671,413
|
|
|
$
|
5,014,277
|
|
LIABILITIES AND EQUITY
|
|
|
|
Liabilities:
|
|
|
|
Accounts payable, accrued expenses and other liabilities
|
$
|
332,358
|
|
|
$
|
316,251
|
|
Liabilities associated with properties held for sale
|
234,267
|
|
|
2,341
|
|
Loan participations payable, net
|
25,021
|
|
|
22,484
|
|
Debt obligations, net
|
3,070,296
|
|
|
3,609,086
|
|
Total liabilities
|
3,661,942
|
|
|
3,950,162
|
|
Commitments and contingencies (refer to Note 11)
|
|
|
|
|
|
Equity:
|
|
|
|
iStar Inc. shareholders' equity:
|
|
|
|
Preferred Stock Series D, G and I, liquidation preference $25.00 per share (refer to Note 13)
|
12
|
|
|
12
|
|
Convertible Preferred Stock Series J, liquidation preference $50.00 per share (refer to Note 13)
|
4
|
|
|
4
|
|
Common Stock, $0.001 par value, 200,000 shares authorized, 66,061 and 68,085 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively
|
66
|
|
|
68
|
|
Additional paid-in capital
|
3,335,719
|
|
|
3,352,225
|
|
Accumulated deficit
|
(2,495,836
|
)
|
|
(2,472,061
|
)
|
Accumulated other comprehensive loss (refer to Note 13)
|
(29,594
|
)
|
|
(17,270
|
)
|
Total iStar Inc. shareholders' equity
|
810,371
|
|
|
862,978
|
|
Noncontrolling interests
|
199,100
|
|
|
201,137
|
|
Total equity
|
1,009,471
|
|
|
1,064,115
|
|
Total liabilities and equity
|
$
|
4,671,413
|
|
|
$
|
5,014,277
|
|
_______________________________________________________________________________
Note - Refer to Note 2 for details on the Company's consolidated variable interest entities ("VIEs").
The accompanying notes are an integral part of the consolidated financial statements.
iStar Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31,
|
|
2019
|
|
2018
|
Revenues:
|
|
|
|
Operating lease income
|
$
|
58,915
|
|
|
$
|
45,799
|
|
Interest income
|
20,375
|
|
|
26,697
|
|
Other income
|
14,813
|
|
|
15,320
|
|
Land development revenue
|
12,699
|
|
|
276,429
|
|
Total revenues
|
106,802
|
|
|
364,245
|
|
Costs and expenses:
|
|
|
|
Interest expense
|
46,577
|
|
|
45,182
|
|
Real estate expense
|
25,940
|
|
|
36,180
|
|
Land development cost of sales
|
14,449
|
|
|
223,407
|
|
Depreciation and amortization
|
15,668
|
|
|
11,110
|
|
General and administrative
|
21,099
|
|
|
28,814
|
|
Recovery of loan losses
|
(97
|
)
|
|
(855
|
)
|
Impairment of assets
|
3,851
|
|
|
4,100
|
|
Other expense
|
508
|
|
|
1,166
|
|
Total costs and expenses
|
127,995
|
|
|
349,104
|
|
Income from sales of real estate
|
9,407
|
|
|
17,048
|
|
Income (loss) from operations before earnings from equity method investments and other items
|
(11,786
|
)
|
|
32,189
|
|
Loss on early extinguishment of debt, net
|
(468
|
)
|
|
(372
|
)
|
Earnings from equity method investments
|
5,309
|
|
|
3,332
|
|
Net income (loss) before income taxes
|
(6,945
|
)
|
|
35,149
|
|
Income tax expense
|
(25
|
)
|
|
(121
|
)
|
Net income (loss)
|
(6,970
|
)
|
|
35,028
|
|
Net (income) attributable to noncontrolling interests
|
(2,471
|
)
|
|
(95
|
)
|
Net income (loss) attributable to iStar Inc.
|
(9,441
|
)
|
|
34,933
|
|
Preferred dividends
|
(8,124
|
)
|
|
(8,124
|
)
|
Net income (loss) allocable to common shareholders
|
$
|
(17,565
|
)
|
|
$
|
26,809
|
|
Per common share data:
|
|
|
|
Net income (loss) allocable to common shareholders:
|
|
|
|
Basic
|
$
|
(0.26
|
)
|
|
$
|
0.39
|
|
Diluted
|
$
|
(0.26
|
)
|
|
$
|
0.35
|
|
Weighted average number of common shares:
|
|
|
|
Basic
|
67,747
|
|
|
67,913
|
|
Diluted
|
67,747
|
|
|
83,670
|
|
The accompanying notes are an integral part of the consolidated financial statements.
iStar Inc.
Consolidated Statements of Comprehensive Income (Loss)
(In thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31,
|
|
2019
|
|
2018
|
Net income (loss)
|
$
|
(6,970
|
)
|
|
$
|
35,028
|
|
Other comprehensive income (loss):
|
|
|
|
Impact from adoption of new accounting standards
|
—
|
|
|
276
|
|
Reclassification of losses on cash flow hedges into earnings upon realization
(1)
|
7
|
|
|
9
|
|
Unrealized gains (losses) on available-for-sale securities
|
1,000
|
|
|
(971
|
)
|
Unrealized gains (losses) on cash flow hedges
|
(15,012
|
)
|
|
2,351
|
|
Unrealized losses on cumulative translation adjustment
|
—
|
|
|
(108
|
)
|
Other comprehensive income (loss)
|
(14,005
|
)
|
|
1,557
|
|
Comprehensive income (loss)
|
(20,975
|
)
|
|
36,585
|
|
Comprehensive (income) attributable to noncontrolling interests
|
(790
|
)
|
|
(95
|
)
|
Comprehensive income (loss) attributable to iStar Inc.
|
$
|
(21,765
|
)
|
|
$
|
36,490
|
|
_______________________________________________________________________________
|
|
(1)
|
Amount reclassified to "Interest expense" in the Company's consolidated statements of operations is
$151
for the three months ended March 31, 2019. Amounts reclassified to "Earnings (losses) from equity method investments" in the Company's consolidated statements of operations are
$(144)
and
$9
for the three months ended
March 31, 2019
and 2018, respectively.
|
The accompanying notes are an integral part of the consolidated financial statements.
iStar Inc.
Consolidated Statements of Changes in Equity
For the Three Months Ended March 31, 2019 and 2018
(In thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
iStar Inc. Shareholders' Equity
|
|
|
|
|
|
|
Preferred
Stock
(1)
|
|
Preferred Stock Series J
(1)
|
|
Common
Stock at
Par
|
|
Additional
Paid-In
Capital
|
|
Retained
Earnings
(Deficit)
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Noncontrolling
Interests
|
|
Total
Equity
|
Balance as of December 31, 2018
|
|
$
|
12
|
|
|
$
|
4
|
|
|
$
|
68
|
|
|
$
|
3,352,225
|
|
|
$
|
(2,472,061
|
)
|
|
$
|
(17,270
|
)
|
|
$
|
201,137
|
|
|
$
|
1,064,115
|
|
Dividends declared—preferred
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,124
|
)
|
|
—
|
|
|
—
|
|
|
(8,124
|
)
|
Dividends declared—common ($.09 per share)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,210
|
)
|
|
—
|
|
|
—
|
|
|
(6,210
|
)
|
Issuance of stock/restricted stock unit amortization, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,661
|
|
|
—
|
|
|
—
|
|
|
428
|
|
|
3,089
|
|
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,441
|
)
|
|
—
|
|
|
2,471
|
|
|
(6,970
|
)
|
Change in accumulated other comprehensive income (loss)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,324
|
)
|
|
(1,681
|
)
|
|
(14,005
|
)
|
Repurchase of stock
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
(19,167
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(19,169
|
)
|
Distributions to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,255
|
)
|
|
(3,255
|
)
|
Balance as of March 31, 2019
|
|
$
|
12
|
|
|
$
|
4
|
|
|
$
|
66
|
|
|
$
|
3,335,719
|
|
|
$
|
(2,495,836
|
)
|
|
$
|
(29,594
|
)
|
|
$
|
199,100
|
|
|
$
|
1,009,471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2017
|
|
$
|
12
|
|
|
$
|
4
|
|
|
$
|
68
|
|
|
$
|
3,352,665
|
|
|
$
|
(2,470,564
|
)
|
|
$
|
(2,482
|
)
|
|
$
|
34,546
|
|
|
$
|
914,249
|
|
Dividends declared—preferred
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,124
|
)
|
|
—
|
|
|
—
|
|
|
(8,124
|
)
|
Issuance of stock/restricted stock unit amortization, net
|
|
—
|
|
|
—
|
|
|
1
|
|
|
5,888
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,889
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
34,933
|
|
|
—
|
|
|
95
|
|
|
35,028
|
|
Change in accumulated other comprehensive income (loss)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,281
|
|
|
—
|
|
|
1,281
|
|
Repurchase of stock
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(8,303
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,304
|
)
|
Contributions from noncontrolling interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
|
9
|
|
Impact from adoption of new accounting standards
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
75,593
|
|
|
276
|
|
|
—
|
|
|
75,869
|
|
Balance as of March 31, 2018
|
|
$
|
12
|
|
|
$
|
4
|
|
|
$
|
68
|
|
|
$
|
3,350,250
|
|
|
$
|
(2,368,162
|
)
|
|
$
|
(925
|
)
|
|
$
|
34,650
|
|
|
$
|
1,015,897
|
|
_______________________________________________________________________________
|
|
(1)
|
Refer to
Note 13
for details on the Company's Preferred Stock.
|
The accompanying notes are an integral part of the consolidated financial statements.
iStar Inc.
Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31,
|
|
2019
|
|
2018
|
Cash flows from operating activities:
|
|
|
|
Net income (loss)
|
$
|
(6,970
|
)
|
|
$
|
35,028
|
|
Adjustments to reconcile net income to cash flows from operating activities:
|
|
|
|
Recovery of loan losses
|
(97
|
)
|
|
(855
|
)
|
Impairment of assets
|
3,851
|
|
|
4,100
|
|
Depreciation and amortization
|
15,668
|
|
|
11,110
|
|
Stock-based compensation expense
|
4,249
|
|
|
9,091
|
|
Amortization of discounts/premiums and deferred financing costs on debt obligations, net
|
3,616
|
|
|
3,943
|
|
Amortization of discounts/premiums and deferred interest on loans, net
|
(9,853
|
)
|
|
(9,067
|
)
|
Deferred interest on loans received
|
5,850
|
|
|
17,930
|
|
Earnings from equity method investments
|
(5,309
|
)
|
|
(3,332
|
)
|
Distributions from operations of other investments
|
1,389
|
|
|
3,101
|
|
Deferred operating lease income
|
(4,222
|
)
|
|
(2,239
|
)
|
Income from sales of real estate
|
(9,407
|
)
|
|
(17,048
|
)
|
Land development revenue in excess of cost of sales
|
1,750
|
|
|
(53,022
|
)
|
Loss on early extinguishment of debt, net
|
468
|
|
|
372
|
|
Other operating activities, net
|
(181
|
)
|
|
865
|
|
Changes in assets and liabilities:
|
|
|
|
Changes in accrued interest and operating lease income receivable
|
(954
|
)
|
|
617
|
|
Changes in deferred expenses and other assets, net
|
(1,512
|
)
|
|
(2,016
|
)
|
Changes in accounts payable, accrued expenses and other liabilities
|
(44,869
|
)
|
|
(45,144
|
)
|
Cash flows used in operating activities
|
(46,533
|
)
|
|
(46,566
|
)
|
Cash flows from investing activities:
|
|
|
|
Originations and fundings of loans receivable, net
|
(58,318
|
)
|
|
(103,288
|
)
|
Capital expenditures on real estate assets
|
(5,184
|
)
|
|
(7,840
|
)
|
Capital expenditures on land and development assets
|
(37,762
|
)
|
|
(30,954
|
)
|
Acquisitions of real estate assets
|
(109,663
|
)
|
|
—
|
|
Repayments of and principal collections on loans receivable and other lending investments, net
|
157,915
|
|
|
114,525
|
|
Net proceeds from sales of real estate
|
58,529
|
|
|
48,469
|
|
Net proceeds from sales of land and development assets
|
11,455
|
|
|
130,304
|
|
Distributions from other investments
|
46,778
|
|
|
17,813
|
|
Contributions to and acquisition of interest in other investments
|
(260,297
|
)
|
|
(43,391
|
)
|
Other investing activities, net
|
(16,685
|
)
|
|
491
|
|
Cash flows provided by (used in) investing activities
|
(213,232
|
)
|
|
126,129
|
|
Cash flows from financing activities:
|
|
|
|
Borrowings from debt obligations
|
63,500
|
|
|
—
|
|
Repayments and repurchases of debt obligations
|
(379,797
|
)
|
|
(349,658
|
)
|
Preferred dividends paid
|
(8,124
|
)
|
|
(8,124
|
)
|
Common dividends paid
|
(6,127
|
)
|
|
—
|
|
Repurchase of stock
|
(15,328
|
)
|
|
(8,304
|
)
|
Payments for deferred financing costs
|
—
|
|
|
(252
|
)
|
Payments for withholding taxes upon vesting of stock-based compensation
|
(1,842
|
)
|
|
(3,845
|
)
|
Distributions to noncontrolling interests
|
(3,255
|
)
|
|
—
|
|
Other financing activities, net
|
—
|
|
|
9
|
|
Cash flows used in financing activities
|
(350,973
|
)
|
|
(370,174
|
)
|
Effect of exchange rate changes on cash
|
8
|
|
|
22
|
|
Changes in cash, cash equivalents and restricted cash
|
(610,730
|
)
|
|
(290,589
|
)
|
Cash, cash equivalents and restricted cash at beginning of period
|
974,544
|
|
|
677,733
|
|
Cash, cash equivalents and restricted cash at end of period
|
$
|
363,814
|
|
|
$
|
387,144
|
|
Supplemental disclosure of non-cash investing and financing activity:
|
|
|
|
Fundings and repayments of loan receivables and loan participations, net
|
$
|
2,502
|
|
|
$
|
(17,117
|
)
|
Accrued repurchase of stock
|
3,841
|
|
|
—
|
|
Contributions of land and development assets to equity method investments, net
|
4,073
|
|
|
—
|
|
Accounts payable for capital expenditures on real estate assets
|
—
|
|
|
338
|
|
Developer fee payable
|
—
|
|
|
28,831
|
|
Acquisitions of land and development assets through foreclosure
|
—
|
|
|
4,600
|
|
Financing provided on sales of land and development assets, net
|
—
|
|
|
142,639
|
|
The accompanying notes are an integral part of the consolidated financial statements.
iStar Inc.
Notes to Consolidated Financial Statements
(unaudited)
Note 1—Business and Organization
Business
—iStar Inc. (the "Company") finances, invests in and develops real estate and real estate related projects as part of its fully-integrated investment platform. The Company also manages entities focused on ground lease and net lease investments (refer to Note 7). The Company has invested approximately
$40 billion
of capital over the past
two
decades and is structured as a real estate investment trust ("REIT") with a diversified portfolio focused on larger assets located in major metropolitan markets. The Company's primary reportable business segments are real estate finance, net lease, operating properties and land and development (refer to Note 17).
Organization
—The Company began its business in 1993 through the management of private investment funds and became publicly traded in 1998. Since that time, the Company has grown through the origination of new investments and corporate acquisitions.
Note 2—Basis of Presentation and Principles of Consolidation
Basis of Presentation
—The accompanying unaudited consolidated financial statements have been prepared in conformity with the instructions to Form 10-Q and Article 10-01 of Regulation S-X for interim financial statements. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles in the United States of America ("GAAP") for complete financial statements. These unaudited consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K for the year ended
December 31, 2018
(the "
2018
Annual Report").
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
In the opinion of management, the accompanying consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the interim periods presented. Such operating results may not be indicative of the expected results for any other interim periods or the entire year. Certain prior year amounts have been reclassified in the Company's consolidated financial statements and the related notes to conform to the current period presentation.
Principles of Consolidation
—The consolidated financial statements include the financial statements of the Company, its wholly owned subsidiaries, controlled partnerships and VIEs for which the Company is the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation. The Company's involvement with VIEs affects its financial performance and cash flows primarily through amounts recorded in "Operating lease income," "Interest income," "Earnings from equity method investments," "Real estate expense" and "Interest expense" in the Company's consolidated statements of operations. The Company has provided no financial support to those VIEs that it was not previously contractually required to provide.
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)
Consolidated VIEs
—The Company consolidates VIEs for which it is considered the primary beneficiary. The liabilities of these VIEs are non-recourse to the Company and can only be satisfied from each VIE's respective assets. The Company did not have any unfunded commitments related to consolidated VIEs as of
March 31, 2019
. The following table presents the assets and liabilities of the Company's consolidated VIEs as of
March 31, 2019
and December 31, 2018 ($ in thousands):
|
|
|
|
|
|
|
|
|
|
As of
|
|
March 31,
2019
|
|
December 31,
2018
|
ASSETS
|
|
|
|
Real estate
|
|
|
|
Real estate, at cost
|
$
|
848,059
|
|
|
$
|
848,052
|
|
Less: accumulated depreciation
|
(19,736
|
)
|
|
(15,365
|
)
|
Real estate, net
|
828,323
|
|
|
832,687
|
|
Land and development, net
|
305,800
|
|
|
279,031
|
|
Other investments
|
68
|
|
|
72
|
|
Cash and cash equivalents
|
15,963
|
|
|
25,219
|
|
Accrued interest and operating lease income receivable, net
|
1,781
|
|
|
1,302
|
|
Deferred operating lease income receivable, net
|
10,639
|
|
|
8,972
|
|
Deferred expenses and other assets, net
|
142,177
|
|
|
167,324
|
|
Total assets
|
$
|
1,304,751
|
|
|
$
|
1,314,607
|
|
LIABILITIES
|
|
|
|
Accounts payable, accrued expenses and other liabilities
|
$
|
103,523
|
|
|
$
|
106,907
|
|
Debt obligations, net
|
483,508
|
|
|
485,000
|
|
Total liabilities
|
587,031
|
|
|
591,907
|
|
Unconsolidated VIEs
—The Company has investments in VIEs where it is not the primary beneficiary and accordingly the VIEs have not been consolidated in the Company's consolidated financial statements. As of
March 31, 2019
, the Company's maximum exposure to loss from these investments does not exceed the sum of the
$70.4 million
carrying value of the investments, which are classified in "Other investments" on the Company's consolidated balance sheets, and
$30.8 million
of related unfunded commitments.
Note 3—Summary of Significant Accounting Policies
The following paragraphs describe the impact on the Company's consolidated financial statements from the adoption of Accounting Standards Updates ("ASUs") on January 1, 2019.
ASU 2016-02 and ASU 2018-11—Accounting Standards Update ("ASU") 2016-02, Leases ("ASU 2016-02") required the recognition of right-of-use lease assets and lease liabilities by the Company as lessee for those leases classified as operating or finance leases, both measured at the present value of the lease payments, on its consolidated balance sheets. For operating lease arrangements as of December 31, 2018 for which the Company was the lessee, primarily under leases of office space and certain ground leases, and a finance lease the Company entered into during the three months ended March 31, 2019, the Company recorded operating lease right-of-use assets of
$31.6 million
and a finance lease right-of-use asset of
$68.1 million
in "Deferred expenses and other assets, net" and operating lease liabilities of
$31.6 million
and a finance lease liability of
$68.1 million
in "Accounts payable, accrued expenses and other liabilities" on its consolidated balance sheets (refer to Significant Accounting Policies below). The accounting applied by the Company as a lessor is generally unchanged from that applied under previous GAAP.
Management elected the practical expedient package that allowed the Company: (a) to not reassess whether any expired or existing contracts entered into prior to January 1, 2019 are or contain leases; (b) to not reassess the lease classification for any expired or existing leases entered into prior to January 1, 2019; and (c) to not reassess initial direct costs for any expired or existing leases entered into prior to January 1, 2019. In addition, the Company elected to not record on its consolidated balance sheets leases whose term is less than 12 months at lease inception.
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)
ASU 2018-11, Leases amended ASU 2016-02 so that: (i) entities could elect to not recast the comparative periods presented when transitioning to ASC 842 by allowing entities to change their initial application to the beginning of the period of adoption; and (ii) provided lessors with a practical expedient to not separate non-lease components from the associated lease component of the contractual payments if certain conditions are met. Management elected both of these provisions.
ASU 2018-16—ASU 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate ("SOFR") Overnight Index Swap ("OIS") Rate as a Benchmark Interest Rate for Hedge Accounting Purposes was issued in October 2018 and expands the list of U.S. benchmark interest rates permitted in the application of hedge accounting by adding the OIS rate based on SOFR as an eligible benchmark interest rate. The adoption of ASU 2018-16 did not have a material impact on the Company's consolidated financial statements.
Significant Accounting Policies
Restricted cash—
The following table provides a reconciliation of the cash and cash equivalents and restricted cash reported in the Company's consolidated balance sheets that total to the same amount as reported in the consolidated statements of cash flows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
|
March 31, 2018
|
|
December 31, 2017
|
Cash and cash equivalents
|
|
$
|
315,407
|
|
|
$
|
931,751
|
|
|
$
|
366,723
|
|
|
$
|
657,688
|
|
Restricted cash included in deferred expenses and other assets, net
(1)
|
|
48,407
|
|
|
42,793
|
|
|
20,421
|
|
|
20,045
|
|
Total cash, cash equivalents and restricted cash reported in the consolidated statements of cash flows
|
|
$
|
363,814
|
|
|
$
|
974,544
|
|
|
$
|
387,144
|
|
|
$
|
677,733
|
|
_______________________________________________________________________________
|
|
(1)
|
Restricted cash represents amounts required to be maintained under certain of the Company's debt obligations, loans, leasing, land development, sale and derivative transactions.
|
Deferred expenses and other assets and accounts payable, accrued expenses and other liabilities—
Effective January 1, 2019 with the adoption of ASU 2016-02, the Company, as lessee, records right-of-use lease assets in "Deferred expenses and other assets" and lease liabilities in "Accounts payable, accrued expenses and other liabilities" on its consolidated balance sheets for operating and finance leases, both measured at the present value of the lease payments. Some of the Company's lease agreements include extension options, which are not included in the lease payments unless the extensions are reasonably certain to be exercised.
For operating leases, the Company recognizes a single lease cost for office leases in "General and administrative" and a single lease cost for ground leases in "Real estate expense" in the consolidated statements of operations, calculated so that the cost of the lease is allocated generally on a straight-line basis over the term of the lease, and classifies all cash payments within operating activities in the consolidated statements of cash flows. For finance leases, the Company recognizes amortization of the right-of-use assets on a straight-line basis over the term of the lease in "Depreciation and amortization" and interest expense on the lease liability using the effective interest method in "Interest expense" in the consolidated statements of operations. Repayments of the principal portion of the finance lease liability are classified within financing activities in the consolidated statements of cash flows and payments of interest on a finance lease liability are classified within operating activities in the consolidated statement of cash flows.
For the remainder of the Company's significant accounting policies, refer to the Company's 2018 Annual Report.
New Accounting Pronouncements
—
In June 2016
,
the
FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"), which was issued to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments held by a reporting entity. This amendment replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company currently records a general reserve that covers performing loans and reserves for loan losses are recorded when: (i) available information as of each balance sheet date indicates that it is probable a loss has occurred in the portfolio; and (ii) the amount of the loss can be reasonably estimated. The formula-based general reserve is derived from estimated principal default probabilities and loss severities applied to groups of loans based upon risk ratings assigned to loans with similar risk characteristics during our quarterly loan portfolio assessment. The Company estimates loss rates based on historical realized losses experienced
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)
within its portfolio and take into account current economic conditions affecting the commercial real estate market when establishing appropriate time frames to evaluate loss experience. ASU 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted for interim and annual reporting periods beginning after December 15, 2018. Management is currently evaluating the impact from ASU 2016-13 on the Company's consolidated financial statements.
Note 4—Real Estate
The Company's real estate assets were comprised of the following ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Lease
|
|
Operating
Properties
|
|
Total
|
As of March 31, 2019
|
|
|
|
|
|
Land, at cost
|
$
|
302,199
|
|
|
$
|
105,771
|
|
|
$
|
407,970
|
|
Buildings and improvements, at cost
|
1,389,332
|
|
|
76,340
|
|
|
1,465,672
|
|
Less: accumulated depreciation
|
(241,686
|
)
|
|
(10,952
|
)
|
|
(252,638
|
)
|
Real estate, net
|
1,449,845
|
|
|
171,159
|
|
|
1,621,004
|
|
Real estate available and held for sale
(1)
|
219,184
|
|
|
34,152
|
|
|
253,336
|
|
Total real estate
|
$
|
1,669,029
|
|
|
$
|
205,311
|
|
|
$
|
1,874,340
|
|
As of December 31, 2018
|
|
|
|
|
|
Land, at cost
|
$
|
336,740
|
|
|
$
|
133,599
|
|
|
$
|
470,339
|
|
Buildings and improvements, at cost
|
1,487,270
|
|
|
118,724
|
|
|
1,605,994
|
|
Less: accumulated depreciation
|
(287,516
|
)
|
|
(17,798
|
)
|
|
(305,314
|
)
|
Real estate, net
|
1,536,494
|
|
|
234,525
|
|
|
1,771,019
|
|
Real estate available and held for sale
(1)
|
1,055
|
|
|
21,496
|
|
|
22,551
|
|
Total real estate
|
$
|
1,537,549
|
|
|
$
|
256,021
|
|
|
$
|
1,793,570
|
|
_______________________________________________________________________________
|
|
(1)
|
As of
March 31, 2019
and
December 31, 2018
, the Company had
$16.1 million
and
$20.6 million
, respectively, of residential condominiums available for sale in its operating properties portfolio.
|
Acquisitions—
During the
three months
ended
March 31, 2019
, the Company acquired a net lease asset for
$11.5 million
and acquired the leasehold interest in another net lease asset for
$98.2 million
, inclusive of closing costs, and simultaneously entered into a new
98
-year Ground Lease with SAFE (refer to Note 7).
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)
Dispositions—
The following table presents the net proceeds and income recognized for properties sold, by property type ($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
2019
|
|
2018
|
Operating Properties
|
|
|
|
|
Proceeds
|
|
$
|
58.5
|
|
|
$
|
41.9
|
|
Income from sales of real estate
|
|
9.4
|
|
|
16.6
|
|
|
|
|
|
|
Net Lease
|
|
|
|
|
Proceeds
|
|
$
|
—
|
|
|
$
|
2.3
|
|
Income from sales of real estate
|
|
—
|
|
|
0.4
|
|
|
|
|
|
|
Total
|
|
|
|
|
Proceeds
|
|
$
|
58.5
|
|
|
$
|
44.2
|
|
Income from sales of real estate
|
|
9.4
|
|
|
17.0
|
|
Real Estate Available and Held for Sale—
During the three months ended March 31, 2019, the Company transferred a portfolio of net lease assets with an aggregate carrying value of
$218.1 million
and associated liabilities to held for sale due to an executed contract with a third party. In addition, the Company transferred a commercial operating property with a carrying value of
$16.2 million
to held for sale based on an executed purchase and sale agreement.
Impairments—
During the
three months
ended
March 31, 2019
, the Company recorded an impairment of
$3.2 million
on a commercial operating property based on an executed purchase and sale agreement and recorded
$0.7 million
of impairments in connection with the sale of residential condominium units. During the
three months
ended
March 31, 2018
, the Company recorded an impairment of
$4.1 million
on a real estate asset held for sale due to contracts to sell the remaining
four
condominium units at the property.
Tenant Reimbursements—
The Company receives reimbursements from tenants for certain facility operating expenses including common area costs, insurance, utilities and real estate taxes. Tenant expense reimbursements were
$5.4 million
and
$5.6 million
for the three months ended
March 31, 2019
and 2018, respectively. These amounts are included in "Operating lease income" in the Company's consolidated statements of operations.
Allowance for Doubtful Accounts—
As of
March 31, 2019
and
December 31, 2018
, the allowance for doubtful accounts related to real estate tenant receivables was
$1.1 million
and
$1.5 million
, respectively, and the allowance for doubtful accounts related to deferred operating lease income was
$1.3 million
and
$1.8 million
as of
March 31, 2019
and
December 31, 2018
, respectively. These amounts are included in "Accrued interest and operating lease income receivable, net" and "Deferred operating lease income receivable, net," respectively, on the Company's consolidated balance sheets.
Note 5—Land and Development
The Company's land and development assets were comprised of the following ($ in thousands):
|
|
|
|
|
|
|
|
|
|
As of
|
|
March 31,
|
|
December 31,
|
|
2019
|
|
2018
|
Land and land development, at cost
|
$
|
625,228
|
|
|
$
|
606,849
|
|
Less: accumulated depreciation
|
(8,878
|
)
|
|
(8,631
|
)
|
Total land and development, net
|
$
|
616,350
|
|
|
$
|
598,218
|
|
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)
Acquisitions—
During the
three months
ended March 31, 2018, the Company acquired, via foreclosure, title to a land asset which had a total fair value of
$4.6 million
and had previously served as collateral for loans receivable held by the Company. No gain or loss was recorded in connection with this transaction.
Dispositions—
During the
three months
ended
March 31, 2019
and 2018, the Company sold land parcels and residential lots and units and recognized land development revenue of
$12.7 million
and
$276.4 million
, respectively. In connection with the sale of
two
land parcels totaling
93
acres during the
three months
ended March 31, 2018, the Company provided an aggregate
$145.0 million
of financing to the buyers.
$81.2 million
was repaid in the second quarter 2018. During the
three months
ended
March 31, 2019
and 2018, the Company recognized land development cost of sales of
$14.4 million
and
$223.4 million
, respectively, from its land and development portfolio.
Note 6—Loans Receivable and Other Lending Investments, net
The following is a summary of the Company's loans receivable and other lending investments by class ($ in thousands):
|
|
|
|
|
|
|
|
|
|
As of
|
Type of Investment
|
March 31,
2019
|
|
December 31,
2018
|
Senior mortgages
|
$
|
690,860
|
|
|
$
|
760,749
|
|
Corporate/Partnership loans
|
143,426
|
|
|
148,583
|
|
Subordinate mortgages
|
10,338
|
|
|
10,161
|
|
Total gross carrying value of loans
|
844,624
|
|
|
919,493
|
|
Reserves for loan losses
|
(53,298
|
)
|
|
(53,395
|
)
|
Total loans receivable, net
|
791,326
|
|
|
866,098
|
|
Other lending investments—securities
|
103,520
|
|
|
122,126
|
|
Total loans receivable and other lending investments, net
|
$
|
894,846
|
|
|
$
|
988,224
|
|
Reserve for Loan Losses
—Changes in the Company's reserve for loan losses were as follows ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31,
|
|
|
2019
|
|
2018
|
Reserve for loan losses at beginning of period
|
|
$
|
53,395
|
|
|
$
|
78,489
|
|
Recovery of loan losses
|
|
(97
|
)
|
|
(855
|
)
|
Charge-offs
|
|
—
|
|
|
(8,168
|
)
|
Reserve for loan losses at end of period
|
|
$
|
53,298
|
|
|
$
|
69,466
|
|
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)
The Company's recorded investment in loans (comprised of a loan's carrying value plus accrued interest) and the associated reserve for loan losses were as follows ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually
Evaluated for
Impairment
(1)
|
|
Collectively
Evaluated for
Impairment
(2)
|
|
Total
|
As of March 31, 2019
|
|
|
|
|
|
Loans
|
$
|
66,500
|
|
|
$
|
783,334
|
|
|
$
|
849,834
|
|
Less: Reserve for loan losses
|
(40,888
|
)
|
|
(12,410
|
)
|
|
(53,298
|
)
|
Total
(3)
|
$
|
25,612
|
|
|
$
|
770,924
|
|
|
$
|
796,536
|
|
As of December 31, 2018
|
|
|
|
|
|
Loans
|
$
|
66,725
|
|
|
$
|
857,662
|
|
|
$
|
924,387
|
|
Less: Reserve for loan losses
|
(40,395
|
)
|
|
(13,000
|
)
|
|
(53,395
|
)
|
Total
(3)
|
$
|
26,330
|
|
|
$
|
844,662
|
|
|
$
|
870,992
|
|
_______________________________________________________________________________
|
|
(1)
|
The carrying value of these loans include unamortized discounts, premiums, deferred fees and costs totaling net discounts of
$0.5 million
and
$0.5 million
as of
March 31, 2019
and
December 31, 2018
, respectively. The Company's loans individually evaluated for impairment primarily represent loans on non-accrual status; therefore, the unamortized amounts associated with these loans are not currently being amortized into income.
|
|
|
(2)
|
The carrying value of these loans include unamortized discounts, premiums, deferred fees and costs totaling net discounts of
$2.5 million
and
$3.1 million
as of
March 31, 2019
and
December 31, 2018
, respectively.
|
|
|
(3)
|
The Company's recorded investment in loans as of
March 31, 2019
and
December 31, 2018
, including accrued interest of
$5.2 million
and
$4.9 million
, respectively, is included in "Accrued interest and operating lease income receivable, net" on the Company's consolidated balance sheets. As of
March 31, 2019
and
December 31, 2018
, the total amounts exclude
$103.5 million
and
$122.1 million
, respectively, of securities that are evaluated for impairment under ASC 320.
|
Credit Characteristics
—As part of the Company's process for monitoring the credit quality of its loans, it performs a quarterly loan portfolio assessment and assigns risk ratings to each of its performing loans. Risk ratings, which range from 1 (lower risk) to 5 (higher risk), are based on judgments, which are inherently uncertain, and there can be no assurance that actual performance will be similar to current expectation. The Company designates loans as non-performing at such time as: (1) the loan becomes 90 days delinquent; (2) the loan has a maturity default; or (3) management determines it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan. All non-performing loans are placed on non-accrual status and income is only recognized in certain cases upon actual cash receipt.
The Company's recorded investment in performing loans, presented by class and by credit quality, as indicated by risk rating, was as follows ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2019
|
|
As of December 31, 2018
|
|
Performing
Loans
|
|
Weighted
Average
Risk Ratings
|
|
Performing
Loans
|
|
Weighted
Average
Risk Ratings
|
Senior mortgages
|
$
|
628,408
|
|
|
2.81
|
|
|
$
|
697,807
|
|
|
2.76
|
|
Corporate/Partnership loans
|
144,556
|
|
|
2.89
|
|
|
149,663
|
|
|
2.84
|
|
Subordinate mortgages
|
10,370
|
|
|
3.00
|
|
|
10,192
|
|
|
3.00
|
|
Total
|
$
|
783,334
|
|
|
2.83
|
|
|
$
|
857,662
|
|
|
2.77
|
|
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)
The Company's recorded investment in loans, aged by payment status and presented by class, was as follows ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
Less Than
and Equal
to 90 Days
|
|
Greater
Than
90 Days
(1)
|
|
Total
Past Due
|
|
Total
|
As of March 31, 2019
|
|
|
|
|
|
|
|
|
|
Senior mortgages
|
$
|
634,408
|
|
|
$
|
—
|
|
|
$
|
60,500
|
|
|
$
|
60,500
|
|
|
$
|
694,908
|
|
Corporate/Partnership loans
|
144,556
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
144,556
|
|
Subordinate mortgages
|
10,370
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,370
|
|
Total
|
$
|
789,334
|
|
|
$
|
—
|
|
|
$
|
60,500
|
|
|
$
|
60,500
|
|
|
$
|
849,834
|
|
As of December 31, 2018
|
|
|
|
|
|
|
|
|
|
Senior mortgages
|
$
|
703,807
|
|
|
$
|
—
|
|
|
$
|
60,725
|
|
|
$
|
60,725
|
|
|
$
|
764,532
|
|
Corporate/Partnership loans
|
149,663
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
149,663
|
|
Subordinate mortgages
|
10,192
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,192
|
|
Total
|
$
|
863,662
|
|
|
$
|
—
|
|
|
$
|
60,725
|
|
|
$
|
60,725
|
|
|
$
|
924,387
|
|
_______________________________________________________________________________
|
|
(1)
|
As of
March 31, 2019
, the Company had
two
loans which were greater than
90 days
delinquent and were in various stages of resolution, including legal and foreclosure-related proceedings and environmental matters, and ranged from
4.0
to
10.0 years
outstanding. As of December 31, 2018, the Company had
two
loans which were greater than
90 days
delinquent and were in various stages of resolution, including legal and foreclosure-related proceedings and environmental matters, and ranged from
4.0
to
9.0 years
outstanding.
|
Impaired Loans
—The Company's recorded investment in impaired loans, presented by class, was as follows ($ in thousands)
(1)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2019
|
|
As of December 31, 2018
|
|
Recorded
Investment
|
|
Unpaid
Principal
Balance
|
|
Related
Allowance
|
|
Recorded
Investment
|
|
Unpaid
Principal
Balance
|
|
Related
Allowance
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
Senior mortgages
|
$
|
66,500
|
|
|
$
|
66,461
|
|
|
$
|
(40,888
|
)
|
|
$
|
66,725
|
|
|
$
|
66,777
|
|
|
$
|
(40,395
|
)
|
Total
|
$
|
66,500
|
|
|
$
|
66,461
|
|
|
$
|
(40,888
|
)
|
|
$
|
66,725
|
|
|
$
|
66,777
|
|
|
$
|
(40,395
|
)
|
____________________________________________________________
|
|
(1)
|
All of the Company's non-accrual loans are considered impaired and included in the table above.
|
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)
The Company's average recorded investment in impaired loans and interest income recognized, presented by class, were as follows ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31,
|
|
2019
|
|
2018
|
|
Average
Recorded
Investment
|
|
Interest
Income
Recognized
|
|
Average
Recorded
Investment
|
|
Interest
Income
Recognized
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
Subordinate mortgages
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
92
|
|
Subtotal
|
—
|
|
|
—
|
|
|
—
|
|
|
92
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
Senior mortgages
|
66,612
|
|
|
—
|
|
|
74,390
|
|
|
—
|
|
Corporate/Partnership loans
|
—
|
|
|
—
|
|
|
156,605
|
|
|
—
|
|
Subtotal
|
66,612
|
|
|
—
|
|
|
230,995
|
|
|
—
|
|
Total:
|
|
|
|
|
|
|
|
Senior mortgages
|
66,612
|
|
|
—
|
|
|
74,390
|
|
|
—
|
|
Corporate/Partnership loans
|
—
|
|
|
—
|
|
|
156,605
|
|
|
—
|
|
Subordinate mortgages
|
—
|
|
|
—
|
|
|
—
|
|
|
92
|
|
Total
|
$
|
66,612
|
|
|
$
|
—
|
|
|
$
|
230,995
|
|
|
$
|
92
|
|
Securities
—Other lending investments—securities include the following ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Face
Value
|
|
Amortized Cost Basis
|
|
Net Unrealized Gain
|
|
Estimated Fair Value
|
|
Net Carrying Value
|
As of March 31, 2019
|
|
|
|
|
|
|
|
|
|
Available-for-Sale Securities
|
|
|
|
|
|
|
|
|
|
Municipal debt securities
|
$
|
21,140
|
|
|
$
|
21,140
|
|
|
$
|
1,475
|
|
|
$
|
22,615
|
|
|
$
|
22,615
|
|
Held-to-Maturity Securities
|
|
|
|
|
|
|
|
|
|
Debt securities
|
100,000
|
|
|
80,905
|
|
|
—
|
|
|
80,905
|
|
|
80,905
|
|
Total
|
$
|
121,140
|
|
|
$
|
102,045
|
|
|
$
|
1,475
|
|
|
$
|
103,520
|
|
|
$
|
103,520
|
|
As of December 31, 2018
|
|
|
|
|
|
|
|
|
|
Available-for-Sale Securities
|
|
|
|
|
|
|
|
|
|
Municipal debt securities
|
$
|
21,185
|
|
|
$
|
21,185
|
|
|
$
|
476
|
|
|
$
|
21,661
|
|
|
$
|
21,661
|
|
Held-to-Maturity Securities
|
|
|
|
|
|
|
|
|
|
Debt securities
|
120,866
|
|
|
100,465
|
|
|
7
|
|
|
100,472
|
|
|
100,465
|
|
Total
|
$
|
142,051
|
|
|
$
|
121,650
|
|
|
$
|
483
|
|
|
$
|
122,133
|
|
|
$
|
122,126
|
|
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)
As
of
March 31, 2019
, the contractual maturities of the Company's securities were as follows ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-Maturity Securities
|
|
Available-for-Sale Securities
|
|
Amortized Cost Basis
|
|
Estimated Fair Value
|
|
Amortized Cost Basis
|
|
Estimated Fair Value
|
Maturities
|
|
|
|
|
|
|
|
Within one year
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
After one year through 5 years
|
80,905
|
|
|
80,905
|
|
|
—
|
|
|
—
|
|
After 5 years through 10 years
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
After 10 years
|
—
|
|
|
—
|
|
|
21,140
|
|
|
22,615
|
|
Total
|
$
|
80,905
|
|
|
$
|
80,905
|
|
|
$
|
21,140
|
|
|
$
|
22,615
|
|
Note 7—Other Investments
The Company's other investments and its proportionate share of earnings from equity method investments were as follows ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in Earnings (Losses)
|
|
Carrying Value as of
|
|
For the Three Months Ended March 31,
|
|
March 31, 2019
|
|
December 31, 2018
|
|
2019
|
|
2018
|
Real estate equity investments
|
|
|
|
|
|
|
|
Safehold Inc. ("SAFE")
|
$
|
402,052
|
|
|
$
|
149,589
|
|
|
$
|
7,316
|
|
|
$
|
1,472
|
|
iStar Net Lease II LLC ("Net Lease Venture II")
|
5,630
|
|
|
16,215
|
|
|
(86
|
)
|
|
—
|
|
iStar Net Lease I LLC ("Net Lease Venture")
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
2,084
|
|
Other real estate equity investments
|
107,090
|
|
|
130,955
|
|
|
(2,123
|
)
|
|
270
|
|
Subtotal
|
514,772
|
|
|
296,759
|
|
|
5,107
|
|
|
3,826
|
|
Other strategic investments
|
7,227
|
|
|
7,516
|
|
|
202
|
|
|
(494
|
)
|
Total
|
$
|
521,999
|
|
|
$
|
304,275
|
|
|
$
|
5,309
|
|
|
$
|
3,332
|
|
____________________________________________________________
|
|
(1)
|
The Company consolidated the assets and liabilities of the Net Lease Venture on June 30, 2018 (refer to Net Lease Venture below).
|
Safehold Inc.
—Safehold Inc. ("SAFE"), formerly known as Safety, Income & Growth Inc., is a publicly-traded company formed by the Company primarily to acquire, own, manage, finance and capitalize ground leases. Ground leases generally represent ownership of the land underlying commercial real estate projects that is net leased by the fee owner of the land to the owners/operators of the real estate projects built thereon ("Ground Leases"). As of
March 31, 2019
, the Company owned approximately
42.4%
of SAFE's common stock outstanding.
On January 2, 2019, the Company purchased
12,500,000
newly designated limited partnership units (the "Investor Units") in SAFE's operating partnership ("SAFE OP"), at a purchase price of
$20.00
per unit, for a total purchase price of
$250.0 million
. The purpose of the investment was to allow SAFE to fund additional Ground Lease acquisitions and originations.
The Investor Units have the following features:
|
|
•
|
the right to receive equivalent distributions per unit to those paid on one share of SAFE common stock;
|
|
|
•
|
non-transferable prior to June 30, 2019;
|
|
|
•
|
no automatic conversion or exchange rights; and
|
|
|
•
|
limited protective consent rights.
|
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)
SAFE has agreed to seek stockholder approval to exchange the Investor Units for shares of SAFE common stock, on a one-for-one basis.
The Investor Units represent an approximate
40.6%
fully diluted economic interest in SAFE. After giving effect to the issuance of the Investor Units, the Company's aggregate fully diluted economic interest in SAFE (including the shares of SAFE common stock and Investor Units owned by the Company) is approximately
65.8%
; however, the Company's voting power in SAFE will remain capped at
41.9%
, as a result of the limitations described below.
In connection with the Company's purchase of the Investor Units, it entered into a Stockholder's Agreement with SAFE on January 2, 2019. The Stockholder's Agreement:
|
|
•
|
limits the Company's discretionary voting power to
41.9%
of the outstanding voting power of SAFE's common stock until its aggregate ownership of SAFE common stock is less than
41.9%
;
|
|
|
•
|
requires the Company to cast all of its voting power in favor of three director nominees to SAFE's board who are independent of each of the Company and SAFE for three years;
|
|
|
•
|
subjects the Company to certain standstill provisions for two years;
|
|
|
•
|
restricts the Company's ability to transfer shares of SAFE common stock issued in exchange for Investor Units, or "Exchange Shares," for one year after their issuance;
|
|
|
•
|
prohibits the Company from transferring shares of SAFE common stock representing more than
20%
of the outstanding SAFE common stock in one transaction or a series of related transactions to any person or group, other than pursuant to a widely distributed public offering, unless SAFE's other stockholders have participation rights in the transaction; and
|
|
|
•
|
provides the Company certain preemptive rights.
|
A wholly-owned subsidiary of the Company is the external manager of SAFE and is entitled to a management fee. Following are the key terms of the management agreement:
|
|
•
|
The Company received no management fee through June 30, 2018, which covered the first year of the management agreement;
|
|
|
•
|
The Company receives a fee equal to
1.0%
of total SAFE equity (as defined in the management agreement) up to
$1.5 billion
;
1.25%
of total SAFE equity (for incremental equity of
$1.5 billion
-
$3.0 billion
);
1.375%
of total SAFE equity (for incremental equity of
$3.0 billion
-
$5.0 billion
); and
1.5%
of total SAFE equity (for incremental equity over
$5.0 billion
);
|
|
|
•
|
Fee to be paid in cash or in shares of SAFE common stock, at the discretion of SAFE's independent directors;
|
|
|
•
|
The stock is locked up for two years, subject to certain restrictions;
|
|
|
•
|
There is no additional performance or incentive fee;
|
|
|
•
|
From January 1, 2019 through June 30, 2022, the management agreement is non-terminable by SAFE except for cause; and
|
|
|
•
|
Automatic annual renewals thereafter, subject to non-renewal upon certain findings by SAFE's independent directors and payment of termination fee equal to
three
times the prior year's management fee, subject to SAFE having raised
$820 million
of total equity since inception.
|
During the three months ended
March 31, 2019
, the Company recorded
$1.5 million
of management fees and during the three months ended March 31, 2018, the Company waived
$0.9 million
of management fees pursuant to its management agreement with SAFE.
The Company is also entitled to receive expense reimbursements, including for the allocable costs of its personnel that perform certain legal, accounting, due diligence tasks and other services that third-party professionals or outside consultants otherwise would perform. The Company waived certain of the expense reimbursements through June 30, 2018. For the three months ended
March 31, 2019
, the Company was reimbursed
$0.5 million
of expense reimbursements. For the three months ended March 31, 2018, the Company waived
$0.4 million
of expense reimbursements pursuant to its management agreement with SAFE.
The Company has an exclusivity agreement with SAFE pursuant to which it agreed, subject to certain exceptions, that it will not acquire, originate, invest in, or provide financing for a third party’s acquisition of, a Ground Lease unless it has first offered that opportunity to SAFE and a majority of its independent directors has declined the opportunity.
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)
Following is a list of investments that the Company has transacted with SAFE for the periods presented:
In August 2017, the Company committed to provide a
$24.0 million
loan to the ground lessee of a Ground Lease originated at SAFE. The loan is for the renovation of a medical office building in Atlanta, GA. As of March 31, 2019,
$18.0 million
of the loan was funded. During the
three months
ended
March 31, 2019
and 2018, the Company recorded
$0.5 million
and
$0.2 million
of interest income, respectively, on the loan. The transaction was approved by the Company's and SAFE's independent directors.
In October 2017, the Company closed on a
99
-year Ground Lease and a
$80.5 million
construction financing commitment to support the ground-up development of Great Oaks Multifamily, a to-be-built
301
-unit community within the Great Oaks Master Plan of San Jose, CA. The transaction includes a combination of: (i) a newly created Ground Lease and a
$7.2 million
leasehold improvement allowance, which was fully funded as of March 31, 2019; and (ii) a
$80.5 million
leasehold first mortgage. The Company entered into a forward purchase contract with SAFE under which SAFE would acquire the Ground Lease in November 2020 for approximately
$34.0 million
. The forward purchase contract was approved by the Company's and SAFE's independent directors.
In May 2018, the Company provided a
$19.9 million
leasehold mortgage loan to the ground lessee of a Ground Lease originated at SAFE. The loan was for the acquisition of 100 and 200 Glenridge Point,
two
multi-tenant office buildings in Atlanta, GA. During the
three months
ended
March 31, 2019
, the Company recorded
$0.6 million
of interest income on the loan. The transaction was approved by the Company's and SAFE's independent directors.
In January 2019, the Company committed to provide a
$13.3 million
loan to the ground lessee of a Ground Lease originated at SAFE. The loan is for the conversion of an office building into a multi-family property in Washington, DC. As of
March 31, 2019
,
$11.9 million
of the loan was funded. During the
three months
ended
March 31, 2019
, the Company recorded
$0.2 million
of interest income on the loan. The transaction was approved by the Company's and SAFE's independent directors.
In February 2019, the Company acquired the leasehold interest in a net lease property and simultaneously entered into a new
98
-year Ground Lease with SAFE (refer to Note 4). The transaction was approved by the Company's and SAFE's independent directors.
Net Lease Venture
—In February 2014, the Company partnered with a sovereign wealth fund to form the Net Lease Venture to acquire and develop net lease assets and gave a right of first offer to the venture on all new net lease investments. The Company and its partner had joint decision making rights pertaining to the acquisition of new investments. Upon the expiration of the investment period on June 30, 2018, the Company obtained control of the venture through its unilateral rights of management and disposition of the assets. As a result, the expiration of the investment period resulted in a reconsideration event under GAAP and the Company determined that the Net Lease Venture is a VIE for which the Company is the primary beneficiary. Effective June 30, 2018, the Company consolidated the Net Lease Venture as an asset acquisition under ASC 810. The Company recorded a gain of
$67.9 million
in "Gain on consolidation of equity method investment" in the Company's consolidated statement of operations as a result of the consolidation. The Net Lease Venture had previously been accounted for as an equity method investment. The Company has an equity interest in the Net Lease Venture of approximately
51.9%
and recorded a
$188.3 million
increase to "Noncontrolling interests." The Company is responsible for sourcing new opportunities and managing the venture and its assets in exchange for a management fee and incentive fee. Several of the Company's senior executives whose time is substantially devoted to the Net Lease Venture own a total of
0.6%
equity ownership in the venture via co-investment. These senior executives are also entitled to an amount equal to
50%
of any incentive fee received based on the
47.5%
partner's interest.
During the three months ended March 31, 2018, the Company recorded
$0.6 million
of management fees from the Net Lease Venture. The management fees are included in "Other income" in the Company's consolidated statements of operations. Beginning after the Company's consolidation of the Net Lease Venture on June 30, 2018 and after the effect of eliminations, the Company earned
$0.4 million
of management fees during the three months ended March 31, 2019 with respect to services provided to other investors in the Net Lease Venture, which was recorded as a reduction to "Net income attributable to noncontrolling interests" in the Company's consolidated statements of operations.
Net Lease Venture II
—In July 2018, the Company entered into a new venture ("Net Lease Venture II") with an investment strategy similar to the Net Lease Venture. The Net Lease Venture II has a right of first offer on all new net lease investments (excluding Ground Leases) originated by the Company. The Company has an equity interest in the new venture of approximately
51.9%
, which will be accounted for as an equity method investment, and is responsible for managing the venture in exchange for
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)
a management fee and incentive fee.
During the three months ended March 31, 2019, the Company recorded
$0.4 million
of management fees from the Net Lease Venture II.
In December 2018, Net Lease Venture II acquired
four
buildings comprising
168,636
square feet (the "Properties") located in Livermore, CA. Net Lease Venture II acquired the Properties for
$31.2 million
which are
100%
leased with
four
separate leases that expire in December 2028.
Other real estate equity investments
—As of
March 31, 2019
, the Company's other real estate equity investments include equity interests in real estate ventures ranging from
16.0%
to
95.0%
, comprised of investments of
$62.4 million
in operating properties and
$44.7 million
in land assets. As of
December 31, 2018
, the Company's other real estate equity investments included
$65.6 million
in operating properties and
$65.3 million
in land assets.
In August 2018, the Company provided a mezzanine loan with a principal balance of
$31.2 million
and
$30.5 million
as of March 31, 2019 and December 31, 2018, respectively, to an unconsolidated entity in which the Company owns a
50%
equity interest. As of March 31, 2019 and December 31, 2018, the loan is included in "Loans receivable and other lending investments, net" on the Company's consolidated balance sheet. During the three months ended March 31, 2019, the Company recorded
$0.7 million
of interest income on the mezzanine loan.
In December 2016, the Company sold a land and development asset to a newly formed unconsolidated entity in which the Company owns a
50.0%
equity interest. The Company provided financing to the entity in the form of a
$27.0 million
senior loan, all of which was funded as of
March 31, 2019
and
December 31, 2018
and is included in "Loans receivable and other lending investments, net" on the Company's consolidated balance sheets. During the
three months
ended
March 31, 2019
and 2018, the Company recorded
$0.5 million
and
$0.5 million
of interest income, respectively, on the senior loan.
Other strategic investments
—As of
March 31, 2019
and December 31, 2018, the Company also had investments in real estate related funds and other strategic investments in real estate entities.
Summarized investee financial information
—The following table presents the investee level summarized financial information of the Company's equity method investments, which were significant subsidiaries for the three months ended March, 31, 2019 and 2018 ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
Expenses
|
|
Net Income Attributable to Parent Entities
|
For the Three Months Ended March 31, 2019
|
|
|
|
|
|
SAFE
|
$
|
21,820
|
|
|
$
|
(10,683
|
)
|
|
$
|
6,619
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2018
|
|
|
|
|
|
SAFE
|
$
|
11,693
|
|
|
$
|
(7,950
|
)
|
|
$
|
3,720
|
|
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)
Note 8—Other Assets and Other Liabilities
Deferred expenses and other assets, net, consist of the following items ($ in thousands):
|
|
|
|
|
|
|
|
|
|
As of
|
|
March 31, 2019
|
|
December 31, 2018
|
Intangible assets, net
(1)
|
$
|
170,701
|
|
|
$
|
156,281
|
|
Restricted cash
|
48,407
|
|
|
42,793
|
|
Finance lease right-of-use assets
(2)
|
68,005
|
|
|
—
|
|
Operating lease right-of-use assets
(2)
|
30,294
|
|
|
—
|
|
Other assets
(3)
|
22,120
|
|
|
32,333
|
|
Other receivables
(4)
|
19,635
|
|
|
46,887
|
|
Leasing costs, net
(5)
|
4,621
|
|
|
6,224
|
|
Corporate furniture, fixtures and equipment, net
(6)
|
3,549
|
|
|
3,850
|
|
Deferred financing fees, net
|
704
|
|
|
900
|
|
Deferred expenses and other assets, net
|
$
|
368,036
|
|
|
$
|
289,268
|
|
_______________________________________________________________________________
|
|
(1)
|
Intangible assets, net includes above market and in-place lease assets and lease incentives related to the acquisition of real estate assets. Accumulated amortization on intangible assets, net was
$29.6 million
and
$27.0 million
as of
March 31, 2019
and
December 31, 2018
, respectively. The amortization of above market leases and lease incentive assets decreased operating lease income in the Company's consolidated statements of operations by
$0.6 million
and
$0.4 million
for the
three months
ended
March 31, 2019
and 2018, respectively. These intangible lease assets are amortized over the remaining term of the lease. The amortization expense for in-place leases was
$2.2 million
and
$0.4 million
for the
three months
ended
March 31, 2019
and 2018, respectively. These amounts are included in "Depreciation and amortization" in the Company's consolidated statements of operations.
|
|
|
(2)
|
Right-of-use lease assets relate primarily to the Company's leases of office space and certain of its ground leases. Right-of use lease assets initially equal the lease liability. The lease liability (see table below) equals the present value of the minimum rental payments due under the lease discounted at the rate implicit in the lease or the Company's incremental secured borrowing rate for similar collateral. For operating leases, lease liabilities were discounted at the Company's weighted average incremental secured borrowing rate for similar collateral estimated to be
5.6%
and the weighted average lease term is
9.7
years. For finance leases, lease liabilities were discounted at a weighted average rate implicit in the lease of
5.7%
and the weighted average lease term is
98
years. Right-of-use assets for finance leases are amortized on a straight-line basis over the term of the lease and are recorded in "Depreciation and amortization" in the Company's consolidated statements of operations. During the three months ended March 31, 2019, the Company recognized
$0.4 million
in "Interest expense" and
$0.1 million
in "Depreciation and amortization" in its consolidated statement of operations relating to finance leases. Right-of-use assets for operating leases are amortized on a straight-line basis over the term of the lease and are recorded in "General and administrative" and "Real estate expense" in the Company's consolidated statements of operations (refer to Note 3). During the three months ended March 31, 2019, the Company recognized
$0.9 million
in "General and administrative" and
$1.1 million
in "Real estate expense" in its consolidated statement of operations relating to operating leases.
|
|
|
(3)
|
Other assets primarily includes derivative assets, prepaid expenses and deposits for certain real estate assets.
|
|
|
(4)
|
As of
December 31, 2018
, includes
$26.0 million
of reimbursements receivable related to the construction and development of an operating property that was received during the three months ended March 31, 2019.
|
|
|
(5)
|
Accumulated amortization of leasing costs was
$3.0 million
and
$4.4 million
as of
March 31, 2019
and
December 31, 2018
, respectively.
|
|
|
(6)
|
Accumulated depreciation on corporate furniture, fixtures and equipment was
$12.2 million
and
$11.9 million
as of
March 31, 2019
and
December 31, 2018
, respectively.
|
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)
Accounts payable, accrued expenses and other liabilities consist of the following items ($ in thousands):
|
|
|
|
|
|
|
|
|
|
As of
|
|
March 31, 2019
|
|
December 31, 2018
|
Other liabilities
(1)
|
$
|
90,682
|
|
|
143,325
|
|
Accrued expenses
|
71,305
|
|
|
95,149
|
|
Finance lease liabilities
|
68,184
|
|
|
—
|
|
Intangible liabilities, net
(2)
|
48,925
|
|
|
35,108
|
|
Operating lease liabilities
|
30,294
|
|
|
—
|
|
Accrued interest payable
|
22,968
|
|
|
42,669
|
|
Accounts payable, accrued expenses and other liabilities
|
$
|
332,358
|
|
|
$
|
316,251
|
|
_______________________________________________________________________________
|
|
(1)
|
As of
March 31, 2019
and
December 31, 2018
, other liabilities includes
$18.6 million
and
$18.5 million
, respectively, related to profit sharing arrangements with developers for certain properties sold. As of
March 31, 2019
and
December 31, 2018
, other liabilities also includes
$9.3 million
and
$9.4 million
, respectively, related to tax increment financing bonds which were issued by government entities to fund development within
two
of the Company's land projects. The amount represents tax assessments associated with each project, which will decrease as the Company sells units.
|
|
|
(2)
|
Intangible liabilities, net includes below market lease liabilities related to the acquisition of real estate assets. Accumulated amortization on below market lease liabilities was
$3.3 million
and
$2.8 million
as of
March 31, 2019
and
December 31, 2018
, respectively. The amortization of below market leases increased operating lease income in the Company's consolidated statements of operations by
$0.5 million
and
$0.1 million
for the
three months
ended
March 31, 2019
and 2018, respectively.
|
Note 9—Loan Participations Payable, net
The Company's loan participations payable, net were as follows ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Carrying Value as of
|
|
|
March 31, 2019
|
|
December 31, 2018
|
Loan participations payable
(1)
|
|
$
|
25,145
|
|
|
$
|
22,642
|
|
Debt discounts and deferred financing costs, net
|
|
(124
|
)
|
|
(158
|
)
|
Total loan participations payable, net
|
|
$
|
25,021
|
|
|
$
|
22,484
|
|
_______________________________________________________________________________
|
|
(1)
|
As of
March 31, 2019
and December 31, 2018, the Company had
one
loan participation payable with an interest rate of
7.0%
.
|
Loan participations represent transfers of financial assets that did not meet the sales criteria established under ASC Topic 860 and are accounted for as loan participations payable, net as of
March 31, 2019
and
December 31, 2018
. As of
March 31, 2019
and
December 31, 2018
, the corresponding loan receivable balances were
$25.1 million
and
$22.5 million
, respectively, and are included in "Loans receivable and other lending investments, net" on the Company's consolidated balance sheets. The principal and interest due on these loan participations payable are paid from cash flows of the corresponding loans receivable, which serve as collateral for the participations.
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)
Note 10—Debt Obligations, net
The Company's debt obligations were as follows ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying Value as of
|
|
Stated
Interest Rates
|
|
Scheduled
Maturity Date
|
|
March 31, 2019
|
|
December 31, 2018
|
|
|
Secured credit facilities and mortgages:
|
|
|
|
|
|
|
|
2015 $325 million Revolving Credit Facility
|
$
|
—
|
|
|
$
|
—
|
|
|
LIBOR + 2.50%
|
|
(1)
|
September 2020
|
2016 Senior Term Loan
|
645,125
|
|
|
646,750
|
|
|
LIBOR + 2.75%
|
|
(2)
|
June 2023
|
Mortgages collateralized by net lease assets
(3)
|
634,695
|
|
|
802,367
|
|
|
3.62% - 7.26%
|
|
(3)
|
|
Total secured credit facilities and mortgages
|
1,279,820
|
|
|
1,449,117
|
|
|
|
|
|
|
Unsecured notes:
|
|
|
|
|
|
|
|
5.00% senior notes
(4)
|
—
|
|
|
375,000
|
|
|
5.00
|
%
|
|
—
|
4.625% senior notes
(5)
|
400,000
|
|
|
400,000
|
|
|
4.625
|
%
|
|
September 2020
|
6.50% senior notes
(6)
|
275,000
|
|
|
275,000
|
|
|
6.50
|
%
|
|
July 2021
|
6.00% senior notes
(7)
|
375,000
|
|
|
375,000
|
|
|
6.00
|
%
|
|
April 2022
|
5.25% senior notes
(8)
|
400,000
|
|
|
400,000
|
|
|
5.25
|
%
|
|
September 2022
|
3.125% senior convertible notes
(9)
|
287,500
|
|
|
287,500
|
|
|
3.125
|
%
|
|
September 2022
|
Total unsecured notes
|
1,737,500
|
|
|
2,112,500
|
|
|
|
|
|
|
Other debt obligations:
|
|
|
|
|
|
|
|
Trust preferred securities
|
100,000
|
|
|
100,000
|
|
|
LIBOR + 1.50%
|
|
|
October 2035
|
Total debt obligations
|
3,117,320
|
|
|
3,661,617
|
|
|
|
|
|
|
Debt discounts and deferred financing costs, net
|
(47,024
|
)
|
|
(52,531
|
)
|
|
|
|
|
|
Total debt obligations, net
(10)
|
$
|
3,070,296
|
|
|
$
|
3,609,086
|
|
|
|
|
|
|
_______________________________________________________________________________
|
|
(1)
|
The loan bears interest at the Company's election of either: (i) a base rate, which is the greater of (a) prime, (b) federal funds plus
0.5%
or (c) LIBOR plus
1.0%
and subject to a margin ranging from
1.25%
to
1.75%
; or (ii) LIBOR subject to a margin ranging from
2.25%
to
2.75%
. At maturity, the Company may convert outstanding borrowings to a
one year
term loan which matures in quarterly installments through September 2021.
|
|
|
(2)
|
The loan bears interest at the Company's election of either: (i) a base rate, which is the greater of (a) prime, (b) federal funds plus
0.5%
or (c) LIBOR plus
1.0%
and subject to a margin of
1.75%
; or (ii) LIBOR subject to a margin of
2.75%
.
|
|
|
(3)
|
As of March 31, 2019, a non-recourse mortgage associated with a net lease asset was reclassified to “Liabilities associated with properties held for sale” (refer to Note 4). As of
March 31, 2019
, the weighted average interest rate of these loans is
4.4%
, inclusive of the effect of interest rate swaps.
|
|
|
(4)
|
The Company prepaid these senior notes in March 2019 without penalty.
|
|
|
(5)
|
The Company can prepay these senior notes without penalty beginning June 15, 2020.
|
|
|
(6)
|
The Company can prepay these senior notes without penalty beginning July 1, 2020.
|
|
|
(7)
|
The Company can prepay these senior notes without penalty beginning April 1, 2021.
|
|
|
(8)
|
The Company can prepay these senior notes without penalty beginning September 15, 2021.
|
|
|
(9)
|
The Company's
3.125%
senior convertible fixed rate notes due September 2022 ("3.125% Convertible Notes") are convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding September 15, 2022. The conversion rate as of March 31, 2019 was
66.1052
shares per
$1,000
principal amount of
3.125%
Convertible Notes, which equals a conversion price of
$15.13
per share. The conversion rate is subject to adjustment from time to time for specified events. Upon conversion, the Company will pay or deliver, as the case may be, a combination of cash and shares of its common stock. As such, at issuance in September 2017, the Company valued the debt component at
$221.8 million
, net of fees, and the equity component of the conversion feature at
$22.5 million
, net of fees, and recorded the equity component in "Additional paid-in capital" on the Company's consolidated balance sheet. In October 2017, the initial purchasers of the
3.125%
Convertible Notes exercised their option to purchase an additional
$37.5 million
aggregate principal amount of the
3.125%
Convertible Notes. At issuance, the Company valued the debt component at
$34.0 million
, net of fees, and the equity component of the conversion feature at
$3.4 million
, net of fees, and recorded the equity component in "Additional paid-in capital" on the Company's consolidated balance sheet. As of
March 31, 2019
, the carrying value of the
3.125%
Convertible Notes was
$264.1 million
, net of fees, and the unamortized discount of the
3.125%
Convertible Notes was
$19.3 million
, net of fees. During the
three months
ended
March 31, 2019
and 2018, the Company recognized
$2.2 million
and
$2.2 million
, respectively, of contractual interest and
$1.2 million
and
$1.2 million
, respectively, of discount amortization on the
3.125%
Convertible Notes. The effective interest rate was
5.2%
.
|
|
|
(10)
|
The Company capitalized interest relating to development activities of
$3.0 million
and
$2.4 million
during the
three months
ended
March 31, 2019
and 2018, respectively.
|
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)
Future Scheduled Maturities
—As of
March 31, 2019
, future scheduled maturities of outstanding debt obligations are as follows ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured Debt
|
|
Secured Debt
|
|
Total
|
2019 (remaining nine months)
|
$
|
—
|
|
|
$
|
116
|
|
|
$
|
116
|
|
2020
|
400,000
|
|
|
—
|
|
|
400,000
|
|
2021
|
275,000
|
|
|
161,213
|
|
|
436,213
|
|
2022
|
1,062,500
|
|
|
48,698
|
|
|
1,111,198
|
|
2023
|
—
|
|
|
645,125
|
|
|
645,125
|
|
Thereafter
|
100,000
|
|
|
424,668
|
|
|
524,668
|
|
Total principal maturities
|
1,837,500
|
|
|
1,279,820
|
|
|
3,117,320
|
|
Unamortized discounts and deferred financing costs, net
|
(37,818
|
)
|
|
(9,206
|
)
|
|
(47,024
|
)
|
Total debt obligations, net
|
$
|
1,799,682
|
|
|
$
|
1,270,614
|
|
|
$
|
3,070,296
|
|
2016 Senior Term Loan
—In June 2016, the Company entered into a senior term loan of
$450.0 million
(the "2016 Senior Term Loan"). In August 2016, the Company upsized the facility to
$500.0 million
. The initial
$450.0 million
of the 2016 Senior Term Loan was issued at
99%
of par and the upsize was issued at par. In September 2017, the Company reduced, repriced and extended the 2016 Senior Term Loan to
$400.0 million
priced at LIBOR plus
3.00%
with a
0.75%
LIBOR floor and maturing in
October 2021
. In June 2018, the Company increased the 2016 Senior Term Loan to
$650.0 million
, re-priced at LIBOR plus
2.75%
and extended its maturity to June 2023. The facility was also modified to permit substitution of collateral, subject to overall collateral pool coverage and concentration limits, over the life of the facility. This modification eliminates the mandatory amortization upon payoff or sale of collateral which existed prior to the upsize and broadens the types of collateral permitted under the facility. The Company may make optional prepayments, subject to prepayment fees, and is required to repay
0.25%
of the principal amount each quarter.
During the three months ended March 31, 2018, repayments of the 2016 Senior Term Loan resulted in losses on early extinguishment of debt of
$0.4 million
.
2015 Revolving Credit Facility
—In March 2015, the Company entered into a secured revolving credit facility with a maximum capacity of
$250.0 million
(the "2015 Revolving Credit Facility"). In September 2017, the Company upsized the 2015 Revolving Credit Facility to
$325.0 million
, added additional lenders to the syndicate, extended the maturity date to September 2020 and made certain other changes. This facility is secured by a pledge of the equity interest in a pool of assets which provide asset value coverage for borrowings under the facility. Borrowings under this credit facility bear interest at a floating rate indexed to one of several base rates plus a margin which adjusts upward or downward based upon the Company's corporate credit rating. An undrawn credit facility commitment fee ranges from
0.30%
to
0.50%
, based on corporate credit ratings. At maturity, the Company may convert outstanding borrowings to a
one year
term loan which matures in quarterly installments through September 2021. As of
March 31, 2019
, based on the Company's borrowing base of assets, the Company had
$325.0 million
of borrowing capacity available under the 2015 Revolving Credit Facility.
Unsecured Notes
—In March 2019, the Company repaid in full the
5.00%
senior unsecured notes due July 2019. During the three months ended
March 31, 2019
, repayments of unsecured notes prior to maturity resulted in losses on early extinguishment of debt of
$0.5 million
.
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)
Collateral Assets
—The carrying value of the Company's assets that are directly pledged or are held by subsidiaries whose equity is pledged as collateral to secure the Company's obligations under its secured debt facilities are as follows, by asset type ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
March 31, 2019
|
|
December 31, 2018
|
|
Collateral Assets
(1)
|
|
Non-Collateral Assets
|
|
Collateral Assets
(1)
|
|
Non-Collateral Assets
|
Real estate, net
|
$
|
1,533,390
|
|
|
$
|
87,614
|
|
|
$
|
1,620,008
|
|
|
$
|
151,011
|
|
Real estate available and held for sale
|
219,184
|
|
|
34,152
|
|
|
1,055
|
|
|
21,496
|
|
Land and development, net
|
42,300
|
|
|
574,050
|
|
|
12,300
|
|
|
585,918
|
|
Loans receivable and other lending investments, net
(2)(3)
|
431,189
|
|
|
450,988
|
|
|
498,524
|
|
|
480,154
|
|
Other investments
|
—
|
|
|
521,999
|
|
|
—
|
|
|
304,275
|
|
Cash and other assets
|
6,601
|
|
|
757,277
|
|
|
—
|
|
|
1,329,990
|
|
Total
|
$
|
2,232,664
|
|
|
$
|
2,426,080
|
|
|
$
|
2,131,887
|
|
|
$
|
2,872,844
|
|
_______________________________________________________________________________
|
|
(1)
|
The 2016 Senior Term Loan and the 2015 Revolving Credit Facility are secured only by pledges of equity of certain of the Company's subsidiaries and not by pledges of the assets held by such subsidiaries. Such subsidiaries are subject to contractual restrictions under the terms of such credit facilities, including restrictions on incurring new debt (subject to certain exceptions). As of
March 31, 2019
, Collateral Assets includes
$406.2 million
carrying value of assets held by entities pledged as collateral for the
$325.0 million
2015 Revolving Credit Facility that is undrawn as of
March 31, 2019
.
|
|
|
(2)
|
As of
March 31, 2019
and
December 31, 2018
, the amounts presented exclude general reserves for loan losses of
$12.4 million
and
$13.0 million
, respectively.
|
|
|
(3)
|
As of
March 31, 2019
and
December 31, 2018
, the amounts presented exclude loan participations of
$25.1 million
and
$22.5 million
, respectively.
|
Debt Covenants
The Company's outstanding unsecured debt securities contain corporate level covenants that include a covenant to maintain a ratio of unencumbered assets to unsecured indebtedness, as such terms are defined in the indentures governing the debt securities, of at least
1.2
x and a covenant not to incur additional indebtedness (except for incurrences of permitted debt), if on a pro forma basis the Company's consolidated fixed charge coverage ratio, determined in accordance with the indentures governing the Company's debt securities, is
1.5
x or lower. If any of the Company's covenants are breached and not cured within applicable cure periods, the breach could result in acceleration of its debt securities unless a waiver or modification is agreed upon with the requisite percentage of the bondholders. If the Company's ability to incur additional indebtedness under the fixed charge coverage ratio is limited, the Company is permitted to incur indebtedness for the purpose of refinancing existing indebtedness and for other permitted purposes under the indentures.
The Company's 2016 Senior Term Loan and the 2015 Revolving Credit Facility contain certain covenants, including covenants relating to collateral coverage, restrictions on fundamental changes, transactions with affiliates, matters relating to the liens granted to the lenders and the delivery of information to the lenders. In particular, the 2016 Senior Term Loan requires the Company to maintain collateral coverage of at least
1.25
x outstanding borrowings on the facility. The 2015 Revolving Credit Facility is secured by a borrowing base of assets and requires the Company to maintain both borrowing base asset value of at least
1.5
x outstanding borrowings on the facility and a consolidated ratio of cash flow to fixed charges of at least
1.5
x. The 2015 Revolving Credit Facility does not require that proceeds from the borrowing base be used to pay down outstanding borrowings provided the borrowing base asset value remains at least
1.5
x outstanding borrowings on the facility. To satisfy this covenant, the Company has the option to pay down outstanding borrowings or substitute assets in the borrowing base. The Company may not pay common dividends if it ceases to qualify as a REIT. In June 2018, the Company amended the terms of the 2016 Senior Term Loan and the 2015 Revolving Credit Facility to include the ability to pay common dividends with no restrictions so long as the Company is not in default on any of its debt obligations.
The Company's 2016 Senior Term Loan and the 2015 Revolving Credit Facility contain cross default provisions that would allow the lenders to declare an event of default and accelerate the Company's indebtedness to them if the Company fails to pay amounts due in respect of its other recourse indebtedness in excess of specified thresholds or if the lenders under such other indebtedness are otherwise permitted to accelerate such indebtedness for any reason. The indentures governing the Company's unsecured public debt securities permit the bondholders to declare an event of default and accelerate the Company's indebtedness to them if the Company's other recourse indebtedness in excess of specified thresholds is not paid at final maturity or if such indebtedness is accelerated.
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)
Note 11—Commitments and Contingencies
Unfunded Commitments
—The Company generally funds construction and development loans and build-outs of space in real estate assets over a period of time if and when the borrowers and tenants meet established milestones and other performance criteria. The Company refers to these arrangements as Performance-Based Commitments. In addition, the Company has committed to invest capital in several real estate funds and other ventures. These arrangements are referred to as Strategic Investments.
As of
March 31, 2019
, the maximum amount of fundings the Company may be required to make under each category, assuming all performance hurdles and milestones are met under the Performance-Based Commitments and that
100%
of its capital committed to Strategic Investments is drawn down, are as follows ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and Other Lending Investments
(1)
|
|
Real Estate
|
|
Other
Investments
|
|
Total
|
Performance-Based Commitments
|
$
|
385,215
|
|
|
$
|
9,543
|
|
|
$
|
—
|
|
|
$
|
394,758
|
|
Strategic Investments
|
—
|
|
|
—
|
|
|
33,304
|
|
|
33,304
|
|
Total
|
$
|
385,215
|
|
|
$
|
9,543
|
|
|
$
|
33,304
|
|
|
$
|
428,062
|
|
_______________________________________________________________________________
|
|
(1)
|
Excludes
$24.9 million
of commitments on loan participations sold that are not the obligation of the Company.
|
Other Commitments
—Future minimum lease obligations under operating and finance leases are as follows ($ in thousands):
|
|
|
|
|
|
|
|
|
|
Operating
(1)(2)
|
|
Finance
(1)
|
2019
|
$
|
4,165
|
|
|
$
|
2,181
|
|
2020
|
3,841
|
|
|
2,633
|
|
2021
|
1,468
|
|
|
2,686
|
|
2022
|
869
|
|
|
2,740
|
|
2023
|
728
|
|
|
2,794
|
|
Thereafter
|
2,074
|
|
|
759,082
|
|
_______________________________________________________________________________
|
|
(1)
|
Operating lease obligations for 2019 are as of January 1, 2019 and finance lease obligations are as of lease inception (refer to Note 4). During the three months ended March 31, 2019, the Company made payments of
$1.1 million
and
$0.2 million
, respectively, related to its operating and finance leases.
|
|
|
(2)
|
The Company is obligated to pay ground rent under certain operating leases; however, the Company's tenants at the properties pay this expense directly under the terms of various subleases and these amounts are excluded from lease obligations.
|
Legal Proceedings
—The Company and/or one or more of its subsidiaries is party to various pending litigation matters that are considered ordinary routine litigation incidental to the Company's business as a finance and investment company focused on the commercial real estate industry, including foreclosure-related proceedings. The Company believes it is not a party to, nor are any of its properties the subject of, any pending legal proceeding that would have a material adverse effect on the Company’s consolidated financial statements.
Note 12—Derivatives
The Company's use of derivative financial instruments has historically been limited to the utilization of interest rate swaps, interest rate caps and foreign exchange contracts. The principal objective of such financial instruments is to minimize the risks and/or costs associated with the Company's operating and financial structure and to manage its exposure to interest rates and foreign exchange rates. The Company may have derivatives that are not designated as hedges because they do not meet the strict hedge accounting requirements. Although not designated as hedges, such derivatives are entered into to manage the Company's exposure to interest rate movements, foreign exchange rate movements and other identified risks.
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)
The table below presents the fair value of the Company's derivative financial instruments as well as their classification on the consolidated balance sheets as of
March 31, 2019
and
December 31, 2018
($ in thousands)
(1)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Assets
|
|
Derivative Liabilities
|
As of March 31, 2019
|
|
Balance Sheet
Location
|
|
Fair
Value
|
|
Balance Sheet
Location
|
|
Fair
Value
|
Derivatives Designated in Hedging Relationships
|
|
|
|
|
Interest rate swaps
|
|
Deferred expenses and other assets, net
|
|
$
|
2,279
|
|
|
Accounts payable, accrued expenses and other liabilities
|
|
$
|
14,297
|
|
Total
|
|
|
|
$
|
2,279
|
|
|
|
|
$
|
14,297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Assets
|
|
Derivative Liabilities
|
As of December 31, 2018
|
|
Balance Sheet
Location
|
|
Fair
Value
|
|
Balance Sheet
Location
|
|
Fair
Value
|
Derivatives Designated in Hedging Relationships
|
|
|
|
|
Interest rate swaps
|
|
Deferred expenses and other assets, net
|
|
$
|
3,669
|
|
|
Accounts payable, accrued expenses and other liabilities
|
|
$
|
10,244
|
|
Total
|
|
|
|
$
|
3,669
|
|
|
|
|
$
|
10,244
|
|
_________________________________________________________
|
|
(1)
|
Over the next
12
months, the Company expects that
$2.8 million
related to cash flow hedges will be reclassified from "Accumulated other comprehensive income (loss)" as a reduction to interest expense. As of
March 31, 2019
and
December 31, 2018
, the Company posted cash collateral of
$10.7 million
and
$6.4 million
, respectively, in connection with its derivatives which were in a liability position and would not have been required to post any additional collateral to settle these contracts had the Company been declared in default on its derivative obligations.
|
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)
The tables below present the effect of the Company's derivative financial instruments, including the Company's share of derivative financial instruments at certain of its equity method investments, in the consolidated statements of operations and the consolidated statements of comprehensive income (loss) ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives Designated in Hedging Relationships
|
|
Location of Gain (Loss)
When Recognized in Income
|
|
Amount of Gain (Loss) Recognized in Accumulated Other Comprehensive Income
|
|
Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Earnings
|
For the Three Months Ended March 31, 2019
|
|
|
|
|
Interest rate swaps
|
|
Earnings from equity method investments
|
|
$
|
(7,190
|
)
|
|
$
|
144
|
|
Interest rate swaps
|
|
Interest expense
|
|
(7,822
|
)
|
|
(151
|
)
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2018
|
|
|
|
|
Interest rate swaps
|
|
Earnings from equity method investments
|
|
2,351
|
|
|
(9
|
)
|
Note 13—Equity
Preferred Stock
—The Company had the following series of Cumulative Redeemable and Convertible Perpetual Preferred Stock outstanding as of
March 31, 2019
and December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Preferential Cash
Dividends
(1)(2)
|
|
|
Series
|
|
Shares Issued and
Outstanding
(in thousands)
|
|
Par Value
|
|
Liquidation Preference
(3)(4)
|
|
Rate per Annum
|
|
Equivalent to
Fixed Annual
Rate (per share)
|
|
Carrying Value
(in thousands)
|
D
|
|
4,000
|
|
|
$
|
0.001
|
|
|
$
|
25.00
|
|
|
8.00
|
%
|
|
$
|
2.00
|
|
|
$
|
89,041
|
|
G
|
|
3,200
|
|
|
0.001
|
|
|
25.00
|
|
|
7.65
|
%
|
|
1.91
|
|
|
72,664
|
|
I
|
|
5,000
|
|
|
0.001
|
|
|
25.00
|
|
|
7.50
|
%
|
|
1.88
|
|
|
120,785
|
|
J (convertible)
(4)
|
|
4,000
|
|
|
0.001
|
|
|
50.00
|
|
|
4.50
|
%
|
|
2.25
|
|
|
193,510
|
|
|
|
16,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
476,000
|
|
________________________________________
|
|
(1)
|
Holders of shares of the Series D, G, I and J preferred stock are entitled to receive dividends, when and as declared by the Company's Board of Directors, out of funds legally available for the payment of dividends. Dividends are cumulative from the date of original issue and are payable quarterly in arrears on or before the 15th day of each March, June, September and December or, if not a business day, the next succeeding business day. Any dividend payable on the preferred stock for any partial dividend period will be computed on the basis of a
360
-day year consisting of
twelve
30
-day months. Dividends will be payable to holders of record as of the close of business on the first day of the calendar month in which the applicable dividend payment date falls or on another date designated by the Company's Board of Directors for the payment of dividends that is not more than
30
nor less than
10
days prior to the dividend payment date.
|
|
|
(2)
|
The Company declared and paid dividends of
$2.0 million
,
$1.5 million
and
$2.3 million
on its Series D, G and I Cumulative Redeemable Preferred Stock during the
three months
ended
March 31, 2019
and
2018
, respectively. The Company declared and paid dividends of
$2.3 million
on its Series J Convertible Perpetual Preferred Stock during the
three months
ended
March 31, 2019
and
2018
. The Company redeemed all of its issued and outstanding Series E and F Cumulative Redeemable Preferred Stock in October 2017. The character of the 2018 dividends was
100%
capital gain distribution, of which
26.02%
represented unrecaptured section 1250 gain and
73.98%
represented long term capital gain. There are
no
dividend arrearages on any of the preferred shares currently outstanding.
|
|
|
(3)
|
The Company may, at its option, redeem the Series G and I Preferred Stock, in whole or in part, at any time and from time to time, for cash at a redemption price equal to
100%
of the liquidation preference of
$25.00
per share, plus accrued and unpaid dividends, if any, to the redemption date.
|
|
|
(4)
|
Each share of the Series J Preferred Stock is convertible at the holder's option at any time into shares of the Company's common stock. The Company may, at its option, redeem the Series J Preferred Stock, in whole or in part, at any time and from time to time, for cash at a redemption price equal to
100%
of the liquidation preference of
$50.00
per share, plus accrued and unpaid dividends, if any, to the redemption date. The conversion rate as of March 31, 2019 was
4.0149
shares of the Company's common stock (equal to a conversion price of approximately
$12.45
per share). The conversion rate is subject to adjustment from time to time for specified events.
|
Dividends
—To maintain its qualification as a REIT, the Company must annually distribute, at a minimum, an amount equal to
90%
of its taxable income, excluding net capital gains, and must distribute
100%
of its taxable income (including net capital gains) to eliminate corporate federal income taxes payable by the REIT. The Company has recorded NOLs and may record NOLs in the future, which may reduce its taxable income in future periods and lower or eliminate entirely the Company's obligation to
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)
pay dividends for such periods in order to maintain its REIT qualification. As of December 31, 2017, the Company had
$582.4 million
of NOL carryforwards at the corporate REIT level that can generally be used to offset both ordinary taxable income and capital gain net income in future years. The NOL carryforwards will begin to expire in 2029 and will fully expire in
2036
if unused. Because taxable income differs from cash flow from operations due to non-cash revenues and expenses (such as depreciation and certain asset impairments), in certain circumstances, the Company may generate operating cash flow in excess of its dividends, or alternatively, may need to make dividend payments in excess of operating cash flows. The 2016 Senior Term Loan and the 2015 Revolving Credit Facility permit the Company to pay common dividends with no restrictions so long as the Company is not in default on any of its debt obligations. The Company declared and paid common stock dividends of
$6.2 million
and
$6.1 million
, respectively, or
$0.09
per share, for the
three months
ended March 31, 2019. The Company did not declare or pay any common stock dividends for the
three months
ended March 31,
2018
.
Stock Repurchase Program
—The Company may repurchase shares in negotiated transactions or open market transactions, including through one or more trading plans. During the three months ended March 31, 2019, the Company repurchased
2.3 million
shares of its outstanding common stock for
$19.2 million
, for an average cost of
$8.46
per share. During the
three months
ended March 31, 2018, the Company repurchased
0.8 million
shares of its outstanding common stock for
$8.3 million
, for an average cost of
$10.22
per share. As of
March 31, 2019
, the Company had remaining authorization to repurchase up to
$22.6 million
of common stock under its stock repurchase program.
Accumulated Other Comprehensive Income (Loss)
—"Accumulated other comprehensive income (loss)" reflected in the Company's shareholders' equity is comprised of the following ($ in thousands):
|
|
|
|
|
|
|
|
|
|
As of
|
|
March 31, 2019
|
|
December 31, 2018
|
Unrealized gains on available-for-sale securities
|
$
|
1,476
|
|
|
$
|
475
|
|
Unrealized losses on cash flow hedges
|
(26,871
|
)
|
|
(13,546
|
)
|
Unrealized losses on cumulative translation adjustment
|
(4,199
|
)
|
|
(4,199
|
)
|
Accumulated other comprehensive loss
|
$
|
(29,594
|
)
|
|
$
|
(17,270
|
)
|
Note 14—Stock-Based Compensation Plans and Employee Benefits
Stock-Based Compensation
—The Company recorded stock-based compensation expense, including the expense related to performance incentive plans (see below), of
$4.2 million
and
$9.1 million
for the
three months
ended
March 31, 2019
and 2018, respectively, in "General and administrative" in the Company's consolidated statements of operations.
Performance Incentive Plans
—The Company's Performance Incentive Plans ("iPIP") are designed to provide, primarily to senior executives and select professionals engaged in the Company's investment activities, long-term compensation which has a direct relationship to the realized returns on investments included in the plans. Awards vest over
six
years, with
40%
being vested at the end of the second year and
15%
each year thereafter.
2019-2020 iPIP Plan
—The Company's 2019-2020 iPIP plan is an equity-classified award which is measured at the grant date fair value and recognized as compensation cost in "General and administrative" in the Company's consolidated statements of operations and "Noncontrolling interests" in the Company's consolidated statements of changes in equity over the requisite service period. Investments in the 2019-2020 iPIP plan will be held by a consolidated subsidiary of the Company that has
two
ownership classes, class A units and class B units. The Company owns
100%
of the class A units and the class B units were issued to employees as long-term compensation. Except for certain clawback provisions, participants can retain vested class B units upon their termination of employment with the Company. The class B units are entitled to distributions from the net cash realized from the investments in the plan after the Company, through its ownership of the class A units, has received a specified return on its invested capital and a return of its invested capital. Distributions on the class B units are also subject to reductions under a total shareholder return ("TSR") adjustment. The fair value of the class B units was determined using a model that forecasts the underlying cash flows from the investments within the entity to which the class B units have ownership rights. During the three months ended March 31, 2019, the Company recorded
$0.4 million
of expense related to the 2019-2020 iPIP plan. Distributions on the class B units will be
50%
in cash and
50%
in shares of the Company's common stock.
2013-2018 iPIP Plans
—The remainder of the Company's iPIP plans, as shown in the table below, are liability-classified awards and are remeasured each reporting period at fair value until the awards are settled. Certain employees will be granted
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)
awards that entitle employees to receive the residual cash flows from the investments in the plans after the Company has received a specified return on its invested capital and a return of its invested capital. Awards are also subject to reductions under a TSR adjustment. The fair value of awards is determined using a model that forecasts the Company's projected investment performance. Settlement of the awards will be
50%
in cash and
50%
in shares of the Company's common stock.
The following is a summary of the status of the Company’s liability-classified iPIP plans and changes during the
three months
ended
March 31, 2019
and the year ended December 31, 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2019
|
|
Year Ended December 31, 2018
|
|
iPIP Investment Pool
|
|
iPIP Investment Pool
|
|
2013-2014
|
|
2015-2016
|
|
2017-2018
|
|
2013-2014
|
|
2015-2016
|
|
2017-2018
|
Points at beginning of period
|
85.77
|
|
|
79.41
|
|
|
82.43
|
|
|
86.57
|
|
|
84.16
|
|
|
40.97
|
|
Granted
|
—
|
|
|
—
|
|
|
—
|
|
|
0.50
|
|
|
—
|
|
|
49.33
|
|
Forfeited
|
—
|
|
|
(0.82
|
)
|
|
(1.03
|
)
|
|
(1.3
|
)
|
|
(4.75
|
)
|
|
(7.87
|
)
|
Points at end of period
|
85.77
|
|
|
78.59
|
|
|
81.40
|
|
|
85.77
|
|
|
79.41
|
|
|
82.43
|
|
During the
three months
ended March 31, 2019, the Company made distributions to participants in the 2013-2014 investment pool. The iPIP participants received total distributions in the amount of
$7.4 million
as compensation, comprised of
$3.8 million
in cash and
389,545
shares of the Company's common stock, with a fair value of
$3.6 million
or
$9.21
per share, which are fully-vested and issued under the 2009 LTIP (see below). After deducting statutory minimum tax withholdings, a total of
209,118
shares of the Company's common stock were issued. As of
March 31, 2019
and
December 31, 2018
, the Company had accrued compensation costs relating to iPIP of
$33.0 million
and
$37.5 million
, respectively, which are included in "Accounts payable, accrued expenses and other liabilities" on the Company's consolidated balance sheets.
Long-Term Incentive Plan
—The Company's 2009 Long-Term Incentive Plan (the "2009 LTIP") is designed to provide incentive compensation for officers, key employees, directors and advisors of the Company. The 2009 LTIP provides for awards of stock options, shares of restricted stock, phantom shares, restricted stock units, dividend equivalent rights and other share-based performance awards. All awards under the 2009 LTIP are made at the discretion of the Company's Board of Directors or a committee of the Board of Directors. The Company's shareholders approved the 2009 LTIP in 2009 and approved the performance-based provisions of the 2009 LTIP, as amended, in 2014.
As of
March 31, 2019
, an aggregate of
2.1 million
shares remain available for issuance pursuant to future awards under the Company's 2009 LTIP.
Restricted Stock Unit Activity
—A summary of the Company’s stock-based compensation awards to certain employees in the form of long-term incentive awards for the
three months
ended
March 31, 2019
and the year ended December 31, 2018, are as follows (in thousands):
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2019
|
|
Year Ended
December 31, 2018
|
Nonvested at beginning of period
|
357
|
|
|
282
|
|
Granted
|
474
|
|
|
278
|
|
Vested
|
(52
|
)
|
|
(142
|
)
|
Forfeited
|
(9
|
)
|
|
(61
|
)
|
Nonvested at end of period
|
770
|
|
|
357
|
|
As of
March 31, 2019
, there was
$5.4 million
of total unrecognized compensation cost related to all unvested restricted stock units that are expected to be recognized over a weighted average remaining vesting/service period of
2.0
years.
Directors' Awards
—During the
three months
ended
March 31, 2019
, the Company issued
1,899
common stock equivalents ("CSEs") at a fair value of
$8.17
per CSE in respect of dividend equivalents on outstanding CSEs. As of
March 31, 2019
, a combined total of
241,700
CSEs and restricted shares of common stock granted to members of the Company's Board of Directors remained outstanding under the Company's Non-Employee Directors Deferral Plan, with an aggregate intrinsic value of
$2.0 million
.
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)
401(k) Plan
—The Company made contributions of
$0.6 million
and
$0.7 million
for the
three months
ended
March 31, 2019
and 2018, respectively.
Note 15—Earnings Per Share
The following table presents a reconciliation of income (loss) from operations used in the basic and diluted earnings per share ("EPS") calculations ($ in thousands, except for per share data):
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31,
|
|
2019
|
|
2018
|
Net income (loss)
|
$
|
(6,970
|
)
|
|
$
|
35,028
|
|
Net income attributable to noncontrolling interests
|
(2,471
|
)
|
|
(95
|
)
|
Preferred dividends
|
(8,124
|
)
|
|
(8,124
|
)
|
Net income (loss) allocable to common shareholders for basic earnings per common share
|
$
|
(17,565
|
)
|
|
$
|
26,809
|
|
Add: Effect of Series J convertible perpetual preferred stock
|
—
|
|
|
2,250
|
|
Net income (loss) allocable to common shareholders for diluted earnings per common share
|
$
|
(17,565
|
)
|
|
$
|
29,059
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31,
|
|
2019
|
|
2018
|
Earnings allocable to common shares:
|
|
|
|
Numerator for basic earnings per share:
|
|
|
|
Net income (loss) allocable to common shareholders
|
$
|
(17,565
|
)
|
|
$
|
26,809
|
|
|
|
|
|
Numerator for diluted earnings per share:
|
|
|
|
Net income (loss) allocable to common shareholders
|
$
|
(17,565
|
)
|
|
$
|
29,059
|
|
|
|
|
|
Denominator for basic and diluted earnings per share:
|
|
|
|
Weighted average common shares outstanding for basic earnings per common share
|
67,747
|
|
|
67,913
|
|
Add: Effect of assumed shares issued under treasury stock method for restricted stock units
|
—
|
|
|
122
|
|
Add: Effect of series J convertible perpetual preferred stock
|
—
|
|
|
15,635
|
|
Weighted average common shares outstanding for diluted earnings per common share
|
67,747
|
|
|
83,670
|
|
|
|
|
|
Basic earnings per common share:
|
|
|
|
Net income (loss) allocable to common shareholders
|
$
|
(0.26
|
)
|
|
$
|
0.39
|
|
|
|
|
|
Diluted earnings per common share:
|
|
|
|
Net income (loss) allocable to common shareholders
|
$
|
(0.26
|
)
|
|
$
|
0.35
|
|
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)
The following shares were not included in the diluted EPS calculation because they were anti-dilutive (in thousands)
(1)
:
|
|
|
|
|
|
|
|
For the Three Months Ended March 31,
|
|
2019
|
|
2018
|
Series J convertible perpetual preferred stock
|
15,951
|
|
|
—
|
|
_______________________________________________________________________________
|
|
(1)
|
For the
three months
ended
March 31, 2019
, the effect of the Company's unvested Units, performance-based Units, CSEs and restricted stock awards were anti-dilutive due to the Company having a net loss for the period. The Company will settle conversions of the
3.125%
Convertible Notes by paying the conversion value in cash up to the original principal amount of the notes being converted and shares of common stock to the extent of any conversion premium. The amount of cash and shares of common stock, if any, due upon conversion will be based on a daily conversion value calculated for each trading day in a
40
consecutive day observation period. Based upon the conversion price of the
3.125%
Convertible Notes, no shares of common stock would have been issuable upon conversion of the
3.125%
Convertible Notes for the
three months
ended
March 31, 2019
and
2018
and therefore the
3.125%
Convertible Notes had no effect on diluted EPS for such periods.
|
Note 16—Fair Values
Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following fair value hierarchy prioritizes the inputs to be used in valuation techniques to measure fair value:
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
Certain of the Company's assets and liabilities are recorded at fair value either on a recurring or non-recurring basis. Assets required to be marked-to-market and reported at fair value every reporting period are classified as being valued on a recurring basis. Assets not required to be recorded at fair value every period may be recorded at fair value if a specific provision or other impairment is recorded within the period to mark the carrying value of the asset to market as of the reporting date. Such assets are classified as being valued on a non-recurring basis.
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)
The following fair value hierarchy table summarizes the Company's assets and liabilities recorded at fair value on a recurring and non-recurring basis by the above categories ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Using
|
|
Total
|
|
Quoted market
prices in
active markets
(Level 1)
|
|
Significant other
observable
inputs
(Level 2)
|
|
Significant
unobservable
inputs
(Level 3)
|
As of March 31, 2019
|
|
|
|
|
|
|
|
Recurring basis:
|
|
|
|
|
|
|
|
Derivative assets
(1)
|
$
|
2,279
|
|
|
$
|
—
|
|
|
$
|
2,279
|
|
|
$
|
—
|
|
Derivative liabilities
(1)
|
14,297
|
|
|
—
|
|
|
14,297
|
|
|
—
|
|
Available-for-sale securities
(1)
|
22,615
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
22,615
|
|
Non-recurring basis:
|
|
|
|
|
|
|
|
Impaired real estate available and held for sale
(2)
|
17,100
|
|
|
—
|
|
|
—
|
|
|
17,100
|
|
|
|
|
|
|
|
|
|
As of December 31, 2018
|
|
|
|
|
|
|
|
Recurring basis:
|
|
|
|
|
|
|
|
Derivative assets
(1)
|
$
|
3,669
|
|
|
$
|
—
|
|
|
$
|
3,669
|
|
|
$
|
—
|
|
Derivative liabilities
(1)
|
10,244
|
|
|
—
|
|
|
10,244
|
|
|
—
|
|
Available-for-sale securities
(1)
|
$
|
21,661
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
21,661
|
|
Non-recurring basis:
|
|
|
|
|
|
|
|
Impaired real estate
(3)
|
29,400
|
|
|
—
|
|
|
—
|
|
|
29,400
|
|
Impaired real estate available and held for sale
(4)
|
19,300
|
|
|
—
|
|
|
—
|
|
|
19,300
|
|
Impaired land and development
(5)
|
78,400
|
|
|
—
|
|
|
—
|
|
|
78,400
|
|
____________________________________________________________
|
|
(1)
|
The fair value of the Company's derivatives are based upon widely accepted valuation techniques utilized by a third-party specialist using observable inputs such as interest rates and contractual cash flow and are classified as Level 2. The fair value of the Company's available-for-sale securities are based upon unadjusted third-party broker quotes and are classified as Level 3.
|
|
|
(2)
|
The Company recorded an impairment of
$3.2 million
on a commercial operating property based on an executed purchase and sale agreement.
|
|
|
(3)
|
The Company recorded aggregate impairments of
$76.3 million
on
three
real estate assets with an estimated aggregate fair value of
$29.4 million
. The impairments were as follows:
|
|
|
a.
|
A
$23.2 million
impairment on a commercial operating property based on a decline in expected operating performance. The fair value is based on the Company's estimate of the recoverability of its investment in the project.
|
|
|
b.
|
A
$6.0 million
impairment on a property based on a strategic decision to sell the asset. The fair value is based on purchase offers received from third parties, which is consistent with the Company's estimate of fair value.
|
|
|
c.
|
A
$47.1 million
impairment on a commercial operating property based on a strategic decision to sell the asset. The fair value is based on purchase offers received from third parties, which is consistent with the Company's estimate of fair value.
|
|
|
(4)
|
The Company recorded aggregate impairments of
$3.7 million
on
two
real estate assets held for sale. The fair values are based on market comparable sales.
|
|
|
(5)
|
The Company recorded aggregate impairments of
$55.4 million
on
four
land and development assets with an estimated aggregate fair value of
$78.4 million
. The impairments were as follows:
|
|
|
a.
|
A
$25.0 million
impairment on a waterfront land and development asset based on a strategic decision to sell the asset. The fair value is based on purchase offers received from third parties, which is consistent with the Company's estimate of fair value.
|
|
|
b.
|
A
$21.6 million
impairment on a master planned community based on a strategic decision to sell the asset. The fair value is based on purchase offers received from third parties, which is consistent with the Company's estimate of fair value.
|
|
|
c.
|
A
$6.9 million
impairment on an infill land and development asset based on the deterioration of the asset. The fair value is based on purchase offers received from third parties, which is consistent with the Company's estimate of fair value.
|
|
|
d.
|
A
$1.9 million
impairment on a waterfront land and development asset based on the sale of the asset in 2019.
|
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)
The following table summarizes changes in Level 3 available-for-sale securities reported at fair value on the Company's consolidated balance sheets for the
three months
ended
March 31, 2019
and
2018
($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
Beginning balance
|
|
$
|
21,661
|
|
|
$
|
22,842
|
|
Repayments
|
|
(46
|
)
|
|
(36
|
)
|
Unrealized gains (losses) recorded in other comprehensive income
|
|
1,000
|
|
|
(971
|
)
|
Ending balance
|
|
$
|
22,615
|
|
|
$
|
21,835
|
|
Fair values of financial instruments—
The Company's estimated fair values of its loans receivable and other lending investments and outstanding debt, including liabilities associated with properties held for sale, was
$0.9 billion
and
$3.3 billion
, respectively, as of
March 31, 2019
and
$1.0 billion
and
$3.5 billion
, respectively, as of
December 31, 2018
. The Company determined that the significant inputs used to value its loans receivable and other lending investments and debt obligations fall within Level 3 of the fair value hierarchy. The carrying value of other financial instruments including cash and cash equivalents, restricted cash, accrued interest receivable and accounts payable, approximate the fair values of the instruments. Cash and cash equivalents and restricted cash values are considered Level 1 on the fair value hierarchy. The fair value of other financial instruments, including derivative assets and liabilities, is included in the fair value hierarchy table above.
Note 17—Segment Reporting
The Company has determined that it has
four
reportable segments based on how management reviews and manages its business. These reportable segments include: Real Estate Finance, Net Lease, Operating Properties and Land and Development. The Real Estate Finance segment includes all of the Company's activities related to senior and mezzanine real estate loans and real estate related securities. The Net Lease segment includes the Company's activities and operations related to the ownership of properties generally leased to single corporate tenants and its investment in SAFE (refer to Note 7). The Operating Properties segment includes the Company's activities and operations related to its commercial and residential properties. The Land and Development segment includes the Company's activities related to its developable land portfolio.
The Company evaluates performance based on the following financial measures for each segment. The Company's segment information is as follows ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate Finance
|
|
Net Lease
|
|
Operating Properties
|
|
Land and Development
|
|
Corporate/Other
(1)
|
|
Company Total
|
Three Months Ended March 31. 2019:
|
|
|
|
|
|
|
|
|
|
|
Operating lease income
|
$
|
—
|
|
|
$
|
49,482
|
|
|
$
|
9,356
|
|
|
$
|
77
|
|
|
$
|
—
|
|
|
$
|
58,915
|
|
Interest income
|
20,375
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20,375
|
|
Other income
|
2,189
|
|
|
3,420
|
|
|
2,375
|
|
|
3,447
|
|
|
3,382
|
|
|
14,813
|
|
Land development revenue
|
—
|
|
|
—
|
|
|
—
|
|
|
12,699
|
|
|
—
|
|
|
12,699
|
|
Earnings (losses) from equity method investments
|
—
|
|
|
7,230
|
|
|
(2,410
|
)
|
|
287
|
|
|
202
|
|
|
5,309
|
|
Income from sales of real estate
|
—
|
|
|
—
|
|
|
9,407
|
|
|
—
|
|
|
—
|
|
|
9,407
|
|
Total revenue and other earnings
|
22,564
|
|
|
60,132
|
|
|
18,728
|
|
|
16,510
|
|
|
3,584
|
|
|
121,518
|
|
Real estate expense
|
—
|
|
|
(6,106
|
)
|
|
(11,033
|
)
|
|
(8,801
|
)
|
|
—
|
|
|
(25,940
|
)
|
Land development cost of sales
|
—
|
|
|
—
|
|
|
—
|
|
|
(14,449
|
)
|
|
—
|
|
|
(14,449
|
)
|
Other expense
|
(265
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(243
|
)
|
|
(508
|
)
|
Allocated interest expense
|
(8,413
|
)
|
|
(21,766
|
)
|
|
(2,918
|
)
|
|
(5,127
|
)
|
|
(8,353
|
)
|
|
(46,577
|
)
|
Allocated general and administrative
(2)
|
(2,209
|
)
|
|
(5,678
|
)
|
|
(761
|
)
|
|
(3,257
|
)
|
|
(4,945
|
)
|
|
(16,850
|
)
|
Segment profit (loss)
(3)
|
$
|
11,677
|
|
|
$
|
26,582
|
|
|
$
|
4,016
|
|
|
$
|
(15,124
|
)
|
|
$
|
(9,957
|
)
|
|
$
|
17,194
|
|
Other significant items:
|
|
|
|
|
|
|
|
|
|
|
|
Recovery of loan losses
|
$
|
(97
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(97
|
)
|
Impairment of assets
|
—
|
|
|
—
|
|
|
3,851
|
|
|
—
|
|
|
—
|
|
|
3,851
|
|
Depreciation and amortization
|
—
|
|
|
13,561
|
|
|
1,557
|
|
|
247
|
|
|
303
|
|
|
15,668
|
|
Capitalized expenditures
|
—
|
|
|
2,756
|
|
|
416
|
|
|
36,079
|
|
|
—
|
|
|
39,251
|
|
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate Finance
|
|
Net Lease
|
|
Operating Properties
|
|
Land and Development
|
|
Corporate/Other
(1)
|
|
Company Total
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
Operating lease income
|
$
|
—
|
|
|
$
|
29,727
|
|
|
$
|
15,817
|
|
|
$
|
255
|
|
|
$
|
—
|
|
|
$
|
45,799
|
|
Interest income
|
26,697
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
26,697
|
|
Other income
|
384
|
|
|
1,049
|
|
|
12,144
|
|
|
471
|
|
|
1,272
|
|
|
15,320
|
|
Land development revenue
|
—
|
|
|
—
|
|
|
—
|
|
|
276,429
|
|
|
—
|
|
|
276,429
|
|
Earnings from equity method investments
|
—
|
|
|
3,556
|
|
|
(1,275
|
)
|
|
1,545
|
|
|
(494
|
)
|
|
3,332
|
|
Income from sales of real estate
|
—
|
|
|
414
|
|
|
16,634
|
|
|
—
|
|
|
—
|
|
|
17,048
|
|
Total revenue and other earnings
|
27,081
|
|
|
34,746
|
|
|
43,320
|
|
|
278,700
|
|
|
778
|
|
|
384,625
|
|
Real estate expense
|
—
|
|
|
(3,948
|
)
|
|
(21,626
|
)
|
|
(10,606
|
)
|
|
—
|
|
|
(36,180
|
)
|
Land development cost of sales
|
—
|
|
|
—
|
|
|
—
|
|
|
(223,407
|
)
|
|
—
|
|
|
(223,407
|
)
|
Other expense
|
(400
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(766
|
)
|
|
(1,166
|
)
|
Allocated interest expense
|
(11,765
|
)
|
|
(14,201
|
)
|
|
(5,528
|
)
|
|
(6,473
|
)
|
|
(7,215
|
)
|
|
(45,182
|
)
|
Allocated general and administrative
(2)
|
(3,969
|
)
|
|
(4,586
|
)
|
|
(2,043
|
)
|
|
(3,805
|
)
|
|
(5,320
|
)
|
|
(19,723
|
)
|
Segment profit (loss)
(3)
|
$
|
10,947
|
|
|
$
|
12,011
|
|
|
$
|
14,123
|
|
|
$
|
34,409
|
|
|
$
|
(12,523
|
)
|
|
$
|
58,967
|
|
Other significant items:
|
|
|
|
|
|
|
|
|
|
|
|
Recovery of loan losses
|
$
|
(855
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(855
|
)
|
Impairment of assets
|
—
|
|
|
—
|
|
|
4,100
|
|
|
—
|
|
|
—
|
|
|
4,100
|
|
Depreciation and amortization
|
—
|
|
|
6,309
|
|
|
3,926
|
|
|
515
|
|
|
360
|
|
|
11,110
|
|
Capitalized expenditures
|
—
|
|
|
478
|
|
|
7,700
|
|
|
31,447
|
|
|
—
|
|
|
39,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
Real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate, net
|
$
|
—
|
|
|
$
|
1,449,845
|
|
|
$
|
171,159
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,621,004
|
|
Real estate available and held for sale
|
—
|
|
|
219,184
|
|
|
34,152
|
|
|
—
|
|
|
—
|
|
|
253,336
|
|
Total real estate
|
—
|
|
|
1,669,029
|
|
|
205,311
|
|
|
—
|
|
|
—
|
|
|
1,874,340
|
|
Land and development, net
|
—
|
|
|
—
|
|
|
—
|
|
|
616,350
|
|
|
—
|
|
|
616,350
|
|
Loans receivable and other lending investments, net
|
894,846
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
894,846
|
|
Other investments
|
—
|
|
|
407,682
|
|
|
62,434
|
|
|
44,656
|
|
|
7,227
|
|
|
521,999
|
|
Total portfolio assets
|
$
|
894,846
|
|
|
$
|
2,076,711
|
|
|
$
|
267,745
|
|
|
$
|
661,006
|
|
|
$
|
7,227
|
|
|
3,907,535
|
|
Cash and other assets
|
|
|
|
|
|
|
|
|
|
|
763,878
|
|
Total assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,671,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
Real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate, net
|
$
|
—
|
|
|
$
|
1,536,494
|
|
|
$
|
234,525
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,771,019
|
|
Real estate available and held for sale
|
—
|
|
|
1,055
|
|
|
21,496
|
|
|
—
|
|
|
—
|
|
|
22,551
|
|
Total real estate
|
—
|
|
|
1,537,549
|
|
|
256,021
|
|
|
—
|
|
|
—
|
|
|
1,793,570
|
|
Land and development, net
|
—
|
|
|
—
|
|
|
—
|
|
|
598,218
|
|
|
—
|
|
|
598,218
|
|
Loans receivable and other lending investments, net
|
988,224
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
988,224
|
|
Other investments
|
—
|
|
|
165,804
|
|
|
65,643
|
|
|
65,312
|
|
|
7,516
|
|
|
304,275
|
|
Total portfolio assets
|
$
|
988,224
|
|
|
$
|
1,703,353
|
|
|
$
|
321,664
|
|
|
$
|
663,530
|
|
|
$
|
7,516
|
|
|
3,684,287
|
|
Cash and other assets
|
|
|
|
|
|
|
|
|
|
|
1,329,990
|
|
Total assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,014,277
|
|
_______________________________________________________________________________
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)
|
|
(1)
|
Corporate/Other represents all corporate level and unallocated items including any intercompany eliminations necessary to reconcile to consolidated Company totals. This caption also includes the Company's joint venture investments and strategic investments that are not included in the other reportable segments above.
|
|
|
(2)
|
General and administrative excludes stock-based compensation expense of
$4.2 million
and
$9.1 million
for the
three months
ended
March 31, 2019
and 2018, respectively.
|
|
|
(3)
|
The following is a reconciliation of segment profit to net income (loss) ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31,
|
|
2019
|
|
2018
|
Segment profit
|
$
|
17,194
|
|
|
$
|
58,967
|
|
Add: Recovery of loan losses
|
97
|
|
|
855
|
|
Less: Impairment of assets
|
(3,851
|
)
|
|
(4,100
|
)
|
Less: Stock-based compensation expense
|
(4,249
|
)
|
|
(9,091
|
)
|
Less: Depreciation and amortization
|
(15,668
|
)
|
|
(11,110
|
)
|
Less: Income tax expense
|
(25
|
)
|
|
(121
|
)
|
Less: Loss on early extinguishment of debt, net
|
(468
|
)
|
|
(372
|
)
|
Net income (loss)
|
$
|
(6,970
|
)
|
|
$
|
35,028
|
|