iStar Financial cuts $600 million debt, posts $59 million loss in Q2

By Lisa Kerner

Charlotte, N.C., July 27 - iStar Financial Inc. retired $600 million of debt during the second quarter of 2012 and ended the period with about $707 million of cash and cash equivalents, including cash reserved for debt repayment, chief financial officer David DiStaso said during the company's earnings call on Friday.

The company delivered on two of its main objectives during the quarter, chairman and chief executive Jay Sugarman said on the call, continuing to pay down significant amounts of debt and accessing the unsecured debt market for its new issue.

The company issued $275 million of 9% senior unsecured notes due 2017. Proceeds were used to refinance unsecured debt maturing in 2012.

Also during the quarter, iStar repaid $90.3 million of its 5½% senior unsecured notes due June 2012 and repurchased $191.5 million of its senior convertible unsecured notes due October 2012, said DiStaso.

iStar repaid $225.7 million on the A-1 tranche of its 2011 secured credit facility, bringing the remaining outstanding balance to $646.1 million at quarter's end.

The company also repaid $81.4 million on the A-1 tranche of its 2012 secured credit facility, bringing the remaining outstanding balance to $328.6 million.

Share repurchases for the second quarter totaled 809,720 shares at an average price of $5.69 per share. iStar had remaining authority to repurchase up to $16 million of shares under its share repurchase program at the end of the quarter.

iStar's leverage was 2.5 times at June 30, an improvement from 2.7 times in the prior quarter. The weighted average effective cost of debt for the second quarter was 6½%.

Net loss for quarter

For the second quarter, iStar reported a net loss allocable to common shareholders of $59 million, compared with $35.5 million for the second quarter of 2011.

During the second quarter, iStar generated $555.4 million of proceeds from its portfolio, comprised of $185.8 million of principal repayments, $117.0 million primarily from residential unit sales of other real estate owned assets, $136.2 million from sales of net lease assets, $57.0 million from loan sales and $59.4 million from other investments, DiStaso said.

iStar funded a total of $39.7 million of investments and capital expenditures during the period.

At June 30, iStar's total portfolio had a carrying value of $6.3 billion, gross of general loan loss reserves. The portfolio was comprised of about $2.4 billion of loans and other lending investments, $1.6 billion of net lease assets, $2.0 billion of owned real estate and $428 million of other investments.

The company's $1.7 billion of performing loans and other lending investments had a weighted average last dollar loan-to-value ratio of 74% and a weighted average maturity of 3.0 years at the end of the quarter.

iStar is a New York-based finance company focused on the commercial real estate industry.

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