iStar Financial ends Q3 with $740 million cash, equivalents; posts $72 million loss

By Lisa Kerner

Charlotte, N.C., Oct. 26 - iStar Financial Inc. ended the third quarter of 2012 with about $740 million of cash and cash equivalents, including cash reserved for debt repayment.

The company paid down "significant amounts" of debt. Coupled with its most recent debt refinancing, iStar can focus on deploying capital in 2013, new investments, and debt reduction and refinancing activities, said chairman and chief executive officer Jay Sugarman during iStar's third-quarter earnings call on Friday.

During the quarter, iStar repaid $147.7 million on the A-1 tranche of its 2011 secured credit facility, resulting in an outstanding balance of $498.3 million at quarter-end. The balance of the A-2 tranche of the 2011 secured credit facility at the end of the quarter was $1.45 billion.

iStar closed on a $54.5 million secured, 10-year term loan during the third quarter and used the proceeds to refinance existing debt on one net lease asset. The new loan bears interest at a rate of 4.85%, compared to the prior loan's rate of 6.41%, a company news release.

The company also repaid $66.4 million on the A-1 tranche of its 2012 secured credit facility during the quarter, bringing its remaining outstanding balance to $262.3 million. At Sept. 30, the balance of the A-2 tranche of the 2012 secured credit facility was $470.0 million.

Subsequent to the end of the third quarter, iStar closed on a new $1.82 billion senior secured credit facility due Oct. 15, 2017. Proceeds were used to refinance the remaining balances of the 2011 A-1/A-2 secured credit facilities, chief financial officer David DiStaso said on the call.

Moody's upgraded iStar's corporate family rating to B2 and senior unsecured credit rating to B3, and also assigned a B1 rating to the new senior secured term loan.

iStar also repaid the remaining $460.7 million balance of its senior unsecured convertible notes due Oct. 1, 2012 at maturity with cash, also after the close of the third quarter.

iStar's leverage was 2.5 times, unchanged from the prior quarter.

The weighted average effective cost of debt for the third quarter was 6.5%.

Financial highlights

For the third quarter, iStar reported a net loss allocable to common shareholders of $72 million, or a loss of 86 cents per share.

Proceeds generated from iStar's portfolio in the third quarter totaled $318 million and included about $158 million of principal repayments, $80 million from residential unit sales, $67 million from sales of owned real estate assets, and about 13 million from other investment.

iStar funded a total of about $28 million in new and existing investments for the period.

At Sept. 30, iStar reported its $1.52 billion of performing loans had a weighted average last dollar loan-to-value ratio of 70.8% and a weighted average maturity of 2.9 years. The performing loans consisted of 46% floating rate loans and 54% fixed rate loans.

The company's non-performing loans had a carrying value of about $640 million, net of $491 million of specific reserves, compared to $640 million, net of $491 million of specific reserves, at the end of the prior quarter.

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

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