SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| | ||||
(Mark One) | |||||
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the quarterly period ended | |||||
March 31, | |||||
OR | |||||
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the transition period from to |
Commission File No. 1-15371
iStar Inc.
(Exact name of registrant as specified in its charter)
| | | ||||||||||||
Maryland | 95-6881527 | |||||||||||||
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification Number) | ||||||||||||
1114 Avenue of the Americas, 39th Floor | | |||||||||||||
New York , NY |
| 10036 | ||||||||||||
(Address of principal executive offices) | | (Zip code) |
Registrant's
Registrant’s telephone number, including area code: (212) (212) 930-9400
Securities registered pursuant to Section 12(b) of the Act:
| | | | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, $0.001 par value | STAR | New York Stock Exchange | ||
8.00% Series D Cumulative Redeemable Preferred Stock, $0.001 par value | | STAR-PD | | New York Stock Exchange |
7.65% Series G Cumulative Redeemable Preferred Stock, $0.001 par value | | STAR-PG | | New York Stock Exchange |
7.50% Series I Cumulative Redeemable Preferred Stock, $0.001 par value | | STAR-PI | | New York Stock Exchange |
Indicate by check mark whether the registrant: (i)(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports); and (ii)(2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large“large accelerated filer," "accelerated” “accelerated filer," "smaller” “smaller reporting company,"” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | ||||||||||||||||||
Large Accelerated Filer | Filer | Accelerated Filer | Non‑accelerated Filer | Smaller Reporting Company | Emerging Growth Company | |||||||||||||||||||||
☒ | | ☐ | | ☐ | | ☐ | | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
$0.001 par value | ||||||||||||||
$0.001 par value | ||||||||||||||
$0.001 par value | ||||||||||||||
$0.001 par value |
As of April 27, 2021,29, 2022, there were 73,235,77982,847,755 shares, $0.001 par value per share, of iStar Inc. common stock outstanding.
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| Consolidated Statements of Comprehensive Income (Loss) (unaudited)—For the three months ended March 31, | 4 | ||||||
| 5 | |||||||
| 6 | |||||||
| 8 | |||||||
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54 |
iStar Inc.
(In thousands, except per share data)(1)
(unaudited)
| | | | | | | |
| | As of | | ||||
| | March 31, | | December 31, | | ||
|
| 2022 |
| 2021 | | ||
ASSETS |
| |
|
| |
| |
Real estate |
| |
|
| |
| |
Real estate, at cost | | $ | 113,679 | | $ | 113,510 | |
Less: accumulated depreciation | |
| (22,245) | |
| (21,360) | |
Real estate, net | |
| 91,434 | |
| 92,150 | |
Real estate available and held for sale | |
| 301 | |
| 301 | |
Total real estate | |
| 91,735 | |
| 92,451 | |
Real estate and other assets available and held for sale and classified as discontinued operations(2) | | | 226,309 | | | 2,299,711 | |
Net investment in leases ($281 and $0 of allowances as of March 31, 2022 and December 31, 2021, respectively) | | | 28,131 | | | 43,215 | |
Land and development, net | |
| 277,421 | |
| 286,810 | |
Loans receivable and other lending investments, net ($4,932 and $4,769 of allowances as of March 31, 2022 and December 31, 2021, respectively) | |
| 331,839 | |
| 332,844 | |
Loans receivable held for sale | | | — | | | 43,215 | |
Other investments | |
| 1,526,019 | |
| 1,297,281 | |
Cash and cash equivalents | |
| 1,500,203 | |
| 339,601 | |
Accrued interest and operating lease income receivable, net | |
| 1,666 | |
| 1,813 | |
Deferred operating lease income receivable, net | |
| 3,046 | |
| 3,159 | |
Deferred expenses and other assets, net | |
| 97,682 | |
| 100,434 | |
Total assets | | $ | 4,084,051 | | $ | 4,840,534 | |
LIABILITIES AND EQUITY | |
|
| |
|
| |
Liabilities: | |
|
| |
|
| |
Accounts payable, accrued expenses and other liabilities | | $ | 198,886 | | $ | 236,732 | |
Liabilities associated with real estate held for sale and classified as discontinued operations(2) | | | 15,963 | | | 968,419 | |
Liabilities associated with properties held for sale | |
| — | |
| 3 | |
Debt obligations, net | |
| 2,084,252 | |
| 2,572,174 | |
Total liabilities | |
| 2,299,101 | |
| 3,777,328 | |
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 | |
| 12 | |
| 12 | |
Common Stock, $0.001 par value, 200,000 shares authorized, 69,096 and 68,870 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively | |
| 69 | |
| 69 | |
Additional paid-in capital | |
| 3,100,665 | |
| 3,100,015 | |
Accumulated deficit | |
| (1,625,086) | |
| (2,227,213) | |
Accumulated other comprehensive loss | |
| (21,224) | |
| (21,587) | |
Total iStar Inc. shareholders' equity | |
| 1,454,436 | |
| 851,296 | |
Noncontrolling interests | |
| 330,514 | |
| 211,910 | |
Total equity | |
| 1,784,950 | |
| 1,063,206 | |
Total liabilities and equity | | $ | 4,084,051 | | $ | 4,840,534 | |
(1) | Refer to Note 2 for details on the Company’s consolidated variable interest entities (“VIEs”). |
(2) | Refer to Note 3 - Net Lease Sale and Discontinued Operations. |
(1)
As of | |||||||||||
March 31, 2021 | December 31, 2020 | ||||||||||
ASSETS | |||||||||||
Real estate | |||||||||||
Real estate, at cost | $ | 1,753,378 | $ | 1,752,053 | |||||||
Less: accumulated depreciation | (278,985) | (267,772) | |||||||||
Real estate, net | 1,474,393 | 1,484,281 | |||||||||
Real estate available and held for sale | 2,600 | 5,212 | |||||||||
Total real estate | 1,476,993 | 1,489,493 | |||||||||
Net investment in leases ($9,270 and $10,871 of allowances as of March 31, 2021 and December 31, 2020, respectively) | 431,126 | 429,101 | |||||||||
Land and development, net | 406,781 | 430,663 | |||||||||
Loans receivable and other lending investments, net ($9,058 and $13,170 of allowances as of March 31, 2021 and December 31, 2020, respectively) | 533,716 | 732,330 | |||||||||
Loan receivable held for sale | 16,086 | 0 | |||||||||
Other investments | 1,237,295 | 1,176,560 | |||||||||
Cash and cash equivalents | 193,852 | 98,633 | |||||||||
Accrued interest and operating lease income receivable, net | 8,686 | 10,061 | |||||||||
Deferred operating lease income receivable, net | 60,812 | 58,128 | |||||||||
Deferred expenses and other assets, net | 428,244 | 436,839 | |||||||||
Total assets | $ | 4,793,591 | $ | 4,861,808 | |||||||
LIABILITIES AND EQUITY | |||||||||||
Liabilities: | |||||||||||
Accounts payable, accrued expenses and other liabilities | $ | 451,010 | $ | 467,922 | |||||||
Liabilities associated with properties held for sale | 231 | 27 | |||||||||
Loan participations payable, net | 0 | 42,501 | |||||||||
Debt obligations, net | 3,291,343 | 3,286,975 | |||||||||
Total liabilities | 3,742,584 | 3,797,425 | |||||||||
Commitments and contingencies (refer to Note 12) | 0 | 0 | |||||||||
Equity: | |||||||||||
iStar Inc. shareholders' equity: | |||||||||||
Preferred Stock Series D, G and I, liquidation preference $25.00 per share (refer to Note 14) | 12 | 12 | |||||||||
Common Stock, $0.001 par value, 200,000 shares authorized, 73,440 and 73,967 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively | 73 | 74 | |||||||||
Additional paid-in capital | 3,204,862 | 3,240,535 | |||||||||
Accumulated deficit | (2,309,763) | (2,316,972) | |||||||||
Accumulated other comprehensive loss (refer to Note 14) | (41,858) | (52,680) | |||||||||
Total iStar Inc. shareholders' equity | 853,326 | 870,969 | |||||||||
Noncontrolling interests | 197,681 | 193,414 | |||||||||
Total equity | 1,051,007 | 1,064,383 | |||||||||
Total liabilities and equity | $ | 4,793,591 | $ | 4,861,808 |
2
(In thousands, except per share data)
(unaudited)
| | | | | | | |
| | For the Three Months Ended March 31, | | ||||
|
| 2022 |
| 2021 | | ||
Revenues: | | |
|
| |
| |
Operating lease income | | $ | 3,109 | | $ | 4,931 | |
Interest income | |
| 4,948 | |
| 9,789 | |
Interest income from sales-type leases | |
| 356 | |
| — | |
Other income | |
| 8,640 | |
| 13,015 | |
Land development revenue | |
| 14,900 | |
| 32,249 | |
Total revenues | |
| 31,953 | |
| 59,984 | |
Costs and expenses: | |
|
| |
|
| |
Interest expense | |
| 29,243 | |
| 28,809 | |
Real estate expense | |
| 10,117 | |
| 8,719 | |
Land development cost of sales | |
| 14,496 | |
| 29,323 | |
Depreciation and amortization | |
| 1,357 | |
| 2,401 | |
General and administrative | |
| 1,375 | |
| 21,439 | |
Provision for (recovery of) loan losses | |
| 135 | |
| (3,642) | |
Provision for losses on net investment in leases | |
| 281 | |
| — | |
Impairment of assets | |
| — | |
| 257 | |
Other expense | |
| 930 | |
| 253 | |
Total costs and expenses | |
| 57,934 | |
| 87,559 | |
Income from sales of real estate | |
| 492 | |
| 612 | |
Loss from operations before earnings from equity method investments and other items | |
| (25,489) | |
| (26,963) | |
Loss on early extinguishment of debt, net | |
| (1,428) | |
| 0 | |
Earnings from equity method investments | |
| 25,032 | |
| 11,768 | |
Net loss from continuing operations before income taxes | |
| (1,885) | |
| (15,195) | |
Income tax (expense) benefit | |
| (3) | |
| 698 | |
Net loss from continuing operations | | | (1,888) | | | (14,497) | |
Net income from discontinued operations(1) | |
| 797,688 | |
| 22,486 | |
Net income | | | 795,800 | | | 7,989 | |
Net loss from continuing operations attributable to noncontrolling interests | |
| 18 | |
| 44 | |
Net (income) from discontinued operations attributable to noncontrolling interests | | | (179,089) | | | (2,564) | |
Net income attributable to iStar Inc. | |
| 616,729 | |
| 5,469 | |
Preferred dividends | |
| (5,874) | |
| (5,874) | |
Net income (loss) allocable to common shareholders | | $ | 610,855 | | $ | (405) | |
Per common share data: | |
|
| |
|
| |
Net income (loss) allocable to common shareholders | |
|
| |
|
| |
Basic and diluted | | $ | 8.85 | | $ | (0.01) | |
Net loss from continuing operations and allocable to common shareholders: | |
|
| |
|
| |
Basic and diluted | | $ | (0.11) | | $ | (0.28) | |
Net income from discontinued operations and allocable to common shareholders: | |
|
| |
|
| |
Basic and diluted | | $ | 8.96 | | $ | 0.27 | |
Weighted average number of common shares: | |
|
| |
|
| |
Basic and diluted | |
| 69,037 | |
| 73,901 | |
(1) | Refer to Note 3 - Net Lease Sale and Discontinued Operations. |
For the Three Months Ended March 31, | ||||||||||||||||||||||||||
2021 | 2020 | |||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||
Operating lease income | $ | 47,444 | $ | 47,346 | ||||||||||||||||||||||
Interest income | 10,650 | 17,216 | ||||||||||||||||||||||||
Interest income from sales-type leases | 8,627 | 8,355 | ||||||||||||||||||||||||
Other income | 14,290 | 20,368 | ||||||||||||||||||||||||
Land development revenue | 32,249 | 80,176 | ||||||||||||||||||||||||
Total revenues | 113,260 | 173,461 | ||||||||||||||||||||||||
Costs and expenses: | ||||||||||||||||||||||||||
Interest expense | 39,563 | 43,392 | ||||||||||||||||||||||||
Real estate expense | 16,894 | 22,498 | ||||||||||||||||||||||||
Land development cost of sales | 29,323 | 77,059 | ||||||||||||||||||||||||
Depreciation and amortization | 15,455 | 14,486 | ||||||||||||||||||||||||
General and administrative | 21,439 | 34,271 | ||||||||||||||||||||||||
(Recovery of) provision for loan losses | (3,794) | 4,003 | ||||||||||||||||||||||||
(Recovery of) provision for losses on net investment in leases | (1,601) | 1,292 | ||||||||||||||||||||||||
Impairment of assets | 1,785 | 1,708 | ||||||||||||||||||||||||
Other expense | 253 | 74 | ||||||||||||||||||||||||
Total costs and expenses | 119,317 | 198,783 | ||||||||||||||||||||||||
Income from sales of real estate | 612 | 0 | ||||||||||||||||||||||||
Loss from operations before earnings from equity method investments and other items | (5,445) | (25,322) | ||||||||||||||||||||||||
Loss on early extinguishment of debt, net | 0 | (4,115) | ||||||||||||||||||||||||
Earnings from equity method investments | 12,769 | 16,612 | ||||||||||||||||||||||||
Net income (loss) before income taxes | 7,324 | (12,825) | ||||||||||||||||||||||||
Income tax benefit (expense) | 665 | (60) | ||||||||||||||||||||||||
Net income (loss) | 7,989 | (12,885) | ||||||||||||||||||||||||
Net (income) attributable to noncontrolling interests | (2,520) | (2,691) | ||||||||||||||||||||||||
Net income (loss) attributable to iStar Inc. | 5,469 | (15,576) | ||||||||||||||||||||||||
Preferred dividends | (5,874) | (5,874) | ||||||||||||||||||||||||
Net loss allocable to common shareholders | $ | (405) | $ | (21,450) | ||||||||||||||||||||||
Per common share data: | ||||||||||||||||||||||||||
Net loss allocable to common shareholders: | ||||||||||||||||||||||||||
Basic | $ | (0.01) | $ | (0.28) | ||||||||||||||||||||||
Diluted | $ | (0.01) | $ | (0.28) | ||||||||||||||||||||||
Weighted average number of common shares: | ||||||||||||||||||||||||||
Basic | 73,901 | 77,444 | ||||||||||||||||||||||||
Diluted | 73,901 | 77,444 | ||||||||||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
3
(In thousands)
(unaudited)
| | | | | | | |
|
| For the Three Months Ended March 31, | | ||||
| | 2022 |
| 2021 | | ||
Net income | | $ | 795,800 | | $ | 7,989 | |
Other comprehensive income (loss): | |
|
| |
|
| |
Reclassification of losses on cash flow hedges into earnings upon realization(1) | |
| 621 | |
| 2,338 | |
Unrealized losses on available-for-sale securities | |
| (3,013) | |
| (1,031) | |
Unrealized gains on cash flow hedges | |
| 2,755 | |
| 11,973 | |
Other comprehensive income | |
| 363 | |
| 13,280 | |
Comprehensive income | |
| 796,163 | |
| 21,269 | |
Comprehensive (income) attributable to noncontrolling interests(2) | |
| (179,071) | |
| (4,978) | |
Comprehensive income attributable to iStar Inc. | | $ | 617,092 | | $ | 16,291 | |
(1) | Reclassified to “Net income from discontinued operations” in the Company’s consolidated statements of operations for the three months ended March 31, 2021 is $2,104. Reclassified to “Earnings from equity method investments” in the Company’s consolidated statements of operations for the three months ended March 31, 2022 and 2021 are $621 and $234, respectively. |
(2) | For the three months ended March 31, 2022 and 2021, $179.1 million and $5.0 million, respectively, of comprehensive income attributable to noncontrolling interests was from discontinued operations. |
For the Three Months Ended March 31, | |||||||||||||||||||||||
2021 | 2020 | ||||||||||||||||||||||
Net income (loss) | $ | 7,989 | $ | (12,885) | |||||||||||||||||||
Other comprehensive income (loss): | |||||||||||||||||||||||
Reclassification of losses on cash flow hedges into earnings upon realization(1) | 2,338 | 1,314 | |||||||||||||||||||||
Unrealized (losses) gains on available-for-sale securities | (1,031) | 203 | |||||||||||||||||||||
Unrealized gains (losses) on cash flow hedges | 11,973 | (27,776) | |||||||||||||||||||||
Other comprehensive income (loss) | 13,280 | (26,259) | |||||||||||||||||||||
Comprehensive income (loss) | 21,269 | (39,144) | |||||||||||||||||||||
Comprehensive (income) loss attributable to noncontrolling interests | (4,978) | 2,753 | |||||||||||||||||||||
Comprehensive income (loss) attributable to iStar Inc. | $ | 16,291 | $ | (36,391) |
4
(In thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | |
|
| iStar Inc. Shareholders' Equity | | | | | | | |||||||||||||
|
| | |
| | |
|
| |
|
| |
| | Accumulated |
| | |
| | |
| | | | | | Common | | | Additional | | | Retained | | | Other | | | | | | |
| | | Preferred | | | Stock at | | | Paid-In | | | Earnings | | | Comprehensive | | | Noncontrolling | | Total | |
| | | Stock(1) | | | Par | | | Capital | | | (Deficit) | | | Income (Loss) | | | Interests | | Equity | |
Balance as of December 31, 2021 | | $ | 12 | | $ | 69 | | $ | 3,100,015 | | $ | (2,227,213) | | $ | (21,587) | | $ | 211,910 | | $ | 1,063,206 |
Dividends declared—preferred | |
| — | |
| — | |
| — | |
| (5,874) | |
| — | |
| — | |
| (5,874) |
Dividends declared—common ($0.125 per share) | |
| — | |
| — | |
| — | |
| (8,728) | |
| — | |
| — | |
| (8,728) |
Issuance of stock/restricted stock unit amortization, net(2) | |
| — | |
| — | |
| 650 | |
| — | |
| — | |
| 1,350 | |
| 2,000 |
Net income | |
| — | |
| — | |
| — | |
| 616,729 | |
| — | |
| 179,071 | |
| 795,800 |
Change in accumulated other comprehensive income (loss) | |
| — | |
| — | |
| — | |
| — | |
| 363 | |
| — | |
| 363 |
Contributions from noncontrolling interests | |
| — | |
| — | |
| — | |
| — | |
| — | |
| 7,893 | |
| 7,893 |
Distributions to noncontrolling interests | |
| — | |
| — | |
| — | |
| — | |
| — | |
| (69,710) | |
| (69,710) |
Balance as of March 31, 2022 | | $ | 12 | | $ | 69 | | $ | 3,100,665 | | $ | (1,625,086) | | $ | (21,224) | | $ | 330,514 | | $ | 1,784,950 |
| | | | | | | | | | | | | | | | | | | | | |
Balance as of December 31, 2020 | | $ | 12 | | $ | 74 | | $ | 3,240,535 | | $ | (2,316,972) | | $ | (52,680) | | $ | 193,414 | | $ | 1,064,383 |
Impact from adoption of new accounting standards | | | — | | | — | | | (25,869) | | | 15,850 | | | — | | | — | | | (10,019) |
Dividends declared—preferred | |
| — | |
| — | |
| — | |
| (5,874) | |
| — | |
| — | |
| (5,874) |
Dividends declared—common ($0.11 per share) | |
| — | |
| — | |
| — | |
| (8,236) | |
| — | |
| — | |
| (8,236) |
Issuance of stock/restricted stock unit amortization, net(2) | |
| — | |
| — | |
| 2,572 | |
| — | |
| — | |
| 1,370 | |
| 3,942 |
Net income | |
| — | |
| — | |
| — | |
| 5,469 | |
| — | |
| 2,520 | |
| 7,989 |
Change in accumulated other comprehensive income (loss) | |
| — | |
| — | |
| — | |
| — | |
| 10,822 | |
| 2,458 | |
| 13,280 |
Repurchase of stock | |
| — | |
| (1) | |
| (12,376) | |
| — | |
| — | |
| — | |
| (12,377) |
Contributions from noncontrolling interests | | | — | | | — | | | — | | | — | | | — | | | 64 | | | 64 |
Distributions to noncontrolling interests | |
| — | |
| — | |
| — | |
| — | |
| — | |
| (2,145) | |
| (2,145) |
Balance as of March 31, 2021 | | $ | 12 | | $ | 73 | | $ | 3,204,862 | | $ | (2,309,763) | | $ | (41,858) | | $ | 197,681 | | $ | 1,051,007 |
(1) | Refer to Note 13 for details on the Company’s Preferred Stock. |
(2) | Net of payments for withholding taxes upon vesting of stock-based compensation. |
iStar Inc. Shareholders' Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock(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, 2020 | $ | 12 | $ | 74 | $ | 3,240,535 | $ | (2,316,972) | $ | (52,680) | $ | 193,414 | $ | 1,064,383 | ||||||||||||||||||||||||||||||||||||||||||||||||
Impact from adoption of new accounting standards (refer to Note 3) | — | — | (25,869) | 15,850 | — | — | (10,019) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared—preferred | — | — | — | (5,874) | — | — | (5,874) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared—common ($0.11 per share) | — | — | — | (8,236) | — | — | (8,236) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of stock/restricted stock unit amortization, net(2) | — | — | 2,572 | — | — | 1,370 | 3,942 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | 5,469 | — | 2,520 | 7,989 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in accumulated other comprehensive income (loss) | — | — | — | — | 10,822 | 2,458 | 13,280 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of stock | — | (1) | (12,376) | — | — | — | (12,377) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contributions from noncontrolling interests | — | — | — | — | — | 64 | 64 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions to noncontrolling interests | — | — | — | — | — | (2,145) | (2,145) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of March 31, 2021 | $ | 12 | $ | 73 | $ | 3,204,862 | $ | (2,309,763) | $ | (41,858) | $ | 197,681 | $ | 1,051,007 | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2019 | $ | 12 | $ | 78 | $ | 3,284,877 | $ | (2,205,838) | $ | (38,707) | $ | 197,538 | $ | 1,237,960 | ||||||||||||||||||||||||||||||||||||||||||||||||
Impact from adoption of new accounting standards | — | — | — | (12,382) | — | — | (12,382) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared—preferred | — | — | — | (5,874) | — | — | (5,874) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared—common ($0.10 per share) | — | — | — | (7,834) | — | — | (7,834) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of stock/restricted stock unit amortization, net(2) | — | 2,222 | — | — | 727 | 2,949 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | (15,576) | — | 2,691 | (12,885) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in accumulated other comprehensive income (loss) | — | — | — | — | (20,815) | (5,444) | (26,259) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of stock | — | (1) | (12,044) | — | — | — | (12,045) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contributions from noncontrolling interests | — | — | — | — | — | 163 | 163 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions to noncontrolling interests | — | — | — | — | — | (3,724) | (3,724) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of March 31, 2020 | $ | 12 | $ | 77 | $ | 3,275,055 | $ | (2,247,504) | $ | (59,522) | $ | 191,951 | $ | 1,160,069 |
The accompanying notes are an integral part of the consolidated financial statements.
5
(In thousands)
(unaudited)
| | | | | | | |
|
| For the Three Months Ended March 31, | | ||||
|
| 2022 |
| 2021 | | ||
Cash flows from operating activities: | | |
|
| |
| |
Net income (loss) | | $ | 795,800 | | $ | 7,989 | |
Adjustments to reconcile net income (loss) to cash flows from operating activities: | |
|
| |
|
| |
Provision for (recovery of) loan losses | |
| 135 | |
| (3,794) | |
Provision for losses on net investment in leases | |
| 281 | |
| (1,601) | |
Impairment of assets | |
| 1,492 | |
| 1,785 | |
Depreciation and amortization | |
| 1,357 | |
| 15,455 | |
Non-cash interest income from sales-type leases | |
| (1,580) | |
| (9,388) | |
Stock-based compensation (income) expense | |
| (12,427) | |
| 5,508 | |
Amortization of discounts/premiums and deferred financing costs on debt obligations, net | |
| 2,930 | |
| 2,016 | |
Amortization of discounts/premiums and deferred interest on loans, net | |
| (2,785) | |
| (3,379) | |
Deferred interest on loans received | |
| 0 | |
| 23,703 | |
Earnings from equity method investments | |
| (152,161) | |
| (12,769) | |
Distributions from operations of other investments | |
| 16,429 | |
| 10,598 | |
Deferred operating lease income | |
| (2,373) | |
| (2,684) | |
Income from sales of real estate | |
| (684,229) | |
| (612) | |
Land development revenue in excess of cost of sales | |
| (404) | |
| (2,926) | |
Loss on early extinguishment of debt, net | |
| 42,836 | |
| 0 | |
Other operating activities, net | |
| (9,940) | |
| (3,917) | |
Changes in assets and liabilities: | |
| | |
| | |
Origination and fundings of loans receivable held for sale | | | 0 | | | (16,086) | |
Changes in accrued interest and operating lease income receivable | |
| 1,368 | |
| 1,945 | |
Changes in deferred expenses and other assets, net | |
| (1,735) | |
| 1,776 | |
Changes in accounts payable, accrued expenses and other liabilities | |
| (25,618) | |
| (17,414) | |
Cash flows used in operating activities | |
| (30,624) | |
| (3,795) | |
Cash flows from investing activities: | |
|
| |
|
| |
Originations and fundings of loans receivable, net | |
| (4,000) | |
| (50,670) | |
Capital expenditures on real estate assets | |
| (741) | |
| (648) | |
Capital expenditures on land and development assets | |
| (4,803) | |
| (4,134) | |
Acquisitions of real estate, net investments in leases and land assets | |
| (28,309) | |
| 0 | |
Repayments of and principal collections on loans receivable and other lending investments, net | |
| 4,612 | |
| 109,926 | |
Net proceeds from sales of loans receivable | |
| 96,202 | |
| 79,560 | |
Net proceeds from sales of real estate | |
| 1,981,599 | |
| 2,967 | |
Net proceeds from sales of land and development assets | |
| 14,407 | |
| 30,801 | |
Net proceeds from sales of net investment in leases | | | 563,495 | | | 0 | |
Net proceeds from net investment in leases | | | 0 | | | 6,575 | |
Distributions from other investments | |
| 46,073 | |
| 20,032 | |
Contributions to and acquisition of interest in other investments | |
| (255,182) | |
| (59,866) | |
Other investing activities, net | |
| 4,514 | |
| 3,092 | |
Cash flows provided by investing activities | |
| 2,417,867 | |
| 137,635 | |
Cash flows from financing activities: | |
|
| |
|
| |
Borrowings from debt obligations | |
| 50,000 | |
| 25,000 | |
Repayments and repurchases of debt obligations | |
| (965,592) | |
| (32,308) | |
Purchase of marketable securities in connection with the defeasance of mortgage notes payable | |
| (252,571) | |
| 0 | |
Preferred dividends paid | |
| (5,874) | |
| (5,874) | |
Common dividends paid | |
| (8,956) | |
| (8,216) | |
Repurchase of stock | |
| 0 | |
| (10,775) | |
Payments for deferred financing costs | |
| 0 | |
| (75) | |
Payments for withholding taxes upon vesting of stock-based compensation | |
| (3,808) | |
| (2,085) | |
Contributions from noncontrolling interests | |
| 7,893 | |
| 64 | |
Distributions to noncontrolling interests | |
| (35,476) | |
| (2,145) | |
Payments for debt prepayment or extinguishment costs | |
| (15,608) | |
| 0 | |
Cash flows used in financing activities | |
| (1,229,992) | |
| (36,414) | |
Effect of exchange rate changes on cash | |
| 3 | |
| (111) | |
Changes in cash, cash equivalents and restricted cash | |
| 1,157,254 | |
| 97,315 | |
Cash, cash equivalents and restricted cash at beginning of period | |
| 393,996 | |
| 150,566 | |
Cash, cash equivalents and restricted cash at end of period | | $ | 1,551,250 | | $ | 247,881 | |
6
For the Three Months Ended March 31, | |||||||||||||||||
2021 | 2020 | ||||||||||||||||
Cash flows from operating activities: | |||||||||||||||||
Net income (loss) | $ | 7,989 | $ | (12,885) | |||||||||||||
Adjustments to reconcile net income (loss) to cash flows from operating activities: | |||||||||||||||||
(Recovery of) provision for loan losses | (3,794) | 4,003 | |||||||||||||||
(Recovery of) provision for losses on net investment in leases | (1,601) | 1,292 | |||||||||||||||
Impairment of assets | 1,785 | 1,708 | |||||||||||||||
Depreciation and amortization | 15,455 | 14,486 | |||||||||||||||
Non-cash interest income from sales-type leases | (9,388) | (1,570) | |||||||||||||||
Stock-based compensation expense | 5,508 | 16,270 | |||||||||||||||
Amortization of discounts/premiums and deferred financing costs on debt obligations, net | 2,016 | 3,320 | |||||||||||||||
Amortization of discounts/premiums and deferred interest on loans, net | (3,379) | (8,404) | |||||||||||||||
Deferred interest on loans received | 23,703 | 0 | |||||||||||||||
Earnings from equity method investments | (12,769) | (16,612) | |||||||||||||||
Distributions from operations of other investments | 10,598 | 5,009 | |||||||||||||||
Deferred operating lease income | (2,684) | (3,618) | |||||||||||||||
Income from sales of real estate | (612) | 0 | |||||||||||||||
Land development revenue in excess of cost of sales | (2,926) | (3,117) | |||||||||||||||
Loss on early extinguishment of debt, net | 0 | 4,115 | |||||||||||||||
Other operating activities, net | (3,917) | (9,710) | |||||||||||||||
Changes in assets and liabilities: | |||||||||||||||||
Origination of loan receivable held for sale | (16,086) | 0 | |||||||||||||||
Changes in accrued interest and operating lease income receivable | 1,945 | 79 | |||||||||||||||
Changes in deferred expenses and other assets, net | 1,776 | (3,039) | |||||||||||||||
Changes in accounts payable, accrued expenses and other liabilities | (17,414) | (12,324) | |||||||||||||||
Cash flows provided by (used in) operating activities | (3,795) | (20,997) | |||||||||||||||
Cash flows from investing activities: | |||||||||||||||||
Originations and fundings of loans receivable, net | (50,670) | (37,977) | |||||||||||||||
Capital expenditures on real estate assets | (648) | (4,008) | |||||||||||||||
Capital expenditures on land and development assets | (4,134) | (15,035) | |||||||||||||||
Repayments of and principal collections on loans receivable and other lending investments, net | 109,926 | 18,346 | |||||||||||||||
Net proceeds from sales of loans receivable | 79,560 | 0 | |||||||||||||||
Net proceeds from sales of real estate | 2,967 | 7,493 | |||||||||||||||
Net proceeds from net investment in leases | 6,575 | 0 | |||||||||||||||
Net proceeds from sales of land and development assets | 30,801 | 76,776 | |||||||||||||||
Distributions from other investments | 20,032 | 9,866 | |||||||||||||||
Contributions to and acquisition of interest in other investments | (59,866) | (118,991) | |||||||||||||||
Other investing activities, net | 3,092 | 769 | |||||||||||||||
Cash flows used in investing activities | 137,635 | (62,761) | |||||||||||||||
Cash flows from financing activities: | |||||||||||||||||
Borrowings from debt obligations | 25,000 | 306,180 | |||||||||||||||
Repayments and repurchases of debt obligations | (32,308) | (113,634) | |||||||||||||||
Preferred dividends paid | (5,874) | (5,874) | |||||||||||||||
Common dividends paid | (8,216) | (7,797) | |||||||||||||||
Repurchase of stock | (10,775) | (18,153) | |||||||||||||||
Payments for debt prepayment or extinguishment costs | 0 | (3,316) | |||||||||||||||
Payments for deferred financing costs | (75) | (2,382) | |||||||||||||||
Payments for withholding taxes upon vesting of stock-based compensation | (2,085) | (1,984) | |||||||||||||||
Contributions from noncontrolling interests | 64 | 163 | |||||||||||||||
Distributions to noncontrolling interests | (2,145) | (3,724) | |||||||||||||||
Cash flows (used in) provided by financing activities | (36,414) | 149,479 | |||||||||||||||
Effect of exchange rate changes on cash | (111) | (25) | |||||||||||||||
Changes in cash, cash equivalents and restricted cash | 97,315 | 65,696 | |||||||||||||||
Cash, cash equivalents and restricted cash at beginning of period | 150,566 | 352,206 | |||||||||||||||
Cash, cash equivalents and restricted cash at end of period | $ | 247,881 | $ | 417,902 |
For the Three Months Ended March 31, | |||||||||||
2021 | 2020 | ||||||||||
Supplemental disclosure of non-cash investing and financing activity: | |||||||||||
Fundings and (repayments) of loan receivables and loan participations, net | $ | (42,501) | $ | 2,110 | |||||||
Accrued repurchase of stock | 1,802 | 250 | |||||||||
| | | | | | | |
|
| For the Three Months Ended March 31, | | ||||
| | 2022 |
| 2021 | | ||
Reconciliation of cash and cash equivalents and restricted cash presented on the consolidated statements of cash flows | | | | | | | |
Cash and cash equivalents | | $ | 1,500,203 | | $ | 193,852 | |
Restricted cash included in deferred expenses and other assets, net | | | 51,047 | | | 54,029 | |
Total cash and cash equivalents and restricted cash | | $ | 1,551,250 | | $ | 247,881 | |
Supplemental disclosure of non-cash investing and financing activity: |
| |
|
| |
| |
Fundings and (repayments) of loan receivables and loan participations, net | | $ | — | | $ | (42,501) | |
Accrued repurchase of stock | | | — | | | 1,802 | |
Distributions to noncontrolling interests | |
| 34,467 | |
| — | |
Defeasance of mortgage notes payable | |
| 230,452 | |
| — | |
Marketable securities transferred in connection with the defeasance of mortgage notes payable | |
| 252,571 | |
| — | |
Accounts payable for capital expenditures on land and development and real estate assets | |
| 2,053 | |
| — | |
Assumption of mortgage by third party | |
| 62,825 | |
| — | |
The accompanying notes are an integral part of the consolidated financial statements.
7
iStar Inc.
Business
—iStar Inc. (theOrganization
—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 condensed 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 AmericaThe 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'sCompany’s consolidated financial statements and the related notes (refer to Note 3 – Net Lease Sale and Discontinued Operations) 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. The8
2021. The following table presents the assets and liabilities of the Company'sCompany’s consolidated VIEs as of March 31, 20212022 and December 31, 20202021 ($ in thousands):
| | | | | | |
|
| As of | ||||
|
| March 31, 2022 |
| December 31, 2021 | ||
ASSETS | | |
|
| |
|
Real estate | | |
|
| |
|
Real estate, at cost | | $ | 93,592 | | $ | 93,477 |
Less: accumulated depreciation | |
| (15,761) | |
| (14,987) |
Real estate, net | |
| 77,831 | |
| 78,490 |
Real estate and other assets available and held for sale and classified as discontinued operations | | | — | | | 886,845 |
Land and development, net | |
| 168,458 | |
| 176,833 |
Cash and cash equivalents | |
| 730,820 | |
| 23,908 |
Accrued interest and operating lease income receivable, net | |
| 541 | |
| — |
Deferred operating lease income receivable, net | |
| 5 | |
| 3 |
Deferred expenses and other assets, net | |
| 5,371 | |
| 5,001 |
Total assets | | $ | 983,026 | | $ | 1,171,081 |
LIABILITIES | |
|
| |
|
|
Accounts payable, accrued expenses and other liabilities | | $ | 28,529 | | $ | 24,744 |
Liabilities associated with real estate held for sale and classified as discontinued operations | | | — | | | 493,739 |
Total liabilities | |
| 28,529 | |
| 518,483 |
As of | |||||||||||
March 31, 2021 | December 31, 2020 | ||||||||||
ASSETS | |||||||||||
Real estate | |||||||||||
Real estate, at cost | $ | 900,349 | $ | 899,110 | |||||||
Less: accumulated depreciation | (68,141) | (61,917) | |||||||||
Real estate, net | 832,208 | 837,193 | |||||||||
Land and development, net | 220,273 | 240,137 | |||||||||
Other investments | 31 | 35 | |||||||||
Cash and cash equivalents | 32,756 | 22,571 | |||||||||
Accrued interest and operating lease income receivable, net | 2,501 | 1,472 | |||||||||
Deferred operating lease income receivable, net | 31,785 | 29,428 | |||||||||
Deferred expenses and other assets, net | 120,288 | 122,591 | |||||||||
Total assets | $ | 1,239,842 | $ | 1,253,427 | |||||||
LIABILITIES | |||||||||||
Accounts payable, accrued expenses and other liabilities | $ | 116,224 | $ | 115,581 | |||||||
Debt obligations, net | 482,827 | 488,719 | |||||||||
Total liabilities | 599,051 | 604,300 | |||||||||
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'sCompany’s consolidated financial statements. As of March 31, 2021,2022, the Company'sCompany’s maximum exposure to loss from these investments does not exceed the sum of the $127.7$58.7 million carrying value of the investments, which are classified in "Other investments"“Other investments” on the Company'sCompany’s consolidated balance sheets, and $17.0$2.3 million of related unfunded commitments.
Note 3—Summary of Significant Accounting Policies
Net Lease Sale and Discontinued Operations—A discontinued operation represents: (i) a component of the impactCompany or group of components that has been disposed of or is classified as held for sale in a single transaction and represents a strategic shift that has or will have a major effect on the Company'sCompany’s operations and financial results or (ii) an acquired business that is classified as held for sale on the date of acquisition.
Net Lease Sale—In March 2022, the Company, through certain subsidiaries of and entities managed by the Company, closed on a definitive purchase and sale agreement to sell a portfolio of net lease properties owned and managed by such subsidiaries and entities to a third party for an aggregate gross sales price of approximately $3.07 billion and recognized a gain of $663.7 million in “Net income from discontinued operations” in the Company’s consolidated financial statements from the adoption of Accounting Standards Updates ("ASUs") on January 1, 2021.
The portfolio sold consisted of office, entertainment and industrial properties located in the adoption date of January 1, 2021 will not be adjusted. In addition, upon the adoption of ASU 2020-06,United States comprising approximately 18.3 million square feet. It included assets wholly-owned by the Company is required to use a modified if-convertedand assets owned by 2 joint ventures (see Net Lease Venture and Net Lease Venture II below) managed by the Company and in which it owned 51.9% interests. At the time of closing, the portfolio was encumbered by an aggregate of $702 million of mortgage indebtedness, including indebtedness from equity method when calculating earnings per share. The Company will settle conversionsinvestments, which was repaid with proceeds from the sale. After repayment of the 3.125%mortgage indebtedness and prepayment penalties, a senior convertible notesterm loan secured by paying the conversion value in cash up to the original principal amountcertain of the notes being convertedassets (refer to Note 10), payments to terminate derivative contracts, payments to joint venture partners, and sharespayments of common stock topromotes, transaction expenses and amounts due under employee incentive plans, the extent of any conversion premium. The if-converted method is modified so that interest expense is not added back to the numerator, and the denominator only includes theCompany retained net number of incremental shares that would be issued upon conversion.cash proceeds
9
iStar Inc.
of $1.2 billion from the transaction. In March 2020,addition, as part of the Financial Accounting Standards Board issued ASU 2020-04, Reference Rate Reform ("ASU 2020-04"transaction, the buyer sold 3 of the properties to Safehold Inc. (“SAFE”). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives$122.0 million and other contracts. The guidanceentered into 3 Ground Leases with SAFE. NaN net lease properties were sold to different third parties in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. In March 2020, the Company elected to apply the hedge accounting expedients related to probabilityfirst quarter of 2022 and the assessments of effectiveness for future LIBOR-indexed cash flows to assume thatCompany’s net lease assets associated with its Ground Lease businesses were not included in the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation.sale. The Company continues to evaluatereceived net cash proceeds of $33.9 million from the impactsale of the guidance2 net lease properties and may apply other elections as applicable as additional changesrecognized a gain of $23.9 million in “Net income from discontinued operations” in the market occur.
Net Lease(1) | Operating Properties | Total | |||||||||||||||
As of March 31, 2021 | |||||||||||||||||
Land, at cost | $ | 188,418 | $ | 103,530 | $ | 291,948 | |||||||||||
Buildings and improvements, at cost | 1,354,952 | 106,478 | 1,461,430 | ||||||||||||||
Less: accumulated depreciation | (260,288) | (18,697) | (278,985) | ||||||||||||||
Real estate, net(1) | 1,283,082 | 191,311 | 1,474,393 | ||||||||||||||
Real estate available and held for sale(2) | 0 | 2,600 | 2,600 | ||||||||||||||
Total real estate | $ | 1,283,082 | $ | 193,911 | $ | 1,476,993 | |||||||||||
As of December 31, 2020 | |||||||||||||||||
Land, at cost | $ | 188,418 | $ | 103,530 | $ | 291,948 | |||||||||||
Buildings and improvements, at cost | 1,353,683 | 106,422 | 1,460,105 | ||||||||||||||
Less: accumulated depreciation | (250,198) | (17,574) | (267,772) | ||||||||||||||
Real estate, net(1) | 1,291,903 | 192,378 | 1,484,281 | ||||||||||||||
Real estate available and held for sale(2) | 0 | 5,212 | 5,212 | ||||||||||||||
Total real estate | $ | 1,291,903 | $ | 197,590 | $ | 1,489,493 |
Net Lease Venture (refer to Net Lease Venture below).
Net Lease Venture II—In July 2018, the Company entered into a new venture (the “Net Lease Venture II”) with an investment strategy similar to the Net Lease Venture. The Company was responsible for managing the venture in exchange for a management fee and incentive fee. During the three months ended March 31, 2020,2022 and 2021, the Company sold arecorded $0.4 million and $0.4 million, respectively, of management fees from Net Lease Venture II in “Net income from discontinued operations” in the Company’s consolidated statements of operations. Net Lease Venture II was part of the Net Lease Sale. As of March 31, 2022, $216.3 million of “Real estate and other assets available and held for sale and classified as discontinued operations” was attributable to the Net Lease Venture II and represented proceeds from the Net Lease Sale that were not yet distributed to the Company as of March 31, 2022.
Discontinued Operations—The Company’s net lease assetassets and liabilities included in the Net Lease Sale and the Company’s other 2 net lease assets are classified as “Real estate and other assets available and held for net proceedssale and classified as discontinued operations” and “Liabilities associated with real estate held for sale and classified as discontinued operations,” respectively, on the Company’s consolidated balance sheets as of $7.5 million and recognized an impairment of $1.7 million in connection with the sale.
10
iStar Inc.
The following table presents the Company’s consolidated assets and liabilities recorded in “Real estate and other assets available and held for sale and classified as discontinued operations” and “Liabilities associated with real estate held for sale and classified as discontinued operations,” respectively, on the Company’s consolidated balance sheets as of March 31, 2022 and December 31, 2021 ($ in thousands).
| | | | | | | |
| | As of | | ||||
| | March 31, | | December 31, | | ||
| | 2022 |
| 2021 | | ||
ASSETS | | |
|
| |
| |
Real estate | | |
|
| |
| |
Real estate, at cost | | $ | — | | $ | 1,537,655 | |
Less: accumulated depreciation | |
| — | |
| (271,183) | |
Total real estate, net | |
| — | |
| 1,266,472 | |
Net investment in leases | |
| — | |
| 486,389 | |
Loans receivable held for sale | | | — | | | 48,675 | |
Other investments | |
| 216,309 | |
| 103,229 | |
Finance lease right of use assets | | | — | | | 150,099 | |
Accrued interest and operating lease income receivable, net | |
| 1,018 | |
| 2,997 | |
Deferred operating lease income receivable, net | |
| — | |
| 63,156 | |
Deferred expenses and other assets, net | |
| 8,982 | |
| 178,694 | |
Total real estate and other assets available and held for sale and classified as discontinued operations | | $ | 226,309 | | $ | 2,299,711 | |
| |
|
| |
|
| |
LIABILITIES | |
|
| |
|
| |
Accounts payable, accrued expenses and other liabilities | | $ | 15,963 | | $ | 92,865 | |
Finance lease liabilities | | | — | | | 161,258 | |
Debt obligations, net | |
| — | |
| 714,296 | |
Total liabilities associated with real estate held for sale and classified as discontinued operations | | $ | 15,963 | | $ | 968,419 | |
11
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)
The transaction described above involving the Company's net lease business qualified for discontinued operations and the following table summarizes net income from discontinued operations for the three months ended March 31, 2020,2022 and 2021 ($ in thousands):
| | | | | | | |
| | For the Three Months Ended March 31, | | ||||
|
| 2022 |
| 2021 | | ||
Revenues: | | |
|
| |
| |
Operating lease income | | $ | 35,596 | | $ | 42,513 | |
Interest income | |
| 885 | |
| 861 | |
Interest income from sales-type leases | |
| 8,803 | |
| 8,627 | |
Other income | |
| 4,292 | |
| 1,275 | |
Total revenues | |
| 49,576 | |
| 53,276 | |
Costs and expenses: | |
| | |
| | |
Interest expense(1) | |
| 7,484 | |
| 10,754 | |
Real estate expense | |
| 5,072 | |
| 8,175 | |
Depreciation and amortization(1) | |
| — | |
| 13,054 | |
Recovery of loan losses | | | — | | | (152) | |
Recovery of losses on net investment in leases | |
| — | |
| (1,601) | |
Impairment of assets | |
| 1,492 | |
| 1,528 | |
Other expense(2) | |
| (5,669) | |
| — | |
Total costs and expenses | |
| 8,379 | |
| 31,758 | |
Income from sales of real estate | |
| 683,738 | |
| — | |
Income from discontinued operations before earnings from equity method investments and other items | |
| 724,935 | |
| 21,518 | |
Earnings from equity method investments | |
| 127,129 | |
| 1,001 | |
Loss on early extinguishment of debt, net | |
| (41,408) | |
| — | |
Net income from discontinued operations before income taxes | |
| 810,656 | |
| 22,519 | |
Income tax expense | |
| (12,968) | |
| (33) | |
Net income from discontinued operations | |
| 797,688 | |
| 22,486 | |
Net (income) from discontinued operations attributable to noncontrolling interests | |
| (179,089) | |
| (2,564) | |
Net income from discontinued operations attributable to iStar Inc. | | $ | 618,599 | | $ | 19,922 | |
(1) | For the three months ended March 31, 2022, the Company recorded $1.3 million of “Interest expense” in its consolidated statements of operations from its Ground Leases with SAFE. For the three months ended March 31, 2021, the Company recorded $2.1 million and $0.4 million, respectively, of “Interest expense” and “Depreciation and amortization” in its consolidated statements of operations from its Ground Leases with SAFE. |
(2) | Represents the reversal of other expenses recognized in connection with the settlement of interest rate hedges during the three months ended March 31, 2022. |
The following table presents cash flows provided by operating activities and cash flows used in investing activities from discontinued operations for the Company recorded an impairmentthree months ended March 31, 2022 and 2021 ($ in thousands).
| | | | | | |
| | For the Three Months Ended March 31, | ||||
| | 2022 |
| 2021 | ||
Cash flows provided by operating activities | | $ | 22,571 | | $ | 20,847 |
Cash flows provided by investing activities | |
| 2,553,349 | |
| 566 |
12
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)
Note 4—Real Estate
The Company’s real estate assets were comprised of the following ($ in connection with the sale of a net lease asset.thousands):
| | | |
As of March 31, 2022 |
| |
|
Land, at cost | | $ | 6,830 |
Buildings and improvements, at cost | |
| 106,849 |
Less: accumulated depreciation | |
| (22,245) |
Real estate, net | |
| 91,434 |
Real estate available and held for sale(1) | |
| 301 |
Total real estate | | $ | 91,735 |
As of December 31, 2021 | |
|
|
Land, at cost | | $ | 6,831 |
Buildings and improvements, at cost | |
| 106,679 |
Less: accumulated depreciation | |
| (21,360) |
Real estate, net | |
| 92,150 |
Real estate available and held for sale(1) | |
| 301 |
Total real estate | | $ | 92,451 |
(1) | As of March 31, 2022 and December 31, 2021, the Company had $0.3 million and $0.3 million, respectively, of residential condominiums available for sale in its operating properties portfolio. |
Dispositions—Refer to Note 3 - Net Lease Sale and Discontinued Operations.
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 $7.0$0.7 million and $5.9$0.7 million for the three months ended March 31, 2022 and 2021, and 2020, respectively.respectively. These amounts are included in "Operating“Operating lease income"income” in the Company'sCompany’s consolidated statements of operations.
Allowance for Doubtful Accounts—
As of March 31,Future Minimum Operating Lease Payments
—Future minimum operating lease payments to be collected under non-cancelable operating leases, excluding customer reimbursements of expenses, in effect as of March 31, | | | |
|
| Operating | |
Year | | Properties | |
2022 (remaining nine months) | | $ | 4,843 |
2023 | |
| 6,293 |
2024 | |
| 6,195 |
2025 | |
| 5,600 |
2026 | |
| 5,125 |
Thereafter | |
| 4,361 |
Year | Net Lease | Operating Properties | ||||||||||||
2021 (remaining nine months) | $ | 95,970 | $ | 10,877 | ||||||||||
2022 | 130,077 | 6,677 | ||||||||||||
2023 | 121,718 | 6,421 | ||||||||||||
2024 | 116,027 | 6,383 | ||||||||||||
2025 | 119,483 | 5,720 | ||||||||||||
Thereafter | 1,254,867 | 8,247 |
Note 5—Net Investment in Leases
In May 2019,June 2021, the Company acquired 2 parcels of land for $42.0 million each and simultaneously entered into 2 Ground Leases with the respective tenants. Each Ground Lease also provides for a transaction withleasehold improvement allowance up to a maximum of $83.0 million. The Company also concurrently entered into an operatoragreement pursuant to which SAFE would
13
iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)
acquire the Ground Leases from the Company. If certain construction conditions are not met within a specified time period, SAFE will have 0 obligation to acquire the Ground Leases or fund the leasehold improvement allowances. The Company classified 1 of the purchase of 9 bowling centers for $56.7 million, of which 7 were acquired from the lessee for $44.1 million,Ground Leases as a sales-type lease and a commitment to invest up to $55.0 millionit is recorded in additional bowling centers over the next several years. The new centers were added to the Company's existing master leases with the tenant. In connection with this transaction, the maturities of the master leases were extended by 15 years to 2047. In the second quarter 2020, the Company entered into a transaction with the lessee whereby it would apply $10 million of the net proceeds it received from certain sales of the lessee's facilities to the lessee's upcoming rent obligations to the Company. In exchange, the Company's obligation under the lease to acquire an equal amount of new facilities for them or to reduce their rent in the future has been terminated. In the third quarter 2020, the Company granted the lessee a nine-month rent deferral on its 2 wholly-owned master leases in exchange for eliminating the Company's commitment to invest up to $55.0 million in additional bowling centers over the next several years. All deferred amounts are required to be repaid with interest beginning in January 2023.
NaN Ground Lease was entered into with the seller of the land and did not qualify for sale leaseback accounting, and as such, was accounted for as a financing transaction and $42.0 million was recorded in “Loans receivable held for sale” on the Company’s consolidated balance sheet at the time of acquisition. There can be no assurance that the conditions to closing will be satisfied and that SAFE will acquire the properties and Ground Leases from the Company. In January 2022, the Company sold the Ground Lease to the Ground Lease Plus Fund (refer to Note 8).
In January 2022, the Company entered into a commitment to acquire land for $36.0 million and simultaneously structured and entered into a Ground Lease as part of the Ground Lease tenant’s recapitalization of an existing multifamily property. As of March 31, 2022, the Company had funded $28.2 million of this commitment. SAFE (refer to Note 8) waived its right of first refusal on this investment but entered into an agreement with the Company pursuant to which SAFE would acquire the land and related Ground Lease when certain construction related conditions are met.
The Company’s net investment in leases were comprised of the following as of March 31, 2022 and December 31, 2021 ($ in thousands):
| | | | | | |
|
| March 31, 2022 |
| December 31, 2021 | ||
Total undiscounted cash flows | | $ | 356,338 | | $ | 524,712 |
Unguaranteed estimated residual value | |
| 21,750 | |
| 42,000 |
Present value discount | |
| (349,676) | |
| (523,497) |
Allowance for losses on net investment in leases | |
| (281) | |
| — |
Net investment in leases(1) | | $ | 28,131 | | $ | 43,215 |
(1) | As of March 31, 2022 and December 31, 2021, the Company’s net investment in lease was current in its payment status and performing in accordance with the terms of the lease. As of March 31, 2022, the risk rating on the Company’s net investment in leases was 1.0. |
Dispositions—
During the three months ended March 31, 2021, the Company sold net lease assets for net proceeds of $6.6 million and recognized an aggregate impairment of $1.5 million in connection with theMarch 31, 2021 | December 31, 2020 | |||||||||||||
Total undiscounted cash flows | $ | 1,020,921 | $ | 1,020,921 | ||||||||||
Unguaranteed estimated residual value | 338,543 | 345,284 | ||||||||||||
Present value discount | (919,068) | (926,233) | ||||||||||||
Allowance for losses on net investment in leases | (9,270) | (10,871) | ||||||||||||
Net investment in leases(1) | $ | 431,126 | $ | 429,101 |
| | | |
|
| Amount | |
2022 (remaining nine months) | | $ | 688 |
2023 | |
| 934 |
2024 | |
| 1,194 |
2025 | |
| 1,240 |
2026 | |
| 1,264 |
Thereafter | |
| 351,018 |
Total undiscounted cash flows | | $ | 356,338 |
Amount | ||||||||||||||||||||||||||
2021 (remaining nine months) | $ | 14,248 | ||||||||||||||||||||||||
2022 | 30,481 | |||||||||||||||||||||||||
2023 | 41,854 | |||||||||||||||||||||||||
2024 | 41,584 | |||||||||||||||||||||||||
2025 | 30,481 | |||||||||||||||||||||||||
Thereafter | 862,273 | |||||||||||||||||||||||||
Total undiscounted cash flows | $ | 1,020,921 | ||||||||||||||||||||||||
14
Allowance for Losses on Net Investment in Leases—Changes in the Company'sCompany’s allowance for losses on net investment in leases for the three months ended March 31, 20212022 and 20202021 were as follows ($ in thousands):
2021 | 2020 | |||||||||||||||||||||||||||||||||||||||||||
Allowance for losses on net investment in leases at beginning of period | $ | 10,871 | $ | 0 | ||||||||||||||||||||||||||||||||||||||||
Initial allowance recorded upon adoption of new accounting standard(1) | 0 | 9,111 | ||||||||||||||||||||||||||||||||||||||||||
(Recovery of) provision for losses on net investment in leases(2) | (1,601) | 1,292 | ||||||||||||||||||||||||||||||||||||||||||
Allowance for losses on net investment in leases at end of period | $ | 9,270 | $ | 10,403 |
| | | | | | | |
|
| Three Months Ended |
| ||||
| | March 31, 2022 |
| March 31, 2021 | | ||
Allowance for losses on net investment in leases at beginning of period(1) |
| $ | — | | $ | 10,871 |
|
Provision for (recovery of) losses on net investment in leases (2) | | | 281 | | | (1,601) | |
Allowance for losses on net investment in leases at end of period(1) | | $ | 281 | | $ | 9,270 | |
(1) | All 2021 amounts were for net investment in leases included in the Net Lease Sale (refer to Note 3 – Net Lease Sale and Discontinued Operations). |
(2) | During the three months ended March 31, 2022, the Company recorded a provision for losses on net investment in leases of $0.3 million due primarily to the macroeconomic forecast on commercial real estate markets. During the three months ended March 31, 2021, the Company recorded a recovery of losses on net investment in leases of $1.6 million (which is included in “Net income from discontinued operations’) due primarily to an improving macroeconomic forecast on commercial real estate markets since December 31, 2020. |
The Company'sCompany’s land and development assets were comprised of the following ($ in thousands):
As of | |||||||||||
March 31, | December 31, | ||||||||||
2021 | 2020 | ||||||||||
Land and land development, at cost | $ | 417,537 | $ | 441,201 | |||||||
Less: accumulated depreciation | (10,756) | (10,538) | |||||||||
Total land and development, net | $ | 406,781 | $ | 430,663 |
| | | | | | | |
|
| As of | | ||||
| | March 31, | | December 31, | | ||
|
| 2022 |
| 2021 | | ||
Land and land development, at cost | | $ | 288,460 | | $ | 297,621 | |
Less: accumulated depreciation | |
| (11,039) | |
| (10,811) | |
Total land and development, net | | $ | 277,421 | | $ | 286,810 | |
Dispositions—
During the three months ended March 31,
15
The following is a summary of the Company'sCompany’s loans receivable and other lending investments by class ($ in thousands):
| | | | | | | |
|
| As of | | ||||
|
| March 31, 2022 |
| December 31, 2021 | | ||
Construction loans | | | | | | | |
Senior mortgages | | $ | 186,094 | | $ | 184,643 | |
Corporate/Partnership loans | |
| 0 | |
| 618 | |
Subtotal - gross carrying value of construction loans(1) | |
| 186,094 | |
| 185,261 | |
Loans | |
|
| |
|
| |
Senior mortgages | |
| 14,724 | |
| 14,965 | |
Subordinate mortgages | |
| 12,670 | |
| 12,457 | |
Subtotal - gross carrying value of loans | |
| 27,394 | |
| 27,422 | |
Other lending investments | |
|
| |
|
| |
Held-to-maturity debt securities | |
| 98,419 | |
| 96,838 | |
Available-for-sale debt securities | |
| 24,864 | |
| 28,092 | |
Subtotal - other lending investments | |
| 123,283 | |
| 124,930 | |
Total gross carrying value of loans receivable and other lending investments | |
| 336,771 | |
| 337,613 | |
Allowance for loan losses | |
| (4,932) | |
| (4,769) | |
Total loans receivable and other lending investments, net | | $ | 331,839 | | $ | 332,844 | |
(1) | As of March 31, 2022, 100% of gross carrying value of construction loans had completed construction. |
As of | ||||||||||||||
March 31, 2021 | December 31, 2020 | |||||||||||||
Construction loans | ||||||||||||||
Senior mortgages | $ | 277,253 | $ | 449,733 | ||||||||||
Corporate/Partnership loans | 20,623 | 65,100 | ||||||||||||
Subtotal - gross carrying value of construction loans(1) | 297,876 | 514,833 | ||||||||||||
Loans | ||||||||||||||
Senior mortgages | 49,758 | 35,922 | ||||||||||||
Corporate/Partnership loans | 19,653 | 20,567 | ||||||||||||
Subordinate mortgages | 11,839 | 11,640 | ||||||||||||
Subtotal - gross carrying value of loans | 81,250 | 68,129 | ||||||||||||
Other lending investments | ||||||||||||||
Financing receivables (refer to Note 5) | 47,409 | 46,549 | ||||||||||||
Held-to-maturity debt securities | 92,196 | 90,715 | ||||||||||||
Available-for-sale debt securities | 24,043 | 25,274 | ||||||||||||
Subtotal - other lending investments | 163,648 | 162,538 | ||||||||||||
Total gross carrying value of loans receivable and other lending investments | 542,774 | 745,500 | ||||||||||||
Allowance for loan losses | (9,058) | (13,170) | ||||||||||||
Total loans receivable and other lending investments, net | $ | 533,716 | $ | 732,330 |
| | | | | | | | | | | | | | | |
|
| General Allowance | | | | | | ||||||||
|
| | |
| | |
| Held to |
| | |
| | | |
| | Construction | | | | | Maturity Debt | | Specific | | | | |||
Three Months Ended March 31, 2022 | | Loans | | Loans | | Securities | | Allowance | | Total | |||||
Allowance for loan losses at beginning of period | | $ | 1,213 | | $ | 676 | | $ | 2,304 | | $ | 576 | | $ | 4,769 |
Provision for (recovery of) loan losses(1) | |
| 39 | |
| (2) | |
| 111 | |
| 15 | |
| 163 |
Allowance for loan losses at end of period | | $ | 1,252 | | $ | 674 | | $ | 2,415 | | $ | 591 | | $ | 4,932 |
| | | | | | | | | | | | | | | |
Three Months Ended March 31, 2021 | | | | | | | | | | | | | | | |
Allowance for loan losses at beginning of period | ��� | $ | 6,541 | | $ | 1,643 | | $ | 3,093 | | $ | 743 | | $ | 12,020 |
(Recovery of) provision for loan losses(1) | |
| (3,648) | |
| 172 | |
| (408) | |
| (76) | |
| (3,960) |
Allowance for loan losses at end of period | | $ | 2,893 | | $ | 1,815 | | $ | 2,685 | | $ | 667 | | $ | 8,060 |
(1) | During the three months ended March 31, 2022 and 2021, the Company recorded a provision for (recovery of) loan losses of $0.1 million and ($3.6) million, respectively, in its consolidated statements of operations. The provision in 2022 was due primarily to accretion on the Company’s held-to-maturity debt security. The recovery in 2021 was due primarily to the repayment of loans during the three months ended March 31, 2021 and an improving macroeconomic forecast on commercial real estate markets since December 31, 2020. Of this amount, $0.3 million related to a provision for loan losses for unfunded loan commitments and is recorded as a reduction to "Accounts payable, accrued expenses and other liabilities.” |
General Allowance | ||||||||||||||||||||||||||||||||||||||||||||
Construction Loans | Loans | Held to Maturity Debt Securities | Financing Receivables | Specific Allowance | Total | |||||||||||||||||||||||||||||||||||||||
Allowance for loan losses at beginning of period | $ | 6,541 | $ | 1,643 | $ | 3,093 | $ | 1,150 | $ | 743 | $ | 13,170 | ||||||||||||||||||||||||||||||||
(Recovery of) provision for loan losses(1) | (3,648) | 172 | (408) | (152) | (76) | (4,112) | ||||||||||||||||||||||||||||||||||||||
Allowance for loan losses at end of period | $ | 2,893 | $ | 1,815 | $ | 2,685 | $ | 998 | $ | 667 | $ | 9,058 |
16
General Allowance | ||||||||||||||||||||||||||||||||||||||||||||
Construction Loans | Loans | Held to Maturity Debt Securities | Financing Receivables | Specific Allowance | Total | |||||||||||||||||||||||||||||||||||||||
Allowance for loan losses at beginning of period | $ | 6,668 | $ | 265 | $ | 0 | $ | 0 | $ | 21,701 | $ | 28,634 | ||||||||||||||||||||||||||||||||
Adoption of new accounting standard(1) | (353) | 98 | 20 | 964 | 0 | 729 | ||||||||||||||||||||||||||||||||||||||
Provision for loan losses(2) | 3,409 | 323 | 33 | 136 | 0 | 3,901 | ||||||||||||||||||||||||||||||||||||||
Allowance for loan losses at end of period | $ | 9,724 | $ | 686 | $ | 53 | $ | 1,100 | $ | 21,701 | $ | 33,264 |
iStar Inc.
The Company'sCompany’s investment in loans and other lending investments and the associated allowance for loan losses were as follows as of March 31, 20212022 and December 31, 20202021 ($ in thousands):
| | | | | | | | | |
|
| Individually |
| Collectively |
| | | ||
| | Evaluated for | | Evaluated for | | | | ||
| | Impairment(1) | | Impairment | | Total | |||
As of March 31, 2022 |
| |
|
| |
|
| |
|
Construction loans(2) | | $ | 59,642 | | $ | 126,452 | | $ | 186,094 |
Loans(2) | |
| 0 | |
| 27,394 | |
| 27,394 |
Held-to-maturity debt securities | |
| 0 | |
| 98,419 | |
| 98,419 |
Available-for-sale debt securities(3) | |
| 0 | |
| 24,864 | |
| 24,864 |
Less: Allowance for loan losses | |
| (591) | |
| (4,341) | |
| (4,932) |
Total | | $ | 59,051 | | $ | 272,788 | | $ | 331,839 |
As of December 31, 2021 | |
|
| |
|
| |
|
|
Construction loans(2) | | $ | 59,640 | | $ | 125,621 | | $ | 185,261 |
Loans(2) | |
| 0 | |
| 27,422 | |
| 27,422 |
Held-to-maturity debt securities | |
| 0 | |
| 96,838 | |
| 96,838 |
Available-for-sale debt securities(3) | |
| 0 | |
| 28,092 | |
| 28,092 |
Less: Allowance for loan losses | |
| (576) | |
| (4,193) | |
| (4,769) |
Total | | $ | 59,064 | | $ | 273,780 | | $ | 332,844 |
(1) | The carrying value of this loan includes an unamortized discount of $0.8 million and $0.8 million as of March 31, 2022 and December 31, 2021, respectively. The Company’s loans individually evaluated for impairment represent loans on non-accrual status and the unamortized amounts associated with these loans are not currently being amortized into income. |
(2) | The carrying value of these loans includes unamortized discounts, premiums, deferred fees and costs totaling net discounts of $0.2 million and $0.2 million as of March 31, 2022 and December 31, 2021, respectively. |
(3) | Available-for-sale debt securities are evaluated for impairment under ASC 326-30 – Financial Instruments-Credit Losses. |
Individually Evaluated for Impairment(1) | Collectively Evaluated for Impairment | Total | |||||||||||||||
As of March 31, 2021 | |||||||||||||||||
Construction loans(2) | $ | 56,343 | $ | 241,533 | $ | 297,876 | |||||||||||
Loans(2) | 0 | 81,250 | 81,250 | ||||||||||||||
Financing receivables | 0 | 47,409 | 47,409 | ||||||||||||||
Held-to-maturity debt securities | 0 | 92,196 | 92,196 | ||||||||||||||
Available-for-sale debt securities(3) | 0 | 24,043 | 24,043 | ||||||||||||||
Less: Allowance for loan losses | (667) | (8,391) | (9,058) | ||||||||||||||
Total | $ | 55,676 | $ | 478,040 | $ | 533,716 | |||||||||||
As of December 31, 2020 | |||||||||||||||||
Construction loans(2) | $ | 53,305 | $ | 461,528 | $ | 514,833 | |||||||||||
Loans(2) | 0 | 68,129 | 68,129 | ||||||||||||||
Financing receivables | 0 | 46,549 | 46,549 | ||||||||||||||
Held-to-maturity debt securities | 0 | 90,715 | 90,715 | ||||||||||||||
Available-for-sale debt securities(3) | 0 | 25,274 | 25,274 | ||||||||||||||
Less: Allowance for loan losses | (743) | (12,427) | (13,170) | ||||||||||||||
Total | $ | 52,562 | $ | 679,768 | $ | 732,330 |
17
The Company'sCompany’s amortized cost basis in performing senior mortgages, corporate/partnership loans and subordinate mortgages, and financing receivables, presented by year of origination and by credit quality, as indicated by risk rating, as of March 31, 20212022 were as follows ($ in thousands):
Year of Origination | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | Prior to 2017 | Total | |||||||||||||||||||||||||||||||||||||||||
Senior mortgages | |||||||||||||||||||||||||||||||||||||||||||||||
Risk rating | |||||||||||||||||||||||||||||||||||||||||||||||
1.0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 75,014 | $ | 0 | $ | 75,014 | |||||||||||||||||||||||||||||||||
1.5 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||
2.0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||
2.5 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||
3.0 | 33,419 | 0 | 0 | 113,154 | 0 | 3,714 | 150,287 |
| | | | | | | | | | | | | | | | | | | | | |
|
| Year of Origination |
|
| | ||||||||||||||||
|
| 2022 |
| 2021 |
| 2020 |
| 2019 |
| 2018 |
| Prior to 2018 |
| Total | |||||||
Senior mortgages | | | | | | | | | | | | | | | | | | | | | |
Risk rating | | |
|
| |
|
| |
|
| |
|
| |
|
| |
| | |
|
1.0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 |
1.5 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 |
2.0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 11,899 | |
| 0 | |
| 11,899 |
2.5 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 52,336 | |
| 0 | |
| 52,336 |
3.0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 62,912 | |
| 2,826 | |
| 65,738 |
3.5 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 11,203 | |
| 0 | |
| 11,203 |
4.0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 |
4.5 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 |
5.0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 |
Subtotal(1) | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 138,350 | | $ | 2,826 | | $ | 141,176 |
Subordinate mortgages | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Risk rating | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
1.0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 |
1.5 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 |
2.0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 |
2.5 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 |
3.0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 12,670 | |
| 12,670 |
3.5 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 |
4.0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 |
4.5 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 |
5.0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 |
Subtotal | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 12,670 | | $ | 12,670 |
Total | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 138,350 | | $ | 15,496 | | $ | 153,846 |
(1) | As of March 31, 2022, excludes $59.6 million for 1 loan on non-accrual status. |
3.5 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||
4.0 | 0 | 0 | 0 | 45,366 | 0 | 0 | 45,366 | ||||||||||||||||||||||||||||||||||||||||
4.5 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||
5.0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||
Subtotal(1) | $ | 33,419 | $ | 0 | $ | 0 | $ | 158,520 | $ | 75,014 | $ | 3,714 | $ | 270,667 | |||||||||||||||||||||||||||||||||
Corporate/partnership loans | |||||||||||||||||||||||||||||||||||||||||||||||
Risk rating | |||||||||||||||||||||||||||||||||||||||||||||||
1.0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | |||||||||||||||||||||||||||||||||
1.5 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||
2.0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||
2.5 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||
3.0 | 2,525 | 0 | 0 | 18,098 | 0 | 0 | 20,623 | ||||||||||||||||||||||||||||||||||||||||
3.5 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||
4.0 | 0 | 0 | 0 | 19,653 | 0 | 0 | 19,653 | ||||||||||||||||||||||||||||||||||||||||
4.5 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||
5.0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||
Subtotal | $ | 2,525 | $ | 0 | $ | 0 | $ | 37,751 | $ | 0 | $ | 0 | $ | 40,276 | |||||||||||||||||||||||||||||||||
Subordinate mortgages | |||||||||||||||||||||||||||||||||||||||||||||||
Risk rating | |||||||||||||||||||||||||||||||||||||||||||||||
1.0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | |||||||||||||||||||||||||||||||||
1.5 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||
2.0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||
2.5 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||
3.0 | 0 | 0 | 0 | 0 | 0 | 11,839 | 11,839 | ||||||||||||||||||||||||||||||||||||||||
3.5 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||
4.0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||
4.5 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||
5.0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||
Subtotal | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 11,839 | $ | 11,839 | |||||||||||||||||||||||||||||||||
Financing receivables | |||||||||||||||||||||||||||||||||||||||||||||||
Risk rating | |||||||||||||||||||||||||||||||||||||||||||||||
1.0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | |||||||||||||||||||||||||||||||||
1.5 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||
2.0 | 0 | 0 | 47,409 | 0 | 0 | 0 | 47,409 | ||||||||||||||||||||||||||||||||||||||||
2.5 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||
3.0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||
3.5 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||
4.0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||
4.5 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||
5.0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||
Subtotal | $ | 0 | $ | 0 | $ | 47,409 | $ | 0 | $ | 0 | $ | 0 | $ | 47,409 | |||||||||||||||||||||||||||||||||
Total | $ | 35,944 | $ | 0 | $ | 47,409 | $ | 196,271 | $ | 75,014 | $ | 15,553 | $ | 370,191 |
| | | | | | | | | | | | | | | |
|
| | |
| Less Than |
| Greater |
| | |
| | | ||
| | | | | or Equal | | Than | | Total | | | | |||
| | Current | | to 90 Days | | 90 Days | | Past Due | | Total | |||||
As of March 31, 2022 | | | | | | | | | | | | | | | |
Senior mortgages | | $ | 141,176 | | $ | 0 | | $ | 59,642 | | | 59,642 | | $ | 200,818 |
Subordinate mortgages | |
| 12,670 | |
| 0 | |
| 0 | |
| 0 | |
| 12,670 |
Total | | $ | 153,846 | | $ | 0 | | $ | 59,642 | | $ | 59,642 | | $ | 213,488 |
As of December 31, 2021 | |
|
| |
|
| |
|
| |
|
| |
|
|
Senior mortgages | | $ | 139,968 | | $ | 0 | | $ | 59,640 | | | 59,640 | | $ | 199,608 |
Corporate/Partnership loans | |
| 618 | |
| 0 | |
| 0 | |
| 0 | |
| 618 |
Subordinate mortgages | |
| 12,457 | |
| 0 | |
| 0 | |
| 0 | |
| 12,457 |
Total | | $ | 153,043 | | $ | 0 | | $ | 59,640 | | $ | 59,640 | | $ | 212,683 |
Current | Less Than and Equal to 90 Days | Greater Than 90 Days | Total Past Due | Total | |||||||||||||||||||||||||
As of March 31, 2021 | |||||||||||||||||||||||||||||
Senior mortgages | $ | 327,011 | $ | 0 | $ | 0 | 0 | $ | 327,011 | ||||||||||||||||||||
Corporate/Partnership loans | 40,276 | 0 | 0 | 0 | 40,276 | ||||||||||||||||||||||||
Subordinate mortgages | 11,839 | 0 | 0 | 0 | 11,839 | ||||||||||||||||||||||||
Total | $ | 379,126 | $ | 0 | $ | 0 | $ | 0 | $ | 379,126 | |||||||||||||||||||
As of December 31, 2020 | |||||||||||||||||||||||||||||
Senior mortgages | $ | 443,154 | $ | 42,501 | $ | 0 | $ | 42,501 | $ | 485,655 | |||||||||||||||||||
Corporate/Partnership loans | 42,721 | 42,946 | 0 | 42,946 | 85,667 | ||||||||||||||||||||||||
Subordinate mortgages | 11,640 | 0 | 0 | 0 | 11,640 | ||||||||||||||||||||||||
Total | $ | 497,515 | $ | 85,447 | $ | 0 | $ | 85,447 | $ | 582,962 |
18
Impaired Loans—The Company'sCompany’s impaired loan was as follows ($ in thousands):
| | | | | | | | | | | | | | | | | | |
|
| As of March 31, 2022 |
| As of December 31, 2021 | ||||||||||||||
|
| | |
| Unpaid |
| | |
| | |
| Unpaid |
| | | ||
| | Amortized | | Principal | | Related | | Amortized | | Principal | | Related | ||||||
| | Cost | | Balance | | Allowance | | Cost | | Balance | | Allowance | ||||||
With an allowance recorded: | | |
|
| |
|
| |
| | |
|
| |
|
| |
|
Senior mortgages(1) | | $ | 59,642 | | $ | 58,892 | | $ | (591) | | $ | 59,640 | | $ | 58,888 | | $ | (576) |
Total | | $ | 59,642 | | $ | 58,892 | | $ | (591) | | $ | 59,640 | | $ | 58,888 | | $ | (576) |
(1) | The Company has 1 non-accrual loan as of March 31, 2022 and December 31, 2021 that is considered impaired and included in the table above. The Company did 0t record any interest income on impaired loans for the three months ended March 31, 2022 and 2021. |
As of March 31, 2021 | As of December 31, 2020 | ||||||||||||||||||||||||||||||||||
Amortized Cost | Unpaid Principal Balance | Related Allowance | Amortized Cost | Unpaid Principal Balance | Related Allowance | ||||||||||||||||||||||||||||||
With an allowance recorded: | |||||||||||||||||||||||||||||||||||
Senior mortgages(1) | $ | 56,343 | $ | 55,592 | $ | (667) | $ | 53,305 | $ | 52,552 | $ | (743) | |||||||||||||||||||||||
Total | $ | 56,343 | $ | 55,592 | $ | (667) | $ | 53,305 | $ | 52,552 | $ | (743) |
In June 2021, the Company acquired a parcel of land for $42.0 million and simultaneously entered into a Ground Lease (refer to Note 5). The Company also concurrently entered into an agreement pursuant to which SAFE would acquire the Ground Lease from the Company. The Ground Lease was entered into with the seller of the land and did not qualify for sale leaseback accounting, and as such, was accounted for as a financing transaction and $42.0 million was recorded in “Loans receivable held for sale” on the Company’s consolidated balance sheet asat the time of March 31, 2021. Theacquisition. In January 2022, the Company received $2.7 million of consideration from SAFE in connection with this transaction.
Other lending investments
—Other lending investments includes the following securities ($ in thousands): | | | | | | | | | | | | | | | |
|
| | |
| | |
| Net |
| | |
| Net | ||
| | | | | Amortized | | Unrealized | | Estimated | | Carrying | ||||
| | Face Value | | Cost Basis | | Gain | | Fair Value | | Value | |||||
As of March 31, 2022 |
| |
|
| |
|
| |
|
| |
|
| |
|
Available-for-Sale Securities |
| |
|
| |
|
| |
|
| |
|
| |
|
Municipal debt securities | | $ | 23,640 | | $ | 23,640 | | $ | 1,224 | | $ | 24,864 | | $ | 24,864 |
Held-to-Maturity Securities | |
| | |
| | |
| | |
|
| |
| |
Debt securities | |
| 100,000 | |
| 98,419 | |
| — | |
| 98,419 | |
| 98,419 |
Total | | $ | 123,640 | | $ | 122,059 | | $ | 1,224 | | $ | 123,283 | | $ | 123,283 |
As of December 31, 2021 | |
|
| |
|
| |
|
| |
|
| |
|
|
Available-for-Sale Securities | |
|
| |
|
| |
|
| |
|
| |
|
|
Municipal debt securities | | $ | 23,855 | | $ | 23,855 | | $ | 4,237 | | $ | 28,092 | | $ | 28,092 |
Held-to-Maturity Securities | |
| | |
| | |
| | |
|
| |
| |
Debt securities | |
| 100,000 | |
| 96,838 | |
| — | |
| 96,838 | |
| 96,838 |
Total | | $ | 123,855 | | $ | 120,693 | | $ | 4,237 | | $ | 124,930 | | $ | 124,930 |
| | | | | | | | | | | | | | | |
Face Value | Amortized Cost Basis | Net Unrealized Gain | Estimated Fair Value | Net Carrying Value | |||||||||||||||||||||||||
As of March 31, 2021 | |||||||||||||||||||||||||||||
Available-for-Sale Securities | |||||||||||||||||||||||||||||
Municipal debt securities | $ | 20,480 | $ | 20,480 | $ | 3,563 | $ | 24,043 | $ | 24,043 | |||||||||||||||||||
Held-to-Maturity Securities | |||||||||||||||||||||||||||||
Debt securities | 100,000 | 92,196 | 0 | 92,196 | 92,196 | ||||||||||||||||||||||||
Total | $ | 120,480 | $ | 112,676 | $ | 3,563 | $ | 116,239 | $ | 116,239 | |||||||||||||||||||
As of December 31, 2020 | |||||||||||||||||||||||||||||
Available-for-Sale Securities | |||||||||||||||||||||||||||||
Municipal debt securities | $ | 20,680 | $ | 20,680 | $ | 4,594 | $ | 25,274 | $ | 25,274 | |||||||||||||||||||
Held-to-Maturity Securities | |||||||||||||||||||||||||||||
Debt securities | 100,000 | 90,715 | 0 | 90,715 | 90,715 | ||||||||||||||||||||||||
Total | $ | 120,680 | $ | 111,395 | $ | 4,594 | $ | 115,989 | $ | 115,989 |
19
Asof March 31, 2021,2022, the contractual maturities of the Company'sCompany’s securities were as follows ($ in thousands):
| | | | | | | | | | | | |
|
| Held-to-Maturity Debt Securities |
| Available-for-Sale Debt Securities | ||||||||
| | Amortized | | Estimated | | Amortized | | Estimated | ||||
| | Cost Basis |
| Fair Value |
| Cost Basis |
| Fair Value | ||||
Maturities |
| |
|
| |
|
| |
|
| |
|
Within one year | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 |
After one year through 5 years | |
| 98,419 | |
| 98,419 | |
| 0 | |
| 0 |
After 5 years through 10 years | |
| 0 | |
| 0 | |
| 0 | |
| 0 |
After 10 years | |
| 0 | |
| 0 | |
| 23,640 | |
| 24,864 |
Total | | $ | 98,419 | | $ | 98,419 | | $ | 23,640 | | $ | 24,864 |
Held-to-Maturity Debt Securities | Available-for-Sale Debt Securities | ||||||||||||||||||||||
Amortized Cost Basis | Estimated Fair Value | Amortized Cost Basis | Estimated Fair Value | ||||||||||||||||||||
Maturities | |||||||||||||||||||||||
Within one year | $ | 0 | $ | 0 | $ | 0 | $ | 0 | |||||||||||||||
After one year through 5 years | 92,196 | 92,196 | 0 | 0 | |||||||||||||||||||
After 5 years through 10 years | 0 | 0 | 0 | 0 | |||||||||||||||||||
After 10 years | 0 | 0 | 20,480 | 24,043 | |||||||||||||||||||
Total | $ | 92,196 | $ | 92,196 | $ | 20,480 | $ | 24,043 |
The Company'sCompany’s other investments and its proportionate share of earnings (losses) from equity method investments were as follows ($ in thousands):
| | | | | | | | | | | | |
| | | | | | | | Earnings (Losses) from | ||||
| | Carrying Value | | Equity Method Investments | ||||||||
| | as of | | For the Three Months Ended | ||||||||
| | March 31, | | December 31, | | March 31, | ||||||
| | 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
Real estate equity investments | | |
|
| |
|
| |
|
| |
|
Safehold Inc. ("SAFE")(1) | | $ | 1,388,657 | | $ | 1,168,532 | | $ | 17,029 | | $ | 11,412 |
Ground Lease Plus Fund | |
| 64,548 | |
| 17,630 | |
| 769 | |
| — |
Other real estate equity investments | |
| 43,441 | |
| 44,349 | |
| 3,611 | |
| (602) |
Subtotal | |
| 1,496,646 | |
| 1,230,511 | |
| 21,409 | |
| 10,810 |
Other strategic investments(2) | |
| 29,373 | |
| 66,770 | |
| 3,623 | |
| 958 |
Total | | $ | 1,526,019 | | $ | 1,297,281 | | $ | 25,032 | | $ | 11,768 |
Earnings (Losses) from Equity Method Investments(1) | |||||||||||||||||||||||||||||||||||
Carrying Value as of | For the Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||
March 31, 2021 | December 31, 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||||||
Real estate equity investments | |||||||||||||||||||||||||||||||||||
Safehold Inc. ("SAFE")(2) | $ | 955,758 | $ | 937,712 | $ | 11,412 | $ | 19,338 | |||||||||||||||||||||||||||
iStar Net Lease II LLC ("Net Lease Venture II") | 84,481 | 78,998 | 1,001 | 193 | |||||||||||||||||||||||||||||||
Other real estate equity investments | 69,084 | 89,939 | (602) | (2,082) | |||||||||||||||||||||||||||||||
Subtotal | 1,109,323 | 1,106,649 | 11,811 | 17,449 | |||||||||||||||||||||||||||||||
Other strategic investments(3) | 127,972 | 69,911 | 958 | (837) | |||||||||||||||||||||||||||||||
Total | $ | 1,237,295 | $ | 1,176,560 | $ | 12,769 | $ | 16,612 | |||||||||||||||||||||||||||
(1) | As of March 31, 2022, the Company owned 40.1 million shares of SAFE common stock which, based on the closing price of $55.45 on March 31, 2022, had a market value of $2.2 billion. Pursuant to ASC 323-10-40-1, an equity method investor shall account for a share issuance by an investee as if the investor had sold a proportionate share of its investment. Any gain or loss to the investor resulting from an investee’s share issuance shall be recognized in earnings. For the three months ended March 31, 2022 and 2021, equity in earnings includes dilution gains of $0.9 million and $0.5 million, respectively, resulting from SAFE equity offerings. |
(2) | During the three months ended March 31, 2021, the Company identified observable price changes in an equity security held by the Company as evidenced by orderly private issuances of similar securities by the same issuer. In accordance with ASC 321 – Investments – Equity Securities, the Company remeasured its equity investment at fair value and recognized a mark-to-market gain of $5.1 million in “Other income” in the Company’s consolidated statements of operations. The Company’s equity security was redeemed at its carrying value in the fourth quarter of 2021. |
Safehold Inc.
—In January 2019, the Company purchased 12.5 million newly designated limited partnership units (the "Investor Units"“Investor Units”) in SAFE'sSAFE’s operating partnership ("(“SAFE OP"OP”), at a purchase price of $20.00 per unit, for a total purchase price of $250.0 million. In May 2019, after the approval of SAFE's stockholders,SAFE’s shareholders, the Investor Units were exchanged for shares of SAFE'sSAFE’s common stock on a 1-for-one basis. Following the exchange, the Investor Units were retired.
20
In connection with the Company'sCompany’s purchase of the Investor Units, it entered into a Stockholder'sStockholder’s Agreement with SAFE on January 2, 2019. The Stockholder'sStockholder’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%; |
● | subjects the Company to certain standstill provisions; 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. In addition, the Company is also the external manager of a venture in which SAFE is a member. Following are the key terms of the management agreement with SAFE:
● | 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; |
● | The management agreement is non-terminable by SAFE through June 30, 2023, 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 3 times the prior year’s management fee. |
During the three months ended March 31, 20212022 and 2020,2021, the Company recorded $3.5$4.5 million and $2.9$3.5 million, respectively, of management fees pursuant to its management agreement with SAFE.
The Company is also entitled to receive certain 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. TheHistorically, pursuant to the Company’s option under the management agreement, the Company has elected to not seek reimbursement for certain expenses. This historical election is not a waiver of reimbursement for similar expenses in future periods and the Company has started to chargeelect to seek, and may further seek in fullthe future, reimbursement of such additional expenses that it has not previously sought, including, without limitation, rent, overhead and certain of the expense reimbursements while SAFE is growing its portfolio. personnel costs.
During the three months ended March 31, 20212022 and 2020,2021, the Company recognized $1.9$3.1 million and $1.3$1.9 million, respectively, 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.
Following is a list of investments that the Company has transacted with SAFE, all of which were approved by the Company'sCompany’s and SAFE'sSAFE’s independent directors, for the periods presented:
21
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 a to-be-built luxury multi-family project. The transaction included 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, 2021;funded; and (ii) an $80.5 million leasehold first mortgage. During the three months ended March 31, 2021 and 2020, the Company recorded $0.3 million and $0.7 million, respectively, of interest income on the loan. The Company sold the Ground Lease to SAFE in September 2020 for $34.0 million and in January 2021 sold the leasehold first mortgage to an entity in which the Company has a 53% noncontrolling equity interest (refer to "Other“Other strategic investments"investments” below) in January 2021 for $63.3 million.
In January 2019,June 2020, Net Lease Venture II (see below) acquired the leasehold interest in an office laboratory property in Honolulu, HI and simultaneously entered into a 99-year Ground Lease with SAFE. In November 2021, the Company committedacquired the property from Net Lease Venture II. The Company paid $0.6 million to provideits partner to acquire its equity interest in the property and assumed a $13.3$44.4 million loanmortgage on the property. The Company sold the property in the first quarter of 2022. Prior to the ground lessee ofsale, SAFE paid $0.3 million to terminate a Ground Lease originated at SAFE. The loan was for the conversion of an office building into a multi-family property. The loan was repaid during the fourth quarter 2020. During the three months ended March 31, 2020,purchase option that allowed the Company recorded $0.3 millionto purchase the land at the expiration of interest income on the loan.
In February 2021, the Company provided a $50.0 million loan to the ground lessee of a Ground Lease originated at SAFE. The loan was for the Ground Lease tenant'stenant’s recapitalization of a hotel property. The Company received $1.9 million of consideration from SAFE in connection with this transaction. As of March 31, 2021, $38.4 million ofThe Company sold the loan was fundedin July 2021 and during the three months ended March 31, 2021, the Company recorded $0.9 million of interest income0 gain or loss on the loan.
In March 2021, the Company acquired land and simultaneously structured and entered into with the seller a Ground Lease on which a multi-family project will be constructed. At closing, the Company entered into an agreement with SAFE pursuant to which, subject to certain conditions being met, SAFE willwould acquire the ground lessor entity from the Company. The Company sold the ground lessor entity to SAFE in September 2021 and recognized 0 gain or loss on the sale (refer to Note 7 - LoanLoans receivable held for sale). The Company also committed to provide a $75.0 million construction loan to the Ground Lease tenant.
In June 2021, the Company sold to SAFE its rights under a purchase option agreement for $1.2 million. The Company had previously acquired such purchase option agreement from a third-party property owner for $1.0 million and incurred $0.2 million of expenses. Under the option agreement, upon certain conditions being met by an outside developer who may become the Ground Lease tenant, SAFE has the right to acquire for $215.0 million a property and hold a Ground Lease under approximately 1.1 million square feet of office space that may be developed on the property. NaN gain or loss was recognized by the Company as a result of the sale.
In June 2021, the Company and SAFE entered into 2 agreements pursuant to each of which SAFE would acquire land and a new venture ("Netrelated Ground 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. Net Lease Venture II's investment period expires on June 30, 2021. Net Lease Venture IICompany when certain construction related conditions are met by a specified time period. The purchase price to be paid for each is a voting interest entity and$42.0 million, plus an amount necessary for the Company hasto achieve the greater of a 1.25x multiple and a 9% return on its investment. In addition, each Ground Lease provides for a leasehold improvement allowance up to a maximum of $83.0 million, which obligation would be assumed by SAFE upon acquisition. If certain construction conditions are not met within a specified time period, SAFE will have no obligation to acquire the Ground Leases or fund the leasehold improvement allowances. In January 2022, the Company sold the Ground Leases to the Ground Lease Plus Fund (see below). There can be no assurance that the conditions to closing will be satisfied and that SAFE will acquire the properties and Ground Leases from the Ground Lease Plus Fund.
In November 2021, the Company and SAFE entered into an agreement pursuant to which SAFE would acquire land and a related Ground Lease originated by the Company when certain construction related conditions are met by a specified time period. The purchase price to be paid is $33.3 million, plus an amount necessary for the Company to achieve the greater of a 1.25x multiple and a 12% return on its investment. In addition, the Ground Lease provides for a leasehold improvement allowance up to a maximum of $51.8 million, which obligation would be assumed by SAFE upon acquisition. If certain construction conditions are not met within a specified time period, SAFE will have no obligation to acquire the Ground Lease or fund the leasehold improvement allowance. There can be no assurance that the conditions to
22
closing will be satisfied and that SAFE will acquire the land and Ground Lease from the Ground Lease Plus Fund (refer to Ground Lease Plus Fund below).
In December 2021, the Company’s partner in a venture recapitalized an existing multifamily property, which included a Ground Lease provided by SAFE. As part of the recapitalization, the Company’s partner acquired its 50% equity interest in the ventureentity and the mezzanine loan held by the Company was repaid in full. During the three months ended March 31, 2021, the Company recorded $0.6 million of approximately 51.9%interest income on the mezzanine loan.
In January 2022, the Company and SAFE entered into an agreement pursuant to which SAFE would acquire land and a related Ground Lease originated by the Company when certain construction related conditions are met. The purchase price to be paid is a maximum of $36.0 million (refer to Note 5), plus an amount necessary for the Company to achieve the greater of a 1.05x multiple and a 10% return on its investment. There can be no assurance that the conditions to closing will be satisfied and that SAFE will acquire the land and Ground Lease from the Company.
In February 2022, the Loan Fund (refer to Other Strategic Investments below) committed to provide a $130.0 million loan to the ground lessee of a Ground Lease originated at SAFE. The loan is for the Ground Lease tenant’s recapitalization of a life science office property. The Loan Fund received $9.0 million of consideration from SAFE in connection with this transaction.
Ground Lease Plus Fund—The Company formed and manages an investment fund that targets the origination and acquisition of Ground Leases for commercial real estate projects that are in a pre-development phase (the “Ground Lease Plus Fund”). The Company owns a 53% noncontrolling equity interest in the Ground Lease Plus Fund. The Company does not have a controlling interest in Netthe Ground Lease Venture IIPlus Fund due to the substantive
In January 2022, the Company recorded $0.4sold 2 Ground Leases to the Ground Lease Plus Fund (refer to Note 5) and recognized an aggregate $0.5 million of gains in “Income from sales of real estate” on the sale. The Company and SAFE entered into an agreement pursuant to which SAFE would acquire the land properties and related Ground Leases from the Ground Lease Plus Fund when certain construction related conditions are met by a specified time period (refer to “Safehold Inc.” above).
In November 2021, the Company acquired land for $33.3 million and $0.4 million, respectively, of management feessimultaneously structured and entered into a Ground Lease on which a multi-family project will be constructed. In December 2021, the Company sold the Ground Lease to the Ground Lease Plus Fund and recognized 0 gain or loss on the sale. The Company and SAFE entered into an agreement pursuant to which SAFE would acquire the land and related Ground Lease from Netthe Ground Lease Venture II.
Other real estate equity investments
—As of March 31,Other strategic investments
—As of March 31,In January 2021, the Company sold 2 loans for $83.4 million to a newly formed entity in which the Company hasowns a 53.0% noncontrolling equity interest.interest (the “Loan Fund”). The Company did 0t recognize any gain or loss on the sales. In September 2021, the Company transferred a $75.0 million construction loan commitment to the Loan Fund. The Company does not have a controlling interest in this entitythe Loan Fund due to the substantive participating rights of its partner. The Company accounts for this investment as an equity method investment and receives a fixed annual fee in exchange for managing the entity.
23
In February 2022, the Loan Fund committed to provide a $130.0 million loan to the ground lessee of a Ground Lease originated at SAFE. The loan was for the Ground Lease tenant’s recapitalization of a life science office property.
Summarized investee financial information—The following table presents the investee level summarized financial information for the Company'sCompany’s equity method investment that was significant as of March 31, 20212022 ($ in thousands):
Revenues | Expenses | Net Income Attributable to Parent | ||||||||||||||||||
For the Three Months Ended March 31, 2021 | ||||||||||||||||||||
SAFE | $ | 43,507 | $ | 27,174 | $ | 16,908 | ||||||||||||||
For the Three Months Ended March 31, 2020 | ||||||||||||||||||||
SAFE | $ | 40,165 | $ | 23,587 | $ | 17,347 | ||||||||||||||
| | | | | | | | | |
|
| Revenues |
| Expenses |
| Net Income Attributable to Parent | |||
For the Three Months Ended March 31, 2022 | | | | | | | | | |
SAFE | | $ | 60,363 | | $ | 37,732 | | $ | 24,873 |
| |
| | | | | | | |
For the Three Months Ended March 31, 2021 | | | | | | | | | |
SAFE | | $ | 43,507 | | $ | 27,174 | | $ | 16,908 |
Deferred expenses and other assets, net, consist of the following items ($ in thousands):(1)
| | | | | | | |
| | As of | | ||||
|
| March 31, 2022 |
| December 31, 2021 | | ||
Intangible assets, net(2) | | $ | 1,156 | | $ | 1,209 | |
Restricted cash | |
| 51,047 | |
| 54,395 | |
Operating lease right-of-use assets(3) | |
| 19,349 | |
| 20,437 | |
Other assets(4) | |
| 19,444 | |
| 16,040 | |
Other receivables | |
| 3,648 | |
| 5,054 | |
Leasing costs, net(5) | |
| 789 | |
| 818 | |
Corporate furniture, fixtures and equipment, net(6) | |
| 1,832 | |
| 1,852 | |
Deferred financing fees, net | |
| 417 | |
| 629 | |
Deferred expenses and other assets, net | | $ | 97,682 | | $ | 100,434 | |
(1) | Certain items have been reclassified to “Real estate and other assets available and held for sale and classified as discontinued operations” (refer to Note 3). |
(2) | 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 $9.2 million and $10.2 million as of March 31, 2022 and December 31, 2021, respectively. These intangible lease assets are amortized over the remaining term of the lease. The amortization expense for in-place leases was $0.6 million for the three months ended March 31, 2021. This amount is included in “Depreciation and amortization” in the Company’s consolidated statements of operations. As of March 31, 2022, the weighted average remaining amortization period for the Company’s intangible assets was approximately 5.6 years. |
(3) | Right-of-use lease assets relate primarily to the Company’s leases of office space. Right-of use lease assets initially equal the lease liability. For operating leases, rent expense is recognized on a straight-line basis over the term of the lease and is recorded in “General and administrative” and “Real estate expense” in the Company’s consolidated statements of operations. During the three months ended March 31, 2022 and 2021, the Company recognized $1.2 million and $1.2 million, respectively, in "General and administrative" and $0.1 million and $0.2 million, respectively, in "Real estate expense" in its consolidated statements of operations relating to operating leases. |
(4) | Other assets primarily includes prepaid expenses, deposits for certain real estate assets and management fees and expense reimbursements due from SAFE (refer to Note 8). |
(5) | Accumulated amortization of leasing costs was $0.9 million and $1.1 million as of March 31, 2022 and December 31, 2021, respectively. |
(6) | Accumulated depreciation on corporate furniture, fixtures and equipment was $14.9 million and $14.8 million as of March 31, 2022 and December 31, 2021, respectively. |
As of | |||||||||||
March 31, 2021 | December 31, 2020 | ||||||||||
Intangible assets, net(1) | $ | 152,553 | $ | 156,041 | |||||||
Restricted cash | 54,029 | 51,933 | |||||||||
Finance lease right-of-use assets(2) | 143,356 | 143,727 | |||||||||
Operating lease right-of-use assets(2) | 47,397 | 48,891 | |||||||||
Other assets(3) | 19,751 | 19,453 | |||||||||
Other receivables | 5,964 | 10,881 | |||||||||
Leasing costs, net(4) | 2,046 | 2,340 | |||||||||
Corporate furniture, fixtures and equipment, net(5) | 1,884 | 2,024 | |||||||||
Deferred financing fees, net | 1,264 | 1,549 | |||||||||
Deferred expenses and other assets, net | $ | 428,244 | $ | 436,839 |
24
iStar Inc.
Accounts payable, accrued expenses and other liabilities consist of the following items ($ in thousands):
| | | | | | | |
| | As of | | ||||
|
| March 31, 2022 |
| December 31, 2021 | | ||
Other liabilities(1) | | $ | 35,565 | | | 30,362 | |
Accrued expenses | |
| 115,461 | |
| 151,810 | |
Operating lease liabilities (see table above) | |
| 21,809 | |
| 23,267 | |
Accrued interest payable | |
| 26,051 | |
| 31,293 | |
Accounts payable, accrued expenses and other liabilities | | $ | 198,886 | | $ | 236,732 | |
As of | |||||||||||
March 31, 2021 | December 31, 2020 | ||||||||||
Other liabilities(1) | $ | 87,516 | 91,513 | ||||||||
Accrued expenses | 85,895 | 94,724 | |||||||||
Finance lease liabilities (see table above) | 151,222 | 150,520 | |||||||||
Intangible liabilities, net(2) | 48,115 | 48,738 | |||||||||
Operating lease liabilities (see table above) | 49,146 | 50,072 | |||||||||
Accrued interest payable | 29,116 | 32,355 | |||||||||
Accounts payable, accrued expenses and other liabilities | $ | 451,010 | $ | 467,922 |
(1) | As of March 31, 2022 and December 31, 2021, other liabilities includes $20.8 million and $20.1 million, respectively, of deferred income. As of March 31, 2022 and December 31, 2021, other liabilities includes $0.1 million and $0.1 million, respectively, of expected credit losses for unfunded loan commitments. |
Note 10—Loan Participations Payable, net
The Company'sCompany’s debt obligations were as follows ($ in thousands):
| | | | | | | | | | |
| | Carrying Value as of | | Stated | | Scheduled | ||||
|
| March 31, 2022 |
| December 31, 2021 |
| Interest Rates |
| Maturity Date | ||
Secured credit facilities: |
| |
|
| |
| |
|
|
|
Revolving Credit Facility | | $ | 0 | | $ | 0 | | LIBOR + 2.00 | % (1) | September 2022 |
Senior Term Loan | |
| 0 | |
| 491,875 | | LIBOR + 2.75 | % (2) | — |
Total secured credit facilities | |
| 0 | |
| 491,875 | |
|
|
|
Unsecured notes: | |
|
| |
|
| |
|
|
|
3.125% senior convertible notes(3) | |
| 287,500 | |
| 287,500 | | 3.125 | % | September 2022 |
4.75% senior notes(4) | |
| 775,000 | |
| 775,000 | | 4.75 | % | October 2024 |
4.25% senior notes(5) | |
| 550,000 | |
| 550,000 | | 4.25 | % | August 2025 |
5.50% senior notes(6) | |
| 400,000 | |
| 400,000 | | 5.50 | % | February 2026 |
Total unsecured notes | |
| 2,012,500 | |
| 2,012,500 | |
|
|
|
Other debt obligations: | |
|
| |
|
| |
|
|
|
Trust preferred securities | |
| 100,000 | |
| 100,000 | | LIBOR + 1.50 | % | October 2035 |
Total debt obligations | |
| 2,112,500 | |
| 2,604,375 | |
|
|
|
Debt discounts and deferred financing costs, net | |
| (28,248) | |
| (32,201) | |
|
|
|
Total debt obligations, net(7) | | $ | 2,084,252 | | $ | 2,572,174 | |
|
|
|
(1) | The Revolving Credit Facility bears interest at the Company’s election of either: (i) a base rate, which is the greater of (a) prime, (b) federal funds plus 0.50% or (c) LIBOR plus 1.0% and subject to a margin ranging from 1.00% to 1.50%; or (ii) LIBOR subject to a margin ranging from 2.00% to 2.50%. At maturity, the Company may convert outstanding borrowings to a one year term loan which matures in quarterly installments through September 2023. |
(2) | The loan accrued interest at the Company’s election of either: (i) a base rate, which is the greater of (a) prime, (b) federal funds plus 0.50% 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) | 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 (refer to Note 18) 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, 2022 was 72.3126 shares per $1,000 principal amount of 3.125% Convertible Notes, which equals a conversion price of $13.83 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. During both the three months ended March 31, 2022 and 2021, the Company recognized $2.2 million of contractual interest on the 3.125% Convertible Notes. |
(4) | The Company can prepay these senior notes without penalty beginning July 1, 2024. |
(5) | The Company can prepay these senior notes without penalty beginning May 1, 2025. |
(6) | The Company can prepay these senior notes without penalty beginning August 15, 2024. |
(7) | The Company capitalized interest relating to development activities of $0.3 million and $0.2 million during the three months ended March 31, 2022 and 2021, respectively. |
Carrying Value as of | Stated Interest Rates | Scheduled Maturity Date | |||||||||||||||||||||
March 31, 2021 | December 31, 2020 | ||||||||||||||||||||||
Secured credit facilities and mortgages: | |||||||||||||||||||||||
Revolving Credit Facility | $ | 0 | $ | 0 | LIBOR + 2.00% | (1) | September 2022 | ||||||||||||||||
Senior Term Loan | 491,875 | 491,875 | LIBOR + 2.75% | (2) | June 2023 | ||||||||||||||||||
Mortgages collateralized by net lease assets(3) | 713,766 | 721,075 | 1.66% - 7.26% | (3) | |||||||||||||||||||
Total secured credit facilities and mortgages(4) | 1,205,641 | 1,212,950 | |||||||||||||||||||||
Unsecured notes: | |||||||||||||||||||||||
3.125% senior convertible notes(5) | 287,500 | 287,500 | 3.125% | September 2022 | |||||||||||||||||||
4.75% senior notes(6) | 775,000 | 775,000 | 4.75% | October 2024 | |||||||||||||||||||
4.25% senior notes(7) | 550,000 | 550,000 | 4.25% | August 2025 | |||||||||||||||||||
5.50% senior notes(8) | 400,000 | 400,000 | 5.50% | February 2026 | |||||||||||||||||||
Total unsecured notes | 2,012,500 | 2,012,500 | |||||||||||||||||||||
Other debt obligations: | |||||||||||||||||||||||
Trust preferred securities | 100,000 | 100,000 | LIBOR + 1.50% | October 2035 | |||||||||||||||||||
Total debt obligations | 3,318,141 | 3,325,450 | |||||||||||||||||||||
Debt discounts and deferred financing costs, net(9) | (26,798) | (38,475) | |||||||||||||||||||||
Total debt obligations, net(10) | $ | 3,291,343 | $ | 3,286,975 |
25
iStar Inc.
Future Scheduled Maturities
—As of March 31, | | | | | | | | | |
|
| Unsecured Debt |
| Secured Debt |
| Total | |||
2022 (remaining nine months)(1) | | $ | 287,500 | | $ | 0 | | $ | 287,500 |
2023 | |
| 0 | |
| 0 | |
| 0 |
2024 | |
| 775,000 | |
| 0 | |
| 775,000 |
2025 | |
| 550,000 | |
| 0 | |
| 550,000 |
2026 | |
| 400,000 | |
| 0 | |
| 400,000 |
Thereafter | |
| 100,000 | |
| 0 | |
| 100,000 |
Total principal maturities | |
| 2,112,500 | |
| 0 | |
| 2,112,500 |
Unamortized discounts and deferred financing costs, net | |
| (28,248) | |
| 0 | |
| (28,248) |
Total debt obligations, net | | $ | 2,084,252 | | $ | 0 | | $ | 2,084,252 |
(1) | Refer to Note 18. |
Unsecured Debt | Secured Debt | Total | |||||||||||||||
2021 (remaining nine months) | 0 | $ | 101,519 | $ | 101,519 | ||||||||||||
2022 | 287,500 | 96,406 | 383,906 | ||||||||||||||
2023 | 0 | 491,875 | 491,875 | ||||||||||||||
2024 | 775,000 | 0 | 775,000 | ||||||||||||||
2025 | 550,000 | 271,985 | 821,985 | ||||||||||||||
Thereafter | 500,000 | 243,856 | 743,856 | ||||||||||||||
Total principal maturities | 2,112,500 | 1,205,641 | 3,318,141 | ||||||||||||||
Unamortized discounts and deferred financing costs, net | (21,122) | (5,676) | (26,798) | ||||||||||||||
Total debt obligations, net | $ | 2,091,378 | $ | 1,199,965 | $ | 3,291,343 |
Senior Term Loan
—The CompanyRevolving Credit Facility
—The Company has a secured revolving credit facilityUnsecured Notes
—As of March 31,Debt Covenants
—The26
The Company's Senior Term Loan and theCompany’s Revolving Credit Facility containcontains 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 Senior Term Loan requires the Company to maintain collateral coverage of at least 1.25x outstanding borrowings on the facility. The 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 1.5x outstanding borrowings on the facility and a consolidated ratio of cash flow to fixed charges of at least 1.5x. The Revolving Credit Facility does not require that proceeds from the borrowing base be used to pay down outstanding borrowings provided
The Company's Senior Term Loan and theCompany’s Revolving Credit Facility containcontains cross default provisions that would allow the lenders to declare an event of default and accelerate the Company'sCompany’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'sCompany’s unsecured public debt securities permit the bondholders to declare an event of default and accelerate the Company'sCompany’s indebtedness to them if the Company'sCompany’s other recourse indebtedness in excess of specified thresholds is not paid at final maturity or if such indebtedness is accelerated.
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, 2021,2022, 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 | | Real | | Other | | | | |||
|
| Investments |
| Estate |
| Investments |
| Total | ||||
Performance-Based Commitments | | $ | 4,235 | | $ | 8,111 | | $ | 108,650 | | $ | 120,996 |
Strategic Investments | |
| 0 | |
| 5,061 | |
| 2,325 | |
| 7,386 |
Total | | $ | 4,235 | | $ | 13,172 | | $ | 110,975 | | $ | 128,382 |
Loans and Other Lending Investments | Real Estate | Other Investments | Total | ||||||||||||||||||||
Performance-Based Commitments | $ | 110,398 | $ | 69,734 | $ | 35,044 | $ | 215,176 | |||||||||||||||
Strategic Investments | 0 | 0 | 17,015 | 17,015 | |||||||||||||||||||
Total | $ | 110,398 | $ | 69,734 | $ | 52,059 | $ | 232,191 |
27
Operating(1)(2) | Finance(1) | ||||||||||
2021 (remaining nine months) | $ | 2,975 | $ | 4,133 | |||||||
2022 | 6,756 | 5,604 | |||||||||
2023 | 6,393 | 5,716 | |||||||||
2024 | 6,309 | 5,830 | |||||||||
2025 | 6,297 | 5,946 | |||||||||
Thereafter | 496 | 1,567,826 | |||||||||
Total undiscounted cash flows | 29,226 | 1,595,055 | |||||||||
Present value discount(1) | (3,448) | (1,443,833) | |||||||||
Other adjustments(2) | 23,368 | 0 | |||||||||
Lease liabilities | $ | 49,146 | $ | 151,222 |
iStar Inc.
Other Commitments—Future minimum lease obligations under non-cancelable operating and finance leases as of DecemberMarch 31, 20202022 are as follows ($ in thousands):
| | | |
|
| Operating(1) | |
2022 (remaining nine months) | | $ | 4,929 |
2023 | |
| 6,295 |
2024 | |
| 6,178 |
2025 | |
| 6,166 |
2026 | |
| 142 |
Thereafter | |
| 162 |
Total undiscounted cash flows | |
| 23,872 |
Present value discount(1) | |
| (2,063) |
Lease liabilities | | $ | 21,809 |
Operating(1)(2) | Finance(1) | ||||||||||
2021 | $ | 3,797 | $ | 5,494 | |||||||
2022 | 6,756 | 5,604 | |||||||||
2023 | 6,393 | 5,716 | |||||||||
2024 | 6,309 | 5,830 | |||||||||
2025 | 6,297 | 5,946 | |||||||||
Thereafter | 496 | 1,567,826 | |||||||||
Total undiscounted cash flows | 30,048 | 1,596,416 | |||||||||
Present value discount(1) | (3,771) | (1,445,896) | |||||||||
Other adjustments(2) | 23,795 | 0 | |||||||||
Lease liabilities | $ | 50,072 | $ | 150,520 |
(1) | The lease liability 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 4.7% and the weighted average remaining lease term is 4.4 years. During the three months ended March 31, 2022 and 2021, the Company made payments of $1.7 million and $0.8 million, respectively, related to its operating leases and $1.3 million and $1.4 million, respectively, related to its finance leases with SAFE . |
Legal Proceedings
—The Company and/or one or more of its subsidiaries is party to various pending litigation matters that are considered ordinary routine litigation incidental to the
Note 13—12—Derivatives
The Company'sCompany’s use of derivative financial instruments has historically been limited to the utilization of interest rate swaps, interest rate caps and foreign exchange contracts. The principal objective of such financial instruments is to minimize the risks and/or costs associated with the Company'sCompany’s operating and financial structure and to manage its exposure to interest rates and foreign exchange rates. The Company may have derivatives that are not designated as hedges because they do not meet the strict hedge accounting requirements. Although not designated as hedges, such derivatives are entered into to manage the Company'sCompany’s exposure to interest rate movements and other identified risks.
28
The table below presents the fair value of the Company'sCompany’s derivative financial instruments as well as their classification on the consolidated balance sheets as of March 31, 20212022 and December 31, 20202021 ($ in thousands):(1)
| | | | | |
|
| Derivative Liabilities | |||
| | Balance Sheet | | Fair | |
As of March 31, 2022 |
| Location |
| Value | |
Derivatives Designated in Hedging Relationships | | | | | |
Interest rate swaps |
| Liabilities associated with real estate held for sale and classified as discontinued operations | | $ | 0 |
Total |
|
| | $ | 0 |
| | | | | |
As of December 31, 2021 |
|
| |
|
|
Derivatives Designated in Hedging Relationships |
|
| |
|
|
Interest rate swaps |
| Liabilities associated with real estate held for sale and classified as discontinued operations | | $ | 8,395 |
Total |
|
| | $ | 8,395 |
(1) | ||||||||||||||||||||||||||
Location | Value | |||||||||||||||||||||||||
Location | Value | |||||||||||||||||||||||||
| | | | | | | | |
|
| |
| Amount of Gain |
| Amount of Gain | ||
| | Location of Gain | | (Loss) Recognized in | | (Loss) Reclassified | ||
| | (Loss) | | Accumulated Other | | from Accumulated | ||
Derivatives Designated in | | When Recognized in | | Comprehensive | | Other Comprehensive | ||
Hedging Relationships |
| Income |
| Income |
| Income into Earnings | ||
For the Three Months Ended March 31, 2022 | | | | | | | | |
Interest rate swaps |
| Earnings from equity method investments | |
| 2,755 | |
| (621) |
For the Three Months Ended March 31, 2021 |
|
| |
|
| |
|
|
Interest rate swaps |
| Net income from discontinued operations | | $ | 3,335 | | $ | (2,104) |
Interest rate swaps |
| Earnings from equity method investments | |
| 8,638 | |
| (234) |
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, 2021 | ||||||||||||||||||||||||||
Interest rate swaps | Earnings from equity method investments | $ | 8,656 | $ | (234) | |||||||||||||||||||||
Interest rate swaps | Interest expense | 3,317 | (2,104) | |||||||||||||||||||||||
For the Three Months Ended March 31, 2020 | ||||||||||||||||||||||||||
Interest rate swaps | Interest Expense | (12,604) | (1,088) | |||||||||||||||||||||||
Interest rate swaps | Earnings from equity method investments | (15,172) | (226) | |||||||||||||||||||||||
29
iStar Inc.
Preferred Stock
—The Company had the following series of Cumulative Redeemable Preferred Stock outstanding as of March 31, | | | | | | | | | | | | | | | | | |
|
| |
| | |
| Cumulative Preferential Cash |
| | | | ||||||
| | | | | | | Dividends(1)(2) | | | | | ||||||
| | Shares Issued | | | | | | | | | | | | | | | |
| | and | | | | | | | | | | Annual | | Carrying | | ||
| | Outstanding | | Par | | Liquidation | | Rate per | | Dividend | | Value | | ||||
Series |
| (in thousands) |
| Value |
| Preference(3) |
| Annum |
| per share |
| (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 | |
Total |
| 12,200 | | | | | | |
|
| |
|
| | $ | 282,490 | |
(1) | Holders of shares of the Series D, G and I 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 twelve30-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 both the three months ended March 31, 2022 and 2021. The character of the 2021 dividends was 100% capital gain distribution, of which 18.31% represented unrecaptured section 1250 gain. |
(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. |
Cumulative Preferential Cash Dividends(1)(2) | ||||||||||||||||||||||||||||||||||||||
Series | Shares Issued and Outstanding (in thousands) | Par Value | Liquidation Preference(3) | Rate per Annum | Annual Dividend 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 | |||||||||||||||||||||||||||||||
Total | 12,200 | $ | 282,490 |
Stock Repurchase Program
—The Company may repurchase shares in negotiated transactions or open market transactions, including through one or more trading plans. The Company did not repurchase any shares of its common stock during the three months ended March 31, 2022. During the three months ended March 31, 2021, the Company repurchased 0.7 million shares of its outstanding common stock for $12.4 million, for an average cost of $17.20 per share.30
iStar Inc.
Accumulated Other Comprehensive Income (Loss)
—
As of | |||||||||||
March 31, 2021 | December 31, 2020 | ||||||||||
Unrealized gains on available-for-sale securities | $ | 3,563 | $ | 4,594 | |||||||
Unrealized losses on cash flow hedges | (41,254) | (53,075) | |||||||||
Unrealized losses on cumulative translation adjustment | (4,167) | (4,199) | |||||||||
Accumulated other comprehensive loss | $ | (41,858) | $ | (52,680) |
| | | | | | | |
| | As of | | ||||
|
| March 31, 2022 |
| December 31, 2021 | | ||
Unrealized gains on available-for-sale securities | | $ | 1,224 |
| $ | 4,237 | |
Unrealized losses on cash flow hedges | |
| (22,448) | |
| (25,824) | |
Accumulated other comprehensive loss | | $ | (21,224) | | $ | (21,587) | |
Note 15—14—Stock-Based Compensation Plans and Employee Benefits
Stock-Based Compensation
—The Company recorded stock-based compensation (income) expense, including the expense related to performance incentive plans (see below), ofPerformance Incentive Plans
—The2019-2022 iPIP Plans
—TheThe following is a summary of the status of the Company’s equity-classified iPIP plans and changes during the three months ended March 31, 2021.2022.
| | | | |
| | iPIP Investment Pool | ||
|
| 2019-2020 |
| 2021-2022 |
Points at beginning of period |
| 95.20 |
| 84.75 |
Granted | | 0 | | 7.95 |
Forfeited |
| 0 |
| (0.35) |
Points at end of period |
| 95.20 |
| 92.35 |
As of March 31, 2022, investments with an aggregate gross book value of $764 million, including 26.7 million shares of SAFE common stock acquired by the Company, were attributable to the 2019-2020 Plan and investments with an
iPIP Investment Pool | |||||||||||||||||||||||||||||||||||
2019-2020 | 2021-2022 | ||||||||||||||||||||||||||||||||||
Points at beginning of period | 97.40 | 0 | |||||||||||||||||||||||||||||||||
Granted | 0 | 94.00 | |||||||||||||||||||||||||||||||||
Forfeited | (0.20) | 0 | |||||||||||||||||||||||||||||||||
Points at end of period | 97.20 | 94.00 |
31
aggregate gross book value of $416 million, including 5.0 million shares of SAFE common stock acquired by the Company, were attributable to the 2021-2022 Plan.
2013-2018 iPIP Plans—The remainder of the Company'sCompany’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 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'sCompany’s projected investment performance. Settlement of the awards will be 50% in cash and 50% in shares of the Company'sCompany’s common stock or in shares of SAFE'sSAFE’s common stock owned by the Company.
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, 2021.
iPIP Investment Pool | |||||||||||||||||||||||||||||||||||||||||
2013-2014 | 2015-2016 | 2017-2018 | |||||||||||||||||||||||||||||||||||||||
Points at beginning of period | 80.17 | 70.40 | 73.34 | ||||||||||||||||||||||||||||||||||||||
Forfeited | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||
Points at end of period | 80.17 | 70.40 | 73.34 |
| | | | | | |
| | iPIP Investment Pool | ||||
|
| 2013‑2014 |
| 2015‑2016 |
| 2017‑2018 |
Points at beginning of period |
| 80.17 |
| 70.40 |
| 75.34 |
Granted | | 0 | | 0 | | 0 |
Points at end of period |
| 80.17 |
| 70.40 |
| 75.34 |
During the three months ended March 31, 2022, the Company recorded a $16.0 million reduction of expense related to the 2013-2018 iPIP plans, primarily due to a decrease in the price per share of SAFE common stock. During the three months ended March 31, 2021, and 2020, the Company recorded $2.4 million and $14.3 million, respectively, of expense related to the 2013-2018 iPIP plans.
As of March 31, 2022, investments with an aggregate gross book value of $13 million were attributable to the 2013-2014 Plan and investments with an aggregate gross book value of $277 million, including 7.6 million shares of SAFE common stock acquired by the Company, were attributable to the 2017-2018 Plan. As of March 31, 2022 there were 0 investments attributable to the 2015-2016 Plan.
During the three months ended March 31, 2021, the Company made distributions to participants in the 2015-2016 investment pool. The iPIP participants received total distributions in the amount of $2.8 million as compensation, comprised of cash and 86,807 shares of the Company'sCompany’s common stock with a fair value of $17.72 per share, which are fully-vested and issued under the 2009 LTIP (see below). After deducting statutory minimum tax withholdings, a total of 51,854 shares of the Company's common stock were issued.
As of March 31, 20212022 and December 31, 2020,2021, the Company had accrued compensation costs relating to iPIP of $68.6$102.4 million and $69.1$116.6 million, respectively, which are included in "Accounts“Accounts payable, accrued expenses and other liabilities"liabilities” on the Company'sCompany’s consolidated balance sheets.
Long-Term Incentive Plan
—TheAs of March 31, 2021,2022, an aggregate of 2.12.8 million shares remain available for issuance pursuant to future awards under the Company'sCompany’s 2009 LTIP.
32
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, 2021,2022, is as follows (in thousands):
| | | |||||||||
Nonvested at beginning of period |
| 754 | |||||||||
Granted |
| 212 | |||||||||
Vested |
| (270) | |||||||||
Forfeited | | (4) | |||||||||
Nonvested at end of period | 692 |
As of March 31, 2021,2022, there was $8.0$9.4 million of total unrecognized compensation cost related to all unvested restricted stock units that are expected to be recognized over a weighted average remaining vesting/service period of 1.91.78 years.
Directors’ Awards
—During the three months ended March 31,401(k) Plan
—The Company made contributions of
The following table presents a reconciliation of income from operations used in the basic and diluted earnings per share ("EPS"(“EPS”) calculations ($ in thousands, except for per share data):
| | | | | | | |
| | For the Three Months Ended March 31, | | ||||
|
| 2022 |
| 2021 | | ||
Net loss from continuing operations | | $ | (1,888) | | $ | (14,497) | |
Net loss from continuing operations attributable to noncontrolling interests | |
| 18 | |
| 44 | |
Preferred dividends | |
| (5,874) | |
| (5,874) | |
Net loss from continuing operations and allocable to common shareholders for basic and diluted earnings per common share | | $ | (7,744) | | $ | (20,327) | |
For the Three Months Ended March 31, | |||||||||||||||||||||||
2021 | 2020 | ||||||||||||||||||||||
Net income (loss) | $ | 7,989 | $ | (12,885) | |||||||||||||||||||
Net income attributable to noncontrolling interests | (2,520) | (2,691) | |||||||||||||||||||||
Preferred dividends | (5,874) | (5,874) | |||||||||||||||||||||
Net loss allocable to common shareholders for basic and diluted earnings per common share | $ | (405) | $ | (21,450) | |||||||||||||||||||
33
For the Three Months Ended March 31, | |||||||||||||||||||||||
2021 | 2020 | ||||||||||||||||||||||
Earnings allocable to common shares: | |||||||||||||||||||||||
Numerator for basic and diluted earnings per share: | |||||||||||||||||||||||
Net loss attributable to iStar Inc. and allocable to common shareholders | $ | (405) | $ | (21,450) | |||||||||||||||||||
Denominator for basic and diluted earnings per share: | |||||||||||||||||||||||
Weighted average common shares outstanding for basic and diluted earnings per common share | 73,901 | 77,444 | |||||||||||||||||||||
Basic and diluted earnings per common share:(1) | |||||||||||||||||||||||
Net loss allocable to common shareholders | $ | (0.01) | $ | (0.28) | |||||||||||||||||||
| | | | | | | |
| | For the Three Months Ended March 31, | | ||||
|
| 2022 |
| 2021 | | ||
Earnings allocable to common shares: | | |
|
| |
| |
Numerator for basic and diluted earnings per share: | | |
|
| |
| |
Net loss from continuing operations and allocable to common shareholders | | $ | (7,744) | | $ | (20,327) | |
Net income from discontinued operations | | | 797,688 | | | 22,486 | |
Net (income) from discontinued operations attributable to noncontrolling interests | | | (179,089) | | | (2,564) | |
Net income (loss) allocable to common shareholders | | $ | 610,855 | | $ | (405) | |
| | | | | | | |
Denominator for basic and diluted earnings per share: | |
|
| |
|
| |
Weighted average common shares outstanding for basic and diluted earnings per common share | |
| 69,037 | |
| 73,901 | |
| | | | | | | |
Basic and diluted earnings per common share:(1) | |
|
| |
|
| |
Net loss from continuing operations and allocable to common shareholders | | $ | (0.11) | | $ | (0.28) | |
Net income from discontinued operations and allocable to common shareholders | | | 8.96 | | | 0.27 | |
Net income (loss) allocable to common shareholders | | $ | 8.85 | | $ | (0.01) | |
(1) | For the three months ended March 31, 2022 and 2021, the effect of certain of the Company’s restricted stock awards were anti-dilutive due to the Company having a net loss from continuing operations and allocable to common shareholders for the period. For the three months ended March 31, 2022 and 2021, 8,829,274 and 2,893,787 shares, respectively, of the 3.125% Convertible Notes were antidilutive based upon the conversion price for such periods. |
Note 17—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'sCompany’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.
34
iStar Inc.
The following fair value hierarchy table summarizes the Company'sCompany’s assets and liabilities recorded at fair value on a recurring and non-recurring basis by the above categories ($ in thousands):
| | | | | | | | | | | | |
| | Fair Value Using | ||||||||||
| | | | | Quoted | | | | | | | |
| | | | | market | | Significant | | | | ||
| | | | | prices in | | other | | Significant | |||
| | | | | active | | observable | | unobservable | |||
| | | | | markets | | inputs | | inputs | |||
|
| Total |
| (Level 1) |
| (Level 2) |
| (Level 3) | ||||
As of March 31, 2022 | |
| | |
| | |
| | |
| |
Recurring basis: |
| |
|
| |
|
| |
|
| |
|
Available-for-sale securities(1) |
| $ | 24,864 |
| $ | — |
| $ | — |
| $ | 24,864 |
As of December 31, 2021 |
| |
|
| |
|
| |
|
| |
|
Recurring basis: |
| |
|
| |
|
| |
|
| |
|
Derivative liabilities(1) | | $ | 8,395 |
| $ | — |
| $ | 8,395 |
| $ | — |
Available-for-sale securities(1) | | | 28,092 | | | — | | | — | | | 28,092 |
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, 2021 | |||||||||||||||||||||||
Recurring basis: | |||||||||||||||||||||||
Derivative liabilities(1) | $ | 14,178 | $ | 0 | $ | 14,178 | $ | 0 | |||||||||||||||
Available-for-sale securities(1) | 24,043 | 0 | 0 | 24,043 | |||||||||||||||||||
Loan receivable held for sale (refer to Note 7) | 16,086 | 0 | 0 | 16,086 | |||||||||||||||||||
Non-recurring basis: | |||||||||||||||||||||||
Other investments(2) | 75,402 | 0 | 75,402 | 0 | |||||||||||||||||||
As of December 31, 2020 | |||||||||||||||||||||||
Recurring basis: | |||||||||||||||||||||||
Derivative liabilities(1) | 18,926 | 0 | 18,926 | 0 | |||||||||||||||||||
Available-for-sale securities(1) | 25,274 | 0 | 0 | 25,274 | |||||||||||||||||||
Non-recurring basis: | |||||||||||||||||||||||
Impaired land and development(3) | 6,078 | 0 | 0 | 6,078 |
(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 |
The following table summarizes changes in Level 3 available-for-sale securities reported at fair value on the Company'sCompany’s consolidated balance sheets for the three months ended March 31, 20212022 and 20202021 ($ in thousands):
| | | | | | |
|
| 2022 |
| 2021 | ||
Beginning balance | | $ | 28,092 | | $ | 25,274 |
Repayments | |
| (215) | |
| (200) |
Unrealized losses recorded in other comprehensive income | |
| (3,013) | |
| (1,031) |
Ending balance | | $ | 24,864 | | $ | 24,043 |
2021 | 2020 | |||||||||||||
Beginning balance | $ | 25,274 | $ | 23,896 | ||||||||||
Repayments | (200) | (459) | ||||||||||||
Unrealized gains (losses) recorded in other comprehensive income | (1,031) | 203 | ||||||||||||
Ending balance | $ | 24,043 | $ | 23,640 |
35
iStar Inc.
Fair values of financial instruments—
The following table presents the carrying value and fair value for the | | | | | | | | | | | | |
| | As of March 31, 2022 | | As of December 31, 2021 | ||||||||
| | Carrying | | Fair | | Carrying | | Fair | ||||
|
| Value |
| Value |
| Value |
| Value | ||||
Assets | | | | | | | | | | | | |
Net investment in leases (refer to Note 5)(1) | | $ | 28 | | $ | 28 | | $ | 43 | | $ | 43 |
Loans receivable and other lending investments, net(1) | | | 332 | | | 342 | | | 333 | | | 345 |
Loans receivable held for sale(1) | | | 0 | | | 0 | | | 43 | | | 43 |
Cash and cash equivalents(2) | |
| 1,500 | |
| 1,500 | |
| 340 | |
| 340 |
Restricted cash(2) | |
| 51 | |
| 51 | |
| 54 | |
| 54 |
| | | | | | | | | | | | |
Liabilities | | | | | | | | | | | | |
Debt obligations, net(1)(3) | | | | | | | | | | | | |
Level 1 | | | 1,985 | | | 2,228 | | | 2,473 | | | 2,799 |
Level 3 | | | 99 | | | 101 | | | 99 | | | 104 |
Total debt obligations, net | | | 2,084 | | | 2,329 | | | 2,572 | | | 2,903 |
As of March 31, 2021 | As of December 31, 2020 | |||||||||||||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||||||||||||
Net investment in leases(1) | $ | 431 | $ | 440 | $ | 429 | $ | 431 | ||||||||||||||||||
Loans receivable and other lending investments, net(1) | 534 | 578 | 732 | 772 | ||||||||||||||||||||||
Cash and cash equivalents(2) | 194 | 194 | 99 | 99 | ||||||||||||||||||||||
Restricted cash(2) | 54 | 54 | 52 | 52 | ||||||||||||||||||||||
Loan participations payable, net(1) | 0 | 0 | 43 | 43 | ||||||||||||||||||||||
Debt obligations, net(1)(3) | 3,291 | 3,449 | 3,287 | 3,414 | ||||||||||||||||||||||
(1) | The fair value of the Company’s net investment in leases, loans receivable and other lending investments, net, loans receivable held for sale and certain debt obligations are classified as Level 3 within the fair value hierarchy. |
(2) | The Company determined the carrying values of its cash and cash equivalents and restricted cash approximated their fair values. Restricted cash is recorded in “Deferred expenses and other assets, net” on the Company’s balance sheet. The fair value of the Company’s cash and cash equivalents and restricted cash are classified as Level 1 within the fair value hierarchy. |
(3) | As of March 31, 2022 and December 31, 2021, the fair value of the Company’s unsecured notes is classified as Level 1 in the fair value hierarchy. As of March 31, 2022 and December 31, 2021, the fair value of the Company’s 3.125% Senior Convertible Notes was $497.5 million and $527.5 million, respectively (refer to Note 18). |
Note 18—17—Segment Reporting
The Company has determined that it has 4 reportable segments based on how management reviews and manages its business. These reportable segments include: Net Lease, Real Estate Finance, Operating Properties and Land and Development. The Net Lease segment (refer to Note 3 - Net Lease Sale and Discontinued Operations) includes the Company's activities and operations related to the ownership of properties generally leased to single corporate tenants and itsCompany’s investments in SAFE and Netits Ground Lease Venture IIadjacent businesses (refer to Note 8). The Real Estate Finance segment includes all of the Company'sCompany’s activities related to senior and mezzanine real estate loans and real estate related securities. The Operating Properties segment includes the Company'sCompany’s activities and operations related to its commercial and residential properties. The Land and Development segment includes the Company'sCompany’s activities related to its developable land portfolio.
The Company evaluates performance basedperformance-based on the following financial measures for each segment. The Company'sCompany’s segment information is as follows ($ in thousands):
| | | | | | | | | | | | | | | | | | |
|
| Net |
| Real Estate |
| Operating |
| Land and |
| Corporate/ |
| Company | ||||||
| | Lease(1) | | Finance | | Properties | | Development | | Other(2) | | Total | ||||||
Three Months Ended March 31, 2022 | | | | | | | | | | | | | | | | | | |
Operating lease income | | $ | — | | $ | — | | $ | 2,974 | | $ | 135 | | $ | — | | $ | 3,109 |
Interest income |
| | 75 |
| | 4,873 |
| | — |
| | — |
| | — |
| | 4,948 |
Interest income from sales-type leases |
| | 356 |
| | — |
| | — |
| | — |
| | — |
| | 356 |
Other income |
| | 4,459 |
| | 11 |
| | 2,661 |
| | 1,317 |
| | 192 |
| | 8,640 |
Land development revenue |
| | — |
| | — |
| | — |
| | 14,900 |
| | — |
| | 14,900 |
Earnings from equity method investments |
| | 17,800 |
| | 1,015 |
| | 45 |
| | 3,566 |
| | 2,606 |
| | 25,032 |
Income from sales of real estate |
| | 492 |
| | — |
| | — |
| | — |
| | — |
| | 492 |
Total revenue and other earnings |
| | 23,182 |
| | 5,899 |
| | 5,680 |
| | 19,918 |
| | 2,798 |
| | 57,477 |
Real estate expense |
| | (177) |
| | — |
| | (5,891) |
| | (4,049) |
| | — |
| | (10,117) |
Land development cost of sales |
| | — |
| | — |
| | — |
| | (14,496) |
| | — |
| | (14,496) |
Other expense |
| | (471) |
| | (119) |
| | — |
| | (82) |
| | (258) |
| | (930) |
Allocated interest expense |
| | (16,215) |
| | (3,140) |
| | (1,341) |
| | (4,243) |
| | (4,304) |
| | (29,243) |
Net Lease | Real Estate Finance | Operating Properties | Land and Development | Corporate/Other(1) | Company Total | |||||||||||||||||||||||||||||||||||||||
Three Months Ended March 31, 2021: | ||||||||||||||||||||||||||||||||||||||||||||
Operating lease income | $ | 42,513 | $ | 0 | $ | 4,837 | $ | 94 | $ | 0 | $ | 47,444 | ||||||||||||||||||||||||||||||||
Interest income | 878 | 9,772 | 0 | 0 | 0 | 10,650 | ||||||||||||||||||||||||||||||||||||||
Interest income from sales-type leases | 8,627 | 0 | 0 | 0 | 0 | 8,627 | ||||||||||||||||||||||||||||||||||||||
Other income | 4,751 | 99 | 2,337 | 1,389 | 5,714 | 14,290 | ||||||||||||||||||||||||||||||||||||||
Land development revenue | 0 | 0 | 0 | 32,249 | 0 | 32,249 | ||||||||||||||||||||||||||||||||||||||
Earnings (losses) from equity method investments | 12,413 | 466 | (3,747) | 3,146 | 491 | 12,769 | ||||||||||||||||||||||||||||||||||||||
Income from sales of real estate | 0 | 0 | 612 | 0 | 0 | 612 | ||||||||||||||||||||||||||||||||||||||
Total revenue and other earnings | 69,182 | 10,337 | 4,039 | 36,878 | 6,205 | 126,641 | ||||||||||||||||||||||||||||||||||||||
Real estate expense | (8,633) | 0 | (3,799) | (4,462) | 0 | (16,894) | ||||||||||||||||||||||||||||||||||||||
Land development cost of sales | 0 | 0 | 0 | (29,323) | 0 | (29,323) | ||||||||||||||||||||||||||||||||||||||
Other expense | 0 | (64) | 0 | 0 | (189) | (253) | ||||||||||||||||||||||||||||||||||||||
Allocated interest expense | (25,079) | (4,578) | (2,043) | (3,938) | (3,925) | (39,563) | ||||||||||||||||||||||||||||||||||||||
Allocated general and administrative(2) | (5,937) | (1,459) | (660) | (2,428) | (5,447) | (15,931) | ||||||||||||||||||||||||||||||||||||||
Segment profit (loss)(3) | $ | 29,533 | $ | 4,236 | $ | (2,463) | $ | (3,273) | $ | (3,356) | $ | 24,677 | ||||||||||||||||||||||||||||||||
Other significant items: | ||||||||||||||||||||||||||||||||||||||||||||
Recovery of loan losses | $ | (152) | $ | (3,642) | $ | 0 | $ | 0 | $ | 0 | $ | (3,794) | ||||||||||||||||||||||||||||||||
Recovery of losses on net investment in leases | (1,601) | 0 | 0 | 0 | 0 | (1,601) | ||||||||||||||||||||||||||||||||||||||
Impairment of assets | 1,528 | 0 | 257 | 0 | 0 | 1,785 | ||||||||||||||||||||||||||||||||||||||
Depreciation and amortization | 13,054 | 0 | 1,988 | 218 | 195 | 15,455 | ||||||||||||||||||||||||||||||||||||||
Capitalized expenditures | 1,268 | 0 | 57 | 4,739 | 0 | 6,064 | ||||||||||||||||||||||||||||||||||||||
Three Months Ended March 31, 2020: | ||||||||||||||||||||||||||||||||||||||||||||
Operating lease income | $ | 41,464 | $ | 0 | $ | 5,774 | $ | 108 | $ | 0 | $ | 47,346 | ||||||||||||||||||||||||||||||||
Interest income | 823 | 16,393 | 0 | 0 | 0 | 17,216 | ||||||||||||||||||||||||||||||||||||||
Interest income from sales-type leases | 8,355 | 0 | 0 | 0 | 0 | 8,355 | ||||||||||||||||||||||||||||||||||||||
Other income | 4,293 | 306 | 3,157 | 624 | 11,988 | 20,368 | ||||||||||||||||||||||||||||||||||||||
Land development revenue | 0 | 0 | 0 | 80,176 | 0 | 80,176 | ||||||||||||||||||||||||||||||||||||||
Earnings (losses) from equity method investments | 19,531 | 0 | (2,667) | 584 | (836) | 16,612 | ||||||||||||||||||||||||||||||||||||||
Total revenue and other earnings | 74,466 | 16,699 | 6,264 | 81,492 | 11,152 | 190,073 | ||||||||||||||||||||||||||||||||||||||
Real estate expense | (6,229) | 0 | (7,663) | (8,606) | 0 | (22,498) | ||||||||||||||||||||||||||||||||||||||
Land development cost of sales | 0 | 0 | 0 | (77,059) | 0 | (77,059) | ||||||||||||||||||||||||||||||||||||||
Other expense | 0 | (19) | 0 | 0 | (55) | (74) | ||||||||||||||||||||||||||||||||||||||
Allocated interest expense | (24,478) | (6,199) | (2,259) | (4,570) | (5,886) | (43,392) | ||||||||||||||||||||||||||||||||||||||
Allocated general and administrative(2) | (6,989) | (2,097) | (789) | (2,819) | (5,307) | (18,001) | ||||||||||||||||||||||||||||||||||||||
Segment profit (loss)(3) | $ | 36,770 | $ | 8,384 | $ | (4,447) | $ | (11,562) | $ | (96) | $ | 29,049 | ||||||||||||||||||||||||||||||||
Other significant items: | ||||||||||||||||||||||||||||||||||||||||||||
Provision for loan losses | $ | 137 | $ | 3,866 | $ | 0 | $ | 0 | $ | 0 | $ | 4,003 | ||||||||||||||||||||||||||||||||
Provision for losses on net investment in leases | 1,292 | 0 | 0 | 0 | 0 | 1,292 | ||||||||||||||||||||||||||||||||||||||
Impairment of assets | 1,708 | 0 | 0 | 0 | 0 | 1,708 | ||||||||||||||||||||||||||||||||||||||
Depreciation and amortization | 12,656 | 0 | 1,284 | 243 | 303 | 14,486 | ||||||||||||||||||||||||||||||||||||||
Capitalized expenditures | 1,846 | 0 | 917 | 12,027 | 0 | 14,790 | ||||||||||||||||||||||||||||||||||||||
36
iStar Inc.
Allocated general and administrative(3) |
| | (5,016) |
| | (1,124) |
| | (478) |
| | (2,255) |
| | (4,929) |
| | (13,802) |
Segment profit (loss)(4) | | $ | 1,303 | | $ | 1,516 | | $ | (2,030) | | $ | (5,207) | | $ | (6,693) | | $ | (11,111) |
Other significant items: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Provision for loan losses | | $ | — | | $ | 135 | | $ | — | | $ | — | | $ | — | | $ | 135 |
Provision for losses on net investment in leases | |
| 281 | |
| — | |
| — | |
| — | |
| — | |
| 281 |
Depreciation and amortization | |
| — | |
| — | |
| 986 | |
| 228 | |
| 143 | |
| 1,357 |
Capitalized expenditures | |
| (211) | |
| — | |
| 220 | |
| 4,922 | |
| — | |
| 4,931 |
| | | | | | | | | | | | | | | | | | |
Three Months Ended March 31, 2021 | |
| | |
| | |
| | |
| | |
| | |
| |
Operating lease income | | $ | — | | $ | — | | $ | 4,837 | | $ | 94 | | $ | — | | $ | 4,931 |
Interest income | |
| 17 | |
| 9,772 | |
| — | |
| — | |
| — | |
| 9,789 |
Interest income from sales-type leases | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — |
Other income | |
| 3,476 | |
| 99 | |
| 2,337 | |
| 1,389 | |
| 5,714 | |
| 13,015 |
Land development revenue | |
| — | |
| — | |
| — | |
| 32,249 | |
| — | |
| 32,249 |
Earnings (losses) from equity method investments | |
| 11,412 | |
| 466 | |
| (3,747) | |
| 3,146 | |
| 491 | |
| 11,768 |
Income from sales of real estate | |
| — | |
| — | |
| 612 | |
| — | |
| — | |
| 612 |
Total revenue and other earnings | |
| 14,905 | |
| 10,337 | |
| 4,039 | |
| 36,878 | |
| 6,205 | |
| 72,364 |
Real estate expense | |
| (458) | |
| — | |
| (3,799) | |
| (4,462) | |
| — | |
| (8,719) |
Land development cost of sales | |
| — | |
| — | |
| — | |
| (29,323) | |
| — | |
| (29,323) |
Other expense | |
| — | |
| (64) | |
| — | |
| — | |
| (189) | |
| (253) |
Allocated interest expense | |
| (14,325) | |
| (4,578) | |
| (2,043) | |
| (3,938) | |
| (3,925) | |
| (28,809) |
Allocated general and administrative(3) | |
| (5,937) | |
| (1,459) | |
| (660) | |
| (2,428) | |
| (5,447) | |
| (15,931) |
Segment profit (loss)(4) | | $ | (5,815) | | $ | 4,236 | | $ | (2,463) | | $ | (3,273) | | $ | (3,356) | | $ | (10,671) |
Other significant items: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Recovery of loan losses | | $ | — | | $ | (3,642) | | $ | — | | $ | — | | $ | — | | $ | (3,642) |
Impairment of assets | |
| — | |
| — | |
| 257 | |
| — | |
| — | |
| 257 |
Depreciation and amortization | | | — | | | — | | | 1,988 | | | 218 | | | 195 | | | 2,401 |
Capitalized expenditures | |
| 1,268 | |
| — | |
| 57 | |
| 4,739 | |
| — | |
| 6,064 |
| | | | | | | | | | | | | | | | | | |
As of March 31, 2022 | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Real estate, net | | $ | — | | $ | — | | $ | 91,434 | | $ | — | | $ | — | | $ | 91,434 |
Real estate available and held for sale | |
| — | |
| — | |
| 301 | |
| — | |
| — | |
| 301 |
Total real estate | |
| — | |
| — | |
| 91,735 | |
| — | |
| — | |
| 91,735 |
Real estate and other assets available and held for sale and classified as discontinued operations(1) | | | 226,309 | | | — | | | — | | | — | | | — | | | 226,309 |
Net investment in leases | |
| 28,131 | |
| — | |
| — | |
| — | |
| — | |
| 28,131 |
Land and development, net | |
| — | |
| — | |
| — | |
| 277,421 | |
| — | |
| 277,421 |
Loans receivable and other lending investments, net | |
| — | |
| 331,839 | |
| — | |
| — | |
| — | |
| 331,839 |
Loan receivable held for sale | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — |
Other investments | | | 1,453,205 | | | 4,627 | | | 43,251 | | | 190 | | | 24,746 | | | 1,526,019 |
Total portfolio assets | | | 1,707,645 | | | 336,466 | | | 134,986 | | | 277,611 | | | 24,746 | |
| 2,481,454 |
Cash and other assets | | | | | | | | | | | | | | | | |
| 1,602,597 |
Total assets | | | | |
|
| |
|
| |
|
| |
|
| | $ | 4,084,051 |
| | | | | | | | | | | | | | | | | | |
As of December 31, 2021 | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Real estate, net | | $ | — | | $ | — | | $ | 92,150 | | $ | — | | $ | — | | $ | 92,150 |
Real estate available and held for sale | |
| — | |
| — | |
| 301 | |
| — | |
| — | |
| 301 |
Total real estate | |
| — | |
| — | |
| 92,451 | |
| — | |
| — | |
| 92,451 |
Real estate and other assets available and held for sale and classified as discontinued operations(1) | | | 2,299,711 | | | — | | | — | | | — | | | — | | | 2,299,711 |
Net investment in leases | |
| 43,215 | |
| — | |
| — | |
| — | |
| — | |
| 43,215 |
Land and development, net | |
| — | |
| — | |
| — | |
| 286,810 | |
| — | |
| 286,810 |
Loans receivable and other lending investments, net | |
| — | |
| 332,844 | |
| — | |
| — | |
| — | |
| 332,844 |
Loan receivable held for sale | | | 43,215 | | | — | | | — | | | — | | | — | | | 43,215 |
Other investments | |
| 1,186,162 | | | 48,862 | | | 43,252 | | | 1,096 | | | 17,909 | |
| 1,297,281 |
Total portfolio assets | | $ | 3,572,303 | | $ | 381,706 | | $ | 135,703 | | $ | 287,906 | | $ | 17,909 | |
| 4,395,527 |
Cash and other assets | |
| | |
|
| |
|
| |
|
| |
|
| | | 445,007 |
Total assets | | | | |
|
| |
|
| |
|
| |
|
| | $ | 4,840,534 |
Net Lease | Real Estate Finance | Operating Properties | Land and Development | Corporate/Other(1) | Company Total | |||||||||||||||||||||||||||||||||||||||
As of March 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||
Real estate, net | $ | 1,283,082 | $ | 0 | $ | 191,311 | $ | 0 | $ | 0 | $ | 1,474,393 | ||||||||||||||||||||||||||||||||
Real estate available and held for sale | 0 | 0 | 2,600 | 0 | 0 | 2,600 | ||||||||||||||||||||||||||||||||||||||
Total real estate | 1,283,082 | 0 | 193,911 | 0 | 0 | 1,476,993 | ||||||||||||||||||||||||||||||||||||||
Net investment in leases | 431,126 | 0 | 0 | 0 | 0 | 431,126 | ||||||||||||||||||||||||||||||||||||||
Land and development, net | 0 | 0 | 0 | 406,781 | 0 | 406,781 | ||||||||||||||||||||||||||||||||||||||
Loans receivable and other lending investments, net | 46,411 | 487,305 | 0 | 0 | 0 | 533,716 | ||||||||||||||||||||||||||||||||||||||
Loan receivable held for sale | 16,086 | 0 | 0 | 0 | 0 | 16,086 | ||||||||||||||||||||||||||||||||||||||
Other investments | 1,040,238 | 44,672 | 56,977 | 12,107 | 83,301 | 1,237,295 | ||||||||||||||||||||||||||||||||||||||
Total portfolio assets | $ | 2,816,943 | $ | 531,977 | $ | 250,888 | $ | 418,888 | $ | 83,301 | 4,101,997 | |||||||||||||||||||||||||||||||||
Cash and other assets | 691,594 | |||||||||||||||||||||||||||||||||||||||||||
Total assets | $ | 4,793,591 | ||||||||||||||||||||||||||||||||||||||||||
As of December 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||
Real estate, net | $ | 1,291,903 | $ | 0 | $ | 192,378 | $ | 0 | $ | 0 | $ | 1,484,281 | ||||||||||||||||||||||||||||||||
Real estate available and held for sale | 0 | 0 | 5,212 | 0 | 0 | 5,212 | ||||||||||||||||||||||||||||||||||||||
Total real estate | 1,291,903 | 0 | 197,590 | 0 | 0 | 1,489,493 | ||||||||||||||||||||||||||||||||||||||
Net investment in leases | 429,101 | 0 | 0 | 0 | 0 | 429,101 | ||||||||||||||||||||||||||||||||||||||
Land and development, net | 0 | 0 | 0 | 430,663 | 0 | 430,663 | ||||||||||||||||||||||||||||||||||||||
Loans receivable and other lending investments, net | 45,398 | 686,932 | 0 | 0 | 0 | 732,330 | ||||||||||||||||||||||||||||||||||||||
Other investments | 1,016,710 | 0 | 58,739 | 31,200 | 69,911 | 1,176,560 | ||||||||||||||||||||||||||||||||||||||
Total portfolio assets | $ | 2,783,112 | $ | 686,932 | $ | 256,329 | $ | 461,863 | $ | 69,911 | 4,258,147 | |||||||||||||||||||||||||||||||||
Cash and other assets | 603,661 | |||||||||||||||||||||||||||||||||||||||||||
Total assets | $ | 4,861,808 |
(1) | Refer to Note 3 – Net Lease Sale and Discontinued Operations. |
(2) | 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. |
37
(3) | General and administrative excludes stock-based compensation (income) expense of ($12.4) million and $5.5 million for the three months ended March 31, 2022 and 2021, respectively. |
(4) | The following is a reconciliation of segment profit to net income (loss) ($ in thousands): |
| | | | | | | |
| | For the Three Months Ended March 31, | | ||||
|
| 2022 |
| 2021 | | ||
Segment loss | | $ | (11,111) | | $ | (10,671) | |
Less: (Provision for) recovery of loan losses | |
| (135) | |
| 3,642 | |
Less: Provision for losses on net investment in leases | |
| (281) | |
| 0 | |
Less: Impairment of assets | |
| 0 | |
| (257) | |
Less: Stock-based compensation income (expense) | |
| 12,427 | |
| (5,508) | |
Less: Depreciation and amortization | |
| (1,357) | |
| (2,401) | |
Less: Income tax (expense) benefit | |
| (3) | |
| 698 | |
Less: Loss on early extinguishment of debt, net | |
| (1,428) | |
| 0 | |
Less: Net income from discontinued operations | | | 797,688 | | | 22,486 | |
Net income | | $ | 795,800 | | $ | 7,989 | |
Note 18—Subsequent Events
On April 8, 2022, the Company completed separate, privately-negotiated transactions with holders of $194 million aggregate principal amount of the Company's joint venture investments3.125% Convertible Notes (refer to Note 10) in which the noteholders exchanged their convertible notes with the Company for 13.75 million newly issued shares of the Company's common stock and strategic investments that are not included inaggregate cash payments of $14 million. The 3.125% Convertible Senior Notes received by the other reportable segments above.Company were retired.
For the Three Months Ended March 31, | |||||||||||||||||||||||
2021 | 2020 | ||||||||||||||||||||||
Segment profit | $ | 24,677 | $ | 29,049 | |||||||||||||||||||
Less: Recovery of (provision for) loan losses | 3,794 | (4,003) | |||||||||||||||||||||
Less: Recovery of (provision for) losses on net investment in leases | 1,601 | (1,292) | |||||||||||||||||||||
Less: Impairment of assets | (1,785) | (1,708) | |||||||||||||||||||||
Less: Stock-based compensation expense | (5,508) | (16,270) | |||||||||||||||||||||
Less: Depreciation and amortization | (15,455) | (14,486) | |||||||||||||||||||||
Less: Income tax benefit (expense) | 665 | (60) | |||||||||||||||||||||
Less: Loss on early extinguishment of debt, net | 0 | (4,115) | |||||||||||||||||||||
Net income (loss) | $ | 7,989 | $ | (12,885) |
38
Item 2. Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations
Certain statements in this report, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are "forward-looking statements"“forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the "Securities Act"“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"“Exchange Act”). Forward-looking statements are included with respect to, among other things, iStar Inc.'s’s (the "Company's"“Company’s”) current business plan, business strategy, portfolio management, prospects and liquidity. These forward-looking statements generally are identified by the words "believe," "project," "expect," "anticipate," "estimate," "intend," "strategy," "plan," "may," "should," "will," "would," "will“believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “plan,” “may,” “should,” “will,” “would,” “will be," "will” “will continue," "will” “will likely result,"” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results or outcomes to differ materially from those contained in the forward-looking statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. In assessing all forward-looking statements, readers are urged to read carefully all cautionary statements contained in this Form 10-Q and the uncertainties and risks described in Item 1A—"Risk Factors"Factors’’ in our 2021 Annual Report, on Form 10-K, all of which could affect our future results of operations, financial condition and liquidity. For purposes of Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations, the terms "we," "our"“we,” “our” and "us"“us” refer to iStar Inc. and its consolidated subsidiaries, unless the context indicates otherwise.
The discussion below should be read in conjunction with our consolidated financial statements and related notes in this quarterly report on Form 10-Q and our 2021 Annual Report on Form 10-K.Report. These historical financial statements may not be indicative of our future performance.
Executive Overview
Corporate Strategy. We have reclassifiedcontinue to execute our stated corporate strategy which is to grow our Ground Lease and Ground Lease adjacent businesses and simplify our portfolio through sales of other assets. In March 2022, we, through certain itemssubsidiaries of ours and entities managed by us, sold our portfolio of net lease assets for an aggregate gross sales price of $3.07 billion (the “Net Lease Sale”).
The portfolio sold consisted of office, entertainment and industrial properties located in the United States comprising approximately 18.3 million square feet. It included assets wholly-owned by us and assets owned by two joint ventures managed by us and in which we owned 51.9% interests. At the time of the sale, the portfolio was encumbered by an aggregate of $702 million of mortgage indebtedness, including indebtedness of equity method investments, which was repaid with proceeds from the sale. After repayment of the mortgage indebtedness and prepayment penalties, repayment of our Senior Term Loan (refer to Note 10 to the consolidated financial statementsstatements), payments to terminate derivative contracts, payments to joint venture partners, and payments of prior periodspromotes, transaction expenses and amounts due under employee incentive plans, we retained net cash proceeds of $1.2 billion from the transaction. Two net lease properties were not included in the sale but were sold to conform toother third parties in the first quarter 2022. Our net lease assets associated with our current financial statements presentation.Ground Lease businesses were not included in the sale.
39
Portfolio Overview
As of March 31, 2021,2022, based on our gross book value, our total investment portfolio has the following property/collateral type and geographic characteristics ($ in thousands):
| | | | | | | | | | | | | | | | | | | | | |
Property/Collateral |
| Net |
| Real Estate |
| Operating |
| Land & |
| | |
| | |
| % of |
| ||||
Types | | Lease | | Finance | | Properties | | Development | | Corporate | | Total | | Total |
| ||||||
Ground Leases | | $ | 1,481,337 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 1,481,337 |
| 65.7 | % |
Land and Development | |
| — | |
| 11,607 | |
| — | |
| 223,191 | |
| — | |
| 234,798 |
| 10.4 | % |
Hotel | |
| — | |
| 108,362 | |
| 67,712 | |
| — | |
| — | |
| 176,074 |
| 7.8 | % |
Multifamily | |
| — | |
| 72,151 | |
| 38,837 | |
| — | |
| — | |
| 110,988 |
| 4.9 | % |
Retail | |
| — | |
| 61,807 | |
| 13,600 | |
| 8,340 | |
| — | |
| 83,747 |
| 3.7 | % |
Condominium | |
| — | |
| 11,092 | |
| 301 | |
| 46,080 | |
| — | |
| 57,473 |
| 2.5 | % |
Office | | | — | | | 46,583 | | | — | | | — | | | — | | | 46,583 |
| 2.1 | % |
Entertainment / Leisure | | | — | |
| — | |
| 14,534 | |
| — | |
| — | |
| 14,534 |
| 0.6 | % |
Other Property Types | |
| — | |
| 24,863 | |
| — | |
| — | |
| 24,747 | |
| 49,610 |
| 2.2 | % |
Total | | $ | 1,481,337 | | $ | 336,465 | | $ | 134,984 | | $ | 277,611 | | $ | 24,747 | | $ | 2,255,144 |
| 100.0 | % |
Percentage of Total | | | 66% | | | 15% | | | 6% | | | 12% | | | <1% | | | 100% | | | |
| | | | | | | | | | | | | | | | | | | | | |
|
| Net |
| Real Estate |
| Operating |
| Land & |
| | |
| | |
| % of |
| ||||
Geographic Region | | Lease | | Finance | | Properties | | Development | | Corporate | | Total | | Total |
| ||||||
Northeast | | $ | 567,442 | | $ | 91,039 | | $ | 77,831 | | $ | 173,058 | | $ | — | | $ | 909,370 |
| 40.3 | % |
West | |
| 359,451 | |
| 108,463 | |
| 32,374 | |
| 8,970 | |
| — | |
| 509,258 |
| 22.6 | % |
Mid-Atlantic | |
| 217,016 | |
| — | |
| 4,841 | |
| 95,393 | |
| — | |
| 317,250 |
| 14.1 | % |
Southeast | |
| 154,800 | |
| 29,868 | |
| 4,414 | |
| 190 | |
| — | |
| 189,272 |
| 8.4 | % |
Southwest | |
| 140,891 | |
| — | |
| — | |
| — | |
| — | |
| 140,891 |
| 6.2 | % |
Central | |
| 41,737 | |
| 11,092 | |
| 15,524 | |
| — | |
| — | |
| 68,353 |
| 3.0 | % |
Various | |
| — | |
| 96,003 | |
| — | |
| — | |
| 24,747 | |
| 120,750 |
| 5.4 | % |
Total | | $ | 1,481,337 | | $ | 336,465 | | $ | 134,984 | | $ | 277,611 | | $ | 24,747 | | $ | 2,255,144 |
| 100.0 | % |
(1)
Property/Collateral Types | Net Lease | Real Estate Finance | Operating Properties | Land & Development | Corporate | Total | % of Total | |||||||||||||||||||||||||||||||||||||
Office | $ | 938,297 | $ | 52,035 | $ | 53 | $ | — | $ | — | $ | 990,385 | 21.5 | % | ||||||||||||||||||||||||||||||
Entertainment / Leisure | 969,135 | — | 16,203 | — | — | 985,338 | 21.4 | % | ||||||||||||||||||||||||||||||||||||
Ground Leases | 982,573 | — | — | — | — | 982,573 | 21.3 | % | ||||||||||||||||||||||||||||||||||||
Industrial | 291,586 | — | 97,663 | — | 75,402 | 464,651 | 9.9 | % | ||||||||||||||||||||||||||||||||||||
Land and Development | — | 11,886 | — | 323,329 | — | 335,215 | 7.3 | % | ||||||||||||||||||||||||||||||||||||
Condominium | — | 138,479 | 15,707 | 98,045 | — | 252,231 | 5.5 | % | ||||||||||||||||||||||||||||||||||||
Hotel | — | 140,718 | 83,229 | — | — | 223,947 | 4.9 | % | ||||||||||||||||||||||||||||||||||||
Multifamily | 16,086 | 112,819 | 59,232 | — | — | 188,137 | 4.0 | % | ||||||||||||||||||||||||||||||||||||
Retail | 57,348 | 59,391 | 34,578 | 8,271 | — | 159,588 | 3.5 | % | ||||||||||||||||||||||||||||||||||||
Other Property Types | — | 24,043 | — | — | 7,899 | 31,942 | 0.7 | % | ||||||||||||||||||||||||||||||||||||
Total | $ | 3,255,025 | $ | 539,371 | $ | 306,665 | $ | 429,645 | $ | 83,301 | $ | 4,614,007 | 100.0 | % | ||||||||||||||||||||||||||||||
Percentage of Total | 70 | % | 12 | % | 7 | % | 9 | % | 2 | % | 100 | % | ||||||||||||||||||||||||||
Geographic Region | Net Lease | Real Estate Finance | Operating Properties | Land & Development | Corporate | Total | % of Total | |||||||||||||||||||||||||||||||||||||
Northeast | $ | 927,689 | $ | 221,355 | $ | 93,681 | $ | 256,014 | $ | — | $ | 1,498,739 | 32.5 | % | ||||||||||||||||||||||||||||||
West | 496,559 | 132,202 | 56,366 | 29,982 | — | 715,109 | 15.5 | % | ||||||||||||||||||||||||||||||||||||
Mid-Atlantic | 572,158 | — | 6,145 | 105,963 | — | 684,266 | 14.8 | % | ||||||||||||||||||||||||||||||||||||
Central | 429,928 | 65,019 | 44,707 | 31,500 | — | 571,154 | 12.4 | % | ||||||||||||||||||||||||||||||||||||
Southwest | 406,335 | — | 97,716 | 2,268 | — | 506,319 | 11.0 | % | ||||||||||||||||||||||||||||||||||||
Southeast | 412,914 | 28,599 | 8,050 | 3,918 | — | 453,481 | 9.8 | % | ||||||||||||||||||||||||||||||||||||
Various | 9,442 | 92,196 | — | — | 83,301 | 184,939 | 4.0 | % | ||||||||||||||||||||||||||||||||||||
Total | $ | 3,255,025 | $ | 539,371 | $ | 306,665 | $ | 429,645 | $ | 83,301 | $ | 4,614,007 | 100.0 | % |
Net Lease
Prior to the basis assigned to physical real estate property (land and building), net of any impairments taken after acquisition date and net of basis reductions associated with unit/parcel sales, plus our basis in equity method investments, plus lease related intangibles, capitalized leasing costs and excluding accumulated depreciation and amortization, and for equity method investments, excluding the effect of our share of accumulated depreciation and amortization. For real estate finance, gross book value is defined as principal funded including any deferred capitalized interest receivable, plus protective advances, exit fee receivables and any unamortized origination/modification costs, plus our basis in equity method investments, less purchase discounts and specific allowances. This amount is not reduced for CECL allowances. Real estate finance includes our $45 million pro rata share of loans held within an equity method investment.
After the disposition to be in our best interests.
40
As of March 31, 2021, the gross book value of2022, our consolidated net lease portfolio totaled $2.2 billion. Our net lease portfolio, including the carrying valueconsisted primarily of our equity method investments in SAFE and Netthe Ground Lease Venture II gross of accumulated depreciation, totaled $3.3 billion.Plus Fund. The table below provides certain statistics for our net lease portfolio.
| | | | | | | | | | |
| | Wholly- | | SAFE | | Ground Lease |
| |||
Ownership % | | | 100.0 | % | | 64.7 | % | | 53.0 | % |
Book value (millions)(1) | | $ | 28 | | $ | 1,389 | | $ | 65 | |
| | | | | | | | | | |
% Leased | |
| 100.0 | % |
| 100.0 | % |
| 100.0 | % |
Weighted average lease term (years)(2) | |
| 98.9 | |
| 90.9 | |
| 105.0 | |
Weighted average yield(3) | |
| 5.2 | % |
| 4.9 | % |
| 5.7 | % |
(1) | Wholly-owned includes amounts recorded as net investment in leases (refer to Note 5 to the consolidated financial statements). SAFE includes its pro rata share of its unconsolidated equity method investments. |
(2) | Weighted average lease term is calculated using GAAP rent and the initial maturity and does not include extension options. SAFE includes its pro rata share of its unconsolidated equity method investments. |
(3) | Yield for SAFE is calculated over the trailing twelve months and excludes dilution gains (refer to Note 8 to the consolidated financial statements) and management fees earned by us. |
Wholly-Owned | Net Lease Venture I | Total Consolidated Real Estate(1) | Net Lease Venture II | SAFE | ||||||||||||||||||||||||||||||||||||||||
Ownership % | 100.0 | % | 51.9 | % | — | 51.9 | % | 65.4 | % | |||||||||||||||||||||||||||||||||||
Gross book value (millions)(2) | $ | 1,273 | $ | 908 | $ | 2,181 | $ | 323 | $ | 3,292 | ||||||||||||||||||||||||||||||||||
% Leased | 99.0 | % | 100.0 | % | 99.3 | % | 100.0 | % | 100.0 | % | ||||||||||||||||||||||||||||||||||
Square footage (thousands) | 9,875 | 5,749 | 15,624 | 3,302 | N/A | |||||||||||||||||||||||||||||||||||||||
Weighted average lease term (years)(3) | 15.3 | 16.1 | 15.6 | 12.7 | 88.9 | |||||||||||||||||||||||||||||||||||||||
Weighted average yield(4) | 7.6 | % | 8.2 | % | 7.8 | % | 8.9 | % | 4.4 | % |
We account for our investment in SAFE as an equity method investment (refer to Note 8)8 to the consolidated financial statements). We act as SAFE'sSAFE’s external manager pursuant to a management agreement, and we have an exclusivity agreement with SAFE pursuant to which we agreed, subject to certain exceptions, that we will not acquire, originate, invest in, or provide financing for a third party’s acquisition of, a Ground Lease unless we have first offered that opportunity to SAFE and a majority of its independent directors has declined the opportunity.
Ground Lease Plus Fund—The Company formed and manages an investment fund that targets the origination and acquisition of Ground Leases for commercial real estate projects that are in a pre-development phase (the “Ground Lease Plus Fund”). We own a 53% noncontrolling interest in the Ground Lease Plus Fund. We do not have a controlling interest in the Ground Lease Plus Fund due to the substantive participating rights of our partner and account for this investment as an equity method investment. In addition, the Ground Lease Plus Fund has first look rights on qualifying pre-development projects through December 2023.
Real Estate Finance
Our real estate finance business targets sophisticated and innovative owner/operators of real estate and real estate related projects by providing one-stop capabilities that encompass financing alternatives ranging from full envelope senior loans to mezzanine and preferred equity capital positions. Our real estate finance portfolio consists of leasehold loans to Ground Lease tenants, including tenants of SAFE, senior mortgage loans that are secured by commercial and residential real estate assets where we are the first lien holder, subordinated mortgage loans that are secured by second lien or junior interests in commercial and residential real estate assets, leasehold loans to Ground Lease tenants, including tenants of SAFE, and corporate/partnership loans, which represent mezzanine or subordinated loans to
41
transitional properties Ground Leases and ground-up construction projects. In addition, we also own loans through equity method investments and have preferred equity investments and debt securities classified as other lending investments.
The tables below shows certain statistics for our consolidated real estate finance portfolio including securities and other lending investments, totaled $542.1 million, gross of general loan loss allowances. The portfolio, excluding securities and other lending investments, included $322.8 million of performing loans with a weighted average maturity of 1.7 years.
| | | | | | | | | | | | | | | | |
|
| March 31, 2022 |
| |||||||||||||
|
| |
| | |
| | |
| | |
| |
| Allowance for |
|
| | | | Gross | | Allowance | | | | | | | Loan Losses as |
| ||
| | Number | | Book | | for Loan | | Net Book | | % of | | a % of Gross |
| |||
|
| of Loans |
| Value |
| Losses |
| Value |
| Total | | Book Value | | |||
Performing loans(1) | | 7 | | $ | 153,846 | | $ | (1,925) | | $ | 151,921 |
| 45.8% | | 1.3% | |
Non-performing loans | | 1 | |
| 59,642 | |
| (591) | |
| 59,051 |
| 17.8% | | 1.0% | |
Other lending investments | | 2 | |
| 123,283 | |
| (2,416) | |
| 120,867 |
| 36.4% | | 2.0% | |
Total | | 10 | | $ | 336,771 | | $ | (4,932) | | $ | 331,839 |
| 100.0% | | 1.5% | |
March 31, 2021 | |||||||||||||||||||||||||||||||||||
Number of Loans | Gross Book Value | Allowance for Loan Losses | Net Book Value | % of Total | Allowance for Loan Losses as a % of Gross Book Value | ||||||||||||||||||||||||||||||
Performing loans | 13 | $ | 322,783 | (4,708) | $ | 318,075 | 59.6% | 1.5% | |||||||||||||||||||||||||||
Non-performing loans | 1 | 56,343 | (667) | 55,676 | 10.4% | 1.2% | |||||||||||||||||||||||||||||
Other lending investments | 3 | 163,648 | (3,683) | 159,965 | 30.0% | 2.3% | |||||||||||||||||||||||||||||
Total | 17 | 542,774 | (9,058) | 533,716 | 100.0% | 1.7% | |||||||||||||||||||||||||||||
December 31, 2020 | |||||||||||||||||||||||||||||||||||
Number of Loans | Gross Book Value | Allowance for Loan Losses | Net Book Value | % of Total | Allowance for Loan Losses as a % of Gross Book Value | ||||||||||||||||||||||||||||||
Performing loans | 16 | $ | 529,657 | $ | (8,184) | $ | 521,473 | 71.2% | 1.5% | ||||||||||||||||||||||||||
Non-performing loans | 1 | 53,305 | (742) | 52,563 | 7.2% | 1.4% | |||||||||||||||||||||||||||||
Other lending investments | 3 | 162,538 | (4,244) | 158,294 | 21.6% | 2.6% | |||||||||||||||||||||||||||||
Total | 20 | 745,500 | (13,170) | 732,330 | 100.0% | 1.8% |
(1) | As of March 31, 2022, our performing loans had a weighted average maturity of 3.3 years and, excluding one performing loan with a maturity of September 2057, had a weighted average maturity of 0.4 years. |
| | | | | | | | | | | | | | | | |
|
| December 31, 2021 |
| |||||||||||||
|
| |
| | |
| | |
| | |
| |
| Allowance for |
|
| | | | Gross | | Allowance | | | | | | | Loan Losses as |
| ||
| | Number | | Book | | for Loan | | Net Book | | % of | | a % of Gross |
| |||
| | of Loans | | Value | | Losses | | Value | | Total |
| Book Value | | |||
Performing loans | | 8 | | $ | 153,043 | | $ | (1,888) | | $ | 151,155 |
| 45.4% | | 1.2% | |
Non-performing loans | | 1 | |
| 59,640 | |
| (576) | |
| 59,064 |
| 17.7% | | 1.0% | |
Other lending investments | | 2 | |
| 124,930 | |
| (2,305) | |
| 122,625 |
| 36.8% | | 1.8% | |
Total | | 11 | | $ | 337,613 | | $ | (4,769) | | $ | 332,844 |
| 100.0% | | 1.4% | |
Performing Loans—The table below summarizes our performing loans exclusive of allowances ($ in thousands):
| | | | | | | |
|
| March 31, 2022 |
| December 31, 2021 |
| ||
Senior mortgages | | $ | 141,176 | | $ | 139,968 | |
Corporate/Partnership loans | |
| — | |
| 618 | |
Subordinate mortgages | |
| 12,670 | |
| 12,457 | |
Total | | $ | 153,846 | | $ | 153,043 | |
| | | | | | | |
Weighted average LTV | |
| 61% | |
| 60% | |
Yield - year to date(1) | |
| 7.1% | |
| 7.5% | |
(1) | Yields presented are for the three months ended March 31, 2022 and 2021 and represent the yields on performing loans and other lending investments. |
March 31, 2021 | December 31, 2020 | |||||||||||||||||||||||||
Senior mortgages | $ | 270,668 | $ | 432,350 | ||||||||||||||||||||||
Corporate/Partnership loans | 40,276 | 85,667 | ||||||||||||||||||||||||
Subordinate mortgages | 11,839 | 11,640 | ||||||||||||||||||||||||
Total | $ | 322,783 | $ | 529,657 | ||||||||||||||||||||||
Weighted average LTV | 59 | % | 57 | % | ||||||||||||||||||||||
Yield - year to date(1) | 7.5 | % | 8.2 | % |
Allowance for Loan Losses
—The allowance for loan losses was42
The allowance for loan losses includes an asset-specific component and a formula-based component. An asset-specific allowance is established for an impaired loan when the estimated fair value of the loan'sloan’s collateral less costs to sell is lower than the carrying value of the loan. As of March 31, 20212022 and December 31, 2020,2021, asset-specific allowances were $0.7$0.6 million and $0.7$0.6 million, respectively.
We estimate the formula-based component based on historical realized losses experienced within our portfolio and take into account current economic conditions affecting the commercial real estate market. In addition, we use third-party market data that includes forecasted economic trends, including unemployment rates.
The general allowance decreasedExpected Loss increased to $8.4$4.3 million, or 1.7%1.6%, of performing loans and other lending investments as of March 31, 2021,2022, compared to $12.4$4.2 million, or 1.8%1.5%, of performing loans and other lending investments as of December 31, 2020.2021. The decreaseincrease was due primarily to the repayment of loans during the three months ended March 31, 2021 and an improving macroeconomic forecastaccretion on commercial real estate markets since December 31, 2020.
Operating Properties
Our operating properties represent a pool of assets across a broad range of geographies and property types including industrial, hotel, multifamily, retail, condominium and entertainment/leisure and office properties. As of March 31, 2021,2022, the gross book value of our operating property portfolio, including the carrying value of our equity method investments, gross of accumulated depreciation, totaled $306.7$135.0 million.
Land and Development
The following table presents a land and development portfolio rollforward for the three months ended March 31, 2021.2022.
| | | | | | | | | | | | |
| | Land and Development Portfolio Rollforward | ||||||||||
| | (in millions) | ||||||||||
|
| Asbury Ocean |
| | |
| | |
| | | |
| | Club and | | | | | | | | | | |
| | Asbury Park | | Magnolia | | All | | Total | ||||
| | Waterfront | | Green | | Others | | Segment | ||||
Beginning balance(1) | | $ | 137.8 | | $ | 95.8 | | $ | 53.2 | | $ | 286.8 |
Asset sales(2) | |
| (9.7) | |
| (3.4) | |
| (0.5) | |
| (13.6) |
Capital expenditures | |
| 1.4 | |
| 3.5 | |
| — | |
| 4.9 |
Other | |
| — | |
| (0.6) | |
| (0.1) | |
| (0.7) |
Ending balance(1) | | $ | 129.5 | | $ | 95.3 | | $ | 52.6 | | $ | 277.4 |
(1) | As of March 31, 2022, and December 31, 2021, Total Segment excludes $0.2 million and $1.1 million, respectively, of equity method investments. |
(2) | Represents gross book value of the assets sold, rather than proceeds received. |
Land and Development Portfolio Rollforward | ||||||||||||||||||||||||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||||||||||||||||||
Asbury Ocean Club and Asbury Park Waterfront | Magnolia Green | All Others | Total Segment | |||||||||||||||||||||||||||||||||||||||||
Beginning balance(1) | $ | 201.1 | $ | 101.3 | $ | 128.3 | $ | 430.7 | ||||||||||||||||||||||||||||||||||||
Asset sales(2) | (20.7) | (4.8) | (2.5) | (28.0) | ||||||||||||||||||||||||||||||||||||||||
Capital expenditures | 0.8 | 3.9 | — | 4.7 | ||||||||||||||||||||||||||||||||||||||||
Other | — | (0.6) | — | (0.6) | ||||||||||||||||||||||||||||||||||||||||
Ending balance(1) | $ | 181.2 | $ | 99.8 | $ | 125.8 | $ | 406.8 | ||||||||||||||||||||||||||||||||||||
43
Results of Operations for the Three Months Ended March 31, 20212022 compared to the Three Months Ended March 31, 2020
For the Three Months Ended March 31, | |||||||||||||||||||||||
2021 | 2020 | $ Change | |||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Operating lease income | $ | 47,444 | $ | 47,346 | $ | 98 | |||||||||||||||||
Interest income | 10,650 | 17,216 | (6,566) | ||||||||||||||||||||
Interest income from sales-type leases | 8,627 | 8,355 | 272 | ||||||||||||||||||||
Other income | 14,290 | 20,368 | (6,078) | ||||||||||||||||||||
Land development revenue | 32,249 | 80,176 | (47,927) | ||||||||||||||||||||
Total revenue | 113,260 | 173,461 | (60,201) | ||||||||||||||||||||
Interest expense | 39,563 | 43,392 | (3,829) | ||||||||||||||||||||
Real estate expense | 16,894 | 22,498 | (5,604) | ||||||||||||||||||||
Land development cost of sales | 29,323 | 77,059 | (47,736) | ||||||||||||||||||||
Depreciation and amortization | 15,455 | 14,486 | 969 | ||||||||||||||||||||
General and administrative | 21,439 | 34,271 | (12,832) | ||||||||||||||||||||
(Recovery of) provision for loan losses | (3,794) | 4,003 | (7,797) | ||||||||||||||||||||
(Recovery of) provision for losses on net investment in leases | (1,601) | 1,292 | (2,893) | ||||||||||||||||||||
Impairment of assets | 1,785 | 1,708 | 77 | ||||||||||||||||||||
Other expense | 253 | 74 | 179 | ||||||||||||||||||||
Total costs and expenses | 119,317 | 198,783 | (79,466) | ||||||||||||||||||||
Income from sales of real estate | 612 | — | 612 | ||||||||||||||||||||
Loss on early extinguishment of debt, net | — | (4,115) | 4,115 | ||||||||||||||||||||
Earnings from equity method investments | 12,769 | 16,612 | (3,843) | ||||||||||||||||||||
Income tax benefit (expense) | 665 | (60) | 725 | ||||||||||||||||||||
Net income (loss) | $ | 7,989 | $ | (12,885) | $ | 20,874 |
| | | | | | | | | | |
|
| For the Three Months Ended | | | | | ||||
| | March 31, | | | | | ||||
|
| 2022 |
| 2021 |
| $ Change | | |||
| | (in thousands) | | |||||||
Operating lease income | | $ | 3,109 | | $ | 4,931 | | $ | (1,822) | |
Interest income | |
| 4,948 | |
| 9,789 | |
| (4,841) | |
Interest income from sales-type leases | |
| 356 | |
| — | |
| 356 | |
Other income | |
| 8,640 | |
| 13,015 | |
| (4,375) | |
Land development revenue | |
| 14,900 | |
| 32,249 | |
| (17,349) | |
Total revenue | |
| 31,953 | |
| 59,984 | |
| (28,031) | |
Interest expense | |
| 29,243 | |
| 28,809 | |
| 434 | |
Real estate expense | |
| 10,117 | |
| 8,719 | |
| 1,398 | |
Land development cost of sales | |
| 14,496 | |
| 29,323 | |
| (14,827) | |
Depreciation and amortization | |
| 1,357 | |
| 2,401 | |
| (1,044) | |
General and administrative | |
| 1,375 | |
| 21,439 | |
| (20,064) | |
Provision for (recovery of) loan losses | |
| 135 | |
| (3,642) | |
| 3,777 | |
Provision for losses on net investment in leases | |
| 281 | |
| — | |
| 281 | |
Impairment of assets | |
| — | |
| 257 | |
| (257) | |
Other expense | |
| 930 | |
| 253 | |
| 677 | |
Total costs and expenses | |
| 57,934 | |
| 87,559 | |
| (29,625) | |
Income from sales of real estate | |
| 492 | |
| 612 | |
| (120) | |
Loss on early extinguishment of debt, net | |
| (1,428) | |
| — | |
| (1,428) | |
Earnings from equity method investments | |
| 25,032 | |
| 11,768 | |
| 13,264 | |
Income tax (expense) benefit | |
| (3) | |
| 698 | |
| (701) | |
Net income from discontinued operations | | | 797,688 | |
| 22,486 | | | 775,202 | |
Net income | | $ | 795,800 | | $ | 7,989 | | $ | 787,811 | |
Revenue—Operating lease income, which primarily includes income from net lease assets and commercial operating properties, increased $0.1 milliondecreased to $47.4$3.1 million during the three months ended March 31, 20212022 from $47.3$4.9 million for the same period in 2020.2021. The following table summarizes our operating lease income by segment ($ in millions).
Three Months Ended March 31, | ||||||||||||||||||||||||||
2021 | 2020 | Change | ||||||||||||||||||||||||
Net Lease(1) | $ | 42.5 | $ | 41.5 | $ | 1.0 | ||||||||||||||||||||
Operating Properties(2) | 4.8 | 5.7 | (0.9) | |||||||||||||||||||||||
Land and Development | 0.1 | 0.1 | — | |||||||||||||||||||||||
Total | $ | 47.4 | $ | 47.3 | $ | 0.1 |
Three Months Ended March 31, | ||||||||||||||
2021 | 2020 | |||||||||||||
Operating lease income(1) | $ | 52.0 | $ | 49.1 | ||||||||||
Rent per square foot | $ | 13.39 | $ | 12.56 | ||||||||||
Occupancy(2) | 99.3 | % | 99.4 | % | ||||||||||
Interest income from sales-type leases increased to $8.6was $0.4 million for the three months ended March 31, 20212022 and resulted from $8.4 million for the same period in 2020.
Other income decreased $6.1 million, or 30%, to $14.3$8.6 million during the three months ended March 31, 20212022 from $20.4$13.0 million for the same period in 2020.2021. Other income during the three months ended March 31, 2022 consisted primarily of management fees, income from our hotel properties and other ancillary income from our land and development projects and operating properties. Other income during the three months ended March 31, 2021 consisted primarily of a mark-to-market gain on an equity investment, management fees, other ancillary income from our land and development projects and loan portfolio, income from our hotel properties, lease termination fees and interest income on our cash. Other income during the three months ended March 31, 2020 consisted primarily of a mark-to-market gain on an equity investment, income from our hotel properties, other ancillary income from our operating properties, land and development projects and loan portfolio and interest income on our cash.
Land development revenue and cost of sales—During the three months ended March 31, 2022, we sold land parcels and residential lots and units and recognized land development revenue of $14.9 million which had associated cost of sales of $14.5 million. During the three months ended March 31, 2021, we sold residential lots and units and recognized land development revenue of $32.2 million which had associated cost of sales of $29.3 million. During the three months ended March 31, 2020, we sold residential lots and units and recognized land development revenue
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Costs and expenses—Interest expense decreased $3.8 million, or 9%,increased to $39.6$29.2 million during the three months ended March 31, 20212022 from $43.4$28.8 million for the same period in 2020, due primarily to a decrease in our2021. Our weighted average cost of debt which was 4.6%4.7% for the three months ended March 31, 20212022 compared to 4.9%4.5% for the three months ended March 31, 2020.2021. The average balance of our average outstanding debt inclusive of loan participations and lease liabilities associated with finance-type leases, decreased to $3.47was $2.51 billion for the three months ended March 31, 2021 from $3.572022 and $2.61 billion for the same period in 2020.
Real estate expense decreased $5.6 million, or 25%,increased to $16.9$10.1 million during the three months ended March 31, 20212022 from $22.5$8.7 million for the same period in 2020.2021. The following table summarizes our real estate expenses by segment ($ in millions).
Three Months Ended March 31, | ||||||||||||||||||||||||||
2021 | 2020 | Change | ||||||||||||||||||||||||
Operating Properties(1) | $ | 3.8 | $ | 7.7 | $ | (3.9) | ||||||||||||||||||||
Land and Development(2) | 4.5 | 8.6 | (4.1) | |||||||||||||||||||||||
Net Lease(3) | 8.6 | 6.2 | 2.4 | |||||||||||||||||||||||
Total | $ | 16.9 | $ | 22.5 | $ | (5.6) |
Depreciation and amortization increased $1.0 million, or 7%,decreased to $15.5$1.4 million during the three months ended March 31, 20212022 from $14.5$2.4 million for the same period in 2020, primarily due to the full amortization of intangible assets associated with terminated leases.
General and administrative expense includes payroll and related costs, performance basedperformance-based compensation, public company costs and occupancy costs. General and administrative expenses decreased $12.8 million, or 37%, to $21.4$1.4 million during the three months ended March 31, 20212022 from $34.3$21.4 million for the same period in 2020.2021. The decrease in 20212022 was due primarily to a $11.9$19.3 million decrease in performance basedperformance-based compensation.
The recovery ofprovision for loan losses was $3.8$0.1 million for the three months ended March 31, 20212022 as compared to a provision forrecovery of loan losses of $4.0$3.6 million for the same period in 2020.2021. The provision for loan losses for the three months ended March 31, 2022 resulted from the accretion on our held-to-maturity security. The recovery of loan losses for the three months ended March 31, 2021 resulted from the reversal of CECLExpected Loss allowances on loans that repaid in full in the first quarter 2021 and from an improving macroeconomic forecast on commercial real estate markets since December 31, 2020. The provision for loan losses for the three months ended March 31, 2020 resulted from the adoption of a new accounting standard.
The provision for losses on net investment in leases for the three months ended March 31, 20202022 resulted from the adoption of a new accounting standard.
Other expense increased to $0.3was $0.9 million during the three months ended March 31, 2021 from $0.12022 and $0.3 million for the same period in 2020.
Income from sales of real estate—During the three months ended March 31, 2022, we recorded $0.5 million of income from sales of real estate primarily from the sale of Ground Leases. During the three months ended March 31, 2021, we recorded $0.6 million of income from sales of real estate from the sale of residential condominiums.
Loss on early extinguishment of debt, net—During the three months ended March 31, 2020,2022, we incurred losses on early extinguishment of debt of $4.1$1.4 million resulting from the repayment of our senior notes priorterm loan in connection with our Net Lease Sale (refer to maturity.Note 3 to the consolidated financial statements).
Earnings from equity method investments—Earnings from equity method investments decreasedincreased to $12.8$25.0 million during the three months ended March 31, 20212022 from $16.6$11.8 million for the same period in 2020.2021. During the three months ended March 31, 2022, we recognized $17.0 million of income from our equity method investment in SAFE and $8.0 million of net aggregate income from our remaining equity method investments. During the three months ended March 31, 2021, we recognized $11.4 million of income from our equity method investment in SAFE $1.0 million from our equity method investment in Net Lease Venture II and $0.4 million of net aggregate income from our remaining equity method investments. During the three months ended March 31, 2020, we recognized $19.3 million of income from our equity method investment in SAFE, inclusive of a dilution gain of $7.9 million resulting from the dilution of our ownership in SAFE in connection with a SAFE equity offering in March 2020, offset by $2.7 million of aggregate losses from our remaining equity method investments.
Income tax (expense) benefit (expense)—Income tax benefit of $0.7 million was recorded for the three months ended March 31, 2021 and related primarily to refunds due us for alternative minimum taxes paid in prior periods. Income tax expenseperiods.
Net income from discontinued operations—In March 2022, we closed on the sale of $0.1 million was recorded for the three months ended March 31, 2020majority of our net lease properties owned directly and related primarily to state margins taxesthrough ventures. Our net lease assets were comprised of office, entertainment and other minimum state taxes.industrial properties located in the United States. Our net lease assets associated with our Ground Lease businesses were not included in the sale. Net income from discontinued operations represents the operating results from the net lease assets that are not
45
associated with our Ground Lease businesses (refer to Note 3 to the consolidated financial statements - Net Lease Sale and Discontinued Operations).
Adjusted Earnings
In 2019, we announced a new business strategy that would focus our management personnel and our investment resources primarily on scaling our Ground Lease platform. As part of this strategy, we accelerated the monetization of legacy assets reducing our legacy portfolio to approximately 15% of our overall portfolio as of March 31, 2021, and deployed a substantial portion of the proceeds into additional investments in SAFE and new loan and net lease originations relating to the Ground Lease business. Effective for the first quarter 2020,Adjusted earnings is a non-GAAP metric management determined that a modified non-GAAP earnings metric, designated "adjusted earnings," is the metric it uses to assess our execution of this strategy and the performance of our operations. Adjusted earnings reflects impairment charges and loan provisions in the same period in which they are recognized in net income (loss) prepared in conformity with generally accepted accounting principles in the United States of America ("GAAP"), rather than in a later period when the asset is sold. We believe this change is appropriate as legacy asset sales have become less central to our business, even though sales may be material to particular periods when they occur.
Adjusted earnings is used internally as a supplemental performance measure adjusting for certain items to give management a view of income more directly derived from operating activities in the period in which they occur. Adjusted earnings is calculated as net income (loss) allocable to common shareholders, prior to the effect of depreciation and amortization, including our proportionate share of depreciation and amortization from equity method investments and excluding depreciation and amortization allocable to noncontrolling interests, stock-based compensation expense, the non-cash portion of loss on early extinguishment of debt and the liquidation preference recorded as a premium above book value on the redemption of preferred stock ("(“Adjusted Earnings"Earnings”). All prior periods have been calculated in accordance with this definition.
Adjusted Earnings should be examined in conjunction with net income (loss) as shown in our consolidated statements of operations. Adjusted Earnings should not be considered as an alternative to net income (loss) (determined in accordance with GAAP)generally accepted accounting principles in the United States of America (“GAAP”)), or to cash flows from operating activities (determined in accordance with GAAP), as a measure of our liquidity, nor is Adjusted Earnings indicative of funds available to fund our cash needs or available for distribution to shareholders. Rather, Adjusted Earnings is an additional measure we use to analyze our business performance because it excludes the effects of certain non-cash charges that we believe are not necessarily indicative of our operating performance. It should be noted that our manner of calculating Adjusted Earnings may differ from the calculations of similarly-titled measures by other companies.
For the Three Months Ended March 31, | |||||||||||
2021 | 2020 | ||||||||||
(in thousands) | |||||||||||
Adjusted Earnings | |||||||||||
Net loss allocable to common shareholders | $ | (405) | $ | (21,450) | |||||||
Add: Depreciation and amortization | 17,629 | 15,056 | |||||||||
Add: Stock-based compensation expense | 5,508 | 16,270 | |||||||||
Add: Non-cash portion of loss on early extinguishment of debt | — | 799 | |||||||||
Adjusted earnings allocable to common shareholders | $ | 22,732 | $ | 10,675 |
| | | | | | | |
|
| For the Three Months Ended March 31, | | ||||
|
| 2022 |
| 2021 | | ||
| | (in thousands) | | ||||
Adjusted Earnings | | |
|
| |
| |
Net income (loss) allocable to common shareholders | | $ | 610,855 | | $ | (405) | |
Add: Depreciation and amortization | |
| 4,002 | |
| 17,629 | |
Add: Stock-based compensation (income) expense | |
| (12,427) | |
| 5,508 | |
Add: Non-cash portion of loss on early extinguishment of debt | |
| 5,109 | |
| — | |
Adjusted earnings allocable to common shareholders | | $ | 607,539 | | $ | 22,732 | |
Liquidity and Capital Resources
During the three months ended March 31, 2021,2022, we received net proceeds from the Net Lease Sale of approximately $1.2 billion. We invested an aggregate $105$247 million in new investments, prior financing commitments and real estate development. Investments included $88$231 million in net lease, loan, and strategic investments, $12our Ground Lease businesses (including $202 million in the repurchaseshares of ourSAFE common stockstock) and $5$16 million of loan fundings and capital expenditures on legacy and strategic assets. These amounts are inclusive of fundings from our consolidated investments and our pro rata share from equity method investments and includes $5 millioninvestments.
46
The following table outlines our capital expenditures on operating properties, net lease and land and development assets as reflected in our consolidated statements of cash flows for the three months ended March 31, 2022 and 2021, by segment ($ in thousands):
For the Three Months Ended March 31, | |||||||||||
2021 | 2020 | ||||||||||
Operating Properties | $ | 96 | $ | 716 | |||||||
Net Lease | 552 | 3,292 | |||||||||
Total capital expenditures on real estate assets | $ | 648 | $ | 4,008 | |||||||
Land and Development | $ | 4,134 | $ | 15,035 | |||||||
Total capital expenditures on land and development assets | $ | 4,134 | $ | 15,035 |
| | | | | | | |
|
| For the Three Months Ended March 31, | | ||||
|
| 2022 |
| 2021 | | ||
Operating Properties | | $ | 239 | | $ | 96 | |
Net Lease | |
| 502 | |
| 552 | |
Total capital expenditures on real estate assets | | $ | 741 | | $ | 648 | |
| | | | | | | |
Land and Development | | $ | 4,803 | | $ | 4,134 | |
Total capital expenditures on land and development assets | | $ | 4,803 | | $ | 4,134 | |
As of March 31, 2021,2022, we had unrestricted cash of $194 million$1.5 billion and $350 million of borrowing capacity available under the Revolving Credit Facility. The COVID-19 pandemic has for the time being adversely affected our strategies of monetizing legacy assets and materially scaling SAFE's portfolio as its Manager. These conditions will adversely affect our strategies while they persist. Our primary cash uses over the next 12 months are expected to be funding of investments in our Ground Lease and Ground Lease adjacent businesses, distributions to noncontrolling interests resulting from the Net Lease Sale (refer to Note 3 to the consolidated financial statements), repayment of debt obligations (refer to Note 10 to the consolidated financial statements), capital expenditures on legacy assets, distributions to shareholders through dividends and share repurchases and funding ongoing business operations. operations, including operating lease payments (refer to Note 11 to the consolidated financial statements). The amount we actually invest will depend on the fullclosing of asset sales, the continuing impact of the COVID-19 pandemic, inflation, interest rate increases, market volatility and other macroeconomic factors on our businessbusiness.
In April 2022, we completed separate, privately-negotiated transactions with holders of $194 million aggregate principal amount of our 3.125% convertible notes (refer to Note 18 to the consolidated financial statements) in which the noteholders exchanged their convertible notes with us for 13.75 million newly issued shares of our common stock and the paceaggregate cash payments of the economic recovery.
We expect that we will be able to meet our liquidity requirements over the next 12 months and for the reasonably foreseeable future. Our capital sources to meet such cash requirements are expected to include cash on hand, including proceeds from the Net Lease Sale, Revolving Credit Facility borrowings, income from our portfolio, loan repayments from borrowers and proceeds from asset sales. We cannot predict with certainty the specific transactions we will undertake to generate sufficient liquidity to meet our obligations as they come due. We will adjust our plans as appropriate in response to changes in our expectations and changes in market conditions.
We also have amounts due under our liability-classified and equity-classified iPIP Plans. We currently estimate the total amount due under our iPIP Plans to be $219 million, assuming SAFE is valued at a price of $43.05 per share and our other assets perform with current underwriting expectations. Of this amount, $114 million has been accrued in our financial statements (refer to Note 14 to the consolidated financial statements), of which $39 million will be paid in cash and shares of our common stock in the second quarter of 2022 resulting from the Net Lease Sale. Distributions on our iPIP Plans are expected to be 50% in cash and 50% in shares of our common stock; provided, however, that (a) the cash portion will be increased if we do not have sufficient shares available under shareholder approved equity plans; and (b) if the principal remaining material asset in a plan is unsold SAFE shares, we may elect to distribute SAFE shares in lieu of cash and our common stock. Additional information on our iPIP Plans can be found in our 2021 Annual Report and our 2021 Proxy Statement, both of which are available on our website.
47
The following table outlines our cash flows provided by operating activities, cash flows used in investing activities and cash flows provided by financing activities for the three months ended March 31, 2022 and 2021 ($ in thousands):
| | | | | | | |
|
| For the Three Months Ended March 31, | | ||||
| | 2022 |
| 2021 | | ||
| | | | | | | |
Cash flows used in operating activities | | $ | (30,624) | | $ | (3,795) | |
Cash flows provided by investing activities | | | 2,417,867 | | | 137,635 | |
Cash flows used in financing activities | | | (1,229,992) | | | (36,414) | |
The decrease in cash flows provided by operating activities during 2022 was due primarily to a decrease in the collection of deferred interest on loans. The increases in cash flows provided by investing activities and cash flows used in financing activities during 2022 was due primarily to the Net Lease Sale (refer to Note 3 to the consolidated financial statements).
Debt Covenants—Our 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 1.2x1.3x and a covenant restricting certain incurrences of debt based on a fixed charge coverage ratio. If any of our covenants are breached and not cured within applicable cure periods, the breach could result in acceleration of our debt securities unless a waiver or modification is agreed upon with the requisite percentage of the bondholders.
The Senior Term Loan and the Revolving Credit Facility containcontains 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 Senior Term Loan requires us to maintain collateral coverage of at least 1.25x outstanding borrowings on the facility. The Revolving Credit Facility is secured by a borrowing base of assets and requires us to maintain both borrowing base asset value of at least 1.5x outstanding borrowings on the facility and a consolidated ratio of cash flow to fixed charges of at least 1.5x. The 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 1.5x outstanding borrowings on the facility. To satisfy this covenant, we have the option to pay down outstanding borrowings or substitute assets in the borrowing base. Under both the Senior Term Loan and the Revolving Credit Facility we are permitted to pay dividends provided that no material default (as defined in the relevant agreement) has occurred and is continuing or
Derivatives
—Our use of derivative financial instruments, if necessary, has primarily been limited to the utilization of interest rate swaps, interest rate caps or other instruments to manage interest rate risk exposure and foreign exchange contracts to manage our risk to changes in foreign currencies. Refer to NoteUnfunded Commitments
—We generally fund construction and development loans and build-outs of space in48
committed to invest capital in several real estate funds and other ventures. These arrangements are referred to as Strategic Investments.
As of March 31, 2021,2022, the maximum amount of fundings we may be obligated to make under each category, assuming all performance hurdles and milestones are met under the Performance-Based Commitments and assuming that 100% of our capital committed to Strategic Investments is drawn down, are as follows (in thousands):
| | | | | | | | | | | | |
| | Loans and Other |
| | |
| | |
| | | |
| | Lending | | | | | Other | | | | ||
|
| Investments |
| | Real Estate |
| Investments |
| Total | |||
Performance-Based Commitments | | $ | 4,235 | | $ | 8,111 | | $ | 108,650 | | $ | 120,996 |
Strategic Investments | |
| — | |
| 5,061 | |
| 2,325 | |
| 7,386 |
Total | | $ | 4,235 | | $ | 13,172 | | $ | 110,975 | | $ | 128,382 |
Loans and Other Lending Investments | Real Estate | Other Investments | Total | ||||||||||||||||||||
Performance-Based Commitments | $ | 110,398 | $ | 69,734 | $ | 35,044 | $ | 215,176 | |||||||||||||||
Strategic Investments | — | — | 17,015 | 17,015 | |||||||||||||||||||
Total | $ | 110,398 | $ | 69,734 | $ | 52,059 | $ | 232,191 |
Stock Repurchase Program
—We may repurchase shares in negotiated transactions or open market transactions, including through one or more trading plans. During the three months ended March 31, 2021, we repurchased 0.7 million shares of our outstanding common stock for $12.4 million, for an average cost of $17.20 per share.Critical Accounting Estimates
The preparation of financial statements in accordance with GAAP requires management to make estimates and judgments in certain circumstances that affect amounts reported as assets, liabilities, revenues and expenses. We have established detailed policies and control procedures intended to ensure that valuation methods, including any judgments made as part of such methods, are well controlled, reviewed and applied consistently from period to period. We base our estimates on historical corporate and industry experience and various other assumptions that we believe to be appropriate under the circumstances. For all of these estimates, we caution that future events rarely develop exactly as forecasted, and, therefore, routinely require adjustment.
For a discussion of our critical accounting policies, refer to Note 3 to the consolidated financial statements and our 2021 Annual Report on Form 10-K.Report.
49
Market Risks
Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates, commodity prices and equity prices. In pursuing our business plan, the primary market risk to which we are exposed is interest rate risk. Our operating results will depend in part on the difference between the interest and related income earned on our assets and the interest expense incurred in connection with our interest-bearing liabilities. Changes in the general level of interest rates prevailing in the financial markets will affect the spread between our floating rate assets and liabilities subject to the net amount of floating rate assets/liabilities and the impact of interest rate floors and caps. Any significant compression of the spreads between interest-earning assets and interest-bearing liabilities could have a material adverse effect on us.
In the event of a significant rising interest rate environment or economic downturn, defaults could increase and cause us to incur additional credit losses which would adversely affect our liquidity and operating results. Such delinquencies or defaults would likely have a material adverse effect on the spreads between interest-earning assets and interest-bearing liabilities. In addition, an increase in interest rates could, among other things, reduce the value of our fixed-rate interest-bearing assets and our ability to realize gains from the sale of such assets.
Interest rates are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political conditions, and other factors beyond our control. We monitor the spreads between our interest-earning assets and interest-bearing liabilities and may implement hedging strategies to limit the effects of changes in interest rates on our operations, including engaging in interest rate swaps, interest rate caps and other interest rate-related derivative contracts. Such strategies are designed to reduce our exposure, on specific transactions or on a portfolio basis, to changes in cash flows as a result of interest rate movements in the market. We do not enter into derivative contracts for speculative purposes or as a hedge against changes in our credit risk or the credit risk of our borrowers.
While a REIT may utilize derivative instruments to hedge interest rate risk on its liabilities incurred to acquire or carry real estate assets without generating non-qualifying income, use of derivatives for other purposes will generate non-qualified income for REIT income test purposes. This includes hedging asset related risks such as credit and interest rate exposure on our loan assets. As a result, our ability to hedge these types of risks is limited. There can be no assurance that our profitability will not be materially adversely affected during any period as a result of changing interest rates.
The following table quantifies the potential changes in annual net income, assuming no change in our interest earning assets or interest bearing liabilities, should interest rates decrease by 10 basis points or increase by 10, 50 or 100 basis points or decrease by 10 basis points, assuming no change in the shape of the yield curve (i.e., relative interest rates). The base interest rate scenario assumes the one-month LIBOR rate of 0.11%0.45% as of March 31, 2021.2022. Actual results could differ significantly from those estimated in the table.
Estimated Change In Net Income
($ in thousands)
| | | | |||||
Change in Interest Rates | | Net Income(1) | ||||||
-10 Basis Points | | $ |
| |||||
Base Interest Rate | | — | ||||||
+10 Basis Points | | 1,451 | ||||||
+50 Basis Points | | 7,256 | ||||||
+100 Basis Points | | 14,512 |
(1) |
50
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company'sCompany’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission'sCommission’s rules and forms, and that such information is accumulated and communicated to the Company'sCompany’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The Company has formed a disclosure committee that is responsible for considering the materiality of information and determining the disclosure obligations of the Company on a timely basis. The disclosure committee reports directly to the Company'sCompany’s Chief Executive Officer and Chief Financial Officer.
As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the disclosure committee and other members of management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company'sCompany’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b) or Rule 15d-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company'sCompany’s disclosure controls and procedures are effective to provide reasonable assurance that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is: (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms; and (ii) accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding disclosure.
There have been no changes during the last fiscal quarter in the Company'sCompany’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company'sCompany’s internal control over financial reporting.
Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in the Company'sCompany’s periodic reports.
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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'sCompany’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.
There were no material changes from the risk factors previously disclosed in our 20202021 Annual Report on Form 10-K.
Issuer Purchases of Equity Securities
We did not purchase any shares of our common stock during the three months ended March 31, 2021.
Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of a Publicly Announced Plan | Maximum Dollar Value of Shares that May Yet be Purchased Under the Plans(1) | |||||||||||
January 1 to January 31 | 125,599 | $ | 15.13 | 125,599 | $ | 31,887,040 | ||||||||
February 1 to February 28 | 36,113 | $ | 15.62 | 36,113 | $ | 50,000,000 | ||||||||
March 1 to March 31 | 557,655 | $ | 17.75 | 557,655 | $ | 40,100,176 |
None.
Not applicable.
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INDEX TO EXHIBITS
| | | |||
Exhibit | Document Description | ||||
31.0 | |||||
| . | ||||
32.0 | | Certifications pursuant to Section 906 of the Sarbanes-Oxley | |||
101* | | The following financial information from the | |||
104 | | Cover Page Interactive Data File (formatted in iXBRL and contained in Exhibit 101) |
* |
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | ||||||
| iStar Inc. | |||||||
| | |||||||
Date: | May 4, 2022 | /s/ JAY SUGARMAN | ||||||
| Jay Sugarman | |||||||
| Chairman of the Board of Directors and Chief | |||||||
| Executive Officer (principal executive officer) | |||||||
| | |||||||
| | |||||||
|
| |||||||
| | |||||||
| iStar Inc. | |||||||
Date: | May 4, 2022 | /s/ BRETT ASNAS | ||||||
| Brett Asnas | |||||||
| Chief Financial Officer | |||||||
| (principal financial officer) |
RETT | | | |||
| | ||||
| iStar Inc. Registrant | ||||
Date: | May 4, 2022 | /s/ GARETT ROSENBLUM | |||
| Garett Rosenblum | ||||
| Chief Accounting Officer | ||||
| |
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