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iStar Financial Inc. (



Q4 2011 Earnings Call

February 28, 2012 10:00 a.m. ET


Jason Fooks - Investor Relations

Jay Sugarman - Chairman and Chief Executive Officer

David DiStaso - Chief Financial Officer


Jonathan Feldman - Nomura Securities

Joshua Barber - Stifel Nicolaus

Michael Kim - CRT Capital Group



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Ladies and gentlemen, good day and welcome to iStar Financial’s Fourth Quarter and Fiscal Year 2011 Earnings Conference Call. (Operator Instructions) As a reminder, today's conference is being recorded. At this time for opening remarks and introductions, I would like to turn the conference over to Jason Fooks, Vice President of Investor Relations and Marketing. Please go ahead, sir.

Jason Fooks

Thank you, John, and good morning everyone. Thank you for joining us today to review iStar Financial’s fourth quarter and fiscal year 2011 earnings report. With me today are Jay Sugarman, Chairman and Chief Executive Officer; and David DiStaso our Chief Financial Officer. This morning’s call is being webcast on our website at in the Investor Relations section. There will be a replay of the call beginning at 12:30 pm Eastern Time today. The dial-in for the replay is 1-800-475-6701 with a confirmation code of 236132.

Before I turn the call over to Jay, I’d like to remind everyone that statements in this earnings call which are not historical facts will be forward-looking. iStar Financials actual results may differ materially from these forward-looking statements and the risk factors that could cause these differences are detailed in our SEC reports. In addition, as stated more fully in our SEC reports, iStar disclaims any intent or obligation to update these forward-looking statements except as expressly required by law.

Now, I’d like to turn the call over to iStar’s Chairman and CEO, Jay Sugarman. Jay?

Jay Sugarman

Thanks, Jason, and thank you all for joining us on the call this morning. During the fourth quarter we continued our efforts to reposition and streamline the balance sheet. We sold substantially all our interest in Oak Hill Advisors at a gain and monetized other assets at or prior to maturity. We reduced overhead where possible and made investments where returns were being compelling. We continue to bring down leverage and are in the process of launching a new financing that will help address our 2012 debt maturity.

Our goal through all this is to enable us to maximize the value of our diversified portfolio of assets overtime and create a stronger foundation for the company. Now while the credits markets have firmed and real estate markets have nicely recovered, we still have a large percentage of assets that do not yet generate GAAP earnings. We continue to invest in many assets that require repositioning before their full value can be realized.

As a result we reported a net loss of $35 million for the quarter and a net loss of $62 million for the full year. Excluding depreciation and non-cash provisions and impairments, net income for the quarter was a positive $5 million and net income for the year was approximately positive $70 million. Liquidity remains solid at over $350 million in cash at the end of the year, helped by loan pre-payments and asset sales. We also continued selectively invest in both new opportunities and existing portfolio assets, spending just over $80 million during the quarter, with approximately $40 million coming from the new origination and senior debt acquisition, and the remainder representing add-on investments in existing portfolio assets.

Lastly, on the liability side of the balance sheet. We have seen strong performance in the secured collateral pool for our 2011 secured financing facility and believe this new 2012 secured financing facility we are launching will enjoy strong performance as well. These financings together with continued asset monetizations should give us a clear runway to focus on ways to enhance shareholder value throughout the rest of the year. And as we enter 2012, our goals are to better match our asset liability profile, attract capital to our successful net lease and financing businesses, and demonstrate the growing potential in our own real estate and land development platforms.

Our progress will take time with low interest rates and slowing improving macro backdrop, we believe each of these businesses can begin to move forward and position themselves for making attractive investments as we continue to strengthen the overall corporate balance sheet. And with that quick update let me turn it over to Dave for more of the details. Dave?

David DiStaso

Thanks, Jay, and good morning everyone. I will begin by discussing our financial results for the first quarter and fiscal year 2011 before moving to investment activity and credit quality. And I will end up with an update on liquidity, including the launch of the new financing that we announced this morning.

For the quarter we reported a net loss of $35 million, or a loss of $0.43 per diluted common share compared to a net loss of $67 million or a loss of $0.73 per diluted common share for the fourth quarter of 2010. The year-over-year improvement was due to lower loan loss provisions of $16 million versus $54 million for the same period last year, as well as increased earnings for equity method investments as a result of the sales of our interest in Oak Hill Advisors. This was partially offset by lower revenues from a smaller overall asset base and increased interest expense.

Adjusted EBITDA for the fourth quarter was $100 million compared to $103 million for the same period last year. The year-over-year results included lower revenue from a smaller asset base, offset by increased earnings from equity method investments and lower general and administrative costs. For the full year 2011, we reported a net loss of $62 million or a loss of $0.70 per diluted common share, compared to income of $36 million or $0.39 per diluted common share in 2010.

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