Filing identity and period
The supplied filing is iStar Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2021—not a Safehold Inc. 10-Q. Safehold (SAFE) is discussed as an equity-method investment that iStar owned approximately 65.4% of at quarter-end. The summary below covers iStar’s consolidated results; SAFE-specific figures are identified as investee information.
Financial performance and position
| Metric | Q1 2021 | Q1 2020 / prior period |
|---|---|---|
| Total revenue | $113.3 million | $173.5 million |
| Net income (loss) | $8.0 million | $(12.9) million |
| Net income (loss) attributable to iStar | $5.5 million | $(15.6) million |
| Net loss allocable to common shareholders | $(0.4) million; $(0.01) per share | $(21.5) million; $(0.28) per share |
| Cash flow from operations | $(3.8) million | $(21.0) million |
| Cash flow from investing | $137.6 million | $(62.8) million |
| Cash flow from financing | $(36.4) million | $149.5 million |
| Cash and cash equivalents at quarter-end | $193.9 million | $98.6 million at Dec. 31, 2020 |
| Total assets | $4.794 billion | $4.862 billion at Dec. 31, 2020 |
| Debt obligations, net | $3.291 billion | $3.287 billion at Dec. 31, 2020 |
| Total equity | $1.051 billion | $1.064 billion at Dec. 31, 2020 |
Unrestricted cash was $193.9 million, with $350 million available under the revolving credit facility. Including restricted cash, cash and equivalents totaled $247.9 million. The filing does not provide a conventional consolidated operating-margin measure.
Changes versus the prior comparable quarter
- Revenue fell $60.2 million, mainly because land development revenue declined $47.9 million to $32.2 million as fewer lots and units were sold. Associated land development costs also decreased, to $29.3 million from $77.1 million.
- Interest income decreased $6.6 million to $10.7 million, primarily as average performing loans and other lending investments fell to $526 million from $792 million; reported yield declined to 7.5% from 8.2%.
- General and administrative expense decreased $12.8 million to $21.4 million, primarily reflecting lower performance-based compensation. Interest expense declined $3.8 million to $39.6 million.
- Credit-loss results improved: iStar recorded a $3.8 million recovery of loan losses and a $1.6 million recovery on net investments in leases, versus provisions of $4.0 million and $1.3 million, respectively, in Q1 2020.
- Equity-method earnings decreased to $12.8 million from $16.6 million. The prior-year period included a $7.9 million SAFE dilution gain.
- Adjusted earnings, a company-defined non-GAAP measure, rose to $22.7 million from $10.7 million. It is not a substitute for GAAP earnings or operating cash flow.
Liquidity, debt, outlook, and risks
- Investing cash flow was positive mainly due to loan repayments and collections, loan-sale proceeds, and proceeds from land and lease dispositions; operating cash flow remained negative.
- Scheduled principal maturities were $101.5 million for the remaining nine months of 2021, $383.9 million in 2022, and $491.9 million in 2023, among later maturities. The $287.5 million convertible notes mature in September 2022; the $491.9 million senior term loan matures in June 2023.
- Management expected liquidity to be sufficient for the next 12 months and the reasonably foreseeable future, relying on cash, revolver capacity, portfolio income, loan repayments, and asset-sale proceeds. It cited approximately $232.2 million of maximum unfunded investment commitments and approximately $308 million of scheduled real estate finance asset maturities over the next 12 months.
- COVID-19 continued to threaten rent and interest collections and to constrain legacy-asset monetization and SAFE portfolio growth. Entertainment/leisure and hotel exposures represented 21.4% and 4.9% of portfolio gross book value, respectively. Management said it could not predict the pandemic’s full effect.
- Other material risks include interest-rate exposure, potential credit losses, covenant compliance, and the ability to complete asset sales and investment funding. The filing reports one non-performing loan, with a $55.7 million carrying value. Management stated that the loan portfolio’s collateral and allowances were adequate, while noting estimates involve significant judgment.
- There is no quantified earnings or revenue guidance in the supplied filing. iStar declared a common dividend of $0.11 per share and repurchased 0.7 million shares for $12.4 million during the quarter; $40.1 million remained authorized for repurchases at quarter-end.
Safehold-specific information disclosed by iStar
iStar reported a $955.8 million carrying value for its SAFE equity-method investment and $11.4 million of equity-method earnings from SAFE in Q1 2021. iStar held 34.8 million SAFE shares, valued at approximately $2.4 billion using SAFE’s March 31 closing price of $70.10. SAFE’s summarized investee information reported Q1 revenue of $43.5 million and net income attributable to parent of $16.9 million. These are disclosures within iStar’s filing, not a substitute for SAFE’s own financial statements.
Key facts for investors to verify
- Confirm the intended issuer: this is iStar’s filing, not Safehold’s filing.
- Review SAFE’s own Q1 2021 filing for its consolidated results, liquidity, debt, and outlook; distinguish those from iStar’s equity-method accounting and ownership disclosures.
- Assess whether iStar’s cash, revolver availability, scheduled maturities, and expected loan repayments adequately cover its funding needs and commitments.
- Monitor pandemic-related collection risks, the performance of the non-performing loan, and changes in credit-loss allowances.
- Evaluate the sustainability of cash generation and dividends given negative operating cash flow and reliance on investment repayments and asset sales.