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30% of iStar Financial’s Loans are Non-Performing

February 28, 2009

iStar Financial (SFI: N/A N/A), a commercial mortgage REIT that had been an active player of the past few years, is in dire straits with an some 23-30% of its loan portfolio not performing.

The company acquired the assets of Fremont Investment & Loan, a notorious lender on highly speculative condo and housing projects. I’ve visted some of the projects Fremont made loans on and it was apparent long ago that those loans would be failures.

The trouble is that iStar’s own portfolio is beginning to crack, and in conjunction with the Fremont portfolio, the bank is close to violating some of its own debt covenants and is now scrambling to find cash or restructure its loans.

Moody’s has as a result downgraded iStar from a B2 to BA3 credit rating, and has a negative outlook as there is roughly $3.5Billion in non-performing assets on the companies books.

The bright spot for the company is that, according to its website, and as of September 2008, its loan portfolio consisted of:

  • 92% 1st mortgages and senior loans
  • 68.9% weighted average loan to value (though this is certainly a lot higher now as values have fallen).

Locally, iStar Financial has a fairly significant presence, with a concentration on Milpitas, and additional holdings in Sunnyvale, San Jose, Fremont, Burlingame, Walnut Creek, and Palo Alto.

On the leasing side, its tenants include Solyndra, ECP Biosystems, Spectra Laboratories, and the Moore Foundation.

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Non Performing Assets March 6, 2009

Thank you very much for sharing this information.This is good information for all money investor. I think it’s important for Investors to evaluate these changes in an environment of the overall iStar financial business. And during this call, I’ll seek to provide the context and metrics we are using to evaluate our own business and portfolio under current Market conditions.

RSA Funding March 16, 2009

You are starting to see some of the same things from the REITs as you are with the general population. I am getting requests lately for financing to buy assets of REITS at a discount. Obviously the REITS bought property as a pure asset play and now are stuck with them.

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