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iStar (STAR) Completes $3B Net Lease Asset Portfolio Sale
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iStar Inc. completed the previously announced sale of a portfolio of net lease assets owned and managed by the company to The Carlyle Group Inc.’s (CG - Free Report) Global Credit platform for a gross consideration of $3.07 billion.
The portfolio consists of 18.3 million square feet of institutional-quality entertainment, office and industrial properties situated across the United States.
The company expects the transaction to contribute $570 million, $580 million and $310 million to net income allocable to common shareholders, common equity and adjusted common equity in first-quarter 2022.
Management noted, "As a result, we'll be able to capture a significant gain, de-leverage the balance sheet and pay off nearly all of our secured debt, enabling us to continue scaling the ground lease ecosystem."
The disposition is projected to generate net cash proceeds of $1.2 billion after associated fees, distributions to its joint venture partner, the repayment of debt collateralized by the portfolio assets, the repayment of the company's senior secured term loan, distributions under its long-term incentive plan, and other costs.
The portfolio sale aside, iStar also sold additional net lease assets for a total gross consideration of $108 million. This is anticipated to have positive impacts in the first quarter.
While the company continues to own investments in ground leases as part of its net lease segment, the sale is in line with iStar’s strategy to simplify business and strengthen the balance sheet.
As for CG, the acquisition will diversify the Global Credit segment’s triple-net lease portfolio, including industrial, office and entertainment properties located all over the United States. The company expects to grow the net lease business to $10 billion and make the product available to the retail channel over time. It wants to expand the business into adjacent scalable areas in the near future. iStar’s net lease business acquisition will boost the assets under management (AUM) of the Global Credit segment, CG’s fastest-growing segment over the past three years.
Over the past year, shares of STAR have rallied 37.7% against the 8.2% decline of the industry.
In the near term, market conditions are likely to remain challenging as the Federal Reserve shifts from quantitative easing to tightening policy and raises short-term interest rates. STAR’s efforts to de-leverage its balance sheet will likely help it navigate such immediate macro-economic headwinds.
Notably, several other mortgage REITs, including AGNC Investment (AGNC - Free Report) , are making efforts to deleverage their balance sheets.
In anticipation of any spread widening, operating at a conservative leverage level will enable AGNC to deploy capital in investment opportunities in the upcoming period. Amid expected spread widening and higher volatility, AGNC Investment has trimmed its investment portfolio.
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iStar (STAR) Completes $3B Net Lease Asset Portfolio Sale
iStar Inc. completed the previously announced sale of a portfolio of net lease assets owned and managed by the company to The Carlyle Group Inc.’s (CG - Free Report) Global Credit platform for a gross consideration of $3.07 billion.
The portfolio consists of 18.3 million square feet of institutional-quality entertainment, office and industrial properties situated across the United States.
The company expects the transaction to contribute $570 million, $580 million and $310 million to net income allocable to common shareholders, common equity and adjusted common equity in first-quarter 2022.
Management noted, "As a result, we'll be able to capture a significant gain, de-leverage the balance sheet and pay off nearly all of our secured debt, enabling us to continue scaling the ground lease ecosystem."
The disposition is projected to generate net cash proceeds of $1.2 billion after associated fees, distributions to its joint venture partner, the repayment of debt collateralized by the portfolio assets, the repayment of the company's senior secured term loan, distributions under its long-term incentive plan, and other costs.
The portfolio sale aside, iStar also sold additional net lease assets for a total gross consideration of $108 million. This is anticipated to have positive impacts in the first quarter.
While the company continues to own investments in ground leases as part of its net lease segment, the sale is in line with iStar’s strategy to simplify business and strengthen the balance sheet.
As for CG, the acquisition will diversify the Global Credit segment’s triple-net lease portfolio, including industrial, office and entertainment properties located all over the United States. The company expects to grow the net lease business to $10 billion and make the product available to the retail channel over time. It wants to expand the business into adjacent scalable areas in the near future. iStar’s net lease business acquisition will boost the assets under management (AUM) of the Global Credit segment, CG’s fastest-growing segment over the past three years.
Over the past year, shares of STAR have rallied 37.7% against the 8.2% decline of the industry.
Image Source: Zacks Investment Research
STAR currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In the near term, market conditions are likely to remain challenging as the Federal Reserve shifts from quantitative easing to tightening policy and raises short-term interest rates. STAR’s efforts to de-leverage its balance sheet will likely help it navigate such immediate macro-economic headwinds.
Notably, several other mortgage REITs, including AGNC Investment (AGNC - Free Report) , are making efforts to deleverage their balance sheets.
In anticipation of any spread widening, operating at a conservative leverage level will enable AGNC to deploy capital in investment opportunities in the upcoming period. Amid expected spread widening and higher volatility, AGNC Investment has trimmed its investment portfolio.