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IStar Financial 10-Q 2017
Document

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________________________________________
FORM 10-Q
(Mark One)
 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017
OR
o
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
(State or other jurisdiction of
incorporation or organization)
 
95-6881527
(I.R.S. Employer
Identification Number)
1114 Avenue of the Americas, 39th Floor
 
 
New York, NY
(Address of principal executive offices)
 
10036
(Zip code)
Registrant's telephone number, including area code: (212) 930-9400
_______________________________________________________________________________
Indicate by check mark whether the registrant: (i) 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) has been subject to such filing requirements for the past 90 days. Yes ý    No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ý    No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ý
 
Accelerated filer o
 
Non-accelerated filer o
 (Do not check if a
smaller reporting company)
 
Smaller reporting company o
 
Emerging growth company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o    No ý
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. o    
As of November 1, 2017, there were 68,200,015 shares, $0.001 par value per share, of iStar Inc. common stock outstanding.
 



TABLE OF CONTENTS

 
 
Page
 
 
 

 
 
 




PART I. CONSOLIDATED FINANCIAL INFORMATION
Item 1.    Financial Statements
iStar Inc.
Consolidated Balance Sheets
(In thousands, except per share data)
 
As of
 
September 30, 2017 (unaudited)
 
December 31,
2016
ASSETS
 
 
 
Real estate
 
 
 
Real estate, at cost
$
1,687,318

 
$
1,740,893

Less: accumulated depreciation
(363,456
)
 
(353,619
)
Real estate, net
1,323,862

 
1,387,274

Real estate available and held for sale
65,658

 
237,531

Total real estate
1,389,520

 
1,624,805

Land and development, net
861,507

 
945,565

Loans receivable and other lending investments, net
1,109,442

 
1,450,439

Other investments
289,037

 
214,406

Cash and cash equivalents
1,912,448

 
328,744

Accrued interest and operating lease income receivable, net
10,849

 
11,254

Deferred operating lease income receivable, net
87,696

 
88,189

Deferred expenses and other assets, net
134,720

 
162,112

Total assets
$
5,795,219

 
$
4,825,514

LIABILITIES AND EQUITY
 
 
 
Liabilities:
 
 
 
Accounts payable, accrued expenses and other liabilities
$
466,374

 
$
211,570

Loan participations payable, net
122,489

 
159,321

Debt obligations, net
4,278,954

 
3,389,908

Total liabilities
4,867,817

 
3,760,799

Commitments and contingencies (refer to Note 11)

 

Redeemable noncontrolling interests
3,513

 
5,031

Equity:
 
 
 
iStar Inc. shareholders' equity:
 
 
 
Preferred Stock Series D, E, F, G and I, liquidation preference $25.00 per share (refer to Note 13)
12

 
22

Convertible Preferred Stock Series J, liquidation preference $50.00 per share (refer to Note 13)
4

 
4

Common Stock, $0.001 par value, 200,000 shares authorized, 68,200 and 72,042 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively
68

 
72

Additional paid-in capital
3,357,489

 
3,602,172

Retained earnings (deficit)
(2,465,654
)
 
(2,581,488
)
Accumulated other comprehensive income (loss) (refer to Note 13)
(3,830
)
 
(4,218
)
Total iStar Inc. shareholders' equity
888,089

 
1,016,564

Noncontrolling interests
35,800

 
43,120

Total equity
923,889

 
1,059,684

Total liabilities and equity
$
5,795,219

 
$
4,825,514

The accompanying notes are an integral part of the consolidated financial statements.

1


iStar Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
(unaudited)
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Revenues:
 
 
 
 
 
 
 
Operating lease income
$
47,806

 
$
46,800

 
$
142,155

 
$
147,270

Interest income
25,442

 
32,258

 
83,145

 
99,877

Other income
20,662

 
13,442

 
172,037

 
35,079

Land development revenue
25,962

 
31,554

 
178,722

 
74,389

Total revenues
119,872

 
124,054

 
576,059

 
356,615

Costs and expenses:
 
 
 
 
 
 
 
Interest expense
48,732

 
55,105

 
148,684

 
168,173

Real estate expense
36,280

 
35,243

 
106,554

 
104,815

Land development cost of sales
27,512

 
22,004

 
165,888

 
50,842

Depreciation and amortization
11,846

 
12,201

 
37,297

 
39,781

General and administrative
20,955

 
19,666

 
73,347

 
62,433

(Recovery of) provision for loan losses
(2,600
)
 
(14,955
)
 
(8,128
)
 
(12,749
)
Impairment of assets
595

 
8,741

 
15,292

 
11,753

Other expense
2,704

 
819

 
20,849

 
4,741

Total costs and expenses
146,024

 
138,824

 
559,783

 
429,789

Income (loss) before earnings from equity method investments and other items
(26,152
)
 
(14,770
)
 
16,276

 
(73,174
)
Loss on early extinguishment of debt, net
(616
)
 
(36
)
 
(4,142
)
 
(1,618
)
Earnings from equity method investments
2,461

 
26,540

 
13,677

 
74,254

Income (loss) from continuing operations before income taxes
(24,307
)
 
11,734

 
25,811

 
(538
)
Income tax (expense) benefit
1,278

 
8,256

 
(972
)
 
9,859

Income (loss) from continuing operations
(23,029
)
 
19,990

 
24,839

 
9,321

Income from discontinued operations

 
3,721

 
4,939

 
10,934

Gain from discontinued operations

 

 
123,418

 

Income tax expense from discontinued operations

 

 
(4,545
)
 

Income from sales of real estate(1)
19,313

 
34,444

 
28,267

 
88,387

Net income (loss)
(3,716
)
 
58,155

 
176,918

 
108,642

Net (income) loss attributable to noncontrolling interests
160

 
967

 
(4,450
)
 
(6,915
)
Net income (loss) attributable to iStar Inc. 
(3,556
)
 
59,122

 
172,468

 
101,727

Preferred dividends
(30,974
)
 
(12,830
)
 
(56,634
)
 
(38,490
)
Net (income) loss allocable to Participating Security holders(2)

 

 

 
(27
)
Net income (loss) allocable to common shareholders
$
(34,530
)
 
$
46,292

 
$
115,834

 
$
63,210

Per common share data:
 
 
 
 
 
 
 
Income (loss) attributable to iStar Inc. from continuing operations:
 
 
 
 
 
 
 
Basic
$
(0.48
)
 
$
0.60

 
$
(0.11
)
 
$
0.70

Diluted
$
(0.48
)
 
$
0.41

 
$
(0.11
)
 
$
0.57

Net income (loss) attributable to iStar Inc.:
 
 
 
 
 
 
 
Basic
$
(0.48
)
 
$
0.65

 
$
1.61

 
$
0.85

Diluted
$
(0.48
)
 
$
0.44

 
$
1.61

 
$
0.66

Weighted average number of common shares:
 
 
 
 
 
 
 
Basic
71,713

 
71,210

 
71,972

 
74,074

Diluted
71,713

 
115,666

 
71,972

 
118,590

_______________________________________________________________________________
(1)
Income from sales of real estate represents gains from sales of real estate that do not qualify as discontinued operations.
(2)
Participating Security holders are non-employee directors who hold common stock equivalents ("CSEs") and restricted stock awards granted under the Company's Long Term Incentive Plans that are eligible to participate in dividends (refer to Note 14 and Note 15).


The accompanying notes are an integral part of the consolidated financial statements.

2


iStar Inc.
Consolidated Statements of Comprehensive Income (Loss)
(In thousands)
(unaudited)
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Net income (loss)
$
(3,716
)
 
$
58,155

 
$
176,918

 
$
108,642

Other comprehensive income (loss):
 
 
 
 
 
 
 
Reclassification of (gains)/losses on cash flow hedges into earnings upon realization(1)
56

 
112

 
(135
)
 
487

Unrealized gains/(losses) on available-for-sale securities
(116
)
 
(202
)
 
450

 
263

Unrealized gains/(losses) on cash flow hedges
(56
)
 
249

 
338

 
(1,070
)
Unrealized gains/(losses) on cumulative translation adjustment
(36
)
 
(249
)
 
(265
)
 
(259
)
Other comprehensive income (loss)
(152
)
 
(90
)

388

 
(579
)
Comprehensive income (loss)
(3,868
)
 
58,065

 
177,306

 
108,063

Comprehensive (income) loss attributable to noncontrolling interests
160

 
967

 
(4,450
)
 
(6,915
)
Comprehensive income (loss) attributable to iStar Inc. 
$
(3,708
)
 
$
59,032

 
$
172,856

 
$
101,148

_______________________________________________________________________________
(1)
Reclassified to "Interest expense" in the Company's consolidated statements of operations are $16 and $76 for the three and nine months ended September 30, 2017, respectively, and $20 and $202 for the three and nine months ended September 30, 2016, respectively. Reclassified to "Earnings from equity method investments" in the Company's consolidated statements of operations are $40 and $204 for the three and nine months ended September 30, 2017, respectively, and $92 and $285 for the three and nine months ended September 30, 2016, respectively.

The accompanying notes are an integral part of the consolidated financial statements.

3


iStar Inc.
Consolidated Statements of Changes in Equity
For the Nine Months Ended September 30, 2017 and 2016
(In thousands)
(unaudited)




 
 
iStar Inc. Shareholders' Equity
 
 
 
 
 
 
Preferred
Stock(1)
 
Preferred Stock Series J(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, 2016
 
$
22

 
$
4

 
$
72

 
$
3,602,172

 
$
(2,581,488
)
 
$
(4,218
)
 
$
43,120

 
$
1,059,684

Dividends declared—preferred
 

 

 

 

 
(38,490
)
 

 

 
(38,490
)
Issuance of stock/restricted stock unit amortization, net
 

 

 

 
2,248

 

 

 

 
2,248

Net income for the period(2)
 

 

 

 

 
172,468

 

 
5,785

 
178,253

Change in accumulated other comprehensive income (loss)
 

 

 

 

 

 
388

 

 
388

Repurchase of stock
 

 

 
(4
)
 
(45,924
)
 

 

 

 
(45,928
)
Issuance of senior unsecured convertible notes (refer to Note 10)
 

 

 

 
22,487

 

 

 

 
22,487

Dividends declared and payable — Series E and Series F Preferred Stock

 

 

 

 

 
(1,830
)
 

 

 
(1,830
)
Redemption of Series E and F Preferred Stock

 
(10
)
 

 

 
(223,676
)
 
(16,314
)
 

 

 
(240,000
)
Change in additional paid in capital attributable to redeemable noncontrolling interest
 

 

 

 
182

 

 

 

 
182

Contributions from noncontrolling interests
 

 

 

 

 

 

 
12

 
12

Distributions to noncontrolling interests
 

 

 

 

 

 

 
(13,117
)
 
(13,117
)
Balance as of September 30, 2017
 
$
12

 
$
4

 
$
68

 
$
3,357,489

 
$
(2,465,654
)
 
$
(3,830
)
 
$
35,800

 
$
923,889

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of December 31, 2015
 
$
22

 
$
4

 
$
81

 
$
3,689,330

 
$
(2,625,474
)
 
$
(4,851
)
 
$
42,218

 
$
1,101,330

Dividends declared—preferred
 

 

 

 

 
(38,490
)
 

 

 
(38,490
)
Issuance of stock/restricted stock unit amortization, net
 

 

 

 
1,675

 

 

 

 
1,675

Net income for the period(2)
 

 

 

 

 
101,727

 

 
10,908

 
112,635

Change in accumulated other comprehensive income (loss)
 

 

 

 

 

 
(579
)
 

 
(579
)
Repurchase of stock
 

 

 
(10
)
 
(98,419
)
 

 

 

 
(98,429
)
Change in additional paid in capital attributable to redeemable noncontrolling interest
 

 

 

 
124

 

 

 

 
124

Contributions from noncontrolling interests
 

 

 

 

 

 

 
513

 
513

Change in noncontrolling interest(3)
 

 

 

 

 

 

 
(7,292
)
 
(7,292
)
Balance as of September 30, 2016
 
$
22

 
$
4

 
$
71

 
$
3,592,710

 
$
(2,562,237
)
 
$
(5,430
)
 
$
46,347

 
$
1,071,487

_______________________________________________________________________________
(1)
Refer to Note 13 for details on the Company's Preferred Stock.
(2)
For the nine months ended September 30, 2017 and 2016, net income (loss) shown above excludes $(1,335) and $(3,993) of net loss attributable to redeemable noncontrolling interests.
(3)
Includes a payment to acquire a noncontrolling interest (refer to Note 5).
The accompanying notes are an integral part of the consolidated financial statements.

4


iStar Inc.
Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
 
For the Nine Months Ended September 30,
 
2017
 
2016
Cash flows from operating activities:
 
 
 
Net income
$
176,918

 
$
108,642

Adjustments to reconcile net income to cash flows from operating activities:
 
 
 
(Recovery of) provision for loan losses
(8,128
)
 
(12,749
)
Impairment of assets
15,292

 
11,753

Depreciation and amortization
38,198

 
42,184

Non-cash expense for stock-based compensation
12,730

 
7,644

Amortization of discounts/premiums and deferred financing costs on debt obligations, net
9,793

 
12,954

Amortization of discounts/premiums on loans, net
(10,098
)
 
(10,835
)
Deferred interest on loans, net
1,162

 
(5,632
)
Gain from discontinued operations
(123,418
)
 

Earnings from equity method investments
(13,677
)
 
(74,254
)
Distributions from operations of other investments
39,076

 
44,893

Deferred operating lease income
(4,870
)
 
(7,340
)
Income from sales of real estate
(28,775
)
 
(88,387
)
Land development revenue in excess of cost of sales
(12,834
)
 
(23,547
)
Loss on early extinguishment of debt, net
1,392

 
1,618

Debt discount on repayments of debt obligations

(6,634
)
 
(5,369
)
Other operating activities, net
12,210

 
4,115

Changes in assets and liabilities:
 
 
 
Changes in accrued interest and operating lease income receivable, net
2,533

 
5,715

Changes in deferred expenses and other assets, net
(8,271
)
 
(14,194
)
Changes in accounts payable, accrued expenses and other liabilities
(5,792
)
 
(11,773
)
Cash flows provided by (used in) operating activities
86,807

 
(14,562
)
Cash flows from investing activities:
 
 
 
Originations and fundings of loans receivable, net
(177,952
)
 
(226,012
)
Capital expenditures on real estate assets
(24,891
)
 
(55,385
)
Capital expenditures on land and development assets
(84,966
)
 
(87,891
)
Acquisitions of real estate assets

 
(4,740
)
Repayments of and principal collections on loans receivable and other lending investments, net
491,680

 
243,780

Net proceeds from sales of real estate
201,939

 
412,335

Net proceeds from sales of land and development assets
174,979

 
64,159

Net proceeds from sales of other investments

 
39,810

Distributions from other investments
40,772

 
25,795

Contributions to and acquisition of interest in other investments
(181,279
)
 
(45,635
)
Changes in restricted cash held in connection with investing activities
5,491

 
(603
)
Other investing activities, net
646

 
(14,265
)
Cash flows provided by investing activities
446,419

 
351,348

Cash flows from financing activities:
 
 
 
Borrowings from debt obligations and convertible notes
1,903,643

 
696,401

Repayments and repurchases of debt obligations
(726,795
)
 
(1,065,253
)
Proceeds from loan participations payable

 
22,844

Preferred dividends paid
(38,490
)
 
(38,490
)
Repurchase of stock
(45,928
)
 
(99,335
)
Payments for deferred financing costs
(27,972
)
 
(8,930
)
Payments for withholding taxes upon vesting of stock-based compensation
(511
)
 
(1,203
)
Distributions to noncontrolling interests

(12,889
)
 
(7,248
)
Other financing activities, net
(599
)
 
821

Cash flows provided by (used in) financing activities
1,050,459

 
(500,393
)
Effect of exchange rate changes on cash
19

 
16

Changes in cash and cash equivalents
1,583,704

 
(163,591
)
Cash and cash equivalents at beginning of period
328,744

 
711,101

Cash and cash equivalents at end of period
$
1,912,448

 
$
547,510

Supplemental disclosure of non-cash investing and financing activity:
 
 
 
Fundings and repayments of loan receivables and loan participations, net

$
(37,405
)
 
$
31,030

Accrual for redemption of preferred stock and preferred stock dividends
241,830

 

Accounts payable for capital expenditures on land and development assets
5,700

 
3,187

Accounts payable for capital expenditures on real estate assets
2,574

 

Acquisitions of real estate and land and development assets through deed-in-lieu

 
9,083

Developer fee payable

 
9,478

Accrued financing costs
3,031

 

The accompanying notes are an integral part of the consolidated financial statements.

5

iStar Inc.
Notes to Consolidated Financial Statements
(unaudited)





Note 1—Business and Organization

Business—iStar Inc. (the "Company"), doing business as "iStar," finances, invests in and develops real estate and real estate related projects as part of its fully-integrated investment platform. The Company also provides management services for its ground lease and net lease equity method investments (refer to Note 7). The Company has invested more than $35 billion over the past two decades and is structured as a real estate investment trust ("REIT") with a diversified portfolio focused on larger assets located in major metropolitan markets. The Company's primary business segments are real estate finance, net lease, operating properties and land and development (refer to Note 17).

Organization—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, as well as through corporate acquisitions.

Note 2—Basis of Presentation and Principles of Consolidation
Basis of Presentation—The accompanying unaudited 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 America ("GAAP") for complete financial statements. These unaudited consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2016 (the "2016 Annual Report").
The 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's consolidated financial statements and the related notes 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 variable interest entities ("VIEs") for which the Company is the primary beneficiary. All significant intercompany balances and transactions have been eliminated in consolidation. The Company's involvement with VIEs affects its financial performance and cash flows primarily through amounts recorded in "Operating lease income," "Interest income," "Earnings from equity method investments," "Real estate expense" and "Interest expense" in the Company's consolidated statements of operations. The Company has not provided financial support to those VIEs that it was not previously contractually required to provide.    
Consolidated VIEs—As of September 30, 2017, the Company consolidates VIEs for which it is considered the primary beneficiary. As of September 30, 2017, the total assets of these consolidated VIEs were $331.4 million and total liabilities were $74.2 million. The classifications of these assets are primarily within "Land and development, net" and "Real estate, net" on the Company's consolidated balance sheets. The classifications of liabilities are primarily within "Accounts payable, accrued expenses and other liabilities" and "debt obligations, net" on the Company's consolidated balance sheets. The liabilities of these VIEs are non-recourse to the Company and can only be satisfied from each VIE's respective assets. The Company did not have any unfunded commitments related to consolidated VIEs as of September 30, 2017.

Unconsolidated VIEs—As of September 30, 2017, the Company has investments in VIEs where it is not the primary beneficiary and accordingly the VIEs have not been consolidated in the Company's consolidated financial statements. As of September 30, 2017, the Company's maximum exposure to loss from these investments does not exceed the sum of the $65.8 million carrying value of the investments, which are classified in "Other investments" and "Loans receivable and other lending investments, net" on the Company's consolidated balance sheets, and $80.7 million of related unfunded commitments.


6

iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)


Note 3—Summary of Significant Accounting Policies

On January 1, 2017, the Company adopted Accounting Standards Update ("ASU") 2016-09, Compensation—Stock Compensation: Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"), which was issued to simplify several aspects of the accounting for share-based payment transactions, including income tax, classification of awards as either equity or liabilities and classification on the statement of cash flows. The adoption of ASU 2016-09 did not have a material impact on the Company's consolidated financial statements.
As of September 30, 2017, the remainder of the Company's significant accounting policies, which are detailed in the Company's 2016 Annual Report, have not changed materially.
New Accounting PronouncementsIn August 2017, the FASB issued Accounting Standards Update ("ASU") 2017-12, Derivatives and Hedging - Targeted Improvements to Accounting for Hedging Activities ("ASU 2017-12"), to better align an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. ASU 2017-12 expands and refines hedge accounting for both nonfinancial and financial risk components and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. ASU 2017-12 is effective for interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. Management does not believe the guidance will have a material impact on the Company's consolidated financial statements.
In February 2017, the FASB issued ASU 2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets ("ASU 2017-05"), to clarify the scope of Subtopic 610-20, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets, and to add guidance for partial sales of nonfinancial assets. The amendments in ASU 2017-05 simplify GAAP by eliminating several accounting differences between transactions involving assets and transactions involving businesses. The amendments in ASU 2017-05 require an entity to initially measure a retained noncontrolling interest in a nonfinancial asset at fair value consistent with how a retained noncontrolling interest in a business is measured. Also, if an entity transfers ownership interests in a consolidated subsidiary that is within the scope of ASC 610-20 and continues to have a controlling financial interest in that subsidiary, ASU 2017-05 requires the entity to account for the transaction as an equity transaction, which is consistent with how changes in ownership interests in a consolidated subsidiary that is a business are recorded when a parent retains a controlling financial interest in the business. ASU 2017-05 is effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted beginning January 1, 2017. Management is evaluating the impact of the guidance on the Company's consolidated financial statements and expects to adopt the retrospective approach, which would require the Company to recast revenue and expenses for all prior periods presented in the year of adoption of the new standard. The Company expects that transactions in assets and businesses in which the Company retains an ownership interest, such as the sale of a controlling interest in its GL business (refer to Note 4), will be impacted by this guidance. As a result, under the retrospective approach, in 2018, the Company expects to record an incremental gain of $55.5 million in its consolidated statements of operations for the nine months ended September 30, 2017, bringing the Company's full gain on the sale of its GL business to approximately $178.9 million.
In January 2017, the FASB issued ASU 2017-01, Business Combinations: Clarifying the Definition of a Business ("ASU 2017-01"), to provide a more robust framework to use in determining when a set of assets and activities is a business. The amendments provide more consistency in applying the guidance, reduce the costs of application, and make the definition of a business more operable. The Company's real estate acquisitions have historically been accounted for as a business combination or an asset acquisition. Under ASU 2017-01, certain transactions previously accounted for as business combinations under the existing guidance would be accounted for as asset acquisitions under the new guidance. As a result, the Company expects more transaction costs to be capitalized under real estate acquisitions and less transaction costs to be expensed under business combinations. ASU 2017-01 is effective for interim and annual reporting periods beginning after December 15, 2017. Early application is permitted. Management is evaluating the impact of the guidance on the Company's consolidated financial statements.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash ("ASU 2016-18"), which requires that restricted cash be included with cash and cash equivalents when reconciling beginning and ending cash and cash equivalents on the statement of cash flows. In addition, ASU 2016-18 requires disclosure of what is included in restricted cash. ASU 2016-18 is effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted. Management does not believe the guidance will have a material impact on the Company's consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments ("ASU 2016-15"), which was issued to reduce diversity in practice in how certain cash receipts and cash payments,

7

iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)


including debt prepayment or debt extinguishment costs, distributions from equity method investees, and other separately identifiable cash flows, are presented and classified in the statement of cash flows. ASU 2016-15 is effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted. Management does not believe the guidance will have a material impact on the Company's consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"), which was issued to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments held by a reporting entity. This amendment replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company currently records a general reserve that covers performing loans and reserves for loan losses are recorded when (i) available information as of each balance sheet date indicates that it is probable a loss has occurred in the portfolio and (ii) the amount of the loss can be reasonably estimated. The formula-based general reserve is derived from estimated principal default probabilities and loss severities applied to groups of loans based upon risk ratings assigned to loans with similar risk characteristics during our quarterly loan portfolio assessment. The Company estimates loss rates based on historical realized losses experienced within its portfolio and take into account current economic conditions affecting the commercial real estate market when establishing appropriate time frames to evaluate loss experience. The Company believes this general reserve component of its total loan loss reserves should minimize the impact of ASU 2016-13. ASU 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted for interim and annual reporting periods beginning after December 15, 2018. Management does not believe the guidance will have a material impact on the Company's consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases ("ASU 2016-02"), which requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases. For operating leases, a lessee will be required to do the following: (i) recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position; (ii) recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis and (iii) classify all cash payments within operating activities in the statement of cash flows. For operating lease arrangements for which the Company is the lessee, primarily the lease of office space, the Company expects the impact of ASU 2016-02 to be the recognition of a right-of-use asset and lease liability on its consolidated balance sheets. The accounting applied by the Company as a lessor will be largely unchanged from that applied under previous GAAP. However, in certain instances, a new long-term lease of land subsequent to adoption could be classified as a sales-type lease, which could result in the Company derecognizing the underlying asset from its books and recording a profit or loss on sale and the net investment in the lease. ASU 2016-02 is effective for interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. Management is evaluating the impact of the guidance on the Company's consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01"), which addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. ASU 2016-01 is effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is not permitted. Management is evaluating the impact of the guidance on the Company's consolidated financial statements.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"), which supersedes existing industry-specific guidance, including ASC 360-20, Real Estate Sales. The new standard is principles-based and requires more estimates and judgment than current guidance. Certain contracts with customers, including lease contracts and financial instruments and other contractual rights, are not within the scope of the new guidance. Although most of the Company's revenue is operating lease income generated from lease contracts and interest income generated from financial instruments, certain other of the Company's revenue streams will be impacted by the new guidance. The Company currently expects that income from the sale of residential condominiums, land development revenue and other income will be impacted by ASU 2014-09. The Company does not expect income from the sales of net lease or commercial operating properties to be impacted by ASU 2014-09. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers - Deferral of the Effective Date, to defer the effective date of ASU 2014-09 by one year. ASU 2014-09 is now effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted beginning January 1, 2017. Management is evaluating the impact of the guidance on the Company’s consolidated financial statements and expects to adopt the full retrospective approach, which would require the Company to recast revenue and expenses for all prior periods presented in the year of adoption of the new standard.

8

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 thousands):
 
Net Lease(1)
 
Operating
Properties
 
Total
As of September 30, 2017
 
 
 
 
 
Land, at cost
$
223,764

 
$
209,068

 
$
432,832

Buildings and improvements, at cost
926,912

 
327,574

 
1,254,486

Less: accumulated depreciation
(306,183
)
 
(57,273
)
 
(363,456
)
Real estate, net
844,493

 
479,369

 
1,323,862

Real estate available and held for sale (2)

 
65,658

 
65,658

Total real estate
$
844,493

 
$
545,027

 
$
1,389,520

As of December 31, 2016
 
 
 
 
 
Land, at cost
$
231,506

 
$
211,054

 
$
442,560

Buildings and improvements, at cost
987,050

 
311,283

 
1,298,333

Less: accumulated depreciation
(307,444
)
 
(46,175
)
 
(353,619
)
Real estate, net
911,112

 
476,162

 
1,387,274

Real estate available and held for sale (2)
155,051

 
82,480

 
237,531

Total real estate
$
1,066,163

 
$
558,642

 
$
1,624,805

_______________________________________________________________________________
(1)
In 2014, the Company partnered with a sovereign wealth fund to form a venture to acquire and develop net lease assets (the "Net Lease Venture") and gave a right of first refusal to the Net Lease Venture on all new net lease investments (refer to Note 7 for more information on the Net Lease Venture). The Company is responsible for sourcing new opportunities and managing the Net Lease Venture and its assets in exchange for a promote and management fee.
(2)
As of December 31, 2016, net lease includes the Company's ground lease ("GL") assets that were reclassified to "Real estate available and held for sale" (refer to "Dispositions" below). As of December 31, 2016, the carrying value of the Company's GL assets were previously classified as $104.5 million in "Real estate, net," $37.5 million in "Deferred expenses and other assets, net," $8.2 million in "Deferred operating lease income receivable, net" and $3.5 million in "Accrued interest and operating lease income receivable, net" on the Company's consolidated balance sheet. As of September 30, 2017 and December 31, 2016, the Company had $65.7 million and $82.5 million, respectively, of residential properties available for sale in its operating properties portfolio.

In the third quarter 2017, in conjunction with the modification of two master leases, the Company exchanged real property with the tenant. The fair value of the property exchanged exceeded the Company's cost basis by approximately $1.5 million which will be deferred and amortized to "Operating lease income" in the Company's consolidated statements of operations over the remaining master lease terms.
Real Estate Available and Held for Sale—During the nine months ended September 30, 2017, the Company transferred one net lease asset with a carrying value of $0.9 million to held for sale due to an executed contract with a third party. During the nine months ended September 30, 2016, the Company transferred one net lease asset with a carrying value of $0.7 million and one commercial operating property with a carrying value of $16.1 million to held for sale due to executed contracts with third parties. During the nine months ended September 30, 2016, the Company also acquired a residential operating property for $0.8 million that had no operations and was sold as of September 30, 2017.

During the nine months ended September 30, 2016, the Company acquired land for $3.9 million and simultaneously entered into a 99 year ground lease with the seller. This asset was one of the 12 properties comprising the Company's GL business that was disposed of in April 2017 (see "Disposition of Ground Lease Business" below).
Disposition of Ground Lease Business—In April 2017, institutional investors acquired a controlling interest in the Company's GL business through the merger of a Company subsidiary and related transactions (the "Acquisition Transactions"). The Company's GL business was a component of the Company's net lease segment and consisted of 12 properties subject to long-term net leases including seven GLs and one master lease (covering five properties). The acquiring entity was a newly formed unconsolidated entity named Safety, Income & Growth Inc. ("SAFE"). The carrying value of the Company's GL assets was approximately $161.1 million. Shortly before the Acquisition Transactions, the Company completed the $227.0 million 2017 Secured Financing on its GL assets (refer to Note 10). The Company received all of the proceeds of the 2017 Secured Financing.

9

iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)


The Company received an additional $113.0 million of proceeds in the Acquisition Transactions, including $55.5 million that the Company contributed to SAFE in its initial capitalization. As a result of the Acquisition Transactions, the Company deconsolidated the 12 properties and the associated 2017 Secured Financing. The Company accounts for its investment in SAFE as an equity method investment (refer to Note 7). The Company accounted for this transaction as an in substance sale of real estate and recognized a gain of $123.4 million, reflecting the aggregate gain less the fair value of the Company's retained interest in SAFE (refer to Note 2 - Summary of Significant Accounting Policies). The carrying value of the 12 properties is classified in "Real estate available and held for sale" on the Company's consolidated balance sheet as of December 31, 2016 and the gain was recorded in "Gain from discontinued operations" in the Company's consolidated statements of operations.
Discontinued Operations—The transactions described above involving the Company's GL business qualified for discontinued operations and the following table summarizes income from discontinued operations for the three and nine months ended September 30, 2017 and 2016 ($ in thousands)(1)(2):
 
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
 
2017
 
2016
 
2017
 
2016
Revenues
 
$

 
$
4,614

 
$
6,430

 
$
13,600

Expenses
 

 
(893
)
 
(1,491
)
 
(2,666
)
Income from discontinued operations
 
$

 
$
3,721

 
$
4,939

 
$
10,934

_______________________________________________________________________________
(1)
The transactions closed on April 14, 2017 and revenues, expenses and income from discontinued operations excludes the period from April 14, 2017 to September 30, 2017. Revenues primarily consisted of operating lease income and expenses primarily consisted of depreciation and amortization and real estate expense.
(2)
For the nine months ended September 30, 2017, cash flows provided by operating activities and cash flows used in investing activities from discontinued operations was $5.7 million and $0.5 million, respectively. For the nine months ended September 30, 2016, cash flows provided by operating activities and cash flows used in investing activities from discontinued operations was $12.9 million and $5.6 million, respectively.

Other Dispositions—During the nine months ended September 30, 2017 and 2016, the Company sold residential condominiums for total net proceeds of $21.8 million and $74.9 million, respectively, and recorded income from sales of real estate totaling $3.3 million and $23.3 million, respectively. During the nine months ended September 30, 2017 and 2016, the Company received net proceeds related to net lease asset sales of $61.7 million and $108.5 million, respectively, resulting in gains of $25.0 million and $15.9 million, respectively. During the nine months ended September 30, 2016, the Company also sold commercial operating properties for net proceeds of $229.1 million resulting in gains of $49.2 million. The gains are recorded in "Income from sales of real estate" in the Company's consolidated statements of operations.
Impairments—During the nine months ended September 30, 2017, the Company recorded an impairment of $4.4 million on a real estate asset held for sale due to shifting demand in the local condominium market along with a change in the Company's exit strategy and an impairment of $0.6 million in connection with the sale of an outparcel located at a commercial operating property. During the nine months ended September 30, 2016, the Company recorded impairments of $7.9 million comprised of $3.0 million on a residential operating property resulting from a slowdown in the local condominium real estate market and $4.9 million on the sale of net lease assets.
Other Developments—The Company identified properties that sustained damages associated with the recent hurricanes in the United States. The Company has insurance policies in place to cover damages in excess of the Company's deductibles. As of September 30, 2017, the Company has recorded approximately $1.2 million to "Real estate expense" in the Company's consolidated statements of operations to cover expected losses at the properties.
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 $6.1 million and $17.0 million for the three and nine months ended September 30, 2017, respectively. Tenant expense reimbursements were $6.2 million and $18.4 million for the three and nine months ended September 30, 2016, respectively. These amounts are included in "Operating lease income" in the Company's consolidated statements of operations.
Allowance for Doubtful Accounts—As of September 30, 2017 and December 31, 2016, the allowance for doubtful accounts related to real estate tenant receivables was $1.2 million and $1.3 million, respectively, and the allowance for doubtful accounts related to deferred operating lease income was $1.1 million and $1.3 million as of September 30, 2017 and December 31, 2016,

10

iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)


respectively. These amounts are included in "Accrued interest and operating lease income receivable, net" and "Deferred operating lease income receivable, net," respectively, on the Company's consolidated balance sheets.
Note 5—Land and Development

The Company's land and development assets were comprised of the following ($ in thousands):
 
As of
 
September 30,
 
December 31,
 
2017
 
2016
Land and land development, at cost(1)
$
869,331

 
$
952,051

Less: accumulated depreciation
(7,824
)
 
(6,486
)
Total land and development, net
$
861,507

 
$
945,565

_______________________________________________________________________________
(1)
During the nine months September 30, 2017, the Company funded capital expenditures on land and development assets of $85.0 million.

Dispositions—During the nine months ended September 30, 2017, the Company sold one land parcel totaling 1,250 acres (see following paragraph) and residential lots and units and recognized land development revenue of $178.7 million from its land and development portfolio. During the nine months ended September 30, 2016, the Company sold residential lots and units and recognized land development revenue of $74.4 million from its land and development portfolio. During the nine months ended September 30, 2017 and 2016, the Company recognized land development cost of sales of $165.9 million and $50.8 million, respectively, from its land and development portfolio.

In connection with the resolution of litigation involving a dispute over the purchase and sale of approximately 1,250 acres of land in Prince George’s County, Maryland ("Bevard"), during the nine months ended September 30, 2017, the Company recognized $114.0 million of land development revenue and $106.3 million of land development cost of sales (refer to Note 11). In 2016, the Company acquired an additional 10.7% interest in Bevard for $10.8 million and owned 95.7% of Bevard at the time of resolution.

Impairments—During the nine months ended September 30, 2017, the Company recorded an impairment of $10.1 million on a land asset due to a change in the Company's exit strategy. During the nine months ended September 30, 2016, the Company recorded an impairment of $3.8 million equal to the carrying value on a land asset resulting from a change in business strategy.
Redeemable Noncontrolling Interest—The Company has a majority interest in a strategic venture that provides the third party minority partner an option to redeem their interest at fair value. The Company has reflected the partner's noncontrolling interest in this venture as a component of redeemable noncontrolling interest within its consolidated balance sheets. Changes in fair value are being accreted over the term from the date of issuance of the redemption option to the earliest redemption date using the interest method. As of September 30, 2017 and December 31, 2016, this interest had a carrying value of zero and $1.3 million, respectively. As of September 30, 2017 and December 31, 2016, this interest did not have a redemption value.

11

iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)


Note 6—Loans Receivable and Other Lending Investments, net

The following is a summary of the Company's loans receivable and other lending investments by class ($ in thousands):
 
As of
Type of Investment
September 30,
2017
 
December 31,
2016
Senior mortgages
$
594,081

 
$
940,738

Corporate/Partnership loans
495,066

 
490,389

Subordinate mortgages
9,335

 
24,941

Total gross carrying value of loans
1,098,482

 
1,456,068

Reserves for loan losses
(76,189
)
 
(85,545
)
Total loans receivable, net
1,022,293

 
1,370,523

Other lending investments—securities
87,149

 
79,916

Total loans receivable and other lending investments, net
$
1,109,442

 
$
1,450,439


Reserve for Loan Losses—Changes in the Company's reserve for loan losses were as follows ($ in thousands):
 
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
 
2017
 
2016
 
2017
 
2016
Reserve for loan losses at beginning of period
 
$
78,789

 
$
110,371

 
$
85,545

 
$
108,165

(Recovery of) provision for loan losses(1)
 
(2,600
)
 
(14,955
)
 
(8,128
)
 
(12,749
)
Charge-offs
 

 

 
(1,228
)
 

Reserve for loan losses at end of period
 
$
76,189

 
$
95,416

 
$
76,189

 
$
95,416

_______________________________________________________________________________
(1)
For the three and nine months ended September 30, 2016, the provision for loan losses includes recoveries of previously recorded asset-specific loan loss reserves of $11.7 million.

12

iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)



The Company's recorded investment in loans (comprised of a loan's carrying value plus accrued interest) and the associated reserve for loan losses were as follows ($ in thousands):
 
Individually
Evaluated for
Impairment(1)
 
Collectively
Evaluated for
Impairment(2)
 
Total
As of September 30, 2017
 
 
 
 
 
Loans
$
238,155

 
$
865,953

 
$
1,104,108

Less: Reserve for loan losses
(60,989
)
 
(15,200
)
 
(76,189
)
Total(3)
$
177,166

 
$
850,753

 
$
1,027,919

As of December 31, 2016
 
 
 
 
 
Loans
$
253,941

 
$
1,209,062

 
$
1,463,003

Less: Reserve for loan losses
(62,245
)
 
(23,300
)
 
(85,545
)
Total(3)
$
191,696

 
$
1,185,762

 
$
1,377,458

_______________________________________________________________________________
(1)
The carrying value of these loans include unamortized discounts, premiums, deferred fees and costs totaling net discounts of $0.7 million and $0.4 million as of September 30, 2017 and December 31, 2016, respectively. The Company's loans individually evaluated for impairment primarily represent loans on non-accrual status and therefore, the unamortized amounts associated with these loans are not currently being amortized into income.
(2)
The carrying value of these loans include unamortized discounts, premiums, deferred fees and costs totaling net premiums of $6.2 million and $1.9 million as of September 30, 2017 and December 31, 2016, respectively.
(3)
The Company's recorded investment in loans as of September 30, 2017 and December 31, 2016 includes accrued interest of $5.6 million and $6.9 million, respectively, which are included in "Accrued interest and operating lease income receivable, net" on the Company's consolidated balance sheets. As of September 30, 2017 and December 31, 2016, the total excludes $87.1 million and $79.9 million, respectively, of securities that are evaluated for impairment under ASC 320.

Credit Characteristics—As part of the Company's process for monitoring the credit quality of its loans, it performs a quarterly loan portfolio assessment and assigns risk ratings to each of its performing loans. Risk ratings, which range from 1 (lower risk) to 5 (higher risk), are based on judgments, which are inherently uncertain, and there can be no assurance that actual performance will be similar to current expectation. The Company designates loans as non-performing at such time as: (1) the loan becomes 90 days delinquent; (2) the loan has a maturity default; or (3) management determines it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan. All non-performing loans are placed on non-accrual status and income is only recognized in certain cases upon actual cash receipt.

The Company's recorded investment in performing loans, presented by class and by credit quality, as indicated by risk rating, was as follows ($ in thousands):
 
As of September 30, 2017
 
As of December 31, 2016
 
Performing
Loans
 
Weighted
Average
Risk Ratings
 
Performing
Loans
 
Weighted
Average
Risk Ratings
Senior mortgages
$
515,610

 
2.47

 
$
859,250

 
3.12

Corporate/Partnership loans
340,980

 
2.76

 
335,677

 
3.09

Subordinate mortgages
9,363

 
3.00

 
14,135

 
3.00

  Total
$
865,953

 
2.59

 
$
1,209,062

 
3.11



13

iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)


The Company's recorded investment in loans, aged by payment status and presented by class, was as follows ($ in thousands):
 
Current
 
Less Than
and Equal
to 90 Days
 
Greater
Than
90 Days(1)
 
Total
Past Due
 
Total
As of September 30, 2017
 
 
 
 
 
 
 
 
 
Senior mortgages
$
521,610

 
$

 
$
75,732

 
$
75,732

 
$
597,342

Corporate/Partnership loans
340,980

 

 
156,423

 
156,423

 
497,403

Subordinate mortgages
9,363

 

 

 

 
9,363

Total
$
871,953

 
$

 
$
232,155

 
$
232,155

 
$
1,104,108

As of December 31, 2016
 
 
 
 
 
 
 
 
 
Senior mortgages
$
868,505

 
$

 
$
76,677

 
$
76,677

 
$
945,182

Corporate/Partnership loans
335,677

 

 
157,146

 
157,146

 
492,823

Subordinate mortgages
24,998

 

 

 

 
24,998

Total
$
1,229,180

 
$

 
$
233,823

 
$
233,823

 
$
1,463,003

_______________________________________________________________________________
(1)
As of September 30, 2017, the Company had four loans, which were greater than 90 days delinquent, and were in various stages of resolution, including legal proceedings, environmental concerns and foreclosure-related proceedings, and ranged from 1.0 to 8.0 years outstanding. As of December 31, 2016, the Company had four loans, which were greater than 90 days delinquent, and were in various stages of resolution, including legal proceedings, environmental concerns and foreclosure-related proceedings, and ranged from 1.0 to 8.0 years outstanding.

Impaired Loans—The Company's recorded investment in impaired loans, presented by class, was as follows ($ in thousands)(1):
 
As of September 30, 2017
 
As of December 31, 2016
 
Recorded
Investment
 
Unpaid
Principal
Balance
 
Related
Allowance
 
Recorded
Investment
 
Unpaid
Principal
Balance
 
Related
Allowance
With no related allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
Subordinate mortgages
$

 
$

 
$

 
$
10,862

 
$
10,846

 
$

Subtotal

 

 

 
10,862

 
10,846

 

With an allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
Senior mortgages
81,732

 
81,848

 
(48,518
)
 
85,933

 
85,780

 
(49,774
)
Corporate/Partnership loans
156,423

 
145,849

 
(12,471
)
 
157,146

 
146,783

 
(12,471
)
Subtotal
238,155

 
227,697

 
(60,989
)
 
243,079

 
232,563

 
(62,245
)
Total:
 
 
 
 
 
 
 
 
 
 
 
Senior mortgages
81,732

 
81,848

 
(48,518
)
 
85,933

 
85,780

 
(49,774
)
Corporate/Partnership loans
156,423

 
145,849

 
(12,471
)
 
157,146

 
146,783

 
(12,471
)
Subordinate mortgages

 

 

 
10,862

 
10,846

 

Total
$
238,155

 
$
227,697

 
$
(60,989
)
 
$
253,941

 
$
243,409

 
$
(62,245
)
____________________________________________________________
(1)
All of the Company's non-accrual loans are considered impaired and included in the table above.


14

iStar Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)


The Company's average recorded investment in impaired loans and interest income recognized, presented by class, were as follows ($ in thousands):
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
With no related allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Senior mortgages
$

 
$

 
$
4,608

 
$
114

 
$

 
$

 
$
4,575

 
$
226

Subordinate mortgages
5,501

 
385

 
11,567

 

 
8,227

 
385

 
5,784

 

Subtotal
5,501

 
385

 
16,175

 
114

 
8,227

 
385

 
10,359

 
226

With an allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Senior mortgages
82,007

 

 
127,494

 

 
83,100

 

 
127,169

 

Corporate/Partnership loans
156,399

 

 
81,108

 

 
156,811

 

 
43,339

 

Subtotal
238,406

 

 
208,602