* Q2 adj loss/shr $0.89 vs est loss/shr $0.30
* Says in talks with bankers on debt maturity extention
* Net investment income down 53 pct
* Loan-loss provision $109.4 mln vs $435 mln
* Shares down 16 pct (Adds analyst comments)
By Archana Shankar
BANGALORE, Aug 3 (Reuters) - U.S. commercial real estate lender iStar Financial Inc SFI.N posted a wider-than-expected adjusted second-quarter loss, hurt by a drop in interest income, sending its shares down 16 percent.
The company, which is saddled with bad loans, has almost $3.2 billion of debt coming due in the first half of 2011.
“The debt maturities in 2011 and 2012 remain an obvious concern,” Chief Executive Jay Sugarman said on a conference call with analysts, adding that the company was in talks with the bankers to extend debt maturities.
Last year, iStar saw provisions for loan losses skyrocket as the credit crisis took liquidity out of the commercial real-estate market, dragging the prices of its assets and shares to new lows.
“We believe that the company still faces quite significant capital & credit issues,” analyst Jim Shanahan of Wells Fargo Securities said.
Shanahan expects continued poor results for iStar through the middle of 2011, as the company is in a challenging part of the commercial real estate cycle with significant exposure to some of the weakest subsectors like land and condominium.
IStar, which has been selling assets to repay debt and meet its short-term liquidity needs, is concerned about the pace of recovery of asset prices. “The real estate capital markets continue to recover, we remain cautious on the speed at which values on certain of our more difficult assets will recover,” CEO Sugarman said. The company had $531.5 million of cash at the end of the quarter, compared with $640.9 million in the first quarter.
Non performing loans were lower at $3 billion, or 39.9 percent of managed loan value, compared with $3.5 billion or 42.3 percent last quarter.
For the second quarter, net income allocable to common shareholders was $212.3 million, or $2.27 a share, compared with a year-ago loss of $284.2 million, or $2.85 a share.
Excluding the $250.3 million gain on the sale of a corporate tenant lease (CTL) portfolio sale, the company posted a loss of 89 cents a share.
Analysts on average were expecting iStar to post a loss of 30 cents a share, excluding items, according to Thomson Reuters I/B/E/S.
“Earnings continue to be impacted by increased provisions and continued high levels of nonperforming assets, partially offset by gains on debt repurchases,” Sugarman said.
In the second quarter, provision for loan losses fell to $109.4 million from $435 million.
Quarterly revenue fell more than 29 percent to $136.8 million, hurt by a drop in interest income as performing loans moved to non-performing status.
Interest income fell 39 percent to $86.5 million and net investment income more than halved to $129.8 million.
The company completed the sale of a portfolio of 32 CTL properties for $1.33 billion, it said.
Shares of the company were down 12 percent at $4.60 in midday trade Tuesday on the New York Stock Exchange. They touched a low of $4.41 in early trade. (Reporting by Archana Shankar in Bangalore; Editing by Don Sebastian, Unnikrishnan Nair)