Good day and welcome to iStar’s Fourth Quarter and Fiscal Year 2015 Earnings Conference Call. [Operator Instructions] As a reminder, today’s conference is being recorded. At this time for opening remarks and introductions, I’d like to turn the conference over to Mr. Jason Fooks, Vice President of Investor Relations and Marketing. Please go ahead, sir.

Thank you, John. And good morning everyone. Thank you for joining us today to review iStar’s fourth quarter and fiscal year 2015 earnings report. With me today are Jay Sugarman, Chairman and Chief Executive Officer, and David DiStaso, our Chief Financial Officer. This morning’s call is being webcast on our website at iStar.com in the Investor section. There will be a replay of the call beginning at 12.30 PM Eastern Time today. The dial-in for the replay is 1-800-475-6701 with a confirmation code of 386538. Before I turn the call over to Jay, I’d like to remind everyone that statements in this earnings call which are not historical facts will be forward looking. iStar’s actual results may differ materially from these forward-looking statements and the risk factors that could cause these differences are detailed in our SEC reports and our investor presentation which is posted on our website. iStar disclaims any intent or obligation to update these forward-looking statements except as expressly required by law. Now I would like to turn the call over to iStar’s Chairman and CEO, Jay Sugarman. Jay?

Thanks, Jason. Thanks to all of you for joining us today. The last few months have been interesting one for our market. Weakness and volatility in the public market have taken a heavy toll on share prices while the private markets for real estate remain relatively strong because historically low interest rates continuing to drive interest in well located cash flowing assets. The case for earning real estate assets remains intact. But a note of caution has reduced the frostiness we saw last summer. iStar’s response as we reported last quarter has been to sell things in favor and by/or invest in things out of favor. During the fourth quarter, this strategy led us to sell several assets that have reached the point where a market could see their true value and redeploy those proceeds into significant share repurchases. This process when successful represents an attractive redeployment of the balance sheet which we call our gain now gain later strategy. And I’ll talk a bit about that in a minute after Dave reviews the quarter and yearend numbers. But the punch line, it’s a solid earnings realization in the fourth quarter from this strategy and a nice push on earnings per share going forward. On the other hand, our decision to hold significant cash balances and remain pretty selective on new investments will slow earnings momentum in 2016. And we have reset our internal goals and now look to grow earnings by 50% from 2015 to 2016 from our previous goal of over 100% growth. This growth will be driven by value realized in our operating property and land portfolios mostly in the mid to later parts of the year. So we’ll have further updates in the coming quarters. And with that, let’s get into the numbers with Dave. Dave?

Thanks Jay and good morning everyone. I’ll begin by discussing our financial results for the fourth quarter and fiscal year 2015 before moving on to investment activity and the performance of our business segments. Finally, I’ll finish with an update on recent capital markets activity and our outlook for the coming year. For the quarter, our adjusted income allocable to common shareholders was $39 million or $0.34 per diluted common share compared to $28 million or $0.26 per diluted common share for the same quarter last year. The primary reasons for the improvement was a $40 million increase in contributions from our land and development business and a $4 million increase in interest income partially offset by $9 million less of other income compared to the fourth quarter of last year. Our net income allocable to common shareholders for the quarter was $8 million compared to a net loss of $13 million for the same period last year. In addition to the items I just discussed, net income benefitted this quarter from a decrease in impairments and lower depreciation expense. For the full year 2015, our adjusted income allocable to common shareholders was $84 million or $0.81 per diluted common share compared to $109 million or $1 per diluted common share last year. The prior year benefitted from the sale of two equity method investments which generated $57 million of incremental earnings. This year, we saw the results of our development efforts produce meaningful growth in land revenues. Specifically, our land segment contribute an additional $32 million of gross margin year-over-year. Our net loss allocable to common shareholders for the year was $53 million compared to a loss of $34 million for the same period last year. In addition to the items discussed, net income in the prior year included…

Thanks, Dave. Let me walk you through the gain now gain later dynamic in a little more detail. During the fourth quarter, we sold two sizeable assets. These assets had a net worth value of around $45 million. They generated relatively little free cash flow. We sold them for $89 million and generated approximately $44 million in gains. That’s the gain now part. We then took those proceeds and compared investing them in a pipeline of deals available to us with a sizeable share repurchase. We chose the share repurchase path and we purchased approximately 8.5 million shares. With a 50% increase in adjusted earnings per share in 2016, we think those shares would earn roughly $1.25 per share. As we think about it, we took assets with low book value and little cash flow, created significant value and gains upon sale and then repurchase shares with implied adjusted earnings north of $10 million and perhaps higher going forward. That’s the gain later part. So our goal in 2016 is to continue working to create those accretive dynamic and bring assets to market where value has been created over the past several years, generate gains and then redeploy proceeds into further earnings positive investments in the market or in our own capital structure. And with that, let’s go ahead and open it up for questions. Operator.

[Operator Instructions] And we will go to the line of Jade Rahmani with KBW. Please go ahead.

Thank you very much. Regarding upcoming maturities, how much of the $926 million do you think you would refinance with - or pay off with cash on hand?

Hey Jade. Look, we look through our balance sheet to find the lowest cost to capital available to us. Obviously, we have a lot of cash and paying down debt with that is accretive. But we also have lots of other sources in the book and we continually look at the secured and unsecured markets to really try to find an appropriate balance on term, maturity, price, structure. So it’s probably pretty immature to talk about the rest of the year, but certainly, we’re focused on first couple of maturities and we built the cash balance that gives us the ability to take those out pretty simply with cash. We do think the markets will start to recognize some of the things we’ve got in place and towards the later end of the year, I’m sure we’re going to be looking at a lot of different alternatives.

In terms of secured debt, what form or forms would that be likely to take based on your current vantage point? Are you talking about secured credit facilities?

No, I think more as we season assets in our portfolio, as we bring some of the operating property portfolios up the full stabilization, it gives us a lot more choices on individual assets how to extract relatively low cost financing. So we’ve got lots of different things that we’re looking at as Dave kind of went through the list anywhere from selling those assets to figuring out a way to JV them, to sell participations, to sell off A notes. So as a portfolio has seasoned, it’s created a lot of opportunities to think about those. We still primarily want to be an unsecured borrower so that’s always in our mind as well. But if the market is not going to give us pricing we think as appropriate, then we’ll look at some of those other strategies.

In terms of the change in your earnings goals, is the driver of the lower earnings primarily a higher cash balance and less investment activity or are you anticipating fewer asset sales than you previously expected?

Well, I think it starts with the cash balances. Obviously, we came into the fourth quarter with a pretty heavy balance. We’re still carrying the majority of that capital, so not deploying it is going to take a little bit of a bite just deferring some of those earnings further into the future. I think the asset sale side, the monetization side, the asset realization side, we still feel quite comfortable with. But a lot of those transactions are set up for mid to later parts of the year. So we think with the increased cash balances, primate sense to set a goal of 50% growth rather than something more dependent on putting all that money to work sooner.

Can you quantify maybe some of the spread widening on the financial sales, you’re looking at cap rate widening, if you’re seeing that as yet? And also on the land side, homebuilders have been talking about moderating their appetite for land purchases, is that affecting anything of what you’re seeing in the land side?

Let’s take them one at a time. I think the finance markets definitely feel like they took a slight move. We’ve seen CMBS widen out about 40, 50 basis points on the triple As. That’s rippled down through the rest of the finance markets on the 50, 75, even 100 basis point widening. We don’t think it has translated anywhere close to what we’ve seen in the public market and publicly traded securities. So I think the private market is still a lot more stable. We’ve seen the same thing on cash flowing assets. We don’t see cap rates widening materially for good quality assets and good markets. We think the drop in interest rates have offset some of the spread widening. So we’re not seeing nearly the kind of volatility we see in the public market. The land question, I think the homebuilders are probably closer to it than we are, but what we see right now is lots of interest. Again, it’s a little bit by quality and by market. We do see the markets that we’ve invested a lot of time and money and still being quite strong. But the sentiment of the homebuilders changes, it will impact us. We’re not seeing that just yet.

Okay. And I wanted to ask you about strategically how you think about potential M&A and opportunities. Can you say if you have or would bid on portfolios being marketed for sales by REITs that are trading at discounts to NAV? Or potentially whole companies? And if you would, can you say which REITs sectors potentially are into this? I don’t know if you’re interested in healthcare, manufactured housing or you previously commented on demographic which I assumed referred to healthcare such as seniors housing. So I wondered if you could comment on that.

Yes, I mean we look at the market and we look where values are relatively to what we think they are. And if there’s a big disparity we get interested. I would say we don’t have the best currency right now either. So there’s no big arbitrage between where we’re trading and where others are. We think those were the big discount and yes we unfortunately are trading in what we think is the big discount. So there’s no obvious pick up from that. But anything that we think fits our wheelhouse in terms of our new strategy and some of our business lines, it’s very much of interest. As you know, we have a very significant relationship with the sovereign wealth partner so we certainly have the capital is we something very much mispriced and can take advantage of it, would be of interest. But nothing eminent Jade just in terms of we’re watching the market as everybody else is to try to find where value is going to sell.

And then just lastly, any update on the Bovard [ph] litigation? Is that something that you think could come to fruition this year?

It’s hopefully at the tail end of the process. We think by the end of the year, we should have some clarity on that. But it’s in the court’s purview of when that decision comes down. So we’ve been waiting seven years and may have to wait a little while longer.

Thanks very much for taking my questions.

[Operator Instructions] And we’ll go to the line of Sean Monaghan with Penn Capital Management. Please go ahead.

Hey guys, how are we doing?

Good.

Just a quick question. Can you break out for me what percentage of the sources of cash are going to come from asset sales and principal, a rough breakdown?

Yes, Sean, I think when we look at asset sales components, we see three different thesis and really would be from the commercial operating is about $400 million of sales that we would expect. And we’d expect somewhere in the neighborhood of $300 million of land sales. Those are the main components. The other piece would be real estate finance repayments, which are somewhere between right around $475 million based on our current estimate.

Okay. Thanks guys. Can you just talk about to what kind of assets in the portfolio are eligible for individual mortgages and what terms are you guys looking at right now that are available?

Well, we certainly got some JV properties in the multifamily sector. We have a lot of liquidity attached to them that we’ve not yet accessed. That would be a place we’re certainly going to look at as we move through 2016 and they lease up and stabilize. That market is deep and rich and we think the cost to fund is quite attractive. Other stuff, really we look at the market from time to time on almost all our properties both for sale, for financing, for syndication. We have seen some of our loan assets, some of our very large we call them track assets that were transitional, repositioning acquisition and construction loans that have seasoned now. And we have some interest on A notes on a lot of those. So that’s another avenue that we could certainly explore. But give the large cash balance, we haven’t pushed the button on any of those yet. But that’s the like of kind of things we would look at throughout the year.

And then what kind of dislocation are you guys seeing in the markets right now?

As I said, I think we see a lot of dislocation in the public side. You see a lot less of it in the private side. Maybe that’s just because it doesn’t price every day, so some of these dynamics don’t get translated immediately. The assets we have for sale in the fourth quarter were not impacted at all. Some of the stuff we have in the market now doesn’t really look like it’s being impacted or seeing significant interest. But if those folks go to the market, CMBS market or other markets, we have to see where that kind of financing gets placed. Right now, I’d say the spread widening has been offset by the treasuries dropping into the 170 range for tenure. So we have not seen a material impact on good solid cash flowing assets. I think some of the frothiness around high in the sky business plans is off and some of the really high end condominiums in New York are kind of the bell weather for that. But we’re not seeing the sort of core stuff change in price materially.

And talking about just what’s open to you guys like capital markets right now - I know you talked about cash and refinancing. What looks attractive to you right now? Is it the secured market and unsecured market? I know you guys like to keep your interest expense low. But what looks attractive to you guys and what terms do you guys think you guys be amendable to?

Well, I can say the unsecured market would be a buyer of our bonds of these prices, not a seller. So I don’t think that’s something makes a lot of sense for us right now. The secured market, we did a small secured deal earlier last year. But we thought the pricing was quite attractive and made sense for the asset type. It really depends on the asset. And we’ve got four different business lines. I think they have four different personalities in terms of terms and structures that make sense in pricing. But we would compare that kind of facility to some of the things we talked about earlier. And certainly I think multifamily is going to finance a lot cheaper right now than some of the operating properties and land we have. So it will be a mix of decisions we have to make throughout the year. But right now, I’d say unsecured would be a buyer, not a seller. And there’s probably some secured stuff we would do at prices today.

Okay. That’s it for me. Thanks.

And Mr. Fooks, we have no further questions. Thank you.

Thanks, John. Thanks everyone for joining us this morning. If you should have any additional questions on today’s earnings release, please feel free to contact me directly. John, would you give the conference call replay instructions once again? Thanks.

Certainly. Ladies and gentlemen, the conference replay starts today at 12:30 pm, will last until March 10th at midnight. You may access the replay at any time by dialing 800-475-6701, entering the access code 386538. That number again, 800-475-6701. The access code, 386538. That does conclude your conference for today.