iStar Inc. Outlook Revised To Negative On Economic Impact From COVID-19; 'BB' Ratings Affirmed

  • We expect the economic impact of COVID-19 will erode commercial real estate credit performance, particularly on loans to transitional properties in the hardest hit sectors and geographies like New York.
  • We are revising our outlook on iStar to negative from stable and affirming our ratings on iStar, including the 'BB' issuer credit and senior unsecured debt ratings.
  • The affirmation reflects that we expect iStar's funding and liquidity to remain sound given its lack of margin call exposure and debt maturities until 2022.
  • The negative outlook reflects the potential for weaker economic conditions to cause debt to total adjusted equity leverage to rise above our expectations for the current rating.
NEW YORK (S&P Global Ratings) March 26, 2020-- S&P Global Ratings said today it revised its outlook on iStar Inc. to negative from stable. At the same time, we affirmed all our ratings on iStar, including our 'BB' issuer credit and senior unsecured debt ratings.
The negative outlook reflects our expectation for economic pressure related to COVID-19 to erode the credit performance of iStar's loan portfolio and, to a lesser extent, its net leasing portfolio. We believe that this, coupled with the firm's already weaker-than-peer profitability, could cause its debt to adjusted total equity leverage to increase above our expectation of 2.75x for the rating, given that it was 2.56x at year-end 2019.
The negative outlook reflects the potential for weaker economic conditions to cause debt to total adjusted equity leverage to rise above our 2.75x expectation for the ratings. We also expect the company to maintain its long-term, largely unsecured funding and adequate liquidity.
Over the next 12 months, we could lower our ratings on iStar if we expect:
  • Leverage to increase above 2.75x on a sustained basis, or
  • Asset quality, profitability, or liquidity to deteriorate materially.

Over the same time horizon, we could revise the outlook to stable if the macro environment improves, iStar's asset quality is relatively stable, and the company maintains leverage below 2.75x.
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