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Fitch affirms iStar ratings, assigns expected rating on new notes

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Fitch affirms iStar ratings, assigns expected rating on new notes

Fitch Ratings affirmed iStar Inc.'s long-term issuer default rating at BB-, with a stable outlook.

The rating agency also affirmed the long-term ratings on the ground-lease real estate investment trust's senior secured debt at BB+, senior unsecured debt at BB and preferred stock at B-. It assigned the REIT's new senior unsecured notes an expected long-term rating of BB (EXP) in light of its planned issuance of $675 million of new senior unsecured notes due 2024.

Fitch said the affirmations take into account iStar's relatively unique platform and strategy, solid liquidity profile, improved asset quality resulting from reduced exposure to legacy land assets and nonperforming loans, decreasing leverage and meaningful proportion of unsecured debt funding compared with similarly rated finance and leasing companies.

Factors such as the material shift in iStar's strategy earlier in 2019 and execution risk tied to continued monetization of legacy assets in the near term, greater performance strain on certain commercial real estate subsectors and ongoing exposure to certain longer-term legacy land assets, however, could pose rating constraints, Fitch said.

Key person risk related to CEO Jay Sugarman has also increased after recent leadership turnovers, Fitch added.

The stable outlook is based on Fitch's views that the REIT will continue to see improved earnings and asset quality over the outlook horizon while maintaining appropriate leverage levels, adequate liquidity and a heavily unsecured funding profile.