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02/28/2008

iStar Financial Announces Fourth Quarter and Fiscal Year 2007 Results

- Total revenues reach $413.8 million and record $1.4 billion for the fourth quarter and fiscal year 2007, respectively.

- Company records $134.9 million of non-cash mark-to-market impairments in its Corporate Loan and Debt portfolio; also records loan loss provision of $113.0 million in fourth quarter.

- Inclusive of non-cash impairments, adjusted earnings (loss) per diluted common share were ($0.29) and $2.72 for the fourth quarter and fiscal year 2007, respectively. Excluding the impact of these non-cash charges, adjusted earnings per diluted common share were $0.74 and $3.75 for the fourth quarter and fiscal year 2007, respectively.

- Company forms $500 million joint venture with private equity real estate fund to invest in large commercial real estate loans.

- Company signs definitive agreement to sell TimberStar's southwest portfolio for a significant gain.

- Company expects fiscal year 2008 adjusted earnings of $3.50 - $4.00 per diluted common share and GAAP earnings of $4.00 - $4.50 per diluted common share.

NEW YORK, Feb. 28 /PRNewswire-FirstCall/ -- iStar Financial Inc. (NYSE: SFI), a leading publicly traded finance company focused on the commercial real estate industry, today reported results for the fourth quarter and fiscal year ended December 31, 2007.

"We've recently taken a number of steps to increase our liquidity position, improve our financial flexibility and position us to take advantage of new opportunities in this dislocated market," said Jay Sugarman, iStar's chairman and chief executive officer. "Our quarterly earnings include both increased reserves and mark-to-market impairments, reflecting the impact of the current credit environment on specific investments in our portfolio, as well as the continued stresses in the overall market. Our solid balance sheet, diversified portfolio and deep experience and track record through many market cycles will enable us to begin moving forward and to find the best risk-adjusted returns across multiple asset classes."

Fourth Quarter 2007 Results

iStar reported adjusted earnings (loss) allocable to common shareholders for the quarter of ($36.6) million or ($0.29) per diluted common share. Included in fourth quarter earnings were $134.9 million of non-cash charges associated with the impairment of two credits that are accounted for as held-to-maturity debt securities in its Corporate Loan and Debt portfolio. These securities are performing and continue to pay interest. Accounting standards for these securities do not allow for loan loss reserves to be taken on these assets; the standards require that the value be impaired based on a significant drop in market price and on management's current assessment that the decline is other than temporary.

Excluding the effect of these impairments, adjusted earnings allocable to common shareholders for the fourth quarter were $95.4 million or $0.74 per diluted common share. This compares with $110.1 million or $0.91 per diluted common share for the fourth quarter 2006. Adjusted earnings represent net income computed in accordance with GAAP, adjusted for preferred dividends, depreciation, depletion, amortization, gain (loss) from discontinued operations and ineffectiveness on interest rate hedges.

Net income (loss) allocable to common shareholders for the fourth quarter was ($78.7) million, or ($0.62) per diluted common share, compared to $79.2 million, or $0.65 per diluted common share for the fourth quarter 2006. The year-over-year decrease was due to the impact of the non-cash impairment charges and higher provision for loan losses in the fourth quarter. Please see the financial tables that follow the text of this press release for a detailed reconciliation of adjusted earnings to GAAP net income.

Net investment income for the quarter was $220.6 million, compared to $122.2 million for the fourth quarter 2006. The year-over-year increase was due to growth in the overall loan portfolio, primarily due to the addition of the Fremont assets, as well as the amortization of $43.0 million of Fremont loan purchase discount recognized in the quarter. Net investment income represents interest income, operating lease income and earnings from equity method investments, less interest expense, operating costs for corporate tenant lease assets and loss on early extinguishment of debt.

The Company announced that during the fourth quarter, it closed 15 new financing commitments, for a total of $704.8 million. Of that amount, $213.0 million was funded during the quarter. In addition, the Company funded $1.1 billion under pre-existing commitments and received $504.6 million in principal repayments.

During the quarter, iStar took title to three properties that served as collateral on its loans, resulting in $19.3 million of charge-offs against the Company's reserve for loan losses. All of the loans were previously on non-performing loan (NPL) status.

"In certain instances it has become absolutely clear to us that, in order to recover maximum potential value, we need to control the collateral securing our loan," Sugarman said. "As an owner of over 40 million square feet of commercial real estate across the country, we have the capability to manage and increase the value of our properties through our extensive in-house resources, including asset managers, leasing experts, construction professionals and significant local relationships."

For the quarter ended December 31, 2007, the Company generated adjusted return on average common book equity of (6.1%). Excluding the non-cash impairments, adjusted return on average common book equity for the quarter was 15.0%.

The Company's equity represented 23% of total capitalization at quarter end and its debt to book equity plus accumulated depreciation/depletion and loan loss reserves, all as determined in accordance with GAAP, was 3.4x.

The Company's net finance margin, calculated as the rate of return on assets less the cost of debt, was 4.34% for the quarter. Excluding the impact of the amortization of the Fremont loan portfolio purchase discount, the Company's net finance margin was 3.16% for the quarter, versus 3.53% in the previous quarter.

Fiscal Year 2007 Results

Adjusted earnings allocable to common shareholders for the year ended December 31, 2007, were $347.8 million or $2.72 per diluted share. Excluding the non-cash impairment charges, adjusted earnings allocable to common shareholders were $479.8 million or $3.75 per diluted share. This compares to $419.4 million or $3.61 per diluted share for the year ended December 31, 2006.

Net income allocable to common shareholders for the year ended December 31, 2007, was $192.3 million or $1.51 per diluted common share, compared to $324.5 million or $2.79 per diluted common share for the year ended December 31, 2006.

Net investment income and total revenue were $694.4 million and $1.4 billion, respectively, for the year ended December 31, 2007, versus $435.1 million and $959.9 million, respectively, for the year ended December 31, 2006.

Net asset growth for 2007 was $5.0 billion, including $5.0 billion of fundings in 138 new financing commitments, $2.7 billion in additional fundings and $2.7 billion in repayments and asset sales. This compares to net asset growth of $2.5 billion for fiscal year 2006.

"Results for the year show that, while a portion of our investments are experiencing stress due to market conditions, the strength of our balance sheet and value of our diversified portfolio remain competitive advantages and our first mortgage residential construction positions remain generally well protected. The credit issues we do have in our real estate portfolio are knowable and underwritable, and we continue to work with our borrowers to reach resolutions," said Sugarman.

Capital Markets Summary

As of December 31, 2007, the Company had $1.2 billion available under $3.9 billion in revolving credit facilities. In addition, the Company had $1.3 billion outstanding on its interim facility used to fund the acquisition of Fremont General's commercial real estate lending business, versus $1.9 billion at the end of the third quarter.

During the quarter, the Company issued $800 million of convertible senior floating rate notes. The notes priced at par, mature on October 1, 2012, and bear interest at a rate of LIBOR plus 0.50%. The notes will be convertible into cash, shares of common stock, or any combination thereof at the Company's option at an initial conversion price of $45.05, which represented a 30% premium over the closing price on October 10, 2007. The Company used half of the net proceeds to pay down the interim facility used to fund the Fremont acquisition and half to pay down other indebtedness.

During the quarter, the Company completed a follow-on equity offering in which it issued eight million shares of its common stock, generating $217.9 million in net proceeds. The Company used the proceeds to pay down the interim facility used to fund the Fremont acquisition.

Consistent with its match funding policy under which a one percentage point increase in interest rates cannot impact adjusted earnings by more than 2.5%, as of December 31, 2007, a one percentage point increase in rates would have increased the Company's adjusted earnings by 0.52%.

Other Capital Initiatives

The Company said it continues to identify alternate sources of capital in order to maintain its financial flexibility and to take advantage of increasing opportunities in the market.

The Company cited several initiatives:

-- The Company is in the process of raising financing secured by a portion of its $3.3 billion corporate tenant lease portfolio, which, if completed, would result in proceeds of approximately $1.0 billion in the second quarter. In addition, the Company is in the process of raising approximately $170 million of capital secured by corporate tenant lease assets of its AutoStar subsidiary which it expects to close in the second quarter.

-- The Company has formed a joint venture with real-estate private equity firm Lubert-Adler to create a $500 million vehicle that will invest primarily in large commercial real estate loans, including first or second mortgage loans, mezzanine loans, unsecured loans, construction loans and loan participations. The investment vehicle will be comprised of a $125 million contribution from iStar and a $375 million contribution from Lubert-Adler.

-- The Company recently announced that one of its timber investments, TimberStar Southwest, has entered into an agreement to sell approximately 900,000 acres of timberland for approximately $1.7 billion. TimberStar Southwest is a joint venture between iStar subsidiary TimberStar and equity investors MSD Capital, York Capital Management and Perry Capital. TimberStar Southwest purchased the properties from International Paper for approximately $1.2 billion in October 2006. Once completed, iStar is expected to receive approximately $400 million of net proceeds from the sale, representing an approximate $215 million cash gain on sale.

"Our $16 billion of unencumbered assets are providing us with financial flexibility to tap different capital sources at a time when the capital markets remain disrupted," said Catherine D. Rice, iStar's chief financial officer. "In addition, our strong reputation and deep relationships have allowed us to joint venture with one of the premier real estate private equity firms in the market."

Risk Management

At December 31, 2007, first mortgages, participations in first mortgages, senior loans and corporate tenant lease investments collectively comprised 87.0% of the Company's asset base, versus 86.0% in the prior quarter. The Company's loan portfolio consisted of 78.0% floating rate and 22.0% fixed rate loans, with a weighted average maturity of 3.0 years.

The weighted average last dollar loan-to-value ratio for all structured finance assets was 69.3%. At quarter end, the Company's corporate tenant lease assets were 95.3% leased with a weighted average remaining lease term of 11.2 years. At December 31, 2007, the weighted average risk ratings of the Company's structured finance and corporate tenant lease assets were 3.07 and 2.50, respectively, versus 2.92 and 2.48, respectively, in the previous quarter.

As expected, non-performing loans and watch list assets increased from the prior quarter. On December 31, 2007, the Company had 31 loans on NPL status representing $1.2 billion of gross loan value, compared to 29 loans on NPL status representing $848.7 million of gross loan value in the prior quarter. At the end of the fourth quarter, the Company had 40 loans on its watch list representing $1.6 billion of gross loan value, compared to 28 loans on its watch list representing $1.1 billion of gross loan value in the prior quarter.

Gross loan values represent iStar's book value plus Fremont's A-participation interest. Excluding Fremont's A-participation interest on the associated assets, NPL and watch list assets were $719.4 million and $1.2 billion, respectively, compared to NPL and watch list assets in the prior quarter of $428.7 million and $610.5 million, respectively. The Company's policy is to stop the accrual of interest on loans placed on NPL status. The

Company believes it has adequate collateral and loan loss reserves to support the book value for each of the NPL and watch list assets.

The Company had $217.9 million in loan loss reserves at December 31, 2007 versus $52.2 million at December 31, 2006. During the fourth quarter, the Company recorded $113.0 million in loan loss provision versus $62.0 million in the prior quarter. The $51.0 million quarter-over-quarter increase reflects the continued deterioration in the overall credit markets and its impact on the Company's portfolio as determined in its regular quarterly risk ratings review process.

The Company's total loss coverage, defined as the combination of loan loss reserves of $217.9 million, and remaining purchase discount from the Fremont acquisition of $166.8 million, was $384.7 million or 3.6% of total loan assets at the end of the fourth quarter. This compares to total loss coverage of $344.9 million or 3.2% of total loan assets in the prior quarter. The Company continues to believe its loss coverage provides adequate protection against future loan losses.

"As we've seen economic and market conditions deteriorate this quarter, we took a prudent stance with respect to our reserves and expect to continue to do so as appropriate," said Timothy J. O'Connor, iStar's chief operating officer. "The portfolio remains highly diversified by product type, geographic area, loan structure and origination vintage."

Summary of Fremont Contributions to Quarterly Results

At the end of the fourth quarter, the Fremont portfolio, including additional fundings made during the quarter, had a gross loan value of $5.4 billion consisting of 221 loans versus 243 at the end of the third quarter with a gross loan value of $5.5 billion.

At the end of the fourth quarter, the value of Fremont's A-participation interest in the portfolio was $3.0 billion versus $3.4 billion on September 30, 2007. The book value of iStar's B-participation interest at the end of the fourth quarter was $2.4 billion versus $2.1 billion on September 30, 2007. During the quarter, iStar received $615.5 million in principal repayments of which the Company retained 30%. The balance of principal repayments was paid to Fremont as part of the terms of its participation. The weighted average maturity of the portfolio is approximately 10 months.

During the fourth quarter, iStar funded $531.7 million of commitments related to the portfolio. Unfunded commitments at the end of the fourth quarter were $2.2 billion, of which the Company only expects to fund approximately $1.8 billion based upon its comprehensive review of the portfolio. This compares to unfunded commitments of $3.0 billion on September 30, 2007.

At December 31, 2007, there were 23 Fremont loans on NPL status with a gross loan value of $825.4 million versus 22 loans at the prior quarter end, with $640.1 million of gross loan value. In addition, there were 25 loans on the Company's watch list with a gross loan value of $733.7 million versus 22 loans at the prior quarter end, with $781.3 million of gross loan value. Excluding Fremont's A-participation interest on the associated assets, NPL and watch list assets for the Fremont portfolio were $351.1 million and $358.5 million, respectively, versus $220.1 million and $296.0 million in the prior quarter.

Earnings Guidance

Consistent with the Securities and Exchange Commission's Regulation FD and Regulation G, iStar Financial comments on earnings expectations within the context of its regular earnings press releases.

For fiscal year 2008, the Company expects diluted adjusted earnings per common share of $3.50 - $4.00, and diluted GAAP earnings per common share of $4.00 - $4.50. The lower end of these ranges assumes minimal net asset growth in 2008 as well as an asset management focus on maximizing long-term returns rather than minimizing near-term earnings impact.

Dividend

During the fourth quarter, the Company increased its regular quarterly cash dividend on its common stock to $0.87 per share for the quarter ended December 31, 2007. The $0.87 per share quarterly dividend, or $3.48 per share on an annualized basis, represented an approximate 5% increase over iStar's previous quarterly dividend rate of $0.825 per share. The fourth quarter dividend was paid on December 31, 2007 to shareholders of record on December 17, 2007.

On December 20, 2007, iStar Financial declared a special dividend of $0.25 per share. The special dividend was paid on January 14, 2008 to shareholders of record on December 31, 2007.

iStar Financial Inc. is a leading publicly traded finance company focused on the commercial real estate industry. The Company primarily provides custom-tailored investment capital to high-end private and corporate owners of real estate, including senior and mezzanine real estate debt, senior and mezzanine corporate capital, as well as corporate net lease financing and equity. The Company, which is taxed as a real estate investment trust ("REIT"), seeks to deliver strong dividends and superior risk-adjusted returns on equity to shareholders by providing innovative and value added financing solutions to its customers.

iStar Financial will hold a quarterly earnings conference call at 10:00 a.m. EST today, February 28, 2008. This conference call will be broadcast live over the Internet and can be accessed by all interested parties through iStar Financial's website, www.istarfinancial.com, under the "Investor Relations" section. To listen to the live call, please go to the website's "Investor Relations" section at least 15 minutes prior to the start of the call to register, download and install any necessary audio software. For those who are not available to listen to the live broadcast, a replay will be available shortly after the call on the iStar Financial website.

(Note: Statements in this press release which are not historical fact may be deemed forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although iStar Financial Inc. believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, the Company can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from iStar Financial Inc.'s expectations include completion of pending investments, continued ability to originate new investments, the mix of originations between structured finance and corporate tenant lease assets, repayment levels, the timing of receipt of prepayment penalties, the availability and cost of capital for future investments, competition within the finance and real estate industries, economic conditions, loss experience and other risks detailed from time to time in iStar Financial Inc.'s SEC reports.)



    Selected Income Statement Data
    (In thousands)
    (unaudited)
                                       Three Months Ended Twelve Months Ended
                                          December 31,        December 31,
                                         2007      2006      2007      2006
                                         ----      ----      ----      ----

    Net investment income (1)          $220,567  $122,189  $694,397  $435,111
    Other income                         21,598    20,962   103,360    78,709
    Non-interest expense (2)           (317,523)  (58,116) (588,286) (186,658)
    Minority interest in consolidated
     entities                               514       154       816    (1,207)
                                       --------  --------  --------  --------
    Income (loss) from continuing
     operations                         (74,844)   85,189   210,287   325,955

    Income (loss) from discontinued
     operations                           4,990     4,076    20,839    24,645
    Gain from discontinued operations         9     2,428     7,832    24,227
    Preferred dividends                 (10,580)  (10,580)  (42,320)  (42,320)
                                       --------  --------  --------  --------
    Net income (loss) allocable to
     common shareholders and HPU
     holders (3)                       ($80,425)  $81,113  $196,638  $332,507
                                       ========  ========  ========  ========


    (1) Includes interest income, operating lease income and earnings from
        equity method investments, less interest expense, operating costs for
        corporate tenant lease assets and loss on early extinguishment of
        debt.

    (2) Includes depreciation and amortization, general and administrative
        expenses, provision for loan losses and other expenses. Also includes
        $134.9 million of non-cash impairment charges in the fourth quarter of
        2007.

    (3) HPU holders are Company employees who purchased high performance
        common stock units under the Company's High Performance Unit Program.



    Selected Balance Sheet Data
    (In thousands)
    (unaudited)                                 As of             As of
                                          December 31, 2007 December 31, 2006
                                          ----------------- -----------------

    Loans and other lending investments, net    $10,949,354        $6,799,850
    Corporate tenant lease assets, net            3,309,866         3,084,794
    Other investments                               856,609           789,647
    Total assets                                 15,848,298        11,059,995
    Debt obligations                             12,399,558         7,833,437
    Total liabilities                            12,894,869         8,034,394
    Total shareholders' equity                    2,899,481         2,986,863



                             iStar Financial Inc.
                    Consolidated Statements of Operations
                   (In thousands, except per share amounts)
                                 (unaudited)

                                     Three Months Ended  Twelve Months Ended
                                       December 31,          December 31,
                                      2007       2006      2007        2006
                                      ----       ----      ----        ----
    REVENUES

      Interest income               $308,128   $161,421   $998,008   $575,598
      Operating lease income          84,092     76,632    324,210    305,583
      Other income                    21,598     20,962    103,360     78,709
                                  ---------- ---------- ---------- ----------
      Total revenues                 413,818    259,015  1,425,578    959,890
                                  ---------- ---------- ---------- ----------
    COSTS AND EXPENSES

      Interest expense               186,643    119,613    627,720    429,613
      Operating costs - corporate
       tenant lease assets             8,088      6,146     29,727     28,848
      Depreciation and amortization   26,333     19,733     93,944     76,226
      General and administrative (1)  36,937     29,383    165,176     96,432
      Provision for loan losses      113,000      9,000    185,000     14,000
      Other expense                  141,253          -    144,166          -
                                  ---------- ---------- ---------- ----------
      Total costs and expenses       512,254    183,875  1,245,733    645,119
                                  ---------- ---------- ---------- ----------
      Income (loss) from continuing
       operations before other items (98,436)    75,140    179,845    314,771
      Earnings from equity method
       investments                    23,078      9,895     29,626     12,391
      Minority interest in
       consolidated entities             514        154        816     (1,207)
                                  ---------- ---------- ---------- ----------
      Income (loss) from continuing
       operations                    (74,844)    85,189    210,287    325,955

      Income from discontinued
       operations                      4,990      4,076     20,839     24,645
      Gain from discontinued
       operations                          9      2,428      7,832     24,227
                                  ---------- ---------- ---------- ----------
      Net income (loss)              (69,845)    91,693    238,958    374,827
      Preferred dividends            (10,580)   (10,580)   (42,320)   (42,320)
                                  ---------- ---------- ---------- ----------
      Net income (loss) allocable
       to common shareholders and
       HPU holders                  ($80,425)   $81,113   $196,638   $332,507
                                  ========== ========== ========== ==========
      Net income (loss) per common
       share
           Basic                      ($0.62)     $0.66      $1.52      $2.82
           Diluted (2)                ($0.62)     $0.65      $1.51      $2.79

      Net income (loss) per HPU
       share
           Basic (3)                ($116.93)   $124.73    $287.93    $533.80
           Diluted (2) (4)          ($116.47)   $123.47    $285.00    $528.67

    (1) For the three months ended December 31, 2007 and 2006, includes $5,549
        and $2,077 of stock-based compensation expense, respectively. For the
        years ended December 31, 2007 and 2006, includes $17,601 and $11,435
        of stock-based compensation expense, respectively.

    (2) For the three months ended December 31, 2006, includes the allocable
        share of $29 of joint venture income. For the years ended December
        31, 2007 and 2006, includes the allocable share of $85 and $115 of
        joint venture income, respectively.

    (3) For the three months ended December 31, 2007 and 2006, ($1,754) and
        $1,871 of net income (loss) is allocable to HPU holders, respectively.
        For the years ended December 31, 2007 and 2006, $4,319 and $8,007 of
        net income is allocable to HPU holders, respectively.

    (4) For the three months ended December 31, 2007 and 2006, ($1,747) and
        $1,852 of net income (loss) is allocable to HPU holders, respectively.
        For the years ended December 31, 2007 and 2006, $4,275 and $7,930 of
        net income is allocable to HPU holders, respectively.




                             iStar Financial Inc.
                        Earnings Per Share Information
                   (In thousands, except per share amounts)
                                 (unaudited)

                                        Three Months Ended Twelve Months Ended
                                           December 31,       December 31,
                                          2007      2006     2007      2006
                                          ----      ----     ----      ----
      EPS INFORMATION FOR COMMON SHARES

      Income (loss) from continuing
       operations per common share (1)
          Basic                           ($0.66)    $0.61    $1.30     $2.40
          Diluted (2)                     ($0.66)    $0.60    $1.29     $2.38

      Net income (loss) per common
       share
          Basic                           ($0.62)    $0.66    $1.52     $2.82
          Diluted (2)                     ($0.62)    $0.65    $1.51     $2.79

      Weighted average common shares
       outstanding
          Basic                          127,267   120,191  126,801   115,023
          Diluted                        127,798   121,498  127,792   116,219

      EPS INFORMATION FOR HPU SHARES

      Income (loss) from continuing
       operations per HPU share (1)
          Basic                         ($124.20)  $114.73  $246.13   $455.40
          Diluted (2)                   ($123.67)  $113.60  $243.47   $450.94

      Net income (loss) per HPU share (3)
          Basic                         ($116.93)  $124.73  $287.93   $533.80
          Diluted (2)                   ($116.47)  $123.47  $285.00   $528.67

      Weighted average HPU shares
       outstanding
          Basic                               15        15       15        15
          Diluted                             15        15       15        15

    (1) For the three months ended December 31, 2007 and 2006, excludes
        preferred dividends of $10,580. For the years ended December 31, 2007
        and 2006, excludes preferred dividends of $42,320.

    (2) For the three months ended December 31, 2007 and 2006, includes the
        allocable share of $0 and $29 of joint venture income, respectively.
        For the years ended December 31, 2007 and 2006, includes the allocable
        share of $85 and $115 of joint venture income, respectively.

    (3) As more fully explained in the Company's quarterly SEC filings, three
        plans of the Company's HPU program vested in December 2002, December
        2003 and December 2004. Each of the respective plans contain 5 HPU
        shares. Cumulatively, these 15 shares were entitled to ($1,754) and
        $1,871 of net income (loss) for the three months ended December 31,
        2007 and 2006, respectively, and $4,319 and $8,007 of net income for
        the years ended December 31, 2007 and 2006, respectively. On a diluted
        basis, these cumulative 15 shares were entitled to ($1,747) and $1,852
        of net income (loss) for the three months ended December 31, 2007 and
        2006, respectively, and $4,275 and $7,930 of net income for the years
        ended December 31, 2007 and 2006, respectively.



                             iStar Financial Inc.
            Reconciliation of Adjusted Earnings to GAAP Net Income
                   (In thousands, except per share amounts)
                                 (unaudited)

                                     Three Months Ended  Twelve Months Ended
                                        December 31,         December 31,
                                       2007       2006     2007       2006
                                       ----       ----     ----       ----
      ADJUSTED EARNINGS (1)

      Net income (loss)              ($69,845)   $91,693 $238,958   $374,827
      Add: Depreciation, depletion
       and amortization                28,254     21,267   99,427     83,058
      Add: Joint venture income             -         31       92        123
      Add: Joint venture
       depreciation, depletion and
       amortization                     9,834      6,848   40,826     14,941
      Add: Amortization of deferred
       financing costs                  8,145      5,849   28,367     23,520
      Add: Hedge ineffectiveness,
       net                             (3,183)         -     (239)         -
      Less: Preferred dividends       (10,580)   (10,580) (42,320)   (42,320)
      Less: Gain from discontinued
       operations                          (9)    (2,428)  (7,832)   (24,227)
      Less: Joint venture gain from
       discontinued operations              -          -   (1,572)         -
                                    ---------  --------- --------- ---------
      Adjusted earnings (loss)
       allocable to common
       shareholders and HPU
       holders:
         Basic                       ($37,384)  $112,649 $355,615   $429,799
         Diluted                     ($37,384)  $112,680 $355,707   $429,922

      Adjusted earnings (loss) per
       common share:
         Basic (2)                     ($0.29)     $0.92    $2.74      $3.65
         Diluted (3)                   ($0.29)     $0.91    $2.72      $3.61

      Weighted average common shares
       outstanding:
         Basic                        127,267    120,191  126,801    115,023
         Diluted                      127,798    121,498  121,792    116,219

      Common shares outstanding at
       end of period:
         Basic                        133,929    126,565  133,929    126,565
         Diluted                      134,465    127,854  134,465    127,854

    (1) Adjusted earnings should be examined in conjunction with net income as
        shown in the Consolidated Statements of Operations. Adjusted earnings
        should not be considered as an alternative to net income (determined
        in accordance with GAAP) as an indicator of the Company's performance,
        or to cash flows from operating activities (determined in accordance
        with GAAP) as a measure of the Company's liquidity, nor is this
        measure indicative of funds available to fund the Company's cash needs
        or available for distribution to shareholders. Rather, adjusted
        earnings is an additional measure the Company uses to analyze how its
        business is performing. It should be noted that the Company's manner
        of calculating adjusted earnings may differ from the calculations of
        similarly-titled  measures by other companies.

    (2) For the three months ended December 31, 2007 and 2006, excludes ($816)
        and $2,599 of net income (loss) allocable to HPU holders,
        respectively. For the years ended December 31, 2007 and 2006,
        excludes $7,799 and $10,351 of net income allocable to HPU holders,
        respectively.

    (3) For the three months ended December 31, 2007 and 2006, excludes ($812)
        and $2,572 of net income (loss) allocable to HPU holders,
        respectively. For the years ended December 31, 2007 and 2006,
        excludes $7,730 and $10,250 of net income allocable to HPU holders,
        respectively.



                             iStar Financial Inc.
                         Consolidated Balance Sheets
                                (In thousands)


                                               As of             As of
                                         December 31, 2007 December 31, 2006
                                         ----------------- -----------------
                                              (unaudited)
     ASSETS

     Loans and other lending investments, net  $10,949,354        $6,799,850
     Corporate tenant lease assets, net          3,309,866         3,084,794
     Other investments                             856,609           789,647
     Other real estate owned                       128,558                 -
     Assets held for sale                           74,335             9,398
     Cash and cash equivalents                     104,507           105,951
     Restricted cash                                32,977            28,986
     Accrued interest and operating lease
      income receivable                            141,405            72,954
     Deferred operating lease income
      receivable                                   102,135            79,498
     Deferred expenses and other assets            105,274            71,181
     Goodwill                                       43,278            17,736
                                         ----------------- -----------------
        Total assets                           $15,848,298       $11,059,995
                                         ================= =================


     LIABILITIES AND SHAREHOLDERS' EQUITY

     Accounts payable, accrued expenses
      and other liabilities                       $495,311          $200,957

     Debt obligations:
      Unsecured senior notes                     7,916,852         6,250,249
      Unsecured revolving credit facilities      2,681,174           923,068
      Interim financing facility                 1,289,811                 -
      Secured term loans                           413,683           562,116
      Other debt obligations                        98,038            98,004
                                         ----------------- -----------------
        Total liabilities                       12,894,869         8,034,394

     Minority interest in consolidated entities     53,948            38,738
     Shareholders' equity                        2,899,481         2,986,863
                                         ----------------- -----------------
     Total liabilities and shareholders'
      equity                                   $15,848,298       $11,059,995
                                         ================= =================


                             iStar Financial Inc.
                           Supplemental Information
                                (In thousands)
                                 (unaudited)

    PERFORMANCE STATISTICS
                                                            Three Months Ended
    Net Finance Margin                                       December 31, 2007
    ------------------                                      ------------------
    Weighted average GAAP yield of loan and CTL investments            10.75%
    Less: Cost of debt                                                 (6.41%)
                                                                 ------------
    Net Finance Margin (1)                                              4.34%
                                                                 ============
    Net Finance Margin Excluding Amortization of Discount on
     Fremont Loans                                                      3.16%
                                                                 ============
    Return on Average Common Book Equity
    ------------------------------------
    Average total book equity                                      $2,967,041
    Less: Average book value of preferred equity                     (506,176)
                                                                 ------------
    Average common book equity (A)                                 $2,460,865

    Net income allocable to common shareholders and HPU holders      ($80,425)
    Net income allocable to common shareholders and HPU holders -
     Annualized (B)                                                 ($321,700)

    Return on Average Common Book Equity (B) / (A)                     (13.1%)
                                                                 ============
    Adjusted basic earnings allocable to common shareholders
     and HPU holders (2)                                             ($37,384)
    Adjusted basic earnings allocable to common shareholders
     and HPU holders
     - Annualized (C)                                               ($149,536)

    Adjusted Return on Average Common Book Equity (3) (C) / (A)         (6.1%)
                                                                 ============
    Adjusted Return on Average Common Book Equity Excluding Non-Cash
     Impairments (3)                                                    15.0%
                                                                 ============
    Expense Ratio
    -------------
    General and administrative expenses (D)                           $36,937
    Total revenue (E)                                                $413,818
    Expense Ratio (D) / (E)                                              8.9%
                                                                 ============

    (1) Weighted average GAAP yield is the annualized sum of interest income
        and operating lease income (excluding other income), divided by the
        sum of average gross corporate tenant lease assets, average loans and
        other lending investments, average SFAS No. 141 purchase intangibles
        and average assets held for sale over the period.  Cost of debt is the
        annualized sum of interest expense and operating costs-corporate
        tenant lease assets, divided by the average gross debt obligations
        over the period.  Operating lease income and operating costs-corporate
        tenant lease assets exclude SFAS No. 144 adjustments from discontinued
        operations of $5,343 and $141, respectively. The Company does not
        consider net finance margin to be a measure of the Company's liquidity
        or cash flows.  It is one of several measures that management
        considers to be an indicator of the profitability of its operations.

    (2) Adjusted earnings should be examined in conjunction with net income
        as shown in the Consolidated Statements of Operations. Adjusted
        earnings should not be considered as an alternative to net income
        (determined in accordance with GAAP) as an indicator of the Company's
        performance, or to cash flows from operating activities (determined in
        accordance with GAAP) as a measure of the Company's liquidity, nor is
        this measure indicative of funds available to fund the Company's cash
        needs or available for distribution to shareholders.  Rather, adjusted
        earnings is an additional measure the Company uses to analyze how its
        business is performing.  It should be noted that the Company's manner
        of calculating adjusted earnings may differ from the calculations of
        similarly-titled measures by other companies.

    (3) We are presenting this measure both including and excluding the effect
        of $134.9 million of non-cash impairment charges recorded in the
        fourth quarter of 2007. We believe that it is useful for investors to
        consider this measure without the effect of the charges because the
        impaired assets continue to perform and we have no near-term plans to
        sell the assets and realize losses.




                             iStar Financial Inc.
                           Supplemental Information
                                (In thousands)
                                 (Unaudited)


    CREDIT STATISTICS
                                                            Three Months Ended
                                                             December 31, 2007
                                                            ------------------
    Book debt (A)                                                 $12,399,558

    Book equity                                                    $2,899,481
    Add: Accumulated depreciation/depletion and loan loss
     reserves                                                         705,400
                                                                 ------------
    Sum of book equity, accumulated depreciation/depletion
     and loan loss reserves (B)                                    $3,604,881

    Book Debt / Sum of Book Equity, Accumulated
     Depreciation/Depletion and Loan Loss Reserves (A) / (B)             3.4x
                                                                 ============
    Ratio of Earnings to Fixed Charges (1)                               0.5x

    Ratio of Earnings to Fixed Charges and Preferred
     Stock Dividends (1)                                                 0.5x

    Interest Coverage

    EBITDA (1) (2) (C)                                               $154,886
    GAAP interest expense (D)                                        $186,643

    EBITDA / GAAP Interest Expense (1) (C) / (D)                         0.8x
                                                                 ============
    Fixed Charge Coverage

    EBITDA (1) (2) (C)                                               $154,886

    GAAP interest expense                                            $186,643
    Add: Preferred dividends                                           10,580
                                                                 ------------
    Total GAAP interest expense and preferred dividends (E)          $197,223

    EBITDA / GAAP Interest Expense and
     Preferred Dividends (1) (C) / (E)                                   0.8x
                                                                 ============
    Covenant Calculation of Fixed Charge Coverage Ratio (3)              1.7x
                                                                 ============
    RECONCILIATION OF NET INCOME TO EBITDA

    Net income                                                       ($69,845)
    Add: GAAP interest expense                                        186,643
    Add: Depreciation, depletion and amortization                      28,254
    Add: Joint venture depreciation, depletion and amortization         9,834
                                                                 ------------
    EBITDA (1) (2)                                                   $154,886
                                                                 ============
    (1) Includes impact of $134.9 million of non-cash impairment charges.

    (2) EBITDA should be examined in conjunction with net income as shown in
        the Consolidated Statements of Operations. EBITDA should not be
        considered as an alternative to net income (determined in accordance
        with GAAP) as an indicator of the Company's performance, or to cash
        flows from operating activities (determined in accordance with GAAP)
        as a measure of the Company's liquidity, nor is this measure
        indicative of funds available to fund the Company's cash needs or
        available for distribution to shareholders. It should be noted that
        the Company's manner of calculating EBITDA may differ from the
        calculations of similarly-titled measures by other companies.

    (3) This measure, which is a trailing twelve-month calculation and
        excludes the effect of $134.9 million of non-cash impairment charges
        recorded in the fourth quarter of 2007, is consistent with covenant
        calculations included in the Company's unsecured credit facilities;
        therefore, we believe it is a useful measure for investors to
        consider.



                             iStar Financial Inc.
                           Supplemental Information
                                (In thousands)
                                 (Unaudited)

      Three Months Ended
      December 31, 2007             LOAN ORIGINATIONS (1)
                                    ---------------------

                                                     Total/            OTHER
                                  Fixed  Floating  Weighted  CORPORATE INVEST-
                                   Rate      Rate   Average  LEASING   MENTS
                              --------- --------- --------- --------- --------
      Amount funded             $31,741  $181,274  $213,015        -        -
      Weighted average GAAP
       yield                      7.54%     9.55%     9.25%      N/A      N/A
      Weighted average all-in
       spread/margin (basis
       points) (2)                  417       495       483      N/A      N/A
      Weighted average first $
       loan-to-value ratio        0.00%     5.62%     4.78%      N/A      N/A
      Weighted average last $
       loan-to-value ratio       59.03%    56.25%    56.67%      N/A      N/A

    UNFUNDED COMMITMENTS

      Number of assets with unfunded
       commitments                                                        327

                                                       2009 and
                                              2008    thereafter      Total
                                          ----------  ----------   ----------
      Discretionary commitments             $604,239    $396,395   $1,000,634
      Non-discretionary commitments        1,707,030   3,566,515    5,273,545
                                          ----------  ----------   ----------
      Total unfunded commitments          $2,311,269  $3,962,910   $6,274,179
                                          ==========  ==========   ==========
      Estimated weighted average funding
       period                                          Approximately 2.0 years

      UNENCUMBERED ASSETS                                         $15,769,061


    RISK MANAGEMENT STATISTICS
    (weighted average risk rating)                     2007             2006
                                       -----------------------------  --------
                                       December September  June March December
                                            31        30     30    31      31
                                       ------------------------------ --------
    Structured Finance Assets (principal
     risk)                                3.07      2.92   2.78  2.64    2.74
    Corporate Tenant Lease Assets         2.50      2.48   2.50  2.45    2.37

                                            (1=lowest risk; 5=highest risk)


    (1) Excludes loans purchased through the Fremont acquisition.



                             iStar Financial Inc.
                           Supplemental Information
                   (In thousands, except per share amounts)
                                 (unaudited)

    LOANS AND OTHER LENDING INVESTMENTS CREDIT STATISTICS

                                                         As of
                                        -----------------    -----------------
                                        December 31, 2007    December 31, 2006
                                        -----------------    -----------------
    Value of non-performing loans (1)/
     As a percentage of total assets    $1,193,669  7.53%    $61,480     0.56%
    Reserve for loan losses /
     As a percentage of total assets      $217,910  1.37%    $52,201     0.47%
     As a percentage of non-performing
      loans (1)                                    18.26%               84.91%


    RECONCILIATION OF DILUTED ADJUSTED EPS
    GUIDANCE TO DILUTED GAAP EPS GUIDANCE (2)

                                                             Year Ending
                                                          December 31, 2008
                                                          -----------------
    Earnings per diluted common share guidance               $4.00 - $4.50
    Less: Gains, depreciation and other adjustments, net     $0.00 - $1.00
                                                          -----------------
    Adjusted earnings per diluted common share guidance      $3.50 - $4.00
                                                          =================

    (1) Non-performing loans include iStar's book value and Fremont's
        A-participation interest on the associated assets.

    (2) Adjusted earnings should be examined in conjunction with net income as
        shown in the Consolidated Statements of Operations. Adjusted earnings
        should not be considered as an alternative to net income (determined
        in accordance with GAAP) as an indicator of the Company's performance,
        or to cash flows from operating activities (determined in accordance
        with GAAP) as a measure of the Company's liquidity, nor is this
        measure indicative of funds available to fund the Company's cash needs
        or available for distribution to shareholders. Rather, adjusted
        earnings is an additional measure the Company uses to analyze how its
        business is performing. It should be noted that the Company's manner
        of calculating adjusted earnings may differ from the calculations of
        similarly-titled  measures by other companies.



                             iStar Financial Inc.
                           Supplemental Information
                                (In millions)
                                 (unaudited)

    PORTFOLIO STATISTICS AS OF DECEMBER 31, 2007 (1)

    Security Type
     First Mortgages / Senior Loans                    $9,835           62.3%
     Corporate Tenant Leases                            3,902           24.7
     Mezzanine / Subordinated Debt                      1,332            8.5
     Other Investments                                    711            4.5
          Total                                       $15,780          100.0%

    Collateral Type
     Apartment / Residential                           $3,371           21.4%
     Land                                               2,228           14.1
     Office (CTL)                                       1,760           11.2
     Retail                                             1,600           10.1
     Industrial / R&D                                   1,483            9.4
     Corporate - Real Estate                            1,393            8.8
     Entertainment / Leisure                              949            6.0
     Hotel                                                799            5.1
     Other                                                801            5.1
     Mixed Use / Mixed Collateral                         699            4.4
     Corporate - Non-Real Estate                          403            2.5
     Office (Lending)                                     294            1.9
          Total                                       $15,780          100.0%

    Collateral Location
     West                                              $3,323           21.0%
     Northeast                                          2,846           18.0
     Southeast                                          2,534           16.1
     Mid-Atlantic                                       1,601           10.1
     Various                                            1,198            7.6
     International                                      1,026            6.6
     Central                                              991            6.3
     South                                                821            5.2
     Southwest                                            822            5.2
     Northcentral                                         399            2.5
     Northwest                                            219            1.4
          Total                                       $15,780          100.0%

    (1) Figures presented prior to loan loss reserves, accumulated
        depreciation and impact of Statement of Financial Accounting Standards
        No. 141, "Business Combinations."

SOURCE iStar Financial Inc.

CONTACT:
Catherine D. Rice, Chief Financial Officer
or
Andrew G. Backman, Senior Vice President - Investor Relations
both of iStar Financial Inc.
1-212-930-9400
Web site: http://www.istarfinancial.com

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