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10/30/2008

iStar Financial Announces Third Quarter 2008 Results

Thursday October 30, 7:00 am ET

- Total revenues were $341 million; up 5.3% from the prior quarter.

- Company records $411 million of loan loss provision during the quarter.

- Adjusted earnings (loss) for the quarter was ($285.9) million for common shareholders or ($2.15) per diluted common share.

- Net income (loss) allocable to common shareholders was ($305.8) million or ($2.30) per diluted common share for the quarter.

- Company updates full year 2008 adjusted earnings per diluted common share guidance to ($3.50) - ($3.00) and diluted GAAP earnings per share of ($2.50) - ($2.00).

NEW YORK, Oct. 30 /PRNewswire-FirstCall/ -- iStar Financial Inc. (NYSE: SFI - News), a leading publicly traded finance company focused on the commercial real estate industry, today reported results for the third quarter ended September 30, 2008.

iStar reported adjusted earnings (loss) for the quarter of ($2.15) per diluted common share, compared with $1.07 for the third quarter 2007. Adjusted earnings (loss) allocable to common shareholders for the third quarter 2008 were ($285.9) million, compared with $135.7 million for the third quarter 2007. Adjusted earnings (loss) represent net income computed in accordance with GAAP, adjusted primarily for preferred dividends, depreciation, depletion, amortization, impairments of goodwill and intangible assets, and gain (loss) from discontinued operations.

Net income (loss) allocable to common shareholders for the third quarter was ($305.8) million, or ($2.30) per diluted common share, compared to $93.0 million, or $0.73 per diluted common share for the third quarter 2007. Please see the financial tables that follow the text of this press release for a detailed reconciliation of adjusted earnings to GAAP net income.

Results this quarter included $411.1 million of loan loss provisions, $88.1 million of impairments, $68.3 million of gains associated with the early extinguishment of debt and $20.0 million of gains from the sale of four corporate tenant lease (CTL) assets. Gains on the sale of CTLs are excluded from adjusted earnings, but included in net income.

Net investment income for the quarter was $215.0 million, compared to $220.2 million for the third quarter 2007. Net investment income represents interest income, operating lease income, earnings (loss) from equity method investments and gain (loss) on early extinguishment of debt, less interest expense and operating costs for corporate tenant lease assets.

During the quarter, the Company funded a total of $737.0 million under new and pre-existing commitments and received $678.8 million in gross principal repayments. Of the gross principal repayments, $283.0 million was utilized to pay down the A-participation interest associated with the Fremont portfolio. During the quarter, the Company closed four new financing commitments for a total of $60.8 million, of which it funded $8.6 million.

The Company's equity represented 23.4% of total capitalization at quarter end versus 24.1% at the end of the prior quarter. The Company's leverage, calculated as book debt net of unrestricted cash and cash equivalents, divided by the sum of book equity, accumulated depreciation and loan loss reserves, each as determined in accordance with GAAP, was 3.3x at September 30, 2008 versus 3.1x at June 30, 2008.

The Company's net finance margin, calculated as the rate of return on assets less the cost of debt, was 2.99% for the quarter. Excluding the impact of the amortization of the Fremont portfolio purchase discount, the Company's net finance margin was 2.74% for the quarter, versus 2.75% in the prior quarter.

As of September 30, 2008, a one percentage point increase in short-term rates, excluding the impact of interest floors in certain loan assets, would have increased the Company's adjusted earnings by 0.27%, which is consistent with its match funding policy.

Capital Markets

As of September 30, 2008, the Company had $877.7 million of cash and available capacity under $3.7 billion in revolving credit facilities versus $1.4 billion at the end of the prior quarter. The Company is currently in compliance with all of its bank and bond covenants.

During the quarter, the Company repurchased approximately 2.4 million shares of its common stock pursuant to its existing repurchase program. The Company currently has remaining authority to repurchase up to $44.2 million of shares under the previously authorized $50 million share repurchase program.

Risk Management

At September 30, 2008, first mortgages, participations in first mortgages, senior loans and corporate tenant lease investments collectively comprised 90.7% of the Company's asset base, versus 89.2% in the prior quarter. The Company's loan portfolio consisted of 79.2% floating rate and 20.8% fixed rate loans, with a weighted average maturity of 2.6 years.

The weighted average last dollar loan-to-value ratio for all structured finance assets was 75.0%. At quarter end, the Company's corporate tenant lease assets were 94.8% leased with a weighted average remaining lease term of 12.0 years. At September 30, 2008, the weighted average risk ratings of the Company's structured finance and corporate tenant lease assets were 3.41 and 2.55, respectively, versus 3.28 and 2.55, respectively, in the prior quarter.

As of September 30, 2008, 51 of the Company's 377 total loans were on non-performing loan (NPL) status. These loans represent $2.5 billion or 19.4% of total managed loans, compared to 39 loans representing $1.3 billion or 10.5% of total managed loans in the prior quarter. Managed asset and loan values represent iStar's book value plus the A-participation interest associated with the Fremont portfolio. The Company's total managed loan value at quarter end was $12.8 billion. The Company's policy is to stop the accrual of interest on loans placed on NPL status.

During the quarter, the Company resolved three NPLs with a managed asset value of $71.1 million and sold two NPLs for $38.7 million. The three resolved NPLs are currently performing assets.

At the end of the third quarter, the Company had 29 loans on its watch list representing $1.3 billion or 10.2% of total managed loans, compared to 30 loans representing $1.5 billion or 11.4% of total managed loans in the prior quarter. Assets on the Company's watch list are all performing loans.

At the end of the third quarter, the Company had 10 assets classified as other real estate owned (OREO) with a book value of $277.2 million. The Company recorded $36.2 million of non-cash impairment charges on five OREO assets. During the quarter, the Company took title to three properties that served as collateral on its loans, resulting in $25.1 million of charge-offs against the Company's reserve for loan losses. All of the loans were previously on NPL status and had a managed asset value of $81.1 million prior to the Company receiving title to the properties. Of the three assets added to OREO, one asset was sold during the quarter for total net proceeds of $11.5 million, which represented a slight premium to book value.

During the quarter, the Company recorded $51.9 million of non-cash impairment charges associated with five credits in its Corporate Loan and Debt portfolio and its Other Investments.

At September 30, 2008, the Company had $832.7 million in loan loss reserves versus $460.1 million at June 30, 2008. During the third quarter, the Company recorded $411.1 million in loan loss provision, reflecting the severe deterioration in the overall credit markets and its impact on the portfolio as determined in the Company's regular quarterly risk ratings review process performed following the end of the quarter.

The Company's total loss coverage, defined as the combination of loan loss reserves of $832.7 million and remaining unamortized purchase discount from the Fremont acquisition of $75.6 million, was $908.2 million or 7.1% of total managed loans at the end of the third quarter. This compares to total loss coverage of $554.3 million or 4.3% of total managed loans in the prior quarter.

Summary of Fremont Contributions to Quarterly Results

At the end of the third quarter, the Fremont portfolio, including additional fundings made during the quarter, had a managed asset value of $4.3 billion consisting of 152 loans versus $4.5 billion consisting of 178 loans at the end of the second quarter 2008.

At the end of the third quarter, the value of the A-participation interest in the portfolio was $1.6 billion versus $1.9 billion on June 30, 2008. The book value of iStar's B-participation interest at the end of the third quarter was $2.7 billion versus $2.6 billion on June 30, 2008. During the quarter, iStar received $404.2 million in principal repayments, of which the Company retained 30%. The balance of principal repayments was paid to the A-participation interest. The weighted average maturity of the Fremont portfolio is nine months.

During the third quarter, iStar funded $275.1 million of commitments related to the portfolio. Unfunded commitments at the end of the third quarter were $0.9 billion, of which the Company expects to fund approximately $0.7 billion based upon its comprehensive review of the portfolio. This compares to unfunded commitments of $1.2 billion at the end of the prior quarter.

At September 30, 2008, there were 29 Fremont loans on NPL status with a managed asset value of $777.8 million versus 26 loans at the prior quarter end, with $683.0 million of managed asset value. In addition, there were 14 loans on the Company's watch list with a managed asset value of $578.1 million versus 14 loans at the prior quarter end, with $411.8 million of managed asset value.

Earnings Guidance and Dividend Expectations

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) - ($3.00), and diluted GAAP earnings per common share of ($2.50) - ($2.00).

As announced earlier in the quarter, the Company said that it would not pay a third quarter dividend. The Board of Directors will meet at the end of the fourth quarter to consider whether any dividend will be paid for the fourth quarter. Based upon current estimates for taxable income for the full-year 2008, the Company does not expect to pay a dividend for the fourth quarter 2008.

                            [Financial Tables to Follow]

                       *                   *                  *

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. ET today, October 30, 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    Nine Months Ended
                                        September 30,         September 30,
                                       2008      2007        2008      2007
                                       ----      ----        ----      ----

    Net investment income (1)        $214,985  $220,164    $551,047  $466,306
    Other income                       22,922    19,271      88,707    84,855
    Non-interest expense (2)         (560,808) (139,439) (1,166,776) (266,188)
    Minority interest in consolidated
     entities                             502      (277)      1,069       302
    Gain on sale of joint venture
     interest, net of minority
     interest                               -         -     261,659         -
                                    ---------   -------   ---------  --------
    Income (loss) from continuing
     operations                      (322,399)   99,719    (264,294)  285,275

    Income from discontinued
     operations                           688     4,880      11,222    15,705
    Gain from discontinued
     operations, net of minority
     interest                          19,955     1,045      68,798     7,823
    Preferred dividends               (10,580)  (10,580)    (31,740)  (31,740)
                                    ---------   -------   ---------  --------
    Net income (loss) allocable
     to common shareholders and
     HPU holders (3)                ($312,336)  $95,064   ($216,014) $277,063
                                    =========   =======   =========  ========

    (1) Includes interest income, operating lease income and earnings (loss)
        from equity method investments, less interest expense, operating costs
        for corporate tenant lease assets and gain (loss) on early
        extinguishment of debt.
    (2) Includes depreciation and amortization, general and administrative
        expenses, provision for loan losses, impairments and other expenses.
    (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)
                                                As of              As of
                                          September 30, 2008 December 31, 2007
                                          ------------------ -----------------
                                              (unaudited)

    Loans and other lending  investments, net   $10,744,047       $10,949,354
    Corporate tenant lease assets, net           $3,143,697        $3,309,866
    Other investments                              $527,760          $856,609
    Total assets                                $15,923,976       $15,848,298
    Debt obligations                            $13,060,499       $12,399,558
    Total liabilities                           $13,408,688       $12,894,869
    Total shareholders' equity                   $2,454,082        $2,899,481



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

                                       Three Months Ended   Nine Months Ended
                                         September 30,        September 30,
                                        2008      2007       2008       2007
                                        ----      ----       ----       ----
    REVENUES

      Interest income                $237,006  $316,829   $748,460   $689,836
      Operating lease income           81,440    81,859    242,008    237,975
      Other income                     22,922    19,271     88,707     84,855
                                    ---------   -------  ---------   --------
        Total revenues                341,368   417,959  1,079,175  1,012,666
                                    ---------   -------  ---------   --------

    COSTS AND EXPENSES

      Interest expense                168,040   173,376    499,131    441,095
      Operating costs - corporate
       tenant lease assets              5,647     7,746     15,583     21,555
      Depreciation and amortization    24,827    23,244     73,973     63,061
      General and administrative (1)   37,736    51,246    124,516    128,178
      Provision for loan losses       411,142    62,000    777,302     72,000
      Impairments of goodwill               -         -     39,092          -
      Impairments of other assets      88,075         -    145,766          -
      Other expense                      (972)    2,949      6,127      2,949
                                    ---------   -------  ---------   --------
        Total costs and expenses      734,495   320,561  1,681,490    728,838
                                    ---------   -------  ---------   --------

      Income (loss) from continuing
       operations before other items (393,127)   97,398   (602,315)   283,828
        Gain on early extinguishment
         of debt                       68,321         -     69,916          -
        Gain on sale of joint venture
         interest, net of minority
         interest                           -         -    261,659          -
        Earnings (loss) from equity
         method investments             1,905     2,598      5,377      1,145
        Minority interest in
         consolidated entities            502      (277)     1,069        302
                                    ---------   -------  ---------   --------
      Income (loss) from continuing
       operations                    (322,399)   99,719   (264,294)   285,275

        Income from discontinued
         operations                       688     4,880     11,222     15,705
        Gain from discontinued
         operations, net of
         minority interest             19,955     1,045     68,798      7,823
                                    ---------   -------  ---------   --------
      Net income (loss)              (301,756)  105,644   (184,274)   308,803
      Preferred dividend
       requirements                   (10,580)  (10,580)   (31,740)   (31,740)
                                    ---------   -------  ---------   --------
      Net income (loss) allocable
       to common shareholders and
       HPU holders                  ($312,336)  $95,064  ($216,014)  $277,063
                                    =========   =======  =========   ========

      Net income (loss) per common share
        Basic                          ($2.30)    $0.74     ($1.58)     $2.14
        Diluted (2)                    ($2.30)    $0.73     ($1.58)     $2.12

      Net income (loss) per HPU share
        Basic (3)                    ($434.47)  $139.07   ($301.53)   $404.87
        Diluted (2) (4)              ($434.47)  $138.07   ($301.53)   $401.47

    (1) For the three months ended September 30, 2008 and 2007, includes
        $4,884 and $3,786 of stock-based compensation expense, respectively.
        For the nine months ended September 30, 2008 and 2007, includes
        $17,725 and $12,051 of stock-based compensation expense, respectively.
    (2) For the three months ended September 30, 2007, includes the allocable
        share of $29 of joint venture income. For the nine months ended
        September 30, 2007, includes the allocable share of $85 of joint
        venture income.
    (3) For the three months ended September 30, 2008 and 2007, ($6,517) and
        $2,086 of net income (loss) is allocable to HPU holders, respectively.
        For the nine months ended September 30, 2008 and 2007, ($4,523) and
        $6,073 of net income (loss) is allocable to HPU holders, respectively.
    (4) For the three months ended September 30, 2008 and 2007, ($6,517) and
        $2,071 of net income (loss) is allocable to HPU holders, respectively.
        For the nine months ended September 30, 2008 and 2007, ($4,523) and
        $6,022 of net income (loss) is allocable to HPU holders, respectively.



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

                                         Three Months Ended  Nine Months Ended
                                             September 30,     September 30,
                                             2008     2007     2008     2007
                                             ----     ----     ----     ----
    EPS INFORMATION FOR COMMON SHARES

    Income (loss) from continuing operations
     per common share (1)
      Basic                                 ($2.46)   $0.69   ($2.16)   $1.96
      Diluted (2)                           ($2.46)   $0.68   ($2.16)   $1.94

    Net income (loss) per common share
      Basic                                 ($2.30)   $0.74   ($1.58)   $2.14
      Diluted (2)                           ($2.30)   $0.73   ($1.58)   $2.12

    Weighted average common shares
     outstanding
      Basic                                133,199  126,488  133,955  126,644
      Diluted                              133,199  127,508  133,955  127,782

    EPS INFORMATION FOR HPU SHARES

    Income (loss) from continuing
     operations per HPU share (1)
      Basic                               ($463.13) $130.41 ($412.19) $370.54
      Diluted (2)                         ($463.13) $129.47 ($412.19) $367.41

    Net income (loss) per HPU share (3)
      Basic                               ($434.47) $139.07 ($301.53) $404.87
      Diluted (2)                         ($434.47) $138.07 ($301.53) $401.47

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

    (1) For the three months ended September 30, 2008 and 2007, excludes
        preferred dividends of $10,580. For the nine months ended September
        30, 2008 and 2007, excludes preferred dividends of $31,740.
    (2) For the three months ended September 30, 2007, includes the allocable
        share of $29 of joint venture income. For the nine months ended
        September 30, 2007, includes the allocable share of $85 of joint
        venture income.
    (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 ($6,517) and
        $2,086 of net income (loss) for the three months ended September 30,
        2008 and 2007, respectively, and ($4,523) and $6,073 for the nine
        months ended September 30, 2008 and 2007, respectively. On a diluted
        basis, these cumulative 15 shares were entitled to ($6,517) and $2,071
        of net income (loss) for the three months ended September 30, 2008 and
        2007, respectively, and ($4,523) and $6,022 of net income (loss) for
        the nine months ended September 30, 2008 and 2007, respectively.



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

                                       Three Months Ended   Nine Months Ended
                                          September 30,        September 30,
                                         2008      2007       2008      2007
                                         ----      ----       ----      ----
    ADJUSTED EARNINGS (1)

    Net income (loss)                ($301,756) $105,644  ($184,274) $308,803
    Add: Depreciation, depletion and
     amortization                       24,448    25,928     78,149    71,172
    Add: Joint venture income                -        31          -        92
    Add: Joint venture depreciation,
     depletion and amortization          1,943    10,407     12,513    30,992
    Add: Amortization of deferred
     financing costs                    15,120     7,065     33,893    20,222
    Add: Impairments of goodwill and
     intangible assets                       -         -     51,549         -
    Less: Hedge ineffectiveness, net    (1,256)    2,944     (2,106)    2,944
    Less: Preferred dividends          (10,580)  (10,580)   (31,740)  (31,740)
    Less: Gain from discontinued
     operations, net of minority
     interest                          (19,955)   (1,045)   (68,798)   (7,823)
    Less: Gain on sale of joint venture
     interest, net of minority interest      -    (1,572)  (261,659)   (1,572)
                                        ------    ------   --------    ------

    Adjusted earnings (loss) allocable
     to common shareholders and HPU
     holders:
       Basic                         ($292,036) $138,791  ($372,473) $392,998
       Diluted                       ($292,036) $138,822  ($372,473) $393,090

    Adjusted earnings (loss) per
     common share:
       Basic (2)                        ($2.15)    $1.07     ($2.72)    $3.04
       Diluted (3)                      ($2.15)    $1.07     ($2.72)    $3.01

    Weighted average common shares
     outstanding:
       Basic                           133,199   126,488    133,955   126,644
       Diluted                         133,199   127,508    133,955   127,782

    Common shares outstanding at end
     of period:
       Basic                           132,043   126,272    132,043   126,272
       Diluted                         132,043   127,282    132,043   127,282

    (1) Adjusted earnings should be examined in conjunction with net income
        (loss) as shown in the Consolidated Statements of Operations. Adjusted
        earnings should not be considered as an alternative to net income
        (loss) (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 September 30, 2008 and 2007, excludes
        ($6,093) and $3,046 of net income (loss) allocable to HPU holders,
        respectively.  For the nine months ended September 30, 2008 and 2007,
        excludes ($7,754) and $8,615 of net income (loss) allocable to HPU
        holders, respectively.
    (3) For the three months ended September 30, 2008 and 2007, excludes
        ($6,093) and $3,023 of net income (loss) allocable to HPU holders,
        respectively. For the nine months ended September 30, 2008 and 2007,
        excludes ($7,754) and $8,542 of net income (loss) allocable to HPU
        holders, respectively.



                               iStar Financial Inc.
                            Consolidated Balance Sheets
                                  (In thousands)

                                                 As of             As of
                                          September 30, 2008 December 31, 2007
                                          ------------------ -----------------
                                               (unaudited)
    ASSETS

    Loans and other lending investments, net     $10,744,047       $10,949,354
    Corporate tenant lease assets, net             3,143,697         3,309,866
    Other investments                                527,760           856,609
    Other real estate owned                          277,232           128,558
    Assets held for sale                               3,657            74,335
    Cash and cash equivalents                        779,472           104,507
    Restricted cash                                   59,329            32,977
    Accrued interest and operating lease income
     receivable                                       89,200           121,405
    Deferred operating lease income receivable       114,748           102,135
    Deferred expenses and other assets               180,648           125,274
    Goodwill                                           4,186            43,278
                                                 -----------       -----------
          Total assets                           $15,923,976       $15,848,298
                                                 ===========       ===========



    LIABILITIES AND SHAREHOLDERS' EQUITY

    Accounts payable, accrued expenses and other
     liabilities                                    $348,189          $495,311

    Debt obligations:
      Unsecured senior notes                       7,788,210         7,916,853
      Unsecured revolving credit facilities        3,184,448         2,681,174
      Secured revolving credit facility              350,000                 -
      Interim financing facility                           -         1,289,811
      Secured term loans                           1,639,777           413,682
      Other debt obligations                          98,064            98,038
                                                 -----------       -----------
        Total liabilities                         13,408,688        12,894,869

    Minority interest in consolidated entities        61,206            53,948
    Shareholders' equity                           2,454,082         2,899,481
                                                 -----------       -----------
          Total liabilities and shareholders'
           equity                                $15,923,976       $15,848,298
                                                 ===========       ===========





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

    PERFORMANCE  STATISTICS                                 Three Months Ended
                                                            September 30, 2008
                                                            ------------------
    Net Finance Margin
    ------------------

    Weighted average GAAP yield of loan and CTL investments           8.44%
    Less: Cost of debt                                                5.45%
                                                                ----------
    Net Finance Margin (1)                                            2.99%

    Net Finance Margin Excluding Amortization of Discount on
     Fremont Loans                                                    2.74%

    Return on Average Common Book Equity
    ------------------------------------

    Average total book equity                                   $2,675,728
    Less: Average book value of preferred equity                  (506,176)
                                                                ----------
    Average common book equity (A)                              $2,169,552

    Net income (loss) allocable to common shareholders and HPU
     holders                                                     ($312,336)
    Net income (loss) allocable to common shareholders and HPU
     holders - Annualized (B)                                  ($1,249,344)

    Return on Average Common Book Equity (B) / (A)                   (57.6%)

    Adjusted basic earnings (loss) allocable to common
     shareholders and HPU holders (2)                            ($292,036)
    Adjusted basic earnings (loss) allocable to common
     shareholders and HPU holders - Annualized ©             ($1,168,144)

    Adjusted Return on Average Common Book Equity © / (A)          (53.8%)

    Expense Ratio
    -------------

    General and administrative expenses (D)                        $37,736
    Total revenue (E)                                             $341,368

    Expense Ratio (D) / (E)                                           11.1%

    (1) Weighted average GAAP yield is the annualized sum of interest income
        and operating lease 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 $870 and $54, 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
        (loss) as shown in the Consolidated Statements of Operations. Adjusted
        earnings should not be considered as an alternative to net income
        (loss) (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 thousands)
                              (unaudited)

    CREDIT STATISTICS                                       Three Months Ended
                                                            September 30, 2008
                                                            ------------------
    Book debt, net of unrestricted cash (A)                     $12,281,027

    Book equity                                                  $2,454,082
    Add: Accumulated depreciation and loan loss reserves          1,305,761
                                                                 ----------
    Sum of book equity, accumulated depreciation and loan
     loss reserves (B)                                           $3,759,843

    Leverage (1) (A)/(B)                                                3.3x

    Ratio of Earnings (Loss) to Fixed Charges                          (0.9x)

    Ratio of Earnings (Loss) to Fixed Charges and Preferred
     Stock Dividends                                                   (0.8x)

    Interest Coverage
    -----------------

    EBITDA (2) ©                                                ($107,325)
    GAAP interest expense (D)                                      $168,040

    EBITDA / GAAP Interest Expense (2) ©/(D)                         (0.6x)

    Covenant Calculation of Fixed Charge Coverage Ratio (3)             2.4x

    RECONCILIATION OF NET INCOME TO EBITDA  (2)

    Net income (loss)                                             ($301,756)
    Add: GAAP interest expense                                      168,040
    Add: Depreciation, depletion and amortization                    24,448
    Add: Joint venture depreciation, depletion and amortization       1,943
                                                                 ----------
    EBITDA (2)                                                    ($107,325)

    (1) Leverage is calculated by dividing book debt net of unrestricted cash
        by the sum of book equity, accumulated depreciation and loan loss
        reserves.
    (2) EBITDA should be examined in conjunction with net income (loss) as
        shown in the Consolidated Statements of Operations. EBITDA should not
        be considered as an alternative to net income (loss) (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 impairment charges and other non-cash items, 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
     September 30, 2008                  LOANS
                             ---------------------------
                                                  Total/  CORPORATE
                                        Floating Weighted  TENANT    OTHER
                            Fixed Rate    Rate    Average  LEASING INVESTMENTS
                            ----------   -------  -------  ------- -----------
    Amount funded              $35,800  $680,353 $716,153  $11,231      $9,657
    Weighted average yield      10.73%     7.73%    7.88%   11.26%         N/A
    Weighted average all-in
     spread/margin (bps) (1)       843       408      429      N/A         N/A
    Weighted average first
     $ loan-to-value ratio      50.28%     1.14%    3.60%      N/A         N/A
    Weighted average last
     $ loan-to-value ratio      84.46%    78.13%   78.44%      N/A         N/A



    UNFUNDED COMMITMENTS

    Number of assets with unfunded commitments                             216

    Discretionary commitments                                         $423,251
    Non-discretionary commitments                                    2,866,172
                                                                  -----------
    Total unfunded commitments                                      $3,289,423

    Estimated weighted average funding period          Approximately 2.0 years

    UNENCUMBERED ASSETS / UNSECURED DEBT

    Unencumbered assets (A)                                        $14,041,706
    Unsecured debt (B)                                             $11,151,264

    Unencumbered Assets / Unsecured Debt (A)/(B)                          1.3x


    RISK MANAGEMENT STATISTICS
    (weighted average risk rating)
                                   2008                       2007
                   -------------------------------- --------------------------
                   September 30, June 30, March 31, December 31, September 30,
                   ------------- -------- --------- ------------ -------------
    Structured
     finance assets
     (principal risk)       3.41     3.28      3.12         3.07          2.92
    Corporate tenant
     lease assets           2.55     2.55      2.51         2.50          2.48

    (1) Represents spread over base rate LIBOR (floating-rate loans) and
        interpolated U.S. Treasury rates (fixed-rate loans) during the
        quarter.



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


    LOANS AND OTHER LENDING INVESTMENTS CREDIT STATISTICS

                                                          As of
                                         -------------------------------------
                                         September 30, 2008  December 31, 2007
                                         ------------------  -----------------
    Value of non-performing loans (1) /
     As a percentage of total managed
      loans                                $2,477,888 19.35% $1,193,669  8.71%

    Reserve for loan losses /
     As a percentage of total managed
      loans                                  $832,663  6.50%   $217,910  1.59%
     As a percentage of non-performing
      loans (1)                                       33.60%            18.26%





    RECONCILIATION OF DILUTED GAAP EPS GUIDANCE
    TO DILUTED ADJUSTED EPS GUIDANCE (2)
                                                                Year Ending
                                                             December 31, 2008
                                                             -----------------

    Earnings per diluted common share guidance               ($2.50) - ($2.00)
    Less: Gains, depreciation and other adjustments, net      $0.50  -  $1.50
                                                             -----------------
    Adjusted earnings per diluted common share guidance      ($3.50) - ($3.00)

    (1) Non-performing loans include iStar's book value and the Fremont
        A-participation interest on the associated assets.
    (2) Adjusted earnings should be examined in conjunction with net income
        (loss) as shown in the Consolidated Statements of Operations. Adjusted
        earnings should not be considered as an alternative to net income
        (loss) (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 September 30, 2008 (1)

    Security Type
    -------------
    First Mortgages / Senior Loans                $10,644      67.3%
    Corporate Tenant Leases                         3,701      23.4
    Mezzanine / Subordinated Debt                     933       5.9
    Other Investments                                 548       3.4
                                                  -------     -----
      Total                                       $15,826     100.0%
                                                  =======     =====

    Collateral Type
    ---------------
    Apartment / Residential                        $3,893      24.6%
    Land                                            2,239      14.1
    Office (CTL)                                    1,746      11.0
    Industrial / R&D                                1,470       9.3
    Retail                                          1,414       8.9
    Corporate - Real Estate                         1,041       6.6
    Entertainment / Leisure                           979       6.2
    Hotel                                             949       6.0
    Other                                             861       5.4
    Mixed Use / Mixed Collateral                      614       3.9
    Corporate - Non-Real Estate                       372       2.4
    Office (Lending)                                  248       1.6
                                                  -------     -----
      Total                                       $15,826     100.0%
                                                  =======     =====

    Collateral Location
    -------------------
    West                                           $3,520      22.2%
    Northeast                                       2,822      17.8
    Southeast                                       2,717      17.2
    Mid-Atlantic                                    1,672      10.6
    Various                                         1,067       6.7
    Central                                           948       6.0
    Southwest                                         916       5.8
    International                                     867       5.5
    South                                             541       3.4
    Northcentral                                      439       2.8
    Northwest                                         317       2.0
                                                  -------     -----
      Total                                       $15,826     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.

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