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02/26/2009

iStar Financial Announces Fourth Quarter And Fiscal Year-End 2008 Results

- Total revenues were $289.9 million and $1.4 billion for the fourth quarter and fiscal year 2008, respectively.

- Company records $252.0 million of loan loss provisions during the quarter versus $411.1 million during the prior quarter.

- Adjusted earnings (loss) allocable to common shareholders for the fourth quarter and fiscal year were $12.7 million and ($352.0) million, respectively, or $0.10 and ($2.68) per diluted common share, respectively.

- Net income (loss) allocable to common shareholders for the fourth quarter and fiscal year were ($22.6) million and ($234.1) million, respectively, or ($0.18) and ($1.78) per diluted common share, respectively.

NEW YORK, Feb. 26 /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, 2008.

Fourth Quarter 2008 Results

iStar reported adjusted earnings (loss) allocable to common shareholders for the quarter of $12.7 million or $0.10 per diluted common share, compared with ($36.6) million or ($0.29) per diluted common share for the fourth 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, hedge ineffectiveness and gain (loss) from discontinued operations.

Net income (loss) allocable to common shareholders for the fourth quarter was ($22.6) million, or ($0.18) per diluted common share, compared to ($78.7) million or ($0.62) per diluted common share for the fourth 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 for the quarter included $252.0 million of loan loss provisions, $150.0 million of impairments, $323.0 million of gains associated with the early extinguishment of debt and $19.0 million of gains from the sale of seven corporate tenant lease (CTL) assets. Gains on the sale of CTL assets are excluded from adjusted earnings, but included in net income.

Net investment income for the quarter was $435.4 million, compared to $218.5 million for the fourth quarter 2007. The increase is primarily due to gains associated with early extinguishment of debt. 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 $683.2 million under new and pre-existing commitments and received $730.0 million in gross principal repayments. Of the gross principal repayments, $278.9 million was utilized to pay down the A-participation interest associated with the Fremont portfolio.

The Company's equity represented 24.2% of total capitalization at quarter end versus 23.4% 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 3.1x at December 31, 2008 versus 3.3x at September 30, 2008.

The Company's net finance margin, calculated as the rate of return on assets less the cost of debt, was 2.15% for the quarter. Excluding the impact of the amortization of the Fremont portfolio purchase discount, the Company's net finance margin was 1.99% for the quarter, versus 2.74% in the prior quarter.

Fiscal Year 2008 Results

Adjusted earnings (loss) allocable to common shareholders for the year ended December 31, 2008, were ($352.0) million or ($2.68) per diluted common share. This compares to $347.8 million or $2.72 per diluted share for the year ended December 31, 2007.

Net income (loss) allocable to common shareholders for the year ended December 31, 2008, was ($234.1) million or ($1.78) per diluted common share, compared to $192.3 million or $1.51 per diluted common share for the year ended December 31, 2007.

Results for fiscal year 2008 included $1.0 billion of loan loss provisions, $334.8 million of impairments, $392.9 of gains associated with the early extinguishment of debt, $64.3 million of gains from sale of 49 CTL assets and $285.1 million of gains from the sale of the Company's timber investments, net of minority interest.

Net investment income and total revenue were $981.9 million and $1.4 billion, respectively, for the year ended December 31, 2008, versus $686.0 million and $1.4 billion, respectively, for the year ended December 31, 2007.

Capital Markets

The Company is currently working with members of its existing bank group and has received the requisite consents and commitments for a new secured facility and restructuring of existing bank facilities. The Company expects that, if completed, its principal amount of the new secured facility would be between $700 million and $1.0 billion. The Company currently has commitments of approximately $700 million.

If completed, the new secured facility would mature in June 2012 and would bear interest at a rate of LIBOR + 2.50%. Lenders who participate in the new secured loan would receive collateral security for their outstanding unsecured positions in the Company's existing unsecured bank lines and the interest on these loans would increase to LIBOR + 1.50%. The new facilities would also provide for additional operating flexibility through the modification of certain financial covenants.

The new secured facility and the restructuring of the existing facilities are currently expected to close in March. However, they are subject to closing conditions including the negotiation of definitive documents. There can be no assurance that these transactions will be completed in this timeframe or at all.

As of December 31, 2008, the Company had $558.1 million of unrestricted cash and available capacity under $3.7 billion in revolving credit facilities versus $877.7 million 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 $635.9 million face amount of its unsecured bonds in open market transactions resulting in a gain of $323.0 million. In addition, the Company repurchased approximately 26.7 million shares of its common stock pursuant to its existing repurchase program.

Risk Management

At December 31, 2008, first mortgages, participations in first mortgages, senior loans and corporate tenant lease investments collectively comprised 91.5% of the Company's asset base, versus 90.7% in the prior quarter. The Company's loan portfolio consisted of 79.8% floating rate and 20.2% fixed rate loans, with a weighted average maturity of 2.3 years. Of the Company's floating rate loans, 62.3% had a weighted average floor of 3.99%.

The weighted average last dollar loan-to-value ratio for all structured finance assets was 75.8%. At quarter end, the Company's corporate tenant lease assets were 95.2% leased with a weighted average remaining lease term of 11.9 years. At December 31, 2008, the weighted average risk ratings of the Company's structured finance and corporate tenant lease assets were 3.53 and 2.58, respectively, versus 3.41 and 2.55, respectively, in the prior quarter.

As of December 31, 2008, 68 of the Company's 357 total loans were on non-performing loan (NPL) status. These loans represent $3.5 billion or 27.5% of total managed loans, compared to 51 loans representing $2.5 billion or 19.4% 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 $12.6 billion. The Company's policy is to stop the accrual of interest on loans placed on NPL status.

During the quarter, the Company sold two NPLs with managed asset value of $18.5 million and reclassified three loans with managed asset value of $71.7 million as other real estate owned (OREO).

At the end of the fourth quarter, the Company had 28 loans on its watch list representing $1.3 billion or 10.1% of total managed loans, compared to 29 loans representing $1.3 billion or 10.2% of total managed loans in the prior quarter. Assets on the Company's watch list are all performing loans.

At the end of the fourth quarter, the Company had 11 assets classified as OREO with a book value of $242.5 million. During the quarter, the Company took title to three properties that served as collateral on its loans, resulting in $30.7 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 $71.7 million prior to the Company receiving title to the properties. The Company sold two OREO assets during the quarter, generating net proceeds of $61.4 million resulting in non-cash impairments of $3.1 million. In addition, the Company recorded $16.4 million of non-cash impairment charges on five OREO assets.

During the quarter, the Company recorded $109.9 million of non-cash impairment charges associated with five credits in its Corporate Loan and Debt portfolio and its Other Investments.

At December 31, 2008, the Company had $976.8 million in loan loss reserves versus $832.7 million at September 30, 2008, consisting of $177.2 million of general reserves and $799.6 million of asset specific reserves. The provisions reflect 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 $976.8 million and remaining unamortized purchase discount from the Fremont acquisition of $55.9 million, was $1.0 billion or 8.2% of total managed loans at the end of the fourth quarter. This compares to total loss coverage of $908.2 million or 7.1% of total managed loans in the prior quarter.

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 managed asset value of $4.0 billion consisting of 140 loans versus $4.3 billion consisting of 152 loans at the end of the third quarter 2008.

At the end of the fourth quarter, the value of the A-participation interest in the portfolio was $1.3 billion versus $1.6 billion on September 30, 2008. The book value of iStar's B-participation interest at the end of the fourth quarter was $2.7 billion versus $2.7 billion on September 30, 2008. During the quarter, iStar received $398.4 million in principal repayments, of which the Company retained 30%. The balance of principal repayments was paid to the A-participation interest. The current weighted average maturity of the Fremont portfolio is eight months.

During the fourth quarter, iStar funded $218.6 million of commitments related to the portfolio. Unfunded commitments at the end of the fourth quarter were $0.7 billion, of which the Company expects to fund approximately $0.4 billion based upon its comprehensive review of the portfolio. This compares to unfunded commitments of $0.9 billion at the end of the prior quarter.

At December 31, 2008, there were 37 Fremont loans on NPL status with a managed asset value of $1.2 billion versus 29 loans at the prior quarter end, with $777.8 million of managed asset value. In addition, there were 18 loans on the Company's watch list with a managed asset value of $758.6 million versus 14 loans at the prior quarter end, with $578.1 million of managed asset value.

Earnings Guidance and Dividend Expectations

Given the continued uncertainty in the market, the Company will not be providing guidance for fiscal year 2009 at this time.

The Company's Board of Directors has concluded that the Company has already paid out 100% of its 2008 taxable income. As a result, the Company will not pay a fourth quarter cash dividend on its common shares. For the year, the Company has paid a total of $1.74 per share in common share dividends.


                          [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 generate attractive risk-adjusted returns on equity to shareholders by providing innovative and value-added financing to its customers.

iStar Financial will hold a quarterly earnings conference call at 10:00 a.m. ET today, February 26, 2009. 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, but are not limited to, 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 periodic reports filed with the Securities and Exchange Commission, including the annual reports on Form 10-K and quarterly reports on Form 10-Q.)




    Selected Income Statement Data
    (In thousands)
    (unaudited)
                                    Three Months Ended    Twelve Months Ended
                                        December 31,          December 31,
                                       2008      2007        2008      2007
                                       ----      ----        ----      ----

    Net investment income (1)        $435,395  $218,516    $981,880  $685,953
    Other income                        9,144    20,530      97,851    99,938
    Non-interest expense (2)         (477,404) (315,960) (1,642,656) (580,868)
    Minority interest in
     consolidated entities                (78)      514         991       816
    Gain on sale of joint venture
     interest, net of minority
     interest                               -         -     261,659         -
                                     --------  --------   ---------  --------
    Income (loss) from continuing
     operations                       (32,943)  (76,400)   (300,275)  205,839

    Income from discontinued
     operations                         1,455     6,546      15,715    25,287
    Gain from discontinued
     operations, net of minority
     interest                          18,971         9      87,769     7,832
    Preferred dividends               (10,580)  (10,580)    (42,320)  (42,320)
                                     --------  --------   ---------  --------
    Net income (loss) allocable to
     common shareholders and HPU
     holders (3)                     ($23,097) ($80,425)  ($239,111) $196,638
                                     ========  ========   =========  ========

    (1) Includes 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.
    (2) Includes depreciation and amortization, general and administrative
        expenses, provision for loan losses, impairments and other expense.
    (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, 2008 December 31, 2007
                                     ----------------- -----------------


    Loans and other lending
     investments, net                   $10,586,644       $10,949,354
    Corporate tenant lease
     assets, net                          3,044,811         3,309,866
    Other investments                       447,318           856,609
    Total assets                         15,296,748        15,848,298
    Debt obligations                     12,516,023        12,399,558
    Total liabilities                    12,870,515        12,894,869
    Total shareholders' equity            2,389,380         2,899,481



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

                                    Three Months Ended   Twelve Months Ended
                                       December 31,          December 31,
                                      2008      2007       2008       2007
                                      ----      ----       ----       ----
    REVENUES

      Interest income               $199,201  $308,128   $947,661   $998,008
      Operating lease income          81,564    81,622    318,600    314,740
      Other income                     9,144    20,530     97,851     99,938
                                    --------  --------  ---------  ---------
        Total revenues               289,909   410,280  1,364,112  1,412,686
                                    --------  --------  ---------  ---------

    COSTS AND EXPENSES

      Interest expense               161,153   186,643    660,284    627,720
      Operating costs - corporate
       tenant lease assets             8,401     7,894     23,575     28,926
      Depreciation and amortization   24,734    24,442     97,368     86,223
      General and administrative (1)  34,765    36,950    159,096    165,128
      Provision for loan losses      252,020   113,000  1,029,322    185,000
      Impairment of goodwill               -         -     39,092          -
      Impairment of other assets     149,972   144,184    295,738    144,184
      Other expense                   15,913    (2,616)    22,040        333
                                    --------  --------  ---------  ---------
        Total costs and expenses     646,958   510,497  2,326,515  1,237,514
                                    --------  --------  ---------  ---------

      Income (loss) from
       continuing operations
       before other items           (357,049) (100,217)  (962,403)   175,172
        Gain on early
         extinguishment of debt      323,027       225    392,943        225
        Gain on sale of joint
         venture interest, net of
         minority interest                 -         -    261,659          -
        Earnings (loss) from
         equity method investments     1,157    23,078      6,535     29,626
        Minority interest
         in consolidated entities        (78)      514        991        816
                                    --------  --------  ---------  ---------
      Income (loss) from continuing
       operations                    (32,943)  (76,400)  (300,275)   205,839

        Income from discontinued
         operations                    1,455     6,546     15,715     25,287
        Gain from discontinued
         operations, net of
         minority interest            18,971         9     87,769      7,832
                                    --------  --------  ---------  ---------
      Net income (loss)              (12,517)  (69,845)  (196,791)   238,958
      Preferred dividend
       requirements                  (10,580)  (10,580)   (42,320)   (42,320)
                                    --------  --------  ---------  ---------
      Net income (loss) allocable
       to common shareholders
       and HPU holders              ($23,097) ($80,425) ($239,111)  $196,638
                                    ========  ========  =========  =========

      Net income (loss) per
       common share
         Basic                        ($0.18)   ($0.62)    ($1.78)     $1.52
         Diluted (2)                  ($0.18)   ($0.62)    ($1.78)     $1.51

      Net income (loss)
       per HPU share
         Basic (3)                   ($34.80) ($116.93)  ($336.33)   $287.93
         Diluted (2)(4)              ($34.80) ($116.47)  ($336.33)   $285.00

    (1) For the three months ended December 31, 2008 and 2007, includes
        $5,817 and $5,549 of stock-based compensation expense, respectively.
        For the years ended December 31, 2008 and 2007, includes $23,542 and
        $17,601 of stock-based compensation expense, respectively.
    (2) For the year ended December 31, 2007, includes the allocable share of
        $85 joint venture income.
    (3) For the three months ended December 31, 2008 and 2007, ($522) and
        ($1,754) of net income (loss) is allocable to HPU holders,
        respectively. For the years ended December 31, 2008 and 2007, ($5,045)
        and $4,319 of net income (loss) is allocable to HPU holders,
        respectively.
    (4) For the three months ended December 31, 2008 and 2007, ($522) and
        ($1,747) of net income (loss) is allocable to HPU holders,
        respectively. For the years ended December 31, 2008 and 2007, ($5,045)
        and $4,275 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   Twelve Months Ended
                                         December 31,          December 31,
                                        2008      2007        2008     2007
                                        ----      ----        ----     ----
    EPS INFORMATION FOR COMMON SHARES

    Income (loss) from continuing
     operations per common share (1)
      Basic                            ($0.34)   ($0.67)     ($2.56)   $1.26
      Diluted (2)                      ($0.34)   ($0.67)     ($2.56)   $1.26

    Net income (loss) per common share
      Basic                            ($0.18)   ($0.62)     ($1.78)   $1.52
      Diluted (2)                      ($0.18)   ($0.62)     ($1.78)   $1.51

    Weighted average common shares
     outstanding
      Basic                           122,809   127,267     131,153  126,801
      Diluted                         122,809   127,798     131,153  127,792

    EPS INFORMATION FOR HPU SHARES

    Income (loss) from continuing
     operations per HPU share (1)
      Basic                           ($65.60) ($126.46)   ($482.46) $239.60
      Diluted (2)                     ($65.60) ($125.94)   ($482.46) $237.07

    Net income (loss) per HPU share (3)
      Basic                           ($34.80) ($116.93)   ($336.33) $287.93
      Diluted (2)                     ($34.80) ($116.47)   ($336.33) $285.00

    Weighted average HPU shares
     outstanding
      Basic and diluted                    15        15          15       15

    (1) For the three months ended December 31, 2008 and 2007, excludes
        preferred dividends of $10,580. For the years ended December 31, 2008
        and 2007, excludes preferred dividends of $42,320.
    (2) For the year ended December 31, 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 ($522) and
        ($1,754) of net income (loss) for the three months ended December 31,
        2008 and 2007, respectively, and ($5,045) and $4,319 of net income
        (loss) for the years ended December 31, 2008 and 2007, respectively.
        On a diluted basis, these cumulative 15 shares were entitled to ($522)
        and ($1,747) of net income (loss) for the three months ended December
        31, 2008 and 2007, respectively, and ($5,045) and $4,275 of net income
        (loss) for the years ended December 31, 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  Twelve Months Ended
                                        December 31,         December 31,
                                       2008      2007       2008      2007
                                       ----      ----       ----      ----
    ADJUSTED EARNINGS (1)

    Net income (loss)                ($12,517) ($69,845) ($196,791) $238,958
    Add: Depreciation, depletion
     and amortization                  24,596    28,254    102,745    99,427
    Add: Joint venture depreciation,
     depletion and amortization         1,953     9,834     14,466    40,826
    Add: Amortization of
     deferred financing costs           9,907     8,145     43,800    28,367
    Add: Impairment of goodwill
     and intangible assets              9,069         -     60,618         -
    Less: Hedge ineffectiveness, net    9,533    (3,183)     7,427      (239)
    Less: Gain from discontinued
     operations, net of minority
     interest                         (18,971)       (9)   (87,769)   (7,832)
    Less: Gain on sale of joint
     venture interest, net of
     minority interest                      -         -   (261,659)   (1,572)
    Less: Preferred dividends         (10,580)  (10,580)   (42,320)  (42,320)
                                      -------   -------    -------   -------

    Adjusted earnings (loss) allocable
     to common shareholders and HPU
     holders:
       Basic                          $12,990  ($37,384) ($359,483) $355,615
       Diluted                        $12,992  ($37,384) ($359,483) $355,707

    Adjusted earnings (loss) per
     common share:
       Basic (2)                        $0.10    ($0.29)    ($2.68)    $2.74
       Diluted (3)                      $0.10    ($0.29)    ($2.68)    $2.72

    Weighted average common
     shares outstanding:
       Basic                          122,809   127,267    131,153   126,801
       Diluted                        123,800   127,798    131,153   127,792

    Common shares outstanding
     at end of period:
       Basic                          105,457   133,929    105,457   133,929
       Diluted                        105,457   134,465    105,457   134,465

    (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, 2008 and 2007, excludes $293
        and ($816) of net income (loss) allocable to HPU holders,
        respectively.  For the years ended December 31, 2008 and 2007,
        excludes ($7,461) and $7,799 of net income (loss) allocable to HPU
        holders, respectively.
    (3) For the three months ended December 31, 2008 and 2007, excludes $291
        and ($812) of net income (loss) allocable to HPU holders,
        respectively.  For the years ended December 31, 2008 and 2007,
        excludes ($7,461) and $7,730 of net income (loss) allocable to HPU
        holders, respectively.



                               iStar Financial Inc.
                            Consolidated Balance Sheets
                                  (In thousands)

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

    Loans and other lending investments, net   $10,586,644       $10,949,354
    Corporate tenant lease assets, net           3,044,811         3,309,866
    Other investments                              447,318           856,609
    Other real estate owned                        242,505           128,558
    Assets held for sale                                 -            74,335
    Cash and cash equivalents                      496,537           104,507
    Restricted cash                                155,965            32,977
    Accrued interest and operating lease
     income receivable, net                         87,151           121,405
    Deferred operating lease income receivable     116,793           102,135
    Deferred expenses and other assets, net        114,838           125,274
    Goodwill                                         4,186            43,278
                                               -----------       -----------
          Total assets                         $15,296,748       $15,848,298
                                               ===========       ===========


    LIABILITIES AND SHAREHOLDERS' EQUITY

    Accounts payable, accrued expenses
     and other liabilities                        $354,492          $495,311

    Debt obligations:
      Unsecured senior notes                     7,218,160         7,916,853
      Unsecured revolving credit facilities      3,281,273         2,681,174
      Secured revolving credit facility            306,867                 -
      Interim financing facility                         -         1,289,811
      Secured term loans                         1,611,650           413,682
      Other debt obligations                        98,073            98,038
                                               -----------       -----------
        Total liabilities                       12,870,515        12,894,869

    Minority interest in consolidated entities      36,853            53,948
    Shareholders' equity                         2,389,380         2,899,481
                                               -----------       -----------
          Total liabilities and
           shareholders' equity                $15,296,748       $15,848,298
                                               ===========       ===========



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

    PERFORMANCE  STATISTICS                                 Three Months Ended
                                                             December 31, 2008
                                                             -----------------
    Net Finance Margin
    ------------------

    Weighted average GAAP yield of loan and CTL investments         7.44%
    Less: Cost of debt                                              5.29%
                                                               ----------
    Net Finance Margin (1)                                          2.15%

    Net Finance Margin Excluding Amortization of Discount
     on Fremont Loans                                               1.99%

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

    Average total book equity                                  $2,421,731
    Less: Average book value of preferred equity                 (506,176)
                                                               ----------
    Average common book equity (A)                             $1,915,555

    Net income (loss) allocable to common
     shareholders and HPU holders                                ($23,097)
    Net income (loss) allocable to common
     shareholders and HPU holders - Annualized (B)               ($92,388)

    Return on Average Common Book Equity (B) / (A)                  (4.8%)

    Adjusted basic earnings (loss) allocable to
     common shareholders and HPU holders (2)                      $12,990
    Adjusted basic earnings (loss) allocable to
     common shareholders and HPU holders - Annualized (C)         $51,960

    Adjusted Return on Average Common Book Equity (C) / (A)          2.7%

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

    General and administrative expenses (3) (D)                   $34,693
    Total revenue (3) (E)                                        $291,731

    Expense Ratio (D) / (E)                                         11.9%

    (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 $1,822 and $127, 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.
    (3) Total revenue and general and administrative expenses exclude SFAS
        No. 144 adjustments from discontinued operations of $1,822 and ($72),
        respectively.



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

    CREDIT STATISTICS                                       Three Months Ended
                                                             December 31, 2008
                                                             -----------------
    Book debt, net of unrestricted cash (A)                      $12,019,486

    Book equity                                                    2,389,380
    Add: Accumulated depreciation and loan loss reserves           1,456,371
                                                                 -----------
    Sum of book equity, accumulated depreciation and
     loan loss reserves (B)                                       $3,845,751

    Leverage (1) (A) / (B)                                              3.1x

    Ratio of Earnings (Loss) to Fixed Charges                           0.8x

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

    Covenant Calculation of Fixed Charge Coverage Ratio (2)             2.7x

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

    EBITDA (3) (C)                                                  $175,185
    GAAP interest expense (D)                                        161,153

    EBITDA / GAAP Interest Expense (3) (C) / (D)                        1.1x

    RECONCILIATION OF NET INCOME TO EBITDA  (3)

    Net income (loss)                                               ($12,517)
    Add: GAAP interest expense                                       161,153
    Add: Depreciation, depletion and amortization                     24,596
    Add: Joint venture depreciation, depletion and amortization        1,953
                                                                 -----------
    EBITDA (3)                                                      $175,185

    (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) 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.
    (3) 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.



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

    FINANCING VOLUME SUMMARY STATISTICS

    Three Months Ended
     December 31, 2008        LOAN ORIGINATIONS
                       ------------------------------
                                              Total/
                                   Floating  Weighted   CORPORATE     OTHER
                       Fixed Rate    Rate    Average     LEASING   INVESTMENTS
                       ----------  --------  --------   ---------  -----------

    Amount funded         $23,216  $622,458   $645,674     $9,411      $28,152
    Weighted average
     GAAP yield              5.91%     7.37%      7.31%     11.78%         N/A
    Weighted average
     all-in spread/margin
     (basis points) (1)       568       665        661        N/A          N/A
    Weighted average
     first $ loan-to-value
     ratio                  45.07%     0.86%      2.36%       N/A          N/A
    Weighted average
     last $ loan-to-value
     ratio                  84.39%    75.10%     75.42%       N/A          N/A


    UNFUNDED COMMITMENTS

    Number of assets with unfunded commitments                         194


    Discretionary commitments                                     $163,393
    Non-discretionary commitments                                2,263,966
                                                       -------------------
    Total unfunded commitments                                  $2,427,359
    Estimated weighted average funding period      Approximately 2.1 years

    UNENCUMBERED ASSETS / UNSECURED DEBT

    Unencumbered assets (A)                                    $13,540,138
    Unsecured debt (B)                                         $10,612,225

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


    RISK MANAGEMENT STATISTICS
    (weighted average
     risk rating)                           2008                     2007
                    --------------------------------------------- ------------
                    December 31, September 30, June 30, March 31, December 31,
                    ------------ ------------- -------- --------- ------------
    Structured
     Finance Assets
     (principal risk)    3.53          3.41     3.28      3.12         3.07
    Corporate Tenant
     Lease Assets        2.58          2.55     2.55      2.51         2.50

                                              (1=lowest risk; 5=highest risk)

    (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
                                          ------------------------------------
                                          December 31, 2008  December 31, 2007
                                          -----------------  -----------------
    Value of non-performing loans (1) /
      As a percentage of total managed
       loans                             $3,458,157  27.48%  $1,193,669  8.71%

    Reserve for loan losses /
      As a percentage of total managed
       loans                               $976,788   7.76%    $217,910  1.59%
      As a percentage of non-performing
       loans (1)                                     28.25%             18.26%

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



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

    PORTFOLIO STATISTICS December 31, 2008 (1)

    Asset Type
    ----------
    First Mortgages / Senior Loans                $10,670         68.4%
    Corporate Tenant Leases                         3,597         23.1
    Mezzanine / Subordinated Debt                     893          5.7
    Other Investments                                 434          2.8
                                                  -------        -----
                Total                             $15,594        100.0%
                                                  =======        =====

    Property / Collateral Type
    --------------------------
    Apartment / Residential                        $4,244         27.2%
    Land                                            2,359         15.1
    Office                                          1,895         12.1
    Industrial / R&D                                1,489          9.5
    Retail                                          1,348          8.7
    Entertainment / Leisure                           967          6.2
    Corporate - Real Estate                           868          5.6
    Hotel                                             821          5.3
    Mixed Use / Mixed Collateral                      641          4.1
    Other                                             582          3.7
    Corporate - Non-Real Estate                       380          2.5
                                                  -------        -----
                Total                             $15,594        100.0%
                                                  =======        =====

    Geography
    ---------
    West                                           $3,581         23.0%
    Northeast                                       2,843         18.2
    Southeast                                       2,659         17.1
    Mid-Atlantic                                    1,672         10.7
    Central                                           927          6.0
    Southwest                                         923          5.9
    Various                                           892          5.7
    International                                     797          5.1
    South                                             515          3.3
    Northcentral                                      435          2.8
    Northwest                                         350          2.2
                                                  -------        -----
                Total                             $15,594        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. -0- 02/26/2009

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
(SFI)

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