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10/30/2009

iStar Financial Announces Third Quarter 2009 Results

  • Adjusted earnings (loss) allocable to common shareholders for the third quarter was ($234.2) million, or ($2.37) per diluted common share.
  • Net income (loss) allocable to common shareholders for the third quarter was ($251.3) million, or ($2.55) per diluted common share.
  • Company records $345.9 million of loan loss provisions during the quarter versus $435.0 million during the prior quarter.

NEW YORK, Oct. 30 /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 third quarter ended September 30, 2009.

iStar reported adjusted earnings (loss) allocable to common shareholders for the third quarter of ($234.2) million or ($2.37) per diluted common share, compared with ($287.2) million or ($2.16) per diluted common share for the third quarter 2008. Adjusted earnings (loss) represents net income (loss) computed in accordance with GAAP, adjusted primarily for preferred dividends, depreciation, depletion, amortization, impairments of goodwill and intangible assets, gain (loss) from discontinued operations, and gain on sale of joint venture interest.

Net income (loss) allocable to common shareholders for the third quarter was ($251.3) million, or ($2.55) per diluted common share, compared to ($308.7) million or ($2.32) per diluted common share for the third quarter 2008. Please see the financial tables that follow the text of this press release for a detailed reconciliation of adjusted earnings (loss) to GAAP net income (loss).

Revenues for the third quarter 2009 were $210.2 million versus $337.3 million for the third quarter 2008. The year-over-year decrease is primarily due to a reduction of interest income resulting from an increase in non-performing loans (NPLs), an overall smaller asset base and lower interest rates.

Net investment income for the quarter was $180.2 million compared to $209.7 million for the third quarter 2008. The year-over-year decrease is primarily due to lower interest income as discussed above, offset by lower interest expense and increased gains on early extinguishment of debt. Net investment income represents interest income, operating lease income, earnings (loss) from equity method investments and gain on early extinguishment of debt, less interest expense and operating costs for corporate tenant lease assets.

During the quarter, the Company received $403.6 million in gross principal repayments. Additionally, the Company generated proceeds of $182.4 million from loan sales; $22.0 million of net proceeds from the sale of three corporate tenant lease (CTL) assets; and $25.9 million of net proceeds from other real estate owned (OREO) asset sales. Of the gross principal repayments and asset sales, $192.0 million was utilized to pay down the A-participation interest associated with the Fremont portfolio. Additionally during the quarter, the Company funded a total of $283.1 million under pre-existing commitments.

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 2.9x at September 30, 2009, versus 2.8x at June 30, 2009. The Company's net finance margin, calculated as the rate of return on assets less the cost of debt, was 1.51% for the quarter, versus 1.48% in the prior quarter.

Capital Markets

As of September 30, 2009, the Company had $187.1 million of unrestricted cash and available capacity on its credit facilities versus $417.4 million at the end of the prior quarter. At September 30, 2009, the Company was in compliance with all of its bank and bond covenants.

During the quarter, the Company repaid its LIBOR + 0.34% senior unsecured notes due September 2009.

During the quarter, the Company repurchased $255.5 million par value of its senior unsecured notes, resulting in a net gain on early extinguishment of debt of $91.7 million. The Company also repurchased 2.2 million shares of its common stock during the quarter. The Company currently has remaining authority to repurchase up to $29.5 million of shares under its share repurchase programs.

Risk Management

At September 30, 2009, first mortgages, participations in first mortgages, senior loans and corporate tenant lease investments collectively comprised 87.0% of the Company's asset base, versus 91.0% in the prior quarter. The Company's loan portfolio consisted of 78.3% floating rate loans and 21.7% fixed rate loans, with a weighted average maturity of 2.0 years.

At the end of the quarter, the weighted average last dollar loan-to-value ratio for all structured finance assets was 83.6%. The Company's corporate tenant lease assets were 94.1% leased with a weighted average remaining lease term of 11.2 years. At September 30, 2009, the weighted average risk ratings of the Company's structured finance and corporate tenant lease assets were 3.91 and 2.60, versus 3.90 and 2.59, respectively, in the prior quarter.

As of September 30, 2009, the Company had 26 loans on its watch list representing $1.2 billion or 11.3% of total managed loans, compared to 28 loans representing $1.2 billion or 10.4% of total managed loans in the prior quarter. Assets on the Company's watch list were all performing loans at September 30, 2009. 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 $10.5 billion.

At the end of the third quarter, 85 of the Company's 260 total loans were on NPL status. These loans represent $4.4 billion or 42.0% of total managed loans, compared to 90 loans representing $4.6 billion or 39.6% of total managed loans in the prior quarter.

Additionally, during the quarter the Company took title to 15 properties that had an aggregate gross loan value of $826.5 million prior to foreclosure, resulting in $266.3 million of charge-offs against the Company's reserve for loan losses and recorded $8.0 million of additional impairments on its OREO and REHI portfolios.

At the end of the quarter, the Company held 29 assets, representing a book value of $920.1 million, which had previously served as collateral on its loans. Of these assets, $584.5 million were classified as OREO and considered held for sale based on management's current intention to market and sell the assets in the near term. The remaining $335.6 million were classified as Real Estate Held for Investment (REHI) based on management's current strategy to hold, operate or develop these assets over a longer period.

During the quarter, the Company also charged-off $58.8 million against its reserve for loan losses associated with restructurings, loan sales and repayments during the quarter. Additionally, the Company recorded $8.9 million of non-cash impairment charges associated with the sales and pending sales of CTL assets, as well as $9.3 million of non-cash impairment charges associated with other assets.

During the third quarter, the Company recorded $345.9 million in loan loss provisions. Provisions in the quarter reflect the continued deterioration in the overall credit markets and its impact on the portfolio as determined in the Company's regular quarterly risk ratings review process. At September 30, 2009, the Company had loan loss reserves of $1.5 billion or 14.2% of total managed loans. This compares to loan loss reserves of $1.5 billion or 12.6% of total managed loans at June 30, 2009.

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 loan value of $3.1 billion consisting of 103 loans, versus $3.6 billion consisting of 122 loans at the end of the prior quarter. In addition, there were 10 OREO assets with a managed asset value of $182.4 million and six REHI assets with a managed asset value of $170.7 million associated with the Fremont portfolio at the end of the quarter.

At the end of the third quarter, the value of the A-participation interest in the portfolio was $672.9 million versus $865.6 million at the end of the prior quarter. The book value of iStar's B-participation interest was $2.4 billion versus $2.7 billion at the end of the prior quarter. During the quarter, iStar received $274.1 million in principal repayments and proceeds from asset sales in respect of Fremont assets, of which the Company retained $82.1 million. The balance of principal repayments was paid to the A-participation interest. The weighted average maturity of the Fremont portfolio is six months.

During the third quarter, iStar funded $70.2 million of commitments related to the portfolio. Unfunded commitments at the end of the third quarter were $0.3 billion, of which the Company expects to fund approximately $0.1 billion based upon its comprehensive review of the portfolio.

At September 30, 2009, there were 45 Fremont loans on NPL status with a managed loan value of $1.8 billion versus 51 loans at the prior quarter end, with $2.0 billion of managed loan value. In addition, there were nine Fremont loans on the Company's watch list with a managed loan value of $213.5 million versus 12 loans at the prior quarter end, with $347.2 million of managed loan value.

                           [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"), provides 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, 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 the amount and timing of additional loan loss provisions, the amount and timing of asset sales (including OREO assets), continued increases in NPLs, repayment levels, the Company's ability to reduce its indebtedness at a discount, the Company's ability to generate liquidity, the Company's ability to maintain compliance with its debt covenants, economic conditions, the availability of liquidity for commercial real estate transactions 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,
                                    2009       2008        2009        2008
                                  --------   --------   ---------   ---------

    Net investment income (1)     $180,198   $209,745    $719,103    $534,988
    Other income                     9,454     22,922      20,408      88,707
    Non-interest expense (2)      (429,797)  (559,699) (1,359,176) (1,163,637)
    Gain on sale of joint
     venture interest                    -          -           -     280,219
                                  --------   --------   ---------   ---------
    Income (loss) from
     continuing operations        (240,145)  (327,032)   (619,665)   (259,723)

    Income (loss) from
     discontinued operations        (8,106)     3,194      (9,248)     19,358
    Gain from discontinued
     operations                        809     19,955      12,426      72,487
    Net (income) loss
     attributable to
     noncontrolling interests         (515)       502         998       1,069
    Gain on sale of joint
     venture interest
     attributable to
     noncontrolling interests            -          -           -     (18,560)
    Gain from discontinued
     operations attributable to
     noncontrolling interests            -          -           -      (3,689)
    Preferred dividends            (10,580)   (10,580)    (31,740)    (31,740)
                                  --------   --------   ---------   ---------
    Net income (loss) allocable
     to common shareholders,
     HPU holders and Participating
     Security holders (3)        ($258,537) ($313,961)  ($647,229)  ($220,798)
                                 =========  =========   =========   =========

    (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 expenses.
    (3)  HPU holders are Company employees who purchased high performance
         common stock units under the Company's High Performance Unit Program.
         Participating Security holders are Company employees and directors
         who hold unvested restricted stock units and common stock
         equivalents under the Company's Long Term Incentive Plan.


    Selected Balance Sheet Data
    (In thousands)
    (unaudited)                           As of                 As of
                                    September 30, 2009    December 31, 2008
                                    ------------------    -----------------

    Loans and other lending
     investments, net                       $8,588,020          $10,586,644
    Corporate tenant lease assets, net      $2,925,413           $3,044,811
    Other investments                         $391,053             $447,318
    Total assets                           $13,404,594          $15,296,748
    Debt obligations, net                  $11,311,405          $12,486,404
    Total liabilities                      $11,586,207          $12,840,896
    Total equity                            $1,810,942           $2,446,662


                                     iStar Financial Inc.
                             Consolidated Statements of Operations
                                      (In thousands)
                                        (unaudited)

                                    Three Months Ended     Nine Months Ended
                                      September 30,          September 30,
                                     2009       2008        2009       2008
                                   --------   --------    --------   --------
    REVENUES

      Interest income              $124,701   $237,006    $444,109   $748,460
      Operating lease income         76,037     77,378     229,246    229,952
      Other income                    9,454     22,922      20,408     88,707
                                   --------   --------    --------  ---------
        Total revenues              210,192    337,306     693,763  1,067,119
                                   --------   --------    --------  ---------

    COSTS AND EXPENSES

      Interest expense              113,938    169,665     372,288    503,915
      Operating costs -
       corporate tenant lease
       assets                         5,673      5,200      17,655     14,802
      Depreciation and
       amortization                  25,298     23,760      73,004     70,876
      General and
       administrative (1)            27,808     37,694     105,617    124,474
      Provision for loan losses     345,892    411,142   1,039,004    777,302
      Impairment of other assets     17,351     88,075      60,729    145,766
      Impairment of goodwill              -          -       4,186     39,092
      Other expense                  13,448       (972)     76,636      6,127
                                   --------   --------   ---------  ---------
        Total costs and expenses    549,408    734,564   1,749,119  1,682,354
                                   --------   --------   ---------  ---------

      Income (loss) from
       continuing operations
       before other items          (339,216)  (397,258) (1,055,356)  (615,235)
        Gain on early
         extinguishment of debt      91,701     68,321     446,957     69,916
        Gain on sale of joint
         venture interest                 -          -           -    280,219
        Earnings (loss) from
         equity method
         investments                  7,370      1,905     (11,266)     5,377
                                   --------   --------    --------  ---------
      Income (loss) from
       continuing operations       (240,145)  (327,032)   (619,665)  (259,723)

        Income (loss) from
         discontinued operations
                                     (8,106)     3,194      (9,248)    19,358
        Gain from discontinued
         operations                     809     19,955      12,426     72,487
                                   --------   --------    --------  ---------
      Net income (loss)            (247,442)  (303,883)   (616,487)  (167,878)

      Net (income) loss
       attributable to
       noncontrolling interests        (515)       502         998      1,069
      Gain on sale of joint
       venture interest
       attributable to
       noncontrolling interests           -          -           -    (18,560)
      Gain from discontinued
       operations attributable to
       noncontrolling interests           -          -           -     (3,689)
                                   --------   --------    --------  ---------
      Net income (loss)
       attributable to iStar
       Financial Inc.              (247,957)  (303,381)   (615,489)  (189,058)

      Preferred dividend
       requirements                 (10,580)   (10,580)    (31,740)   (31,740)
                                   --------   --------    --------  ---------
      Net income (loss) allocable
       to common shareholders,
       HPU holders and Participating
       Security holders (2)       ($258,537) ($313,961)  ($647,229) ($220,798)
                                  =========  =========   =========  =========

    (1)  For the three months ended September 30, 2009 and 2008, includes
         $4,521 and $4,884 of stock-based compensation expense, respectively.
         For the nine months ended September 30, 2009 and 2008, includes
         $17,572 and $17,725 of stock-based compensation expense,
         respectively.
    (2)  HPU holders are Company employees who purchased high performance
         common stock units under the Company's High Performance Unit Program.
         Participating Security holders are Company employees and directors
         who hold unvested restricted stock units and common stock equivalents
         under the Company's Long Term Incentive Plan.


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

                                      Three Months Ended    Nine Months Ended
                                         September 30,         September 30,
                                        2009      2008        2009      2008
                                      --------  --------    --------  --------
    EPS INFORMATION FOR COMMON SHARES
    Income (loss) attributable to
     iStar Financial Inc. from
     continuing operations(1)(2)
      Basic and diluted                ($2.48)   ($2.49)     ($6.24)   ($2.27)
    Net income (loss) attributable
     to iStar Financial Inc.(1)(3)
      Basic and diluted                ($2.55)   ($2.32)     ($6.21)   ($1.63)
    Weighted average shares
     outstanding
      Basic and diluted                98,674   133,199     101,324   133,955

    EPS INFORMATION FOR HPU SHARES
    Income (loss) attributable to
     iStar Financial Inc. from
     continuing operations(1)(2)
      Basic and diluted              ($468.33) ($470.67) ($1,181.53) ($430.66)
    Net income (loss) attributable
     to iStar Financial Inc.(1)(3)(4)
      Basic and diluted              ($481.93) ($438.47) ($1,175.73) ($308.73)
    Weighted average shares outstanding
      Basic and diluted                    15        15          15        15


    (1)  For the three months ended September 30, 2009 and 2008, excludes
         preferred dividends of $10,580. For the nine months ended September
         30, 2009 and 2008, excludes preferred dividends of $31,740.
    (2)  Income (loss) attributable to iStar Financial Inc. from continuing
         operations excludes net (income) loss from noncontrolling interests.
    (3)  For the three and nine months ended September 30, 2008, net income
         (loss) attributable to iStar Financial Inc. and allocable to common
         shareholders and HPU holders is reduced by $1,271 and $2,393,
         respectively, for dividends paid to Participating Security holders.
    (4)  For the three months ended September 30, 2009 and 2008, net income
         (loss) allocable to HPU holders was ($7,229) and ($6,577),
         respectively, on both a basic and dilutive basis. For the nine months
         ended September 30, 2009 and 2008, net income (loss) allocable to HPU
         holders was ($17,636) and ($4,631), respectively, on both a basic and
         diluted basis.


                                    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,
                                      2009       2008       2009       2008
                                    --------   --------   --------   --------
      ADJUSTED EARNINGS (1)

      Net income (loss)            ($247,442) ($303,883) ($616,487) ($167,878)
      Add: Depreciation,
       depletion and amortization     25,264     24,448     73,341     78,149
      Add: Joint venture
       depreciation, depletion and
       amortization                    1,897      1,943     16,091     12,513
      Add: Deferred financing
       amortization                   (8,780)    16,745      3,346     38,677
      Add: Impairment of goodwill
       and intangible assets               -          -      4,186     51,549
      Less: Hedge
       ineffectiveness, net                -     (1,256)         -     (2,106)
      Less: Gain from
       discontinued operations          (809)   (19,955)   (12,426)   (72,487)
      Less: Gain on sale of joint
       venture interest                    -          -          -   (280,219)
      Less: Net (income) loss
       attributable to
       noncontrolling interests         (515)       502        998      1,069
      Less: Preferred dividends      (10,580)   (10,580)   (31,740)   (31,740)
                                     -------    -------    -------    -------

      Adjusted earnings (loss)
       allocable to common
       shareholders, HPU holders
       and Participating Security
       holders:
        Basic and Diluted          ($240,965) ($292,036) ($562,691) ($372,473)

      Adjusted earnings (loss)
       per common share: (2)
        Basic and Diluted (3)         ($2.37)    ($2.16)    ($5.40)    ($2.74)

      Weighted average common
       shares outstanding:
        Basic and Diluted             98,674    133,199    101,324    133,955

      Common shares outstanding at
       end of period:
        Basic and Diluted             97,452    132,043     97,452    132,043


    (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 and nine months ended September 30, 2008, excludes
         $1,271 and $2,393, respectively, of dividends paid to Participating
         Security holders.
    (3)  For the three months ended September 30, 2009 and 2008, excludes
         ($6,737) and ($6,120) of basic and diluted net income (loss)
         allocable to HPU holders, respectively. For the nine months ended
         September 30, 2009 and 2008, excludes ($15,333) and ($7,778) of basic
         and diluted net income (loss) allocable to HPU holders, respectively.



                               iStar Financial Inc.
                            Consolidated Balance Sheets
                                  (In thousands)
                                    (unaudited)

                                               As of             As of
                                        September 30, 2009 December 31, 2008
                                        ------------------ -----------------

      ASSETS

      Loans and other lending investments, net  $8,588,020       $10,586,644
      Corporate tenant lease assets, net         2,925,413         3,044,811
      Other investments                            391,053           447,318
      Real estate held for investment, net         335,635                 -
      Other real estate owned                      584,519           242,505
      Assets held for sale                          19,866                 -
      Cash and cash equivalents                    187,090           496,537
      Restricted cash                               42,509           155,965
      Accrued interest and operating
       lease income receivable, net                 48,233            87,151
      Deferred operating lease income
       receivable                                  120,124           116,793
      Deferred expenses and other assets, net      162,132           119,024
                                               -----------       -----------
            Total assets                       $13,404,594       $15,296,748
                                               ===========       ===========



      LIABILITIES AND EQUITY

      Accounts payable, accrued
       expenses and other liabilities             $274,802          $354,492

      Debt obligations, net:
        Unsecured senior notes                   4,625,363         7,188,541
        Secured senior notes                       869,285                 -
        Unsecured revolving credit
         facilities                                748,562         3,281,273
        Secured revolving credit
         facilities                                961,128           306,867
        Secured term loans                       4,008,966         1,611,650
        Other debt obligations                      98,101            98,073
                                               -----------       -----------
          Total liabilities                     11,586,207        12,840,896

      Redeemable noncontrolling
       interests                                     7,445             9,190

      Total iStar Financial Inc.
       shareholders' equity                      1,774,613         2,418,999
      Noncontrolling interests                      36,329            27,663
                                               -----------       -----------
          Total equity                           1,810,942         2,446,662

                                               -----------       -----------
            Total liabilities and equity       $13,404,594       $15,296,748
                                               ===========       ===========


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

    PERFORMANCE  STATISTICS                                Three Months Ended
                                                           September 30, 2009
                                                           ------------------
    Net Finance Margin
    ------------------
    Weighted average GAAP yield on loan and CTL investments             5.71%
    Less: Cost of debt                                                  4.20%
                                                                        -----
    Net Finance Margin (1)                                              1.51%

    Return on Average Common Book Equity
    ------------------------------------
    Average total book equity                                     $1,901,899
    Less: Average book value of preferred equity                    (506,176)
                                                                  -----------
    Average common book equity (A)                                $1,395,723

    Net income (loss) allocable to common shareholders,
     HPU holders and Participating Security holders                ($258,537)
    Net income (loss) allocable to common shareholders,
     HPU holders and Participating Security holders  -
     Annualized (B)                                              ($1,034,148)
    Return on Average Common Book Equity (B) / (A)                       Neg

    Adjusted basic earnings (loss) allocable to common
     shareholders, HPU holders and Participating Security
     holders (2)                                                   ($240,965)
    Adjusted basic earnings (loss) allocable to common
     shareholders, HPU holders and Participating Security
     holders  - Annualized (C)                                     ($963,860)
    Adjusted Return on Average Common Book Equity (C) / (A)              Neg

    Expense Ratio
    -------------
    General and administrative expenses (D)                          $27,808
    Total revenue (E)                                               $210,192
    Expense Ratio (D) / (E)                                             13.2%

    (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 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
         adjustments from discontinued operations of $758 and ($302),
         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, 2009
                                                           ------------------
    Book debt, net of unrestricted cash and cash
     equivalents (A)                                              $11,124,315

    Book equity                                                     1,810,942
    Add: Accumulated depreciation and loan loss reserves            2,042,688
                                                                  -----------
    Sum of book equity, accumulated depreciation and loan
     loss reserves (B)                                             $3,853,630

    Leverage (1) (A) / (B)                                               2.9x

    Ratio of Earnings to Fixed Charges                                  (1.1x)

    Ratio of Earnings to Fixed Charges and Preferred
     Stock Dividends                                                    (1.0x)

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

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

    EBITDA (3) (C)                                                  ($116,923)
    Interest expense and preferred dividends (D)                      124,518

    EBITDA / Interest Expense (3)  (C) / (D)                              Neg

    RECONCILIATION OF NET INCOME TO EBITDA  (3)

    Net income (loss) less preferred dividends                      ($258,022)
    Add: Interest expense                                             113,938
    Add: Depreciation, depletion and amortization                      25,264
    Add: Joint venture depreciation, depletion and amortization         1,897
                                                                  -----------
    EBITDA (3)                                                      ($116,923)

    (1)  Leverage is calculated by dividing book debt net of unrestricted cash
         and cash equivalents 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
         secured 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 September 30, 2009

                                   LOANS
                        -----------------------------
                                             Total/     CORPORATE
                        Fixed     Floating   Weighted   TENANT     OTHER
                        Rate      Rate       Average    LEASING    INVESTMENTS
                        -------   --------   --------   ---------  -----------
    Amount funded       $20,847   $256,447   $277,294      $411         $5,436
    Weighted average
     GAAP yield            9.86%      6.06%      6.36%      N/A            N/A
    Weighted average
     all-in spread/
     margin (basis
     points) (1)            954         559       588       N/A            N/A
    Weighted average
     first $ loan-to-value
     ratio                19.01%       1.52%     2.90%      N/A            N/A
    Weighted average
     last $ loan-to-value
     ratio                87.66%      81.97%    82.42%      N/A            N/A



    UNFUNDED COMMITMENTS

    Number of assets with unfunded commitments                             119


    Discretionary commitments                                         $126,576
    Non-discretionary commitments                                    1,005,868
                                                                    ----------
    Total unfunded commitments                                      $1,132,444
    Estimated weighted average funding period          Approximately 3.1 years

    UNENCUMBERED ASSETS / UNSECURED DEBT

    Unencumbered assets (A)                                         $7,566,297
    Unsecured debt (B)                                              $5,510,740

    Unencumbered Assets / Unsecured Debt (A) / (B)                        1.4x


    RISK MANAGEMENT STATISTICS
    (weighted average risk rating)

                                   2009                       2008
                   -------------------------------- --------------------------
                   September 30, June 30, March 31, December 31, September 30,
                   -------------------------------- --------------------------
    Structured
     Finance Assets
     (principal risk)       3.91     3.90      3.71         3.53          3.41
    Corporate Tenant
     Lease Assets           2.60     2.59      2.59         2.58          2.55

                                               (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
                                       ---------------------------------------
                                       September 30, 2009    December 31, 2008
                                       ------------------    -----------------
    Value of non-performing
     loans (1) /
      As a percentage of total
       managed loans                   $4,399,701   42.0%   $3,458,158   27.5%

    Reserve for loan losses /
      As a percentage of total
       managed loans                   $1,491,153   14.2%     $976,788    7.8%
      As a percentage of
       non-performing loans (1)                     33.9%                28.3%

    (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)

                                                      Managed       % of
      NPL STATISTICS AS OF SEPTEMBER 30, 2009 (1)       Value       NPLs
                                                      -------      -----

      Origination
      -----------
      iStar Legacy                                     $2,603       59.2%
      Fremont                                           1,797       40.8
                                                       ------      ------
            Total                                      $4,400      100.0%
                                                       ======      ======

      Property / Collateral Type
      --------------------------
      Land                                             $1,328       30.2%
      Condo Construction - Completed                      721       16.4
      Multifamily                                         370        8.4
      Mixed Use / Mixed Collateral                        370        8.4
      Condo Construction - In Progress                    360        8.2
      Retail                                              298        6.8
      Entertainment / Leisure                             274        6.2
      Hotel                                               204        4.6
      Conversion - In Progress                            181        4.1
      Industrial / R&D                                     92        2.1
      Office                                               77        1.8
      Conversion - Completed                               63        1.4
      Corporate - Real Estate                              62        1.4
                                                       ------      ------
            Total                                      $4,400      100.0%
                                                       ======      ======


    (1)  Based on carrying value of the loans, plus the Fremont
         A-participation interest on the associated loans.


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

                                                      Carrying   % of
    PORTFOLIO STATISTICS AS OF SEPTEMBER 30, 2009 (1)   Value   Total
                                                        -----  ------

    Asset Type
    ----------
    First Mortgages / Senior Loans                      $9,247   62.9%
    Corporate Tenant Leases                              3,547   24.1
    Mezzanine / Subordinated Debt                          832    5.7
    Other Real Estate Owned                                585    4.0
    Real Estate Held for Investment                        336    2.3
    Other Investments                                      155    1.0
                                                       -------  ------
      Total                                            $14,702  100.0%
                                                       =======  ======

    Property / Collateral Type
    --------------------------
    Apartment / Residential                             $4,206   28.6%
    Land                                                 2,307   15.7
    Office                                               1,879   12.8
    Industrial / R&D                                     1,366    9.3
    Retail                                               1,178    8.0
    Entertainment / Leisure                                926    6.3
    Hotel                                                  877    5.9
    Mixed Use / Mixed Collateral                           762    5.2
    Corporate - Real Estate                                752    5.1
    Other                                                  439    3.0
    Corporate - Non-Real Estate                             10    0.1
                                                       -------  ------
      Total                                            $14,702  100.0%
                                                       =======  ======

    Geography
    ---------
    West                                                $3,384   23.0%
    Northeast                                            2,700   18.4
    Southeast                                            2,401   16.3
    Mid-Atlantic                                         1,571   10.7
    Various                                                996    6.8
    Central                                                916    6.2
    Southwest                                              869    5.9
    South                                                  500    3.4
    International                                          488    3.3
    Northcentral                                           439    3.0
    Northwest                                              438    3.0
                                                       -------  ------
      Total                                            $14,702  100.0%
                                                       =======  ======
    (1)  Based on carrying value of the Company's total investment
         portfolio, gross of loan loss reserves and accumulated depreciation.

SOURCE iStar Financial Inc.

James D. Burns, Chief Financial Officer, or Andrew G. Backman, Senior Vice President - Investor Relations, iStar Financial Inc., +1-212-930-9400

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