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08/03/2010

iStar Financial Announces Second Quarter 2010 Results


Earnings Report

  • Company completes sale of portfolio comprised of 32 corporate tenant lease assets; recognizes $250.3 million gain associated with transaction; book value increases to $13.72 per common share.
  • Company retires $1.8 billion of debt during the quarter.
  • Adjusted earnings (loss) allocable to common shareholders for the second quarter 2010 was ($83.4) million, or ($0.89) per diluted common share.
  • Net income allocable to common shareholders for the second quarter 2010 was $212.3 million, or $2.27 per diluted common share.
  • Company recorded $109.4 million of loan loss provisions during the quarter versus $89.5 million in the prior quarter.

NEW YORK, Aug 03, 2010 /PRNewswire via COMTEX/ -- iStar Financial Inc. (NYSE: SFI), a publicly traded finance company focused on the commercial real estate industry, today reported results for the second quarter ended June 30, 2010.

Second Quarter 2010 Results

iStar reported adjusted earnings (loss) allocable to common shareholders for the second quarter of ($83.4) million or ($0.89) per diluted common share, compared with ($250.1) million or ($2.51) per diluted common share for the second quarter 2009. Adjusted earnings (loss) represents net income (loss) computed in accordance with GAAP, adjusted primarily for preferred dividends, depreciation and amortization and gain (loss) from discontinued operations. Adjusted earnings does not include the $250.3 million, or $2.60 per diluted common share, gain associated with the portfolio sale of 32 corporate tenant lease properties completed during the quarter.

Net income (loss) allocable to common shareholders for the second quarter, inclusive of the $250.3 million gain on the CTL portfolio sale, was $212.3 million, or $2.27 per diluted common share, compared to ($284.2) million or ($2.85) per diluted common share for the second quarter 2009. 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 second quarter 2010 were $136.8 million versus $193.1 million for the second quarter 2009. The year-over-year decrease is primarily due to a reduction of interest income resulting from performing loans moving to non-performing status and, to a lesser extent, a smaller asset base resulting from loan repayments and sales.

Net investment income for the second quarter was $129.8 million compared to $275.9 million for the second quarter 2009. The year-over-year decrease is primarily due to decreased net gains on early extinguishment of debt in the quarter, as well as lower interest income as discussed above, offset by lower interest expense and increased earnings from equity method investments. Gains on early extinguishment of debt for the prior year period included $107.9 million of gains associated with the bond exchange completed in the second quarter 2009. Net investment income represents interest income, operating lease income, earnings (loss) from equity method investments and net gain on early extinguishment of debt, less interest expense and operating costs for corporate tenant lease assets.

During the second quarter, the Company completed the sale of a portfolio of 32 corporate tenant lease (CTL) properties resulting in net proceeds of $1.33 billion. In addition, the Company received $508.8 million in gross principal repayments; generated $82.7 million of proceeds from loan sales; $74.0 million of net proceeds from sales of other real estate owned (OREO) assets; and $69.5 million of net proceeds from the sale of four additional corporate tenant lease assets. Of the gross principal repayments and asset sales, $116.3 million was utilized to pay the A-participation interest associated with the Fremont portfolio down to $135.2 million. Additionally during the quarter, the Company funded a total of $131.0 million under pre-existing commitments and provided a $105.6 million mezzanine loan associated with the CTL portfolio sale, of which $25.0 million was repaid subsequent to quarter-end.

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 2.4x at June 30, 2010, down from 2.8x at the end of the prior quarter. The Company's net finance margin, calculated as the rate of return on assets less the cost of debt, was 1.62% for the quarter, versus 2.23% in the prior quarter.

Capital Markets

As of June 30, 2010, the Company had $531.5 million of unrestricted cash versus $640.9 million at the end of the prior quarter.

During the quarter, the Company retired a total of $1.76 billion of debt. Specifically, the Company repurchased $234.9 million par value of its senior unsecured notes and redeemed a total of $282.3 million par value of its 2011 and 2014 senior secured notes. In addition, the Company repaid a $947.9 million term loan which was collateralized primarily by the portfolio of 32 CTL assets sold during the quarter. Also, the Company repaid $290.8 million of other outstanding indebtedness during the quarter, including its 5.375% Senior Unsecured Notes due April 2010. For the quarter, the Company recorded an aggregate net gain on early extinguishment of debt of $70.1 million.

Risk Management

At June 30, 2010, first mortgages, participations in first mortgages, senior loans and corporate tenant lease investments collectively comprised 77.4% of the Company's asset base, versus 82.3% in the prior quarter. The Company's loan portfolio consisted of 70.5% floating rate loans and 29.5% fixed rate loans, with a weighted average maturity of 2.2 years.

At the end of the quarter, the weighted average last dollar loan-to-value ratio for all structured finance assets was 84.0%. The Company's corporate tenant lease assets were 87.7% leased with a weighted average remaining lease term of 13.0 years. At June 30, 2010, the weighted average risk ratings of the Company's structured finance and corporate tenant lease assets were 3.90 and 2.76, versus 3.93 and 2.57, respectively, in the prior quarter.

As of June 30, 2010, the Company had 14 loans on its watch list representing $1.03 billion or 13.8% of total managed loans, compared to 12 loans representing $673.9 million or 8.1% of total managed loans in the prior quarter. Assets on the Company's watch list are all performing loans. Managed loan value represents iStar's carrying value of loans, gross of specific reserves and the A-participation interest outstanding on Fremont portfolio assets. The Company's total managed loan value at quarter end was $7.41 billion.

At the end of the second quarter, 63 of the Company's 195 total loans were on non-performing loan (NPL) status. These loans represent $2.96 billion or 39.9% of total managed loans, compared to 72 loans representing $3.50 billion or 42.3% of total managed loans in the prior quarter. At the end of the quarter, the Company charged-off $87.5 million against its reserve for loan losses related to restructurings, loan sales and repayments.

During the quarter, the Company took title to nine properties that had an aggregate managed loan value of $384.8 million prior to foreclosure. This resulted, at the end of the quarter, in $146.8 million of charge-offs against the Company's reserve for loan losses. Additionally, the Company recorded $12.2 million of additional impairments on its OREO portfolio.

At the end of the second quarter, the Company held 49 assets, representing a gross book value of $1.53 billion, which had previously served as collateral for certain of its loan assets. Of these assets, $890.9 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 $641.5 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 term.

At the end of the second quarter, the Company recorded $109.4 million in loan loss provisions. At June 30, 2010, loan loss reserves totaled $1.18 billion or 15.9% of total managed loans. This compares to loan loss reserves of $1.31 billion or 15.8% of total managed loans at March 31, 2010.

                             [Financial Tables to Follow]

                        *                   *                *


iStar Financial Inc. is a 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, August 3, 2010. This conference call will be broadcast live over the Internet and can be accessed by all interested parties through iStar Financial's website, http://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 and to repay indebtedness as it comes due, 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.)

    iStar Financial Inc.
    Selected Income Statement Data
    (In thousands)
    (unaudited)


                                Three Months Ended        Six Months Ended
                                     June 30,                 June 30,
                                  2010         2009      2010         2009
                                  ----         ----      ----         ----

    Net investment income (1) $129,755     $275,862  $250,016     $514,739
    Other income                 5,962        5,557    14,253        8,064
    Non-interest expense (2)  (182,703)    (565,834) (334,227)    (910,083)
    Income (loss) from
     continuing operations    ($46,986)   ($284,415) ($69,958)   ($387,280)
                              --------    ---------  --------    ---------
    Income from discontinued
     operations                 10,877        2,442    17,704        6,618
    Gain from discontinued
     operations                265,960            -   265,960       11,617
                              --------    ---------  --------    ---------
    Net income (loss)         $229,851    ($281,973) $213,706    ($369,045)
                              ========    =========  ========    =========



    (1) Includes interest income, operating lease income, earnings (loss)
    from equity method investments and gain on early extinguishment of debt,
    net, 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.


    iStar Financial Inc.
    Selected Balance Sheet Data
    (In thousands)
    (unaudited)

                                     As of                  As of
                                 June 30, 2010       December 31, 2009
                                 -------------       -----------------

    Loans and other lending
     investments, net                $6,115,092              $7,661,562
    Corporate tenant lease
     assets, net                     $1,849,423              $2,885,896
    Real estate held for
     investment, net                   $636,239                $422,664
    Other real estate owned            $890,881                $839,141
    Total assets                    $10,653,904             $12,810,575
    Debt obligations, net            $8,619,955             $10,894,903
    Total liabilities                $8,802,892             $11,147,013
    Total equity                     $1,843,571              $1,656,118


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


                                Three Months Ended        Six Months Ended
                                    June 30,                 June 30,
                                2010         2009       2010         2009
                                ----         ----       ----         ----

    REVENUES

    Interest income          $86,469     $142,181   $203,085     $319,408
    Operating lease
     income                   44,365       45,351     89,264       92,429
    Other income               5,962        5,557     14,253        8,064
                            --------     --------   --------     --------
      Total revenues        $136,796     $193,089   $306,602     $419,901
                            --------     --------   --------     --------

    COSTS AND EXPENSES

    Interest expense         $82,313     $110,532   $169,529     $225,162
    Operating costs -
     corporate tenant
     lease assets              2,570        3,881      6,764        8,556
    Depreciation and
     amortization             16,726       16,034     32,867       30,910
    General and
     administrative (1)       25,114       33,691     52,330       69,314
    Provision for loan
     losses                  109,359      435,016    198,828      693,112
    Impairment of other
     assets                   12,195       22,232     13,209       47,563
    Other expense             19,309       58,861     36,993       69,184
                            --------     --------   --------     --------
      Total costs and
       expenses             $267,586     $680,247   $510,520   $1,143,801
                            --------     --------   --------   ----------

    Income (loss) from
     continuing
     operations before
     other items           ($130,790)   ($487,158) ($203,918)   ($723,900)
      Gain on early
       extinguishment of
       debt, net              70,054      200,879    108,780      355,256
      Earnings (loss) from
       equity method
       investments            13,750        1,864     25,180      (18,636)
                              ------        -----     ------      -------
    Income (loss) from
     continuing
     operations             ($46,986)   ($284,415)  ($69,958)   ($387,280)
      Income from
       discontinued
       operations             10,877        2,442     17,704        6,618
      Gain from
       discontinued
       operations            265,960            -    265,960       11,617
                            --------     --------   --------     --------
    Net income (loss)       $229,851    ($281,973)  $213,706    ($369,045)
                            --------    ---------   --------    ---------

    Net (income) loss
     attributable to
     noncontrolling
     interests                  (544)         271          1        1,514
                            --------     --------   --------     --------
    Net income (loss)
     attributable to
     iStar Financial
     Inc.                   $229,307    ($281,702)  $213,707    ($367,531)
                            --------    ---------   --------    ---------

    Preferred dividends      (10,580)     (10,580)   (21,160)     (21,160)
    Net income (loss)
     allocable to common
     shareholders,
      HPU holders and
       Participating
       Security holders
       (2)                  $218,727    ($292,282)  $192,547    ($388,691)
                            ========    =========   ========    =========



    (1) For the three months ended June 30, 2010 and 2009, includes
    $4,984 and $7,500 of stock-based compensation expense,
    respectively.  For the six months ended June 30, 2010 and 2009, includes
    $9,714 and $13,051 of stock-based compensation expense, respectively.
    (2) HPU holders are current and former 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   Six Months Ended
                                           June 30,            June 30,
                                       2010        2009      2010      2009
                                       ----        ----      ----      ----
    EPS INFORMATION FOR COMMON
     SHARES

    Income (loss) attributable
     to iStar Financial Inc.
     from continuing operations
     (1) (2)
     Basic and diluted               ($0.60)     ($2.87)   ($0.94)   ($3.85)
    Net income (loss)
     attributable to iStar
     Financial Inc. (1)
      Basic and diluted               $2.27      ($2.85)    $2.00    ($3.68)
    Weighted average shares
     outstanding
      Basic and diluted              93,382      99,769    93,651   102,671

    EPS INFORMATION FOR HPU
     SHARES

    Income (loss) attributable
     to iStar Financial Inc.
     from continuing operations
     (1) (2)
      Basic and diluted            ($114.27)   ($543.53) ($177.33) ($729.81)
    Net income (loss)
     attributable to iStar
     Financial Inc. (1) (3)
      Basic and diluted             $430.13    ($539.00)  $378.93  ($697.07)
    Weighted average shares
     outstanding
      Basic and diluted                  15          15        15        15



    (1) For the three months ended June 30, 2010 and 2009, excludes
    preferred dividends of $10,580. For the six months
    ended June 30, 2010 and 2009, excludes preferred dividends of $21,160.
    (2) Income (loss) attributable to iStar Financial Inc. from
    continuing operations excludes net (income) loss from
    noncontrolling interests.
    (3) For the three months ended June 30, 2010 and 2009, net income
    (loss) allocable to HPU holders was $6,452 and ($8,085), respectively,
    on both a basic and dilutive basis. For the six months ended June 30,
    2010 and 2009, net income (loss) allocable to HPU holders was $5,684
    and ($10,456), respectively, on both a basic and dilutive basis.


                                iStar Financial Inc.
               Reconciliation of Adjusted Earnings to GAAP Net Income
                                   (In thousands)
                                    (unaudited)


                                    Three Months Ended       Six Months Ended
                                         June 30,                June 30,
                                    2010         2009       2010         2009
                                    ----         ----       ----         ----
    ADJUSTED EARNINGS (1)

    Net income (loss)           $229,851    ($281,973)  $213,706    ($369,045)
    Add: Depreciation and
     amortization                 16,934       24,579     38,687       48,078
    Add: Joint venture
     depreciation and
     amortization                  1,848        3,506      3,731       14,194
    Add: Impairment of
     goodwill and
     intangible assets                 -            -          -        4,186
    Add: Net (income) loss
     attributable to
     noncontrolling
     interests                      (544)         271          1        1,514
    Less: Gain from
     discontinued
     operations                 (265,960)           -   (265,960)     (11,617)
    Less: Deferred
     financing amortization      (57,518)       6,966    (79,905)      12,126
    Less: Preferred
     dividends                   (10,580)     (10,580)   (21,160)     (21,160)

    Adjusted earnings
     (loss) allocable to
     common shareholders,
     HPU holders and
     Participating Security
     holders:
      Basic and Diluted (2)     ($85,969)   ($257,231) ($110,900)   ($321,724)

    Adjusted earnings
     (loss) per common
     share:
      Basic and Diluted           ($0.89)      ($2.51)    ($1.15)      ($3.05)

    Weighted average common
     shares outstanding:
      Basic and Diluted           93,382       99,769     93,651      102,671

    Common shares
     outstanding at end of
     period:                      93,382       99,618     93,382       99,618



    (1) Adjusted earnings should be examined in conjunction with net income
    (loss) as shown in the Consolidated Statements of Operations. Adjusted
    earnings should not be considered as an alternative to net income (loss)
    (determined in accordance with GAAP) as an indicator of the Company's
    performance, or to cash flows from operating activities (determined in
    accordance with GAAP) as a measure of the Company's liquidity, nor is
    this measure indicative of funds available to fund the Company's cash
    needs or available for distribution to shareholders. Rather, adjusted
    earnings is an additional measure the Company uses to analyze how its
    business is performing. It should be noted that the Company's manner of
    calculating adjusted earnings may differ from the calculations of
    similarly-titled measures by other companies.
    (2) For the three months ended June 30, 2010 and 2009, adjusted earnings
    (loss) allocable to HPU holders was ($2,536) and ($7,115), respectively,
    on both a basic and dilutive basis.  For the six months ended June 30,
    2010 and 2009, adjusted earnings (loss) allocable to HPU holders was
    ($3,267) and ($8,655), respectively, on both a basic and dilutive basis.


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

                                                    As of        As of
                                                   June 30,   December 31,
                                                     2010         2009
                                                  ---------  -------------
    ASSETS

    Loans and other lending investments, net      $6,115,092     $7,661,562
    Corporate tenant lease assets, net             1,849,423      2,885,896
    Other investments                                422,203        433,130
    Real estate held for investment, net             636,239        422,664
    Other real estate owned                          890,881        839,141
    Assets held for sale                                   -         17,282
    Cash and cash equivalents                        531,520        224,632
    Restricted cash                                   12,744         39,654
    Accrued interest and operating lease income
     receivable, net                                  50,929         54,780
    Deferred operating lease income receivable        65,825        122,628
    Deferred expenses and other assets, net           79,048        109,206
        Total assets                             $10,653,904    $12,810,575
                                                 ===========    ===========

    LIABILITIES AND EQUITY

    Accounts payable, accrued expenses and other
     liabilities                                    $182,937       $252,110

    Debt obligations, net:
      Unsecured senior notes                       3,548,148      4,228,908
      Secured senior notes                           437,558        856,071
      Unsecured revolving credit facilities          739,395        748,601
      Secured revolving credit facilities            943,664        959,426
      Secured term loans                           2,853,060      4,003,786
      Other debt obligations                          98,130         98,111
        Total liabilities                         $8,802,892    $11,147,013

    Redeemable noncontrolling interests                7,441          7,444

    Total iStar Financial Inc. shareholders'
     equity                                        1,796,969      1,605,685
    Noncontrolling interests                          46,602         50,433
        Total equity                               1,843,571      1,656,118

        Total liabilities and equity             $10,653,904    $12,810,575
                                                 ===========    ===========


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


                                                                 As of
                                                                June 30,
    PERFORMANCE  STATISTICS                                       2010
                                                               ---------

    Net Finance Margin
    ------------------
    Weighted average GAAP yield on loan and CTL investments          5.71%
    Less: Cost of debt                                               4.09%
                                                                     ----
    Net Finance Margin (1)                                           1.62%

    Return on Average Common Book Equity
    ------------------------------------
    Average total book equity                                  $1,685,686
    Less: Average book value of preferred equity                 (506,176)
                                                                 --------
    Average common book equity (A)                             $1,179,510

    Net income allocable to common shareholders, HPU holders
     and Participating Security holders                          $218,727
        Annualized (2) (B)                                        $77,028
    Return on Average Common Book Equity (B) / (A)                    6.5%

    Adjusted basic earnings (loss) allocable to common
     shareholders, HPU holders and Participating Security
     holders (3)                                                 ($85,969)
        Annualized (C)                                          ($343,876)
    Adjusted Return on Average Common Book Equity (C) / (A)           Neg

    Expense Ratio (4)
    -----------------
    General and administrative expenses (D)                       $25,116
    Total revenue (E)                                            $164,471
    Expense Ratio (D) / (E)                                          15.3%


    (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 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, operating
    costs-corporate tenant lease assets and interest expense exclude
    adjustments from discontinued operations of $27,673, $1,612 and $14,466,
    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) Net income allocable to common shareholders, HPU holders and
    Participating Security holders on an annualized basis is computed without
    annualizing the gain from discontinued operations.
    (3) 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.
    (4) General and administrative expenses and total revenue exclude
    adjustments from discontinued operations of $2 and $27,675, respectively.


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


                                                              As of
                                                            June 30,
    CREDIT STATISTICS                                          2010
                                                           ---------

    Book debt, net of unrestricted cash and cash
     equivalents (A)                                       $8,088,435

    Book equity                                            $1,843,571
    Add: Accumulated depreciation and loan loss reserves    1,524,083
    Sum of book equity, accumulated depreciation and loan
     loss reserves (B)                                     $3,367,654

    Leverage (1) (A) / (B)                                       2.4x

    Ratio of Earnings to Fixed Charges                           0.4x
    Ratio of Earnings to Fixed Charges and Preferred
     Stock Dividends                                             0.4x
    Covenant Calculation of Fixed Charge Coverage Ratio
     (2)                                                         2.1x

    Interest Coverage
    -----------------
    EBITDA (3) (C)                                           $346,204
    Interest expense and preferred dividends (D)             $107,358
    EBITDA /Interest Expense and Preferred Dividends (3)
      (C) /(D)                                                   3.2x

    RECONCILIATION OF NET INCOME TO EBITDA (3)

    Net income (loss)                                        $229,851
    Add: Interest expense (4)                                  96,778
    Add: Depreciation and amortization (4)                     16,934
    Add: Income taxes                                             793
    Add: Joint venture depreciation and amortization            1,848
    EBITDA (3)                                               $346,204



    (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.
    (4) Interest expense and depreciation and amortization exclude
    adjustments from discontinued operations of $14,466 and $417,
    respectively.


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

                                                             As of
    UNFUNDED COMMITMENTS                                June 30, 2010
                                                        -------------

    Number of assets with unfunded commitments                      73

    Performance-based commitments                             $218,679
    Discretionary fundings                                     251,843
    Strategic investments                                       61,022
    Total Unfunded Commitments                                $531,544

    UNENCUMBERED ASSETS / UNSECURED DEBT

    Unencumbered assets (A)                                 $6,516,292
    Unsecured debt (B)                                      $4,424,372

    Unencumbered Assets / Unsecured Debt (A) / (B)                1.5x


    RISK MANAGEMENT STATISTICS
    (weighted average risk rating)
                                       2010               2009
                                   ------------  ---------------------
                                    June   Mar.   Dec.   Sept.   June
                                     30,    31,    31,     30,    30,
                                   ------------  ---------------------
    Structured Finance Assets
     (principal risk)                3.90   3.93   3.92    3.91   3.90
    Corporate Tenant Lease Assets    2.76   2.57   2.59    2.60   2.59


    LOANS AND OTHER LENDING INVESTMENTS CREDIT STATISTICS

                                               As of
                            -------------------------------------------
                               June 30, 2010          December 31, 2009
                            -------------------      -------------------
    Value of non-performing
     loans (1) /
       As a percentage
        of total
        managed loans       $2,956,158   39.9 %     $4,209,255   45.3 %

    Reserve for loan
     losses /
       As a percentage
        of total
        managed loans       $1,181,288   15.9 %     $1,417,949   15.3 %
       As a percentage
        of non-
        performing
        loans (1)                        40.0 %                  33.7 %




    (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 AS
     OF JUNE 30, 2010 (1)

                                                                        % of
    Asset Type                                                  Total  Total
    ----------                                                  -----  -----
    First Mortgages /
     Senior Loans                                               $6,495   57.6%
    Corporate Tenant
     Leases                                                      2,227   19.8%
    Other Real Estate
     Owned                                                         891    7.9%
    Mezzanine /
     Subordinated Debt                                             802    7.1%
    Real Estate Held
     for Investment                                                642    5.7%
    Other Investments                                              211    1.9%
        Total                                                  $11,268  100.0%
                                                               =======  =====

                                                                        % of
    Geography                                                   Total  Total
    ---------                                                   -----  -----
    West                                                        $2,442   21.7%
    Southeast                                                    2,083   18.5%
    Northeast                                                    1,817   16.1%
    Mid-Atlantic                                                 1,050    9.3%
    Southwest                                                      934    8.3%
    Various                                                        742    6.6%
    Central                                                        647    5.7%
    International                                                  531    4.7%
    South                                                          367    3.3%
    Northwest                                                      346    3.1%
    Northcentral                                                   309    2.7%
        Total                                                  $11,268  100.0%
                                                               =======  =====

                                                                        % of
    Property Type           Performing CTLs   NPLs   OREO REHI  Total  Total
                              Loans &
    -------------              Other   ----   ----   ---- ----  -----  -----
                             --------
    Condo:
      Construction -
       Completed                  $716     $-   $554 $395   $-  $1,665   14.8%
      Construction -In
       Progress                    568      -    168   21    -     757    6.7%
      Conversion                    91      -     37  113    -     241    2.1%
                                   ---    ---    ---  ---  ---     ---    ---
      Subtotal Condo             1,375      -    759  529    -   2,663   23.6%
    Land                           431     59    848  111  454   1,903   16.9%
    Retail                         608    184    312   46    9   1,159   10.3%
    Office                         246    638     53    -    7     944    8.4%
    Entertainment /
     Leisure                       158    483    268    -    -     909    8.1%
    Industrial / R&D               208    618     27    5   50     908    8.1%
    Hotel                          364    184     89   50   70     757    6.7%
    Mixed Use /Mixed
     Collateral                    206     40    316   69   22     653    5.8%
    Corporate -Real
     Estate                        366      -    166    -    -     532    4.7%
    Other (2)                      499     21      2    -    -     522    4.6%
    Multifamily                    166      -     41   81   30     318    2.8%
        Total                   $4,627 $2,227 $2,881 $891 $642 $11,268  100.0%
                                ====== ====== ====== ==== ==== =======  =====



    (1) Based on carrying value of the Company's total investment
    portfolio, gross of loan loss reserves and accumulated depreciation.
    (2) Performing loans and other includes $211 million of other investments.

SOURCE iStar Financial Inc.

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