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10/19/2001

iStar Financial Announces 14th Consecutive Quarterly Increase in Adjusted EPS

NEW YORK, Oct. 19 /PRNewswire/ -- iStar Financial Inc. (NYSE: SFI) reported its fourteenth consecutive quarterly increase in adjusted earnings for the quarter ended September 30, 2001 to $0.73 per diluted common share, up from $0.68 per diluted share for the quarter ended September 30, 2000. Adjusted earnings for third quarter 2001 increased 10.2% to $64.9 million on a diluted basis, from $58.9 million for third quarter 2000. Adjusted earnings represent GAAP net income before depreciation and amortization.

Net income allocable to common shareholders for the third quarter grew to $48.3 million, or $0.54 per diluted common share, compared with $46.4 million, or $0.54 per diluted share, in third quarter 2000. Third quarter 2001 total revenue increased to $120.8 million from $120.7 million for the third quarter 2000.

In the third quarter of 2001, iStar Financial achieved returns on average book assets and average common book equity of 7.2% and 17.9%, respectively, while leverage increased slightly to 1.3x book equity. Net investment income for the quarter ended September 30, 2001 increased to $67.9 million, from $66.7 million for the third quarter of 2000. Net investment income represents interest and operating lease revenue less interest expense and operating costs for corporate tenant lease assets.

Adjusted earnings for the nine months ended September 30, 2001 were $190.2 million, or $2.15 per diluted share, compared to $170.7 million, or $1.98 per diluted share for the same period in 2000. Net income allocable to common shareholders for the nine months ended September 30, 2001 was $143.5 million, or $1.63 per diluted share, compared to $133.7 million, or $1.55 per diluted share for the same period in 2000. Net investment income and total revenue increased to $203.3 million and $364.3 million for the nine months ended September 30, 2001, respectively, from $200.3 million and $349.5 million, respectively, for the 2000 period.

During the third quarter of 2001, iStar Financial closed ten new financing commitments totaling $207.9 million, of which $160.2 million was funded during the quarter. In addition, the Company funded $20.7 million under four pre-existing commitments and received $13.2 million in principal repayments. The Company's recent transactions continue to reflect its core business strategy of originating value-added, structured financing transactions for owners of high-quality commercial real estate assets and leading corporations across the United States.

Jay Sugarman, iStar Financial's chairman and chief executive officer, stated, "In the face of uncertain times for our nation and our economy, we are extremely pleased to announce iStar Financial's fourteenth consecutive quarterly increase in earnings, to a record $0.73 per share. Return on equity also reached a record 17.9% this quarter, despite our running at just 1.3x leverage."

Mr. Sugarman continued, "Those of you who have followed our Company know that we have been quite bearish on the domestic economy for over a year. This conservatism underscored our investment underwriting, funding strategy and risk management tactics prior to the events of September 11, and serves us well following the tragedy. We expect the risk-return dynamics in commercial real estate financing to move solidly in the lender's favor over the coming quarters. However, until we can clearly assess the incremental downside risk in the economy and real estate markets, we have erred on the side of caution."

     Selected Income Statement Data
     (In thousands, except per share amounts)
     (unaudited)
                                Three Months Ended       Nine Months Ended
                                   September 30,           September 30,
                                 2001          2000       2001        2000

     Net investment income     $67,914       $66,721    $203,258   $200,320
     Other income                8,529         4,208      22,389     12,568
     Non-interest expense     (17,070)      (16,883)    (52,816)   (53,598)
     Net income before
      minority interest        $59,373       $54,046    $172,831   $159,290
     Minority interest            (41)          (41)       (177)      (123)
     Gain (loss) on sale
      of corporate tenant
      lease assets             (1,196)         1,974         403      2,948
     One-time effect of a
      change in accounting
      principle                     --            --       (282)         --

Extraordinary loss

  • early extinguishment

      of debt                    (583)         (388)     (1,620)      (705)
     Preferred dividends       (9,227)       (9,227)    (27,681)   (27,681)
     Net income allocable
      to common shareholders   $48,326       $46,364    $143,474   $133,729
     Per basic share             $0.56         $0.54       $1.67      $1.57
     Per diluted share           $0.54         $0.54       $1.63      $1.55

     Adjusted earnings
      allocable to common
      shareholders(a)          $64,928       $58,909    $190,156   $170,685
     Per basic share             $0.75         $0.68       $2.20      $1.99
     Per diluted share           $0.73         $0.68       $2.15      $1.98

     Dividends                 $0.6125       $0.6000      $1.225     $1.200

(a) Adjusted earnings represent GAAP net income to common shareholders

           before depreciation and amortization, and exclude gain (loss) on
           sale of corporate tenant lease assets, one-time effect of change in
           accounting principles and extraordinary loss on early
           extinguishment of debt.

     Selected Balance Sheet Data
     (In thousands)
                                                     As of          As of
                                                 September 30,  December 31,
                                                     2001           2000
                                                  (unaudited)

     Loans and other lending
      investments, net                            $2,392,605     $2,225,183
     Real estate subject to operating
      leases, net                                  1,659,637      1,670,169
     Total assets                                  4,196,553      4,034,775
     Debt obligations                              2,291,774      2,131,967
     Total liabilities                             2,372,477      2,240,666
     Total shareholders' equity                    1,821,426      1,787,885

Transaction Volume

In the third quarter of 2001, iStar Financial generated $207.9 million in new financing commitments in ten separate transactions. The Company also funded an additional $20.7 million under four pre-existing financing commitments and received $13.2 million in loan repayments. Mr. Sugarman stated, "As we noted in prior earnings releases, we expected the pace of loan prepayments to fall in the second half of this year and into 2002. The majority of the drop in long-term interest rates over the past two years occurred in 2000 and early 2001, providing borrowers with an incentive to prepay higher-cost financing despite the presence of prepayment penalties. Many of the borrowers who were able to take advantage of those lower rates appear to have done so by the first half of this year."

During the third quarter of 2001, the weighted average first dollar and last dollar loan-to-value ratio on new loan commitments and follow-on fundings was 12.0% and 67.2%, respectively. This ratio represents the average beginning and ending points for the Company's lending exposure in the aggregate capitalization of the underlying properties or companies it finances.

Mr. Sugarman commented, "Given our cautious outlook, over the past year we have focused on originating first mortgages, corporate tenant leases to investment-grade customers, and corporate loans backed by broadly diversified real estate portfolios with going-concern value and liquidity beyond our collateral. These types of transactions accounted for 74% of our investment volume since the third quarter of 2000."

"Because of this discipline, the Company's overall asset quality remains very strong," Mr. Sugarman said. "While our investment pipeline is robust, the 'bar' for new investments is very high."

Capital Markets

During the third quarter of 2001, iStar Financial issued $350.0 million of 8.75% Senior Notes due in 2008. The Notes are unsecured senior obligations of iStar Financial. The Company used the net proceeds to repay outstanding borrowings under secured credit facilities. In addition, the Company completed a new $300.0 million corporate credit facility during the quarter, replacing two separate facilities which were scheduled to mature in 2002. The new facility bears interest at LIBOR plus 2.125% based on the Company's current credit ratings and matures in July 2004, including a one-year extension at the Company's option. Also during the third quarter of 2001, the Company match funded its recent structured finance investment in The Mills Corporation under iStar Financial's debt facility for corporate finance investments.

Spencer B. Haber, iStar Financial's president and chief financial officer, stated, "Our balance sheet, financial flexibility and liquidity position are very strong. We have no material debt maturities until 2003 and maintain a large pool of unencumbered assets. In August, we completed a $350 million long-term unsecured bond offering, and used the proceeds to pay down our secured credit facilities. Based upon the level of demand, we upsized the offering from $200 million and priced the bonds at the tight end of our expected range. We also saw very meaningful participation from investment-grade bond investors on the strength of our credit story."

At September 30, 2001, the Company had $693 million outstanding under $2.2 billion of total credit facilities. Mr. Haber continued, "With market conditions unsettled, our excess liquidity positions us to capitalize on investment opportunities as they arise and allows us to concentrate on risk management, as opposed to capital raising. While there is clearly a short-term earnings cost for raising this level of excess liquidity, we decided it was the prudent thing to do."

Consistent with the Securities and Exchange Commission's Regulation FD, iStar Financial comments on earnings expectations within the context of its regular earnings press releases. The Company currently expects adjusted EPS of $0.74 - $0.76 (basic) and $0.72 - $0.74 (diluted) for the fourth quarter of 2001. For the calendar 2001, iStar Financial currently expects adjusted EPS of $2.95 - $2.97 (basic) and $2.88 - $2.90 (diluted).

Mr. Haber commented, "Given the tragic events of September 11, we are obviously operating in a very uncertain business environment. As we have stated in our earnings releases during the past year, we already had a very bearish outlook for the U.S. economy prior to September 11, and had adjusted our investment, funding and risk management activities accordingly. This quarter, iStar Financial delivered its fourteenth consecutive quarterly increase in adjusted EPS, and we expect to continue to produce steady growth in earnings for calendar year 2002 and 2003. However, of necessity, our earnings guidance assumes no further economic upheavals arising from our country's campaign against terrorism."

For the calendar year 2002, iStar Financial currently expects adjusted EPS of $3.07 - $3.09 (basic) and $3.00 - $3.02 (diluted). Mr. Haber stated, "We are taking an even more decidedly cautious origination posture than we have over the past year. Although we closed over $200 million of new financing business in the third quarter, we put on hold over $400 million of pending investments for the third and fourth quarters following the events of September 11. Our current gross origination targets for 2002 and 2003 of $1.0 billion and $1.3 billion, respectively, reflect our conservative posture. We do not plan to revisit these targets until the outlook for U.S. economic and real estate market conditions becomes clearer."

iStar Financial's 2002 and 2003 earnings guidance also assumes loan repayments of approximately $290 million and $470 million, respectively. Mr. Haber stated, "Earlier this year, we said that we expected the above-average loan prepayment levels of the first and second quarters to subside in the second half of 2001. Consistent with our expectation, loan repayments fell to just $13 million during the third quarter. While we will continue to proactively seek loan prepayments to lessen our exposure to certain market segments, we believe that the current economic environment and the relatively steep shape of the yield curve should keep prepayments at lower levels throughout 2002 and 2003."

For the calendar year 2003, iStar Financial currently expects adjusted EPS of $3.47 to $3.52 (basic) and $3.38 to $3.43 (diluted). Mr. Haber continued, "While we have also lowered our origination and ancillary revenue forecasts for 2003, we expect to resume our double-digit long-term growth in 2003 as loan repayments return to more normalized levels."

For the third quarter of 2001, iStar Financial declared a common dividend of $0.6125 per share. This dividend represented 81.9% of the Company's basic adjusted earnings per share. Mr. Haber commented, "We have produced a growing dividend stream over the 15 quarters since iStar Financial became a public company. At the same time, we have consistently reduced our dividend payout ratio to provide a larger margin of safety to our shareholders, who count on the security of our dividend. As owners of $160 million of common stock, your Company's management and Board are committed to maintaining an attractive, secure dividend that is strongly supported by the Company's earnings." iStar Financial's Board of Directors reviews the Company's dividend for potential increase in the first quarter of each fiscal year, applicable to such quarter.

Mr. Haber concluded, "In unsettled times, we are pleased to provide shareholders with a stable source of earnings and dividends. Successful risk management remains our highest priority. With significant excess liquidity, no near-term debt maturities and cautious underwriting standards, the Company is well positioned to capitalize on investment opportunities as the macro outlook becomes clearer. Until that time, we are maintaining conservative assumptions for investment originations, ancillary revenue and operating expenses. Under these assumptions, iStar Financial should continue to produce steady growth and income for its shareholders over the coming years. Despite our performance and positive credit ratings momentum, our stock trades at a lower multiple than many other companies in the financial services sector. As more research analysts pick up coverage of the Company, we believe other investors will recognize iStar Financial as a compelling investment."

Credit Risk Management

At September 30, 2001, first mortgages, corporate tenant leases and corporate financing transactions collectively comprised 78.6% of the Company's asset base. The weighted average first and last dollar loan-to-value ratio for all structured finance assets (senior and junior loans) was 30.5% and 70.9%, respectively.

Timothy J. O'Connor, iStar Financial's chief operating officer, stated, "Because we approach corporate tenant leasing as a financing business, not as a real estate equity business, our primary focus has been on lengthening lease terms. By proactively extending leases prior to their stated maturities, we have minimized our lease expiration exposure in the intermediate term. In addition, we have disposed of the bulk of the non-core assets purchased as part of the TriNet acquisition, and our CTL portfolio is essentially full." As of September 30, 2001, the weighted average lease term of the Company's corporate tenant leasing portfolio was 8.4 years, and the portfolio was 99.2% leased. Remaining lease expirations for 2001 and 2002 represent just 0.7% and 2.1% of annualized total GAAP revenue, respectively.

The Company establishes loss reserves based on a quarterly bottom-up review of each of its assets, as well as using top-down guidance from industry-wide loss data and market trends. On a quarterly basis, the Company conducts a comprehensive credit review, resulting in an individual risk rating assigned to each asset. Attendance at the quarterly review sessions is mandatory for each of the Company's professional employees. These quarterly meetings are designed to enable management to evaluate and proactively manage asset-specific credit issues and identify credit trends on a portfolio-wide basis as an "early warning system."

During the risk ratings review, each asset is assigned a risk rating from "one" to "five," with a "one" indicating superior credit quality, a "two" signifying better than average credit quality, "three" as an average rating, a "four" indicating that management time and attention is required, and a "five" denoting a problem asset with potential principal risk to the Company. In addition to the ratings system, the Company maintains a "watch list" of assets which require highly proactive asset management to preserve their current ratings. Each newly-originated asset is typically assigned an initial rating of "three" (or average).

Mr. O'Connor continued, "Risk management has always been our highest Firmwide priority. While no one anticipated the events of September 11, we had been operating for over a year under the assumption that the economy was performing very poorly. With over 50 iStar Financial professionals focused on risk management, this discipline remains a key strength of the Company."

Based upon the Company's third quarter 2001 review, the weighted average risk rating of the Company's structured finance assets was 2.82, higher than last quarter's rating of 2.68. The weighted average risk rating for corporate tenant lease assets at the end of the third quarter was 2.92, higher than the prior quarter rating of 2.79.

The Company currently has three loans and one corporate tenant lease asset on its watch list, with a combined book value of $141.0 million as of September 30, 2001. None of the Company's investment assets was directly impacted by the events of September 11. The two loans added to the Company's watch list this quarter are secured by mortgages on two New York City hotels whose operating performance suffered in mid-September as a result of the attacks. However, the performance of both assets has significantly recovered since late September. The Company is currently comfortable that it has adequate collateral to support the book value for each of the four watch list assets.

At quarter end, accumulated loan loss reserves and corporate tenant lease depreciation represented approximately 2.20% of the gross book value of the Company's investments (loans and operating leases).

Mr. O'Connor commented, "While we have seen a deterioration in the credit quality in our hotel lending business, it represents only 13% of our portfolio at September 30, 2001 based on gross book values. As a result, our overall risk ratings continue to reflect the solid credit quality of our asset base."

The Company's 12 hotel loans are backed by broadly diversified assets, with 110 individual hotel properties in over 75 geographic markets. All of these loans have "lock boxes" through which the Company, as lender, controls operating cash flow. In addition, ten of the 12 loans have "cash trap" mechanisms that allow iStar Financial to keep cash flow after debt service as excess collateral if debt service coverages fall below pre-specified levels. None of the Company's hotel loans is backed by a resort property.

Mr. O'Connor added, "Our lending philosophy has always focused on cross collateralized portfolios of broadly diversified assets. We typically only make single-asset loans on large, institutional-quality properties in major metropolitan markets that can hold their long-term value across market cycles. This philosophy has served us well during the current downturn."

Mr. O'Connor stated, "At current interest rates, our hotel loan portfolio went into September 11 with an average of over 1.7x debt service coverage. In addition, our borrowers have substantial cash equity invested junior to iStar Financial's loans. This cash flow coverage and cash equity create room for declining cash flow performance before iStar Financial is impacted. This quarter, we added two hotel loans to our risk management 'watch list,' and expect that these loans will perform below expectations for the next six months. However, we are highly confident that the current operating environment for hotel properties will not have a material impact on iStar Financial's overall credit quality, earnings or liquidity."

Other Developments

On October 1, 2001, iStar Financial declared a regular quarterly cash dividend of $0.6125 per common share for the quarter ended September 30, 2001. The third quarter 2001 dividend, which will be paid on October 29, 2001 to holders of record as of October 15, 2001, represents approximately 81.9% of basic adjusted earnings per share for the third quarter.

iStar Financial is the largest publicly traded finance company focused exclusively on the commercial real estate industry. The Company provides structured financing to private and corporate owners of real estate nationwide, including senior and junior mortgage debt, corporate mezzanine and subordinated capital, and corporate net lease financing. The Company, which is taxed as a real estate investment trust, seeks to deliver superior risk-adjusted returns on equity to shareholders by providing innovative and value-added financing solutions to its customers.

iStar Financial will hold a quarterly earnings conference call at 10:00 a.m. Eastern time today, October 19, 2001. This conference call will be broadcast live over the Internet and can be accessed by all interested parties through iStar Financial's Web site, www.istarfinancial.com, under the "investor relations" section. To listen to the live call, please go to the Web site'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 Web site and will remain available for the next 30 days.

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

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

                                Three Months Ended        Nine Months Ended
                                   September 30,            September 30,
                                2001          2000        2001        2000
    Revenue:
      Interest income          $62,389      $70,148     $193,205   $197,095
      Operating lease income    49,912       46,327      148,678    139,822
      Other income               8,529        4,208       22,389     12,568
        Total revenue          120,830      120,683      364,272    349,485

    Costs and expenses:
      Interest expense          41,177       46,470      128,905    127,029

Operating costs

  • corporate tenant

       lease assets              3,210        3,284        9,720      9,568
      Depreciation and
       amortization              8,669        8,705       26,255     26,575
      General and
       administrative            6,131        5,859       18,731     20,570
      Provision for possible
       credit losses             1,750        1,750        5,250      4,750
      Stock-based compensation
       expense                     520          569        2,580      1,703
        Total costs and
         expenses               61,457       66,637      191,441    190,195

    Net income before
     minority interest          59,373       54,046      172,831    159,290
      Minority interest           (41)         (41)        (177)      (123)
      Gain (loss) on sale of
       corporate tenant
       lease assets            (1,196)        1,974          403      2,948
      One-time effect of a
       change in accounting
       principle                    --           --        (282)         --

Extraordinary loss

  • early extinguishment

       of debt                   (583)        (388)      (1,620)      (705)
    Net income                 $57,553      $55,591     $171,155   $161,410

    Preferred dividends        (9,227)      (9,227)     (27,681)   (27,681)
    Net income allocable to
     common shareholders       $48,326      $46,364     $143,474   $133,729

    Net income per common share:
      Basic                      $0.56        $0.54        $1.67      $1.57
      Diluted                    $0.54        $0.54        $1.63      $1.55

    Weighted average common
     shares outstanding:
      Basic                     86,470       85,662       86,130     85,345
      Diluted                   88,824       86,644       87,999     86,021


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

                                Three Months Ended       Nine Months Ended
                                   September 30,           September 30,
                                 2001         2000        2001        2000
    ADJUSTED EARNINGS
     PER SHARE:
    Net income                 $57,553      $55,591     $171,155   $161,410
    Add: Depreciation            8,669        8,705       26,255     26,575
    Add: Joint venture
     depreciation                  960        1,148        2,828      2,590
    One-time effect of a
     change in accounting
     principle                      --           --          282         --
    Add: Amortization            4,959        4,042       15,391      9,330
    Less: Preferred
     dividends                 (9,227)      (9,227)     (27,681)   (27,681)
    Less: (Gain) loss on
     sale of corporate tenant
     lease assets                1,196      (1,974)        (403)    (2,948)

Add: Extraordinary loss

  • early extinguishment

     of debt                       583          388        1,620        705
    Adjusted earnings
     allocable to common
     shareholders:
      Basic                    $64,693      $58,673     $189,447   $169,981
      Diluted                  $64,928      $58,909     $190,156   $170,685

    Adjusted earnings
     per common share:
      Basic                      $0.75        $0.68        $2.20      $1.99
      Diluted                    $0.73        $0.68        $2.15      $1.98

    Weighted average common
     shares outstanding:
      Basic                     86,470       85,662       86,130     85,345
      Diluted                   89,197       87,017       88,372     86,393


                             iStar Financial Inc.
                         Consolidated Balance Sheets
                                (In thousands)

                                                    As of           As of
                                                September 30,   December 31,
                                                     2001           2000
                                                 (unaudited)
     ASSETS

     Loans and other lending investments, net     $2,392,605     $2,225,183
     Real estate subject to operating leases, net  1,659,637      1,670,169
     Cash and cash equivalents                        15,155         22,752
     Restricted cash                                  10,853         20,441
     Marketable securities                                41             41
     Accrued interest and operating lease income
      receivable                                      20,843         20,167
     Deferred operating lease income receivable       17,632         10,236
     Other assets                                     79,787         65,786
                     Total assets                 $4,196,553     $4,034,775

     LIABILITIES AND SHAREHOLDERS' EQUITY

     Accounts payable and other liabilities          $75,478        $52,038
     Dividends payable                                 5,225         56,661

     Debt obligations:
       Unsecured senior notes                        608,336        356,510
       Unsecured revolving credit facilities              --        173,450
       Secured revolving credit facilities           692,596        592,349
       Secured term loans                            509,728        349,060
       iStar Asset Receivables secured notes         464,426        588,335
       Other debt obligations                         16,688         72,263
                     Total liabilities            $2,372,477     $2,240,666
     Minority interest                                 2,650          6,224
     Shareholders' equity                          1,821,426      1,787,885
                     Total liabilities
                      and shareholders' equity    $4,196,553     $4,034,775


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

    THIRD QUARTER 2001 PERFORMANCE STATISTICS

    Return on Average Book Assets                 Three Months    Nine Months
                                                      Ended          Ended
                                                  September 30, September 30,
                                                      2001           2001

    Adjusted Basic Earnings to Common
     Shareholders                                    $64,693       $189,447
    Plus: Preferred Dividends                          9,227         27,681
    Adjusted Basic Earnings before
     Preferred Dividends                             $73,920       $217,128
    Adjusted Basic Earnings before
     Preferred Dividends -- Annualized (A)          $295,680       $289,504

    Average Total Book Assets (B)                 $4,124,951     $4,115,664

    Return on Average Book Assets (A)/(B)               7.2%           7.0%

    Return on Average Common Book Equity

    Adjusted Basic Earnings to Common
     Shareholders                                    $64,693       $189,447
    Adjusted Basic Earnings to Common
     -- Annualized (C)                              $258,772       $252,596

    Average Total Book Equity                     $1,826,276     $1,804,656
    Less: Book Value of Preferred Equity           (382,000)      (382,000)
    Average Common Book Equity (D)                $1,444,276     $1,422,656

    Return on Average Common Book
     Equity (C)/(D)                                    17.9%          17.8%

    Efficiency Ratio

    General & Administrative Expenses                 $6,131        $18,731
    Plus: Stock-Based Compensation Expense               520          2,580
    Total Corporate Overhead (E)                      $6,651        $21,311

    Total Revenue (F)                               $120,830       $364,272

    Efficiency Ratio (E)/(F)                            5.5%           5.9%

THIRD QUARTER 2001 CREDIT STATISTICS

    Book Debt/Equity

    Book Debt (A)                                 $2,291,774

    Total Book Equity (B)                         $1,821,426

    Book Debt/Book Equity (A)/(B)                       1.3x

    Interest Coverage

    EBITDA (a) (A)                                  $109,219       $327,991

    GAAP Interest Expense (B)                        $41,177       $128,905

    EBITDA / GAAP Interest Expense (A)/(B)              2.7x           2.5x

    Fixed Charge Coverage

    EBITDA (a) (C)                                  $109,219       $327,991

    GAAP Interest Expense                            $41,177       $128,905
    Plus: Preferred Dividends                          9,227         27,681
    Total Fixed Charges (D)                          $50,404       $156,586

    EBITDA / Fixed Charges (C) / (D)                    2.2x           2.1x

THIRD QUARTER FINANCING VOLUME SUMMARY STATISTICS

                                        LOAN ORIGINATIONS
                                                         Total/
                                            Floating    Weighted    CORPORATE
                               Fixed Rate     Rate       Average     LEASING
    Amount Committed            $21,398    $155,704     $177,102    $51,583
    Weighted Average GAAP
     Yield                       11.22%       8.62%        8.93%     11.42%
    Weighted Average All-In
     Spread/Margin
     (basis points) (b)           + 664       + 507           --      + 632
    Weighted Average First
     $ Loan-to-Value Ratio        63.4%        6.0%        12.0%         --
    Weighted Average Last
     $ Loan-to-Value Ratio        72.8%       81.6%        67.2%         --

    UNFUNDED COMMITMENTS

    Number of Loans with Unfunded
     Commitments                                 10

    Discretionary Commitments               $56,443
    Non-Discretionary Commitments            67,761
    Total Unfunded Commitments             $124,204

`

    Estimated Weighted Average
     Funding Period                        Approximately 1.5 years

(a) EBITDA is calculated as total revenue minus the sum of general and

         administrative expenses, provision for possible credit losses,
         stock-based compensation expense and operating costs on corporate
         tenant lease assets.

(b) Based on average quarterly one-month LIBOR (floating rate loans) and

         U.S. Treasury rates (fixed rate loans and corporate leasing
         transactions) during the quarter.


                             iStar Financial Inc.
                           Supplemental Information
       (as of and for the three-month period ended September 30, 2001)
                                (In millions)
                                 (unaudited)

    PORTFOLIO STATISTICS AS OF SEPTEMBER 30, 2001 (a)

    Security Type                                       $              %
      First Mortgages                                 $1,118          27.0%
      Second Mortgages                                   368           8.9%
      Corporate/Partnership Loans/Other                  872          21.0%
      Corporate Tenant Leases                          1,785          43.1%
        Total                                         $4,143         100.0%

    Collateral Type                                     $              %
      Office                                          $2,037          49.2%
      Industrial/R&D                                     410           9.9%
      Retail                                             198           4.8%
      Hotel (Lending)                                    540          13.0%
      Hotel (Investment-Grade CTL)                       271           6.5%
      Mixed Use                                          152           3.7%
      Apartment/Residential                              178           4.3%
      Homebuilder/Land                                    42           1.0%
      Conference/Entertainment                           311           7.5%
      Various                                              4           0.1%
        Total                                         $4,143         100.0%

    Product Line                                        $              %
      Structured Finance                              $1,090          26.3%
      Portfolio Finance                                  369           8.9%
      Loan Acquisition                                   372           9.0%
      Corporate Finance                                  527          12.7%
      Corporate Tenant Leasing                         1,785          43.1%
        Total                                         $4,143         100.0%

    Collateral Location                                 $              %
      West                                            $1,276          30.8%
      Southwest                                           90           2.1%
      South                                              670          16.2%
      Central                                            305           7.4%
      North Central                                       80           1.9%
      Northeast                                          836          20.2%
      Mid-Atlantic                                       310           7.5%
      Southeast                                          378           9.1%
      Northwest                                          186           4.5%
      Various                                             12           0.3%
        Total                                         $4,143         100.0%

(a) Figures presented prior to loan loss reserves and accumulated depreciation.

SOURCE iStar Financial Inc.

CONTACT: Spencer B. Haber, President & Chief Financial Officer, +1-212-930-9400, or Lianne A. Merchant, Vice President, Investor Relations, +1-212-930-9400, or Erin C. Hart, Associate, Investor Relations, +1-212-930-9400, all of iStar Financial Inc./

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