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07/24/2003

iStar Financial Announces Record Quarterly Earnings

Click here for a PDF version of this Earnings Release

* Adjusted earnings per diluted common share increases to a record $0.80 for second quarter 2003. * New financing activity totals $486.9 million in 13 separate transactions. * Cumulative repeat customer transactions increase to a record high. * First mortgage and first mortgage participation transactions comprise 86% of second quarter financing commitments. * iStar Financial completes another highly successful offering under its proprietary iStar Asset Receivables ("STARs") match funding program. * iStar Financial issues 7 7/8% Cumulative Redeemable Series E Preferred Stock in exchange for $140 million of its 9.50% Series A Cumulative Redeemable Preferred Stock.

NEW YORK, Jul 24, 2003 /PRNewswire-FirstCall via COMTEX/ -- iStar Financial Inc. (NYSE: SFI) reported that adjusted earnings for the quarter ended June 30, 2003 were $0.80 per diluted common share, up from $0.65 per diluted common share for the quarter ended June 30, 2002. Adjusted earnings allocable to common shareholders for second quarter 2003 were $81.8 million on a diluted basis, compared to $59.8 million for second quarter 2002. Adjusted earnings represents net income to common shareholders, computed in accordance with GAAP, before depreciation, amortization, gain (loss) from discontinued operations, extraordinary items and cumulative effect of change in accounting principle.

Net income allocable to common shareholders for the second quarter was $60.0 million, or $0.59 per diluted common share, compared with $33.3 million, or $0.36 per diluted common share, in the second quarter of 2002. Second quarter 2002 net income includes a $12.2 million ($0.13 per diluted common share) charge relating to early extinguishment of debt and a $6.1 million ($0.07 per diluted common share) non-cash charge related to performance-based vesting of restricted shares granted under the Company's long-term incentive plan. Please see the financial tables which follow the text of this press release for a detailed reconciliation of adjusted earnings to GAAP net income.

In the second quarter of 2003, iStar Financial achieved a return on average book assets of 6.1% and a return on average common book equity of 18.7%, while leverage increased to 1.8x book equity. Net investment income for the quarter ended June 30, 2003 increased to a record $86.9 million, up 41.1% from $61.6 million for the second quarter of 2002. Excluding a $12.2 million charge relating to early extinguishment of debt for second quarter 2002, net investment income increased 17.8%. Net investment income represents interest income, operating lease revenue and equity in earnings from joint ventures and unconsolidated subsidiaries, less interest expense and operating costs for corporate tenant lease assets, in each case as computed in accordance with GAAP.

iStar Financial announced that during the second quarter, it closed 13 new financing commitments for a total of $486.9 million, of which $463.0 million was funded during the quarter. In addition, the Company funded $13.9 million under seven pre-existing commitments and received $329.3 million in principal repayments. The Company's recent transactions continue to reflect its core business strategy of originating structured financing transactions for leading corporations and private owners of high-quality commercial real estate assets across the United States.

Jay Sugarman, iStar Financial's chairman and chief executive officer, stated, "This quarter iStar Financial continued to deliver unique, value-added financing for its high-end real estate customers. Our reputation for being a reliable source of capital and dealing fairly with our customers is becoming widely recognized in the market. We have now completed $4.2 billion of financing transactions with repeat customers, which represents over 50% of our financing volume since our business began in 1993."

Mr. Sugarman continued, "We are experiencing some interesting market dynamics. The weak economic environment, combined with the lowest interest rates the U.S. has seen in half a century, present several opportunities and challenges as we look forward. In this environment, we are seeing more financing opportunities from new and existing customers, which enable us to build upon our franchise and market-leading reputation. However, real estate owners are seeking ways to refinance their assets with cheaper debt, resulting in increased repayment activity. Similarly, while net interest margins remain strong, ultra-low interest rates generally offset the benefits of increased investment volume."


     Selected Income Statement Data
     (In thousands)
     (unaudited)
                                          Three Months Ended Six Months Ended
                                               June 30,          June 30,
                                            2003     2002      2003     2002

     Net investment income (1)            $86,861  $61,581  $173,914  128,519
     Other income                           8,440    7,716    12,769   16,441
     Non-interest expense                 (25,365) (28,662)  (48,891) (48,525)
     Net income before minority interest  $69,936  $40,635  $137,792  $96,435

     Minority interest in consolidated
      entities                                (40)     (41)      (79)     (81)
    (Loss) income from discontinued
      operations                             (150)   1,324      (278)   2,674
     Gain from discontinued operations         --      595       264      595
     Preferred dividends                   (9,227)  (9,227)  (18,454) (18,454)
     Net income allocable to common
      shareholders and HPU holders (2)    $60,519  $33,286  $119,245  $81,169

    (1) Net investment income for the three and six months ended June 30,
        2002, includes a $12,166 charge relating to early extinguishment of
        debt.
    (2) HPU holders are Company employees who purchased high performance
        common stock units under the Company's High Performance Unit Program.


     Selected Balance Sheet Data
     (In thousands)
                                                  As of             As of
                                             June 30, 2003   December 31, 2002
                                              (unaudited)

     Loans and other lending investments, net   $3,409,989        $3,050,342
     Corporate tenant lease assets, net          2,332,499         2,291,805
     Total assets                                6,125,264         5,611,697
     Debt obligations                            3,842,856         3,461,590
     Total liabilities                           3,970,759         3,583,816
     Total shareholders' equity                  2,151,924         2,025,300

Transaction Volume

In the second quarter of 2003, iStar Financial generated $486.9 million in new financing commitments in 13 separate transactions. The Company also funded an additional $13.9 million under seven pre-existing financing commitments and received $329.3 million in loan repayments. Of the Company's second quarter financing commitments, 86.3% represented first mortgage and first mortgage participation transactions, of which 57.0% were wholly-owned first mortgages.

During the quarter, the weighted average first dollar and last dollar loan-to-value ratio on new loan commitments was 27.9% and 69.1%, 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, "This quarter we continued to build diversity and safety in our asset base with 13 separate investment transactions, of which 58% were from repeat customers and the majority of which were first mortgages. Our investment pipeline remains strong, and we are beginning to evaluate interesting opportunities in our corporate and junior lending product lines as we reach the bottom of this real estate cycle."

Mr. Sugarman continued, "Given the strength of our core business, we have chosen at the present time not to pursue any of the new business initiatives that we have been exploring since the beginning of the year."

Capital Markets

In May 2003, iStar Financial completed a private offering of asset-backed bonds under the Company's proprietary match funding program, iStar Asset Receivables ("STARs"). The STARs Series 2003-1 offered bonds consist of 11 classes of investment-grade securities. The Company received approximately $646 million of gross proceeds from the offering. The STARs Series 2003-1 bonds create match funded term financing for approximately $739 million of iStar Financial's structured finance and corporate tenant lease assets. The weighted average interest rate on the offered bonds, expressed on an all-floating rate basis, is approximately LIBOR + 47 basis points. The Company used the net proceeds from the offering to repay outstanding borrowings under its credit facilities. At June 30, 2003, the Company had $1.1 billion outstanding under its five primary credit facilities, which total $2.7 billion in committed capacity.

In July 2003, iStar Financial completed an underwritten public offering of 5,600,000 shares of its 7 7/8% Series E Cumulative Redeemable Preferred Stock, having a liquidation preference of $25.00 per share. The Series E Preferred Stock was issued in exchange for 2,800,000 shares of iStar Financial's 9.50% Series A Cumulative Redeemable Preferred Stock, having a liquidation preference of $50.00 per share. The Company did not receive any cash proceeds from the offering.

Catherine D. Rice, iStar Financial's chief financial officer, stated, "Our financing activities over the last several months demonstrate our continued success in accessing the capital markets and reducing the Company's overall cost of capital. Our STARs investors once again acknowledged the high quality of our collateral and the value of iStar Financial's sponsorship in our successful third issuance under the STARs program. In addition, our recently completed exchange of $140 million of Series E preferred stock for Series A preferred stock will result in over $2.2 million of annual preferred dividend savings for the Company."

Ms. Rice continued, "As we've stated in the past, our primary goal for reducing our overall debt costs and increasing financial flexibility is to achieve investment grade ratings from Moody's and S&P. We have scheduled annual update meetings with each of the rating agencies for this fall, and we believe our track record presents a compelling case for an upgrade."

During May 2003, SOFI-IV SMT Holdings, a private investment fund and the Company's then-largest shareholder, distributed approximately 15.9 million of the 20.1 million iStar Financial common shares held by SOFI-IV to the limited and general partners of the fund. Some of the partners then sold 6.9 million of the shares distributed to them in an underwritten public offering. After the offering, SOFI-IV holds 4.2 million shares of iStar Financial common stock, representing less than 5% of iStar Financial's common stock on both a diluted and outstanding basis.

Ms. Rice commented, "Since October 2001, we have created over 50 million shares of demand for SOFI-IV and its affiliates, and the recent distribution should eliminate any perceived "overhang" that remained on our stock. Going forward, we expect that common stock issuances will be focused on raising primary equity for the Company as we continue to grow our asset and capital base."

Consistent with the Securities and Exchange Commission's Regulation FD and the newly adopted Regulation G, iStar Financial comments on earnings expectations within the context of its regular earnings press releases. For fiscal year 2003, the Company currently expects adjusted earnings per diluted common share of $3.20-$3.25. iStar Financial also expects adjusted earnings per diluted common share for the third quarter of $0.81-$0.82. iStar Financial expects GAAP earnings per diluted common share of $2.34-$2.44 for 2003. The Company also expects GAAP earnings per diluted common share for the third quarter of $0.62-$0.64. The 2003 earnings guidance assumes net asset growth of $800 million to $1 billion, consistent with prior expectations. The $800 million to $1 billion figures assume approximately $1.8 billion of gross originations and approximately $900 million of loan repayments.

Ms. Rice commented, "Because interest rates have reached historic lows, we expect loan repayments to increase in the latter half of this year; however, this increased repayment activity should be offset by investments in our pipeline. Our earnings guidance also reflects the impact that extraordinarily low interest rates have on our net income. With LIBOR near 1.10%, our match funded investments deliver lower absolute earnings. In addition, the increase in our stock price is expected to result in an additional $0.03-$0.05 per share of dilution from in-the-money stock-based compensation, stock options and warrants for the remainder of 2003. As a result, we have slightly reduced our earnings growth guidance for 2003."

As of June 30, 2003, the Company's loan portfolio consisted of 60% floating rate and 40% fixed rate loans. Approximately 60% of the Company's floating rate loans have LIBOR floors with a weighted average LIBOR floor of 2.29%. The weighted average GAAP LIBOR margin, inclusive of LIBOR floors, was 5.36%. The weighted average GAAP yield of the Company's fixed rate loans was 11.81%.

Risk Management

At June 30, 2003, first mortgages, participations in first mortgages, corporate tenant leases and corporate financing transactions collectively comprised 90.0% 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 28.0% and 68.7%, respectively. As of June 30, 2003 the weighted average debt service coverage for all structured finance assets, based on either actual cash flow or trailing 12- month cash flow through March 31, 2003, was 2.2x.

At quarter end, the Company's corporate tenant lease assets were 94.9% leased with a weighted average remaining lease term of 9.2 years. Corporate tenant lease expirations for the remainder of 2003 represent 1.8% of annualized total revenue for second quarter 2003. At quarter end, 87.0% of the Company's corporate lease customers were public companies (or subsidiaries of public companies).

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.

The Company assigns two separate quarterly risk ratings to its structured finance assets using a "one" to "five" scale. The Company assigns a rating representing the Company's evaluation of the risk of principal loss, and a rating representing performance compared to original underwriting. Corporate tenant lease risk ratings reflect our assessment of the quality and longevity of the cash flow yield from the asset. Assets with risk ratings of "four" and "five" indicate management time and attention is required, and a "five" rating denotes a potential problem asset. In addition to the ratings system, the Company maintains a "watch list" of assets that require highly proactive asset management.

Based upon the Company's second quarter 2003 review, the weighted average risk ratings of the Company's structured finance assets was 2.52 for risk of principal loss, compared to last quarter's rating of 2.54, and 3.00 for performance compared to original underwriting, compared to last quarter's rating of 2.95. The weighted average risk rating for corporate tenant lease assets was 2.79 at the end of the second quarter, an increase from the prior quarter's rating of 2.76.

For the second quarter, the Company added two loans and one corporate tenant lease asset to its credit watch list. The Company now has seven loans and three corporate tenant lease assets on the list, with a combined book value of $188.5 million as of June 30, 2003, up from $115.2 million at March 31, 2003. The Company is currently comfortable that it has adequate collateral to support the book value for each of the watch list assets.

At quarter end, accumulated loan loss reserves and other asset-specific credit protection represented an aggregate of approximately 5.86% of the gross book value of the Company's loans. In addition, cash deposits, letters of credit, allowances for doubtful accounts and accumulated depreciation relating to corporate tenant lease assets represented 9.84% of the gross book value of the Company's corporate tenant lease assets at quarter end. At June 30, 2003, the Company added two assets and removed two assets from non-accrual status. The Company now has three assets on non-accrual status with an aggregate gross book value of $24.2 million, or 0.4% of the gross book value of the Company's investments. Each of the Company's three non-accrual assets continues to pay as agreed.

Timothy J. O'Connor, iStar Financial's chief operating officer, stated, "Our overall asset quality remains strong despite the continued weak economic and commercial real estate environment. While we have experienced a slight decline in the overall performance rating of our collateral, the better-than- average rating for risk of principal loss shows the stability of our portion in our borrowers' capital structures. Our risk management team continues to proactively identify and address potential asset issues and will continue to protect our capital by working with borrowers when necessary."

Other Developments

On July 1, 2003, iStar Financial declared a regular quarterly cash dividend of $0.6625 per common share for the quarter ended June 30, 2003.

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

iStar Financial will hold a quarterly earnings conference call at 10:00 a.m. ET today, July 24, 2003. This conference call will be broadcast live over the Internet and can be accessed by all interested parties through iStar Financial's website, www.istarfinancial.com, under the "investor relations" section. To listen to the live call, please go to the website's "investor relations" section at least 15 minutes prior to the start of the call to register, download and install any necessary audio software. For those who are not available to listen to the live broadcast, a replay will be available shortly after the call on the iStar Financial website.

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


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

                                     Three Months Ended   Six Months Ended
                                           June 30,            June 30,
                                       2003      2002      2003       2002
    Revenue:
       Interest income               $74,079   $64,395  $147,506   $120,271
       Operating lease income         66,971    58,680   132,495    113,654
       Other income                    8,440     7,716    12,769     16,441
         Total revenue               149,490   130,791   292,770    250,366

    Costs and expenses:
       Interest expense               50,191    58,941    98,171    100,630
       Operating costs - corporate
        tenant lease assets            3,898     2,971     7,758      5,992
       Depreciation and amortization  13,711    11,610    26,983     22,194
       General and administrative      9,038     8,144    16,719     14,761
       General and administrative -
        stock-based compensation
        expense                          866     6,908     1,689      7,820
       Provision for loan losses       1,750     2,000     3,500      3,750
         Total costs and expenses     79,454    90,574   154,820    155,147

    Net income before other items     70,036    40,217   137,950     95,219
         Equity in (loss) earnings
          from joint ventures and
          unconsolidated subsidiaries   (100)      418      (158)     1,216
         Minority interest in
           consolidated entities         (40)      (41)      (79)       (81)
         (Loss) income from
           discontinued operations      (150)    1,324      (278)     2,674
         Gain from discontinued
          operations                      --       595       264        595
    Net income                        69,746    42,513   137,699     99,623

    Preferred dividends               (9,227)   (9,227)  (18,454)   (18,454)

    Net income allocable to common
     shareholders and HPU holders    $60,519   $33,286  $119,245    $81,169

    Net income per common share: (1)
         Basic                         $0.60     $0.38     $1.20      $0.92
         Diluted (2)                   $0.59     $0.36     $1.16      $0.89

    Weighted average common shares
     outstanding:
         Basic                        99,445    88,656    98,784     88,193
         Diluted                     102,389    92,039   101,647     91,263

      (1) For the three months ended June 30, 2003, net income per basic and
          diluted common share excludes $494 and $481 of net income  allocable
          to HPU holders, respectively.  For the six months ended June 30,
          2003, net income per basic and diluted common share excludes
          $979 and $952 of net income allocable to HPU holders, respectively.
      (2) For the three and six months ended June 30, 2003, net income used to
          calculate diluted earnings per common share includes joint venture
          income of $40 and $79, respectively.


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

                                     Three Months Ended   Six Months Ended
                                          June 30,            June 30,
                                       2003      2002      2003       2002

    ADJUSTED EARNINGS: (1)
    Net income                       $69,746   $42,513  $137,699    $99,623
    Add: Joint venture income            251        --       500        521
    Add: Depreciation                 13,711    11,655    26,983     22,285
    Add: Joint venture depreciation
     and amortization                    982     1,221     1,994      2,438
    Add: Amortization                  6,957    14,232    13,408     19,967
    Less: Preferred dividends         (9,227)   (9,227)  (18,454)   (18,454)
    Less: Gain from discontinued
     operations                           --      (595)     (264)      (595)

    Adjusted earnings allocable to
     common shareholders and HPU
     holders: (2)
       Basic                         $82,169   $59,799  $161,366   $125,264
       Diluted                       $82,420   $59,799  $161,866   $125,785

    Adjusted earnings per common
     share:(3)
       Basic                           $0.82     $0.67     $1.62      $1.42
       Diluted                         $0.80     $0.65     $1.58      $1.38

    Weighted average common shares
     outstanding:
       Basic                          99,445    88,656    98,784     88,193
       Diluted                       102,687    92,039   101,945     91,263

    Common shares outstanding at end
     of period:
       Basic                         100,300    89,165   100,300     89,165
       Diluted                       103,541    92,513   103,541     92,513

    (1) Adjusted earnings should be examined in conjunction with net income as
        shown in the Consolidated Statements of Operations. Adjusted earnings
        should not be considered as an alternative to net income (determined
        in accordance with GAAP) as an indicator of the Company's performance,
        or to cash flows from operating activities (determined in accordance
        with GAAP) as a measure of the Company's liquidity, nor is this
        measure indicative of funds available to fund the Company's cash needs
        or available for distribution to shareholders. 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) Includes $3,950 of prepayment penalties associated with early
        extinguishment of debt and a $6,076 non-cash charge related to
        performance-based vesting of restricted shared granted under the
        Company's long-term incentive plan for the three months and six months
        ended June 30, 2002.
    (3) For the three months ended June 30, 2003, net income per basic and
        diluted common share excludes $671 and $652 of net income  allocable
        to HPU holders, respectively.  For the six months ended June 30, 2003,
        net income per basic and diluted common share excludes $1,324 and
        $1,288 of net income allocable to HPU holders, respectively.


                               iStar Financial Inc.
                            Consolidated Balance Sheets
                                  (In thousands)

                                                As of               As of
                                            June 30, 2003    December 31, 2002
                                               (unaudited)

    ASSETS

    Loans and other lending investments, net    $3,409,989        $3,050,342
    Corporate tenant lease assets, net           2,332,499         2,291,805
    Investments in and advances to joint
     ventures and unconsolidated subsidiaries       30,658            30,611
    Assets held for sale                            24,800            28,501
    Cash and cash equivalents                       54,925            15,934
    Restricted cash                                 53,884            40,211
    Accrued interest and operating lease
     income receivable                              27,321            26,804
    Deferred operating lease income receivable      43,893            36,739
    Deferred expenses and other assets             147,295            90,750
                    Total assets                $6,125,264        $5,611,697

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Accounts payable and other liabilities        $122,678          $117,001
    Dividends payable                                5,225             5,225

    Debt obligations:
            Unsecured senior notes                 656,619           617,317
            Unsecured revolving credit facilities       --                --
            Secured revolving credit facilities  1,113,164         1,273,754
            Secured term loans                     678,843           682,615
            iStar Asset Receivables secured
             notes                               1,353,543           871,943
            Other debt obligations                  40,687            15,961
                    Total liabilities           $3,970,759        $3,583,816
    Minority interest                                2,581             2,581
    Shareholders' equity                         2,151,924         2,025,300
                    Total liabilities and
                     shareholders' equity       $6,125,264        $5,611,697


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

    PERFORMANCE STATISTICS

                                     Three Months    Six Months
                                        Ended          Ended
                                       June 30,       June 30,
    Return on Average Book Assets        2003           2003

    Adjusted basic earnings
     allocable to common
     shareholders and HPU holders(1)   $82,169       $161,366
    Plus: Preferred dividends            9,227         18,454
    Adjusted basic earnings before
     preferred dividends               $91,396       $179,820
    Adjusted basic earnings before
     preferred dividends -
     annualized (A)                   $365,584       $359,640
    Average total book assets (B)   $5,999,811     $5,868,480
    Return on average book assets
     (A)/(B)                               6.1%           6.1%

    Return on Average Common Book
     Equity

    Adjusted basic earnings
     allocable to common
     shareholders and HPU holders(1)   $82,169       $161,366
    Adjusted basic earnings
     allocable to common
     shareholders and HPU holders -
     annualized (C)                   $328,676       $322,732
    Average total book equity       $2,132,306     $2,088,612
    Less: Average book value of
     preferred equity                 (370,769)      (370,728)
    Average common book equity (D)  $1,761,537     $1,717,884
    Return on average common book
     equity (C)/(D)                       18.7%          18.8%

    Efficiency Ratio

    General & administrative expenses   $9,038        $16,719
    Plus: General and administrative -
     stock-based compensation              866          1,689
    Total corporate overhead (E)        $9,904        $18,408

    Total revenue (F)                 $149,490       $292,770

    Efficiency ratio (E)/(F)               6.6%           6.3%

    CREDIT STATISTICS

    Book Debt / Equity

    Book Debt (A)                   $3,842,856
    Total Book Equity (B)           $2,151,924
    Book Debt / Book Equity (A)/(B)        1.8x

    (1) Adjusted earnings should be examined in conjunction with net income as
        shown in the Consolidated Statements of Operations. Adjusted earnings
        should not be considered as an alternative to net income (determined
        in accordance with GAAP) as an indicator of the Company's performance,
        or to cash flows from operating activities (determined in accordance
        with GAAP) as a measure of the Company's liquidity, nor is this
        measure indicative of funds available to fund the Company's cash needs
        or available for distribution to shareholders. 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)


    CREDIT STATISTICS  (cont.)
                                          Three Months Ended  Six Months Ended
    Interest Coverage                       June 30, 2003      June 30, 2003

    EBITDA (1) (A)                              $133,838           $262,946

    GAAP interest expense (B)                    $50,191            $98,171

    EBITDA / GAAP interest expense (A)/(B)           2.7x               2.7x

    Fixed Charge Coverage

    EBITDA (1) (C)                              $133,838           $262,946

    GAAP interest expense                        $50,191            $98,171
    Plus: preferred dividends                      9,227             18,454
    Total GAAP interest expense and
     preferred dividends (D)                     $59,418           $116,625

    EBITDA / GAAP interest expense and
     preferred dividends (C)/(D)                     2.3x               2.3x


    Ratio of earnings to fixed charges               2.4x               2.4x

    Ratio of earnings to fixed charges
     and preferred stock dividends                   2.0x               2.0x

    RECONCILIATION OF NET INCOME TO EBITDA

    Net Income                                   $69,746           $137,699
    Add:  Interest expense                        50,191             98,171
    Add:  Depreciation and amortization           13,711             26,983
    Add:  Minority interest in
          consolidated entities                       40                 79
    Add:  (Loss) income from discontinued operations 150                278
    Add:  Gain from discontinued operations           --               (264)

    EBITDA (1)                                  $133,838           $262,946

    (1) EBITDA should be examined in conjunction with net income as shown in
        the Consolidated Statements of Operations. EBITDA should not be
        considered as an alternative to net income (determined in accordance
        with GAAP) as an indicator of the Company's performance, or to cash
        flows from operating activities (determined in accordance with GAAP)
        as a measure of the Company's liquidity, nor is this measure
        indicative of funds available to fund the Company's cash needs or
        available for distribution to shareholders. 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)

      FINANCING VOLUME SUMMARY STATISTICS
      Three Months Ended June 30, 2003             LOAN ORIGINATIONS
                                                                Total/
                                            Fixed   Floating    Weighted
                                             Rate      Rate     Average

      Amount funded                        $84,166  $378,850  $463,016
      Weighted average GAAP yield            11.07%     6.24%     7.12%
      Weighted average all-in
       spread/margin (basis points) (1)       +787      +498        --
      Weighted average first $ loan-to-
       value ratio                            70.8%     20.1%     29.4%
      Weighted average last $ loan-to-
       value ratio                            81.9%     66.6%     69.4%

     UNFUNDED COMMITMENTS

     Number of loans with unfunded
      commitments                                                       14
                                                                         0
     Discretionary commitments                                     $71,000
     Non-discretionary commitments                                 115,548
     Total unfunded commitments                                   $186,548

     Estimated weighted average
     funding period                                Approximately 1.3 years


     RECONCILIATION OF DILUTED ADJUSTED EPS
     GUIDANCE TO GAAP DILUTED EPS GUIDANCE (2)

                                              Three Months Ended   Year Ended
                                                  September 30,   December 31,
                                                      2003            2003

    GAAP earnings per diluted common share
     guidance                                      $0.62-$0.64   $2.34-$2.44
    Add: Depreciation and amortization per
     diluted common share                          $0.18-$0.19   $0.81-$0.86
    Adjusted earnings per diluted common share
     guidance                                      $0.81-$0.82   $3.20-$3.25

    (1) 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.
    (2) Adjusted earnings should be examined in conjunction with net income as
        shown in the Consolidated Statements of Operations. Adjusted earnings
        should not be considered as an alternative to net income (determined
        in accordance with GAAP) as an indicator of the Company's performance,
        or to cash flows from operating activities (determined in accordance
        with GAAP) as a measure of the Company's liquidity, nor is this
        measure indicative of funds available to fund the Company's cash needs
        or available for distribution to shareholders.  It should be noted
        that the Company's manner of calculating adjusted earnings may differ
        from the calculations of similarly-titled  measures by other
        companies.


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

     PORTFOLIO STATISTICS AS OF JUNE 30, 2003 (1)

     Security Type                                      $                 %
     Corporate Tenant Leases                         $2,541             42.5 %
     First Mortgages (2)                              2,382             39.8
     Corporate/Partnership Loans/Other                  814             13.6
     Second Mortgages                                   247              4.1
                Total                                $5,984            100.0 %

     Collateral Type                                    $                 %
     Office (CTL)                                    $1,584             26.5 %
     Office (Lending)                                 1,205             20.1
     Industrial/R&D                                     886             14.8
     Hotel (Lending)                                    638             10.7
     Apartment/Residential                              346              5.8
     Entertainment/Golf                                 298              5.0
     Mixed Use/Mixed Collateral                         292              4.9
     Hotel (Investment-Grade CTL)                       271              4.5
     Retail                                             229              3.8
     Conference Center                                  138              2.3
     Other                                               97              1.6
                Total                                $5,984            100.0 %

     Product Line                                       $                 %
     Corporate Tenant Leasing                        $2,541             42.5 %
     Structured Finance                               1,749             29.2
     Corporate Finance                                  723             12.1
     Portfolio Finance                                  592              9.9
     Loan Acquisition                                   379              6.3
                Total                                $5,984            100.0 %

     Collateral Location                                $                 %
     West                                            $1,610             26.9 %
     Northeast                                        1,286             21.5
     Southeast                                          702             11.7
     South                                              678             11.3
     Mid-Atlantic                                       651             10.9
     Central                                            514              8.6
     North Central                                      244              4.1
     Northwest                                          153              2.6
     Southwest                                           98              1.6
     Various                                             48              0.8
                Total                                $5,984            100.0 %

    (1) Figures presented prior to loan loss reserves and accumulated
        depreciation.
    (2) Includes junior participation interests in first mortgages.

SOURCE iStar Financial Inc.

Catherine D. Rice, Chief Financial Officer, Andrew C.
Richardson, Executive Vice President - Capital Markets, or Erin C. Gatewood,
Associate - Investor Relations, all of iStar Financial Inc., +1-212-930-9400
http://www.istarfinancial.com
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