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10/23/2003

iStar Financial Announces Record Quarterly Earnings

    - Adjusted earnings per diluted common share increases to a record
      $0.83 for third quarter 2003.

    - New financing activity during third quarter totals a record
      $847.8 million in 15 separate transactions.

    - First mortgage, first mortgage participation transactions and
      investment grade corporate tenant leases comprise 68% of third quarter
      financing commitments.

    - iStar Financial issues 7.80% Cumulative Redeemable Series F Preferred
      Stock.

NEW YORK, Oct. 23 /PRNewswire-FirstCall/ -- iStar Financial Inc. (NYSE: SFI) reported that adjusted earnings for the quarter ended September 30, 2003 were $0.83 per diluted common share, up from $0.67 per diluted common share for the quarter ended September 30, 2002. Adjusted earnings allocable to common shareholders for third quarter 2003 were $87.0 million on a diluted basis, compared to $62.5 million for third 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 third quarter was $66.1 million, or $0.63 per diluted common share, compared with $43.4 million, or $0.47 per diluted common share, in the third quarter of 2002. Third quarter 2002 net income includes an $8.9 million ($0.10 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 third quarter of 2003, iStar Financial achieved a return on average book assets of 6.1% and a return on average common book equity of 19.5%, while leverage remained unchanged from last quarter at 1.8x book equity. Net investment income for the quarter ended September 30, 2003 increased to a record $91.2 million, up 16.3% from $78.4 million for the third quarter of 2002. Net investment income represents interest income, operating lease income and equity in earnings from joint ventures and unconsolidated subsidiaries, less interest expense, operating costs for corporate tenant lease assets and loss on early extinguishment of debt in each case as computed in accordance with GAAP.

iStar Financial announced that during the third quarter, it closed 15 new financing commitments for a total of $847.8 million, of which $815.2 million was funded during the quarter. In addition, the Company funded $12.1 million under seven pre-existing commitments and received $435.5 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, "We are very pleased with our results this quarter, and our asset quality and balance sheet remain solid despite continuing weak U.S. commercial real estate fundamentals. During the quarter iStar Financial continued to provide value-added financings for its high-end real estate and corporate customers. Repeat customer transactions increased to almost $5 billion and we continued to build diversification into our asset base with total assets now exceeding $6.5 billion. While real estate fundamentals remain weak in most markets, our underwriting reflects these conditions and we continue to see opportunities to generate safe, high quality income streams."

Mr. Sugarman continued, "Our investment pipeline remains strong and reflects our increasing market penetration and reputation for meeting our customers' needs. In addition, because we match fund our assets, recent volatility in interest rates is not expected to meaningfully impact our business. Our ROAs and ROEs have historically remained steady in both high and low interest rate environments."


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

    Net investment income (1)            $91,244  $78,378  $263,577   205,376
    Other income                           9,971    4,822    22,741    21,263
    Non-interest expense                 (27,448) (32,225)  (76,140)  (80,562)
    Net income before minority interest  $73,767  $50,975  $210,178  $146,077

    Minority interest in consolidated
     entities                                (40)     (40)     (119)     (122)
    Income from discontinued operations      450    1,612     1,555     5,620
    Gain from discontinued operations        701      123       964       717
    Preferred dividend requirements       (8,258)  (9,227)  (26,712)  (27,681)
    Net income allocable to common
     shareholders and HPU holders (2)    $66,620  $43,443  $185,866  $124,611

    (1) Net investment income for the nine months ended September 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
                                              September 30,      December 31,
                                                  2003              2002
                                               (unaudited)

     Loans and other lending investments, net  $3,579,479        $3,050,342
     Corporate tenant lease assets, net         2,519,050         2,291,805
     Total assets                               6,505,785         5,611,697
     Debt obligations                           4,114,348         3,461,590
     Total liabilities                          4,233,776         3,583,816
     Total shareholders' equity                 2,267,105         2,025,300


    Transaction Volume

In the third quarter of 2003, iStar Financial generated $847.8 million in new financing commitments in 15 separate transactions. The Company also funded an additional $12.1 million under seven pre-existing financing commitments and received $435.5 million in loan repayments. Of the Company's third quarter financing commitments, 45.3% represented first mortgage and first mortgage participation transactions, and 22.3% represented long-term investment grade corporate tenant lease transactions.

During the quarter, the weighted average first dollar and last dollar loan-to-value ratio on new loan commitments was 27.6% and 69.2%, 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, "We continue to see attractive risk-adjusted returns in our core real estate finance business across a variety of different asset types including office, hotel and multifamily. While we reached a new financing volume record this quarter, we maintain a cautious outlook with respect to commercial real estate fundamentals. Our new financings continue to be dominated by first mortgages and investment grade corporate tenant leases, reflecting our near-term outlook."

Mr. Sugarman continued, "As we anticipated, repayments were relatively high this quarter despite the upward trend in interest rates as many of our borrowers have taken advantage of the strong sales market for institutional- quality assets."

Capital Markets

In September 2003, iStar Financial completed an underwritten public offering of 4,000,000 shares of its 7.80% Series F Cumulative Redeemable Preferred Stock, having a liquidation preference of $25.00 per share. The Company used the approximately $96.6 million of net proceeds from the offering to repay secured debt. At September 30, 2003, the Company had $1.2 billion outstanding under its five primary credit facilities, which total $2.7 billion in committed capacity.

Catherine D. Rice, iStar Financial's chief financial officer, stated, "We are pleased to have cost-effectively raised preferred equity capital in this volatile interest rate environment. With the completion of this offering, iStar Financial now has over $2.2 billion of tangible equity capital supporting its asset base."

Ms. Rice continued, "During the quarter, we met with the rating agencies as part of our annual update process. Yesterday, Moody's confirmed our senior unsecured debt rating at Ba1, with a positive outlook. We were hopeful that we would receive an upgrade from Moody's in the fourth quarter; however, we remain on positive outlook and Moody's has indicated that it expects to revisit our rating sometime in the second quarter of next year. We expect to receive feedback from S&P later this quarter."

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 $3.24-$3.25. iStar Financial also expects adjusted earnings per diluted common share for the fourth quarter of $0.84-$0.85. iStar Financial expects GAAP earnings per diluted common share of $2.39-$2.42 for 2003. The Company also expects GAAP earnings per diluted common share for the fourth quarter of $0.60-$0.63. The 2003 earnings guidance assumes net asset growth of $1.1-$1.3 billion, which is higher than the Company's previous estimate of $800 million to $1.0 billion. The $1.1-$1.3 billion figures assume approximately $2.3 billion of gross originations and approximately $1.1 billion of loan repayments.

Ms. Rice commented, "Because we completed over $770 million of net asset growth through September 30, 2003 and the investment pipeline remains strong, we are slightly increasing our net asset growth guidance for full year 2003. In addition, we expect other income for the fourth quarter 2003 to be higher than our approximate $10 million quarterly run rate due to prepayment penalties from two loans that are expected to prepay in the fourth quarter. For these reasons, we currently expect our full year earnings results for 2003 to come in at the upper end of the previously communicated range of $3.20-$3.25 and $2.34-$2.44 for adjusted EPS and GAAP EPS, respectively."

Due to strong share price performance, our CEO contingently vested in the remaining 400,000 incentive shares out of a total 2 million available to be earned by him under the Company's long-term incentive plan on October 3, 2003. As we have disclosed in our public SEC filings, these shares will become fully vested, subject to certain conditions, on March 30, 2004, at which time the Company would record in "General and Administrative - Stock-based Compensation Expense" a one-time charge equal to the Company's stock price at that date multiplied by the 2 million vested shares. For example, if the closing stock price on March 30, 2004 were $38.00, the charge to earnings would be $76 million.

Ms. Rice commented, "When our CEO entered into his employment agreement with the Company almost three years ago, it was structured so that he would receive no incentive shares if the Company generated less than a 20% average annual total rate of return for its shareholders from January 1, 2001 through March 30, 2004. In order to earn the maximum 2 million shares available, the Company would have had to generate a greater than 35% average annual total rate of return during the same period. As of October 3, 2003, the Company generated a 39.7% average annual total rate of return for its shareholders since January 1, 2001, compared to -7.2%, - 4.6% and 15.8% for the S&P 500 Index, the Russell 1000 Financials Index and the Morgan Stanley REIT Index, respectively. This represents over $2.4 billion of shareholder value created since January 1, 2001."

In addition, during the first quarter the Company anticipates that its CFO will vest in the 100,000 restricted performance shares awarded to her under the Company's long-term incentive plan in connection with her joining the Company, and approximately 155,000 common shares will be issued to the principals of the former ACRE Partners, representing the final contingent consideration relating to the acquisition of this company in 2000. The first quarter 2004 charge relating to the CFO's restricted shares and ACRE consideration would be calculated in a manner similar to the CEO's incentive share vesting, and would be approximately $10 million in the aggregate (assuming a $38.00 stock price on the respective vesting dates).

Before giving effect to the compensation charges described in the preceding paragraphs, the Company currently expects diluted adjusted EPS for fiscal year 2004 of $3.40-$3.48, and diluted GAAP EPS of $2.43-$2.53. Our 2004 earnings will be reduced by the resulting amounts of the compensation charges. We cannot predict the amount of the aggregate charge at this time, as it will be a function of our stock price at future dates. The Company's 2004 earnings guidance assumes approximately $1.8 billion of net asset growth.

Ms. Rice commented, "Despite the current low interest rates that we believe will continue into next year, we expect to generate steady earnings growth, before giving effect to the first quarter compensation charges, and to maintain a substantial earnings and free cash flow cushion for our dividend. Our $1.8 billion net asset growth assumption reflects the increased velocity of our business, and we believe we have been appropriately conservative with respect to net investment margins and releasing assumptions for next year."

As of September 30, 2003, the Company's loan portfolio consisted of 61% floating rate and 39% fixed rate loans. Approximately 62% of the Company's floating rate loans have LIBOR floors with a weighted average LIBOR floor of 2.25%. The weighted average GAAP LIBOR margin, inclusive of LIBOR floors, was 5.73%. The weighted average GAAP yield of the Company's fixed rate loans was 11.59%.

Risk Management

At September 30, 2003, first mortgages, participations in first mortgages, corporate tenant leases and corporate financing transactions collectively comprised 90.2% 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 27.6% and 69.0%, respectively. As of September 30, 2003 the weighted average debt service coverage for all structured finance assets, based on either year-to-date cash flow or trailing 12-month cash flow through June 30, 2003, was 2.2x.

At quarter end, the Company's corporate tenant lease assets were 92.7% leased with a weighted average remaining lease term of 9.6 years. Corporate tenant lease expirations for the remainder of 2003 represent 0.7% of annualized total revenue for third quarter 2003. At quarter end, 87.6% 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 third quarter 2003 review, the weighted average risk ratings of the Company's structured finance assets was 2.65 for risk of principal loss, compared to last quarter's rating of 2.52, and 3.11 for performance compared to original underwriting, compared to last quarter's rating of 3.00. The weighted average risk rating for corporate tenant lease assets was 2.69 at the end of the third quarter, an improvement from the prior quarter's rating of 2.79.

For the third quarter, the Company added one corporate tenant lease asset to its credit watch list. One loan asset on the watch list at June 30, 2003, with a book value of $3.2 million, paid off during the quarter. Additionally, one loan asset and one CTL asset were removed from the watch list. The Company now has five loans and three corporate tenant lease assets on the list, with a combined book value of $107.6 million as of September 30, 2003, down from $188.5 million at June 30, 2003.

One of the loans on the watch list is the Company's 90% interest in a $31.6 million partnership loan on a class A office building that was acquired at a premium to its face as part of the Company's acquisition of Lazard Freres' structured finance portfolio in 1998. Lazard continues to retain a 10.0% interest in the loan. The loan bears interest at 17.50%, 11.00% of which is paid currently and 6.50% of which is accrued. In August 2003 the borrower stopped making its debt service payments due to insufficient cash flow caused by vacancies at the property. The Company believes the underlying collateral value supports its basis in the outstanding unpaid principal balance of the loan, but believes the $3.3 million unamortized acquisition premium associated with this loan has been impaired. As a result, the Company wrote off the $3.3 million premium against its loan loss reserves in the third quarter. 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 6.55% 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 9.58% of the gross book value of the Company's corporate tenant lease assets at quarter end. At September 30, 2003, the Company added one asset to its non-accrual status. The Company now has four assets on non-accrual status with an aggregate gross book value of $51.3 million, or 0.8% of the gross book value of the Company's investments.

Timothy J. O'Connor, iStar Financial's chief operating officer, stated, "Our assets continue to perform well despite the continuing challenges of weak commercial real estate market conditions. Debt service coverage on our loans remains strong, and the overall increase in our loan risk ratings primarily reflects the impact of this difficult environment on our borrowers. Improvement in our corporate tenant risk ratings is driven by stronger overall credit quality of our corporate customers and longer average least terms."

Mr. O'Connor continued, "As in the past, our risk management team continues to proactively identify and address potential credit and asset issues in order to protect our capital."

Other Developments

On October 1, 2003, iStar Financial declared a regular quarterly cash dividend of $0.6625 per common share for the quarter ended September 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, October 23, 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 reports.)


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

                                      Three Months Ended   Nine Months Ended
                                          September 30,      September 30,
                                         2003      2002      2003       2002
      Revenue:
         Interest income               $77,167   $66,786  $224,672   $187,057
         Operating lease income         65,399    62,594   196,226    174,662
         Other income                    9,971     4,822    22,741     21,263
           Total revenue               152,537   134,202   443,639    382,982

      Costs and expenses:
         Interest expense               47,185    47,471   145,357    135,935
         Operating costs - corporate
          tenant lease assets            4,881     3,616    12,550      9,543
         Depreciation and amortization  13,696    12,591    40,483     34,598
         General and administrative     11,154     8,088    27,870     22,849
         General and administrative -
          stock-based compensation
          expense                          848     9,546     2,537     17,365
         Provision for loan losses       1,750     2,000     5,250      5,750
         Loss on early extinguishment
          of debt                           --        --        --     12,166
           Total costs and expenses     79,514    83,312   234,047    238,206

      Net income before other items     73,023    50,890   209,592    144,776
           Equity in earnings from
            joint ventures and
           unconsolidated subsidiaries     744        85       586      1,301
           Minority interest in
            consolidated entities          (40)      (40)     (119)      (122)
           Income from discontinued
            operations                     450     1,612     1,555      5,620
           Gain from discontinued
            operations                     701       123       964        717
      Net income                        74,878    52,670   212,578    152,292

      Preferred dividends               (8,258)   (9,227)  (26,712)   (27,681)

      Net income allocable to common
       shareholders and HPU holders    $66,620   $43,443  $185,866   $124,611

      Net income per common share: (1)
           Basic                         $0.66     $0.49     $1.85      $1.41
           Diluted (2)                   $0.63     $0.47     $1.79      $1.36

      Weighted average common shares
       outstanding:
           Basic                       100,687    89,431    99,543     88,610
           Diluted                     104,746    92,566   102,809     91,449

    (1) For the three months ended September 30, 2003, net income per basic
        and diluted common share excludes $538 and $517 of net income
        allocable to HPU holders, respectively.  For the nine months ended
        September 30, 2003, net income per basic and diluted common share
        excludes $1,517 and $1,470 of net income allocable to HPU holders,
        respectively.

    (2) For the three and nine months ended September 30, 2003, net income
        used to calculate diluted earnings per common share includes joint
        venture income of $40 and $119, respectively.


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

                                      Three Months Ended    Nine Months Ended
                                          September 30,       September 30,
                                         2003      2002      2003       2002

      ADJUSTED EARNINGS: (1)
      Net income                       $74,878   $52,670  $212,578   $152,292
      Add: Joint venture income            253        --       754        621
      Add: Depreciation                 13,774    12,730    40,756     35,053
      Add: Joint venture depreciation
       and amortization                  1,003       960     3,001      3,391
      Add: Amortization                  6,709     5,451    20,117     25,418
      Less: Preferred dividends         (8,258)   (9,227)  (26,712)   (27,681)
      Less: Gain from discontinued
       operations                         (701)     (123)     (964)      (717)

      Adjusted earnings allocable to
       common shareholders and HPU
       holders: (2) (3)
         Basic                         $87,405   $62,461  $248,776   $187,756
         Diluted                       $87,658   $62,461  $249,530   $188,377

      Adjusted earnings per common
       share:(4)
         Basic                           $0.86     $0.70     $2.48      $2.12
         Diluted                         $0.83     $0.67     $2.40      $2.05

      Weighted average common shares
       outstanding:
         Basic                         100,687    89,431    99,543     88,610
         Diluted                       105,044    92,566   103,106     91,746

      Common shares outstanding at end
       of period:
         Basic                         101,423    89,937   101,423     89,937
         Diluted                       105,780    92,577   105,384     92,954

    (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 $8,874 and $14,950 of non-cash charges related to
        performance-based vesting of restricted shares granted under the
        Company's long-term incentive plan for the three and nine months ended
        September 30, 2002.

    (3) Includes $3,950 of prepayment penalties associated with early
        extinguishment of debt for the nine months ended September 30, 2002,
        respectively.

    (4) For the three months ended September 30, 2003, net income per basic
        and diluted common share excludes $705 and $678 of net income
        allocable to HPU holders, respectively.  For the nine months ended
        September 30, 2003, net income per basic and diluted common share
        excludes $2,030 and $1,966 of net income allocable to HPU holders,
        respectively.


                               iStar Financial Inc.
                            Consolidated Balance Sheets
                                  (In thousands)

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

     ASSETS

     Loans and other lending investments, net    $3,579,479        $3,050,342
     Corporate tenant lease assets, net           2,519,050         2,291,805
     Investments in and advances to joint
      ventures and unconsolidated subsidiaries       29,957            30,611
     Assets held for sale                            34,470            28,501
     Cash and cash equivalents                       23,154            15,934
     Restricted cash                                 70,496            40,211
     Accrued interest and operating lease
      income receivable                              24,789            26,804
     Deferred operating lease income receivable      47,404            36,739
     Deferred expenses and other assets             176,986            90,750
                     Total assets                $6,505,785        $5,611,697

     LIABILITIES AND SHAREHOLDERS' EQUITY

     Accounts payable, accrued expenses
      and other liabilities                        $117,528          $117,001
     Dividends payable                                1,900             5,225

     Debt obligations:
             Unsecured senior notes                 653,563           617,317
             Unsecured revolving credit facilities  130,000                 -
             Secured revolving credit facilities  1,098,332         1,273,754
             Secured term loans                     854,645           682,615
             iStar Asset Receivables secured
              notes                               1,338,764           871,943
             Other debt obligations                  39,044            15,961
                     Total liabilities           $4,233,776        $3,583,816
     Minority interest                                4,904             2,581
     Shareholders' equity                         2,267,105         2,025,300
                     Total liabilities and
                      shareholders' equity       $6,505,785        $5,611,697


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

    PERFORMANCE STATISTICS
                                   Three Months        Nine Months
                                        Ended             Ended
                                    September 30,      September 30,
    Return on Average Book Assets        2003              2003

    Adjusted basic earnings
     allocable to common
     shareholders and HPU holders(1)   $87,405           $248,776
    Plus: Preferred dividends            8,258             26,712
    Adjusted basic earnings before
     preferred dividends               $95,663           $275,488
    Adjusted basic earnings before
     preferred dividends -
     annualized (A)                   $382,652           $367,317
    Average total book assets (B)   $6,315,619         $6,058,741
    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)                    $87,405           $248,776
    Adjusted basic earnings allocable
     to common shareholders and HPU
     holders -annualized(C)           $349,620           $331,701
    Average total book equity       $2,209,610         $2,146,202
    Less: Average book value of
     preferred equity                 (416,388)          (416,305)
    Average common book equity (D)  $1,793,222         $1,729,897
    Return on average common book
     equity (C)/(D)                       19.5%              19.2%

    Efficiency Ratio

    General & administrative
     expenses                          $11,154            $27,870
    Plus: General and administrative
     - stock-based compensation            848              2,537
    Total corporate overhead (E)       $12,002            $30,407

    Total revenue (F)                 $152,537           $443,639

    Efficiency ratio (E) / (F)             7.9%               6.9%


    CREDIT STATISTICS

    Book Debt / Equity

    Book Debt (A)                   $4,114,348
    Total Book Equity (B)           $2,267,105
    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   Nine Months Ended
      Interest Coverage                September 30, 2003  September 30, 2003

      EBITDA (1) (A)                          $134,648           $396,018

      GAAP interest expense (B)                $47,185           $145,357

      EBITDA / GAAP interest expense (A)
       / (B)                                       2.9x               2.7x

      Fixed Charge Coverage

      EBITDA (1) (C)                           $134,648           $396,018

      GAAP interest expense                     $47,185           $145,357
      Plus: preferred dividends                   8,258             26,712
      Total GAAP interest expense and
       preferred dividends (D)                  $55,443           $172,069

      EBITDA / GAAP interest expense and
       preferred dividends (C) / (D)                2.4x               2.3x

      Ratio of earnings to fixed charges            2.6x               2.5x

      Ratio of earnings to fixed charges
       and preferred stock dividends                2.2x               2.1x


      RECONCILIATION OF NET INCOME TO EBITDA

      Net Income                                 $74,878          $212,578
      Add:  Interest expense                      47,185           145,357
      Add:  Depreciation and amortization         13,696            40,483
      Add:  Minority interest in
       consolidated entities                          40               119
      Less:  Income from discontinued operations    (450)           (1,555)
      Less:  Gain from discontinued operations      (701)             (964)

      EBITDA (1)                                $134,648          $396,018

    (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
       September 30, 2003                    LOAN ORIGINATIONS
                                                            Total/
                                                 Floating  Weighted  CORPORATE
                                      Fixed Rate   Rate    Average    LEASING
      Amount funded                    $101,613  $506,328  $607,941  $207,236
      Weighted average GAAP yield        11.96%    10.15%    10.45%     8.56%
      Weighted average all-in
       spread/margin (basis points)(1)    + 773     + 903       --      + 418
      Weighted average first $
       loan-to-value ratio                 0.0%     34.4%     29.1%        --
      Weighted average last $
       loan-to-value ratio                56.2%     73.8%     71.1%        --

     UNFUNDED COMMITMENTS

     Number of loans with unfunded commitments                             15
                                                                            0
     Discretionary commitments                                        $71,000
     Non-discretionary commitments                                    135,978
     Total unfunded commitments                                      $206,978

     Estimated weighted average
      funding period                                  Approximately 1.0 years


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

                       Three Months Ended      Year Ended       Year Ended
                           December 31,        December 31,     December 31,
                               2003                2003             2004
     GAAP earnings per
      diluted common share
      guidance             $0.60-$0.63         $2.39-$2.42      $2.43-$2.53
     Add: Depreciation
      and amortization
      per diluted common
      share                $0.22-$0.24         $0.83-$0.85      $0.95-$0.97

     Adjusted earnings
      per diluted common
      share guidance       $0.84-$0.85         $3.24-$3.25      $3.40-$3.48

    (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 SEPTEMBER 30, 2003 (1)

     Security Type                                      $                 %
     Corporate Tenant Leases                         $2,751             43.2 %
     First Mortgages (2)                              2,517             39.6
     Corporate/Partnership Loans/Other                  921             14.5
     Second Mortgages                                   172              2.7
                Total                                $6,361            100.0 %

     Collateral Type                                    $                 %
     Office (CTL)                                    $1,782             28.0 %
     Office (Lending)                                 1,111             17.5
     Industrial/R&D                                     900             14.1
     Hotel (Lending)                                    679             10.7
     Apartment/Residential                              479              7.5
     Recreation                                         397              6.2
     Mixed Use/Mixed Collateral                         292              4.6
     Hotel (Investment-Grade CTL)                       270              4.3
     Retail                                             181              2.8
     Conference Center                                  138              2.2
     Other                                              132              2.1
                Total                                $6,361            100.0 %

     Product Line                                       $                 %
     Corporate Tenant Leasing                        $2,751             43.2 %
     Structured Finance                               1,610             25.3
     Portfolio Finance                                  980             15.4
     Corporate Finance                                  622              9.8
     Loan Acquisition                                   398              6.3
                Total                                $6,361            100.0 %

     Collateral Location                                $                 %
     West                                            $1,597             25.1 %
     Northeast                                        1,409             22.1
     Southeast                                          810             12.8
     Mid-Atlantic                                       676             10.6
     South                                              674             10.6
     Central                                            595              9.4
     North Central                                      263              4.1
     Northwest                                          191              3.0
     Southwest                                           98              1.5
     Various                                             48              0.8
                Total                                $6,361            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.
    -0-                             10/23/2003
    /CONTACT:  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/
    /Web site:  http://www.istarfinancial.com /
    (SFI)

CO:  iStar Financial Inc.
ST:  New York
IN:  FIN
SU:  ERN

AC 
-- NYTH052 --
7575 10/23/2003 07:31 EDT http://www.prnewswire.com
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