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04/25/2006

iStar Financial Announces First Quarter 2006 Results

     - First quarter new financing commitments total $663 million in 16
       separate transactions.

     - Adjusted earnings per diluted common share were $0.90 for the first
       quarter 2006, up 22% year-over-year.

     - Total revenues reach a record $224.6 million for the first quarter
       2006.

     - Company reaffirms full year 2006 adjusted earnings per diluted common
       share guidance of $3.35 - $3.50.

NEW YORK, April 25 /PRNewswire-FirstCall/ -- iStar Financial Inc. (NYSE: SFI), the leading publicly traded finance company focused on the commercial real estate industry, today reported first quarter 2006 results.

iStar Financial reported adjusted earnings for the quarter ended March 31, 2006 of $0.90 per diluted common share versus $0.74 per diluted common share for the first quarter 2005. Adjusted earnings allocable to common shareholders for the first quarter 2006 were $102.6 million on a diluted basis, compared to $83.5 million for the first quarter 2005. Adjusted earnings represents net income computed in accordance with GAAP, adjusted for preferred dividends, depreciation, depletion, amortization and gain (loss) from discontinued operations.

Net income allocable to common shareholders for the first quarter was $75.6 million, or $0.66 per diluted common share, compared with $58.3 million, or $0.52 per diluted common share, for the first quarter 2005.

Net investment income for the quarter was $111.2 million, compared to $93.0 million for the first quarter of 2005, primarily due to year-over-year growth of the Company's balance sheet. Net investment income represents interest income, operating lease income and equity in earnings from joint ventures, 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.

The Company announced that during the first quarter, it closed 16 new financing commitments, for a total of $663 million, of which $611 million was funded during the quarter. In addition, the Company funded $206 million under pre-existing commitments and received $474 million in principal repayments. Two transactions this quarter were sourced by the Company's recently established iStar Europe subsidiary. Cumulative repeat customer business totaled $9.2 billion at March 31, 2006.

For the quarter ended March 31, 2006, the Company generated return on average common book equity of 21.1%. The Company's debt to book equity plus accumulated depreciation/depletion and loan loss reserves, as determined in accordance with GAAP, was 2.1x for the first quarter.

Capital Markets Summary

As previously announced, the Company issued $500 million of 5.65% senior unsecured notes due 2011 and $500 million of 5.875% senior unsecured notes due 2016 during the first quarter 2006. In addition, the Company extended the final maturity date on its secured credit facility by two years to January 2008 and reduced its maximum principal amount to $500 million from $700 million. Also during the first quarter 2006, Fitch Ratings upgraded the Company's senior unsecured debt rating to 'BBB' from 'BBB-' and its preferred stock rating to 'BB+' from 'BB.' In addition, Moody's Investors Service upgraded the Company's senior unsecured ratings to 'Baa2' from 'Baa3' and its preferred stock rating to 'Ba1' from 'Ba2' and Standard and Poor's Ratings upgraded the Company's long-term unsecured senior debt rating to 'BBB' from 'BBB-' and its preferred stock rating to 'BB+' from 'BB.'

As of March 31, 2006, the Company had $538 million outstanding under $2.0 billion in credit facilities. Consistent with its match funding policy under which a one percentage point change in interest rates cannot impact adjusted earnings by more than 2.5%, as of March 31, 2006, a 100 basis point increase in rates would have increased the Company's adjusted earnings by 1.20%.

Earnings Guidance

Consistent with the Securities and Exchange Commission's Regulation FD and Regulation G, iStar Financial comments on earnings expectations within the context of its regular earnings press releases. The Company continues to expect diluted adjusted earnings per share for the fiscal year 2006 of $3.35 - $3.50, and diluted GAAP earnings per share for the fiscal year 2006 of $2.35 - $2.50, based on expected net asset growth of approximately $1.5 billion. The Company expects to fund its net asset growth with a combination of unsecured notes and equity.

Risk Management

At March 31, 2006, first mortgages, participations in first mortgages, senior loans and corporate tenant lease financing collectively comprised 87.9% of the Company's asset base versus 86.1% in the prior quarter. The Company's loan portfolio consisted of 58% floating rate and 42% fixed rate loans, with a weighted average maturity of 4.0 years. The weighted average first and last dollar loan-to-value ratio for all structured finance assets was 13.9% and 63.0%, respectively. At quarter end, the Company's corporate tenant lease assets were 95.7% leased with a weighted average remaining lease term of 11.0 years.

As of March 31, 2006, the Company's weighted average GAAP yield on its structured finance assets and corporate tenant lease assets was 10.36% and 9.75%, respectively. The company's net finance margin, calculated as the rate of return on assets less the cost of debt, improved to 3.59% from 3.26% in the prior quarter.

At March 31, 2006, the weighted average risk ratings of the Company's structured finance and corporate tenant lease assets were 2.71 and 2.42, respectively.

At quarter end, accumulated loan loss reserves and other asset-specific credit protection represented an aggregate of approximately 5.8% 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 11.9% of the gross book value of the Company's corporate tenant lease assets at quarter end.

At March 31, 2006, the Company's non-performing loan assets (NPLs) represented 0.35% of total assets. NPLs represent loans on non-accrual status and repossessed real estate collateral. At March 31, 2006, the Company had two loans on non-accrual and no repossessed assets. In addition, one asset was removed and one asset was added to the watch list this quarter, with watch list assets representing 0.71% of total assets at March 31, 2006.

Other Developments

Earlier this quarter, the Company's subsidiary, TimberStar, led the acquisition of approximately 900,000 acres of forestland and related assets in Arkansas, Louisiana and Texas from International Paper Co. for approximately $1.17 billion. Through TimberStar, the Company has committed to provide approximately $468 million of capital to a venture to fund the purchase. Due to significant interest from a number of equity sponsors, the Company has elected to syndicate part of its capital commitment, which, will ultimately reduce the Company's investment in the venture to approximately $150 - $175 million. The acquisition is expected to close during the third quarter 2006.

TimberStar seeks to acquire a geographically diverse portfolio of timberlands that generate attractive cash-on-cash yields and capital appreciation. It is focused on creating partnerships with high-quality customers through long-term supply agreements. Prior to the pending purchase of the assets from International Paper, the Company's TimberStar subsidiary had invested approximately $150 million in its timber portfolio.

Dividend and Annual Meeting

On April 3, 2006, iStar Financial declared a regular quarterly dividend of $0.77. The first quarter dividend will be payable on April 28, 2006 to shareholders of record on April 14, 2006.

The Company will host its Annual Meeting of Shareholders at The Harvard Club of New York City, located at 35 West 44th Street, New York, New York 10036 on Wednesday, May 31, 2006 at 9:00 am local time. All shareholders are cordially invited to attend.

iStar Financial Inc. is the leading publicly traded finance company focused on the commercial real estate industry. The Company primarily provides custom tailored financing to high end private and corporate owners of real estate, including senior and mezzanine real estate debt, senior and mezzanine corporate capital, and corporate net lease financing. The Company, which is taxed as a real estate investment trust ("REIT"), seeks to deliver strong dividends 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. EDT today, April 25, 2006. This conference call will be broadcast live over the Internet and can be accessed by all interested parties through iStar Financial's website, http://www.istarfinancial.com, under the "Investor Relations" section. To listen to the live call, please go to the website's "Investor Relations" section at least 15 minutes prior to the start of the call to register, download and install any necessary audio software. For those who are not available to listen to the live broadcast, a replay will be available shortly after the call on the iStar Financial website.

(Note: Statements in this press release which are not historical fact may be deemed forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although iStar Financial Inc. believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, the Company can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from iStar Financial Inc.'s expectations include 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 timing of receipt of prepayment penalties, 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.)



    Selected Income Statement Data
    (In thousands)
    (unaudited)

                                                       Three Months Ended
                                                           March 31,
                                                     2006             2005

    Net investment income                          $111,180          $92,985
    Other income                                     14,265           12,604
    Non-interest expense                            (39,535)         (35,878)
    Minority interest in consolidated entities         (248)            (205)
    Income from continuing operations               $85,662          $69,506

    Income from discontinued operations                 142              813
    Gain from discontinued operations                 2,182                -
    Preferred dividend requirements                 (10,580)         (10,580)
    Net income allocable to common
     shareholders and HPU holders (1)               $77,406          $59,739

    (1) 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
                                             March 31, 2006  December 31, 2005
                                               (unaudited)

    Loans and other lending investments, net    $4,974,891        $4,661,915
    Corporate tenant lease assets, net           3,123,970         3,115,361
    Other investments                              254,506           240,470
    Total assets                                 8,860,874         8,532,296
    Debt obligations                             6,122,828         5,859,592
    Total liabilities                            6,284,882         6,052,114
    Total shareholders' equity                   2,542,386         2,446,671


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

                                                     Three Months Ended
                                                           March 31,
                                                     2006              2005
      Revenue:
         Interest income                           $126,048          $91,618
         Operating lease income                      84,319           76,125
         Other income                                14,265           12,604
           Total revenue                            224,632          180,347

      Costs and Expenses:
         Interest expense                            93,533           68,951
         Operating costs - corporate tenant
          lease assets                                5,940            5,647
         Depreciation and amortization               19,402           17,625
         General and administrative (1)              19,133           16,003
         Provision for loan losses                    1,000            2,250
         Loss on early extinguishment of debt             -                -
           Total costs and expenses                 139,008          110,476

      Income from continuing operations before
       other items                                   85,624           69,871
           Equity in earnings from joint ventures       286             (160)
           Minority interest in consolidated
            entities                                   (248)            (205)
       Income from continuing operations             85,662           69,506

           Income from discontinued operations          142              813
           Gain from discontinued operations          2,182                -
      Net income                                     87,986           70,319

      Preferred dividends                           (10,580)         (10,580)

      Net income allocable to common shareholders
       and HPU holders                              $77,406          $59,739

      Net income per common share:
           Basic (2)                                  $0.67            $0.52
           Diluted (3) (4)                            $0.66            $0.52

      Weighted average common shares outstanding:
           Basic                                    113,243          111,469
           Diluted                                  114,357          112,674


    (1) For the three months ended March 31, 2006 and 2005, includes $1,204
        and $642 of stock-based compensation expense.

    (2) For the three months ended March 31, 2006 and 2005, excludes $1,893
        and $1,483 of net income allocable to HPU holders, respectively.

    (3) For the three months ended March 31, 2006 and 2005, excludes $1,875
        and $1,468 of net income allocable to HPU holders, respectively.

    (4) For the three months ended March 31, 2006, includes $28 of joint
        venture income.


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

                                                       Three Months Ended
                                                           March 31,
                                                     2006              2005

      ADJUSTED EARNINGS: (1)
      Net income                                    $87,986           $70,319
      Add: Depreciation, depletion and
       amortization                                  21,012            18,150
      Add: Joint venture income                          30                42
      Add: Joint venture depreciation and
       amortization                                   2,724               135
      Add: Amortization of deferred financing
       costs                                          6,113             7,526
      Less: Preferred dividends                     (10,580)          (10,580)
      Less: Gain from discontinued operations        (2,182)                -

      Adjusted earnings allocable to common
       shareholders and HPU holders:
         Basic                                     $105,073           $85,550
         Diluted                                   $105,103           $85,592

      Adjusted earnings per common share:
         Basic: (2)                                   $0.91             $0.75
         Diluted: (3)                                 $0.90             $0.74

      Weighted average common shares outstanding:
         Basic                                      113,243           111,469
         Diluted                                    114,357           112,747

      Common shares outstanding at end of period:
         Basic                                      113,268           111,494
         Diluted                                    114,375           112,764

      (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.  Rather, adjusted earnings is an additional measure
          the Company uses to analyze how its business is performing. It
          should be noted that the Company's manner of calculating adjusted
          earnings may differ from the calculations of similarly-titled
          measures by other companies.

    (2)   For the three months ended March 31, 2006 and 2005, excludes $2,569
          and $2,124 of net income allocable to HPU holders, respectively.

    (3)   For the three months ended March 31, 2006 and 2005, excludes $2,545
          and $2,102 of net income allocable to HPU holders, respectively.


                             iStar Financial Inc.
                         Consolidated Balance Sheets
                                (In thousands)

                                                  As of             As of
                                             March 31, 2006  December 31, 2005
                                               (unaudited)

     ASSETS

     Loans and other lending investments, net   $4,974,891        $4,661,915
     Corporate tenant lease assets, net          3,123,970         3,115,361
     Other investments                             254,506           240,470
     Investments in joint ventures                 198,990           202,128
     Cash and cash equivalents                      74,243           115,370
     Restricted cash                                37,580            28,804
     Accrued interest and operating lease income
      receivable                                    45,504            32,166
     Deferred operating lease income receivable     72,875            76,874
     Deferred expenses and other assets             69,112            50,005
     Goodwill                                        9,203             9,203
                   Total assets                 $8,860,874        $8,532,296



     LIABILITIES AND SHAREHOLDERS' EQUITY

     Accounts payable, accrued expenses
      and other liabilities                       $162,054          $192,522

     Debt obligations:
            Unsecured senior notes               5,092,868         4,108,477
            Unsecured revolving credit
             facilities                            538,035         1,242,000
            Secured revolving credit
             facilities                                  -                 -
            Secured term loans                     393,947           411,144
            Other debt obligations                  97,978            97,971
                   Total liabilities             6,284,882         6,052,114
     Minority interest in consolidated
      entities                                      33,606            33,511
     Shareholders' equity                        2,542,386         2,446,671
                   Total liabilities and
                    shareholders' equity        $8,860,874        $8,532,296


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

    PERFORMANCE  STATISTICS
                                           Three Months Ended
    Net Finance Margin                       March 31, 2006

    Weighted average GAAP yield of loan
     and CTL investments                          10.11%
    Less: Cost of debt                            (6.52%)
    Net Finance Margin (1)                         3.59%


    Return on Average Common Book Equity

    Adjusted basic earnings allocable to
     common shareholders and HPU holders (2)   $105,073
    Adjusted basic earnings allocable to
     common shareholders and HPU holders
     - Annualized (A)                          $420,293

    Average total book equity                $2,494,528
    Less: Average book value of preferred
     equity                                    (506,176)
    Average common book equity (B)           $1,988,352
    Return on Average Common Book
     Equity (A)/(B)                                21.1%


    Efficiency Ratio

    General and administrative expenses (C)     $19,133

    Total revenue (D)                          $224,632

    Efficiency Ratio (C)/(D)                        8.5%


    (1) Weighted average GAAP yield is the annualized sum of interest income
        and operating lease income, divided by the sum of average gross
        corporate tenant lease assets, average loans and other lending
        investments, average SFAS No. 141 purchase intangibles and average
        assets held for sale over the period.  Cost of debt is the annualized
        sum of interest expense and operating costs – corporate tenant lease
        assets, divided by the average gross debt obligations over the
        period.  Operating lease income and operating costs – corporate tenant
        lease assets exclude SFAS No. 144 adjustments from discontinued
        operations of $165 and ($8), respectively.  The Company does not
        consider net finance margin to be a  measure of the Company's
        liquidity or cash flows.  It is one of several measures that
        management considers to be an indicator of the profitability of its
        operations.

    (2) Adjusted earnings should be examined in conjunction with net income 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.  Rather, adjusted
        earnings is an additional measure the Company uses to analyze how its
        business is performing.  It should be noted that the Company's manner
        of calculating adjusted earnings may differ from the calculations of
        similarly-titled measures by other companies.


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

    CREDIT STATISTICS
                                                         Three Months Ended
                                                           March 31, 2006
    Book debt (A)                                           $6,122,828

    Book equity                                             $2,542,386
    Add: Accumulated
     depreciation/depletion and loan loss reserves             365,924
    Sum of book equity, accumulated
     depreciation/depletion and loan loss reserves (B)      $2,908,310

    Book Debt / Sum of Book Equity, Accumulated
     Depreciation/Depletion and Loan Loss Reserves (A)/(B)         2.1x

    Ratio of Earnings to Fixed Charges                             1.9x

    Ratio of Earnings to Fixed Charges and Preferred
     Stock Dividends                                               1.7x

    Interest Coverage
    EBITDA (1) (C)                                            $202,819
    GAAP interest expense (D)                                  $93,533

    EBITDA / GAAP Interest Expense (C)/(D)                         2.2x

    Fixed Charge Coverage

    EBITDA (1) (C)                                            $202,819
    GAAP interest expense                                      $93,533
    Add: Preferred dividends                                    10,580
    Total GAAP interest expense and preferred dividends (E)   $104,113

    EBITDA / GAAP Interest Expense and Preferred
     Dividends (C)/(E)                                             1.9x


    RECONCILIATION OF NET INCOME TO EBITDA

    Net income                                                 $87,986
    Add: GAAP interest expense                                  93,533
    Add: Depreciation, depletion and amortization               21,300

    EBITDA (1)                                                $202,819


    (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)
                                 (unaudited)


      FINANCING VOLUME SUMMARY STATISTICS (1)

      Three Months Ended March 31, 2006      LOAN ORIGINATIONS
                                                             Total/
                                                  Floating Weighted  CORPORATE
                                       Fixed Rate   Rate    Average   LEASING
      Amount funded                     $281,632  $308,448  $590,081  $10,424
      Weighted average GAAP yield         11.26%     9.63%    10.41%     8.74%
      Weighted average all-in
       spread/margin (basis points) (2)     672       502         -       415
      Weighted average first $ loan-
       to-value ratio                       8.6%     14.6%     11.8%      N/A
      Weighted average last $ loan-to-
       value ratio                         65.7%     57.8%     61.6%      N/A

      UNFUNDED COMMITMENTS

      Number of assets with unfunded
       commitments                                                         54

      Discretionary commitments                                       $34,996
      Non-discretionary commitments                                 1,275,058
      Total unfunded commitments                                   $1,310,054

      Estimated weighted average funding
       period                                         Approximately 4.5 years

    UNENCUMBERED ASSETS                                            $8,460,448


    RISK MANAGEMENT STATISTICS   2006    2005
    (weighted average
      risk rating)            March 31, Dec. 31, Sept. 30, June 30,  March 31,

    Structured Finance
     Assets                       2.71     2.63      2.60     2.52       2.71
    Corporate Tenant Lease
     Assets                       2.42     2.38      2.36     2.36       2.36

                                            (1=lowest risk; 5=highest risk)

    (1) Excludes other investments.
    (2) 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
                   (In thousands, except per share amounts)
                                 (unaudited)

    LOANS AND OTHER LENDING INVESTMENTS CREDIT STATISTICS

                                                 As of
                                March 31, 2006            December 31, 2005
                                 $           %             $           %
    Carrying value of
     non-performing loans/
     As a percentage of
     total assets             $30,971       0.35%      $35,291         0.41%

    Reserve for loan losses/
     As a percentage of
     total assets             $47,876       0.54%      $46,876         0.55%
    As a percentage of
     non-performing loans                    155%                       133%


    RECONCILIATION OF DILUTED ADJUSTED EPS

    GUIDANCE TO DILUTED GAAP EPS GUIDANCE (1)

                                                               Year Ended
                                                           December 31, 2006

    Earnings per diluted common share guidance               $2.35 - $2.50
    Add: Depreciation, depletion and amortization
     per diluted common share                                $0.85 - $1.15
    Adjusted earnings per diluted common share guidance      $3.35 - $3.50


    (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. Rather, adjusted
        earnings is an additional measure the Company uses to analyze how its
        business is performing. It should be noted that the Company's manner
        of calculating adjusted earnings may differ from the calculations of
        similarly-titled measures by other companies.


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

    PORTFOLIO STATISTICS AS OF MARCH 31, 2006 (1)

    Security Type                                        $              %
    Corporate Tenant Leases                           $3,483           40.0%
    First Mortgages / Senior Loans                     4,177           47.9
    Mezzanine / Subordinated Debt                        846            9.7
    Other Investments                                    212            2.4
        Total                                         $8,718          100.0%

    Collateral Type
    Office (CTL)                                      $1,653           19.0%
    Industrial / R&D                                   1,355           15.5
    Office (Lending)                                     571            6.6
    Entertainment / Leisure                              913           10.4
    Hotel (Lending)                                      444            5.1
    Mixed Use / Mixed Collateral                         977           11.2
    Apartment / Residential                              598            6.9
    Retail                                             1,226           14.0
    Hotel (CTL)                                          268            3.1
    Other                                                713            8.2
        Total                                         $8,718          100.0%

    Collateral Location
    West                                              $2,101           24.1%
    Northeast                                          1,571           18.0
    Southeast                                          1,205           13.8
    Central                                              627            7.2
    Mid-Atlantic                                         732            8.4
    Various                                              910           10.4
    South                                                589            6.8
    Southwest                                            463            5.3
    North Central                                        319            3.7
    Northwest                                            201            2.3
        Total                                         $8,718          100.0%

    (1) Figures presented prior to loan loss reserves, accumulated
        depreciation and impact of statement of Financial Accounting Standards
        No. 141 ("SFAS No. 141") "Business Combinations."

SOURCE iStar Financial Inc.
CONTACT: Catherine D. Rice, Chief Financial Officer, or Andrew G. Backman, Vice President - Investor Relations, both of iStar Financial, +1-212-930-9400

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