iStar Financial Announces Second Quarter 2010 Results

[Financial Tables to Follow]

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

Three Months Ended

Six Months Ended

June 30,

June 30,

2010

2009

2010

2009

Net investment income (1)

$129,755

$275,862

$250,016

$514,739

Other income

5,962

5,557

14,253

8,064

Non-interest expense (2)

(182,703)

(565,834)

(334,227)

(910,083)

Income (loss) from continuing operations

($46,986)

($284,415)

($69,958)

($387,280)

Income from discontinued operations

10,877

2,442

17,704

6,618

Gain from discontinued operations

265,960

-

265,960

11,617

Net income (loss)

$229,851

($281,973)

$213,706

($369,045)

(1) Includes interest income, operating lease income, earnings (loss) from equity method investments
and gain on early extinguishment of debt, net, less interest expense and operating costs for corporate
tenant lease assets.

(2) Includes depreciation and amortization, general and administrative expenses, provision for loan
losses, impairments and other expenses.

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

As of

As of

June 30, 2010

December 31, 2009

Loans and other lending investments, net

$6,115,092

$7,661,562

Corporate tenant lease assets, net

$1,849,423

$2,885,896

Real estate held for investment, net

$636,239

$422,664

Other real estate owned

$890,881

$839,141

Total assets

$10,653,904

$12,810,575

Debt obligations, net

$8,619,955

$10,894,903

Total liabilities

$8,802,892

$11,147,013

Total equity

$1,843,571

$1,656,118

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

Three Months Ended

Six Months Ended

June 30,

June 30,

2010

2009

2010

2009

REVENUES

Interest income

$86,469

$142,181

$203,085

$319,408

Operating lease income  

44,365

45,351

89,264

92,429

Other income

5,962

5,557

14,253

8,064

Total revenues

$136,796

$193,089

$306,602

$419,901

COSTS AND EXPENSES

Interest expense

$82,313

$110,532

$169,529

$225,162

Operating costs - corporate tenant lease assets

2,570

3,881

6,764

8,556

Depreciation and amortization

16,726

16,034

32,867

30,910

General and administrative (1)

25,114

33,691

52,330

69,314

Provision for loan losses

109,359

435,016

198,828

693,112

Impairment of other assets

12,195

22,232

13,209

47,563

Other expense

19,309

58,861

36,993

69,184

Total costs and expenses

$267,586

$680,247

$510,520

$1,143,801

Income (loss) from continuing operations before other items

($130,790)

($487,158)

($203,918)

($723,900)

Gain on early extinguishment of debt, net

70,054

200,879

108,780

355,256

Earnings (loss) from equity method investments

13,750

1,864

25,180

(18,636)

Income (loss) from continuing operations

($46,986)

($284,415)

($69,958)

($387,280)

Income from discontinued operations

10,877

2,442

17,704

6,618

Gain from discontinued operations

265,960

-

265,960

11,617

Net income (loss)

$229,851

($281,973)

$213,706

($369,045)

Net (income) loss attributable to noncontrolling interests

(544)

271

1

1,514

Net income (loss) attributable to iStar Financial Inc.

$229,307

($281,702)

$213,707

($367,531)

Preferred dividends

(10,580)

(10,580)

(21,160)

(21,160)

Net income (loss) allocable to common shareholders,

HPU holders and Participating Security holders (2)

$218,727

($292,282)

$192,547

($388,691)

(1) For the three months ended June 30, 2010 and 2009, includes $4,984 and $7,500 of stock-based compensation
expense, respectively.  For the six months ended June 30, 2010 and 2009, includes $9,714 and $13,051 of stock-
based compensation expense, respectively.

(2) HPU holders are current and former Company employees who purchased high performance common stock units
under the Company's High Performance Unit Program. Participating Security holders are Company employees and
directors who hold unvested restricted stock units and common stock equivalents under the Company's Long Term
Incentive Plan.

iStar Financial Inc.
Earnings Per Share Information
(In thousands, except per share amounts)
(unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2010

2009

2010

2009

EPS INFORMATION FOR COMMON SHARES

Income (loss) attributable to iStar Financial Inc.

from continuing operations (1) (2)

Basic and diluted

($0.60)

($2.87)

($0.94)

($3.85)

Net income (loss) attributable to iStar Financial Inc. (1)

Basic and diluted

$2.27

($2.85)

$2.00

($3.68)

Weighted average shares outstanding

Basic and diluted

93,382

99,769

93,651

102,671

EPS INFORMATION FOR HPU SHARES

Income (loss) attributable to iStar Financial Inc.

from continuing operations (1) (2)

Basic and diluted

($114.27)

($543.53)

($177.33)

($729.81)

Net income (loss) attributable to iStar Financial Inc. (1) (3)

Basic and diluted

$430.13

($539.00)

$378.93

($697.07)

Weighted average shares outstanding

Basic and diluted

15

15

15

15

(1) For the three months ended June 30, 2010 and 2009, excludes preferred dividends of $10,580. For the six
months ended June 30, 2010 and 2009, excludes preferred dividends of $21,160.

(2) Income (loss) attributable to iStar Financial Inc. from continuing operations excludes net (income) loss from
noncontrolling interests.

(3) For the three months ended June 30, 2010 and 2009, net income (loss) allocable to HPU holders was $6,452
and ($8,085), respectively, on both a basic and dilutive basis. For the six months ended June 30, 2010 and 2009,
net income (loss) allocable to HPU holders was $5,684 and ($10,456), respectively, on both a basic and dilutive
basis.

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

Three Months Ended

Six Months Ended

June 30,

June 30,

2010

2009

2010

2009

ADJUSTED EARNINGS (1)

Net income (loss)

$229,851

($281,973)

$213,706

($369,045)

Add: Depreciation and amortization

16,934

24,579

38,687

48,078

Add: Joint venture depreciation and amortization

1,848

3,506

3,731

14,194

Add: Impairment of goodwill and intangible assets

-

-

-

4,186

Add: Net (income) loss attributable to noncontrolling interests

(544)

271

1

1,514

Less: Gain from discontinued operations

(265,960)

-

(265,960)

(11,617)

Less: Deferred financing amortization

(57,518)

6,966

(79,905)

12,126

Less: Preferred dividends

(10,580)

(10,580)

(21,160)

(21,160)

Adjusted earnings (loss) allocable to common shareholders,

HPU holders and Participating Security holders:

Basic and Diluted (2)

($85,969)

($257,231)

($110,900)

($321,724)

Adjusted earnings (loss) per common share:

Basic and Diluted

($0.89)

($2.51)

($1.15)

($3.05)

Weighted average common shares outstanding:

Basic and Diluted

93,382

99,769

93,651

102,671

Common shares outstanding at end of period:

93,382

99,618

93,382

99,618

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

(2) For the three months ended June 30, 2010 and 2009, adjusted earnings (loss) allocable to HPU holders was ($2,536)
and ($7,115), respectively, on both a basic and dilutive basis.  For the six months ended June 30, 2010 and 2009, adjusted
earnings (loss) allocable to HPU holders was ($3,267) and ($8,655), respectively, on both a basic and dilutive basis.  

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

As of

As of

June 30, 2010

December 31, 2009

ASSETS

Loans and other lending investments, net

$6,115,092

$7,661,562

Corporate tenant lease assets, net

1,849,423

2,885,896

Other investments

422,203

433,130

Real estate held for investment, net

636,239

422,664

Other real estate owned

890,881

839,141

Assets held for sale

-

17,282

Cash and cash equivalents

531,520

224,632

Restricted cash

12,744

39,654

Accrued interest and operating lease income receivable, net

50,929

54,780

Deferred operating lease income receivable

65,825

122,628

Deferred expenses and other assets, net

79,048

109,206

Total assets

$10,653,904

$12,810,575

LIABILITIES AND EQUITY

Accounts payable, accrued expenses and other liabilities

$182,937

$252,110

Debt obligations, net:

Unsecured senior notes

3,548,148

4,228,908

Secured senior notes

437,558

856,071

Unsecured revolving credit facilities

739,395

748,601

Secured revolving credit facilities

943,664

959,426

Secured term loans

2,853,060

4,003,786

Other debt obligations

98,130

98,111

Total liabilities

$8,802,892

$11,147,013

Redeemable noncontrolling interests

7,441

7,444

Total iStar Financial Inc. shareholders' equity

1,796,969

1,605,685

Noncontrolling interests

46,602

50,433

Total equity

1,843,571

1,656,118

Total liabilities and equity

$10,653,904

$12,810,575

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

As of

PERFORMANCE  STATISTICS

June 30, 2010

Net Finance Margin

Weighted average GAAP yield on loan and CTL investments

5.71%

Less: Cost of debt

4.09%

Net Finance Margin (1)

1.62%

Return on Average Common Book Equity

Average total book equity

$1,685,686

Less: Average book value of preferred equity

(506,176)

Average common book equity (A)

$1,179,510

Net income allocable to common shareholders, HPU holders and

Participating Security holders

$218,727

Annualized (2) (B)

$77,028

Return on Average Common Book Equity (B) / (A)

6.5%

Adjusted basic earnings (loss) allocable to common shareholders, HPU holders and

Participating Security holders (3)

($85,969)

Annualized (C)

($343,876)

Adjusted Return on Average Common Book Equity (C) / (A)

Neg

Expense Ratio (4)

General and administrative expenses (D)

$25,116

Total revenue (E)

$164,471

Expense Ratio (D) / (E)

15.3%

(1) Weighted average GAAP yield is the annualized sum of interest income and operating lease income, divided
by the sum of average gross corporate tenant lease assets, average loans and other lending investments and
average assets held for sale over the period. Cost of debt is the annualized sum of interest expense and
operating costs–corporate tenant lease assets, divided by the average gross debt obligations over the period.
Operating lease income, operating costs–corporate tenant lease assets and interest expense exclude
adjustments from discontinued operations of $27,673, $1,612 and $14,466, respectively. The Company does
not consider net finance margin to be a measure of the Company's liquidity or cash flows. It is one of several
measures that management considers to be an indicator of the profitability of its operations.

(2) Net income allocable to common shareholders, HPU holders and Participating Security holders on an
annualized basis is computed without annualizing the gain from discontinued operations.

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

(4) General and administrative expenses and total revenue exclude adjustments from discontinued operations
of $2 and $27,675, respectively.

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

As of

CREDIT STATISTICS

June 30, 2010

Book debt, net of unrestricted cash and cash equivalents (A)

$8,088,435

Book equity

$1,843,571

Add: Accumulated depreciation and loan loss reserves

1,524,083

Sum of book equity, accumulated depreciation and loan loss reserves (B)

$3,367,654

Leverage (1) (A) / (B)

2.4x

Ratio of Earnings to Fixed Charges

0.4x

Ratio of Earnings to Fixed Charges and Preferred Stock Dividends

0.4x

Covenant Calculation of Fixed Charge Coverage Ratio (2)

2.1x

Interest Coverage

EBITDA (3) (C)

$346,204

Interest expense and preferred dividends (D)

$107,358

EBITDA / Interest Expense and Preferred Dividends (3)  (C) / (D)

3.2x

RECONCILIATION OF NET INCOME TO EBITDA (3)

Net income (loss)

$229,851

Add: Interest expense (4)

96,778

Add: Depreciation and amortization (4)

16,934

Add: Income taxes

793

Add: Joint venture depreciation and amortization

1,848

EBITDA (3)

$346,204

(1) Leverage is calculated by dividing book debt net of unrestricted cash and cash equivalents by the sum
of book equity, accumulated depreciation and loan loss reserves.

(2) This measure, which is a trailing twelve-month calculation and excludes the effect of impairment
charges and other non-cash items, is consistent with covenant calculations included in the Company's
secured credit facilities; therefore, we believe it is a useful measure for investors to consider.

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

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

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

As of

UNFUNDED COMMITMENTS

June 30, 2010

Number of assets with unfunded commitments

73

Performance-based commitments

$218,679

Discretionary fundings

251,843

Strategic investments

61,022

Total Unfunded Commitments

$531,544

UNENCUMBERED ASSETS / UNSECURED DEBT

Unencumbered assets (A)

$6,516,292

Unsecured debt (B)

$4,424,372

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

1.5x

RISK MANAGEMENT STATISTICS

(weighted average risk rating)

2010

2009

June 30,

Mar. 31,

Dec. 31,

Sept. 30,

June 30,

Structured Finance Assets (principal risk)

3.90

3.93

3.92

3.91

3.90

Corporate Tenant Lease Assets

2.76

2.57

2.59

2.60

2.59

LOANS AND OTHER LENDING INVESTMENTS CREDIT STATISTICS

As of

June 30, 2010

December 31, 2009

Value of non-performing loans (1) /

  As a percentage of total managed loans

$2,956,158

39.9 %

$4,209,255

45.3 %

Reserve for loan losses /

  As a percentage of total managed loans

$1,181,288

15.9 %

$1,417,949

15.3 %

  As a percentage of non-performing loans (1)

40.0 %

33.7 %

(1) Non-performing loans include iStar’s book value and Fremont’s A-participation interest on the associated assets.  

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

PORTFOLIO STATISTICS AS OF JUNE 30, 2010 (1)

Asset Type

Total

% of Total

First Mortgages / Senior Loans

$6,495

57.6%

Corporate Tenant Leases

2,227

19.8%

Other Real Estate Owned

891

7.9%

Mezzanine / Subordinated Debt

802

7.1%

Real Estate Held for Investment

642

5.7%

Other Investments

211

1.9%

Total

$11,268

100.0%

Geography

Total

% of Total

West

$2,442

21.7%

Southeast

2,083

18.5%

Northeast

1,817

16.1%

Mid-Atlantic

1,050

9.3%

Southwest

934

8.3%

Various

742

6.6%

Central

647

5.7%

International

531

4.7%

South

367

3.3%

Northwest

346

3.1%

Northcentral

309

2.7%

Total

$11,268

100.0%

Property Type

Performing
Loans & Other

CTLs

NPLs

OREO

REHI

Total

% of Total

Condo:

Construction - Completed

$716

$-

$554

$395

$-

$1,665

14.8%

Construction - In Progress

568

-

168

21

-

757

6.7%

Conversion

91

-

37

113

-

241

2.1%

Subtotal Condo

1,375

-

759

529

-

2,663

23.6%

Land

431

59

848

111

454

1,903

16.9%

Retail

608

184

312

46

9

1,159

10.3%

Office

246

638

53

-

7

944

8.4%

Entertainment / Leisure

158

483

268

-

-

909

8.1%

Industrial / R&D

208

618

27

5

50

908

8.1%

Hotel

364

184

89

50

70

757

6.7%

Mixed Use / Mixed Collateral

206

40

316

69

22

653

5.8%

Corporate - Real Estate

366

-

166

-

-

532

4.7%

Other (2)

499

21

2

-

-

522

4.6%

Multifamily

166

-

41

81

30

318

2.8%

Total

$4,627

$2,227

$2,881

$891

$642

$11,268

100.0%

(1) Based on carrying value of the Company's total investment portfolio, gross of loan loss reserves and accumulated depreciation.

(2) Performing loans and other includes $211 million of other investments.