- Total revenues were $341 million; up 5.3% from the prior quarter.
NEW YORK, Oct. 30 /PRNewswire-FirstCall/ -- iStar Financial Inc.
(NYSE: SFI), a leading publicly traded finance company focused on
the commercial real estate industry, today reported results for the
third quarter ended September 30, 2008. iStar reported adjusted
earnings (loss) for the quarter of ($2.15) per diluted common
share, compared with $1.07 for the third quarter 2007. Adjusted
earnings (loss) allocable to common shareholders for the third
quarter 2008 were ($285.9) million, compared with $135.7 million
for the third quarter 2007. Adjusted earnings (loss) represent net
income computed in accordance with GAAP, adjusted primarily for
preferred dividends, depreciation, depletion, amortization,
impairments of goodwill and intangible assets, and gain (loss) from
discontinued operations. Net income (loss) allocable to common
shareholders for the third quarter was ($305.8) million, or ($2.30)
per diluted common share, compared to $93.0 million, or $0.73 per
diluted common share for the third quarter 2007. Please see the
financial tables that follow the text of this press release for a
detailed reconciliation of adjusted earnings to GAAP net income.
Results this quarter included $411.1 million of loan loss
provisions, $88.1 million of impairments, $68.3 million of gains
associated with the early extinguishment of debt and $20.0 million
of gains from the sale of four corporate tenant lease (CTL) assets.
Gains on the sale of CTLs are excluded from adjusted earnings, but
included in net income. Net investment income for the quarter was
$215.0 million, compared to $220.2 million for the third quarter
2007. Net investment income represents interest income, operating
lease income, earnings (loss) from equity method investments and
gain (loss) on early extinguishment of debt, less interest expense
and operating costs for corporate tenant lease assets. During the
quarter, the Company funded a total of $737.0 million under new and
pre-existing commitments and received $678.8 million in gross
principal repayments. Of the gross principal repayments, $283.0
million was utilized to pay down the A-participation interest
associated with the Fremont portfolio. During the quarter, the
Company closed four new financing commitments for a total of $60.8
million, of which it funded $8.6 million. The Company's equity
represented 23.4% of total capitalization at quarter end versus
24.1% at the end of the prior quarter. The Company's leverage,
calculated as book debt net of unrestricted cash and cash
equivalents, divided by the sum of book equity, accumulated
depreciation and loan loss reserves, each as determined in
accordance with GAAP, was 3.3x at September 30, 2008 versus 3.1x at
June 30, 2008. The Company's net finance margin, calculated as the
rate of return on assets less the cost of debt, was 2.99% for the
quarter. Excluding the impact of the amortization of the Fremont
portfolio purchase discount, the Company's net finance margin was
2.74% for the quarter, versus 2.75% in the prior quarter. As of
September 30, 2008, a one percentage point increase in short-term
rates, excluding the impact of interest floors in certain loan
assets, would have increased the Company's adjusted earnings by
0.27%, which is consistent with its match funding policy. Capital
Markets As of September 30, 2008, the Company had $877.7 million of
cash and available capacity under $3.7 billion in revolving credit
facilities versus $1.4 billion at the end of the prior quarter. The
Company is currently in compliance with all of its bank and bond
covenants. During the quarter, the Company repurchased
approximately 2.4 million shares of its common stock pursuant to
its existing repurchase program. The Company currently has
remaining authority to repurchase up to $44.2 million of shares
under the previously authorized $50 million share repurchase
program. Risk Management At September 30, 2008, first mortgages,
participations in first mortgages, senior loans and corporate
tenant lease investments collectively comprised 90.7% of the
Company's asset base, versus 89.2% in the prior quarter. The
Company's loan portfolio consisted of 79.2% floating rate and 20.8%
fixed rate loans, with a weighted average maturity of 2.6 years.
The weighted average last dollar loan-to-value ratio for all
structured finance assets was 75.0%. At quarter end, the Company's
corporate tenant lease assets were 94.8% leased with a weighted
average remaining lease term of 12.0 years. At September 30, 2008,
the weighted average risk ratings of the Company's structured
finance and corporate tenant lease assets were 3.41 and 2.55,
respectively, versus 3.28 and 2.55, respectively, in the prior
quarter. As of September 30, 2008, 51 of the Company's 377 total
loans were on non-performing loan (NPL) status. These loans
represent $2.5 billion or 19.4% of total managed loans, compared to
39 loans representing $1.3 billion or 10.5% of total managed loans
in the prior quarter. Managed asset and loan values represent
iStar's book value plus the A-participation interest associated
with the Fremont portfolio. The Company's total managed loan value
at quarter end was $12.8 billion. The Company's policy is to stop
the accrual of interest on loans placed on NPL status. During the
quarter, the Company resolved three NPLs with a managed asset value
of $71.1 million and sold two NPLs for $38.7 million. The three
resolved NPLs are currently performing assets. At the end of the
third quarter, the Company had 29 loans on its watch list
representing $1.3 billion or 10.2% of total managed loans, compared
to 30 loans representing $1.5 billion or 11.4% of total managed
loans in the prior quarter. Assets on the Company's watch list are
all performing loans. At the end of the third quarter, the Company
had 10 assets classified as other real estate owned (OREO) with a
book value of $277.2 million. The Company recorded $36.2 million of
non-cash impairment charges on five OREO assets. During the
quarter, the Company took title to three properties that served as
collateral on its loans, resulting in $25.1 million of charge-offs
against the Company's reserve for loan losses. All of the loans
were previously on NPL status and had a managed asset value of
$81.1 million prior to the Company receiving title to the
properties. Of the three assets added to OREO, one asset was sold
during the quarter for total net proceeds of $11.5 million, which
represented a slight premium to book value. During the quarter, the
Company recorded $51.9 million of non-cash impairment charges
associated with five credits in its Corporate Loan and Debt
portfolio and its Other Investments. At September 30, 2008, the
Company had $832.7 million in loan loss reserves versus $460.1
million at June 30, 2008. During the third quarter, the Company
recorded $411.1 million in loan loss provision, reflecting the
severe deterioration in the overall credit markets and its impact
on the portfolio as determined in the Company's regular quarterly
risk ratings review process performed following the end of the
quarter. The Company's total loss coverage, defined as the
combination of loan loss reserves of $832.7 million and remaining
unamortized purchase discount from the Fremont acquisition of $75.6
million, was $908.2 million or 7.1% of total managed loans at the
end of the third quarter. This compares to total loss coverage of
$554.3 million or 4.3% of total managed loans in the prior quarter.
Summary of Fremont Contributions to Quarterly Results At the end of
the third quarter, the Fremont portfolio, including additional
fundings made during the quarter, had a managed asset value of $4.3
billion consisting of 152 loans versus $4.5 billion consisting of
178 loans at the end of the second quarter 2008. At the end of the
third quarter, the value of the A-participation interest in the
portfolio was $1.6 billion versus $1.9 billion on June 30, 2008.
The book value of iStar's B-participation interest at the end of
the third quarter was $2.7 billion versus $2.6 billion on June 30,
2008. During the quarter, iStar received $404.2 million in
principal repayments, of which the Company retained 30%. The
balance of principal repayments was paid to the A-participation
interest. The weighted average maturity of the Fremont portfolio is
nine months. During the third quarter, iStar funded $275.1 million
of commitments related to the portfolio. Unfunded commitments at
the end of the third quarter were $0.9 billion, of which the
Company expects to fund approximately $0.7 billion based upon its
comprehensive review of the portfolio. This compares to unfunded
commitments of $1.2 billion at the end of the prior quarter. At
September 30, 2008, there were 29 Fremont loans on NPL status with
a managed asset value of $777.8 million versus 26 loans at the
prior quarter end, with $683.0 million of managed asset value. In
addition, there were 14 loans on the Company's watch list with a
managed asset value of $578.1 million versus 14 loans at the prior
quarter end, with $411.8 million of managed asset value. Earnings
Guidance and Dividend Expectations 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. For fiscal year 2008, the
Company expects diluted adjusted earnings per common share of
($3.50) - ($3.00), and diluted GAAP earnings per common share of
($2.50) - ($2.00). As announced earlier in the quarter, the Company
said that it would not pay a third quarter dividend. The Board of
Directors will meet at the end of the fourth quarter to consider
whether any dividend will be paid for the fourth quarter. Based
upon current estimates for taxable income for the full-year 2008,
the Company does not expect to pay a dividend for the fourth
quarter 2008. [Financial Tables to Follow] * * * iStar Financial
Inc. is a leading publicly traded finance company focused on the
commercial real estate industry. The Company primarily provides
custom-tailored investment capital to high-end private and
corporate owners of real estate, including senior and mezzanine
real estate debt, senior and mezzanine corporate capital, as well
as corporate net lease financing and equity. 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. ET today, October 30, 2008.
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 Nine
Months Ended September 30, September 30, 2008 2007 2008 2007 ----
---- ---- ---- Net investment income (1) $214,985 $220,164 $551,047
$466,306 Other income 22,922 19,271 88,707 84,855 Non-interest
expense (2) (560,808) (139,439) (1,166,776) (266,188) Minority
interest in consolidated entities 502 (277) 1,069 302 Gain on sale
of joint venture interest, net of minority interest - - 261,659 -
--------- ------- --------- -------- Income (loss) from continuing
operations (322,399) 99,719 (264,294) 285,275 Income from
discontinued operations 688 4,880 11,222 15,705 Gain from
discontinued operations, net of minority interest 19,955 1,045
68,798 7,823 Preferred dividends (10,580) (10,580) (31,740)
(31,740) --------- ------- --------- -------- Net income (loss)
allocable to common shareholders and HPU holders (3) ($312,336)
$95,064 ($216,014) $277,063 ========= ======= ========= ========
(1) Includes interest income, operating lease income and earnings
(loss) from equity method investments, less interest expense,
operating costs for corporate tenant lease assets and gain (loss)
on early extinguishment of debt. (2) Includes depreciation and
amortization, general and administrative expenses, provision for
loan losses, impairments and other expenses. (3) 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, 2008 December
31, 2007 ------------------ ----------------- (unaudited) Loans and
other lending investments, net $10,744,047 $10,949,354 Corporate
tenant lease assets, net $3,143,697 $3,309,866 Other investments
$527,760 $856,609 Total assets $15,923,976 $15,848,298 Debt
obligations $13,060,499 $12,399,558 Total liabilities $13,408,688
$12,894,869 Total shareholders' equity $2,454,082 $2,899,481 iStar
Financial Inc. Consolidated Statements of Operations (In thousands,
except per share amounts) (unaudited) Three Months Ended Nine
Months Ended September 30, September 30, 2008 2007 2008 2007 ----
---- ---- ---- REVENUES Interest income $237,006 $316,829 $748,460
$689,836 Operating lease income 81,440 81,859 242,008 237,975 Other
income 22,922 19,271 88,707 84,855 --------- ------- ---------
-------- Total revenues 341,368 417,959 1,079,175 1,012,666
--------- ------- --------- -------- COSTS AND EXPENSES Interest
expense 168,040 173,376 499,131 441,095 Operating costs - corporate
tenant lease assets 5,647 7,746 15,583 21,555 Depreciation and
amortization 24,827 23,244 73,973 63,061 General and administrative
(1) 37,736 51,246 124,516 128,178 Provision for loan losses 411,142
62,000 777,302 72,000 Impairments of goodwill - - 39,092 -
Impairments of other assets 88,075 - 145,766 - Other expense (972)
2,949 6,127 2,949 --------- ------- --------- -------- Total costs
and expenses 734,495 320,561 1,681,490 728,838 --------- -------
--------- -------- Income (loss) from continuing operations before
other items (393,127) 97,398 (602,315) 283,828 Gain on early
extinguishment of debt 68,321 - 69,916 - Gain on sale of joint
venture interest, net of minority interest - - 261,659 - Earnings
(loss) from equity method investments 1,905 2,598 5,377 1,145
Minority interest in consolidated entities 502 (277) 1,069 302
--------- ------- --------- -------- Income (loss) from continuing
operations (322,399) 99,719 (264,294) 285,275 Income from
discontinued operations 688 4,880 11,222 15,705 Gain from
discontinued operations, net of minority interest 19,955 1,045
68,798 7,823 --------- ------- --------- -------- Net income (loss)
(301,756) 105,644 (184,274) 308,803 Preferred dividend requirements
(10,580) (10,580) (31,740) (31,740) --------- ------- ---------
-------- Net income (loss) allocable to common shareholders and HPU
holders ($312,336) $95,064 ($216,014) $277,063 ========= =======
========= ======== Net income (loss) per common share Basic ($2.30)
$0.74 ($1.58) $2.14 Diluted (2) ($2.30) $0.73 ($1.58) $2.12 Net
income (loss) per HPU share Basic (3) ($434.47) $139.07 ($301.53)
$404.87 Diluted (2) (4) ($434.47) $138.07 ($301.53) $401.47 (1) For
the three months ended September 30, 2008 and 2007, includes $4,884
and $3,786 of stock-based compensation expense, respectively. For
the nine months ended September 30, 2008 and 2007, includes $17,725
and $12,051 of stock-based compensation expense, respectively. (2)
For the three months ended September 30, 2007, includes the
allocable share of $29 of joint venture income. For the nine months
ended September 30, 2007, includes the allocable share of $85 of
joint venture income. (3) For the three months ended September 30,
2008 and 2007, ($6,517) and $2,086 of net income (loss) is
allocable to HPU holders, respectively. For the nine months ended
September 30, 2008 and 2007, ($4,523) and $6,073 of net income
(loss) is allocable to HPU holders, respectively. (4) For the three
months ended September 30, 2008 and 2007, ($6,517) and $2,071 of
net income (loss) is allocable to HPU holders, respectively. For
the nine months ended September 30, 2008 and 2007, ($4,523) and
$6,022 of net income (loss) is allocable to HPU holders,
respectively. iStar Financial Inc. Earnings Per Share Information
(In thousands, except per share amounts) (unaudited) Three Months
Ended Nine Months Ended September 30, September 30, 2008 2007 2008
2007 ---- ---- ---- ---- EPS INFORMATION FOR COMMON SHARES Income
(loss) from continuing operations per common share (1) Basic
($2.46) $0.69 ($2.16) $1.96 Diluted (2) ($2.46) $0.68 ($2.16) $1.94
Net income (loss) per common share Basic ($2.30) $0.74 ($1.58)
$2.14 Diluted (2) ($2.30) $0.73 ($1.58) $2.12 Weighted average
common shares outstanding Basic 133,199 126,488 133,955 126,644
Diluted 133,199 127,508 133,955 127,782 EPS INFORMATION FOR HPU
SHARES Income (loss) from continuing operations per HPU share (1)
Basic ($463.13) $130.41 ($412.19) $370.54 Diluted (2) ($463.13)
$129.47 ($412.19) $367.41 Net income (loss) per HPU share (3) Basic
($434.47) $139.07 ($301.53) $404.87 Diluted (2) ($434.47) $138.07
($301.53) $401.47 Weighted average HPU shares outstanding Basic 15
15 15 15 Diluted 15 15 15 15 (1) For the three months ended
September 30, 2008 and 2007, excludes preferred dividends of
$10,580. For the nine months ended September 30, 2008 and 2007,
excludes preferred dividends of $31,740. (2) For the three months
ended September 30, 2007, includes the allocable share of $29 of
joint venture income. For the nine months ended September 30, 2007,
includes the allocable share of $85 of joint venture income. (3) As
more fully explained in the Company's quarterly SEC filings, three
plans of the Company's HPU program vested in December 2002,
December 2003 and December 2004. Each of the respective plans
contain 5 HPU shares. Cumulatively, these 15 shares were entitled
to ($6,517) and $2,086 of net income (loss) for the three months
ended September 30, 2008 and 2007, respectively, and ($4,523) and
$6,073 for the nine months ended September 30, 2008 and 2007,
respectively. On a diluted basis, these cumulative 15 shares were
entitled to ($6,517) and $2,071 of net income (loss) for the three
months ended September 30, 2008 and 2007, respectively, and
($4,523) and $6,022 of net income (loss) for the nine months ended
September 30, 2008 and 2007, respectively. iStar Financial Inc.
Reconciliation of Adjusted Earnings to GAAP Net Income (In
thousands, except per share amounts) (unaudited) Three Months Ended
Nine Months Ended September 30, September 30, 2008 2007 2008 2007
---- ---- ---- ---- ADJUSTED EARNINGS (1) Net income (loss)
($301,756) $105,644 ($184,274) $308,803 Add: Depreciation,
depletion and amortization 24,448 25,928 78,149 71,172 Add: Joint
venture income - 31 - 92 Add: Joint venture depreciation, depletion
and amortization 1,943 10,407 12,513 30,992 Add: Amortization of
deferred financing costs 15,120 7,065 33,893 20,222 Add:
Impairments of goodwill and intangible assets - - 51,549 - Less:
Hedge ineffectiveness, net (1,256) 2,944 (2,106) 2,944 Less:
Preferred dividends (10,580) (10,580) (31,740) (31,740) Less: Gain
from discontinued operations, net of minority interest (19,955)
(1,045) (68,798) (7,823) Less: Gain on sale of joint venture
interest, net of minority interest - (1,572) (261,659) (1,572)
------ ------ -------- ------ Adjusted earnings (loss) allocable to
common shareholders and HPU holders: Basic ($292,036) $138,791
($372,473) $392,998 Diluted ($292,036) $138,822 ($372,473) $393,090
Adjusted earnings (loss) per common share: Basic (2) ($2.15) $1.07
($2.72) $3.04 Diluted (3) ($2.15) $1.07 ($2.72) $3.01 Weighted
average common shares outstanding: Basic 133,199 126,488 133,955
126,644 Diluted 133,199 127,508 133,955 127,782 Common shares
outstanding at end of period: Basic 132,043 126,272 132,043 126,272
Diluted 132,043 127,282 132,043 127,282 (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
September 30, 2008 and 2007, excludes ($6,093) and $3,046 of net
income (loss) allocable to HPU holders, respectively. For the nine
months ended September 30, 2008 and 2007, excludes ($7,754) and
$8,615 of net income (loss) allocable to HPU holders, respectively.
(3) For the three months ended September 30, 2008 and 2007,
excludes ($6,093) and $3,023 of net income (loss) allocable to HPU
holders, respectively. For the nine months ended September 30, 2008
and 2007, excludes ($7,754) and $8,542 of net income (loss)
allocable to HPU holders, respectively. iStar Financial Inc.
Consolidated Balance Sheets (In thousands) As of As of September
30, 2008 December 31, 2007 ------------------ -----------------
(unaudited) ASSETS Loans and other lending investments, net
$10,744,047 $10,949,354 Corporate tenant lease assets, net
3,143,697 3,309,866 Other investments 527,760 856,609 Other real
estate owned 277,232 128,558 Assets held for sale 3,657 74,335 Cash
and cash equivalents 779,472 104,507 Restricted cash 59,329 32,977
Accrued interest and operating lease income receivable 89,200
121,405 Deferred operating lease income receivable 114,748 102,135
Deferred expenses and other assets 180,648 125,274 Goodwill 4,186
43,278 ----------- ----------- Total assets $15,923,976 $15,848,298
=========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable, accrued expenses and other liabilities $348,189
$495,311 Debt obligations: Unsecured senior notes 7,788,210
7,916,853 Unsecured revolving credit facilities 3,184,448 2,681,174
Secured revolving credit facility 350,000 - Interim financing
facility - 1,289,811 Secured term loans 1,639,777 413,682 Other
debt obligations 98,064 98,038 ----------- ----------- Total
liabilities 13,408,688 12,894,869 Minority interest in consolidated
entities 61,206 53,948 Shareholders' equity 2,454,082 2,899,481
----------- ----------- Total liabilities and shareholders' equity
$15,923,976 $15,848,298 =========== =========== iStar Financial
Inc. Supplemental Information (In thousands) (unaudited)
PERFORMANCE STATISTICS Three Months Ended September 30, 2008
------------------ Net Finance Margin ------------------ Weighted
average GAAP yield of loan and CTL investments 8.44% Less: Cost of
debt 5.45% ---------- Net Finance Margin (1) 2.99% Net Finance
Margin Excluding Amortization of Discount on Fremont Loans 2.74%
Return on Average Common Book Equity
------------------------------------ Average total book equity
$2,675,728 Less: Average book value of preferred equity (506,176)
---------- Average common book equity (A) $2,169,552 Net income
(loss) allocable to common shareholders and HPU holders ($312,336)
Net income (loss) allocable to common shareholders and HPU holders
- Annualized (B) ($1,249,344) Return on Average Common Book Equity
(B) / (A) (57.6%) Adjusted basic earnings (loss) allocable to
common shareholders and HPU holders (2) ($292,036) Adjusted basic
earnings (loss) allocable to common shareholders and HPU holders -
Annualized (C) ($1,168,144) Adjusted Return on Average Common Book
Equity (C) / (A) (53.8%) Expense Ratio ------------- General and
administrative expenses (D) $37,736 Total revenue (E) $341,368
Expense Ratio (D) / (E) 11.1% (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 $870 and
$54, 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 (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.
iStar Financial Inc. Supplemental Information (In thousands)
(unaudited) CREDIT STATISTICS Three Months Ended September 30, 2008
------------------ Book debt, net of unrestricted cash (A)
$12,281,027 Book equity $2,454,082 Add: Accumulated depreciation
and loan loss reserves 1,305,761 ---------- Sum of book equity,
accumulated depreciation and loan loss reserves (B) $3,759,843
Leverage (1) (A)/(B) 3.3x Ratio of Earnings (Loss) to Fixed Charges
(0.9x) Ratio of Earnings (Loss) to Fixed Charges and Preferred
Stock Dividends (0.8x) Interest Coverage ----------------- EBITDA
(2) (C) ($107,325) GAAP interest expense (D) $168,040 EBITDA / GAAP
Interest Expense (2) (C)/(D) (0.6x) Covenant Calculation of Fixed
Charge Coverage Ratio (3) 2.4x RECONCILIATION OF NET INCOME TO
EBITDA (2) Net income (loss) ($301,756) Add: GAAP interest expense
168,040 Add: Depreciation, depletion and amortization 24,448 Add:
Joint venture depreciation, depletion and amortization 1,943
---------- EBITDA (2) ($107,325) (1) Leverage is calculated by
dividing book debt net of unrestricted cash by the sum of book
equity, accumulated depreciation and loan loss reserves. (2) 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. (3) 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 unsecured credit facilities; therefore, we believe
it is a useful measure for investors to consider. iStar Financial
Inc. Supplemental Information (In thousands) (unaudited) Three
Months Ended September 30, 2008 LOANS ---------------------------
Total/ CORPORATE Floating Weighted TENANT OTHER Fixed Rate Rate
Average LEASING INVESTMENTS ---------- ------- ------- -------
----------- Amount funded $35,800 $680,353 $716,153 $11,231 $9,657
Weighted average yield 10.73% 7.73% 7.88% 11.26% N/A Weighted
average all-in spread/margin (bps) (1) 843 408 429 N/A N/A Weighted
average first $ loan-to-value ratio 50.28% 1.14% 3.60% N/A N/A
Weighted average last $ loan-to-value ratio 84.46% 78.13% 78.44%
N/A N/A UNFUNDED COMMITMENTS Number of assets with unfunded
commitments 216 Discretionary commitments $423,251
Non-discretionary commitments 2,866,172 -----------Total unfunded
commitments $3,289,423 Estimated weighted average funding period
Approximately 2.0 years UNENCUMBERED ASSETS / UNSECURED DEBT
Unencumbered assets (A) $14,041,706 Unsecured debt (B) $11,151,264
Unencumbered Assets / Unsecured Debt (A)/(B) 1.3x RISK MANAGEMENT
STATISTICS (weighted average risk rating) 2008 2007
-------------------------------- --------------------------
September 30, June 30, March 31, December 31, September 30,
------------- -------- --------- ------------ -------------
Structured finance assets (principal risk) 3.41 3.28 3.12 3.07 2.92
Corporate tenant lease assets 2.55 2.55 2.51 2.50 2.48 (1)
Represents spread over base rate LIBOR (floating-rate loans) and
interpolated U.S. Treasury rates (fixed-rate loans) during the
quarter. iStar Financial Inc. Supplemental Information (In
thousands, except per share amounts) (unaudited) LOANS AND OTHER
LENDING INVESTMENTS CREDIT STATISTICS As of
------------------------------------- September 30, 2008 December
31, 2007 ------------------ ----------------- Value of
non-performing loans (1) / As a percentage of total managed loans
$2,477,888 19.35% $1,193,669 8.71% Reserve for loan losses / As a
percentage of total managed loans $832,663 6.50% $217,910 1.59% As
a percentage of non-performing loans (1) 33.60% 18.26%
RECONCILIATION OF DILUTED GAAP EPS GUIDANCE TO DILUTED ADJUSTED EPS
GUIDANCE (2) Year Ending December 31, 2008 -----------------
Earnings per diluted common share guidance ($2.50) - ($2.00) Less:
Gains, depreciation and other adjustments, net $0.50 - $1.50
----------------- Adjusted earnings per diluted common share
guidance ($3.50) - ($3.00) (1) Non-performing loans include iStar's
book value and the Fremont A-participation interest on the
associated assets. (2) 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.
iStar Financial Inc. Supplemental Information (In millions)
(unaudited) PORTFOLIO STATISTICS September 30, 2008 (1) Security
Type ------------- First Mortgages / Senior Loans $10,644 67.3%
Corporate Tenant Leases 3,701 23.4 Mezzanine / Subordinated Debt
933 5.9 Other Investments 548 3.4 ------- ----- Total $15,826
100.0% ======= ===== Collateral Type --------------- Apartment /
Residential $3,893 24.6% Land 2,239 14.1 Office (CTL) 1,746 11.0
Industrial / R&D 1,470 9.3 Retail 1,414 8.9 Corporate - Real
Estate 1,041 6.6 Entertainment / Leisure 979 6.2 Hotel 949 6.0
Other 861 5.4 Mixed Use / Mixed Collateral 614 3.9 Corporate -
Non-Real Estate 372 2.4 Office (Lending) 248 1.6 ------- -----
Total $15,826 100.0% ======= ===== Collateral Location
------------------- West $3,520 22.2% Northeast 2,822 17.8
Southeast 2,717 17.2 Mid-Atlantic 1,672 10.6 Various 1,067 6.7
Central 948 6.0 Southwest 916 5.8 International 867 5.5 South 541
3.4 Northcentral 439 2.8 Northwest 317 2.0 ------- ----- Total
$15,826 100.0% ======= ===== (1) Figures presented prior to loan
loss reserves, accumulated depreciation and impact of Statement of
Financial Accounting Standards No. 141, "Business Combinations."
DATASOURCE: iStar Financial Inc. CONTACT: Catherine D. Rice, Chief
Financial Officer, or Andrew G. Backman, Senior Vice President -
Investor Relations, both of iStar Financial Inc., +1-212-930-9400
Web Site: http://www.istarfinancial.com/
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