Board of Directors Approves 5% Increase in Quarterly Dividend on
Common Stock NEW YORK, Nov. 6 /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, 2007.
Third quarter results reflect the completion of the Fremont
transaction on July 2, 2007. iStar reported adjusted earnings for
the quarter of $1.07 per diluted common share. This compares with
$0.90 per diluted common share for the third quarter 2006. Adjusted
earnings allocable to common shareholders for the third quarter
2007 were $135.8 million on a diluted basis, compared to $103.1
million for the third quarter 2006. Adjusted earnings represent net
income computed in accordance with GAAP, adjusted for preferred
dividends, depreciation, depletion, amortization, gain (loss) from
discontinued operations and ineffectiveness on interest rate
hedges. Net income allocable to common shareholders for the third
quarter was $93.0 million, or $0.73 per diluted common share,
compared to $91.8 million, or $0.80 per diluted common share for
the third quarter 2006. Please see the financial tables that follow
the text of this press release for a detailed reconciliation of
adjusted earnings to GAAP net income. Net investment income for the
quarter was $220.8 million, compared to $109.0 million for the
third quarter 2006. The year-over-year increase was primarily due
to higher interest income associated with the inclusion of the
acquired Fremont portfolio of assets, including $60.7 million
primarily associated with the amortization of the $281.4 million
loan purchase discount from the acquisition. Net investment income
represents interest income, operating lease income and equity in
earnings (loss) from joint ventures, less interest expense,
operating costs for corporate tenant lease assets and loss on early
extinguishment of debt. Excluding the effect of the Fremont
acquisition, the Company announced that during the third quarter,
it closed 42 new financing commitments, for a total of $1.8
billion. Of that amount, $988.4 million was funded during the
quarter. In addition, the Company funded $396.6 million under
pre-existing commitments and received $401.4 million in principal
repayments. Additionally, the Company completed the sale of two
non-strategic corporate tenant lease assets for total proceeds of
$5.6 million, net of costs, resulting in a total net book gain of
approximately $1.0 million. For the quarter ended September 30,
2007, the Company generated adjusted return on average common book
equity of 21.8%. The Company's debt to book equity plus accumulated
depreciation/depletion and loan loss reserves, all as determined in
accordance with GAAP, was 3.3x at quarter end. The Company's net
finance margin, calculated as the rate of return on assets less the
cost of debt, was 5.25% for the quarter, versus 3.22% in the
previous quarter. The increase in quarter-over-quarter net finance
margin was primarily due to the amortization of the Fremont loan
purchase discount. Excluding the impact of the amortization of the
Fremont loan purchase discount, the Company's net finance margin
was 3.53%. Risk Management At September 30, 2007, first mortgages,
participations in first mortgages, senior loans and corporate
tenant lease investments collectively comprised 86.0% of the
Company's asset base, versus 83.6% in the prior quarter. The
Company's loan portfolio consisted of 78% floating rate and 22%
fixed rate loans, with a weighted average maturity of 3.2 years.
The weighted average last dollar loan-to-value ratio for all
structured finance assets was 66.6%. At quarter end, the Company's
corporate tenant lease assets were 95.6% leased with a weighted
average remaining lease term of 11.2 years. At September 30, 2007,
the weighted average risk ratings of the Company's structured
finance and corporate tenant lease assets were 2.92 and 2.48,
respectively, versus 2.78 and 2.50, respectively, in the previous
quarter. Inclusive of the assets acquired in the Fremont
acquisition, at September 30, 2007, the Company had 29 loans on
non-performing loan (NPL) status representing $848.7 million of
gross book value. At the end of the third quarter, the Company had
28 loans on its watch list representing $1.1 billion of gross book
value. Gross book values represent iStar's book value plus
Fremont's A-participation interest. Excluding Fremont's
A-participation interest on the associated assets, NPL and watch
list assets were $428.7 million and $610.5 million, respectively.
The Company's policy is to stop the accrual of interest on loans
placed on NPL status. The Company believes it has adequate
collateral and loan loss reserves to support the book value for
each of the NPL and watch list assets. The Company had $124.2
million in loan loss reserves at September 30, 2007 versus $52.2
million at December 31, 2006. The third quarter increase of $62.0
million in loan loss reserves was the result of the Company's
regular quarterly risk ratings review process as well as the
addition of the Fremont portfolio. This quarter's risk ratings
process included a comprehensive review of the Fremont portfolio.
The Company's total loss coverage, defined as the combination of
loan loss reserves and remaining purchase discount from the Fremont
acquisition, was $344.9 million or 3.2% of total loan assets at the
end of the third quarter. Summary of Fremont Contributions to
Quarterly Results On July 2, 2007, the Company completed its
transaction with Fremont Investment & Loan in which the Company
acquired Fremont's commercial real estate lending business and
retained a $2.1 billion B-participation interest in its commercial
real estate loan assets for an aggregate purchase price of
approximately $1.9 billion. The Company accounted for the
acquisition as a business combination under the purchase method of
accounting. Under the purchase method, the assets acquired and
liabilities assumed were recorded at their fair values as of the
acquisition date, with any excess of the purchase price over the
fair value recorded as goodwill. On the acquisition date, the
Company recorded a $281.4 million aggregate discount related to the
acquired loans as follows. The Company recognized 18 loans with an
aggregate principal balance of $577.2 million, as impaired. These
loans were recorded at a discount of $56.9 million, or
approximately $520.2 million. The majority of these loans will be
accounted for on the cost recovery basis. The remaining $5.7
billion of acquired loans were recorded at a fair value of $5.5
billion, a discount of $224.5 million to principal value. This
discount was determined on a loan by loan basis and will be
amortized through interest income over the life of each individual
loan. During the third quarter, we recognized approximately $57.4
million of interest income related to the amortization of purchase
discount, leaving a balance of $167.1 million. In addition, we
recognized $3.2 million of interest income from two of the impaired
loans, one of which repaid in full during the quarter, and one of
which is expected to repay by year end. The balances discussed
above represent iStar's B-participation interest plus Fremont's
A-participation interest. At the end of the third quarter, the
acquired portfolio and additional fundings made during the quarter,
had a principal balance of $5.7 billion, consisting of 243 loans
with a weighted average margin of 325 bps. This compared to 281
loans on July 2, 2007, with a principal balance of $6.3 billion and
a weighted average margin of 327 bps. At the end of the third
quarter, the principal balance of Fremont's A- participation
interest in the portfolio was $3.4 billion versus $4.2 billion on
July 2, 2007. The principal balance of iStar's B-participation
interest at the end of the third quarter was $2.3 billion versus
$2.1 billion on July 2, 2007. During the quarter, iStar received
$1.1 billion in principal repayments of which the Company retained
30%. The balance of the principal repayments was paid to Fremont as
part of the terms of its participation. The weighted average
maturity of the portfolio is approximately 12 months. During the
third quarter, iStar funded $567.4 million of commitments related
to the portfolio. Unfunded commitments at the end of the third
quarter were $3.0 billion, of which the Company only expects to
fund approximately $2.6 billion based upon its comprehensive review
of the portfolio. This compares to unfunded commitments of $3.7
billion on July 2, 2007. At September 30, 2007, there were 22 loans
from the acquired portfolio on NPL status with a gross book value
of $640.1 million versus 16 loans from the date of the acquisition,
which represented $406.1 million of gross book value. In addition,
there were 22 loans on the Company's watch list with a gross book
value of $781.3 million versus 22 loans from the date of the
acquisition which represented $843.6 million of gross book value.
Excluding Fremont's A- participation interest on the associated
assets, NPL and watch list assets for the acquired portfolio were
$220.1 million and $296.0 million, respectively. Capital Markets
Summary As of September 30, 2007, the Company had $1.7 billion
available under $3.9 billion in revolving 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 September 30, 2007, a one
percentage point increase in rates would have increased the
Company's adjusted earnings by 2.3%. During the third quarter, the
Company repurchased approximately 613,000 shares of its common
stock for $20.2 million pursuant to its existing 5.0 million share
repurchase program. The Company currently has remaining authority
to repurchase up to 2.1 million shares under the program. On
October 15, 2007, the Company issued $800 million of convertible
senior floating rate notes due 2012. The Notes priced at par,
mature on October 1, 2012, and will bear interest at a rate of
3-month LIBOR plus 0.50%. The Notes will be convertible into cash,
shares of common stock, or any combination thereof at the Company's
option at an initial conversion price of $45.05, which represented
a 30% premium over the closing price on October 10, 2007. The
Company used half of the net proceeds to pay down the interim
facility used to fund the Fremont acquisition and the other half to
pay down other indebtedness. 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. For fiscal year
2007, the Company expects diluted adjusted earnings per common
share of $4.00 - $4.10, and diluted GAAP earnings per common share
of $2.80 - $2.90, based on expected net asset growth of
approximately $5.0 billion, including the Company's retained
interest in the Fremont portfolio. Excluding the Fremont interest,
net asset growth for fiscal year 2007 is expected to be
approximately $3.0 billion. For fiscal year 2008, the Company
expects diluted adjusted earnings per common share of $4.00 -
$4.20, and diluted GAAP earnings per common share of $2.70 - $2.90.
The lower end of these ranges assumes minimal net asset growth in
2008. The higher end of these ranges assumes $3.0 - $3.5 billion of
net asset growth in 2008. Dividend On October 1, 2007, iStar
Financial declared a regular quarterly dividend of $0.825 per
share. The third quarter dividend was paid on October 29, 2007 to
shareholders of record on October 15, 2007. iStar Financial
announced today, that effective December 3, 2007, its Board of
Directors approved an increase in the regular quarterly cash
dividend on its common stock to $0.87 per share for the quarter
ending December 31, 2007, payable on December 31, 2007 to holders
of record on December 17, 2007. The $0.87 per share quarterly
dividend, or $3.48 per share on an annualized basis, represents an
approximate 5% increase over iStar Financial's previous quarterly
dividend rate of $0.825 per share. To ensure the Company pays out
100% of its taxable income for fiscal 2007, the Company stated
today that it expects to declare a special dividend later this year
on its common stock of approximately $0.15 - $0.30 per share.
Record and payment dates for a special dividend will be set by the
Board of Directors. [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. EST today, November 6, 2007.
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, 2007 2006 2007 2006 Net
investment income (1) $220,790 $109,042 $468,233 $312,697 Other
income 19,890 20,369 87,165 57,746 Other expenses (2) (141,017)
(48,472) (270,852) (128,594) Minority interest in consolidated
entities (277) (291) 302 (1,360) --------- --------- ---------
--------- Income from continuing operations $99,386 $80,648
$284,848 $240,489 ========= ========= ========= ========= Income
from discontinued operations 5,213 6,738 16,132 20,848 Gain from
discontinued operations 1,045 17,264 7,823 21,800 Preferred
dividends (10,580) (10,580) (31,740) (31,740) --------- ---------
--------- --------- Net income allocable to common shareholders and
HPU holders (3) $95,064 $94,070 $277,063 $251,397 =========
========= ========= ========= ---------------------------- (1)
Includes 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. (2) Includes depreciation and amortization,
general and administrative expenses, provision for loan losses 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, 2007 December 31, 2006
------------------ ----------------- (unaudited) Loans and other
lending investments, net $10,569,207 $6,799,850 Corporate tenant
lease assets, net 3,282,976 3,084,794 Other investments 472,221
407,617 Total assets 15,304,705 11,059,995 Debt obligations
11,748,508 7,833,437 Total liabilities 12,215,295 8,034,394 Total
shareholders' equity 3,034,600 2,986,863 iStar Financial Inc.
Consolidated Statements of Operations (In thousands, except per
share amounts) (unaudited) Three Months Ended Nine Months Ended
September 30, September 30, 2007 2006 2007 2006 ---- ---- ---- ----
REVENUES Interest income $316,855 $153,053 $689,880 $414,177
Operating lease income 82,650 76,097 240,118 228,951 Other income
19,890 20,369 87,165 57,746 --------- --------- --------- ---------
Total revenues 419,395 249,519 1,017,163 700,874 ---------
--------- --------- --------- COSTS AND EXPENSES Interest expense
173,376 115,214 441,077 309,999 Operating costs - corporate tenant
lease assets 7,937 6,337 21,833 22,928 Depreciation and
amortization 24,802 18,980 67,665 56,546 General and
administrative(1) 51,266 27,492 128,238 67,048 Provision for loan
losses 62,000 2,000 72,000 5,000 Other expense 2,949 - 2,949 -
--------- --------- --------- --------- Total costs and expenses
322,330 170,023 733,762 461,521 --------- --------- ---------
--------- Income from continuing operations before other items
97,065 79,496 283,401 239,353 Equity in earnings from joint
ventures 2,598 1,443 1,145 2,496 Minority interest in consolidated
entities (277) (291) 302 (1,360) --------- --------- ---------
--------- Income from continuing operations 99,386 80,648 284,848
240,489 Income from discontinued operations 5,213 6,738 16,132
20,848 Gain from discontinued operations 1,045 17,264 7,823 21,800
--------- --------- --------- --------- Net income 105,644 104,650
308,803 283,137 Preferred dividends (10,580) (10,580) (31,740)
(31,740) --------- --------- --------- --------- Net income
allocable to common shareholders and HPU holders $95,064 $94,070
$277,063 $251,397 ========= ========= ========= ========= Net
income per common share Basic $0.74 $0.81 $2.14 $2.16 Diluted (2)
$0.73 $0.80 $2.12 $2.14 Net income per HPU share Basic (3) $139.07
$153.27 $404.87 $409.67 Diluted (2) (4) $138.07 $151.67 $401.47
$405.73 ------------------------------ (1) For the three months
ended September 30, 2007 and 2006, includes $3,786 and $6,407 of
stock-based compensation expense, respectively. For the nine months
ended September 30, 2007 and 2006, includes $12,051 and $9,357 of
stock-based compensation expense, respectively. (2) For the three
months ended September 30, 2007 and 2006, includes the allocable
share of $29 and $30 of joint venture income, respectively. For the
nine months ended September 30, 2007 and 2006, includes the
allocable share of $85 and $86 of joint venture income,
respectively. (3) For the three months ended September 30, 2007 and
2006, $2,086 and $2,299 of net income is allocable to HPU holders,
respectively. For the nine months ended September 30, 2007 and
2006, $6,073 and $6,145 of net income is allocable to HPU holders,
respectively. (4) For the three months ended September 30, 2007 and
2006, $2,071 and $2,275 of net income is allocable to HPU holders,
respectively. For the nine months ended September 30, 2007 and
2006, $6,022 and $6,086 of net income 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, 2007 2006 2007
2006 ---- ---- ---- ---- EPS INFORMATION FOR COMMON SHARES Income
from continuing operations per common share (1) Basic $0.69 $0.60
$1.96 $1.79 Diluted (2) $0.68 $0.60 $1.94 $1.78 Net income per
common share Basic $0.74 $0.81 $2.14 $2.16 Diluted (2) $0.73 $0.80
$2.12 $2.14 Weighted average common shares outstanding Basic
126,488 113,318 126,644 113,281 Diluted 127,508 114,545 127,782
114,439 EPS INFORMATION FOR HPU SHARES Income from continuing
operations per HPU share (1) Basic $129.94 $114.14 $369.87 $340.14
Diluted (2) $128.94 $113.00 $366.74 $336.86 Net income per HPU
share (3) Basic $139.07 $153.27 $404.87 $409.67 Diluted (2) $138.07
$151.67 $401.47 $405.73 Weighted average HPU shares outstanding
Basic 15 15 15 15 Diluted 15 15 15 15 -----------------------------
(1) For the three months ended September 30, 2007 and 2006,
excludes preferred dividends of $10,580. For the nine months ended
September 30, 2007 and 2006, excludes preferred dividends of
$31,740. (2) For the three months ended September 30, 2007 and
2006, includes the allocable share of $29 and $30 of joint venture
income, respectively. For the nine months ended September 30, 2007
and 2006, includes the allocable share of $85 and $86 of joint
venture income, respectively. (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 $2,086 and $2,299 of net income
for the three months ended September 30, 2007 and 2006,
respectively, and $6,073 and $6,145 of net income for the nine
months ended September 30, 2007 and 2006, respectively. On a
diluted basis, these cumulative 15 shares were entitled to $2,071
and $2,275 of net income for the three months ended September 30,
2007 and 2006, respectively, and $6,022 and $6,086 of net income
for the nine months ended September 30, 2007 and 2006,
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, 2007 2006 2007 2006 ---- ---- ---- ---- ADJUSTED
EARNINGS (1) Net income $105,644 $104,650 $308,803 $283,137 Add:
Depreciation, depletion and amortization 25,928 20,758 71,172
61,791 Add: Joint venture income 31 32 92 92 Add: Joint venture
depreciation, depletion and amortization 10,407 2,645 30,992 8,093
Add: Amortization of deferred financing costs 7,065 5,403 20,222
17,671 Add: Hedge ineffectiveness, net 2,944 - 2,944 - Less:
Preferred dividends (10,580) (10,580) (31,740) (31,740) Less: Gain
from discontinued operations (1,045) (17,264) (7,823) (21,800)
Less: Joint venture gain from discontinued operations (1,572) -
(1,572) - --------- --------- --------- --------- Adjusted earnings
allocable to common shareholders and HPU holders: Basic $138,791
$105,612 $392,998 $317,152 Diluted $138,822 $105,644 $393,090
$317,244 Adjusted earnings per common share: Basic (2) $1.07 $0.91
$3.04 $2.73 Diluted (3) $1.07 $0.90 $3.01 $2.71 Weighted average
common shares outstanding: Basic 126,488 113,318 126,644 113,281
Diluted 127,508 114,545 127,782 114,439 Common shares outstanding
at end of period: Basic 126,272 113,820 126,272 113,820 Diluted
127,282 115,053 127,282 115,053 ------------------------------ (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
September 30, 2007 and 2006, excludes $3,046 and $2,581 of net
income allocable to HPU holders, respectively. For the nine months
ended September 30, 2007 and 2006, excludes $8,615 and $7,752 of
net income allocable to HPU holders, respectively. (3) For the
three months ended September 30, 2007 and 2006, excludes $3,023 and
$2,554 of net income allocable to HPU holders, respectively. For
the nine months ended September 30, 2007 and 2006, excludes $8,542
and $7,678 of net income allocable to HPU holders, respectively.
iStar Financial Inc. Consolidated Balance Sheets (In thousands) As
of As of September 30, 2007 December 31, 2006 ------------------
----------------- (unaudited) ASSETS Loans and other lending
investments, net $10,569,207 $6,799,850 Corporate tenant lease
assets, net 3,282,976 3,084,794 Other investments 472,221 407,617
Investments in joint ventures 390,863 382,030 Assets held for sale
76,590 9,398 Cash and cash equivalents 102,044 105,951 Restricted
cash 33,340 28,986 Accrued interest and operating lease income
receivable 141,373 72,954 Deferred operating lease income
receivable 95,339 79,498 Deferred expenses and other assets 97,697
71,181 Goodwill 43,055 17,736 ------------------ -----------------
Total assets $15,304,705 $11,059,995 ==================
================= LIABILITIES AND SHAREHOLDERS' EQUITY Accounts
payable, accrued expenses and other liabilities $466,787 $200,957
Debt obligations: Unsecured senior notes 7,119,466 6,250,249
Unsecured revolving credit facilities 2,178,049 923,068 Interim
credit facility 1,900,000 - Secured term loans 452,964 562,116
Other debt obligations 98,029 98,004 ------------------
----------------- Total liabilities 12,215,295 8,034,394 Minority
interest in consolidated entities 54,810 38,738 Shareholders'
equity 3,034,600 2,986,863 ------------------ -----------------
Total liabilities and shareholders' equity $15,304,705 $11,059,995
================== ================= iStar Financial Inc.
Supplemental Information (In thousands) (unaudited) PERFORMANCE
STATISTICS Three Months Ended Net Finance Margin September 30, 2007
------------------ ------------------ Weighted average GAAP yield
of loan and CTL investments 11.61% Less: Cost of debt (6.36%)
-------------- Net Finance Margin (1) 5.25% =============== Net
Finance Margin Excluding Amortization of Discount on Fremont Loans
3.53% =============== Return on Average Common Book Equity
------------------------------------ Average total book equity
$3,053,217 Less: Average book value of preferred equity (506,176)
-------------- Average common book equity (A) $2,547,041 Net income
allocable to common shareholders and HPU holders $95,064 Net income
allocable to common shareholders and HPU holders - Annualized (B)
$380,256 Return on Average Common Book Equity (B) / (A) 14.9%
=============== Adjusted basic earnings allocable to common
shareholders and HPU holders (2) $138,791 Adjusted basic earnings
allocable to common shareholders and HPU holders - Annualized ( C )
$555,164 Adjusted Return on Average Common Book Equity ( C ) / (A)
21.8% =============== Efficiency Ratio ---------------- General and
administrative expenses (D) $51,266 Total revenue (E) $419,395
Efficiency Ratio (D) / (E) 12.2% --------------------------
=============== (1) Weighted average GAAP yield is the annualized
sum of interest income and operating lease income (excluding other
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 $5,359 and
$227, 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 September 30, 2007 ------------------ Book debt (A)
$11,748,508 Book equity $3,034,600 Add: Accumulated
depreciation/depletion and loan loss reserves 579,066
-------------- Sum of book equity, accumulated
depreciation/depletion and loan loss reserves (B) $3,613,666 Book
Debt / Sum of Book Equity, Accumulated Depreciation/Depletion and
Loan Loss Reserves (A) / (B) 3.3x =============== Ratio of Earnings
to Fixed Charges 1.6x Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends 1.6x Interest Coverage -----------------
EBITDA (1) (C) $315,355 GAAP interest expense (D) $173,376 EBITDA /
GAAP Interest Expense (C) / (D) 1.8x =============== Fixed Charge
Coverage --------------------- EBITDA (1) (C) $315,355 GAAP
interest expense $173,376 Add: Preferred dividends 10,580
-------------- Total GAAP interest expense and preferred dividends
(E) $183,956 EBITDA / GAAP Interest Expense and Preferred Dividends
(C) / (E) 1.7x =============== RECONCILIATION OF NET INCOME TO
EBITDA Net income $105,644 Add: GAAP interest expense 173,376 Add:
Depreciation, depletion and amortization 25,928 Add: Joint venture
depreciation, depletion and amortization 10,407 --------------
EBITDA (1) $315,355 ---------------------------------
=============== (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) Three Months
Ended September 30, 2007 LOAN ORIGINATIONS (1)
--------------------- Total/ OTHER Floating Weighted CORPORATE
INVEST- Fixed Rate Rate Average LEASING MENTS ---------- ---------
--------- --------- ------- Amount funded $184,973 $660,326
$845,299 $141,163 $1,918 Weighted average GAAP yield 8.96% 8.99%
8.98% 9.96% N/A Weighted average all-in spread/margin (basis
points) (2) 448 384 - 517 N/A Weighted average first $
loan-to-value ratio 15.93% 10.91% 12.03% N/A N/A Weighted average
last $ loan-to-value ratio 59.69% 56.40% 57.12% N/A N/A UNFUNDED
COMMITMENTS Number of assets with unfunded commitments 336
Discretionary commitments $1,082,730 Non-discretionary commitments
6,009,115 ---------- Total unfunded commitments $7,091,845
========== Estimated weighted average funding period Approximately
2.0 years UNENCUMBERED ASSETS $15,011,609 RISK MANAGEMENT
STATISTICS (weighted average risk rating) 2007 2006
-------------------- ------------------ September June March
December September 30, 30, 31, 31, 30, --------------------
------------------ Structured Finance Assets (principal risk) 2.92
2.78 2.64 2.74 2.75 Corporate Tenant Lease Assets 2.48 2.50 2.45
2.37 2.39 (1=lowest risk; 5=highest risk)
------------------------------ (1) Excludes loans purchased through
the Fremont acquisition (2) Represents spread over base rate LIBOR
(floating-rate loans) and interpolated 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
-------------------------------------------------- September 30,
2007 December 31, 2006 -----------------------
------------------------ Book value of non- performing loans (1) /
As a percentage of total assets $848,714 5.55% $61,480 0.56%
Reserve for loan losses / As a percentage of total assets $124,201
0.81% $52,201 0.47% As a percentage of non-performing loans (1)
14.63% 84.91% RECONCILIATION OF DILUTED ADJUSTED EPS GUIDANCE TO
DILUTED GAAP EPS GUIDANCE (2) Year Ending Year Ending December 31,
2007 December 31, 2008 ----------------- ----------------- Earnings
per diluted common share guidance $2.80 - $2.90 $2.70 - $2.90 Add:
Depreciation, depletion and amortization per diluted common share
$1.10 - $1.30 $1.10 - $1.50 ----------------- -----------------
Adjusted earnings per diluted common share guidance $4.00 - $4.10
$4.00 - $4.20 ================= =================
---------------------------------- (1) Non-performing loans include
iStar's book value and Fremont's A- participation interest on the
associated assets. (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 millions) (unaudited) PORTFOLIO
STATISTICS AS OF SEPTEMBER 30, 2007 (1) Security Type -------------
First Mortgages / Senior Loans $9,162 60.5% Corporate Tenant Leases
3,860 25.5 Mezzanine / Subordinated Debt 1,531 10.1 Other
Investments 592 3.9 --------- --------- Total $15,145 100.0%
========= ========= Collateral Type --------------- Apartment /
Residential $2,815 18.6% Land 2,190 14.5 Office (CTL) 1,767 11.7
Corporate - Real Estate 1,682 11.1 Retail 1,591 10.5 Industrial /
R&D 1,436 9.5 Entertainment / Leisure 868 5.7 Hotel 707 4.7
Other 700 4.6 Mixed Use / Mixed Collateral 651 4.3 Corporate -
Non-Real Estate 372 2.4 Office (Lending) 366 2.4 ---------
--------- Total $15,145 100.0% ========= ========= Collateral
Location ------------------- West $3,135 20.7% Northeast 2,606 17.2
Southeast 2,297 15.2 Mid-Atlantic 1,605 10.6 Various 1,360 9.0
International 1,105 7.3 Central 939 6.2 South 799 5.3 Southwest 745
4.9 Northcentral 364 2.4 Northwest 190 1.2 --------- ---------
Total $15,145 100.0% -------------------------------------------
========= ========= (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, Vice President - Investor
Relations, both of iStar Financial Inc., +1-212-930-9400 Web site:
http://www.istarfinancial.com/
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