- Total revenues were $289.9 million and $1.4 billion for the
fourth quarter and fiscal year 2008, respectively. NEW YORK, Feb.
26 /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 fourth quarter
and fiscal year ended December 31, 2008. Fourth Quarter 2008
Results iStar reported adjusted earnings (loss) allocable to common
shareholders for the quarter of $12.7 million or $0.10 per diluted
common share, compared with ($36.6) million or ($0.29) per diluted
common share for the fourth 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, hedge
ineffectiveness and gain (loss) from discontinued operations. Net
income (loss) allocable to common shareholders for the fourth
quarter was ($22.6) million, or ($0.18) per diluted common share,
compared to ($78.7) million or ($0.62) per diluted common share for
the fourth 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 for the quarter
included $252.0 million of loan loss provisions, $150.0 million of
impairments, $323.0 million of gains associated with the early
extinguishment of debt and $19.0 million of gains from the sale of
seven corporate tenant lease (CTL) assets. Gains on the sale of CTL
assets are excluded from adjusted earnings, but included in net
income. Net investment income for the quarter was $435.4 million,
compared to $218.5 million for the fourth quarter 2007. The
increase is primarily due to gains associated with early
extinguishment of debt. 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 $683.2
million under new and pre-existing commitments and received $730.0
million in gross principal repayments. Of the gross principal
repayments, $278.9 million was utilized to pay down the
A-participation interest associated with the Fremont portfolio. The
Company's equity represented 24.2% of total capitalization at
quarter end versus 23.4% 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 3.1x at December 31, 2008 versus 3.3x
at September 30, 2008. The Company's net finance margin, calculated
as the rate of return on assets less the cost of debt, was 2.15%
for the quarter. Excluding the impact of the amortization of the
Fremont portfolio purchase discount, the Company's net finance
margin was 1.99% for the quarter, versus 2.74% in the prior
quarter. Fiscal Year 2008 Results Adjusted earnings (loss)
allocable to common shareholders for the year ended December 31,
2008, were ($352.0) million or ($2.68) per diluted common share.
This compares to $347.8 million or $2.72 per diluted share for the
year ended December 31, 2007. Net income (loss) allocable to common
shareholders for the year ended December 31, 2008, was ($234.1)
million or ($1.78) per diluted common share, compared to $192.3
million or $1.51 per diluted common share for the year ended
December 31, 2007. Results for fiscal year 2008 included $1.0
billion of loan loss provisions, $334.8 million of impairments,
$392.9 of gains associated with the early extinguishment of debt,
$64.3 million of gains from sale of 49 CTL assets and $285.1
million of gains from the sale of the Company's timber investments,
net of minority interest. Net investment income and total revenue
were $981.9 million and $1.4 billion, respectively, for the year
ended December 31, 2008, versus $686.0 million and $1.4 billion,
respectively, for the year ended December 31, 2007. Capital Markets
The Company is currently working with members of its existing bank
group and has received the requisite consents and commitments for a
new secured facility and restructuring of existing bank facilities.
The Company expects that, if completed, its principal amount of the
new secured facility would be between $700 million and $1.0
billion. The Company currently has commitments of approximately
$700 million. If completed, the new secured facility would mature
in June 2012 and would bear interest at a rate of LIBOR + 2.50%.
Lenders who participate in the new secured loan would receive
collateral security for their outstanding unsecured positions in
the Company's existing unsecured bank lines and the interest on
these loans would increase to LIBOR + 1.50%. The new facilities
would also provide for additional operating flexibility through the
modification of certain financial covenants. The new secured
facility and the restructuring of the existing facilities are
currently expected to close in March. However, they are subject to
closing conditions including the negotiation of definitive
documents. There can be no assurance that these transactions will
be completed in this timeframe or at all. As of December 31, 2008,
the Company had $558.1 million of unrestricted cash and available
capacity under $3.7 billion in revolving credit facilities versus
$877.7 million 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 $635.9 million face
amount of its unsecured bonds in open market transactions resulting
in a gain of $323.0 million. In addition, the Company repurchased
approximately 26.7 million shares of its common stock pursuant to
its existing repurchase program. Risk Management At December 31,
2008, first mortgages, participations in first mortgages, senior
loans and corporate tenant lease investments collectively comprised
91.5% of the Company's asset base, versus 90.7% in the prior
quarter. The Company's loan portfolio consisted of 79.8% floating
rate and 20.2% fixed rate loans, with a weighted average maturity
of 2.3 years. Of the Company's floating rate loans, 62.3% had a
weighted average floor of 3.99%. The weighted average last dollar
loan-to-value ratio for all structured finance assets was 75.8%. At
quarter end, the Company's corporate tenant lease assets were 95.2%
leased with a weighted average remaining lease term of 11.9 years.
At December 31, 2008, the weighted average risk ratings of the
Company's structured finance and corporate tenant lease assets were
3.53 and 2.58, respectively, versus 3.41 and 2.55, respectively, in
the prior quarter. As of December 31, 2008, 68 of the Company's 357
total loans were on non-performing loan (NPL) status. These loans
represent $3.5 billion or 27.5% of total managed loans, compared to
51 loans representing $2.5 billion or 19.4% 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 $12.6 billion. The Company's policy is to stop
the accrual of interest on loans placed on NPL status. During the
quarter, the Company sold two NPLs with managed asset value of
$18.5 million and reclassified three loans with managed asset value
of $71.7 million as other real estate owned (OREO). At the end of
the fourth quarter, the Company had 28 loans on its watch list
representing $1.3 billion or 10.1% of total managed loans, compared
to 29 loans representing $1.3 billion or 10.2% of total managed
loans in the prior quarter. Assets on the Company's watch list are
all performing loans. At the end of the fourth quarter, the Company
had 11 assets classified as OREO with a book value of $242.5
million. During the quarter, the Company took title to three
properties that served as collateral on its loans, resulting in
$30.7 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 $71.7 million prior to the Company receiving
title to the properties. The Company sold two OREO assets during
the quarter, generating net proceeds of $61.4 million resulting in
non-cash impairments of $3.1 million. In addition, the Company
recorded $16.4 million of non-cash impairment charges on five OREO
assets. During the quarter, the Company recorded $109.9 million of
non-cash impairment charges associated with five credits in its
Corporate Loan and Debt portfolio and its Other Investments. At
December 31, 2008, the Company had $976.8 million in loan loss
reserves versus $832.7 million at September 30, 2008, consisting of
$177.2 million of general reserves and $799.6 million of asset
specific reserves. The provisions reflect 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 $976.8 million and remaining unamortized purchase
discount from the Fremont acquisition of $55.9 million, was $1.0
billion or 8.2% of total managed loans at the end of the fourth
quarter. This compares to total loss coverage of $908.2 million or
7.1% of total managed loans in the prior quarter. Summary of
Fremont Contributions to Quarterly Results At the end of the fourth
quarter, the Fremont portfolio, including additional fundings made
during the quarter, had a managed asset value of $4.0 billion
consisting of 140 loans versus $4.3 billion consisting of 152 loans
at the end of the third quarter 2008. At the end of the fourth
quarter, the value of the A-participation interest in the portfolio
was $1.3 billion versus $1.6 billion on September 30, 2008. The
book value of iStar's B-participation interest at the end of the
fourth quarter was $2.7 billion versus $2.7 billion on September
30, 2008. During the quarter, iStar received $398.4 million in
principal repayments, of which the Company retained 30%. The
balance of principal repayments was paid to the A-participation
interest. The current weighted average maturity of the Fremont
portfolio is eight months. During the fourth quarter, iStar funded
$218.6 million of commitments related to the portfolio. Unfunded
commitments at the end of the fourth quarter were $0.7 billion, of
which the Company expects to fund approximately $0.4 billion based
upon its comprehensive review of the portfolio. This compares to
unfunded commitments of $0.9 billion at the end of the prior
quarter. At December 31, 2008, there were 37 Fremont loans on NPL
status with a managed asset value of $1.2 billion versus 29 loans
at the prior quarter end, with $777.8 million of managed asset
value. In addition, there were 18 loans on the Company's watch list
with a managed asset value of $758.6 million versus 14 loans at the
prior quarter end, with $578.1 million of managed asset value.
Earnings Guidance and Dividend Expectations Given the continued
uncertainty in the market, the Company will not be providing
guidance for fiscal year 2009 at this time. The Company's Board of
Directors has concluded that the Company has already paid out 100%
of its 2008 taxable income. As a result, the Company will not pay a
fourth quarter cash dividend on its common shares. For the year,
the Company has paid a total of $1.74 per share in common share
dividends. [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 generate
attractive risk-adjusted returns on equity to shareholders by
providing innovative and value-added financing to its customers.
iStar Financial will hold a quarterly earnings conference call at
10:00 a.m. ET today, February 26, 2009. 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, but are not limited to, 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 periodic
reports filed with the Securities and Exchange Commission,
including the annual reports on Form 10-K and quarterly reports on
Form 10-Q.) Selected Income Statement Data (In thousands)
(unaudited) Three Months Ended Twelve Months Ended December 31,
December 31, 2008 2007 2008 2007 ---- ---- ---- ---- Net investment
income (1) $435,395 $218,516 $981,880 $685,953 Other income 9,144
20,530 97,851 99,938 Non-interest expense (2) (477,404) (315,960)
(1,642,656) (580,868) Minority interest in consolidated entities
(78) 514 991 816 Gain on sale of joint venture interest, net of
minority interest - - 261,659 - -------- -------- ---------
-------- Income (loss) from continuing operations (32,943) (76,400)
(300,275) 205,839 Income from discontinued operations 1,455 6,546
15,715 25,287 Gain from discontinued operations, net of minority
interest 18,971 9 87,769 7,832 Preferred dividends (10,580)
(10,580) (42,320) (42,320) -------- -------- --------- -------- Net
income (loss) allocable to common shareholders and HPU holders (3)
($23,097) ($80,425) ($239,111) $196,638 ======== ======== =========
======== (1) Includes 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. (2) Includes depreciation
and amortization, general and administrative expenses, provision
for loan losses, impairments and other expense. (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) (unaudited) As of As of December 31, 2008
December 31, 2007 ----------------- ----------------- Loans and
other lending investments, net $10,586,644 $10,949,354 Corporate
tenant lease assets, net 3,044,811 3,309,866 Other investments
447,318 856,609 Total assets 15,296,748 15,848,298 Debt obligations
12,516,023 12,399,558 Total liabilities 12,870,515 12,894,869 Total
shareholders' equity 2,389,380 2,899,481 iStar Financial Inc.
Consolidated Statements of Operations (In thousands, except per
share amounts) (unaudited) Three Months Ended Twelve Months Ended
December 31, December 31, 2008 2007 2008 2007 ---- ---- ---- ----
REVENUES Interest income $199,201 $308,128 $947,661 $998,008
Operating lease income 81,564 81,622 318,600 314,740 Other income
9,144 20,530 97,851 99,938 -------- -------- --------- ---------
Total revenues 289,909 410,280 1,364,112 1,412,686 --------
-------- --------- --------- COSTS AND EXPENSES Interest expense
161,153 186,643 660,284 627,720 Operating costs - corporate tenant
lease assets 8,401 7,894 23,575 28,926 Depreciation and
amortization 24,734 24,442 97,368 86,223 General and administrative
(1) 34,765 36,950 159,096 165,128 Provision for loan losses 252,020
113,000 1,029,322 185,000 Impairment of goodwill - - 39,092 -
Impairment of other assets 149,972 144,184 295,738 144,184 Other
expense 15,913 (2,616) 22,040 333 -------- -------- ---------
--------- Total costs and expenses 646,958 510,497 2,326,515
1,237,514 -------- -------- --------- --------- Income (loss) from
continuing operations before other items (357,049) (100,217)
(962,403) 175,172 Gain on early extinguishment of debt 323,027 225
392,943 225 Gain on sale of joint venture interest, net of minority
interest - - 261,659 - Earnings (loss) from equity method
investments 1,157 23,078 6,535 29,626 Minority interest in
consolidated entities (78) 514 991 816 -------- -------- ---------
--------- Income (loss) from continuing operations (32,943)
(76,400) (300,275) 205,839 Income from discontinued operations
1,455 6,546 15,715 25,287 Gain from discontinued operations, net of
minority interest 18,971 9 87,769 7,832 -------- -------- ---------
--------- Net income (loss) (12,517) (69,845) (196,791) 238,958
Preferred dividend requirements (10,580) (10,580) (42,320) (42,320)
-------- -------- --------- --------- Net income (loss) allocable
to common shareholders and HPU holders ($23,097) ($80,425)
($239,111) $196,638 ======== ======== ========= ========= Net
income (loss) per common share Basic ($0.18) ($0.62) ($1.78) $1.52
Diluted (2) ($0.18) ($0.62) ($1.78) $1.51 Net income (loss) per HPU
share Basic (3) ($34.80) ($116.93) ($336.33) $287.93 Diluted (2)(4)
($34.80) ($116.47) ($336.33) $285.00 (1) For the three months ended
December 31, 2008 and 2007, includes $5,817 and $5,549 of
stock-based compensation expense, respectively. For the years ended
December 31, 2008 and 2007, includes $23,542 and $17,601 of
stock-based compensation expense, respectively. (2) For the year
ended December 31, 2007, includes the allocable share of $85 joint
venture income. (3) For the three months ended December 31, 2008
and 2007, ($522) and ($1,754) of net income (loss) is allocable to
HPU holders, respectively. For the years ended December 31, 2008
and 2007, ($5,045) and $4,319 of net income (loss) is allocable to
HPU holders, respectively. (4) For the three months ended December
31, 2008 and 2007, ($522) and ($1,747) of net income (loss) is
allocable to HPU holders, respectively. For the years ended
December 31, 2008 and 2007, ($5,045) and $4,275 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 Twelve Months Ended
December 31, December 31, 2008 2007 2008 2007 ---- ---- ---- ----
EPS INFORMATION FOR COMMON SHARES Income (loss) from continuing
operations per common share (1) Basic ($0.34) ($0.67) ($2.56) $1.26
Diluted (2) ($0.34) ($0.67) ($2.56) $1.26 Net income (loss) per
common share Basic ($0.18) ($0.62) ($1.78) $1.52 Diluted (2)
($0.18) ($0.62) ($1.78) $1.51 Weighted average common shares
outstanding Basic 122,809 127,267 131,153 126,801 Diluted 122,809
127,798 131,153 127,792 EPS INFORMATION FOR HPU SHARES Income
(loss) from continuing operations per HPU share (1) Basic ($65.60)
($126.46) ($482.46) $239.60 Diluted (2) ($65.60) ($125.94)
($482.46) $237.07 Net income (loss) per HPU share (3) Basic
($34.80) ($116.93) ($336.33) $287.93 Diluted (2) ($34.80) ($116.47)
($336.33) $285.00 Weighted average HPU shares outstanding Basic and
diluted 15 15 15 15 (1) For the three months ended December 31,
2008 and 2007, excludes preferred dividends of $10,580. For the
years ended December 31, 2008 and 2007, excludes preferred
dividends of $42,320. (2) For the year ended December 31, 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 ($522) and ($1,754) of net income (loss) for the three months
ended December 31, 2008 and 2007, respectively, and ($5,045) and
$4,319 of net income (loss) for the years ended December 31, 2008
and 2007, respectively. On a diluted basis, these cumulative 15
shares were entitled to ($522) and ($1,747) of net income (loss)
for the three months ended December 31, 2008 and 2007,
respectively, and ($5,045) and $4,275 of net income (loss) for the
years ended December 31, 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 Twelve Months Ended December 31, December 31, 2008
2007 2008 2007 ---- ---- ---- ---- ADJUSTED EARNINGS (1) Net income
(loss) ($12,517) ($69,845) ($196,791) $238,958 Add: Depreciation,
depletion and amortization 24,596 28,254 102,745 99,427 Add: Joint
venture depreciation, depletion and amortization 1,953 9,834 14,466
40,826 Add: Amortization of deferred financing costs 9,907 8,145
43,800 28,367 Add: Impairment of goodwill and intangible assets
9,069 - 60,618 - Less: Hedge ineffectiveness, net 9,533 (3,183)
7,427 (239) Less: Gain from discontinued operations, net of
minority interest (18,971) (9) (87,769) (7,832) Less: Gain on sale
of joint venture interest, net of minority interest - - (261,659)
(1,572) Less: Preferred dividends (10,580) (10,580) (42,320)
(42,320) ------- ------- ------- ------- Adjusted earnings (loss)
allocable to common shareholders and HPU holders: Basic $12,990
($37,384) ($359,483) $355,615 Diluted $12,992 ($37,384) ($359,483)
$355,707 Adjusted earnings (loss) per common share: Basic (2) $0.10
($0.29) ($2.68) $2.74 Diluted (3) $0.10 ($0.29) ($2.68) $2.72
Weighted average common shares outstanding: Basic 122,809 127,267
131,153 126,801 Diluted 123,800 127,798 131,153 127,792 Common
shares outstanding at end of period: Basic 105,457 133,929 105,457
133,929 Diluted 105,457 134,465 105,457 134,465 (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
December 31, 2008 and 2007, excludes $293 and ($816) of net income
(loss) allocable to HPU holders, respectively. For the years ended
December 31, 2008 and 2007, excludes ($7,461) and $7,799 of net
income (loss) allocable to HPU holders, respectively. (3) For the
three months ended December 31, 2008 and 2007, excludes $291 and
($812) of net income (loss) allocable to HPU holders, respectively.
For the years ended December 31, 2008 and 2007, excludes ($7,461)
and $7,730 of net income (loss) allocable to HPU holders,
respectively. iStar Financial Inc. Consolidated Balance Sheets (In
thousands) As of As of December 31, 2008 December 31, 2007
----------------- ----------------- (unaudited) ASSETS Loans and
other lending investments, net $10,586,644 $10,949,354 Corporate
tenant lease assets, net 3,044,811 3,309,866 Other investments
447,318 856,609 Other real estate owned 242,505 128,558 Assets held
for sale - 74,335 Cash and cash equivalents 496,537 104,507
Restricted cash 155,965 32,977 Accrued interest and operating lease
income receivable, net 87,151 121,405 Deferred operating lease
income receivable 116,793 102,135 Deferred expenses and other
assets, net 114,838 125,274 Goodwill 4,186 43,278 -----------
----------- Total assets $15,296,748 $15,848,298 ===========
=========== LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable,
accrued expenses and other liabilities $354,492 $495,311 Debt
obligations: Unsecured senior notes 7,218,160 7,916,853 Unsecured
revolving credit facilities 3,281,273 2,681,174 Secured revolving
credit facility 306,867 - Interim financing facility - 1,289,811
Secured term loans 1,611,650 413,682 Other debt obligations 98,073
98,038 ----------- ----------- Total liabilities 12,870,515
12,894,869 Minority interest in consolidated entities 36,853 53,948
Shareholders' equity 2,389,380 2,899,481 ----------- -----------
Total liabilities and shareholders' equity $15,296,748 $15,848,298
=========== =========== iStar Financial Inc. Supplemental
Information (In thousands) (unaudited) PERFORMANCE STATISTICS Three
Months Ended December 31, 2008 ----------------- Net Finance Margin
------------------ Weighted average GAAP yield of loan and CTL
investments 7.44% Less: Cost of debt 5.29% ---------- Net Finance
Margin (1) 2.15% Net Finance Margin Excluding Amortization of
Discount on Fremont Loans 1.99% Return on Average Common Book
Equity ------------------------------------ Average total book
equity $2,421,731 Less: Average book value of preferred equity
(506,176) ---------- Average common book equity (A) $1,915,555 Net
income (loss) allocable to common shareholders and HPU holders
($23,097) Net income (loss) allocable to common shareholders and
HPU holders - Annualized (B) ($92,388) Return on Average Common
Book Equity (B) / (A) (4.8%) Adjusted basic earnings (loss)
allocable to common shareholders and HPU holders (2) $12,990
Adjusted basic earnings (loss) allocable to common shareholders and
HPU holders - Annualized (C) $51,960 Adjusted Return on Average
Common Book Equity (C) / (A) 2.7% Expense Ratio -------------
General and administrative expenses (3) (D) $34,693 Total revenue
(3) (E) $291,731 Expense Ratio (D) / (E) 11.9% (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
$1,822 and $127, 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. (3) Total revenue and
general and administrative expenses exclude SFAS No. 144
adjustments from discontinued operations of $1,822 and ($72),
respectively. iStar Financial Inc. Supplemental Information (In
thousands) (unaudited) CREDIT STATISTICS Three Months Ended
December 31, 2008 ----------------- Book debt, net of unrestricted
cash (A) $12,019,486 Book equity 2,389,380 Add: Accumulated
depreciation and loan loss reserves 1,456,371 ----------- Sum of
book equity, accumulated depreciation and loan loss reserves (B)
$3,845,751 Leverage (1) (A) / (B) 3.1x Ratio of Earnings (Loss) to
Fixed Charges 0.8x Ratio of Earnings (Loss) to Fixed Charges and
Preferred Stock Dividends 0.8x Covenant Calculation of Fixed Charge
Coverage Ratio (2) 2.7x Interest Coverage ----------------- EBITDA
(3) (C) $175,185 GAAP interest expense (D) 161,153 EBITDA / GAAP
Interest Expense (3) (C) / (D) 1.1x RECONCILIATION OF NET INCOME TO
EBITDA (3) Net income (loss) ($12,517) Add: GAAP interest expense
161,153 Add: Depreciation, depletion and amortization 24,596 Add:
Joint venture depreciation, depletion and amortization 1,953
----------- EBITDA (3) $175,185 (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) 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. (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. iStar
Financial Inc. Supplemental Information (In thousands) (unaudited)
FINANCING VOLUME SUMMARY STATISTICS Three Months Ended December 31,
2008 LOAN ORIGINATIONS ------------------------------ Total/
Floating Weighted CORPORATE OTHER Fixed Rate Rate Average LEASING
INVESTMENTS ---------- -------- -------- --------- -----------
Amount funded $23,216 $622,458 $645,674 $9,411 $28,152 Weighted
average GAAP yield 5.91% 7.37% 7.31% 11.78% N/A Weighted average
all-in spread/margin (basis points) (1) 568 665 661 N/A N/A
Weighted average first $ loan-to-value ratio 45.07% 0.86% 2.36% N/A
N/A Weighted average last $ loan-to-value ratio 84.39% 75.10%
75.42% N/A N/A UNFUNDED COMMITMENTS Number of assets with unfunded
commitments 194 Discretionary commitments $163,393
Non-discretionary commitments 2,263,966 ------------------- Total
unfunded commitments $2,427,359 Estimated weighted average funding
period Approximately 2.1 years UNENCUMBERED ASSETS / UNSECURED DEBT
Unencumbered assets (A) $13,540,138 Unsecured debt (B) $10,612,225
Unencumbered Assets / Unsecured Debt (A) / (B) 1.3x RISK MANAGEMENT
STATISTICS (weighted average risk rating) 2008 2007
--------------------------------------------- ------------ December
31, September 30, June 30, March 31, December 31, ------------
------------- -------- --------- ------------ Structured Finance
Assets (principal risk) 3.53 3.41 3.28 3.12 3.07 Corporate Tenant
Lease Assets 2.58 2.55 2.55 2.51 2.50 (1=lowest risk; 5=highest
risk) (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
------------------------------------ December 31, 2008 December 31,
2007 ----------------- ----------------- Value of non-performing
loans (1) / As a percentage of total managed loans $3,458,157
27.48% $1,193,669 8.71% Reserve for loan losses / As a percentage
of total managed loans $976,788 7.76% $217,910 1.59% As a
percentage of non-performing loans (1) 28.25% 18.26% (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 December 31, 2008 (1) Asset Type ---------- First
Mortgages / Senior Loans $10,670 68.4% Corporate Tenant Leases
3,597 23.1 Mezzanine / Subordinated Debt 893 5.7 Other Investments
434 2.8 ------- ----- Total $15,594 100.0% ======= ===== Property /
Collateral Type -------------------------- Apartment / Residential
$4,244 27.2% Land 2,359 15.1 Office 1,895 12.1 Industrial / R&D
1,489 9.5 Retail 1,348 8.7 Entertainment / Leisure 967 6.2
Corporate - Real Estate 868 5.6 Hotel 821 5.3 Mixed Use / Mixed
Collateral 641 4.1 Other 582 3.7 Corporate - Non-Real Estate 380
2.5 ------- ----- Total $15,594 100.0% ======= ===== Geography
--------- West $3,581 23.0% Northeast 2,843 18.2 Southeast 2,659
17.1 Mid-Atlantic 1,672 10.7 Central 927 6.0 Southwest 923 5.9
Various 892 5.7 International 797 5.1 South 515 3.3 Northcentral
435 2.8 Northwest 350 2.2 ------- ----- Total $15,594 100.0%
======= ===== (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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