8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  July 27, 2006

iStar Financial Inc.

(Exact name of registrant as specified in its charter)

Maryland	1-15371	95-6881527
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification Number)

1114 Avenue of the Americas, 27th Floor New York, New York	10036
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:  (212) 930-9400

N/A

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02 Results of Operations and Financial Condition.

The information in this Current Report, including the exhibit hereto, is being furnished and shall not be deemed “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section.  The information in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, unless it is specifically incorporated by reference therein.

On July 27, 2006, iStar Financial Inc. issued an earnings release announcing its financial results for the quarter ended June 30, 2006.  A copy of the earnings release is attached as Exhibit 99.1.

ITEM 9.01 Financial Statements and Exhibits.

Exhibit 99.1 Earnings Release.

2

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	iSTAR FINANCIAL INC.
Date: July 27, 2006	By:	/s/ Jay Sugarman
		Jay Sugarman
		Chairman and Chief Executive Officer
Date: July 27, 2006	By:	/s/ Catherine D. Rice
		Catherine D. Rice
		Chief Financial Officer

3

EXHIBIT INDEX

	Exhibit Number	Description
99.1		Earnings Release.

4

EX-99.1

Exhibit 99.1

 

Second quarter new financing commitments total $1.63 billion in 29 separate transactions. Adjusted earnings per diluted common share were $0.91 for the second quarter 2006, up 9.6% year-over-year. Total revenues reach record $236.8 million for the second quarter 2006. Company increases full year 2006 adjusted earnings per diluted common share guidance to $3.45 - $3.55. iStar Financial Announces Second Quarter 2006 Results NEW YORK – July 27, 2006 – iStar Financial Inc. (NYSE: SFI), the leading publicly traded finance company focused on the commercial real estate industry, today reported second quarter 2006 results. iStar Financial reported adjusted earnings for the quarter ended June 30, 2006 of $0.91 per diluted common share versus $0.83 per diluted common share for the second quarter 2005. Adjusted earnings allocable to common shareholders for the second quarter 2006 were $103.9 million on a diluted basis, compared to $94.5 million for the second quarter 2005. Adjusted earnings represents net income computed in accordance with GAAP, adjusted for preferred dividends, depreciation, depletion, amortization and gain (loss) from discontinued operations. Net income allocable to common shareholders for the second quarter was $78.0 million, or $0.68 per diluted common share, compared to $66.5 million, or $0.58 per diluted common share, for the second quarter 2005. News ReleaseiStar Financial Inc. 1114 Avenue of the Americas New York, NY 10036 (212) 930-9400 Catherine D. Rice Chief Financial Officer Andrew G. Backman Vice President – Investor Relations

 

Net investment income for the quarter was $111.3 million, compared to $95.2 million for the second quarter of 2005, primarily due to year-over-year growth of the Company’s loan portfolio. Net investment income represents interest income, operating lease income and equity in earnings from joint ventures, less interest expense, operating costs for corporate tenant lease assets and loss on early extinguishment of debt. Included in this quarter’s earnings was an early termination fee associated with a multi-asset lease within the Company’s corporate tenant lease portfolio, which was partially offset by an impairment charge related to certain assets within the lease. The net effect was a one-time positive impact to earnings of $4.0 million, or $0.035 per diluted common share for the quarter. The impaired assets are classified as “Assets held for sale” on the Company’s balance sheet. The Company announced that during the second quarter, it closed 29 new financing commitments, for a total of $1.63 billion, up 57% year-over-year. Of that amount, $709 million was funded during the second quarter. In addition, the Company funded $140 million under pre-existing commitments and received $481 million in principal repayments. Additionally, the Company completed the sale of a non-core office and warehouse facility for $12.8 million net of costs, resulting in a net book gain of approximately $2.4 million. Cumulative repeat customer business totaled $9.9 billion at June 30, 2006. For the quarter ended June 30, 2006, the Company generated return on average common book equity of 20.9%. The Company’s debt to book equity plus accumulated depreciation/depletion and loan loss reserves, all as determined in accordance with GAAP, was 2.2x at quarter end. As of June 30, 2006, the Company’s weighted average GAAP yield on its structured finance assets and corporate tenant lease assets was 10.38% and 9.66%, respectively. The Company’s net finance margin, calculated as the rate of return on assets less the cost of debt, was 3.38% for the quarter. Capital Markets Summary During the second quarter, the Company completed an amendment to its existing $1.5 billion unsecured revolving credit facility. The new five-year facility was increased to $2.2 billion; it carries an interest rate of LIBOR + 0.525%, down from LIBOR + 0.70% in the prior facility and an annual facility fee of 12.5 bps, down from 15.0 bps. The Company said that 35 financial institutions, including seven new participants, participated in the new, multicurrency facility. As of June 30, 2006, the Company had $905 million outstanding under $2.7 billion in credit facilities. Consistent with its match funding policy under which a one percentage point change in interest rates cannot impact adjusted earnings by more than 2.5%, as of June 30, 2006, a 100 basis point increase in rates would have decreased the Company’s adjusted earnings by 0.13%. -more- iStar Financial Announces Second Quarter 2006 Results Page 2 of 13

 

Earnings Guidance Consistent with the Securities and Exchange Commission’s Regulation FD and Regulation G, iStar Financial comments on earnings expectations within the context of its regular earnings press releases. The Company expects diluted adjusted earnings per share for the fiscal year 2006 of $3.45 - $3.55, and diluted GAAP earnings per share for the fiscal year 2006 of $2.50 - $2.60, based on expected net asset growth of approximately $1.5 billion. The Company continues to expect to fund its net asset growth with a combination of unsecured notes and equity. Risk Management At June 30, 2006, first mortgages, participations in first mortgages, senior loans and corporate tenant lease investments collectively comprised 88.2% of the Company’s asset base versus 87.9% in the prior quarter. The Company’s loan portfolio consisted of 56.2% floating rate and 43.8% fixed rate loans, with a weighted average maturity of 4.1 years. The weighted average first and last dollar loan-to-value ratio for all structured finance assets was 13.6% and 64.1%, respectively. At quarter end, the Company’s corporate tenant lease assets were 95.8% leased with a weighted average remaining lease term of 10.6 years. At June 30, 2006, the weighted average risk ratings of the Company’s structured finance and corporate tenant lease assets were 2.67 and 2.38, respectively. At quarter end, accumulated loan loss reserves and other asset-specific credit protection represented an aggregate of approximately 5.61% of the gross book value of the Company’s loans. In addition, cash deposits, letters of credit, allowances for doubtful accounts and accumulated depreciation relating to corporate tenant lease assets represented 11.97% of the gross book value of the Company’s corporate tenant lease assets at quarter end. At June 30, 2006, the Company’s non-performing loan assets (NPLs) represented 0.32% of total assets. NPLs represent loans on non-accrual status and repossessed real estate collateral. At June 30, 2006, the Company had two loans on non-accrual and no repossessed assets. In addition, two assets were removed and one asset was added to the watch list this quarter, with watch list assets representing 0.16% of total assets at June 30, 2006. Dividend On July 3, 2006, iStar Financial declared a regular quarterly dividend of $0.77. The second quarter dividend will be payable on July 31, 2006 to shareholders of record on July 17, 2006. -more- Page 3 of 1 3 iStar Financial Announces Second Quarter 2006 Results

 

-more- [Financial Tables to Follow] * * iStar Financial Inc. is the leading publicly traded finance company focused on the commercial real estate industry. The Company primarily provides custom tailored financing to high end private and corporate owners of real estate, including senior and mezzanine real estate debt, senior and mezzanine corporate capital, 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. EDT today, July 27, 2006. This conference call will be broadcast live over the Internet and can be accessed by all interested parties through iStar Financial’s website, 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.) Page 4 of 1 3 iStar Financial Announces Second Quarter 2006 Results

 

iStar Financial Announces Second Quarter 2006 ResultsPage 5 of 13HP U holders are Company employees who purchased high performance common stock unit s under t he Company’s (1)$157,326 $127,898 $79,919 $68,159 Net income allocable to common shareholders and HPU holders (1) (21,160) (21,160) (10,580) (10,580) Preferred dividend requirements 4,536 407 2,353 407 Gain from discontinued operations 1,739 3,126 901 1,547 Income from discontinued operations $172,211 $145,525 $87,245 $76,785 Income from continuing operations (1,069) (280) (821) (74) Minority interest in consolidated entities (81,103) (68,287) (41,831) (32,583) Non-interest expense 32,826 26,870 18,561 14,265 Other income $221,557 $187,222 $111,336 $95,177 Net investment income 2006 2005 2006 2005 June 30, June 30, S ix Months Ended Three Months Ended (unaudited) (In thousands) Selected Income Statement Data 2,446,671 2,553,535 Total shareholders’ equity 6,052,114 6,652,450 Total liabilities 5,859,592 6,471,721 Debt obligations 8,532,296 9,250,518 Total assets 240,470 250,266 Other investments 3,115,361 3,098,797 Corporate tenant lease assets, net $4,661,915 $5,338,334 Loans and other lending investments, net December 31, 2005 June 30, 2006 (unaudited) (In thousands) As of As of Selected Balance Sheet Data -more-

 

Page 6 of 13 iStar Financial Announces Second Quarter 2006 Results 114,381 113,241 Diluted 114,404 113,801 113,263 112,050 Basic 113,282 112,624 Weighted average common shares outstanding: $1.34 $1.10 Diluted (3) (4) $0.68 $0.58 $1.36 $1.11 Basic (2) $0.69 $0.59 Net income per common share: $157,326 $127,898 Net income allocable to common shareholders and HPU holders $79,919 $68,159 178,486 149,058 (21,160) (21,160) Net income 90,499 78,739 Preferred dividends (10,580) (10,580) 4,536 407 Gain from discontinued operations 2,353 407 1,739 3,126 Income from discontinued operations 901 1,547 172,211 145,525 Income from continuing operations 87,245 76,785 (1,069) (280) Minority interest in consolidated entities (821) (74) 1,053 (165) Equity in earnings from joint ventures 767 (5) 172,227 145,970 Income from continuing operations before other items 87,299 76,864 288,096 229,958 Total costs and expenses 149,491 119,781 - Loss on early extinguishment of debt - 3,000 2,250 Provision for loan losses 2,000 - 39,556 30,810 General and administrative (1) 20,424 14,807 38,547 35,227 Depreciation and amortization 19,407 17,776 12,108 11,066 Operating costs - corporate tenant lease assets 6,309 5,544 194,885 150,605 Interest expense 101,351 81,654 Costs and Expenses: 460,323 375,928 Total revenue 236,790 196,645 $261,124 $197,487166,373 151,57132,826 26,870 Revenue: Interest income $135,075 $105,869 Operating lease income 83,154 76,511 Other income 18,561 14,265 June 30, 2006 2005 Six Months Ended (In thousands , except per share amounts) Consolidated Statements of Operations iStar Financial Inc. (unaudited) June 30, 2006 2005 Three Months Ended includes $56 of joint venture income. For the three months ended June 30, 2006, includes $28 of joint venture income. For the six months ended June 30, 2006, (4) holders, respectively. respectively. For the six months ended June 30, 2006 and 2005, excludes $3,811 and $3,126 of net income allocable to HPU For the three months ended June 30, 2006 and 2005, excludes $1,935 and $1,659 of net income allocable to HPU holders, (3) holders, respectively. respectively. For the six months ended June 30, 2006 and 2005, excludes $3,846 and $3,159 of net income allocable to HPU For the three months ended June 30, 2006 and 2005, excludes $1,953 and $1,675 of net income allocable to HPU holders, (2) months ended June 30, 2006 and 2005, includes $2,950 and $1,283 of stock-based compensation expense. For the three months ended June 30, 2006 and 2005, includes $1,747 and $641 of stock-based compensation expense. For the six (1)

 

Page 7 of 13 iStar Financial Announces Second Quarter 2006 Results 113,926 114,438 Diluted 114,438 113,926 112,704 113,303 Basic 113,303 112,704 Common shares outstanding at end of period: 113,292 114,381 Diluted 114,404 113,853 112,050 113,263 Basic 113,282 112,624 Weighted average common shares outstanding: $1.57 $1.81 Diluted (3) $0.91 $0.83 $1.59 $1.82 Basic (2) $0.92 $0.84 Adjusted earnings per common share: $182,440 $211,599 Diluted $106,496 $96,848 $182,365 $211,539 Basic $106,466 $96,815 and HPU holders: Adjusted earnings allocable to common shareholders (407) (4,536) Less: Gain from discontinued operations (2,353) (407) (21,160) (21,160) Less: Preferred dividends (10,580) (10,580) 15,501 12,268 Add: Amortization of deferred financing costs 6,155 7,975 2,842 5,448 Add: Joint venture depreciation and amortization 2,724 2,707 75 60 Add: Joint venture income 30 33 36,531 41,033 Add: Depreciation, depletion and amortization 20,021 18,381 $149,058 $178,486 Net income $90,499 $78,739 ADJUSTED EARNINGS : (1) 2005 2006 2006 2005 30, June June 30, Ended Six Months Three Months Ended (unaudited) (In thousands , except per share amounts) Income Reconciliation of Adjusted Earnings to GAAP Net iStar Financial Inc. HPU holders, respectively. respectively. For the six months ended June 30, 2006 and 2005, excludes $5,124 and $4,457 of net income allocable to For the three months ended June 30, 2006 and 2005, excludes $2,578 and $2,356 of net income allocable to HPU holders, (3) HPU holders, respectively. respectively. For the six months ended June 30, 2006 and 2005, excludes $5,171 and $4,504 of net income allocable to For the three months ended June 30, 2006 and 2005, excludes $2,602 and $2,380 of net income allocable to HPU holders, (2) adjusted earnings may differ from the calculations of similarly-titled measures by other companies. the Company uses to analyze how its business is performing. It should be noted that the Company’s manner of calculating the Company’s cash needs or available for distribution to shareholders. Rather, adjusted earnings is an additional measure accordance with GAAP) as a measure of the Company’s liquidity, nor is this measure indicative of funds available to fund GAAP) as an indicator of the Company’s performance, or to cash flows from operating activities (determined in Operations. Adjusted earnings should not be considered as an alternative to net income (determined in accordance with Adjusted earnings should be examined in conjunction with net income as shown in the Consolidated Statements of (1)

 

Page 8 of 13 iStar Financial Announces Second Quarter 2006 Results 2,446,671 $8,532,296 Shareholders’ equity 2,553,535 Total liabilities and shareholders’ equity $9,250,518 33,511 Minority interest in consolidated entities 44,533 97,971 6,052,114 Other debt obligations 97,987 Total liabilities 6,652,450 411,144 Secured term loans 429,878 1,242,000 Unsecured revolving credit facilities 905,157 4,108,477 Unsecured senior notes 5,038,699 Debt obligations: $192,522 Accounts payable, accrued expenses and other liabilities $180,729 LIABILITIES AND SHAREHOLDERS’ EQUITY $8,532,296 Total assets $9,250,518 9,203 Goodwill 9,203 50,005 Deferred expenses and other assets 89,386 76,874 Deferred operating lease income receivable 68,859 32,166 Accrued interest and operating lease income receivable 53,094 28,804 Restricted cash 51,701 115,370 Cash and cash equivalents 78,171 - Assets held for s ale 16,021 202,128 Investments in joint ventures 196,686 240,470 Other investments 250,266 3,115,361 Corporate tenant leas e assets , net 3,098,797 $4,661,915 Loans and other lending investments , net $5,338,334 ASSETS (unaudited) December 31, 2005 June 30, 2006 As of As of (In thousands) Consolidated Balance Sheets iStar Financial Inc. -more-

 

Page 9 of 13 iStar Financial Announces Second Quarter 2006 Results 8.6% Efficiency Ratio (C) / (D) $236,790 Total revenue (D) $20,424 General and administrative expenses (C) Efficiency Ratio Average common book equity (B) Return on Average Common Book Equity (A) / (B) $106,466 $425,864 $2,547,961 (506,176) $2,041,785 20.9% Return on Average Common Book Equity Adjusted basic earnings allocable to common shareholders and HPU holders (2) Adjusted basic earnings allocable to common shareholders and HPU holders - Annualized (A) Average total book equity Less: Average book value of preferred equity 3.38% Net Finance Margin (1) (6.71%) Less: Cost of debt 10.09% Weighted average GAAP yield of loan and CTL investments June 30, 2006 Net Finance Margin Three Months Ended PERFORMANCE STATISTICS (unaudited) (In thousands) Supplemental Information iStar Financial Inc. calculating adjusted earnings may differ from the calculations of similarly-titled measures by other companies. measure the Company uses to analyze how its business is performing. It should be noted that the Company’s manner of fund the Company’s cash needs or available for distribution to shareholders. Rather, adjusted earnings is an additional accordance with GAAP) as a measure of the Company’s liquidity, nor is this measure indicative of funds available to GAAP) as an indicator of the Company’s performance, or to cash flows from operating activities (determined in Operations. Adjusted earnings should not be considered as an alternative to net income (determined in accordance with Adjusted earnings should be examined in conjunction with net income as shown in the Consolidated Statements of (2) considers to be an indicator of the profitability of its operations. finance margin to be a measure of the Company’s liquidity or cash flows. It is one of several measures that management 144 adjustments from discontinued operations of $895 and $52, respectively. The Company does not consider net obligations over the period. Operating lease income and operating costs—corporate tenant lease assets exclude SFAS No. annualized sum of interest expense and operating costs—corporate tenant lease assets, divided by the average gross debt average SFAS No. 141 purchase intangibles and average assets held for sale over the period. Cost of debt is the income), divided by the sum of average gross corporate tenant lease assets, average loans and other lending investments, Weighted average GAAP yield is the annualized sum of interest income and operating lease income (excluding other (1) -more-

 

Page 10 of 13 iStar Financial Announces Second Quarter 2006 Results (unaudited) (In thousands) Supplemental Information iStar Financial Inc. June 30, 2006 Three Months Ended CREDIT STATISTICS 20,021 $211,871 Add: Depreciation, depletion and amortization EBITDA (1) 101,351 Add: GAAP interest expense $90,499 Net income RECONCILIATION OF NET INCOME TO EBITDA 1.9x EBITDA / GAAP Interest Expense and Preferred Dividends (C) / (E) $111,931 Total GAAP interest expense and preferred dividends (E) $211,871 101,351 10,580 Fixed Charge Coverage EBITDA(1) (C) GAAP interest expense Add: Preferred dividends 1.9x 1.7x $211,871 $101,351 2.1x Ratio of Earnings to Fixed Charges Ratio of Earnings to Fixed Charges and Preferred S tock Dividends Interest Coverage EBITDA(1) (C) GAAP interest expense (D) EBITDA / GAAP Interest Expense (C) / (D) 2.2x and Loan Loss Reserves (A) / (B) Book Debt / S um of Book Equity, Accumulated Depreciation/Depletion $2,939,394 (B) Sum of book equity, accumulated depreciation/depletion and loan loss reserves 385,859 Add: Accumulated depreciation/depletion and loan loss reserves $2,553,535 Book equity $6,471,721 Book debt (A) EBIT DA may differ from the calculations of similarly-t it led measures by other companies. cash needs or available for distribution t o shareholders. It should be not ed that the Company’s manner of calculating GAAP) as a measure of the Company’s liquidity, nor is t his measure indicative of funds available t o fund the Company’s indicator of the Company’s performance, or t o cash flows from operating activities (determined in accordance wit h EBIT DA should not be considered as an alternative to net income (determined in accordance wit h GAAP) as an EBIT DA should be examined in conjunct ion wit h net income as shown in the Consolidated Statements of Operations. (1) -more-

 

Page 11 of 13 iStar Financial Announces Second Quarter 2006 Results (unaudited) (In thousands) Supplemental Information iStar Financial Inc. 2.36 2.36 2.38 2.42 2.38 Corporate Tenant Lease Assets 2.60 2.52 2.63 2.71 2.67 Structured Finance Assets September 30, June 30, December 31, March 31, June 30, Approximately 3.9 years $8,796,046 2005 2006 Estimated weighted average funding period UNENCUMBERED ASSETS RIS K MANAGEMENT STATISTICS (weighted average risk rating) $2,051,340 Total unfunded commitments 2,000,022 Non-discretionary commitments $51,318 Discretionary commitments 85 Number of assets with unfunded commitments UNFUNDED COMMITMENTS 72.7% N/A 73.1% 72.2% Weighted average last $ loan-to-value ratio 15.1% N/A 21.7% 5.7% Weighted average first $ loan-to-value ratio -N/A 456 473 Weighted average all-in sp read/margin (basis points) (2) 9.69% N/A 9.66% 9.75% Weighted average GAAP yield $707,996 - $414,928 $293,068 Amount funded Average LEASING Rate Fixed Rate Weighted CORPORATE Floating Total/ LOAN ORIGINATIONS Three Months Ended June 30, 2006 FINANCING VOLUME SUMMARY STATISTICS (1) ) 5=highest risk ; 1=lowest risk (transactions) during the quarter. and U.S. Treasury rates (fixed-rat e loans and corporate leasing Based on average quarterly one-month LIBOR (floating-rate loans) (2) Excludes other investments. (1) -more-

 

Page 12 of 13 iStar Financial Announces Second Quarter 2006 Results (unaudited) (In thousands, except per share amounts) Supplemental Information iStar Financial Inc. LOANS AND OTHER LENDING INVESTMENTS CREDIT STATIS TICS $0 0.00% $0 0.00% As a percentage of total assets Net charge-offs / December 31, 2005 June 30, 2006 Year Ended S ix Months Ended 133% 170% As a percentage of non-performing loans $46,876 0.55% $49,876 0.54% As a percentage of total assets Reserve for loan losses / $35,291 0.41% $29,294 0.32% As a percentage of total assets Carrying value of non-performing loans / December 31, 2005 June 30, 2006 As of GUIDANCE TO DILUTED GAAP EPS GUIDANCE(1) RECONCILIATION OF DILUTED ADJUS TED EPS Year Ended December 31, 2006 Earnings per diluted common share guidance $2.50 - $2.60 Add: Depreciation, depletion and amortization per diluted common share $0.85 - $1.05 Adjusted earnings per diluted common share guidance $3.45 - $3.55 -more- adjusted earnings may differ from the calculations of similarly-titled measures by other companies. the Company uses to analyze how its business is performing. It should be noted that the Company’s manner of calculating the Company’s cash needs or available for distribution to shareholders. Rather, adjusted earnings is an additional measure accordance with GAAP) as a measure of the Company’s liquidity, nor is this measure indicative of funds available to fund GAAP) as an indicator of the Company’s performance, or to cash flows from operating activities (determined in Operations. Adjusted earnings should not be considered as an alternative to net income (determined in accordance with Adjusted earnings should be examined in conjunction with net income as shown in the Consolidated Statements of (1) -more-

 

Page 13 of 13 iStar Financial Announces Second Quarter 2006 Results (unaudited) (In millions) Supplemental Information iStar Financial Inc. PORTFOLIO STATISTICS AS OF JUNE 30, 2006 (1) Security Type $ Corporate Tenant Leases $3,490 38.4 % Firs t Mortgages / Senior Loans 4,537 49.9 Mezzanine / Subordinated Debt 851 9.3 Other Investments 218 2.4 Total $9,096 100.0 % Collateral Type Office (CTL) $1,645 18.1 % Indus trial / R&D 1,347 14.8 Retail 1,198 13.2 Apartment / Residential 925 10.2 Other 874 9.6 Entertainment / Leisure 862 9.5 Mixed Us e / Mixed Collateral 843 9.3 Hotel 769 8.4 Office (Lending) 633 6.9 Total $9,096 100.0 % Collateral Location West $2,025 22.3 % Northeast 1,562 17.2 Southeast 1,351 14.9 Various 899 9.9 Mid-Atlantic 756 8.3 Central 619 6.8 South 540 5.9 Southwest 466 5.1 International 340 3.7 Northcentral 335 3.7 Northwest 203 2.2 Total $9,096 100.0 % % Standards No. 141 (“SFAS No. 141”) “Business Combinations.” Figures presented prior to loan loss reserves, accumulated depreciation and impact of statement of Financial Accounting (1) -end-