iStar Financial Announces Record Earnings

- Adjusted earnings per diluted share increases to $0.71 for the

first quarter 2001 from $0.64 for first quarter 2000.

- Return on equity reaches 17.3%.

- Financing volume totals $256.1 million.

- iStar Financial credit ratings upgraded by Moody's and S&P.

- Dividend increases to $0.6125 per common share.



Apr 25, 2001, 01:00 ET from iStar Financial Inc.

    NEW YORK, April 25 /PRNewswire/ -- iStar Financial Inc. (NYSE:   SFI)
 reported adjusted earnings for the quarter ended March 31, 2001 of
 $0.71 per diluted common share, up 10.9% from $0.64 per diluted share for the
 quarter ended March 31, 2000. Adjusted earnings for the first quarter 2001
 increased 13.5% to $61.7 million on a diluted basis, from $54.4 million for
 first quarter 2000. Adjusted earnings represent GAAP net income before
 depreciation and amortization.
     Net income allocable to common shareholders for the first quarter grew to
 $45.4 million, or $0.52 per diluted common share, compared with $42.8 million,
 or $0.50 per diluted share, in first quarter 2000. First quarter 2001 total
 revenue increased 10.6% to $122.6 million, from $110.9 million for the
 first quarter 2000.
     In the first quarter of 2001, iStar Financial achieved returns on average
 book assets and average common book equity of 7.0% and 17.3%, respectively,
 while leverage remained at 1.2x book equity. Net investment income for the
 quarter ended March 31, 2001 increased to $66.8 million. Net investment income
 represents interest and operating lease revenue less interest expense and
 operating costs for corporate tenant lease assets.
     During the first quarter of 2001, iStar Financial closed and funded
 five new financing commitments totaling $204.0 million. In addition, the
 Company funded $52.1 million under five pre-existing commitments and received
 $244.8 million in principal repayments. The Company's recent transactions
 continue to reflect its core business strategy of originating large-balance,
 structured financing transactions secured by high-quality commercial real
 estate assets in major metropolitan markets across the United States.
 
     Selected Income Statement Data
     (In thousands, except per share amounts)
     (unaudited)
                                                        Three Months Ended
                                                            March 31,
                                                       2001            2000
 
     Net investment income                            $66,840        $65,241
     Other income                                       6,183          4,533
     Non-interest expense                             (17,520)       (17,960)
     Net income before minority interest              $55,503        $51,814
     Minority interest                                    (95)           (41)
     Gain on sale of corporate tenant
      lease assets                                        555            533
     One-time effect of change in accounting
      principle                                          (282)            --
     Extraordinary loss -- early extinguishment
      of debt                                          (1,037)          (317)
     Preferred dividends                               (9,227)        (9,227)
     Net income allocable to common shareholders      $45,417        $42,762
     Per basic share                                    $0.53          $0.50
     Per diluted share                                  $0.52          $0.50
 
     Adjusted earnings allocable to common
      shareholders(a)                                 $61,722        $54,399
     Per basic share                                    $0.72          $0.64
     Per diluted share                                  $0.71          $0.64
 
     Dividends                                        $0.6125        $0.6000
 
         (a) Adjusted earnings represent GAAP net income before depreciation
             and amortization, and exclude gain on sale of corporate tenant
             ease assets, one-time effect of change in accounting principle and
             extraordinary loss on early extinguishment of debt.
 
     Selected Balance Sheet Data
     (In thousands)
                                                     As of          As of
                                                   March 31,     December 31,
                                                      2001           2000
                                                  (unaudited)
 
     Loans and other lending investments, net      $2,236,030     $2,225,183
     Real estate subject to operating leases, net   1,638,017      1,670,169
     Total assets                                   4,013,892      4,034,775
     Debt obligations                               2,120,834      2,131,967
     Total liabilities                              2,190,532      2,240,666
     Total shareholders' equity                     1,820,711      1,787,885
 
     Transaction Volume
     In the first quarter of 2001, iStar Financial generated $204.0 million in
 new financing commitments in five separate transactions. The Company also
 funded an additional $52.1 million under five pre-existing financing
 commitments and received $244.8 million in loan repayments. Jay Sugarman,
 iStar Financial's chairman and chief executive officer, stated, "As we saw the
 economy slowing last year, we focused our investment strategy on originating
 first mortgages and corporate financing and leasing transactions backed by
 diversified corporate credits. In the first quarter of 2001, we extended this
 cautious approach by again focusing on first mortgage and corporate finance
 transactions, which represented 67% of the Company's total fundings during the
 quarter."
     During the quarter, the weighted average first dollar and last dollar
 loan-to-value ratio on new loan fundings was 33.6% and 68.7%, respectively.
 This ratio represents the average beginning and ending points for the
 Company's lending exposure in the aggregate capitalization of the underlying
 properties or companies it finances.
     Mr. Sugarman commented, "As deteriorating economic conditions begin to
 reduce available liquidity in the real estate and corporate credit markets,
 iStar Financial is well positioned to create attractive risk-adjusted returns
 on the excess liquidity the Company possesses. We are beginning to see
 borrowers' pricing expectations adjust to the realities of a more capital
 constrained environment, and believe the rest of 2001 should produce some
 compelling corporate lending and leasing opportunities."
     At end of first quarter 2001, first mortgages, corporate tenant leases and
 corporate financing transactions collectively comprised 81% of the Company's
 asset base. The weighted average first and last dollar loan-to-value ratio for
 all structured finance assets (senior and junior loans) was 25.9% and
 72.0%, respectively.
 
     Corporate Tenant Leasing
     During the first quarter of 2001, the Company continued to extend lease
 terms in its corporate tenant leasing business. Mr. Sugarman stated, "Given
 our orientation as a finance company and not as a real estate investor, we
 have consistently favored longer lease terms over larger lease rate increases.
 This discipline serves us well in times of declining demand for office and
 industrial facilities, such as the current environment, when our revenue
 stream is essentially unimpacted, and our asset base remains fully leased."
     As of March 31, 2001, the weighted average lease term of the Company's
 corporate tenant leasing portfolio is 8.4 years. This portfolio was
 96.6% leased at the end of the first quarter 2001 (98.6% excluding a vacant
 facility currently being marketed for sale). Remaining lease expirations for
 2001 and 2002 represent 0.8% and 2.7% of annualized total GAAP revenue,
 respectively.
 
     Capital Markets
     During the first quarter of 2001, iStar Financial closed a new
 $700 million secured revolving credit facility with a major commercial bank.
 Interest rates under the new facility range from LIBOR + 1.40% to
 LIBOR + 2.15%, depending upon the collateral contributed to the borrowing
 base. The new facility accepts a broad range of structured finance assets and
 has a final maturity of January 2005. In addition, the Company exercised its
 option to extend for an additional year a $350 million unsecured credit
 facility.
     During the first quarter of 2001, Moody's Investors Service upgraded iStar
 Financial's senior unsecured credit rating to Ba1 from Ba2, and the rating on
 the Company's perpetual preferred stock to Ba3 from B1. In addition,
 subsequent to quarter end, Standard & Poor's upgraded iStar Financial's senior
 unsecured credit rating to BB+ from BB, and the Company's preferred stock
 rating to B+ from B. Spencer B. Haber, iStar Financial's executive vice
 president-finance and CFO, stated, "We are pleased with the Moody's and
 Standard & Poor's upgrades, and believe the ratings actions affirm the
 strength of our business strategy and risk management skills. Our objective is
 to continue to demonstrate the consistent performance which has characterized
 our business in the past, and which will help us to achieve investment grade
 status."
     Also during the first quarter, Moody's Investors Service and Fitch Inc.
 upgraded the ratings of the bonds outstanding under iStar Financial's
 proprietary match funding program, iStar Asset Receivables ("STARS"). The
 STARS Class B bonds were upgraded to Aaa and AAA from Aa2 and AA by Moody's
 and Fitch, respectively. The STARS Class C bonds were upgraded to Aa3 and
 AA- from A2 and A+, respectively. In addition, Fitch also upgraded the STARS
 Class D, E and F bonds to A+, BBB+ and BBB, respectively.
     Mr. Haber commented, "With $2.4 billion of committed credit facilities,
 our recent corporate credit upgrades and the continuing success of the STARS
 program, iStar Financial has the depth and breadth of capital resources to
 capitalize on the current unsettled macro environment. Our focus over the next
 six months is the elimination of all significant remaining debt maturities for
 both 2001 and 2002, for which specific refinancing initiatives are now
 underway."
     Mr. Haber stated, "Once again, our balance sheet continues to be highly
 match funded to minimize interest rate risk. Our corporate policy is to manage
 our net exposure to short-term interest rate fluctuations such that a
 100 basis point change in rates impacts adjusted earnings per share by no more
 than 2.5%. Based on current match funding in place, a 100 basis point move in
 short-term interest rates should impact adjusted earnings per share by less
 than 1.4%."
     Mr. Haber continued, "Consistent with the Securities and Exchange
 Commission's Regulation FD, iStar Financial will comment on earnings
 expectations within the context of its regular earnings press releases.
 Accordingly, we currently expect diluted adjusted EPS of $0.72 to $0.73 for
 the second quarter of 2001 and full-year diluted adjusted EPS of $2.92 to
 $2.95, depending primarily on the timing of new investment activity, net of
 loan repayments."
 
     Credit Risk Management
     The Company establishes loss reserves based on a quarterly bottom-up
 review of each of its assets, as well as using top-down guidance from
 industry-wide loss data and market trends. On a quarterly basis, the Company
 conducts a comprehensive credit review, resulting in an individual risk rating
 assigned to each asset. Attendance at the quarterly review sessions, directed
 by Mr. Sugarman and Timothy O'Connor, iStar Financial's executive vice
 president and chief operating officer, is mandatory for each of the Company's
 professional employees. The quarterly meetings are designed to enable
 management to evaluate and proactively manage asset-specific credit issues and
 identify credit trends on a portfolio-wide basis as an "early warning system."
     During the risk ratings review, each asset is assigned a risk rating from
 "one" to "five," with a "one" indicating superior credit quality, a "two"
 signifying better than average credit quality, "three" as an average rating, a
 "four" indicating that management time and attention is required, and a "five"
 denoting a problem asset with potential principal risk to the Company. In
 addition to the ratings system, the Company maintains a "watch list" of assets
 which are generally rated "four," but which require highly proactive asset
 management to preserve their current ratings. Each newly originated asset is
 typically assigned an initial rating of "three" (or average).
     Based upon the Company's first quarter 2001 review, the weighted average
 risk rating of the Company's structured finance assets was 2.53, slightly
 higher than the year-end rating of 2.50. The weighted average risk rating for
 corporate tenant lease assets at the end of the first quarter was
 2.78, essentially unchanged from the year-end rating of 2.77. The Company has
 one loan and one corporate tenant lease asset currently on its "watch list,"
 with a combined book value of $39.3 million as of March 31, 2001. The Company
 remains comfortable that it has adequate collateral to support its book value
 in both instances.
     At quarter end, accumulated loss reserves and depreciation represented
 approximately 1.81% of the gross book value of the Company's investments
 (loans and operating leases).
 
     Other Developments
     On April 2, 2001, iStar Financial increased its regular quarterly cash
 dividend to $0.6125 per common share for the quarter ended March 31, 2001. The
 first quarter 2001 dividend, which will be paid on April 30, 2001 to holders
 of record as of April 16, 2001, represents approximately 85.5% of basic
 adjusted earnings per share for the first quarter.
     The Company will host its annual shareholders' meeting at the Sheraton
 New York Hotel & Towers, 811 Seventh Avenue, New York, New York 10019 on
 May 17, 2001 at 9:00 a.m. EDT. All shareholders are cordially invited to
 attend.
     iStar Financial is the leading publicly traded finance company focused on
 the commercial real estate industry. The Company provides structured financing
 to private and corporate owners of real estate nationwide, including senior
 and junior mortgage debt, corporate mezzanine and subordinated capital, and
 corporate net lease financing. The Company, which is taxed as a real estate
 investment trust, seeks to deliver 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
 11:00 a.m. Eastern time today, April 25, 2001. This conference call will be
 broadcast live over the Internet and can be accessed by all interested parties
 through iStar Financial's Web site, www.istarfinancial.com, under the
 "investor information" section. To listen to the live call, please go to the
 Web site's "investor information" 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 Web
 site and will remain available for the next 60 days.
     (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 availability and cost of capital for future
 investments, competition within the finance and real estate industries,
 economic conditions, and other risks detailed from time to time in iStar
 Financial Inc.'s SEC reports.)
 
                              iStar Financial Inc.
                         Consolidated Income Statements
                    (In thousands, except per share amounts)
                                  (unaudited)
 
                                                        Three Months Ended
                                                             March 31,
                                                       2001           2000
     Revenue:
       Interest income                                $66,913        $60,083
       Operating lease income                          49,523         46,272
       Other income                                     6,183          4,533
         Total revenue                                122,619        110,888
 
     Costs and expenses:
       Interest expense                                46,360         37,789
       Operating costs -- corporate tenant
        lease assets                                    3,236          3,325
       Depreciation and amortization                    8,808          9,009
       General and administrative                       6,102          6,903
       Provision for possible credit losses             1,750          1,500
       Stock option compensation expense                  860            548
         Total costs and expenses                      67,116         59,074
 
     Net income before minority interest               55,503         51,814
       Minority interest                                  (95)           (41)
       One-time effect of change in accounting
        principle (a)                                    (282)            --
       Gain on sale of corporate tenant lease
        assets                                            555            533
       Extraordinary loss -- early extinguishment
        of debt                                        (1,037)          (317)
     Net income                                       $54,644        $51,989
 
     Preferred dividends                               (9,227)        (9,227)
     Net income allocable to common shareholders      $45,417        $42,762
 
     Net income per common share:
       Basic                                            $0.53          $0.50
       Diluted                                          $0.52          $0.50
 
     Weighted average common shares outstanding:
       Basic                                           85,833         85,087
       Diluted                                         87,149         85,449
 
         (a) Reflects one-time effect of adoption of Statement of Financial
             Accounting Standards No. 133, "Accounting for Derivative
             Instruments and Hedging Activities" as of January 1, 2001.
 
                              iStar Financial Inc.
                         Consolidated Income Statements
                    (In thousands, except per share amounts)
                                  (unaudited)
 
                                                        Three Months Ended
                                                             March 31,
                                                       2001           2000
 
     ADJUSTED EARNINGS PER SHARE:
     Net income                                       $54,644        $51,989
     Add:  Depreciation                                 8,808          9,009
     Add:  Joint venture depreciation                     951            610
     Add:  Amortization                                 5,542          2,234
     Less:  Preferred dividends                        (9,227)        (9,227)
     Add:  One-time effect of change in
      accounting principle                                282             --
     Less:  Gain on sale of corporate
      tenant lease assets                                (555)          (533)
     Add:  Extraordinary loss -- early
      extinguishment of debt                            1,037            317
     Adjusted earnings allocable to common
      shareholders:
       Basic                                          $61,482        $54,399
       Diluted                                        $61,722        $54,399
 
     Adjusted earnings per common share:
       Basic                                            $0.72          $0.64
       Diluted                                          $0.71          $0.64
 
     Weighted average common shares outstanding:
       Basic                                           85,833         85,087
       Diluted                                         87,522         85,449
 
                              iStar Financial Inc.
                          Consolidated Balance Sheets
                                 (In thousands)
 
                                                     As of           As of
                                                   March 31,     December 31,
                                                      2001           2000
                                                  (unaudited)
 
     ASSETS
 
     Loans and other lending investments, net      $2,236,030     $2,225,183
     Real estate subject to operating leases,
      net                                           1,638,017      1,670,169
     Cash and cash equivalents                         22,301         22,752
     Restricted cash                                   13,225         20,441
     Marketable securities                                 41             41
     Accrued interest and operating lease
      income receivable                                18,606         20,167
     Deferred operating lease income receivable        12,812         10,236
     Other assets                                      72,860         65,786
             Total assets                          $4,013,892     $4,034,775
 
     LIABILITIES AND SHAREHOLDERS' EQUITY
 
     Accounts payable and other liabilities           $64,473        $52,038
     Dividends payable                                  5,225         56,661
 
     Debt obligations:
       Unsecured senior notes                         357,298        356,509
       Unsecured revolving credit facilities           68,700        173,450
       Secured revolving credit facilities            738,259        592,349
       Secured term loans                             328,928        349,060
       iStar Asset Receivables secured notes          586,345        588,334
       Other debt obligations                          41,304         72,265
         Total liabilities                         $2,190,532     $2,240,666
     Minority interest                                  2,649          6,224
     Shareholders' equity                           1,820,711      1,787,885
         Total liabilities and shareholders'
          equity                                   $4,013,892     $4,034,775
 
                              iStar Financial Inc.
                            Supplemental Information
          (as of and for the three-month period ended March 31, 2001)
                                 (In thousands)
                                  (unaudited)
 
     FIRST QUARTER 2001 PERFORMANCE STATISTICS
 
     Return on Average Book Assets
 
     Adjusted Basic Earnings to Common Shareholders                  $61,482
     Plus:  Preferred Dividends                                        9,227
     Adjusted Basic Earnings before Preferred Dividends              $70,709
     Adjusted Basic Earnings before Preferred Dividends
      -- Annualized (A)                                             $282,836
 
     Average Total Book Assets (B)                                $4,024,334
 
     Return on Average Book Assets (A)/(B)                              7.0%
 
     Return on Average Common Book Equity
 
     Adjusted Basic Earnings to Common Shareholders                  $61,482
     Adjusted Basic Earnings to Common -- Annualized (C)            $245,928
 
     Average Total Book Equity                                    $1,804,298
     Less: Book Value of Preferred Equity                           (382,000)
     Average Common Book Equity (D)                               $1,422,298
 
     Return on Average Common Book Equity (C)/(D)                      17.3%
 
     Efficiency Ratio
 
     General & Administrative Expenses                                $6,102
     Plus: Stock Option Compensation Expense                             860
     Total Corporate Overhead (E)                                     $6,962
 
     Total Revenue (F)                                              $122,619
 
     Efficiency Ratio (E)/(F)                                           5.7%
 
     FIRST QUARTER 2001 CREDIT STATISTICS
 
     Book Debt/Equity
 
     Book Debt (A)                                                $2,120,834
 
     Total Book Equity (B)                                        $1,820,711
 
     Book Debt / Book Equity (A)/(B)                                    1.2x
 
                              iStar Financial Inc.
                            Supplemental Information
          (as of and for the three-month period ended March 31, 2001)
                                 (In thousands)
                                  (unaudited)
 
     FIRST QUARTER CREDIT STATISTICS
 
     Interest Coverage
 
     EBITDA (1) (A)                                  $110,671
 
     GAAP Interest Expense (B)                        $46,360
 
     EBITDA/GAAP Interest Expense (A)/(B)                2.4x
 
     Fixed Charge Coverage
 
     EBITDA (1) (C)                                  $110,671
 
     GAAP Interest Expense                            $46,360
     Plus:  Preferred Dividends                         9,227
     Total Fixed Charges (D)                          $55,587
 
     EBITDA/Fixed Charges (C)/(D)                        2.0x
 
 
     FIRST QUARTER FINANCING VOLUME SUMMARY STATISTICS
 
                                          LOAN ORIGINATIONS
 
                                                           Total/
                                              Floating    Weighted   CORPORATE
                                 Fixed Rate     Rate      Average     LEASING
 
     Amount Funded                 $77,495    $168,249   $245,744    $10,352
     Weighted Average GAAP Yield    15.14%      10.92%     12.25%     10.34%
     Weighted Average All-In
      Spread/Margin
      (basis points) (2)            +1,001        +541         --       +520
     First $ Loan-to-Value Ratio     58.8%       22.0%      33.6%         --
     Last $ Loan-to-Value Ratio      75.4%       65.7%      68.7%         --
 
     UNFUNDED COMMITMENTS
 
     Number of Loans with Unfunded Commitments                              7
 
     Discretionary Commitments                                        $10,202
     Non-Discretionary Commitments                                     89,286
     Total Unfunded Commitments                                       $99,488
 
     Estimated Weighted Average Funding Period          Approximately 2 years
 
         (1) EBITDA is calculated as total revenue minus the sum of general and
             administrative expenses, provision for possible credit losses,
             stock option compensation expense and operating costs on corporate
             tenant lease assets.
         (2) Based on average quarterly one-month LIBOR (floating rate loans)
             and U.S. Treasury rates (fixed rate loans and corporate leasing
             transactions) during the quarter.
 
                              iStar Financial Inc.
                            Supplemental Information
          (as of and for the three-month period ended March 31, 2001)
                                 (In millions)
                                  (unaudited)
 
     PORTFOLIO STATISTICS AS OF MARCH 31, 2001 (a)
     Security Type                                          $              %
       First Mortgages                                 $1,170          29.6%
       Second Mortgages                                   340           8.6%
       Corporate/Partnership Loans/Other                  712          18.1%
       Corporate Tenant Leases                          1,725          43.7%
         Total                                         $3,947         100.0%
 
     Collateral Type                                        $              %
       Office                                          $1,906          48.3%
       Industrial/R&D                                     400          10.1%
       Retail                                             115           2.9%
       Hotel                                              830          21.0%
       Mixed Use                                          147           3.7%
       Apartment/Residential                              209           5.3%
       Homebuilder/Land                                    49           1.3%
       Resort/Entertainment                               291           7.4%
         Total                                         $3,947         100.0%
 
     Product Line                                           $              %
       Structured Finance                                $944          23.9%
       Portfolio Finance                                  379           9.6%
       Loan Acquisition                                   511          12.9%
       Corporate Finance                                  388           9.9%
       Corporate Tenant Leasing                         1,725          43.7%
         Total                                         $3,947         100.0%
 
     Collateral Location                                    $              %
       West                                            $1,217          30.8%
       Southwest                                           78           2.0%
       South                                              708          17.9%
       Central                                            276           7.0%
       North Central                                       71           1.8%
       Northeast                                          750          19.0%
       Mid-Atlantic                                       335           8.5%
       Southeast                                          331           8.4%
       Northwest                                          181           4.6%
         Total                                         $3,947         100.0%
 
         (a) Figures presented prior to loan loss reserves and accumulated
             depreciation.
 
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SOURCE iStar Financial Inc.
    NEW YORK, April 25 /PRNewswire/ -- iStar Financial Inc. (NYSE:   SFI)
 reported adjusted earnings for the quarter ended March 31, 2001 of
 $0.71 per diluted common share, up 10.9% from $0.64 per diluted share for the
 quarter ended March 31, 2000. Adjusted earnings for the first quarter 2001
 increased 13.5% to $61.7 million on a diluted basis, from $54.4 million for
 first quarter 2000. Adjusted earnings represent GAAP net income before
 depreciation and amortization.
     Net income allocable to common shareholders for the first quarter grew to
 $45.4 million, or $0.52 per diluted common share, compared with $42.8 million,
 or $0.50 per diluted share, in first quarter 2000. First quarter 2001 total
 revenue increased 10.6% to $122.6 million, from $110.9 million for the
 first quarter 2000.
     In the first quarter of 2001, iStar Financial achieved returns on average
 book assets and average common book equity of 7.0% and 17.3%, respectively,
 while leverage remained at 1.2x book equity. Net investment income for the
 quarter ended March 31, 2001 increased to $66.8 million. Net investment income
 represents interest and operating lease revenue less interest expense and
 operating costs for corporate tenant lease assets.
     During the first quarter of 2001, iStar Financial closed and funded
 five new financing commitments totaling $204.0 million. In addition, the
 Company funded $52.1 million under five pre-existing commitments and received
 $244.8 million in principal repayments. The Company's recent transactions
 continue to reflect its core business strategy of originating large-balance,
 structured financing transactions secured by high-quality commercial real
 estate assets in major metropolitan markets across the United States.
 
     Selected Income Statement Data
     (In thousands, except per share amounts)
     (unaudited)
                                                        Three Months Ended
                                                            March 31,
                                                       2001            2000
 
     Net investment income                            $66,840        $65,241
     Other income                                       6,183          4,533
     Non-interest expense                             (17,520)       (17,960)
     Net income before minority interest              $55,503        $51,814
     Minority interest                                    (95)           (41)
     Gain on sale of corporate tenant
      lease assets                                        555            533
     One-time effect of change in accounting
      principle                                          (282)            --
     Extraordinary loss -- early extinguishment
      of debt                                          (1,037)          (317)
     Preferred dividends                               (9,227)        (9,227)
     Net income allocable to common shareholders      $45,417        $42,762
     Per basic share                                    $0.53          $0.50
     Per diluted share                                  $0.52          $0.50
 
     Adjusted earnings allocable to common
      shareholders(a)                                 $61,722        $54,399
     Per basic share                                    $0.72          $0.64
     Per diluted share                                  $0.71          $0.64
 
     Dividends                                        $0.6125        $0.6000
 
         (a) Adjusted earnings represent GAAP net income before depreciation
             and amortization, and exclude gain on sale of corporate tenant
             ease assets, one-time effect of change in accounting principle and
             extraordinary loss on early extinguishment of debt.
 
     Selected Balance Sheet Data
     (In thousands)
                                                     As of          As of
                                                   March 31,     December 31,
                                                      2001           2000
                                                  (unaudited)
 
     Loans and other lending investments, net      $2,236,030     $2,225,183
     Real estate subject to operating leases, net   1,638,017      1,670,169
     Total assets                                   4,013,892      4,034,775
     Debt obligations                               2,120,834      2,131,967
     Total liabilities                              2,190,532      2,240,666
     Total shareholders' equity                     1,820,711      1,787,885
 
     Transaction Volume
     In the first quarter of 2001, iStar Financial generated $204.0 million in
 new financing commitments in five separate transactions. The Company also
 funded an additional $52.1 million under five pre-existing financing
 commitments and received $244.8 million in loan repayments. Jay Sugarman,
 iStar Financial's chairman and chief executive officer, stated, "As we saw the
 economy slowing last year, we focused our investment strategy on originating
 first mortgages and corporate financing and leasing transactions backed by
 diversified corporate credits. In the first quarter of 2001, we extended this
 cautious approach by again focusing on first mortgage and corporate finance
 transactions, which represented 67% of the Company's total fundings during the
 quarter."
     During the quarter, the weighted average first dollar and last dollar
 loan-to-value ratio on new loan fundings was 33.6% and 68.7%, respectively.
 This ratio represents the average beginning and ending points for the
 Company's lending exposure in the aggregate capitalization of the underlying
 properties or companies it finances.
     Mr. Sugarman commented, "As deteriorating economic conditions begin to
 reduce available liquidity in the real estate and corporate credit markets,
 iStar Financial is well positioned to create attractive risk-adjusted returns
 on the excess liquidity the Company possesses. We are beginning to see
 borrowers' pricing expectations adjust to the realities of a more capital
 constrained environment, and believe the rest of 2001 should produce some
 compelling corporate lending and leasing opportunities."
     At end of first quarter 2001, first mortgages, corporate tenant leases and
 corporate financing transactions collectively comprised 81% of the Company's
 asset base. The weighted average first and last dollar loan-to-value ratio for
 all structured finance assets (senior and junior loans) was 25.9% and
 72.0%, respectively.
 
     Corporate Tenant Leasing
     During the first quarter of 2001, the Company continued to extend lease
 terms in its corporate tenant leasing business. Mr. Sugarman stated, "Given
 our orientation as a finance company and not as a real estate investor, we
 have consistently favored longer lease terms over larger lease rate increases.
 This discipline serves us well in times of declining demand for office and
 industrial facilities, such as the current environment, when our revenue
 stream is essentially unimpacted, and our asset base remains fully leased."
     As of March 31, 2001, the weighted average lease term of the Company's
 corporate tenant leasing portfolio is 8.4 years. This portfolio was
 96.6% leased at the end of the first quarter 2001 (98.6% excluding a vacant
 facility currently being marketed for sale). Remaining lease expirations for
 2001 and 2002 represent 0.8% and 2.7% of annualized total GAAP revenue,
 respectively.
 
     Capital Markets
     During the first quarter of 2001, iStar Financial closed a new
 $700 million secured revolving credit facility with a major commercial bank.
 Interest rates under the new facility range from LIBOR + 1.40% to
 LIBOR + 2.15%, depending upon the collateral contributed to the borrowing
 base. The new facility accepts a broad range of structured finance assets and
 has a final maturity of January 2005. In addition, the Company exercised its
 option to extend for an additional year a $350 million unsecured credit
 facility.
     During the first quarter of 2001, Moody's Investors Service upgraded iStar
 Financial's senior unsecured credit rating to Ba1 from Ba2, and the rating on
 the Company's perpetual preferred stock to Ba3 from B1. In addition,
 subsequent to quarter end, Standard & Poor's upgraded iStar Financial's senior
 unsecured credit rating to BB+ from BB, and the Company's preferred stock
 rating to B+ from B. Spencer B. Haber, iStar Financial's executive vice
 president-finance and CFO, stated, "We are pleased with the Moody's and
 Standard & Poor's upgrades, and believe the ratings actions affirm the
 strength of our business strategy and risk management skills. Our objective is
 to continue to demonstrate the consistent performance which has characterized
 our business in the past, and which will help us to achieve investment grade
 status."
     Also during the first quarter, Moody's Investors Service and Fitch Inc.
 upgraded the ratings of the bonds outstanding under iStar Financial's
 proprietary match funding program, iStar Asset Receivables ("STARS"). The
 STARS Class B bonds were upgraded to Aaa and AAA from Aa2 and AA by Moody's
 and Fitch, respectively. The STARS Class C bonds were upgraded to Aa3 and
 AA- from A2 and A+, respectively. In addition, Fitch also upgraded the STARS
 Class D, E and F bonds to A+, BBB+ and BBB, respectively.
     Mr. Haber commented, "With $2.4 billion of committed credit facilities,
 our recent corporate credit upgrades and the continuing success of the STARS
 program, iStar Financial has the depth and breadth of capital resources to
 capitalize on the current unsettled macro environment. Our focus over the next
 six months is the elimination of all significant remaining debt maturities for
 both 2001 and 2002, for which specific refinancing initiatives are now
 underway."
     Mr. Haber stated, "Once again, our balance sheet continues to be highly
 match funded to minimize interest rate risk. Our corporate policy is to manage
 our net exposure to short-term interest rate fluctuations such that a
 100 basis point change in rates impacts adjusted earnings per share by no more
 than 2.5%. Based on current match funding in place, a 100 basis point move in
 short-term interest rates should impact adjusted earnings per share by less
 than 1.4%."
     Mr. Haber continued, "Consistent with the Securities and Exchange
 Commission's Regulation FD, iStar Financial will comment on earnings
 expectations within the context of its regular earnings press releases.
 Accordingly, we currently expect diluted adjusted EPS of $0.72 to $0.73 for
 the second quarter of 2001 and full-year diluted adjusted EPS of $2.92 to
 $2.95, depending primarily on the timing of new investment activity, net of
 loan repayments."
 
     Credit Risk Management
     The Company establishes loss reserves based on a quarterly bottom-up
 review of each of its assets, as well as using top-down guidance from
 industry-wide loss data and market trends. On a quarterly basis, the Company
 conducts a comprehensive credit review, resulting in an individual risk rating
 assigned to each asset. Attendance at the quarterly review sessions, directed
 by Mr. Sugarman and Timothy O'Connor, iStar Financial's executive vice
 president and chief operating officer, is mandatory for each of the Company's
 professional employees. The quarterly meetings are designed to enable
 management to evaluate and proactively manage asset-specific credit issues and
 identify credit trends on a portfolio-wide basis as an "early warning system."
     During the risk ratings review, each asset is assigned a risk rating from
 "one" to "five," with a "one" indicating superior credit quality, a "two"
 signifying better than average credit quality, "three" as an average rating, a
 "four" indicating that management time and attention is required, and a "five"
 denoting a problem asset with potential principal risk to the Company. In
 addition to the ratings system, the Company maintains a "watch list" of assets
 which are generally rated "four," but which require highly proactive asset
 management to preserve their current ratings. Each newly originated asset is
 typically assigned an initial rating of "three" (or average).
     Based upon the Company's first quarter 2001 review, the weighted average
 risk rating of the Company's structured finance assets was 2.53, slightly
 higher than the year-end rating of 2.50. The weighted average risk rating for
 corporate tenant lease assets at the end of the first quarter was
 2.78, essentially unchanged from the year-end rating of 2.77. The Company has
 one loan and one corporate tenant lease asset currently on its "watch list,"
 with a combined book value of $39.3 million as of March 31, 2001. The Company
 remains comfortable that it has adequate collateral to support its book value
 in both instances.
     At quarter end, accumulated loss reserves and depreciation represented
 approximately 1.81% of the gross book value of the Company's investments
 (loans and operating leases).
 
     Other Developments
     On April 2, 2001, iStar Financial increased its regular quarterly cash
 dividend to $0.6125 per common share for the quarter ended March 31, 2001. The
 first quarter 2001 dividend, which will be paid on April 30, 2001 to holders
 of record as of April 16, 2001, represents approximately 85.5% of basic
 adjusted earnings per share for the first quarter.
     The Company will host its annual shareholders' meeting at the Sheraton
 New York Hotel & Towers, 811 Seventh Avenue, New York, New York 10019 on
 May 17, 2001 at 9:00 a.m. EDT. All shareholders are cordially invited to
 attend.
     iStar Financial is the leading publicly traded finance company focused on
 the commercial real estate industry. The Company provides structured financing
 to private and corporate owners of real estate nationwide, including senior
 and junior mortgage debt, corporate mezzanine and subordinated capital, and
 corporate net lease financing. The Company, which is taxed as a real estate
 investment trust, seeks to deliver 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
 11:00 a.m. Eastern time today, April 25, 2001. This conference call will be
 broadcast live over the Internet and can be accessed by all interested parties
 through iStar Financial's Web site, www.istarfinancial.com, under the
 "investor information" section. To listen to the live call, please go to the
 Web site's "investor information" 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 Web
 site and will remain available for the next 60 days.
     (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 availability and cost of capital for future
 investments, competition within the finance and real estate industries,
 economic conditions, and other risks detailed from time to time in iStar
 Financial Inc.'s SEC reports.)
 
                              iStar Financial Inc.
                         Consolidated Income Statements
                    (In thousands, except per share amounts)
                                  (unaudited)
 
                                                        Three Months Ended
                                                             March 31,
                                                       2001           2000
     Revenue:
       Interest income                                $66,913        $60,083
       Operating lease income                          49,523         46,272
       Other income                                     6,183          4,533
         Total revenue                                122,619        110,888
 
     Costs and expenses:
       Interest expense                                46,360         37,789
       Operating costs -- corporate tenant
        lease assets                                    3,236          3,325
       Depreciation and amortization                    8,808          9,009
       General and administrative                       6,102          6,903
       Provision for possible credit losses             1,750          1,500
       Stock option compensation expense                  860            548
         Total costs and expenses                      67,116         59,074
 
     Net income before minority interest               55,503         51,814
       Minority interest                                  (95)           (41)
       One-time effect of change in accounting
        principle (a)                                    (282)            --
       Gain on sale of corporate tenant lease
        assets                                            555            533
       Extraordinary loss -- early extinguishment
        of debt                                        (1,037)          (317)
     Net income                                       $54,644        $51,989
 
     Preferred dividends                               (9,227)        (9,227)
     Net income allocable to common shareholders      $45,417        $42,762
 
     Net income per common share:
       Basic                                            $0.53          $0.50
       Diluted                                          $0.52          $0.50
 
     Weighted average common shares outstanding:
       Basic                                           85,833         85,087
       Diluted                                         87,149         85,449
 
         (a) Reflects one-time effect of adoption of Statement of Financial
             Accounting Standards No. 133, "Accounting for Derivative
             Instruments and Hedging Activities" as of January 1, 2001.
 
                              iStar Financial Inc.
                         Consolidated Income Statements
                    (In thousands, except per share amounts)
                                  (unaudited)
 
                                                        Three Months Ended
                                                             March 31,
                                                       2001           2000
 
     ADJUSTED EARNINGS PER SHARE:
     Net income                                       $54,644        $51,989
     Add:  Depreciation                                 8,808          9,009
     Add:  Joint venture depreciation                     951            610
     Add:  Amortization                                 5,542          2,234
     Less:  Preferred dividends                        (9,227)        (9,227)
     Add:  One-time effect of change in
      accounting principle                                282             --
     Less:  Gain on sale of corporate
      tenant lease assets                                (555)          (533)
     Add:  Extraordinary loss -- early
      extinguishment of debt                            1,037            317
     Adjusted earnings allocable to common
      shareholders:
       Basic                                          $61,482        $54,399
       Diluted                                        $61,722        $54,399
 
     Adjusted earnings per common share:
       Basic                                            $0.72          $0.64
       Diluted                                          $0.71          $0.64
 
     Weighted average common shares outstanding:
       Basic                                           85,833         85,087
       Diluted                                         87,522         85,449
 
                              iStar Financial Inc.
                          Consolidated Balance Sheets
                                 (In thousands)
 
                                                     As of           As of
                                                   March 31,     December 31,
                                                      2001           2000
                                                  (unaudited)
 
     ASSETS
 
     Loans and other lending investments, net      $2,236,030     $2,225,183
     Real estate subject to operating leases,
      net                                           1,638,017      1,670,169
     Cash and cash equivalents                         22,301         22,752
     Restricted cash                                   13,225         20,441
     Marketable securities                                 41             41
     Accrued interest and operating lease
      income receivable                                18,606         20,167
     Deferred operating lease income receivable        12,812         10,236
     Other assets                                      72,860         65,786
             Total assets                          $4,013,892     $4,034,775
 
     LIABILITIES AND SHAREHOLDERS' EQUITY
 
     Accounts payable and other liabilities           $64,473        $52,038
     Dividends payable                                  5,225         56,661
 
     Debt obligations:
       Unsecured senior notes                         357,298        356,509
       Unsecured revolving credit facilities           68,700        173,450
       Secured revolving credit facilities            738,259        592,349
       Secured term loans                             328,928        349,060
       iStar Asset Receivables secured notes          586,345        588,334
       Other debt obligations                          41,304         72,265
         Total liabilities                         $2,190,532     $2,240,666
     Minority interest                                  2,649          6,224
     Shareholders' equity                           1,820,711      1,787,885
         Total liabilities and shareholders'
          equity                                   $4,013,892     $4,034,775
 
                              iStar Financial Inc.
                            Supplemental Information
          (as of and for the three-month period ended March 31, 2001)
                                 (In thousands)
                                  (unaudited)
 
     FIRST QUARTER 2001 PERFORMANCE STATISTICS
 
     Return on Average Book Assets
 
     Adjusted Basic Earnings to Common Shareholders                  $61,482
     Plus:  Preferred Dividends                                        9,227
     Adjusted Basic Earnings before Preferred Dividends              $70,709
     Adjusted Basic Earnings before Preferred Dividends
      -- Annualized (A)                                             $282,836
 
     Average Total Book Assets (B)                                $4,024,334
 
     Return on Average Book Assets (A)/(B)                              7.0%
 
     Return on Average Common Book Equity
 
     Adjusted Basic Earnings to Common Shareholders                  $61,482
     Adjusted Basic Earnings to Common -- Annualized (C)            $245,928
 
     Average Total Book Equity                                    $1,804,298
     Less: Book Value of Preferred Equity                           (382,000)
     Average Common Book Equity (D)                               $1,422,298
 
     Return on Average Common Book Equity (C)/(D)                      17.3%
 
     Efficiency Ratio
 
     General & Administrative Expenses                                $6,102
     Plus: Stock Option Compensation Expense                             860
     Total Corporate Overhead (E)                                     $6,962
 
     Total Revenue (F)                                              $122,619
 
     Efficiency Ratio (E)/(F)                                           5.7%
 
     FIRST QUARTER 2001 CREDIT STATISTICS
 
     Book Debt/Equity
 
     Book Debt (A)                                                $2,120,834
 
     Total Book Equity (B)                                        $1,820,711
 
     Book Debt / Book Equity (A)/(B)                                    1.2x
 
                              iStar Financial Inc.
                            Supplemental Information
          (as of and for the three-month period ended March 31, 2001)
                                 (In thousands)
                                  (unaudited)
 
     FIRST QUARTER CREDIT STATISTICS
 
     Interest Coverage
 
     EBITDA (1) (A)                                  $110,671
 
     GAAP Interest Expense (B)                        $46,360
 
     EBITDA/GAAP Interest Expense (A)/(B)                2.4x
 
     Fixed Charge Coverage
 
     EBITDA (1) (C)                                  $110,671
 
     GAAP Interest Expense                            $46,360
     Plus:  Preferred Dividends                         9,227
     Total Fixed Charges (D)                          $55,587
 
     EBITDA/Fixed Charges (C)/(D)                        2.0x
 
 
     FIRST QUARTER FINANCING VOLUME SUMMARY STATISTICS
 
                                          LOAN ORIGINATIONS
 
                                                           Total/
                                              Floating    Weighted   CORPORATE
                                 Fixed Rate     Rate      Average     LEASING
 
     Amount Funded                 $77,495    $168,249   $245,744    $10,352
     Weighted Average GAAP Yield    15.14%      10.92%     12.25%     10.34%
     Weighted Average All-In
      Spread/Margin
      (basis points) (2)            +1,001        +541         --       +520
     First $ Loan-to-Value Ratio     58.8%       22.0%      33.6%         --
     Last $ Loan-to-Value Ratio      75.4%       65.7%      68.7%         --
 
     UNFUNDED COMMITMENTS
 
     Number of Loans with Unfunded Commitments                              7
 
     Discretionary Commitments                                        $10,202
     Non-Discretionary Commitments                                     89,286
     Total Unfunded Commitments                                       $99,488
 
     Estimated Weighted Average Funding Period          Approximately 2 years
 
         (1) EBITDA is calculated as total revenue minus the sum of general and
             administrative expenses, provision for possible credit losses,
             stock option compensation expense and operating costs on corporate
             tenant lease assets.
         (2) Based on average quarterly one-month LIBOR (floating rate loans)
             and U.S. Treasury rates (fixed rate loans and corporate leasing
             transactions) during the quarter.
 
                              iStar Financial Inc.
                            Supplemental Information
          (as of and for the three-month period ended March 31, 2001)
                                 (In millions)
                                  (unaudited)
 
     PORTFOLIO STATISTICS AS OF MARCH 31, 2001 (a)
     Security Type                                          $              %
       First Mortgages                                 $1,170          29.6%
       Second Mortgages                                   340           8.6%
       Corporate/Partnership Loans/Other                  712          18.1%
       Corporate Tenant Leases                          1,725          43.7%
         Total                                         $3,947         100.0%
 
     Collateral Type                                        $              %
       Office                                          $1,906          48.3%
       Industrial/R&D                                     400          10.1%
       Retail                                             115           2.9%
       Hotel                                              830          21.0%
       Mixed Use                                          147           3.7%
       Apartment/Residential                              209           5.3%
       Homebuilder/Land                                    49           1.3%
       Resort/Entertainment                               291           7.4%
         Total                                         $3,947         100.0%
 
     Product Line                                           $              %
       Structured Finance                                $944          23.9%
       Portfolio Finance                                  379           9.6%
       Loan Acquisition                                   511          12.9%
       Corporate Finance                                  388           9.9%
       Corporate Tenant Leasing                         1,725          43.7%
         Total                                         $3,947         100.0%
 
     Collateral Location                                    $              %
       West                                            $1,217          30.8%
       Southwest                                           78           2.0%
       South                                              708          17.9%
       Central                                            276           7.0%
       North Central                                       71           1.8%
       Northeast                                          750          19.0%
       Mid-Atlantic                                       335           8.5%
       Southeast                                          331           8.4%
       Northwest                                          181           4.6%
         Total                                         $3,947         100.0%
 
         (a) Figures presented prior to loan loss reserves and accumulated
             depreciation.
 
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 SOURCE  iStar Financial Inc.