Good day, ladies and gentlemen and welcome to iStar Financial's Fourth Quarter and Year-End 2008 Earnings Conference Call. (Operator Instructions). As a reminder, today's conference is being recorded. At this time, for opening remarks and introductions, I'd like to turn the conference over to iStar Financial's Senior Vice President of Investor Relations and Marketing, Mr. Andy Backman. Please go ahead, sir.

Thank you, John and good morning everyone. Thanks for joining us today to review iStar's fourth quarter and year-end 2008 earnings report. With me today are Jay Sugarman, our Chairman and Chief Executive Officer; Jay Nydick, our President; Katie Rice, our Chief Financial Officer; and Jim Burns, our Executive Vice President and Treasurer. This morning's call is being webcast on our website at istarfinancial.com in the Investor Relations section. There will of course be a replay of the call beginning at 12:30 PM Eastern Time today. The dial-in for the replay is 1-800-475-6701 with the confirmation code of 983296. Before I turn the call over to Jay, I'd like to remind everyone that statements in this earnings call which are not historical facts may be deemed forward-looking statements. Factors that could cause actual results to differ materially from iStar Financial's expectations are detailed in our SEC reports. And now, let me turn the call over to iStar's Chairman and CEO, Jay Sugarman. Jay?

Thanks, Andy. Thanks everyone for joining us today. We want to go over several things with you. One, the results for the fourth quarter; two results for full year 2008; and three, some of our plans for 2009 and beyond. This has been a punishing year for the market, for the economy and unfortunately for our company. I still believe that severity of the current crisis could have been avoided. It's very clear now our economy is in for a lengthy struggle. Despite this worsening environment, we have continued to work diligently to find ways to fight through the challenges in the marketplace and protect and preserve value for iStar. There are no easy solutions. We have made progress and continue to seek ways to strengthen our balance sheet for the future. So let me recap fourth quarter and full year results and set the table for our plans for 2009. First, earnings. Our fourth quarter earnings were positive but included large gains and large reserve provisions and impairments really overshadowing our core operating results. Nonetheless, we were pleased to report positive $0.10 per share on an adjusted basis in the fourth quarter. And for the full year, adjusted earnings per share was negative $2.58, and reflected material loan provisioning and impairments, partly offset by several large gains from asset sales and debt retirement. With so many one-time items in 2008, we look forward to getting back to more normal operating metrics as we move through 2009. Second, liquidity. We ended the year with over $500 million in unrestricted cash and available capacity on our credit facility. Our repayments and fundings were both lower than expected with gross repayments in the fourth quarter of $730 million and fundings totaling $680 million. For the full year, gross repayments were $3.9 billion…

Thanks, Jay. Good morning, everyone. This quarter global market and economic conditions have deteriorated and remained challenging. The lack of capital in real estate sector has continued to impact our borrowers. Some have had difficulty servicing our loans, while others have had difficulty refinancing our loans at maturity. Because of these challenges, we expect to see continued variability with respect to both the timing and the amounts of repayments from our borrowers. We expect the markets will remain difficult for at least the next 12 to 18 months and that there will be no easy turnaround. To offset the expected slowdown in repayments, as we announced in our press release this morning, we are currently working with members of our bank group to provide a new secured term loan facility and to restructure our existing bank facility. I'll let Jim review the details of the transaction in a couple of minutes, but in general the transaction if closed will provide iStar with between $700 million and $1 billion of incremental liquidity, and would give us increased operating flexibility in exchange for providing security to participating members of our bank lending group. Now let me quickly run through the results for the quarter and for the year. With respect to the first quarter, we reported adjusted earnings of 12.7 million or $0.10 per common share. Our results this quarter included $252 million of additional loan loss provision versus $411 million from the prior quarter. In addition during the fourth quarter, we recorded $150 million of impairments relating to REO, other assets and securities in our corporate loan and debt portfolio. During the quarter, we recorded $19 million of gains from the sale of seven corporate tenant lease assets. As a remainder, gains in CTL sales are excluded from adjusted earnings, but…

Thanks, Katie. I'd like to spend some time walking you through the transaction that we're currently working along with the members of our bank lending group. We expect to close the transaction in March. But let me remind you that this transaction is not yet complete and it's subject to closing conditions. There can be no assurance that this transaction will be completed in this timeframe or at all. We have considered various alternatives of how best to manage our 2009 obligations, including our unfunded commitments and payments on the Fremont A note participation. We looked into alternatives that would most effectively bridge us to 2010 when our very short maturity asset portfolio begins to generate significant cash flow and build substantial liquidity going forward. We determined that creating increased liquidity and flexibility by working with members of our bank lending group would be the most beneficial transaction for the company over the long term. As Katie mentioned, thus far we have received approximately $700 million of commitments and we are continuing the syndication process. If completed, we expect the principal amount of the new facility to be somewhere between $700 million and $1 billion. Lenders who participate in providing new capital to the new secured facility will have a first lien on a pool of collateral and would also receive a second lien to secure their existing positions in our unsecured revolvers. Taken together, the loans would be collateralized with asset coverage of at least 1.2 times. The new facility will be priced at LIBOR plus 250 basis points, and would mature in June 2012. The second lien loans would be priced at LIBOR plus 150 basis points and would maintain their original maturities of June 2011 and June 2012. The secured facilities would also include covenant modifications. We…

Thanks, Jim. So where do we go from here? I think, once the bank deal is closed, we would expect to work with our bond holders and others, see if we can further enhance our liquidity, create more operating flexibility and really open up the runway out for 2010 and beyond. We're going continue to advocate for the real estate industry in its attempts to craft policies and programs beneficial to the industry with the Fed and treasury, and when appropriate, we will seek ways to re-engage our very deep investment resources and capabilities with the investment opportunities this downturn has created. Right now, the challenges in our own portfolio are many, and will take a great deal of time and effort to solve. But we must find a way to solve them and move past them the best we can. And I think I can assure you every person at iStar is working very hard and is focused on doing just that. So with that, let's go ahead and open it up for questions.

Thank you. (Operator Instructions). And our first question is from the line of Ee Lin See with Sirios Capital. Please go ahead.

Hi, thanks for taking my call. Could you just explain how you decide to have reserves as a percentage of NPLs of 28% for the fourth quarter compared to higher number towards 33.6% in the third quarter? Thank you.

Sure. Remember the process for creating reserves is literally a asset-by-asset review by literally 100 people in the firm. So every asset is given a specific reserve based on all material information coming from all parts of the firm; risk management, investment, legal et cetera. There is no formulaic approach to specific reserves. So that number can jump around pretty materially. We have NPLs that are on NPL simply because they couldn't repay maturity. Doesn't necessarily mean, there was going to be a loss. So again, it is not a formula. And I think you probably be down the wrong track if you're just looking at a simple percentage every quarter and trying to put those together. What we will tell you is that every single asset get looked at and every specific reserve is based on all facts available that moment in time.

I see. So what the change result of new NPLs expecting to have lower loss or was it a revaluation of pervious NPLs that resulted in this change?

It was actually a combination. And I think what Jay is referencing is probably the mix of assets that went NPL this quarter, may have been a few more assets that as he is referencing were really maturity defaults, where the borrower was not able to find an additional lender to refinance the loans. But we don't see although we are impaired in anyway with respect to where our loan basis is. But conversely, we also look at all of the NPLs and REO on the book each quarter and there were instances in this quarter where we bumped up reserve on prior NPLs, NPLs from prior quarters to reflect what we thought was currently happening to that asset in the market.

Okay. Thank you very much.

John, next question? Operator: And that's from the line of Shubhomoy Mukherjee with Barclays capital. Please go ahead.

Yeah, hi. I just had a question that's on the kind of collateral that you would be providing for the new secured loan. Could you just give us some sense of whether these will be CTL assets or some of the loan positions that you guys have?

Sure. The collateral that we're discussing would be a combination of our loan and CTL assets.

Okay. Any breakups in terms of what would be the ratio?

No, it's a mix.

No, we are still working on the transaction and that will be both mix of loans and CTLs and the transaction still in process, that's not been finalized.

All right. Thanks a lot.

Thanks a lot. John, next question.

And that's from Tayo Okusanya with UBS. Please go ahead.

Hi, yes, good morning. Just a quick... first of all, quick comment Katie, we'd definitely miss you. It's been great working with you since I have been covering the name for the past 1.5 years and Jim, I definitely look forward to working with you. Couple of questions. One, the new secured line, in the press release you do have the caveat in that which says, it's still subject to closing condition. Could talk about what some of those prudent conditions could be?

Yeah. We are in the process of finalizing the syndication process, so the deal hasn't... will then be subject once we've syndicated to fairly typical closing conditions, the documentation. And as Jim mentioned, there will be some finalization of the collateral package, so fairly typical closing conditions. And we'd hope to be in a position to do that from time in mid March.

Okay. That's great. So I think your second question, with regards to potential assets sales going go especially on the CTL side. Could you just talk a little bit more kind of the environment what you are seeing out there on opportunities to do that?

Yeah. Sure I think Tayo, the market has been very receptive to real estate assets that are very solid for the next several years. What the market is afraid of right now is trying to guess when stabilization gets in. So anything that's got a rollover anything that's got material susceptibility to current economic conditions is pretty tough. Long-term CTLs that have a solid credit gains for the next seven, 10, 12, 15 years; seem to be very much in favor in the marketplace and we have taken advantage of that, sold nice number of assets and generated reasonably strong pricing. We obviously don't want to sell long-term stable assets. They are at the core of our portfolio, but where appropriate we have been peeling some of those off.

Great, okay. Thanks again. And you know just been able to execute on the line and as well as buying back the debt in this environment, very well done and kudos to your team.

Sure.

Thanks Tayo.

Thanks Tayo. Hey John, next question?

And that will be from the line of Joseph Schwartz with Goldman Sachs. Please go ahead.

Yeah, hi good morning. It's actually Louise Pitt here from Goldman Sachs. I work with Joe. Just a couple of questions. One, the first one is that you mentioned asset coverage of at least 1.2 times on the two new secured facility, the one new secured and then the change of the unsecured. That equates roughly I guess to about 83% loan to value. Can you give us a breakdown on how that would be split between the two, the first lien and second lien?

There will be one pool of collateral, which overall, if you added all the loans together, will be covered at least 1.2 times. So that would imply that the first lien will have a much higher coverage ratio and that obviously second lien would always be covered as well at 1.2 times. But it's just one pool of collateral.

Okay, great. Thanks. And also, could you give us any breakdown on the debt that you'd bought back with respect to maturities and sizing of the particular bonds of question?

Yes. It's actually over the course of the quarter with a variety of both long and mid-term and shorter debt. So it's really a variety depending up on what we were able to buy in the market.

Okay. And will that be then be in the 10-K?

Yes, it will.

Okay. And then just final question that I had just with respect to the comment about working with bond holders once these facilities has been closed after March. That can you clarify a little bit more what you meant by that statement?

Sure. We've obviously looked to build long-term relationships with all our credit constituents as part of the review Jim said we went through. We decided going to work with the banks first was the most appropriate way to way to do it. But we did call out an ability to also work with bond holders on similar structure. So we would like to continue to find ways to create the runway we think is prudent given market conditions, then we wanted to be able to include as many credit constituents as possible in that solution.

Okay. That's very helpful. Thanks very much. Operator: And Mr. Backman, we have no further questions.

Great John, thank you very much. Before I wrap up the call, Jay, let me turn it over to you for some summary comments.

Thanks, Andy. Yeah, I just want to really express my own appreciation for what Katie has done for us over the past six years. We've had a great team here. And we've been fortunate to have some really top notch talent and I'm delighted that Jim is going to be able to step in and continue the high quality. But I want to make sure that I made my own appreciation for Katie's work known in this call. And with that, we will talk to you next quarter.

Great. Thanks, Jay. Thanks, Katie; thanks, Jim and thanks everybody for joining us this morning. As always, if you should have additional questions on today's earnings release, please feel free to contact me directly here in New York. And John, would you please give the conference call replay instructions once again. Thank you everybody. Operator: Certainly and yeah, ladies and gentlemen, this replay starts today at 12:30 PM Eastern, will last until March 12th at Midnight. You may access the replay at anytime by dialing 800-475-6701 and entering the access code 983296. That does conclude your conference for today. Thank you for your participation. You may now disconnect.