iStar IncOverviewiStar, f/k/a iStar Financial, is an internally managed (former) commercialmortgage REIT that ended up foreclosing on a variety of land, developmentprojects, and operating assets (office, hotel, condo projects) as developersdefaulted on loans held by iStar following the financial crisis ("REOportfolio"). In recent years, iStar has invested cash flow from its traditionalReal Estate Finance and Net Lease portfolios into the REO portfolio, muchof that investment should show up in gains on sale as iStar sells offrepositioned assets. Sale proceeds can then be either reinvested into their core business and/or used topay down debt and repurchase shares.

Symbol: STARPrice: $10.75Market Cap: $765MMNet Debt & Pref: $4.0BEnterprise Value: $4.77B

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Why is it Cheap?1. Non-dividend paving REIT: iStar canceled its dividend following the financial crisis, so it's a rare

REIT that doesn't pay a dividend. REITs are popular with retail investors for their dividends andare often ignored by institutional investors. It's also not in the major REIT index funds.

2. Unfocused, hard to understand real estate portfolio: The public markets like straight forwardREITs focused on a specific market sub-segment and pay up for the ones that are easy tounderstand. iStar has a mix of loans and operating properties; performing and non-performing;development and stabilized; office, retail, hotel, condo projects. It's basically the opposite ofeasy to understand.

3. 35% of its portfolio doesn't produce recurring revenue: Most REITS avoid development assets asit produces a mismatch between deploying the capital and when a dividend can be paid.Limited asset level disclosure: iStar doesn't break out asset level detail in a clean format like4.

5.

other REITs, it requires a fair amount of digging and primary research. There's a new CFO inplace and as the transformation continues this could change.Limited coverage, limited management promotion: There are only two analysts that cover iStar,most of the articles posted on sites like Seeking Alpha only discuss their preferred shares, andmanagement does little investor outreach or slide decks outside of a recent loan road showpresentation.

Core PortfolioReal Estate Finance - $1.61B Book Value (gross of loan lossreserves) ■ Real Estate F nance

■ Net Lease

□ Operating Properties

■ land& Development

Mostly senior mortgages,development/construction loans, short duration"Targeting the origination of custom-tailoredmortgage, corporate and lease financings wherecustomers require flexible financial solutions and"one-call" responsiveness"

o For example, they have a senior mortgage on FUR's Times Square property.Portfolio Characteristics: Loan-to-value of 67%; 31% fixed-rate loans and 69% variable-rateloans, weighted average yield of 8% and a weighted average remaining term of 2.2 years.

Net Lease Portfolio - $1.53B Book Value (gross of accumulated depreciation)• Triple net lease portfolio (tenant pays for the maintenance, taxes and insurance), the structure

functions much like a credit financing transaction.

Matthew Clarkin, CFASpecial Situation Research Forum - 9/26/2016

• "Net Lease Venture" - Formed in February 2014 with a SWF, iStar and its partner plan tocontribute $500MM in equity with a target portfolio size of $1.25B to acquire and develop netlease assets over time. iStar will earn base and incentive fees for managing the joint venture.

• Portfolio Characteristics: 293 facilities, 17.8MM square feet, 33 states, 96% leased with aweighted average remaining lease term of 14.9 years.

• 8.7% yield on Book Value (gross of accumulated depreciation)

If you simply value the Real Estate Finance, Land and Development, and Operating Properties (ex-stabilized operating properties) at book value and value the Net Lease and stabilized OperatingProperties at a 6.5% cap rate versus book value, iStar could be valued at ~$17/share with no valueattributed to their deferred tax asset or the Lennar litigation proceeds above book value.

Net Lease NOI:Stablized Operating Properties NOI

Total NOI:Cap Rate:

Equity REIT NAV:Book Value of Real Estate Finance:

Total REIT assets:

Book Value of Land and Development Assets:Book Value of Operating Properties (ex-Stabilized):

S$

127,42812,425

$ 139,8536.50%

$ 2,151,578$ 1,568,439$ 3,720,017

$$

1,134,887343,930

Net Debt & Preferred Shares: $ (3,994,200)Net Adjusted Book Value to Common: $ 1,204,634

Adjusted Book Per Share: $ 16.92Adjusted Book w/ 3% Convertible Debt 11/14/16 Converts:Adj Book w/Converts Per Share:

$$

1,404,63415.93

Current Share Price: $ 10.75Discount to Adjusted BV: 64%

Effective Value Attributed to REO Assets: $ 439,492.46Effective Price BV Price for REO Assets: 305.

REO PortfolioOperating Properties - $537.1MM Book Value (gross of accumulated depreciation)Commercial and residential properties that have been acquired through foreclosure, these assetsinclude office, industrial, retail, hotel, and luxury condominium projects.

• Stabilized Commercial Properties: 22% of the portfolio, generating an unlevered weightedaverage effective yield of 8.8% on book value, 89% leased.

• Transitional Commercial Properties: 78% of the portfolio, generating an unlevered weightedaverage effective yield of 2.8% on book value, 65% leased.

• Residential Properties: 94 condominium units remaining, been selling for an average of $800k-1MM per unit in recent quarters.

Recent sale activity:• Q2 Press release: "During the quarter, the Company sold two commercial operating properties

for $153.1 million of proceeds, recognizing $25.1 million of gains."• 130 condominium units have been sold in the last three quarters generating about $100MM in

proceeds, $36MM in income.• From Loan Presentation: "Strategy is working as we monetized $284 million of properties and

recognized $54 million in gains in 2015"

Matthew Clarkin, CFASpecial Situation Research Forum - 9/26/2016

• Q4 15 Conference Call: "During the fourth quarter, we sold two sizable assts. Together theseassets had a net book value of $45 million. They generated relatively little free cash flow. Wesold them for $89 million and generated approximately $44 million in gains."

Land and Development - $1.14B Book Value30 properties comprised of 11 master planned community projects, 13 infill land parcels and 6waterfront land parcels; MPCs represent large-scale residential projects that the Company will entitle,plan, and/or develop, infill and waterfront located in and around major cities that the company willdevelop, sell to or partner with commercial real estate developers.

• Land book value is the sum of the discounted cash flow valuations iStar performed at the time offoreclosure (mostly 2009-2011), does not include any market value appreciation since then.

• iStar used a "mid-teens" discount rate, fast forward a few years and the value of the land shouldbe significantly higher than book if their assumptions were in the ballpark.

• iStar often partners with local developers by forming a JV and contributing their land while thelocal developer brings the cash.

• Much of the initial development and infrastructure spending is typically completed by the timeiStar foreclosed on the land.

• Land has entitlements for ~30,000 units, which would make it a sizeable homebuilder on itsown.

Other AssetsNOLsiStar has $856MM of net operating loss carry-forwards that can be used to offset taxable income anddon't expire until 2034. The NOL allows iStar to utilize retained earnings to grow rather than tap thecapital markets constantly like traditional REITs. This is a plus for iStar as they trade for a significantdiscount to my estimate of NAV, if forced to pay out market rate dividends they might not be able toaccess enough capital to fully realize the value of their development assets. Additionally, they havemore available free cash flow to buy back shares which should ultimately be a better use of cash atthese prices than paying out a dividend.

Lennar LitigationThe litigation involved a dispute over the purchase and sale of approximately 1,250 acres of land inPrince George's County, Maryland. On 1/22/2015, The Court found that the Company was entitled tospecific performance and awarded damages to it in the aggregate amount of:

• (i) the remaining purchase price to be paid by Lennar of $114.0 million; plus• (ii) interest on the unpaid amount at a rate of 12% per annum, calculated on a per diem basis,

from May 27, 2008, until Lennar proceeds to settlement on the land; plus• (iii) real estate taxes paid by the Company; plus• (iv) actual and reasonable attorneys' fees and costs incurred by the Company in connection with

the litigation.

Lennar is appealing the decision, but with interest accruing the proceeds to iStar could be over$200MM.

Matthew Clarkin, CFASpecial Situation Research Forum - 9/26/2016

Capital AllocationNear Term Debt MaturitiesiStar has over $1.3B of debt that matures in the next 14 months that will need to be repaid orrefinanced, they currently has $721MM in cash, a portion of which will be used to pay off the $400MMin convertible notes1 that come due in November.

Near Term Debt Maturities: MMs Maturity3.00% Senior Convertible Notes $ 200.00 Nov-161.50% Senior Convertible Notes $ 200.00 Nov-165.85% Senior Notes $ 99.72 Mar-179.00% Senior Notes $ 275.00 Jun-174.00% Senior Notes $ 550.00 Nov-17

While this creates some risk of the capital markets closing in the meantime, it also forces iStar to bedisciplined and raise cash by selling assets to prepare for debt maturities.

Share RepurchasesThe company is a large net seller of real estate, they will be selling down their portfolio as time goes onusing the proceeds to pay down debt and repurchase more shares. In the past twelve months iStar hasrepurchased 19% of their shares outstanding, after the 2nd quarter they approved another $50MMincrease to their repurchase program. The combination of selling their non-core assets above bookvalue and buying back shares below NAV is powerful and could lead to some substantial returns.

RisksManagement - Same team that led them into the downturn: Jay Sugarman is the CEO of iStar,he's been in that position since the late 1990s and thus led iStar into the financial crisis, he has alot of the trappings of a NYC real estate guy (owns a sports team, Philadelphia Union of the MLS,and a massive home in the Hamptons).Strategy - Does iStar go back to the "boring" business of real estate finance and net lease afterdiving into the glamorous development world? Their website and headshots don't look like yourtypical REIT or credit shop, I worry the management team has fallen in love with real estatedevelopment and the portfolio won't ever resemble a clean REIT until iStar exhausts its NOLs.Timing of asset sales: a few of iStar's land and development assets have long tails (10+ years), ifthey intend to do the development themselves versus selling to a local builder it could push outthe value realization time frame.Leverage: iStar is leveraged 2x book value plus the preferreds shares, development assets allmake iStar more vulnerable to a recession and a downturn in real estate prices. They have somenear term debt maturities and are generally dependent on the capital markets on an ongoingbasis for both refinancing and asset sales.Rising rates - Generally believed we'll see slowly rising rates in the coming years: net incomewould rise as rates rise, but rising rates generally believed to put pressure on REIT valuationsand real estate values.

Note: 3.00% convertible debt has a $11.77 strike price, 1.50% convertible debt has a $17.29 strike priceMatthew Clarkin, CFA

Special Situation Research Forum - 9/26/2016

Long-Term ValuationBack of the envelope calculation, which doesn't include ongoing earnings redeployed and the continuedaccretive share repurchases; it will take some time for iStar to exit the REO portfolio and for the marketto recognize the embedded value present there.

Real Estate FinanceNet LeaseOperating AssetsLand and DevelopmentNOL @ 35% rateLennar Litigation above BV

Total Assets:

Net Debt & PerferredEquity:

Per Share Value:

$ n MMslxBV $ 1,6106.5% Cap $ 2.1511.25x BV1.50x BV10% discount rate

$ 671$S$$

SS

1,710230100

ts: 6,472

(3,994)2,47S

34.82

Matthew Clarkin, CFASpecial Situation Research Forum - 9/26/2016

Appendix - Selected REO Portfolio Assets

Land and Development

Master Planned CommunitiesGrand Vista: 5,500 acres of mostly raw land on the outskirts of Phoenix that has plans for 15,000residential units, this was a large failed project before the financial crisis and it may take a while beforePhoenix builds out to this site.

Heath at Tetherow: Bend, OR; 112 units available on 700 acres that was already in production at thetime of sale. Tetherow is located around a luxury resort featuring two hotels and a golf course.

Highpark: Formerly known as Ponte Vista, Highpark is a 62 acre former naval shipyard in San Pedro,California which will house 700 new residences. Ground broke in May 2014, average pricing will bebetween $600k-$750k, completion is expected to take 5-7 years.

Indiantown: Currently approved for 1,650 residential units and 60,000 square feet of commercial space.Consists of 809 acres of agricultural land in Martin County, FL within 30 miles of West Palm Beach;project never got off the ground prior to foreclosure.

Los Valles: A 430 acre planned community located in the Castaic area of the Santa Clarita Valley innorthern LA County. Featured an Arnold Palmer golf course that is being eliminated and repurposedinto a multiple residential product master plan that will include 497 units.

Magnolia Green: A classic master planned communities outside of Richmond, VA with a golf course androom for 3,500 residential units. It has an estimated sellout date of 2026 and another 2,400 unitsremaining to be sold. Richmond is becoming a hot market, the city itself is pretty vibrant and it's in agood geographic weather location, it should attract both millennials and retiring baby boomers.

Naples Reserve: 1,109 units on 688 acres in Naples, FL.

Spring Mountain Ranch: 785 acre master planned community located in the Inland Empire. For the firstphase of the development, iStar partnered with KB Homes and retained a 75.6% interest in the JV, thefirst phase calls for 435 homes, 200 of which had been sold as of 12/31/15. Additional phases of theMPC will bring a total of 1,400 home sites.

InfillArtesia: 562 units on 44.3 acres, upscale condominium project on the site of the old Scottsdale RadissonResort. Originally was a 480 unit project, but iStar received approval from the Scottsdale City Counsel toexpand the plans in early 2015.

1000 South Clark: 29 story, 469 unit luxury apartment complex located in Chicago's South Loop. iStarpartnered with a local builder in a JV, its both an equity investor and a lender in the deal, it will likely besold after stabilization early next year.

Great Oaks: Mixed-use planned community, 720 units on 72.5 acres in San Jose, CA; rezoned land fromindustrial to a mixed-use development, iStar is developing a commercial center with a Costco, otherretail space, and flexible office/research and development space, with a residential neighborhood tofollow.

Matthew Clarkin, CFASpecial Situation Research Forum - 9/26/2016

Magnolia Square: a 16.5 acre mixed use infill site in Riverside, CA close to downtown and only 15 milesfrom the Ontario International Airport, is located in a core area for retail centers, medical services andemployment centers.

Mammoth Crossing: A gateway to the Village at Mammoth and only 400 meters from the gondola,consists of 10.7 acres of developable parcels entitled for a total of 396 units.

One Palm: Upscale apartment and hotel building in Sarasota, FL; 280 units. The apartment units are100% leased and the hotel has had an average occupancy of 77% since opening.

Sage: 72 units on 1.8 acres in downtown Scottsdale, AZ.

WaterfrontAsbury Park Waterfront: iStar recently opened an "adult playground" hotel, The Asbury, in Asbury Park,NJ (Jersey Shore), the hotel/entertainment venue is meant to spur additional development in thesurrounding 35 acres of land iStar owns that will eventually support over 2,7000 residential units. iStaris currently finishing up a small condo project, called Monroe, which is 40% sold and has plans to revivean uncompleted high rise construction project called Esperanza that was abandoned after the financialcrisis.

Coney Island: iStar just recently completed construction on a 5,000 seat amphitheater along theboardwalk in Coney Island, the amphitheater was built to spur additional development around it, whichiStar has 5.5 acres and plans for 565 residential units.

Marina Palms: Two luxury towers along with a marina in North Miami Beach, the second tower iscurrently under construction and slated to be finished in December 2016. The company partnered witha local builder and contributed the land for a 47.5% interest in the JV.

o As of 6/30/2016 the venture's carrying value of total assets was $207.6MM

One West: Entitled for 432 units and a 49-slip deep water marina on the Caloosahatchee River in FortMyers, FL-the last remaining waterfront development west of downtown directly on the river.

Stuart Harbor: On Florida's St. Lucie River, includes a working commercial marina. Re-entitlement of the26-acre project for condos and townhomes is currently underway.

Wayfarer: Along the boardwalk in Long Beach, NY, with ocean and NYC views, the city recently rejectedtheir development plans but the initial plan would have featured two luxury towers, retail, etc, along thebeach (522 units and 6 acres).

Matthew Clarkin, CFASpecial Situation Research Forum - 9/26/2016