Good day and welcome to iStar Financial’s Third Quarter 2013 Earnings Call. (Operator Instructions) As a reminder, today’s conference is being recorded. At this time, for opening remarks and introductions, I would like to turn the conference over to Jason Fooks, Vice President of Investor Relations and Marketing. Please go ahead, sir.

Thank you, Art, and good morning, everyone. Thank you for joining us today to review iStar Financial’s third quarter 2013 earnings report. With me today are Jay Sugarman, Chairman and Chief Executive Officer; and Dave DiStaso, our Chief Financial Officer. This morning’s call is being webcast on our website at istarfinancial.com in the Investor Relations section. There will be a replay of the call beginning at 12:30 p.m. Eastern Time today. The dial-in for the replay is 1800-475-6701 with a confirmation code of 305829. 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 will be forward-looking. iStar Financial’s actual results may differ materially from these forward-looking statements and the risk factors that could cause these differences are detailed in our SEC reports. In addition and as stated more fully in our SEC reports, iStar disclaims any intent or obligation to update these forward-looking statements except as expressly required by law. Now, I’d like to turn the call over to iStar’s Chairman and CEO, Jay Sugarman. Jay?

Thanks, Jason, and thanks all of you for joining us this morning. During the third quarter, our main focus was on ramping up investment activity and we saw good results where there were $400 million in new transactions put under letter of intent and over $100 million of funding on investments made in prior quarters. We still have some $700 million of cash sitting idly on the balance sheet, so these new fundings and potential investments should improve the profitability of the Company once fully deployed. We also continued to whittle away of the remaining asset issues in the portfolio, and while there will be both good and not so good surprises, on the whole we are making progress. On the land front, the story is still moving forward, with our teams on the East and West Coast beginning to see the light at the end of the tunnel on a number of arduous re-entitlement processes. Nothing is done till it's done but we are hopeful that 2014 will be the beginning of a significantly more active period in the land book. We continue to add personnel as we prepare for a larger number of the projects to get underway in the coming quarters. Just a quick overview of our various businesses. Our real estate finance book continued to see repayments outpace new fundings in the quarter, but that relationship should start levelling out and begin going the other way. The good news is we've almost fully funded our $146 million preferred investment in Landmark Apartment Trust which helped boost the yield on the performing loan portfolio to 8% from 7% last quarter, and we hope to have a good portion of the letters of intent closed in the fourth quarter as well to help boost the overall revenue in…

Thanks, Jay, and good morning, everyone. Let me begin by discussing our financial results for the third quarter of 2013 and capital markets activities before moving on to discuss investments and the performance of our business segments. For the quarter, our adjusted income was a loss of $7 million or $0.09 per common share compared to a loss of $26 million or $0.31 for the same quarter last year. Contributing to the year-over-year improvement to adjusted income was a $28 million decrease in interest expense as a result of paydowns on our secured facilities and debt refinancings at lower rates, which has allowed us to meaningfully reduce overall interest expense. At the same time, revenues year-over-year have remained flat as the reduction in interest income, which stems from our smaller real estate finance portfolio, was offset by an increase in operating lease income due to the increased size of our operating properties portfolio and the leasing progress we've been achieving in that segment. We recognized gains from the sale of one of our operating properties, which I'll discuss further, while earning less from equity method investments as a result of the sale of our stake in LNR during the second quarter of this year. Our net loss allocable to common shareholders for the quarter was $31 million or $0.36 per diluted common share compared to a loss of $72 million or $0.86 per diluted common share for the same period last year. The year-over-year improvement was additionally due to the $10 million net recovery of loan loss reserves this quarter versus a $17 million provision in the third quarter of 2012. During the third quarter, we paid off the remaining balance on the A-1 tranche of our 2012 secured credit facility and repaid $30 million on the A-2 tranche, bringing…

Thanks Dave. Dave mentioned some interest rate protection we've put on this quarter. With the rate flow unfavorable conditions in the real estate markets, we took the opportunity to protect somewhat against the rise in rates beginning later next year. As long as rates stay low, we're likely to find a lot of good spread opportunities in the market. So this is a way to stretch that low rate environment out on about $500 million, so we can work part of the new investment book with more interest rate certainty. I look forward to closing some more deals on our pipeline and using that protection to our advantage in the coming quarters. With that, let's go ahead and open it up for questions. Operator?

(Operator Instructions) Our first question comes from the line of Michael Kim with CRT Capital. Please go ahead.

Jay, in your prepared remarks, you talked about your team seeing the light at the end of the tunnel for some of the land projects. Now I know your team has made a lot of progress with the waterfront land assets, but just kind of curious, what are you seeing for the master planned communities or what sort of project milestones have you hit that's kind of giving you better visibility for some of these projects?

Frankly, I'd say a couple of things. One, on the East Coast, we've been able to push some of the projects forward, feeling pretty good that 2014 will have some material milestones that we can share with you. I think in terms of just the re-entitlement processes, Southern California has always been a tough place, continues to be a tough place. We've got some very valuable land there that we're trying to do some smart things with, in one case, sub-zoning, in another case down-zoning, but those have been long, relatively difficult processes. Again, I feel like both of them are in the home stretch, but we definitely don’t want to count our chickens before they hatch. So, all we can say at this point is, it feels good. I think our guys have done a great job kind of getting us to the yard line, now we've got to push it across.

Is that more a function of just local municipalities generally being more willing to work on big projects with you or like is there any change in terms of at the local level?

I wish I could say that. I don’t really think there's been a change. I think it's just been a lot of hard work between the local zoning boards and ourselves and the planning commissions. So these are meaningful projects in each of these communities and a lot of people have a say on them, and so you've got to go through the process because everybody avoids them. Sometimes that just takes a long time.

Fair. I appreciate that. And just on the new originations investments, great to see the pipeline go large. I was just wondering if you could provide some details on sort of the types of investments that are part of the pipeline, should we expect the return profiles to be somewhat similar in nature to the Landmark preferred investment, just to give us a sense of kind of what's in the pipeline right now?

So I don't want to go into too much detail, but as we said in the past, they tend to be larger deals, they're going to be in major metro markets. These are primarily in the, I'm going to call it, L-700, L-800 range, LIBOR plus 800 and LIBOR plus 700. So not quite the yield on the Landmark deal, but we think on a risk-adjusted basis, it was quite attractive, some good floating rate exposure. We continue to poke around in the net lease world. Those kinds of deals are still in the 7% cap range. It's a tougher market these days but leverage is pretty attractive in that sector as well. So you can push the return on equities up into the double-digits and with bumps on those that can be a nice place to put capital. So right now, we're trying to pick and choose among the things we've historically played in. We've done a lot with the existing book. As you saw this quarter, we had some nice resolutions on a number of deals in the U.S., tougher on two deals in Europe that looked like they're going to end up with less favorable resolution. So we may get an interesting financing opportunity out of one of those. So there we've got a large field to pick from and we're doing as fast as we can with the kind of prudence you'd like to see.

Right. And the new investments that you have in the pipeline, I mean what sort of I guess weighted-average duration can we expect or are you kind of looking at with or without maturity extension option?

As you might suspect, the floaters are going to be relatively short, call it two to three years, on average duration. On that lease, [outflow] (ph) will be longer.

Yes, understood. Okay, great. And you touched on the NPL balance. Obviously those are well ahead of the guidance that you provided earlier this year. Just kind of curious, as you look forward, how much opportunity or visibility do you have in terms of additional resolutions within the next six to nine months, maybe is that still a work in process or do you have better visibility on the [indiscernible] of NPL book?

Because I said, we are going to see some good outcomes, we're probably going to see some not so good outcomes, but overall, the number of issues are shrinking. We definitely have a hope here that the good surprises will outpace the bad ones and I think that's been our experience to-date and we continue to work hard on the remaining ones but we've never been able to predict exactly when those revolutions will occur, but hopefully we're getting to the end of that part of the curve, and by the end of 2014, we'll hope most of that list has been cleaned up.

Understood. Alright, great. Thank you very much. I'll get back in the queue.

(Operator Instructions) Our next question comes from the line of Jonathan Feldman with Nomura Securities. Please go ahead.

Just wondering, Jay, if you could just talk about deployment of that cash on the balance sheet and how you see that proceeding into being closer to earnings breakeven or even profitability, what your current thoughts are on that subject?

You hit the nail on the head. I mean you can't have $700 million of unproductive capital sitting around and make progress. So we are looking to get that money deployed. The run-up to some of the deals has been longer than we expected. As you can imagine, we like complexity. On the one hand, it allows us to generate excess returns. On the other hand, it also means longer lead times in getting that capital deployed. We hope – usually what happens is people get a little bit of pressure to close by year-end. So we would expect to get most of that stuff, under contract today, closed by the end of next quarter, but we've still got work to do, Jonathan. We've got money coming in every day. So as you can see from Dave's comments, we're deleveraging probably even beyond where we'd like to be, putting the cash back to work will help that issue. So, it's on us to get that capital deployed in places that are attractive, and we do think even at the kind of high single-digit, low double-digit numbers, we're thinking $700 million deployed is $70 million of earnings. That's a big step towards profitability for us. So a combination of knocking down the NPLs and deploying that capital are the two biggest levers to getting us over the hump.

Got it, thanks. That's very helpful. And then just one follow-up question which goes along with that, and that is, just was wondering where a dividend lies in terms of your list of priorities and if that's a near or medium term goal? And then I guess finally, did your various debt securities prohibit that at this time?

I think it's two-fold. As you know, we have a fairly large NOL to utilize which we think is a pretty attractive way to retain capital. It's probably our cheapest form of repaying capital. So we do think, as earnings start to kick in, we aren't going to immediately go to dividend, even if our debt would allow it. There are some restrictions in the debt but I think the overarching theme here is to rebuild the equity capital base, begin growing the investment side of the business, and then look to reinstate that dividend once we effectively utilize the NOL to the greatest extent possible.

Got it. Thank you for your time this morning.

Our next question is from the line of Jade Rahmani with KBW. Please go ahead, you're open.

I wanted to find out if you could give any color on what drove the loan loss reversal and also the asset impairment, and if you could say whether those two items were related at all?

They are not related. As I said, we had a couple of nice resolutions in the U.S. and a couple that looked not so good in Europe, and the net of that was a reversal for us. So that was a good thing. The impairment was unfortunately, we had a piece of collateral under contract, thought the deal was done, just couldn't get the final deal closed, which means we're back to the drawing board, it pushes out the resolution date which has to be discounted at a market rate. So we'll probably get the same amount of dollars at the end of the day but it will be out in the future and we had to mark that given the time value of money.

Great, thanks. That's helpful. Just regarding your pipeline, can you say – you mentioned refinance opportunities as well as new opportunities, can you say what percentage of your pipeline is coming from existing borrower relationships and what percentage is directly sourced?

I'd say the profounder to what we have in shop right now is working on deals we have deep familiarity with and actually have a relatively proprietary way to get into those deals. We would close a couple of deals with new parties, which is good, but that's going to be a slower road for us. I think the markets are not uncompetitive. So we're trying to find angles and wedges into deals where we have some relationships or we have some knowledge. Those tend to be better priced and more interesting to us.

Thanks. And just a housekeeping item, the sequential increase in G&A expense, can you give any color on that?

As you probably saw last year, we set up a bonus program that's tied to some adjusted EBITDA targets. We're tracking ahead of the target set at the beginning of the year. So there's an incremental bonus accrual that kicked in this quarter. We can't say for sure whether that's going to play out but it's getting close enough that we need to start accruing for it.

Thank you very much.

Mr. Fooks, we have no further questions.

Great. Thanks, Art, and thanks to everyone for joining us this morning. As always, if you have any additional questions on today’s earnings release, please feel free to contact me directly. Art, would you please repeat the conference call replay instructions once again.

Yes, I will. Ladies and gentlemen, this conference will be available for a replay from 12.30 PM today through Tuesday, November 12. To access the replay, dial 1800-475-6701 and then you'll be prompt for an access code. The access code is 305829. For international diallers, please dial 320-365-3844 and enter the same access code, 305829. That does conclude your conference for today. Thank you for your participation and thank you for using the AT&T Executive TeleConference Service. You may now disconnect.