Ladies and gentlemen, good afternoon and welcome to iStar's Second Quarter 2018 Earnings Conference 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, Anna and good afternoon, everyone. Thank you for joining us today to review iStar's second quarter 2018 earnings. With me today are Jay Sugarman, Chairman and Chief Executive Officer; Andy Richardson, Chief Financial Officer and President of Land and Development; Marcus Alvarado, President and Chief Investment Officer. This call will refer to the slides that we published on our website at istar.com in the Investor section. You can also find the webcast of this presentation. There will be a replay of the call beginning at 7:00 p.m. Eastern Time today. Dial-in for the replay is 1-800-475-6701, with the confirmation code of 451422. Before I turn the call over to Jay, I would like to remind everyone that statements in this earnings call, which are not historical facts, will be forward-looking. iStar'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. iStar disclaims any intent or obligation to update these forward-looking statements except as required by law. Now I would like to turn the call over to iStar's Chairman and CEO, Jay Sugarman. Jay.

Thanks, Jason. Our second quarter was highlighted by strong earnings continued progress on legacy assets and solid investment activity as well as an upside term loan facility with lower pricing and expanded flexibility. Each of these represents an important step in our progress towards a leaner more focused iStar. Earnings in the first quarter were strong coming in at $0.54 of net income and $0.55 on an adjusted basis. Driven by our large finance and net lease portfolios and helped by gains from our newly consolidated net lease Venture and several asset sales, but offset by losses on several legacy resolutions. Total legacy asset transactions generated $190 million of proceeds with the sale of Westgate Sports and Entertainment complex in Phoenix and the last three phases of our Spring Mountain Ranch Master Plan Community topping the list. We also cut a deal to resolve the Hammond's nonperforming loan receiving a partial pay-down and a more secure position going forward. We continue to weigh the cost of accelerating sales and resolutions with the benefit of freeing up capital and internal resources and believe we are making good progress on a number of additional legacy asset dispositions. With almost $1 billion of dry powder, we are well-positioned to move into attractive areas quickly and like last year we focused on delivering highly efficient capital solutions for repeat customers and repeat after situation this quarter based on a higher probability of achieving attractive risk-adjusted returns and a higher certainty closing. We are happy that the majority of recent deals have followed this pattern. Based on our strong earnings, strong balance sheet and ample liquidity, we are also pleased to begin paying a regular quarterly dividend, making our shares attractive to a wider range of investors. I will let Andy share with you more details on the dividend and the rest of the quarter. Andy.

Thanks Jay and good afternoon everyone. My remarks today will refer to the slides from the earnings presentation that we posted on our website earlier this afternoon. Before I begin, I would like to point out that certain balance sheet metrics throughout the presentation are pro forma for the $273 million partial redemption of our 5% senior notes due July 2019. These notes were repaid after the end of the quarter using the excess cash proceeds from the new term loan transactions completed in the second quarter. With that let’s turn to Slide 4 to review some of the highlights from the second quarter. Net income was $43 million or $0.54 per share on an adjusted basis we earned $44 million $0.55 per share. Combined with our first quarter results, we have earned $0.89 per share of GAAP net income year to date and $2.16 of adjusted income per share. Performance over the period was driven by earnings from our core business and continued execution of our legacy asset monetization strategy. As Jay noted, we have initiated a quarterly common dividend of $0.09 per share was $0.36 on an annualized basis. The dividend will be paid on August 31st, to shareholders of record on August 15th. Turning to Slide 5, we can take a deeper dive into our investment activity. During the quarter, we originated $269 million of new investments largely driven by new loan commitments. This brought total new originations in our core business over the past four quarters to $1.2 billion. Meanwhile we had $378 million of loan repayments of the quarter, including 46 million from the resolution of our largest nonperforming loan. We also sold two net leased properties in Miami, Florida for $36 million and generated a $24 million gain. These properties were sold at ground…

Andy mentioned our investment in safe, safe income and growth and I want to reiterate, we think this can become a key part of our approach to the real estate market, offering more efficient capital and opening doors that enable us to demonstrate everything iStar can do for our customers. We look forward to sharing our further progress on that front with you next quarter. With that operator, let’s go ahead and open it up for questions.

Thank you. Today's question-and-answer session will be conducted electronically. [Operator Instructions] Our first question comes from Ben Zucker with BTIG. Please go ahead.

Good morning everyone and thanks for taking my questions. Congratulations on instituting a dividend, that is nice to say. When I look at Slide 5 of your deck. The origination volumes over the past three quarters really jumped out at me, what has been driving that increase lately, you have always been pretty flush with capital, so I don't think it's as simple as you finally reclaiming new money to deploy and as a quick follow-up could you provide some details around the types of loans that you closed this quarter?

Sure Ben. Thanks. Again, I think we mentioned that a little bit of our focus and target area has been existing customers and situations where we have and inside leg up and pulling back a little bit from situations where we were head-to-head with somebody who ultimately was just willing to price tighter or giveaway provisions that we just weren’t willing to do. So we have I think been a little bit more focused a little bit more targeted, in how we use our time and effort you are right we have got plenty of capital so that is certainly not a constraint. But if you are taking a generally cautious stance you can I think be a little more thoughtful when you are in a property or with a borrower, you have done business before, the probability of getting something done goes up pretty materially and in those situations we found more success and more deals getting done, but also the risk reward feel better to us. So I think just a little bit of a shift in focus from the broader market that we saw eroding, both pricing and some of the provisions that we like and going back to our existing customer base and really hitting that much harder and I would say the second thing is as legacy assets pay down we are freeing up internal resources, particularly on the deal side, so they can go sit in front of customers more often, again that is where I think you have heard us talk about it before, custom tailing, customer focused business, particularly with people who have done business with us before just seems to be a better place for us to go.

That is helpful and I forgot that you had mentioned that in the past that you are able to redirect people's attention back to your principal investment platform as you sell down the non-core assets. Real quickly on the NPL that was resolved in the quarter, can you tell us what the interest rate was on that preferred equity piece.

So the preferred equity is just a notional amount we have marked it at a level that it will generate the mid to high single-digit return.

Okay got you, either way it seems like a big resolution for your book the optics around the real estate finance segment definitely improved. Turning to the net lease statement really quickly, I know you are launching at least Venture II without investment capacity of about $1.5 billion. Can you remind us of how this compares in size to the last net lease venture around and idea around how quickly you might be able to deploy capital here and maybe just your thoughts more high-level around the market for net lease assets right now the competition there all that stuff.

It’s almost identical to net lease Venture I they were both about $0.5 billion of equity commitment leverage is been anywhere from the 50% to 65% range, so there are very similar in that context. And again I think almost where we are going to have success was probably also similar to what we are doing and the rest of our business which is going where we think we have competitive advantage you saw just based on the consolidation. The value that team was able to create in the first Venture that continues that team, although I think the market is more got more competitive. We do see a significant capital looking for safe places to put their money, income stream that grows on a annual basis. And then it really comes down to what you believe about the future and those residuals we do think that that combination is the thing everybody looking for right now. So obviously we think we can find that in the ground business, but we think we can also find in the net lease business. So had a great relationship for a very capital savvy partner and we want to continue working with them all sorts of things.

That is helpful. I think, you clearly demonstrated your capabilities there with your prior fund and then just lastly for me. You guys have been pretty active repurchases of your shares in the past when the price is right. I’m just curious now that you implemented a dividend as a new form of capital return to shareholders. Do you think that makes you incrementally less inclined to continue buying back your stock or you find working both of those in tandem with each other's as long as the price is right.

We kept plan out there. We do have capacity that plan and we do still think in terms of valuation when it makes sense that is the smart way to deploy capital for all shareholders.

I appreciate your comments Jay and congratulations again on the continued clean up progress.

Thank you.

Our next question comes from Jade Rahmani with KBW. Please go ahead.

Thanks very much, just on the Hammond’s and [indiscernible] resolution. The discount implies, I think you said the mid to high single-digit return that I assume is accretion, non-cash income, is that correct.

That is correct the underlying asset pool and they are pretty diverse and those asset sell there is the potential will get repaid and accrete upon sale, some of thon sale of some of that but were not counting on that.

Okay. And the duration of that is pretty long, relative to your average real estate finance investment any color there?

Yes. Maybe I think ultimately we saw a long still painful resolution with lots of legal fees attached to it out of our pocket so when we measure the two we would rather have a safer piece of paper and get the whole enterprise out and back on economic footing. The lease give us a chance to recover that money earlier, but we were unable to get the solution that forced early payoff to us. So this was the best we could do. And we think underlying asset base certainly is a better place to be than where we were in bankruptcy in litigation.

And turning to the real estate finance segment I think the overall portfolio continues to shrink and there is a big spike in repayments, any color on the spike in repayment and what your expectations there would be for the balance of the year, are you expecting to grow the portfolio in aggregate and do you see accelerated repayments continuing as a result of the competitive market?

Yes it’s a good question. I mean the nature of the business right now is people are sizing up some of the deals we have done in the past that have great credit metrics and relatively attractive yields and so we are not surprised that some of those are coming back to us. We will continue to evaluate where is the best place to put our capital, I don't think we necessarily have a defined number we are shooting for. Frankly, if we can find good risk-adjusted returns somewhere else in the book we will find the way things get repaid and redeploy that capital. But we will continue to look with our top customers and in the markets and in the assets we feel like we have a competitive advantage in, the risk-adjusted returns still were pretty attractive. So I think from our standpoint, we are not concerned when we get money back, we have always been able to find good places to put it But a lot has come back and now we have got a $1 billion of liquidity to play with so we are going to be taking a very hard look on where's that best risk-adjusted sector for us to deploy that money.

And the 267 million of commitments how many loans did that represent, can you give any color on property type, considering the funding were 198 million. I'm sure that is a heavy transition there and also what was the roughly LTV in yield?

Yes. It’s about five deals, one fairly large, all relatively diverse. All the I would say 75%, 80% of its repeat customer by dollar volume, LTVs let me get to that number - and the rates were in the 600 to 700 over range. I think the last LTV on a weighted average basis was probably in the high 50s low 60s.

Okay and is that like condo construction or the one outsized deal?

That is a fully built project, it’s a bridge loan on contracted condo assets.

In New York?

It’s in a major market in Chicago.

Okay. what is your outlook for the New York condo market, there has been some evidence of declining condo values definitely in the luxury segment, but also I think slowing sales pace, slowing absorption in what some would say is more affordable.

Yes, no it’s right now the numbers are not good. Again, I think we did not do anything in New York this past quarter, there may be some opportunities there in the future, but our underwriting was a little bit more conservative maybe than others last quarter or two and it's coming to fruition that is some of the strength we saw at the end of last year just to having continued. I still think it's a good margin but there was a lot of supply hitting the market at all price points can take a while for the markets to absorb it, obviously the economy has been good and the geopolitical uncertainty has been bad for the international buyers so it's a little bit of a tug and push. Nothing catastrophic, but yes you have seen some softening rental and for sale products. So we are still looking, I think it is a right basis, New York's still a great place to invest but you got to be careful right now.

And how are the Asbury Park condo sales going?

Well, we are opening our permanent sales center that is actually in the physical structure on August 15th, I think this week or next week we will actually have a filed permission to sell to New York customers, those are two big milestones that we have been waiting on. We have seen some nice response from people actually know the project because they are down there, but we really haven't been able to market it more widely and so you will start to see that happen. But at least in terms of the early price returns we are feeling pretty good.

Okay. I noticed in operating properties there is a $50 million strategic non-legacy investment and I think the balance increased from last quarter. I guess what do those relate to?

Over the last I think two years we talked about things we were looking at that had the potential to grow into interesting businesses where we thought we had competitive advantage. We have made small investments across a range of partnerships and market areas where we thought they might grow into something much larger. So those are mostly seed investments to see how somebody performs or to give us greater insight into some of these perhaps more interesting platform ideas that we have had. I certainly think when we said we are going to find some of the next big thing three years ago the ground lease business has outstripped all the other ones. So the 50 million is relatively small and not taking a lot of time and attention, but we do like to have - tip our toes in the water in things that we feel like are mispriced so that is somehow aren't getting the proper recognition that we might be able to help scale, so these are small things that unless we can scale them they will remain quite small.

Okay, and lastly just the dividend, you know what was the thinking is that relative to any kind of core recurring number or something else.

Look I think the net lease book is big and solid and consistent, the loan book has been a good solid contributor, yes there is repayments but continues to generate a lot of income out of that. We have done that long enough the balance sheet is strong enough. The liquidity continues to look better and better and is been able to create a maturity profile, I mean everything is green right now. So we decided that the right time to signal to the market that particular those investors who perhaps couldn't buy into a iStar store, because of a lack of dividend, might of lack of value proposition but without income or just a block from considering it. We think this opens up the market to them and we think it's time we think about it signals a lot about where we are and where were going.

Thanks very much for taking the questions.

Our next question comes from Steven Loff with Raymond James. Please go ahead.

Hi, good afternoon, and I like to also give you congratulations and resume reinstating the dividend. Touching on the legacy asset monetization process, Andy I think you went through a good business in your remarks that you know the remaining 1.26 billion of assets, how should we think about that as you look for resolutions and monetization there, you guys accomplish quite a bit the last few quarters. You know have some of the easier assets and move so to speak, and the remaining stuff gets more difficult or maybe can you talk about how that selection process of what you have already monetized versus what is left has taken place.

Hey Steven, I think I would say that some of the larger asset by dollar volume have been monetize, there is a handful of assets that we have on the market today. That hopefully will come to resolution in a sale in the next six months or so. I expect that to be a smaller dollar volume currently and we have seen in the first half of the year there is a few other assets that aren't yet ready to come on the market. And then there is a few like some of the assets we have that in they are strategic to what we are trying to accomplish there that are longer term holds. So you will see more assets being sold over the next 12 months, but I think you have seen a lot of the larger ones earlier this year and then you are going to see later this year.

So smaller deals a lot less chunky assets still need to be monetized there.

Yes.

Any updates on where you expect to be at year-end. I mean, you know, as far as the remaining assets are just kind of continue to two of ticket one-by-one.

I think you probably seemed that were lumpy process and you know you these processors take a while. When you get asset ready for market you put on the market. It's hard to estimate how long that is going to take and one asset that could be a $10 million asset that same process of the 50 million or $100 million asset that really hard to get back on specificity.

Yes sure. Jay switching gears to those the new originations side, you mentioned and billion in the dry powder you know you guys are pretty diverse than what where you see the most attractive places to the point capital now, you mentioned some cautious things on a few things in your previous remarks, but you how you look at that. Is there anything you might look at from acquisitions standpoint as far as adding a new business, you guys obviously created a safe vehicle through identifying that opportunity is there any else out there you are looking for where you see this capital being deployed.

Yes. I still think safe in the ground lease or sort of the most interesting, because they do open doors to other conversations. Ultimately if you ask me to characterize what we are looking for more proprietary opportunities. We don't want to and try to avoid situations where there is five people at the table and we are just waiting to see who can bid the lowest price, so certainly on the net lease side that is been our mantra, we like to show up and really be able to provide a solution in a fairly unique way and then we can actually get the kind of risk-adjusted returns we want. Same has been true on finance in the last two years, and we really think our track loans transition repositioning acquisition or construction those have been really attractive at points in time and then they can get competitive. so can’t give you a steady stream of business opportunities because the market keeps finding the little holes that we find in filling them. But we keep finding things where because of our prior relationship or right now there is a little pocket in a major Southern California market we have been able to do a number of deals and because we been there. We been there with our customer we have seen the change that is taking place and we are actually prepared to continue to provide capital there. But at some point I'm sure that windows is going to close too, so you got to be nimble, you are going to have your feet on the ground in a lot of different markets and fortunately we have got 25 years of relationships that we can lean on.

I appreciate that color. One last quick question I mean just if you can remind me on safe, but what was that management fee deferred for a bid and I think now you will start to record that as income in the third quarter. Is that correct?

Yes, that is correct, it was weighed for one year at iStar and that expired at the end of June.

So we will see that obviously contribute as soon as that just go into the net lease line item at the top as far as revenues or is it accounted for differently?

Well it won’t be calculated as part of the yield on our own assets, but it will be part of the net lease segment.

Segment, yes. Okay, fantastic thanks for taking my questions.

Thanks.

Our next question comes from Steve Delaney with JMP Securities. Please go ahead.

Good evening and congratulations on the progress in the quarter. Jay this could sound like a dumb question, but the new dividend is great. Should we view that as being related to the second quarter, or prospectively for the third quarter?

Well we have a board meeting, usually after the second quarter. So we need to get approval after the second quarter so the August 15th, record date is the function of just we have got it approved and now we can announce it. So, I think…

So this would be declared in arrears if you will in another words after the fact and we do have several mortgage REITs that do that as opposed to declaring them in the last month of the current quarter, going forward then as I may ask just for housekeeping, what would do you anticipate the timing of the announcement of your dividends for each quarter would -- have you considered when that might be?

I mean look we like to get on a regular schedule here and I think the regular quarterly board meeting is on a regular schedule, but the dividends usually get approved and as I would imagine three months from this one there will be another announcement.

Alright thank you that is helpful. Andy on page 12, the significant personal repayments and basis sold. Can you split that for me and was some of that intentional were there assets that are in the RE finance portfolio that were parts of your monetization plan, I'm just trying to understand the 378 relative to what has been more of a run rate of about 100 million per quarter, thanks.

378 is just part of the loan portfolio if I'm understanding you correctly, Steve. Those are just pure loan repayments.

Pretty chunky isn't it, on a $1.4 billion portfolio and was there like one or two really large loans there.

We had a $100 million loan repayment during the quarter, which was the largest one.

One of our favorite loans in Times Square that we made a lot of money off of unfortunate it’s finally repaid.

You want your money back, but somebody you would like to stick around right Jay. And can you comment a little bit on the origination pipeline I mean 198 for cranking it back up again I guess is the right way to suggest where you guys are, is it building and can you, you got to build, you got a lot of money to put to work so is it kind like pedal to the floor understanding that you are going to be focused on quality and fair pricing.

I think it’s not pedal to the floor. I would characterize it more as we can go in at any size in the opportunities we like with the customers we have a relationship with or markets we like, I think our opportunity to move quickly when we see something we like - we are not setting artificial goals and saying got to go out and get this much. Then go find the deals that fit this profile in the markets we like and the places we have identified the customers the high-quality customers that we want to do more business with, and if they are doing $50 million deals then we are doing $50 million deals if they are doing $300 million deals then we are going to be doing $300 million deals. But again it's for us it's because we have multiple business lines because we have multiple growth drivers, I think we are a little less sensitive about just dollar volume and more sensitive about building relationships customer focused activity that we think can build future more proprietary like deals upstream.

That is unique I think in the way you run your business, because so much of what we see is what I would refer to kind of bid through broker or you got a more commoditized product and it really comes down price and proceeds, but it sound like you are not taking that approach you are putting your winding force, targeting it to specific customers as opposed to just kind of scouring the country for whatever is floating around being offered out there by loan brokers, am I hearing you correctly?

We would love it, the generic deal is really attractive on a risk adjusted basis, sometimes it is, it isn’t right now so you really have to dig and do your work and look there is lots for opportunity for capital out there, so we are not saying we shouldn’t be putting cap out but we want to stick to best risk adjusted returns to control our business lines.

Well you guys have covered a lot with a number of questions tonight. So that is all I have and again congratulations and look forward to the next quarter.

Thanks Steve.

[Operator Instructions] And there are no questions in queue, please continue.

Well if you have any additional questions about this earning call please feel free to contact me directly. Would you please read the conference call replay instructions again.