UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



(Mark One)
ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, ~~2017~~2018
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File No. 1-15371

iStar Inc.

(Exact name of registrant as specified in its charter)



Maryland (State or other jurisdiction of incorporation or organization)		95-6881527 (I.R.S. Employer Identification Number)
1114 Avenue of the Americas, 39th Floor
New York, NY (Address of principal executive offices)		10036 (Zip code)

Registrant's telephone number, including area code: (212) 930-9400

Indicate by check mark whether the registrant: (i) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports); and (ii) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer ý	Accelerated filer o	Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company o	Emerging growth company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No ý

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

As of May 2, ~~2017,~~2018, there were ~~72,105,169~~67,901,019 shares, $0.001 par value per share, of iStar Inc. common stock outstanding.

TABLE OF CONTENTS



		Page
PART I	Consolidated Financial Information	1
Item 1.	Financial Statements:	1
	Consolidated Balance Sheets (unaudited) as of March 31, ~~2017 (unaudited)~~2018 and December 31, ~~2016~~2017	1
	Consolidated Statements of Operations (unaudited)—For the three months ended March 31, ~~2017~~2018 and ~~2016~~2017	2
	Consolidated Statements of Comprehensive Income (Loss) (unaudited)—For the three months ended March 31, ~~2017~~2018 and ~~2016~~2017	3
	Consolidated Statements of Changes in Equity (unaudited)—For the three months ended March 31, ~~2017~~2018 and ~~2016~~2017	4
	Consolidated Statements of Cash Flows (unaudited)—For the three months ended March 31, ~~2017~~2018 and ~~2016~~2017	5
	Notes to Consolidated Financial Statements (unaudited)	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3532
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4847
Item 4.	Controls and Procedures	4847
PART II	Other Information	5049
Item 1.	Legal Proceedings	5049
Item 1A.	Risk Factors	5049
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5149
Item 3.	Defaults Upon Senior Securities	5149
Item 4.	Mine Safety Disclosures	5149
Item 5.	Other Information	5149
Item 6.	Exhibits	5250
SIGNATURES		5351

PART I. CONSOLIDATED FINANCIAL INFORMATION

Item 1. Financial Statements

iStar Inc.

Consolidated Balance Sheets

(In thousands, except per share data)

(unaudited)


	As of						As of
	March 31, 2017 (unaudited)			December 31, 2016			March 31, 2018			December 31, 2017
ASSETS
Real estate
Real estate, at cost	$	1,896,262		$	1,906,592		$	1,659,651		$	1,629,436
Less: accumulated depreciation	(419,671		)	(414,840		)	(357,508		)	(347,405		)
Real estate, net	1,476,591			1,491,752			1,302,143			1,282,031
Real estate available and held for sale	71,934			83,764			41,857			68,588
Total real estate	1,548,525			1,575,516			1,344,000			1,350,619
Land and development, net	955,150			945,565			681,410			860,311
Loans receivable and other lending investments, net	1,381,227			1,450,439			1,400,474			1,300,655
Other investments	197,559			214,406			422,853			321,241
Cash and cash equivalents	897,487			328,744			366,723			657,688
Accrued interest and operating lease income receivable, net	12,561			14,775			11,030			11,957
Deferred operating lease income receivable, net	97,859			96,420			88,820			86,877
Deferred expenses and other assets, net	204,148			199,649			134,749			141,730
Total assets	$	5,294,516		$	4,825,514		$	4,450,059		$	4,731,078
LIABILITIES AND EQUITY
Liabilities:
Accounts payable, accrued expenses and other liabilities	$	192,040		$	211,570		$	217,874		$	238,004
Loan participations payable, net	182,087			159,321			85,354			102,425
Debt obligations, net	3,882,395			3,389,908			3,130,934			3,476,400
Total liabilities	4,256,522			3,760,799			3,434,162			3,816,829
Commitments and contingencies (refer to Note 11)	—			—
Redeemable noncontrolling interests (refer to Note 5)	3,513			5,031
Equity:
iStar Inc. shareholders' equity:
Preferred Stock Series D, E, F, G and I, liquidation preference $25.00 per share (refer to Note 13)	22			22
Preferred Stock Series D, G and I, liquidation preference $25.00 per share (refer to Note 13)							12			12
Convertible Preferred Stock Series J, liquidation preference $50.00 per share (refer to Note 13)	4			4			4			4
Common Stock, $0.001 par value, 200,000 shares authorized, 72,105 and 72,042 shares issued and outstanding as of March 31, 2017 and December 31, 2016, respectively	72			72
Common Stock, $0.001 par value, 200,000 shares authorized, 67,901 and 68,236 shares issued and outstanding as of March 31, 2018 and December 31, 2017, respectively							68			68
Additional paid-in capital	3,603,586			3,602,172			3,350,250			3,352,665
Retained earnings (deficit)	(2,608,590		)	(2,581,488		)	(2,368,162		)	(2,470,564		)
Accumulated other comprehensive income (loss) (refer to Note 13)	(3,974		)	(4,218		)	(925		)	(2,482		)
Total iStar Inc. shareholders' equity	991,120			1,016,564			981,247			879,703
Noncontrolling interests	43,361			43,120			34,650			34,546
Total equity	1,034,481			1,059,684			1,015,897			914,249
Total liabilities and equity	$	5,294,516		$	4,825,514		$	4,450,059		$	4,731,078

The accompanying notes are an integral part of the consolidated financial statements.

iStar Inc.

Consolidated Statements of Operations

(In thousands, except per share data)

(unaudited)


	For the Three Months Ended March 31,						For the Three Months Ended March 31,
	2017			2016			2018			2017
Revenues:
Operating lease income	$	52,591		$	54,937		$	45,799		$	47,347
Interest income	29,058			33,219			26,697			29,058
Other income	11,864			11,541			15,320			11,864
Land development revenue	20,050			14,947			276,429			20,050
Total revenues	113,563			114,644			364,245			108,319
Costs and expenses:
Interest expense	51,193			57,021			45,182			51,145
Real estate expense	35,741			34,305			36,180			35,590
Land development cost of sales	15,910			11,575			223,407			15,910
Depreciation and amortization	13,067			14,708			11,110			12,280
General and administrative(1)	25,173			23,102			28,814			25,173
(Recovery of) provision for loan losses	(4,928		)	1,506
Recovery of loan losses							(855		)	(4,928		)
Impairment of assets	4,413			—			4,100			4,413
Other expense	1,869			740			1,166			1,869
Total costs and expenses	142,438			142,957			349,104			141,452
Income (loss) before earnings from equity method investments and other items	(28,875		)	(28,313		)	15,141			(33,133		)
Loss on early extinguishment of debt, net	(210		)	(125		)	(372		)	(210		)
Earnings from equity method investments	5,702			8,267			3,332			5,702
Income (loss) from operations before income taxes	(23,383		)	(20,171		)
Income tax (expense) benefit	(607		)	414
Income (loss) from operations	(23,990		)	(19,757		)
Income from sales of real estate	8,618			10,458
Income (loss) from continuing operations before income taxes							18,101			(27,641		)
Income tax expense							(121		)	(607		)
Income (loss) from continuing operations							17,980			(28,248		)
Income from discontinued operations							—			4,766
Income from sales of real estate⁽²⁾							17,048			8,110
Net income (loss)	(15,372		)	(9,299		)	35,028			(15,372		)
Net (income) loss attributable to noncontrolling interests	1,100			942			(95		)	1,100
Net income (loss) attributable to iStar Inc.	(14,272		)	(8,357		)	34,933			(14,272		)
Preferred dividends	(12,830		)	(12,830		)	(8,124		)	(12,830		)
Net income (loss) allocable to common shareholders	$	(27,102	)	$	(21,187	)	$	26,809		$	(27,102	)
Per common share data:
Income (loss) attributable to iStar Inc. from operations:
Basic and diluted	$	(0.38	)	$	(0.27	)
Income (loss) attributable to iStar Inc. from continuing operations:
Basic							$	0.39		$	(0.44	)
Diluted							$	0.35		$	(0.44	)
Net income (loss) attributable to iStar Inc.:
Basic and diluted	$	(0.38	)	$	(0.27	)
Basic							$	0.39		$	(0.38	)
Diluted							$	0.35		$	(0.38	)
Weighted average number of common shares:
Basic and diluted	72,065			77,060
Basic							67,913			72,065
Diluted							83,670			72,065

(1)

For the three months ended March 31, 2018 and 2017, includes $7.9 million and $5.0 million, respectively, of equity-based compensation associated with iPIP Plans (refer to Note 14). These plans are liability-based plans which are marked-to-market quarterly and such marks are based upon the performance of the assets underlying the plans as of the quarterly measurement dates; however, actual amounts cannot be determined until the end date of the plans and the ultimate repayment or monetization of the related assets.


(2)	Income from sales of real estate represents gains from sales of real estate that do not qualify as discontinued operations.

The accompanying notes are an integral part of the consolidated financial statements.

iStar Inc.

Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

(unaudited)


	For the Three Months Ended March 31,						For the Three Months Ended March 31,
	2017			2016			2018			2017
Net income (loss)	$	(15,372	)	$	(9,299	)	$	35,028		$	(15,372	)
Other comprehensive income (loss):
Reclassification of (gains)/losses on cash flow hedges into earnings upon realization⁽¹⁾	122			257
Unrealized gains/(losses) on available-for-sale securities	(17		)	19
Unrealized gains/(losses) on cash flow hedges	540			(962		)
Unrealized gains/(losses) on cumulative translation adjustment	(401		)	(40		)
Other comprehensive income (loss)	244			(726		)
Impact from adoption of new accounting standards (refer to Note 3)							276			—
Reclassification of losses on cash flow hedges into earnings upon realization⁽¹⁾							9			122
Unrealized losses on available-for-sale securities							(971		)	(17		)
Unrealized gains on cash flow hedges							2,351			540
Unrealized losses on cumulative translation adjustment							(108		)	(401		)
Other comprehensive income							1,557			244
Comprehensive income (loss)	(15,128		)	(10,025		)	36,585			(15,128		)
Comprehensive (income) loss attributable to noncontrolling interests	1,100			942			(95		)	1,100
Comprehensive income (loss) attributable to iStar Inc.	$	(14,028	)	$	(9,083	)	$	36,490		$	(14,028	)

(1)

~~Reclassified~~Amount reclassified to "Interest expense" in the Company's consolidated statements of operations ~~are~~is $30 ~~and $160~~ for the three months ended March 31, ~~2017 and 2016, respectively. Reclassified~~2017. Amounts reclassified to "Earnings from equity method investments" in the Company's consolidated statements of operations are ~~$92~~$9 and ~~$97~~$92 for the three months ended March 31, ~~2017~~2018 and ~~2016,~~2017, respectively.

The accompanying notes are an integral part of the consolidated financial statements.

iStar Inc.

Consolidated Statements of Changes in Equity

For the Three Months Ended March 31, ~~2017~~2018 and ~~2016~~2017

(In thousands)

(unaudited)


	iStar Inc. Shareholders' Equity																						iStar Inc. Shareholders' Equity
																							Preferred Stock⁽¹⁾		Preferred Stock Series J⁽¹⁾		Common Stock at Par			Additional Paid-In Capital			Retained Earnings (Deficit)			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interests		Total Equity
Balance as of December 31, 2017																							$	12	$	4	$	68		$	3,352,665		$	(2,470,564	)	$	(2,482	)	$	34,546	$	914,249
Dividends declared—preferred																							—		—		—			—			(8,124		)	—			—		(8,124		)
Issuance of stock/restricted stock unit amortization, net																							—		—		1			5,888			—			—			—		5,889
Net income for the period																							—		—		—			—			34,933			—			95		35,028
Change in accumulated other comprehensive income																							—		—		—			—			—			1,281			—		1,281
Repurchase of stock																							—		—		(1		)	(8,303		)	—			—			—		(8,304		)
Contributions from noncontrolling interests																							—		—		—			—			—			—			9		9
Impact from adoption of new accounting standards (refer to Note 3)																							—		—		—			—			75,593			276			—		75,869
Balance as of March 31, 2018																							$	12	$	4	$	68		$	3,350,250		$	(2,368,162	)	$	(925	)	$	34,650	$	1,015,897
	Preferred Stock⁽¹⁾		Preferred Stock Series J⁽¹⁾		Common Stock at Par			Additional Paid-In Capital			Retained Earnings (Deficit)			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interests			Total Equity
Balance as of December 31, 2016	$	22	$	4	$	72		$	3,602,172		$	(2,581,488	)	$	(4,218	)	$	43,120		$	1,059,684		$	22	$	4	$	72		$	3,602,172		$	(2,581,488	)	$	(4,218	)	$	43,120	$	1,059,684
Dividends declared—preferred	—		—		—			—			(12,830		)	—			—			(12,830		)	—		—		—			—			(12,830		)	—			—		(12,830		)
Issuance of stock/restricted stock unit amortization, net	—		—		—			1,237			—			—			—			1,237			—		—		—			1,237			—			—			—		1,237
Net income (loss) for the period⁽²⁾	—		—		—			—			(14,272		)	—			241			(14,031		)	—		—		—			—			(14,272		)	—			241		(14,031		)
Change in accumulated other comprehensive income (loss)	—		—		—			—			—			244			—			244
Change in accumulated other comprehensive income																							—		—		—			—			—			244			—		244
Change in additional paid in capital attributable to redeemable noncontrolling interest	—		—		—			177			—			—			—			177			—		—		—			177			—			—			—		177
Balance as of March 31, 2017	$	22	$	4	$	72		$	3,603,586		$	(2,608,590	)	$	(3,974	)	$	43,361		$	1,034,481		$	22	$	4	$	72		$	3,603,586		$	(2,608,590	)	$	(3,974	)	$	43,361	$	1,034,481

Balance as of December 31, 2015	$	22	$	4	$	81		$	3,689,330		$	(2,625,474	)	$	(4,851	)	$	42,218		$	1,101,330
Dividends declared—preferred	—		—		—			—			(12,830		)	—			—			(12,830		)
Issuance of stock/restricted stock unit amortization, net	—		—		—			604			—			—			—			604
Net income (loss) for the period⁽²⁾	—		—		—			—			(8,357		)	—			358			(7,999		)
Change in accumulated other comprehensive income (loss)	—		—		—			—			—			(726		)	—			(726		)
Repurchase of stock	—		—		(6		)	(58,126		)	—			—			—			(58,132		)
Change in additional paid in capital attributable to redeemable noncontrolling interest	—		—		—			438			—			—			—			438
Change in noncontrolling interest⁽³⁾	—		—		—			—			—			—			(7,292		)	(7,292		)
Balance as of March 31, 2016	$	22	$	4	$	75		$	3,632,246		$	(2,646,661	)	$	(5,577	)	$	35,284		$	1,015,393


(1)	Refer to Note 13 for details on the Company's Preferred Stock.


(2)	For the three months ended March 31, 2017, ~~and 2016,~~ net income (loss) shown above excludes $(1,341) ~~and $(1,300)~~ of net loss attributable to redeemable noncontrolling interests.


~~(3)~~	~~Includes a payment to acquire a noncontrolling interest (refer to Note 5).~~

The accompanying notes are an integral part of the consolidated financial statements.

iStar Inc.

Consolidated Statements of Cash Flows

(In thousands)

(unaudited)


	For the Three Months Ended March 31,						For the Three Months Ended March 31,
	2017			2016			2018			2017
Cash flows from operating activities:
Net income (loss)	$	(15,372	)	$	(9,299	)	$	35,028		$	(15,372	)
Adjustments to reconcile net income (loss) to cash flows from operating activities:
Adjustments to reconcile net income to cash flows from operating activities:
(Recovery of) provision for loan losses	(4,928		)	1,506			(855		)	(4,928		)
Impairment of assets	4,413			—			4,100			4,413
Depreciation and amortization	13,067			14,708			11,110			13,067
Non-cash expense for stock-based compensation	5,881			4,577			9,091			5,881
Amortization of discounts/premiums and deferred financing costs on debt obligations, net	3,512			4,601			3,943			3,512
Amortization of discounts/premiums on loans, net	(3,184		)	(3,422		)
Deferred interest on loans, net	(11,467		)	(12,114		)
Amortization of discounts/premiums on loans and deferred interest on loans, net							(9,067		)	(14,652		)
Deferred interest on loans received							17,930			1
Earnings from equity method investments	(5,702		)	(8,267		)	(3,332		)	(5,702		)
Distributions from operations of other investments	20,029			26,317			3,101			20,029
Deferred operating lease income	(2,109		)	(2,126		)	(2,239		)	(2,185		)
Income from sales of real estate	(8,618		)	(10,458		)	(17,048		)	(8,618		)
Land development revenue in excess of cost of sales	(4,140		)	(3,372		)	(53,022		)	(4,140		)
Loss on early extinguishment of debt, net	210			125			372			210
Debt discount on repayments of debt obligations	(267		)	(492		)
Other operating activities, net	2,683			1,599			865			3,689
Changes in assets and liabilities:
Changes in accrued interest and operating lease income receivable, net	2,214			2,415
Changes in accrued interest and operating lease income receivable							617			2,131
Changes in deferred expenses and other assets, net	(8,726		)	1,034			(2,016		)	(8,035		)
Changes in accounts payable, accrued expenses and other liabilities	(24,987		)	(23,023		)	(45,144		)	(24,987		)
Cash flows used in operating activities	(37,491		)	(15,691		)
Cash flows provided by (used in) operating activities							(46,566		)	(35,686		)
Cash flows from investing activities:
Originations and fundings of loans receivable, net	(61,605		)	(94,343		)	(103,288		)	(61,605		)
Capital expenditures on real estate assets	(7,781		)	(17,735		)	(7,840		)	(7,781		)
Capital expenditures on land and development assets	(27,604		)	(29,375		)	(30,954		)	(27,604		)
Repayments of and principal collections on loans receivable and other lending investments, net	171,066			73,211			114,525			171,066
Net proceeds from sales of real estate	30,215			35,680			48,469			30,215
Net proceeds from sales of land and development assets	20,923			8,775			130,304			20,923
Distributions from other investments	4,709			7,675			17,813			4,709
Contributions to other investments	(1,813		)	(6,377		)
Changes in restricted cash held in connection with investing activities	284			1,660
Contributions to and acquisition of interest in other investments							(43,391		)	(1,813		)
Other investing activities, net	1,801			7,716			491			1,801
Cash flows provided by (used in) investing activities	130,195			(13,113		)
Cash flows provided by investing activities							126,129			129,911
Cash flows from financing activities:
Borrowings from debt obligations	854,637			275,000
Borrowings from debt obligations and convertible notes							—			854,637
Repayments and repurchases of debt obligations	(353,191		)	(282,755		)	(349,658		)	(353,458		)
Preferred dividends paid	(12,830		)	(12,830		)	(8,124		)	(12,830		)
Repurchase of stock	—			(58,760		)	(8,304		)	—
Payments for deferred financing costs	(11,497		)	—			(252		)	(11,497		)
Payments for withholding taxes upon vesting of stock-based compensation	(420		)	(1,109		)	(3,845		)	(420		)
Payments for debt prepayment or extinguishment costs							—			(847		)
Other financing activities, net	(661		)	(10,686		)	9			(661		)
Cash flows provided by (used in) financing activities	476,038			(91,140		)	(370,174		)	474,924
Effect of exchange rate changes on cash	1			24			22			1
Changes in cash and cash equivalents	568,743			(119,920		)
Cash and cash equivalents at beginning of period	328,744			711,101
Cash and cash equivalents at end of period	$	897,487		$	591,181
Changes in cash, cash equivalents and restricted cash							(290,589		)	569,150
Cash, cash equivalents and restricted cash at beginning of period							677,733			354,627
Cash, cash equivalents and restricted cash at end of period							$	387,144		$	923,777
Supplemental disclosure of non-cash investing and financing activity:
Fundings of loan receivables and loan participations	$	22,602		$	1,905
Accounts payable for capital expenditures on land and development assets	—			3,650
Fundings and repayments of loan receivables and loan participations, net							$	(17,117	)	$	22,602
Accounts payable for capital expenditures on real estate assets	781			—			338			781
Acquisitions of land and development assets through foreclosure							4,600			—
Profit sharing arrangement							28,831			—
Financing provided on sales of land and development assets, net							142,639			—

The accompanying notes are an integral part of the consolidated financial statements.

Table of Contents

iStar Inc.

Notes to Consolidated Financial Statements

(unaudited)

Note 1—Business and Organization

Business—iStar Inc. (the "Company")~~, doing business as "iStar,"~~ finances, invests in and develops real estate and real estate related projects as part of its fully-integrated investment platform. The Company also provides management services for its ground lease and net lease equity method investments (refer to Note 7). The Company has invested more than $35 billion over the past two decades and is structured as a real estate investment trust ("REIT") with a diversified portfolio focused on larger assets located in major metropolitan markets. The Company's primary reportable business segments are real estate finance, net lease, operating properties and land and development (refer to Note 17).

Organization—The Company began its business in 1993 through the management of private investment funds and became publicly traded in 1998. Since that time, the Company has grown through the origination of new investments ~~as well as through~~and corporate acquisitions.

Note 2—Basis of Presentation and Principles of Consolidation

Basis of Presentation—The accompanying unaudited consolidated financial statements have been prepared in conformity with the instructions to Form 10-Q and Article 10-01 of Regulation S-X for interim financial statements. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles in the United States of America ("GAAP") for complete financial statements. These unaudited consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2016~~2017 (the ~~"2016~~"2017 Annual Report").

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

In the opinion of management, the accompanying consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the interim periods presented. Such operating results may not be indicative of the expected results for any other interim periods or the entire year. Certain prior year amounts have been reclassified in the Company's consolidated financial statements and the related notes to conform to the current period presentation.

Principles of Consolidation—The consolidated financial statements include the financial statements of the Company, its wholly owned subsidiaries, controlled partnerships and variable interest entities ("VIEs") for which the Company is the primary beneficiary. All ~~significant~~ intercompany balances and transactions have been eliminated in consolidation. The Company's involvement with VIEs affects its financial performance and cash flows primarily through amounts recorded in "Operating lease income," "Interest income," "Earnings from equity method investments," "Real estate expense" and "Interest expense" in the Company's consolidated statements of operations. The Company has not provided financial support to those VIEs that it was not previously contractually required to provide.

Consolidated VIEs—As of March 31, ~~2017,~~2018, the Company consolidates VIEs for which it is considered the primary beneficiary. As of March 31, ~~2017,~~2018, the total assets of these consolidated VIEs were ~~$449.3~~$318.9 million and total liabilities were ~~$74.4~~$43.2 million. The classifications of these assets are primarily within "Land and development, net" and "Real estate, net" on the Company's consolidated balance sheets. The classifications of liabilities are primarily within "Accounts payable, accrued expenses and other liabilities" ~~and "debt obligations, net"~~ on the Company's consolidated balance sheets. The liabilities of these VIEs are non-recourse to the Company and can only be satisfied from each VIE's respective assets. The Company did not have any unfunded commitments related to consolidated VIEs as of March 31, ~~2017.~~2018.

Unconsolidated VIEs—As of March 31, ~~2017,~~2018, the Company has investments in VIEs where it is not the primary beneficiary and accordingly the VIEs have not been consolidated in the Company's consolidated financial statements. As of March 31, ~~2017,~~2018, the Company's maximum exposure to loss from these investments does not exceed the sum of the ~~$52.9~~$92.9 million carrying value of the investments, which are classified in "Other investments" and "Loans receivable and other lending investments, net" on the Company's consolidated balance sheets, and ~~$58.0~~$29.7 million of related unfunded commitments.

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iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Note 3—Summary of Significant Accounting Policies

OnThe following paragraphs describe the impact on the Company's consolidated financial statements from the adoption of Accounting Standards Updates ("ASUs") on January 1, ~~2017,~~2018.

ASU 2014-09—ASU 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"), stipulates that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Certain contracts with customers, including lease contracts and financial instruments and other contractual rights, are not within the scope of the new guidance. The Company's revenue within the scope of the guidance is primarily ancillary income related to its operating properties. The Company adopted ~~Accounting Standards Update ("ASU") 2016-09,~~ ~~Compensation—Stock Compensation: Improvements to Employee Share-Based Payment Accounting~~ ("ASU ~~2016-09") which was issued to simplify several aspects of~~2014-09 using the ~~accounting for share-based payment transactions, including income tax, classification of awards as either equity or liabilities~~modified retrospective approach and ~~classification on~~ the ~~statement of cash flows. The~~ adoption ~~of ASU 2016-09~~ did not have a material impact on the Company's consolidated financial statements.

ASU 2016-01 and ASU 2018-03—ASU 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities("ASU 2016-01"), addressed certain aspects of recognition, measurement, presentation and disclosure of financial instruments. ASU 2018-03, Technical Corrections and Improvements to Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities, provided technical corrections and improvements to ASU 2016-01. ASU 2016-01 requires entities to measure equity investments not accounted for under the equity method at fair value and recognize changes in fair value in net income. For equity investments without readily determinable fair values, entities may elect a measurement alternative that will allow those investments to be recorded at cost, less impairment, and adjusted for subsequent observable price changes. Upon adoption, entities must record a cumulative-effect adjustment to the balance sheet as of the beginning of the first reporting period in which the standard is adopted. ASU 2016-01 also eliminated the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet. The adoption of ASU 2016-01 and ASU 2018-03 did not have a material impact on the Company's consolidated financial statements.

ASU 2016-15—ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments ("ASU 2016-15"), was issued to reduce diversity in practice in how certain cash receipts and cash payments, including debt prepayment or debt extinguishment costs, distributions from equity method investees, and other separately identifiable cash flows, are presented and classified in the statement of cash flows. The adoption of ASU 2016-15 was retrospective and resulted in an increase to cash flows provided by operating activities of $1.1 million and a decrease to cash flows provided by financing activities of $1.1 million for the three months ended March 31, 2017, primarily resulting from the ~~remainder~~reclassification of cash payments made related to the extinguishment of debt.

ASU 2016-18—ASU 2016-18, Statement of Cash Flows: Restricted Cash ("ASU 2016-18"), requires that restricted cash be included with cash and cash equivalents when reconciling beginning and ending cash and cash equivalents on the statement of cash flows and requires disclosure of what is included in restricted cash. The adoption of ASU 2016-18 did not have a material impact on the Company's consolidated financial statements. The adoption of ASU 2016-18 was retrospective and resulted in an increase to cash flows provided by operating activities of $0.7 million and a decrease to cash flows provided by investing activities of $0.3 million for the three months ended March 31, 2017.

The following table provides a reconciliation of the ~~Company's significant accounting policies, which are detailed~~cash and cash equivalents and restricted cash reported in the Company's ~~2016 Annual Report, have not changed materially.~~consolidated balance sheets that total to the same amount as reported in the consolidated statements of cash flows (in thousands):



	March 31, 2018		December 31, 2017		March 31, 2017		December 31, 2016
Cash and cash equivalents	$	366,723	$	657,688	$	897,487	$	328,744
Restricted cash included in deferred expenses and other assets, net⁽¹⁾	20,421		20,045		26,290		25,883
Total cash, cash equivalents and restricted cash reported in the consolidated statements of cash flows	$	387,144	$	677,733	$	923,777	$	354,627


(1)	Restricted cash represents amounts required to be maintained under certain of the Company's debt obligations, loans, leasing, land development, sale and derivative transactions.

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iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

~~New Accounting Pronouncements~~ASU 2017-01—~~In February 2017,~~The adoption of ASU 2017-01, Business Combinations: Clarifying the ~~Financial Accounting Standards Board~~Definition of a Business ("~~FASB"~~ASU 2017-01") ~~issued Accounting Standards Update ("ASU")~~, did not have a material impact on the Company's consolidated financial statements. Under ASU 2017-01, certain transactions previously accounted for as business combinations under the former accounting guidance will be accounted for as asset acquisitions under ASU 2017-01. As a result, the Company expects more transaction costs to be capitalized relating to real estate acquisitions as a result of ASU 2017-01.

ASU 2017-05—ASU 2017-05, Other ~~Income—~~Income - Gains and Losses from the Derecognition of Nonfinancial Assets ("("ASU 2017-05") to clarify the scope of Subtopic 610-20, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets, and to add guidance for partial sales of nonfinancial assets. The amendments in ASU 2017-05 simplify, simplifies GAAP by eliminating several accounting differences between transactions involving assets and transactions involving businesses. The amendments in ASU 2017-05 require an entity to initially measure a retained noncontrolling interest in a nonfinancial asset at fair value consistent with how a retained noncontrolling interest in a business is measured. Also, if an entity transfers ownership interests in a consolidated subsidiary that is within the scope of ASC 610-20 and continues to have a controlling financial interest in that subsidiary, ASU 2017-05 requires the entity to account for the transaction as an equity transaction, which is consistent with how changes in ownership interests in a consolidated subsidiary that is a business are recorded when a parent retains a controlling financial interest in the business. The Company adopted ASU 2017-05 ~~is effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted beginning~~using the modified retrospective approach which was applied to all contracts. On January 1, ~~2017. Management is evaluating~~2018, the ~~impact~~Company recorded a step-up in basis to fair value of its retained noncontrolling interest relating to the ~~guidance~~sale of its ground lease business (refer to note 4) and other transactions where the Company sold or contributed real estate to a venture and previously recognized partial gains. Prior to the adoption of ASU 2017-05, the Company was required to recognize gains on only the portion of its interest transferred to third parties and was precluded from recognizing a gain on its retained noncontrolling interest which was carried at the Company’s historical cost basis. The adoption of ASU 2017-05 had the following impact on the Company's consolidated financial ~~statements.~~statements (in thousands):



				Impact from ASU 2017-05on January 1, 2018
	December 31, 2017			Impact from ASU 2017-05on January 1, 2018		January 1, 2018
Other investments	$	321,241		$	75,869	$	397,110
Total assets	4,731,078			75,869		4,806,947

Retained earnings (deficit)	$	(2,470,564	)	$	75,869	$	(2,394,695	)
Total equity	914,249			75,869		990,118

~~In January 2017,~~ASU 2017-12—ASU 2017-12, Derivatives and Hedging - Targeted Improvements to Accounting for Hedging Activities ("ASU 2017-12"), was issued to better align an entity’s risk management activities and financial reporting for hedging relationships through changes to both the ~~FASB issued~~designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. ASU ~~2017-01,~~ ~~Business Combinations: Clarifying~~2017-12 expands and refines hedge accounting for both nonfinancial and financial risk components and aligns the ~~Definition of a Business~~ ~~("ASU 2017-01") to provide a more robust framework to use in determining when a set of assets~~recognition and activities is a business. The amendments provide more consistency in applying the guidance, reduce the costs of application, and make the definition of a business more operable. The Company's real estate acquisitions have historically been accounted for as a business combination or an asset acquisition. Under ASU 2017-01, certain transactions previously accounted for as business combinations under the existing guidance would be accounted for as asset acquisitions under the new guidance. As a result, the Company expects more transaction costs to be capitalized under real estate acquisitions and less transaction costs to be expensed under business combinations. ASU 2017-01 is effective for interim and annual reporting periods beginning after December 15, 2017. Early application is permitted under certain conditions. Management is evaluating the impactpresentation of the ~~guidance~~effects of the hedging instrument and the hedged item in the financial statements. The Company adopted ASU 2017-12 on January 1, 2018 and the ~~Company's consolidated financial statements.~~

~~In November 2016, the FASB issued ASU 2016-18,~~ ~~Statement of Cash Flows: Restricted Cash~~ ("ASU 2016-18") which requires that restricted cash be included with cash and cash equivalents when reconciling beginning and ending cash and cash equivalents on the statement of cash flows. In addition, ASU 2016-18 requires disclosure of what is included in restricted cash. ASU 2016-18 is effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption ~~is permitted. Management does~~did not ~~believe the guidance will~~ have a material impact on the Company's consolidated financial statements.

~~In August 2016~~New Accounting Pronouncements, —~~theFASB issued ASU 2016-15,~~ ~~Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments~~ ("ASU 2016-15") which was issued to reduce diversity in practice in how certain cash receipts and cash payments, including debt prepayment or debt extinguishment costs, distributions from equity method investees, and other separately identifiable cash flows, are presented and classified in the statement of cash flows. ASU 2016-15 is effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted. Management does not believe the guidance will have a material impact on the Company's consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial ~~Instruments—~~Instruments - Credit Losses:Measurement of Credit Losses on Financial Instruments ("("ASU 2016-13"), which was issued to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments held by a reporting entity. This amendment replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company currently records a general reserve that covers performing loans and reserves for loan losses are recorded ~~when~~when: (i) available information as of each balance sheet date indicates that it is probable a loss has occurred in the ~~portfolio~~portfolio; and (ii) the amount of the loss can be reasonably estimated. The formula-based general reserve is derived from estimated principal default probabilities and loss severities

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~~iStar Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~(unaudited)~~

applied to groups of loans based upon risk ratings assigned to loans with similar risk characteristics during our quarterly loan portfolio assessment. The Company estimates loss rates based on historical realized losses experienced within its portfolio and take into account current economic conditions affecting the commercial real estate market when establishing appropriate time frames to evaluate loss experience. ~~The Company believes this general reserve component of its total loan loss reserves should minimize the impact of ASU 2016-13.~~ ASU 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted for interim and annual reporting periods beginning after December 15, 2018. Management does not believe the guidance will have a material impact on the Company's consolidated financial statements.

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iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

In February 2016, the FASB issued ASU 2016-02, Leases~~Leases~~ ("ASU 2016-02"), which requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases. For operating leases, a lessee will be required to do the following: (i) recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position; (ii) recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line ~~basis~~basis; and (iii) classify all cash payments within operating activities in the statement of cash flows. For operating lease arrangements for which the Company is the lessee, primarily the lease of office space, the Company expects the impact of ASU 2016-02 to be the recognition of a right-of-use asset and lease liability on its consolidated balance sheets. The accounting applied by the Company as a lessor will be largely unchanged from that applied under previous GAAP. However, in certain instances, a new long-term lease of land subsequent to adoption could be classified as a sales-type lease, which could result in the Company derecognizing the underlying asset ~~from its books~~ and recording a profit or loss on sale and the net investment in the lease. ASU 2016-02 is effective for interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. Management is evaluating the impact of the guidance on the Company's consolidated financial statements.

~~In January 2016, the FASB issued ASU 2016-01,~~ ~~Financial Instruments - Overall:Recognition and Measurement of Financial Assets and Financial Liabilities~~ ("ASU 2016-01"), which addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. ASU 2016-01 is effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is not permitted. Management is evaluating the impact of the guidance on the Company's consolidated financial statements.

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers~~ ~~("ASU 2014-09") which supersedes existing industry-specific guidance, including ASC 360-20,~~ ~~Real Estate Sales~~. The new standard is principles-based and requires more estimates and judgment than current guidance. Certain contracts with customers, including lease contracts and financial instruments and other contractual rights, are not within the scope of the new guidance. Although most of the Company's revenue is operating lease income generated from lease contracts and interest income generated from financial instruments, certain other of the Company's revenue streams will be impacted by the new guidance. The Company currently expects that income from sales of real estate, land development revenue and other income will be impacted by ASU 2014-09. In August 2015, the FASB issued ASU 2015-14, ~~Revenue from Contracts with Customers - Deferral of the Effective Date~~, to defer the effective date of ASU 2014-09 by one year. ASU 2014-09 is now effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted beginning January 1, 2017. Management is evaluating the impact of the guidance on the Company's consolidated financial statements.

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~~iStar Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~(unaudited)~~

Note 4—Real Estate

The Company's real estate assets were comprised of the following ($ in thousands):


	Net Lease⁽¹⁾			Operating Properties			Total			Net Lease⁽¹⁾			Operating Properties			Total
As of March 31, 2017
As of March 31, 2018
Land, at cost	$	271,433		$	211,054		$	482,487		$	218,261		$	212,782		$	431,043
Buildings and improvements, at cost	1,097,049			316,726			1,413,775			888,058			340,550			1,228,608
Less: accumulated depreciation	(370,168		)	(49,503		)	(419,671		)	(297,881		)	(59,627		)	(357,508		)
Real estate, net	998,314			478,277			1,476,591			808,438			493,705			1,302,143
Real estate available and held for sale ⁽²⁾	—			71,934			71,934			—			41,857			41,857
Total real estate	$	998,314		$	550,211		$	1,548,525		$	808,438		$	535,562		$	1,344,000
As of December 31, 2016
As of December 31, 2017
Land, at cost	$	272,666		$	211,054		$	483,720		$	219,092		$	203,278		$	422,370
Buildings and improvements, at cost	1,111,589			311,283			1,422,872			888,959			318,107			1,207,066
Less: accumulated depreciation	(368,665		)	(46,175		)	(414,840		)	(292,268		)	(55,137		)	(347,405		)
Real estate, net	1,015,590			476,162			1,491,752			815,783			466,248			1,282,031
Real estate available and held for sale ⁽²⁾	1,284			82,480			83,764			—			68,588			68,588
Total real estate	$	1,016,874		$	558,642		$	1,575,516		$	815,783		$	534,836		$	1,350,619

(1)

In 2014, the Company partnered with a sovereign wealth fund to form a venture to acquire and develop net lease assets (the "Net Lease Venture") and gave a right of first ~~refusal~~offer to the Net Lease Venture on all new net lease investments (refer to Note 7 for more information on the Net Lease Venture). The Company is responsible for sourcing new opportunities and managing the Net Lease Venture ~~and its assets~~ in exchange for a promote and management fee.


(2)	As of March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, the Company had ~~$71.9~~$40.9 million and ~~$82.5~~$48.5 million, respectively, of residential ~~properties~~condominiums available for sale in its operating properties portfolio.

~~Real Estate Available~~Disposition of Ground Lease Business—In April 2017, institutional investors acquired a controlling interest in the Company's ground lease business through the merger of a Company subsidiary and ~~Held~~related transactions (the "Acquisition Transactions"). Ground leases generally represent ownership of the land underlying commercial real estate projects that is triple net leased by the fee owner of the land to the owners/operators of the real estate projects built thereon ("Ground Lease"). The Company's Ground Lease business was a component of the Company's net lease segment and consisted of 12 properties subject to long-term net leases including seven Ground Leases and one master lease (covering five properties). The acquiring entity was a newly formed unconsolidated entity named Safety, Income & Growth Inc. ("SAFE"). The carrying value of the Company's Ground Lease assets was approximately $161.1 million. Shortly before the Acquisition Transactions, the Company completed the $227.0 million 2017 Secured Financing on its Ground Lease assets (refer to Note 10). The Company received all of the proceeds of the 2017 Secured Financing. The Company received an additional $113.0 million of proceeds in the Acquisition Transactions, including $55.5 million that the Company contributed to SAFE in its initial capitalization. As a result of the Acquisition Transactions, the Company deconsolidated the 12 properties and the associated 2017 Secured Financing. The Company accounts for ~~Sale—~~its investment in SAFE as an equity method investment (refer to Note 7). The Company accounted for this transaction as an in substance sale of real estate and recognized a gain of $123.4 million, reflecting the aggregate gain less the fair value of the Company's retained

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iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

interest in SAFE. As a result of the adoption of ASU 2017-05 (refer to Note 3), on January 1, 2018, the Company recorded an increase to retained earnings of $55.5 million, bringing the Company's aggregate gain on the sale of its Ground Lease business to approximately $178.9 million.

Discontinued Operations— ~~During~~The transactions described above involving the Company's Ground Lease business qualified for discontinued operations and the following table summarizes income from discontinued operations for the three months ended March 31, ~~2016,~~2017 ($ in thousands)⁽¹⁾⁽²⁾:



Revenues	$	5,244
Expenses	(986		)
Income from sales of real estate	508
Income from discontinued operations	$	4,766


(1)	The transactions closed on April 14, 2017. Revenues primarily consisted of operating lease income and expenses primarily consisted of depreciation and amortization and real estate expense.


(2)	For the three months ended March 31, 2017, cash flows provided by operating activities and cash flows used in investing activities from discontinued operations was $6.3 million and $0.5 million, respectively.

Other Dispositions—The following table presents the ~~Company transferred one~~ net ~~lease asset with a carrying value of $0.7 million to held~~proceeds and income recognized for ~~sale due to an executed contract with a third party.~~properties sold, by property type ($ in millions):



	Three Months Ended March 31,
	2018		2017
Operating Properties
Proceeds	$	41.9	$	10.2
Income from sales of real estate	16.6		1.9

Net Lease
Proceeds	$	2.3	$	19.5
Income from sales of real estate	0.4		6.2

Total
Proceeds	$	44.2	$	29.7
Income from sales of real estate	17.0		8.1

~~Dispositions—~~Impairments—During the three months ended March 31, ~~2017 and 2016,~~2018, the Company ~~sold residential condominiums for total net proceeds~~recorded an impairment of ~~$10.2~~$4.1 million ~~and $19.7 million, respectively, and recorded income from sales of~~on a real estate ~~totaling $1.9 million and $4.9 million, respectively. During~~asset held for sale due to impending contracts to sell the ~~three months ended March 31, 2017 and 2016,~~remaining four condominium units at the Company sold net lease assets for net proceeds of $20.0 million and $10.0 million, respectively, resulting in gains of $6.7 million and $4.9 million, respectively. During the three months ended March 31, 2016, the Company also sold a commercial operating property for net proceeds of $5.9 million resulting in a gain of $0.7 million. The gains are recorded in "Income from sales of real estate" in the Company's consolidated statements of operations.

~~Impairments—~~property. During the three months ended March 31, 2017, the Company recorded an impairment of $4.4 million on a real estate asset held for sale due to shifting demand in the local condominium market along with a change in the Company's exit strategy.

Tenant Reimbursements—The Company receives reimbursements from tenants for certain facility operating expenses including common area costs, insurance, utilities and real estate taxes. Tenant expense reimbursements were ~~$5.7~~$5.6 million and ~~$6.3~~$5.5 million for the three months ended March 31, ~~2017~~2018 and ~~2016,~~2017, respectively. These amounts are included in "Operating lease income" in the Company's consolidated statements of operations.

Allowance for Doubtful Accounts—As of March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, the allowance for doubtful accounts related to real estate tenant receivables was ~~$1.4~~$1.6 million and $1.3 million, respectively, and the allowance for doubtful accounts related to deferred operating lease income was $1.5 million and $1.3 million as of March 31, ~~2017~~2018 and December 31, ~~2016.~~2017, respectively. These amounts are included in "Accrued interest and operating lease income receivable, net" and "Deferred operating lease income receivable, net," respectively, on the Company's consolidated balance sheets.

910

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iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Note 5—Land and Development

The Company's land and development assets were comprised of the following ($ in thousands):


	As of						As of
	March 31,			December 31,			March 31,			December 31,
	2017			2016			2018			2017
Land and land development, at cost(1)	$	961,907		$	952,051		$	689,249		$	868,692
Less: accumulated depreciation	(6,757		)	(6,486		)	(7,839		)	(8,381		)
Total land and development, net	$	955,150		$	945,565		$	681,410		$	860,311


(1)	During the three months ended March 31, 2018, the Company funded capital expenditures on land and development assets of $31.0 million.

Acquisitions—~~In 2016,~~During the three months ended March 31, 2018, the Company acquired, ~~an additional 10.7% interest~~via foreclosure, title to a land asset which had a total fair value of $4.6 million and had previously served as collateral for loans receivable held by the Company. No gain or loss was recorded in ~~a consolidated entity for $10.8 million. The Company owns 95.7% of the entity as of March 31, 2017.~~connection with this transaction.

Dispositions—During the three months ended March 31, ~~2017~~2018 and ~~2016,~~2017, the Company sold land parcels and residential lots and units and recognized land development revenue of ~~$20.1~~$276.4 million and ~~$14.9~~$20.1 million, respectively, from its land and development portfolio. In connection with the sale of two land parcels during the three months ended March 31, 2018, the Company originated an aggregate $145.0 million of financing to the buyers. $81.2 million was repaid subsequent to March 31, 2018. During the three months ended March 31, ~~2017~~2018 and ~~2016,~~2017, the Company recognized land development cost of sales of ~~$15.9~~$223.4 million and ~~$11.6~~$15.9 million, respectively, from its land and development portfolio.

~~Redeemable Noncontrolling Interest—~~The Company has a majority interest in a strategic venture that provides the third party minority partner an option to redeem its interest at fair value. The Company has reflected the partner's noncontrolling interest in this venture as a component of redeemable noncontrolling interest within its consolidated balance sheets. Changes in fair value are being accreted over the term from the date of issuance of the redemption option to the earliest redemption date using the interest method. As of March 31, 2017 and December 31, 2016, this interest had a carrying value of zero and $1.3 million, respectively. As of March 31, 2017 and December 31, 2016, this interest did not have a redemption value.

Note 6—Loans Receivable and Other Lending Investments, net

The following is a summary of the Company's loans receivable and other lending investments by class ($ in thousands):


	As of						As of
Type of Investment	March 31, 2017			December 31, 2016			March 31, 2018			December 31, 2017
Senior mortgages	$	834,795		$	940,738		$	906,482		$	791,152
Corporate/Partnership loans	519,198			490,389			513,088			488,921
Subordinate mortgages	25,242			24,941			9,657			9,495
Total gross carrying value of loans	1,379,235			1,456,068			1,429,227			1,289,568
Reserves for loan losses	(79,389		)	(85,545		)	(69,466		)	(78,489		)
Total loans receivable, net	1,299,846			1,370,523			1,359,761			1,211,079
Other lending investments—securities	81,381			79,916			40,713			89,576
Total loans receivable and other lending investments, net	$	1,381,227		$	1,450,439		$	1,400,474		$	1,300,655

Reserve for Loan Losses—Changes in the Company's reserve for loan losses were as follows ($ in thousands):


	For the Three Months Ended March 31,					For the Three Months Ended March 31,
	2017			2016		2018			2017
Reserve for loan losses at beginning of period	$	85,545		$	108,165	$	78,489		$	85,545
(Recovery of) provision for loan losses	(4,928		)	1,506
Recovery of loan losses						(855		)	(4,928		)
Charge-offs	(1,228		)	—		(8,168		)	(1,228		)
Reserve for loan losses at end of period	$	79,389		$	109,671	$	69,466		$	79,389

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iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

The Company's recorded investment in loans (comprised of a loan's carrying value plus accrued interest) and the associated reserve for loan losses were as follows ($ in thousands):


	Individually Evaluated for Impairment⁽¹⁾			Collectively Evaluated for Impairment⁽²⁾			Total			Individually Evaluated for Impairment⁽¹⁾			Collectively Evaluated for Impairment⁽²⁾			Total
As of March 31, 2017
As of March 31, 2018
Loans	$	250,801		$	1,135,134		$	1,385,935		$	224,113		$	1,211,138		$	1,435,251
Less: Reserve for loan losses	(60,989		)	(18,400		)	(79,389		)	(52,866		)	(16,600		)	(69,466		)
Total⁽³⁾	$	189,812		$	1,116,734		$	1,306,546		$	171,247		$	1,194,538		$	1,365,785
As of December 31, 2016
As of December 31, 2017
Loans	$	253,941		$	1,209,062		$	1,463,003		$	237,877		$	1,056,944		$	1,294,821
Less: Reserve for loan losses	(62,245		)	(23,300		)	(85,545		)	(60,989		)	(17,500		)	(78,489		)
Total⁽³⁾	$	191,696		$	1,185,762		$	1,377,458		$	176,888		$	1,039,444		$	1,216,332

(1)

The carrying value of these loans include unamortized discounts, premiums, deferred fees and costs totaling net discounts of $0.7 million and ~~$0.4~~$0.7 million as of March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively. The Company's loans individually evaluated for impairment primarily represent loans on non-accrual ~~status and~~status; therefore, the unamortized amounts associated with these loans are not currently being amortized into income.


(2)	The carrying value of these loans include unamortized discounts, premiums, deferred fees and costs totaling net premiums of ~~$2.9~~$5.5 million and ~~$1.9~~$6.2 million as of March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively.

(3)

The Company's recorded investment in loans as of March 31, ~~2017~~2018 and December 31, ~~2016 includes~~2017, including accrued interest of ~~$6.7~~$6.0 million and ~~$6.9~~$5.3 million, respectively, ~~which are~~is included in "Accrued interest and operating lease income receivable, net" on the Company's consolidated balance sheets. As of March 31, ~~2017~~2018 and December 31, ~~2016, excludes $81.4~~2017, the total amounts exclude $40.7 million and ~~$79.9~~$89.6 million, respectively, of securities that are evaluated for impairment under ASC 320.

Credit Characteristics—As part of the Company's process for monitoring the credit quality of its loans, it performs a quarterly loan portfolio assessment and assigns risk ratings to each of its performing loans. Risk ratings, which range from 1 (lower risk) to 5 (higher risk), are based on judgments, which are inherently uncertain, and there can be no assurance that actual performance will be similar to current expectation. The Company designates loans as non-performing at such time as: (1) the loan becomes 90 days delinquent; (2) the loan has a maturity default; or (3) management determines it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan. All non-performing loans are placed on non-accrual status and income is only recognized in certain cases upon actual cash receipt.

The Company's recorded investment in performing loans, presented by class and by credit quality, as indicated by risk rating, was as follows ($ in thousands):


	As of March 31, 2017			As of December 31, 2016			As of March 31, 2018			As of December 31, 2017
	Performing Loans		Weighted Average Risk Ratings	Performing Loans		Weighted Average Risk Ratings	Performing Loans		Weighted Average Risk Ratings	Performing Loans		Weighted Average Risk Ratings
Senior mortgages	$	756,720	2.31	$	859,250	3.12	$	842,509	2.52	$	713,057	2.72
Corporate/Partnership loans	364,159		3.06	335,677		3.09	358,943		2.47	334,364		2.85
Subordinate mortgages	14,255		2.46	14,135		3.00	9,686		3.00	9,523		3.00
Total	$	1,135,134	2.55	$	1,209,062	3.11	$	1,211,138	2.51	$	1,056,944	2.77

1112

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iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

The Company's recorded investment in loans, aged by payment status and presented by class, ~~were~~was as follows ($ in thousands):


	Current		Less Than and Equal to 90 Days		Greater Than 90 Days⁽¹⁾		Total Past Due		Total		Current		Less Than and Equal to 90 Days		Greater Than 90 Days⁽¹⁾		Total Past Due		Total
As of March 31, 2017
As of March 31, 2018
Senior mortgages	$	762,720	$	—	$	76,454	$	76,454	$	839,174	$	848,509	$	—	$	61,437	$	61,437	$	909,946
Corporate/Partnership loans	364,159		—		157,303		157,303		521,462		358,943		—		156,676		156,676		515,619
Subordinate mortgages	25,299		—		—		—		25,299		9,686		—		—		—		9,686
Total	$	1,152,178	$	—	$	233,757	$	233,757	$	1,385,935	$	1,217,138	$	—	$	218,113	$	218,113	$	1,435,251
As of December 31, 2016
As of December 31, 2017
Senior mortgages	$	868,505	$	—	$	76,677	$	76,677	$	945,182	$	719,057	$	—	$	75,343	$	75,343	$	794,400
Corporate/Partnership loans	335,677		—		157,146		157,146		492,823		334,364		—		156,534		156,534		490,898
Subordinate mortgages	24,998		—		—		—		24,998		9,523		—		—		—		9,523
Total	$	1,229,180	$	—	$	233,823	$	233,823	$	1,463,003	$	1,062,944	$	—	$	231,877	$	231,877	$	1,294,821

(1)

As of March 31, 2018, the Company had three loans which were greater than 90 days delinquent and were in various stages of resolution, including legal and foreclosure-related proceedings and environmental matters, and ranged from 2.0 to 9.0 years outstanding. As of December 31, 2017, the Company had four loans which were greater than 90 days delinquent and were in various stages of resolution, including legal ~~proceedings, environmental concerns~~ and foreclosure-related proceedings and environmental matters, and ranged from 1.0 to 8.0 years outstanding. As of December 31, 2016, the Company had four loans which were greater than 90 days delinquent and were in various stages of resolution, including legal proceedings, environmental concerns and foreclosure-related proceedings, and ranged from 1.0 to 8.09.0 years outstanding.

Impaired Loans—The Company's recorded investment in impaired loans, presented by class, ~~were~~was as follows ($ in thousands)⁽¹⁾:


	As of March 31, 2017							As of December 31, 2016							As of March 31, 2018							As of December 31, 2017
	Recorded Investment		Unpaid Principal Balance		Related Allowance			Recorded Investment		Unpaid Principal Balance		Related Allowance			Recorded Investment		Unpaid Principal Balance		Related Allowance			Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Subordinate mortgages	$	11,044	$	11,027	$	—		$	10,862	$	10,846	$	—
Subtotal	11,044		11,027		—			10,862		10,846		—
With an allowance recorded:
Senior mortgages	82,454		82,571		(48,518		)	85,933		85,780		(49,774		)	$	67,437	$	67,871	$	(40,395	)	$	81,343	$	81,431	$	(48,518	)
Corporate/Partnership loans	157,303		146,783		(12,471		)	157,146		146,783		(12,471		)	156,676		145,849		(12,471		)	156,534		145,849		(12,471		)
Subtotal	239,757		229,354		(60,989		)	243,079		232,563		(62,245		)
Total:
Senior mortgages	82,454		82,571		(48,518		)	85,933		85,780		(49,774		)
Corporate/Partnership loans	157,303		146,783		(12,471		)	157,146		146,783		(12,471		)
Subordinate mortgages	11,044		11,027		—			10,862		10,846		—
Total	$	250,801	$	240,381	$	(60,989	)	$	253,941	$	243,409	$	(62,245	)	$	224,113	$	213,720	$	(52,866	)	$	237,877	$	227,280	$	(60,989	)


(1)	All of the Company's non-accrual loans are considered impaired and included in the table above.

1213

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iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

The Company's average recorded investment in impaired loans and interest income recognized, presented by class, were as follows ($ in thousands):


	For the Three Months Ended March 31,								For the Three Months Ended March 31,
	2017				2016				2018				2017
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Senior mortgages	$	—	$	—	$	4,542	$	—
Subordinate mortgages	10,953		—		—		—		$	—	$	92	$	10,953	$	—
Subtotal	10,953		—		4,542		—		—		92		10,953		—
With an allowance recorded:
Senior mortgages	84,194		—		126,843		—		74,390		—		84,194		—
Corporate/Partnership loans	157,224		—		5,571		—		156,605		—		157,224		—
Subtotal	241,418		—		132,414		—		230,995		—		241,418		—
Total:
Senior mortgages	84,194		—		131,385		—		74,390		—		84,194		—
Corporate/Partnership loans	157,224		—		5,571		—		156,605		—		157,224		—
Subordinate mortgages	10,953		—		—		—		—		92		10,953		—
Total	$	252,371	$	—	$	136,956	$	—	$	230,995	$	92	$	252,371	$	—

Securities—Other lending investments—securities ~~includes~~include the following ($ in thousands):


	Face Value		Amortized Cost Basis		Net Unrealized Gain (Loss)		Estimated Fair Value		Net Carrying Value		Face Value		Amortized Cost Basis		Net Unrealized Gain (Loss)		Estimated Fair Value		Net Carrying Value
As of March 31, 2017
As of March 31, 2018
Available-for-Sale Securities
Municipal debt securities	$	21,230	$	21,230	$	409	$	21,639	$	21,639	$	21,195	$	21,195	$	640	$	21,835	$	21,835
Held-to-Maturity Securities
Debt securities	59,867		59,742		2,321		62,063		59,742		18,903		18,878		403		19,281		18,878
Total	$	81,097	$	80,972	$	2,730	$	83,702	$	81,381	$	40,098	$	40,073	$	1,043	$	41,116	$	40,713
As of December 31, 2016
As of December 31, 2017
Available-for-Sale Securities
Municipal debt securities	$	21,240	$	21,240	$	426	$	21,666	$	21,666	$	21,230	$	21,230	$	1,612	$	22,842	$	22,842
Held-to-Maturity Securities
Debt securities	58,454		58,250		2,753		61,003		58,250		66,618		66,734		1,581		68,315		66,734
Total	$	79,694	$	79,490	$	3,179	$	82,669	$	79,916	$	87,848	$	87,964	$	3,193	$	91,157	$	89,576

1314

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iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Asof March 31, 2018, the contractual maturities of the Company's securities were as follows ($ in thousands):



	Held-to-Maturity Securities				Available-for-Sale Securities
	Amortized Cost Basis		Estimated Fair Value		Amortized Cost Basis		Estimated Fair Value
Maturities
Within one year	$	—	$	—	$	—	$	—
After one year through 5 years	18,878		19,281		—		—
After 5 years through 10 years	—		—		—		—
After 10 years	—		—		21,195		21,835
Total	$	18,878	$	19,281	$	21,195	$	21,835

Note 7—Other Investments

The Company's other investments and its proportionate share of earnings ~~(losses)~~ from equity method investments were as follows ($ in thousands):


					Equity in Earnings (Losses)									Equity in Earnings (Losses)
	Carrying Value as of				For the Three Months Ended March 31,					Carrying Value as of				For the Three Months Ended March 31,
	March 31, 2017		December 31, 2016		2017		2016			March 31, 2018		December 31, 2017		2018			2017
Real estate equity investments
iStar Net Lease I LLC ("Net Lease Venture")	$	92,024	$	92,669	$	981	$	946		$	132,103	$	121,139	$	2,084		$	981
Marina Palms, LLC ("Marina Palms")	19,439		35,185		3,117		8,221
Other real estate equity investments	53,230		53,202		1,357		(1,702		)
Safety, Income & Growth Inc. ("SAFE")⁽¹⁾										146,991		83,868		1,472			—
Marina Palms, LLC ("Marina Palms")⁽¹⁾										4,670		2,555		1,489			3,117
Other real estate equity investments⁽¹⁾										126,855		100,061		(1,219		)	1,357
Subtotal	164,693		181,056		5,455		7,465			410,619		307,623		3,826			5,455
Other strategic investments⁽¹⁾	32,866		33,350		247		802
Other strategic investments										12,234		13,618		(494		)	247
Total	$	197,559	$	214,406	$	5,702	$	8,267		$	422,853	$	321,241	$	3,332		$	5,702

(1)

~~In conjunction with~~On January 1, 2018, the Company recorded a step-up in basis to fair value of its retained noncontrolling interest relating to the sale of ~~the Company's interests in Oak Hill Advisors, L.P. in 2011,~~its Ground Lease business (refer to note 4) and other transactions where the Company ~~retained~~sold or contributed real estate to a ~~share~~venture and previously recognized partial gains. Prior to the adoption of ~~the carried interest related~~ASU 2017-05 (refer to ~~various funds. During the three months ended March 31, 2016,~~Note 3), the Company ~~recognized $3.2 million~~was required to recognize gains on only the portion of its interest transferred to third parties and was precluded from recognizing a gain on its retained noncontrolling interest, which was carried ~~interest income.~~at the Company’s historical cost basis.

Net Lease Venture—In February 2014, the Company partnered with a sovereign wealth fund to form ~~an unconsolidated entity in which~~ the Net Lease Venture to acquire and develop net lease assets and gave a right of first offer to the Net Lease Venture on all new net lease investments. The Company has an equity interest in the Net Lease Venture of approximately 51.9%. This entity is not a VIE and the Company does not have controlling interest due to the substantive participating rights of its partner. The partners plan to contribute up to an aggregate $500 million of equity to acquire and develop net lease assets over time. The Company is responsible for sourcing new opportunities and managing the venture ~~and its assets~~ in exchange for a promote and management fee. Several of the Company's senior executives whose time is substantially devoted to the Net Lease Venture own a total of 0.6% equity ownership in the venture via co-investment. These senior executives are also entitled to an amount equal to ~~50%~~50.0% of any promote payment received based on the 47.5% partner's interest. The Net Lease Venture's investment period was extended from March 31, 2018 to June 30, 2018 during the first quarter 2018.

As of March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, the venture's carrying value of total assets was ~~$516.5~~$740.7 million and ~~$511.3~~$658.3 million, respectively. During the three months ended March 31, ~~2017~~2018 and ~~2016,~~2017, the Company recorded ~~$0.5~~management fees of $0.6 million and ~~$0.4~~$0.5 million, ~~of management fees,~~ respectively, from the Net Lease Venture which are included in "Other income" in the Company's consolidated statements of operations. ~~This entity~~

Safety, Income & Growth Inc.—The Company and two institutional investors capitalized SIGI Acquisition, Inc. ("SIGI") on April 14, 2017 to acquire, manage and capitalize Ground Leases. The Company contributed $55.5 million for an initial 49.1%

Table of Contents

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

noncontrolling interest in SIGI and the two institutional investors contributed an aggregate $57.5 million for an initial 50.9% controlling interest in SIGI. A wholly-owned subsidiary of the Company that held the Company's Ground Lease business and assets merged with and into SIGI on April 14, 2017 with SIGI surviving the merger and being renamed Safety, Income & Growth Inc. ("SAFE"). Through this merger and related transactions, the institutional investors acquired a controlling interest in the Company's Ground Lease business. The Company's carrying value of the Ground Lease assets was approximately $161.1 million. Shortly before the Acquisition Transactions, the Company completed the $227.0 million 2017 Secured Financing on its Ground Lease assets (refer to Note 10). The Company received all of the proceeds of the 2017 Secured Financing. The Company received an additional $113.0 million of proceeds in the Acquisition Transactions, including $55.5 million that the Company contributed to SAFE in its initial capitalization. As a result of the Acquisition Transactions, the Company deconsolidated the 12 properties and the associated 2017 Secured Financing. The Company accounted for this transaction as an in substance sale of real estate and recognized a gain of $123.4 million, reflecting the aggregate gain less the fair value of the Company's retained interest in SAFE. As a result of the adoption of ASU 2017-05, on January 1, 2018, the Company recorded an increase to retained earnings of $55.5 million, bringing the Company's aggregate gain on the sale of its Ground Lease business to approximately $178.9 million.

On June 27, 2017, SAFE completed its initial public offering (the "Offering") raising $205.0 million in gross proceeds and concurrently completed a $45.0 million private placement to the Company. In addition, the Company paid $18.9 million in organization and offering costs of the up to $25.0 million in organization and offering costs it agreed to pay in connection with the Offering and concurrent private placement. The Company expensed the portion of offering costs that was attributable to other investors in "Other expense" in the Company's consolidated statements of operations and capitalized the portion of offering costs attributable to the Company's ownership interest in "Other investments" on the Company's consolidated balance sheets. Subsequent to the initial public offering, the Company purchased 2.2 million shares of SAFE's common stock for $41.7 million, representing an average cost of $18.67 per share, pursuant to two 10b5-1 plans in accordance with Rules 10b5-1 and 10b-18 under the Securities and Exchange Act of 1934, as amended, under which the Company could buy shares of SAFE's common stock in the open market. As of March 31, 2018, the Company had utilized all of the availability authorized in the 10b5-1 Plans and owned approximately 39.9% of SAFE's common stock outstanding.

In addition, subsequent to SAFE's initial public offering, trusts established by Jay Sugarman, the Company's Chairman and Chief Executive Officer, and Geoffrey Jervis, the Company's former Chief Operating Officer and former Chief Financial Officer, purchased 26,000 shares in the aggregate of SAFE's common stock for an aggregate $0.5 million, representing an average cost of $19.20 per share, pursuant to a 10b5-1 plan in accordance with Rules 10b5-1 and 10b-18 under the Securities and Exchange Act of 1934, as amended.

A wholly-owned subsidiary of the Company is the external manager of SAFE and is entitled to a management fee, payable solely in shares of SAFE's common stock, equal to the sum of 1.0% of SAFE's total equity up to $2.5 billion and 0.75% of SAFE's total equity in excess of $2.5 billion. The Company is not ~~a VIE~~entitled to receive any performance or incentive compensation. The Company is also entitled to receive expense reimbursements, including for the allocable costs of its personnel that perform certain legal, accounting, due diligence tasks and other services that third-party professionals or outside consultants otherwise would perform. The Company has agreed to waive both the management fee and certain of the expense reimbursements through June 30, 2018. For the three months ended March 31, 2018, the Company ~~does~~waived $0.9 million of management fees and $0.4 million of expense reimbursements. The Company has an exclusivity agreement with SAFE pursuant to which it agreed, subject to certain exceptions, that it will not ~~have controlling interest due~~acquire, originate, invest in, or provide financing for a third party’s acquisition of, a Ground Lease unless it has first offered that opportunity to SAFE and a majority of its independent directors has declined the opportunity.

In August 2017, the Company committed to provide a $24.0 million loan to the ~~substantive participating rights~~ground lessee of ~~its partner.~~a Ground Lease originated at SAFE. The loan has an initial term of one year and will be used for the renovation of a medical office building in Atlanta, GA. $10.3 million of the loan was funded as of March 31, 2018. The transaction was approved by the Company's and SAFE's independent directors.

In October 2017, the Company closed on a 99-year Ground Lease and a $80.5 million construction financing commitment to support the ground-up development of Great Oaks Multifamily, a to-be-built 301-unit community within the Great Oaks Master Plan of San Jose, CA. The transaction includes a combination of: (i) a newly created Ground Lease and up to a $7.2 million leasehold improvement allowance; and (ii) a $80.5 million leasehold first mortgage. The Company entered into a forward purchase contract with SAFE under which SAFE would acquire the Ground Lease in November 2020 for approximately $34.0 million. The forward purchase contract was approved by the Company's and SAFE's independent directors.

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iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Marina Palms—As of March 31, ~~2017,~~2018, the Company owned a 47.5% equity interest in Marina Palms, a 468 unit, two tower residential condominium development in North Miami Beach, Florida. The 234 unit north tower has one unit remaining for sale as of March 31, ~~2017.~~2018. The 234 unit south tower ~~is 84% sold or pre-sold (based on unit count)~~has 30 units remaining for sale as of March 31, ~~2017.~~2018. This entity is not a VIE and the Company does not have controlling interest due to shared control of the entity with its partner. As of March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, the venture's carrying value of total assets was ~~$98.3~~$30.9 million and ~~$201.8~~$32.4 million, respectively.

Other real estate equity investments—As of March 31, 2018, the Company's other real estate equity investments include equity interests in real estate ventures ranging from 20.0% to 95.0%, comprised of investments of $55.9 million in operating properties and $71.0 million in land assets. As of December 31, 2017, the Company's other real estate equity investments included ~~equity interests in real estate ventures ranging from 20% to 85%, comprised of investments of $3.2~~$38.8 million in operating properties and ~~$50.0 million in land assets. As of December 31, 2016, the Company's other real estate equity investments included $3.6 million in operating properties and $49.6~~$61.3 million in land assets.

In December 2016, the Company sold a land and development asset to a newly formed unconsolidated entity in which the Company owns a 50.0% equity interest. This entity is a VIE and the Company does not have a controlling interest due to shared control of the entity with its partner. The Company and its partner ~~both~~each made a $7.0 million ~~contributions~~contribution to the venture and the Company provided financing to the entity in the form of a $27.0 million senior loan commitment, of which ~~had a carrying value of $23.1~~$26.0 million and ~~$22.7~~$25.4 million was funded as of March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively, and is included in "Loans receivable and other lending investments, net" on the Company's consolidated balance sheets. During the three months ended March 31, 2018 and 2017, the Company recorded $0.5 million and $0.4 million of interest income, respectively, on the senior loan.

Other strategic investments—As of March 31, 2018 and December 31, 2017, the Company also had ~~smaller~~ investments in real estate related funds and other strategic investments in ~~several other entities that were accounted for under the equity method or cost method. As of~~real estate entities.

~~Table of Contents~~

~~iStar Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~(unaudited)~~

~~March 31, 2017 and December 31, 2016, the carrying value of the Company's cost method investments was $0.9 million and $1.4 million, respectively.~~

Summarized investee financial information—The following table presents the investee level summarized financial information of the Company's equity method investments, which were significant subsidiaries, for the three months ended March 31, ~~2017~~2018 and ~~2016~~2017 ($ in thousands):


	Revenues		Expenses			Net Income Attributable to Parent Entities		Revenues		Expenses			Net Income
For the Three Months Ended March 31, 2018
Marina Palms								$	12,315	$	(7,873	)	$	4,442

For the Three Months Ended March 31, 2017
Marina Palms	$	23,669	$	(14,911	)	$	8,758	$	23,669	$	(14,911	)	$	8,758
Net Lease Venture	9,621		(7,588		)	1,890

For the Three Months Ended March 31, 2016
Marina Palms	$	50,628	$	(25,511	)	$	25,117
Net Lease Venture	7,830		(5,863		)	1,823

Table of Contents

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Note 8—Other Assets and Other Liabilities

Deferred expenses and other assets, net, consist of the following items ($ in thousands):


	As of				As of
	March 31, 2017		December 31, 2016		March 31, 2018		December 31, 2017
Intangible assets, net⁽¹⁾	$	61,723	$	63,098
Other receivables⁽²⁾	51,047		52,820
Other receivables⁽¹⁾					$	48,232	$	56,369
Intangible assets, net⁽²⁾					27,410		27,124
Other assets(3)	47,877		39,591		23,125		24,490
Restricted cash	26,290		25,883		20,421		20,045
Leasing costs, net⁽³⁾⁽⁴⁾	11,812		12,566		9,675		9,050
Corporate furniture, fixtures and equipment, net⁽⁴⁾⁽⁵⁾	5,399		5,691		4,598		4,652
Deferred financing fees, net					1,288		—
Deferred expenses and other assets, net	$	204,148	$	199,649	$	134,749	$	141,730


(1)	As of March 31, 2018 and December 31, 2017, included $26.0 million of reimbursements receivable related to the construction and development of an operating property.

(2)

Intangible assets, net includes above market and in-place lease assets and lease incentives related to the acquisition of real estate assets. Accumulated amortization on intangible assets, net was ~~$33.2~~$35.1 million and ~~$32.6~~$34.9 million as of March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively. The amortization of above market leases and lease incentive assets decreased operating lease income in the Company's consolidated statements of operations by ~~$0.9~~$0.4 million and ~~$1.2~~$0.8 million for the three months ended March 31, ~~2017~~2018 and ~~2016,~~2017, respectively. These intangible lease assets are amortized over the remaining term of the lease. The amortization expense for in-place leases was $0.4 million and $0.5 million for the three months ended March 31, 2018 and 2017, ~~and 2016.~~respectively. These amounts are included in "Depreciation and amortization" in the Company's consolidated statements of operations.


~~(2)~~(3)	~~As of March 31, 2017~~Other assets primarily includes prepaid expenses and ~~December 31, 2016, included $25.8 million and~~ ~~$26.0 million, respectively, of receivables related to the construction and development of an amphitheater.~~ deposits for certain real estate assets.


~~(3)~~(4)	Accumulated amortization of leasing costs was ~~$6.4~~$4.6 million and ~~$6.7~~$4.7 million as of March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively.


~~(4)~~(5)	Accumulated depreciation on corporate furniture, fixtures and equipment was ~~$9.5~~$10.8 million and ~~$9.0~~$10.5 million as of March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively.

~~Table of Contents~~

~~iStar Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~(unaudited)~~

Accounts payable, accrued expenses and other liabilities consist of the following items ($ in thousands):


	As of				As of
	March 31, 2017		December 31, 2016		March 31, 2018		December 31, 2017
Other liabilities⁽¹⁾	$	79,398	$	75,993	$	104,261	$	79,015
Accrued expenses⁽²⁾	62,139		72,693		75,995		101,035
Accrued interest payable	41,901		54,033		29,741		49,933
Intangible liabilities, net⁽³⁾	8,602		8,851		7,877		8,021
Accounts payable, accrued expenses and other liabilities	$	192,040	$	211,570	$	217,874	$	238,004

(1)

As of March 31, ~~2017~~2018 and December 31, ~~2016, "Other liabilities"~~2017, other liabilities includes ~~$24.0~~$58.0 million and $29.2 million, respectively, related to profit sharing arrangements with developers for certain properties sold. As of March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, includes ~~$1.4~~$0.9 million and ~~$1.2~~$1.6 million, respectively, associated with "Real estate available and held for sale" on the Company's consolidated balance sheets. As of March 31, ~~2017~~2018 and December 31, ~~2016, "Other liabilities"~~2017, other liabilities also includes ~~$7.8~~$4.8 million and ~~$8.5~~$6.2 million, respectively, related to tax increment financing bonds which were issued by government entities to fund development within two of the Company's land projects. The amount represents tax assessments associated with each project, which will decrease as the Company sells units.


(2)	As of March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, accrued expenses includes ~~$2.4~~$4.2 million and ~~$1.7~~$2.5 million, respectively, associated with "Real estate available and held for sale" on the Company's consolidated balance sheets.

(3)

Intangible liabilities, net includes below market lease liabilities related to the acquisition of real estate assets. Accumulated amortization on below market ~~leases~~lease liabilities was ~~$6.7~~$7.1 million and ~~$6.4~~$7.8 million as of March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively. The amortization of below market leases increased operating lease income in the Company's consolidated statements of operations by $0.1 million and $0.3 million for the three months ended March 31, 2018 and 2017, ~~and 2016.~~respectively.

~~Deferred tax assets and liabilities~~

Table of ~~the Company's taxable REIT subsidiaries were as follows ($ in thousands):~~Contents

iStar Inc.

As of
March 31, 2017 December 31, 2016
Deferred tax assets (liabilities) $ 70,806
$ 66,498
Valuation allowance (70,806 ) (66,498 )
Net deferred tax assets (liabilities) $ —
$ —
Notes to Consolidated Financial Statements (Continued)

(unaudited)

Note 9—Loan Participations Payable, net

The Company's loan participations payable, net were as follows ($ in thousands):


	Carrying Value as of						Carrying Value as of
	March 31, 2017			December 31, 2016			March 31, 2018			December 31, 2017
Loan participations payable⁽¹⁾	$	182,853		$	160,251		$	85,621		$	102,737
Debt discounts and deferred financing costs, net	(766		)	(930		)	(267		)	(312		)
Total loan participations payable, net	$	182,087		$	159,321		$	85,354		$	102,425


(1)	As of March 31, ~~2017,~~2018, the Company had ~~three~~two loan participations payable with a weighted average interest rate of ~~5.2%~~6.8%. As of December 31, ~~2016,~~2017, the Company had ~~three~~two loan participations payable with a weighted average interest rate of ~~4.8%~~6.5%.

Loan participations represent transfers of financial assets that did not meet the sales criteria established under ASC Topic 860 and are accounted for as loan participations payable, ~~net.~~net as of March 31, 2018 and December 31, 2017. As of March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, the corresponding loan receivable balances were ~~$181.9~~$85.3 million and ~~$159.1~~$102.3 million, respectively, and are included in "Loans receivable and other lending investments, net" on the Company's consolidated balance sheets. The principal and interest due on these loan participations payable are paid from cash flows of the corresponding loans receivable, which serve as collateral for the participations.

1619

Table of Contents

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Note 10—Debt Obligations, net

The Company's debt obligations were as follows ($ in thousands):

Carrying Value as of
Stated
Interest Rates

Scheduled
Maturity Date
March 31, 2017 December 31, 2016
Secured credit facilities and mortgages:
2015 $250 Million Secured Revolving Credit Facility $ —
$ —
LIBOR + 2.75%
⁽¹⁾
March 2018
2016 Senior Secured Credit Facility 500,000
498,648
LIBOR + 3.75%
⁽²⁾
July 2020
2017 Secured Financing 227,000
—
3.795 %
⁽³⁾
April 2027
Mortgages collateralized by net lease assets 247,535
249,987
3.875% - 7.26%
⁽⁴⁾
Various through 2032
Total secured credit facilities and mortgages 974,535
748,635

Unsecured notes:
5.85% senior notes —
99,722
5.85 % —
9.00% senior notes 275,000
275,000
9.00 % June 2017
4.00% senior notes⁽⁵⁾
550,000
550,000
4.00 % November 2017
7.125% senior notes 300,000
300,000
7.125 % February 2018
4.875% senior notes⁽⁶⁾
300,000
300,000
4.875 % July 2018
5.00% senior notes⁽⁷⁾
770,000
770,000
5.00 % July 2019
6.50% senior notes⁽⁸⁾
275,000
275,000
6.50 % July 2021
6.00% senior notes⁽⁹⁾
375,000
—
6.00 % April 2022
Total unsecured notes 2,845,000
2,569,722

Other debt obligations:

Trust preferred securities 100,000
100,000
LIBOR + 1.50%
October 2035
Total debt obligations 3,919,535
3,418,357

Debt discounts and deferred financing costs, net (37,140 ) (28,449 )

Total debt obligations, net⁽¹⁰⁾
$ 3,882,395
$ 3,389,908



	Carrying Value as of						Stated Interest Rates			Scheduled Maturity Date
	March 31, 2018			December 31, 2017			Stated Interest Rates			Scheduled Maturity Date
Secured credit facilities and mortgages:
2015 $325 million Revolving Credit Facility	$	—		$	325,000		LIBOR + 2.50%		⁽¹⁾	September 2020
2016 Senior Credit Facility	376,671			399,000			LIBOR + 3.00%		⁽²⁾	October 2021
Mortgages collateralized by net lease assets	206,162			208,491			4.102% - 7.26%		⁽³⁾	Various through 2026
Total secured credit facilities and mortgages	582,833			932,491
Unsecured notes:
5.00% senior notes⁽⁴⁾	770,000			770,000			5.00	%		July 2019
4.625% senior notes⁽⁵⁾	400,000			400,000			4.625	%		September 2020
6.50% senior notes⁽⁶⁾	275,000			275,000			6.50	%		July 2021
6.00% senior notes⁽⁷⁾	375,000			375,000			6.00	%		April 2022
5.25% senior notes⁽⁸⁾	400,000			400,000			5.25	%		September 2022
3.125% senior convertible notes⁽⁹⁾	287,500			287,500			3.125	%		September 2022
Total unsecured notes	2,507,500			2,507,500
Other debt obligations:
Trust preferred securities	100,000			100,000			LIBOR + 1.50%			October 2035
Total debt obligations	3,190,333			3,539,991
Debt discounts and deferred financing costs, net	(59,399		)	(63,591		)
Total debt obligations, net⁽¹⁰⁾	$	3,130,934		$	3,476,400

(1)

The loan bears interest at the Company's election of ~~either~~either: (i) a base rate, which is the greater of (a) prime, (b) federal funds plus 0.5% or (c) LIBOR plus 1.0% and subject to a margin ranging from 1.25% to 1.75%,; or (ii) LIBOR subject to a margin ranging from 2.25% to 2.75%. At maturity, the Company may convert outstanding borrowings to a one year term loan which matures in quarterly installments through ~~March 2019.~~September 2021.


(2)	The loan bears interest at the Company's election of ~~either~~either: (i) a base rate, which is the greater of (a) prime, (b) federal funds plus 0.5% or (c) LIBOR plus 1.0% and subject to a margin of ~~2.75%~~2.00%; or (ii) LIBOR subject to a margin of ~~3.75%~~3.00% with a minimum LIBOR rate of ~~1.0%~~0.75%.


(3)	~~The Company entered into a $200 million notional rate lock swap, bringing the effective interest rate down from 3.795% to 3.773%.~~


~~(4)~~	As of March 31, ~~2017 and December 31, 2016, includes a loan with a floating rate of LIBOR plus 2.0%. As of March 31, 2017,~~2018, the weighted average interest rate of these loans is ~~5.1%~~5.2%.


~~(5)~~	~~The Company can prepay these senior notes without penalty beginning August 1, 2017.~~


~~(6)~~	~~The Company can prepay these senior notes without penalty beginning January 1, 2018.~~


~~(7)~~(4)	The Company can prepay these senior notes without penalty beginning July 1, 2018.


~~(8)~~(5)	The Company can prepay these senior notes without penalty beginning June 15, 2020.


(6)	The Company can prepay these senior notes without penalty beginning July 1, 2020.


~~(9)~~(7)	The Company can prepay these senior notes without penalty beginning April 1, 2021.


(8)	The Company can prepay these senior notes without penalty beginning September 15, 2021.

(9)

The Company's 3.125% senior convertible fixed rate notes due September 2022 ("3.125% Convertible Notes") are convertible at the option of the holders at a conversion rate of 64.36 shares per $1,000 principal amount of 3.125% Convertible Notes, which equals a conversion price of $15.54 per share, at any time prior to the close of business on the business day immediately preceding September 15, 2022. Upon conversion, the Company will pay or deliver, as the case may be, a combination of cash and shares of its common stock. As such, at issuance in September 2017, the Company valued the debt component at $221.8 million, net of fees, and the equity component of the conversion feature at $22.5 million, net of fees, and recorded the equity component in "Additional paid-in capital" on the Company's consolidated balance sheet. In October 2017, the initial purchasers of the 3.125% Convertible Notes exercised their option to purchase an additional $37.5 million aggregate principal amount of the 3.125% Convertible Notes. At issuance, the Company valued the debt component at $34.0 million, net of fees, and the equity component of the conversion feature at $3.4 million, net of fees, and recorded the equity component in "Additional paid-in capital" on the Company's consolidated balance sheet. As of March 31, 2018, the carrying value of the 3.125% Convertible Notes was $258.2 million, net of fees, and the unamortized discount of the 3.125% Convertible Notes was $24.0 million, net of fees. During the three months ended March 31, 2018, the Company recognized $2.2 million of contractual interest and $1.2 million of discount amortization on the 3.125% Convertible Notes. The effective interest rate was 5.2%.


(10)	The Company capitalized interest relating to development activities of ~~$2.0~~$2.4 million and ~~$1.4~~$2.0 million during the three months ended March 31, ~~2017~~2018 and ~~2016,~~2017, respectively.

1720

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iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Future Scheduled Maturities—As of March 31, ~~2017~~2018, future scheduled maturities of outstanding debt obligations are as follows ($ in thousands):


	Unsecured Debt			Secured Debt			Total			Unsecured Debt			Secured Debt			Total
2017 (remaining nine months)	$	825,000		$	—		$	825,000
2018	600,000			10,648			610,648
2018 (remaining nine months)										$	—		$	—		$	—
2019	770,000			28,770			798,770			770,000			1,356			771,356
2020	—			500,000			500,000			400,000			—			400,000
2021	275,000			119,072			394,072			275,000			492,552			767,552
2022										1,062,500			58,519			1,121,019
Thereafter	475,000			316,045			791,045			100,000			30,406			130,406
Total principal maturities	2,945,000			974,535			3,919,535			2,607,500			582,833			3,190,333
Unamortized discounts and deferred financing costs, net	(21,148		)	(15,992		)	(37,140		)	(52,109		)	(7,290		)	(59,399		)
Total debt obligations, net	$	2,923,852		$	958,543		$	3,882,395		$	2,555,391		$	575,543		$	3,130,934

~~(1)~~

The Company has $825.0 million of debt obligations maturing in two separate tranches during 2017, and $310.6 million of other debt obligations maturing before the end of May 2018, as listed in the debt obligations table above. The Company's plans to satisfy these obligations primarily consist of accessing the debt and/or equity markets to obtain capital to satisfy the maturing obligations. In addition, management intends to execute on its business strategy of disposing of assets and selling interests in business lines as well as collecting loan repayments from borrowers to further generate available liquidity. Should these sources of capital not be sufficiently available, the Company will slow its pace of making new investments and will need to identify alternative sources of capital. As of May 3, 2017, the Company had approximately $1.2 billion of cash and available capacity under existing borrowing arrangements.

2017 Secured Financing—In March 2017, the ~~Company~~predecessor of SAFE (which at the time was comprised of the Company's wholly-owned subsidiaries conducting its Ground Lease business) entered into a $227.0 million secured financing transaction (the "2017 Secured Financing") that ~~accrues~~accrued interest at 3.795% and matures in April 2027. ~~Subsequent to March 31, 2017, the~~The 2017 Secured Financing was ~~assumed by an entity in which the Company has a 49% noncontrolling interest (refer to Note 18). The 2017 Secured Financing is~~ collateralized by the 12 properties ~~including seven ground net leases and one master lease (covering the accounts of five properties).~~comprising SAFE's initial portfolio. In connection with the 2017 Secured Financing, the Company incurred ~~$7.4~~$7.3 million of lender and third-party fees, substantially all of which was capitalized in "Debt obligations, net" on the Company's consolidated balance sheets.

~~2016 Secured Term Loan~~—In ~~December 2016, the Company arranged a $170.0 million delayed draw secured term loan (the "2016 Secured Term Loan"). During the three months ended March 31,~~April 2017, the Company allowed the 2016 Secured Term Loan to expire and replaced the 2016 Secured Term Loan with the 2017 Secured Financing. The 2016 Secured Term Loan was collateralized by the 12 properties that now serve as collateral forderecognized the 2017 Secured Financing ~~which were sold subsequent~~when third parties acquired a controlling interest in SAFE's predecessor, prior to ~~March 31, 2017.~~SAFE's initial public offering (refer to Note 4).

The Company is providing a limited recourse guaranty and environmental indemnity under the 2017 Secured Financing that will remain in effect until SAFE has achieved either an equity market capitalization of at least $500.0 million (inclusive of the initial portfolio that the Company contributed to SAFE) or a net worth of at least $250.0 million (exclusive of the initial portfolio that the Company contributed to SAFE), and SAFE or another replacement guarantor provides similar guaranties and indemnities to the lenders. The management agreement with SAFE provides that SAFE may not terminate the management agreement unless a successor guarantor reasonably acceptable to the Company has agreed to replace the Company as guarantor and indemnitor or has provided the Company with a reasonably acceptable indemnity for any losses suffered by the Company as guarantor and indemnitor. SAFE has generally agreed to indemnify the Company for any amounts the Company is required to pay, or other losses the Company may suffer, under the limited recourse guaranty and environmental indemnity.

2016 Senior ~~Secured~~ Credit Facility—In June 2016, the Company entered into a senior ~~secured~~ credit facility of $450.0 million (the "2016 Senior ~~Secured~~ Credit Facility"). In August 2016, the Company upsized the facility to $500.0 million. The initial $450.0 million of the 2016 Senior ~~Secured~~ Credit Facility was issued at 99% of par and the upsize was issued at par. ~~The 2016 Senior Secured Credit Facility initially accrued interest at a floating rate of LIBOR plus 4.50% with a 1.00% LIBOR floor.~~ In January 2017, the Company repriced the 2016 Senior ~~Secured~~ Credit Facility to LIBOR plus 3.75% with a 1.00% LIBOR floor from LIBOR plus 4.50% with a 1.00% LIBOR floor. In September 2017, the Company reduced, repriced and extended the 2016 Senior Credit Facility to $400.0 million priced at LIBOR plus 3.00% with a 0.75% LIBOR floor and maturing in October 2021. These transactions resulted in an aggregate 1.50% reduction in price.

The 2016 Senior ~~Secured~~ Credit Facility is collateralized 1.25x by a first lien on a fixed pool of assets. Proceeds from principal repayments and sales of collateral are applied to amortize the 2016 Senior ~~Secured~~ Credit Facility. Proceeds received for interest, rent, lease payments and fee income are retained by the Company. The Company may also make optional prepayments, subject to prepayment fees, and is required to repay 0.25% of the principal amount on the first business day of each quarter. ~~Proceeds from~~

During the ~~2016 Senior Secured Credit Facility, together with cash on hand, were primarily used to repay other secured debt.~~

In connection with the 2016 Senior Secured Credit Facility, the Company incurred $4.5 million of lender fees, substantially all of which was capitalized in "Debt obligations, net" on the Company's consolidated balance sheets. The Company also incurred $6.2 million in third party fees, of which $4.3 million was capitalized in “Debt obligations, net” on the Company's consolidated balance sheets, as it related to new lenders, and $1.9 million was recognized in “Other expense” in the Company's consolidated statements of operations as it related primarily to those lenders from the original facility that modified their debt under the new facility. In connection with the repricingthree months ended March 31, 2018, repayments of the 2016 Senior ~~Secured~~ Credit Facility resulted in ~~January 2017, the Company incurred an additional $0.8 million in fees, substantially all~~losses on early extinguishment of ~~which was recognized in "Other expense."~~

debt of $0.4 million.

2015 ~~Secured~~ Revolving Credit Facility—In March 2015, the Company entered into a secured revolving credit facility with a maximum capacity of $250.0 million (the "2015 ~~Secured~~ Revolving Credit Facility"). In September 2017, the Company upsized the 2015 Revolving Credit Facility to $325.0 million, added additional lenders to the syndicate, extended the maturity date to September 2020 and made certain other changes. This facility is secured by a pledge of the equity interest in a pool of assets which provide asset value coverage for borrowings under the facility. Borrowings under this credit facility

~~Table of Contents~~

~~iStar Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~(unaudited)~~

bear interest at a floating rate indexed to one of several base rates plus a margin which adjusts upward or downward based upon the Company's corporate credit rating.

Table of Contents

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

An undrawn credit facility commitment fee ranges from ~~0.375%~~0.30% to 0.50%, based on ~~average utilization each quarter. During the three months ended March 31, 2017, the weighted average cost of the~~corporate credit ~~facility was 3.46%. Commitments under the revolving facility mature in March 2018.~~ratings. At maturity, the Company may convert outstanding borrowings to a one year term loan which matures in quarterly installments through September 2021. During the three months ended March ~~2019. As~~31, 2018, the Company repaid from cash on hand the $325.0 million outstanding on the 2015 Revolving Credit Facility and as of March 31, ~~2017,~~2018, based on the Company's borrowing base of assets, the Company had ~~$236.0~~$325.0 million of borrowing capacity available under the 2015 ~~Secured~~ Revolving Credit Facility.

Unsecured Notes—In September 2017, the Company issued $400.0 million principal amount of 4.625% senior unsecured notes due September 2020, $400.0 million principal amount of 5.25% senior unsecured notes due September 2022 and $250.0 million of 3.125% Convertible Notes due September 2022. The Company incurred approximately $18.6 million dollars in fees related to these offerings, all of which was capitalized in "Debt obligations, net" on the Company's consolidated balance sheets. Proceeds from these offerings, together with cash on hand, were used to repay in full the $550.0 million principal amount outstanding of the 4.0% senior unsecured notes due November 2017, the $300.0 million principal amount outstanding of the 7.125% senior unsecured notes due February 2018 and the $300.0 million principal amount outstanding of the 4.875% senior unsecured notes due July 2018. In addition, the initial purchasers of the 3.125% Convertible Notes exercised their option to purchase an additional $37.5 million aggregate principal amount of the 3.125% Convertible Notes.

In March 2017, the Company issued $375.0 million principal amount of 6.00% senior unsecured notes due April 2022. Proceeds from the offering were primarily used to repay in full the $99.7 million principal amount outstanding of the 5.85% senior unsecured notes due March 2017 and ~~subsequent to March 31, 2017,~~ repay in full the $275.0 million principal amount outstanding of the 9.00% senior unsecured notes due June 2017. In March 2016, the Company repaid its $261.4 million principal amount of 5.875% senior unsecured notes at maturity using available cash. In addition, the Company issued $275.0 million principal amount of 6.50% senior unsecured notes due July 2021. Proceeds from the offering were primarily used2017 prior to ~~repay in full the $265.0 million principal amount of senior unsecured notes due July 2016 and repay $5.0 million of the 2015 Secured Revolving Credit Facility.~~

In November 2016, in connection with the retirement of the Company's $200.0 million principal amount of 3.0% senior unsecured convertible notes due November 2016, the Company converted $9.6 million principal amount into 0.8 million shares of our common stock.maturity.

~~Encumbered/Unencumbered~~Collateral Assets—The carrying value of the Company's ~~encumbered and unencumbered~~ assets that are directly pledged or are held by subsidiaries whose equity is pledged as collateral to secure the Company's obligations under its secured debt facilities are as follows, by asset type ~~are as follows~~ ($ in thousands):


	As of								As of
	March 31, 2017				December 31, 2016				March 31, 2018				December 31, 2017
	Encumbered Assets		Unencumbered Assets		Encumbered Assets		Unencumbered Assets		Collateral Assets⁽¹⁾		Non-Collateral Assets		Collateral Assets⁽¹⁾		Non-Collateral Assets
Real estate, net	$	1,005,826	$	470,765	$	881,212	$	610,540	$	790,545	$	511,598	$	795,321	$	486,710
Real estate available and held for sale	—		71,934		—		83,764		—		41,857		20,069		48,519
Land and development, net	35,165		919,985		35,165		910,400		25,100		656,310		25,100		835,211
Loans receivable and other lending investments, net⁽²⁾⁽³⁾	137,293		1,080,448		172,581		1,142,050		185,161		1,146,571		194,529		1,021,340
Other investments	—		197,559		—		214,406		—		422,853		—		321,241
Cash and other assets	—		1,212,055		—		639,588		—		601,322		—		898,252
Total	$	1,178,284	$	3,952,746	$	1,088,958	$	3,600,748	$	1,000,806	$	3,380,511	$	1,035,019	$	3,611,273

(1)

AsThe 2016 Senior Credit Facility and the 2015 Revolving Credit Facility are secured only by pledges of ~~March 31, 2017~~equity of certain of the Company's subsidiaries and ~~December 31, 2016,~~not by pledges of the ~~amounts presented exclude general reserves for loan losses~~assets held by such subsidiaries. Such subsidiaries are subject to contractual restrictions under the terms of ~~$18.4 million and $23.3 million, respectively.~~

such credit facilities, including restrictions on incurring new debt (subject to certain exceptions).


(2)	As of March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, the amounts presented exclude general reserves for loan losses of $16.6 million and $17.5 million, respectively.


(3)	As of March 31, 2018 and December 31, 2017, the amounts presented exclude loan participations of ~~$181.9~~$85.3 million and ~~$159.1~~$102.3 million, respectively.

Debt Covenants

The Company's outstanding unsecured debt securities contain corporate level covenants that include a covenant to maintain a ratio of unencumbered assets to unsecured indebtedness, as such terms are defined in the indentures governing the debt securities, of at least 1.2x and a covenant not to incur additional indebtedness (except for incurrences of permitted debt), if on a pro forma basis the Company's consolidated fixed charge coverage ratio, determined in accordance with the indentures governing the Company's debt securities, is 1.5x or lower. If any of the Company's covenants are breached and not cured within applicable cure periods, the breach could result in acceleration of its debt securities unless a waiver or modification is agreed upon with the requisite percentage of the bondholders. If the Company's ability to incur additional indebtedness under the fixed charge coverage ratio is limited, the Company is permitted to incur indebtedness for the purpose of refinancing existing indebtedness and for other permitted purposes under the indentures.

Table of Contents

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

The Company's 2016 Senior ~~Secured~~ Credit Facility and the 2015 ~~Secured~~ Revolving Credit Facility contain certain covenants, including covenants relating to collateral coverage, dividend payments, restrictions on fundamental changes, transactions with affiliates, matters relating to the liens granted to the lenders and the delivery of information to the lenders. In particular, the 2016 Senior ~~Secured~~ Credit Facility requires the Company to maintain collateral coverage of at least 1.25x outstanding borrowings on the facility. The 2015 ~~Secured~~ Revolving Credit Facility is secured by a borrowing base of assets and requires the

~~Table of Contents~~

~~iStar Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~(unaudited)~~

Company to maintain both ~~collateral coverage~~borrowing base asset value of at least 1.5x outstanding borrowings on the facility and a consolidated ratio of cash flow to fixed charges of at least 1.5x. The 2015 ~~Secured~~ Revolving Credit Facility does not require that proceeds from the borrowing base be used to pay down outstanding borrowings provided the ~~collateral coverage~~borrowing base asset value remains at least 1.5x outstanding borrowings on the facility. To satisfy this covenant, the Company has the option to pay down outstanding borrowings or substitute assets in the borrowing base. In addition, for so long as the Company maintains its qualification as a REIT, the 2016 Senior ~~Secured~~ Credit Facility and the 2015 ~~Secured~~ Revolving Credit Facility permit the Company to distribute 100% of its REIT taxable income on an annual basis (prior to deducting certain cumulative net operating loss ("NOL") carryforwards). The Company may not pay common dividends if it ceases to qualify as a REIT.

The Company's 2016 Senior ~~Secured~~ Credit Facility and the 2015 ~~Secured~~ Revolving Credit Facility contain cross default provisions that would allow the lenders to declare an event of default and accelerate the Company's indebtedness to them if the Company fails to pay amounts due in respect of its other recourse indebtedness in excess of specified thresholds or if the lenders under such other indebtedness are otherwise permitted to accelerate such indebtedness for any reason. The indentures governing the Company's unsecured public debt securities permit the bondholders to declare an event of default and accelerate the Company's indebtedness to them if the Company's other recourse indebtedness in excess of specified thresholds is not paid at final maturity or if such indebtedness is accelerated.

Note 11—Commitments and Contingencies

Unfunded Commitments—The Company generally funds construction and development loans and build-outs of space in real estate assets over a period of time if and when the borrowers and tenants meet established milestones and other performance criteria. The Company refers to these arrangements as Performance-Based Commitments. In addition, the Company sometimes establishes a maximum amount of additional funding which it will make available to a borrower or tenant for an expansion or addition to a project if it approves of the expansion or addition in its sole discretion. The Company refers to these arrangements as Discretionary Fundings. Finally, the Company has committed to invest capital in several real estate funds and other ventures. These arrangements are referred to as Strategic Investments.

As of March 31, ~~2017~~2018, the maximum amount of fundings the Company may be required to make under each category, assuming all performance hurdles and milestones are met under the Performance-Based Commitments ~~that it approves all Discretionary Fundings~~ and that 100% of its capital committed to Strategic Investments is drawn down, are as follows ($ in thousands):


	Loans and Other Lending Investments⁽¹⁾		Real Estate		Other Investments		Total		Loans and Other Lending Investments⁽¹⁾		Real Estate		Other Investments		Total
Performance-Based Commitments	$	305,862	$	9,814	$	24,059	$	339,735	$	436,639	$	10,630	$	24,587	$	471,856
Strategic Investments	—		—		45,564		45,564		—		—		9,427		9,427
Total⁽²⁾	$	305,862	$	9,814	$	69,623	$	385,299	$	436,639	$	10,630	$	34,014	$	481,283


(1)	Excludes ~~$155.3~~$83.7 million of commitments on loan participations sold that are not the obligation of the Company.


~~(2)~~	~~The Company did not have any Discretionary Fundings as of March 31, 2017.~~

Legal Proceedings—The Company and/or one or more of its subsidiaries is party to various pending litigation matters that are considered ordinary routine litigation incidental to the Company's business as a finance and investment company focused on the commercial real estate industry, including ~~loan foreclosure and~~ foreclosure-related proceedings. In addition to such matters, the Company is a party to the following legal ~~proceedings:~~proceeding:

~~Shareholder Action~~

As previously reported, a shareholder action was filed in 2014 in Maryland state court purporting to assert derivative, class and individual claims against the Company, a number of our current and former senior executives (including our chief executive officer) and current and former directors as defendants. The complaint alleged breach of fiduciary duty, breach of contract and other causes of action arising out of compensation awards granted by the Company to our senior executives in December 2008 and modified in July 2011. On October 30, 2014, the Maryland Circuit Court dismissed all of plaintiffs' claims in the action. Plaintiffs appealed and, on January 28, 2016, the Maryland Court of Special Appeals affirmed the order of the Circuit Court. Plaintiffs appealed that decision and, on January 20, 2017, the Maryland Court of Appeals (Maryland’s highest court) issued its opinion affirming the dismissal of all of plaintiffs’ claims against the Company and the other defendants. This matter is concluded.

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~~iStar Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~(unaudited)~~

U.S. Home Corporation ("Lennar") v. Settlers Crossing, LLC, et al. ~~(Civil Action No. DKC 08-1863)~~

~~This litigation involves a dispute over the purchase and sale of approximately 1,250 acres of land in Prince George’s County, Maryland. On January 22, 2015, the United~~(United States District Court for the District of Maryland, (the District Court) entered a judgment in favor of the Company, as seller, and against Lennar, as purchaser. The District Court found that the Company is entitled to specific performance and awarded damages to the Company in the aggregate amount of: (i) the remaining purchase price to be paid by Lennar of $114.0 million; plus (ii) simple interest on the unpaid amount at a rate of 12% annually, calculated 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 appealed the District Court's judgment and posted an appeal bond.

Civil Action No. DKC 08-1863)

On ~~April 12,~~December 4, 2017, the United States Court of Appeals for the Fourth Circuit (the Court of Appeals) affirmed the judgment of the District Court in its entirety. Lennar has filed a petition with the Court of Appeals for rehearing en banc, only with respect to the calculation of interest owed by Lennar on the unpaid purchase price following the date of the judgment of the District Court, which petition is pending. Lennar’s time period to seek review of the Court of Appeals’ decision by the United StatesU.S. Supreme Court ~~has not expired.~~

~~On April 21, 2017, the Company and Lennar completed settlement~~issued an order denying Lennar’s petition for a writ of ~~transfer of the land, pursuant to which we conveyed the land to Lennar and received net proceeds of $231.1 million after payment of $6.3 million~~certiorari in documentary transfer taxes, subject to certain holdbacks and subject also to final resolution of the amount of post-judgment interest owed by Lennar, consisting of $114.0 million of sales proceeds, $121.8 million of interest and $1.6 million of real estate tax reimbursements.this matter. The amount of attorneys’ fees and costs to be recovered by the Company will be determined through further proceedings before the District Court. ~~A portion of the net proceeds received by the~~The Company has applied for attorney’s fees in excess of $17.0 million. A hearing on the Company’s application for attorney’s fees has not yet been ~~paid~~scheduled. Please refer to the ~~third party which holds~~Company's 2017 Annual Report for a ~~4.3% participation interest in all proceeds received by the Company.~~more complete description of this matter.

~~On a quarterly basis, the Company evaluates developments in legal proceedings that could require a liability~~

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iStar Inc.

Notes to be accrued and/or disclosed. Based on its current knowledge, and after consultation with legal counsel, the Company believes it is not a party to, nor are any of its properties the subject of, any pending legal proceeding that would have a material adverse effect on the Company's consolidated financial statements.Consolidated Financial Statements (Continued)

(unaudited)

Note 12—Derivatives

The Company's use of derivative financial instruments ~~is primarily~~has historically been limited to the utilization of interest rate swaps, interest rate caps and foreign exchange contracts. The principal objective of such financial instruments is to minimize the risks and/or costs associated with the Company's operating and financial structure and to manage its exposure to interest rates and foreign exchange rates. Derivatives not designated as hedges are not speculative and are used to manage the Company's exposure to interest rate movements, foreign exchange rate movements, and other identified risks, but may not meet the strict hedge accounting requirements.

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~~iStar Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~(unaudited)~~

The ~~table below presents the fair value of the Company's~~Company did not directly own any derivative financial instruments as ~~well as their classification on the consolidated balance sheets ($ in thousands):~~

Derivative Assets as of Derivative Liabilities as of
March 31, 2017 December 31, 2016 March 31, 2017 December 31, 2016

Balance Sheet
Location

Fair
Value

Balance Sheet
Location

Fair
Value

Balance Sheet
Location

Fair
Value

Balance Sheet
Location

Fair
Value
Derivatives Designated in Hedging Relationships
Foreign exchange contracts N/A $ —
N/A $ —
Other Liabilities $ 307
Other Liabilities $ 8
Interest rate swaps Other assets 58
N/A —
N/A —
Other Liabilities 39
Total $ 58
$ —
$ 307
$ 47

Derivatives not Designated in Hedging Relationships
Foreign exchange contracts N/A $ —
Other Assets $ 702
Other Liabilities $ 264
N/A $ —
Interest rate cap Other Assets 71
Other Assets 25
N/A —
N/A —
Total $ 71
$ 727
$ 264
$ —

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~~iStar Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~(unaudited)~~

March 31, 2018 and December 31, 2017. The tables below present the effect of the Company's derivative financial instruments, including the Company's share of derivative financial instruments at certain of its equity method investments, in the consolidated statements of operations and the consolidated statements of comprehensive income (loss) ($ in thousands):


Derivatives Designated in Hedging Relationships		Location of Gain (Loss) Recognized in Income	Amount of Gain (Loss) Recognized in Accumulated Other Comprehensive Income (Effective Portion)		Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Earnings (Effective Portion)		Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Earnings (Ineffective Portion)		Location of Gain (Loss) Recognized in Income	Amount of Gain (Loss) Recognized in Accumulated Other Comprehensive Income (Effective Portion)		Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Earnings (Effective Portion)		Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Earnings (Ineffective Portion)
For the Three Months Ended March 31, 2018								For the Three Months Ended March 31, 2018
Interest rate swaps									Earnings from equity method investments	2,351		(9	)	N/A
For the Three Months Ended March 31, 2017	For the Three Months Ended March 31, 2017							For the Three Months Ended March 31, 2017
Interest rate swaps		Interest Expense	467		(30	)	N/A
Interest rate cap		Earnings from equity method investments	(5	)	(5	)	N/A
Interest rate swap		Earnings from equity method investments	78		(87	)	N/A
Foreign exchange contracts		Earnings from equity method investments	(299	)	—		N/A
For the Three Months Ended March 31, 2016
Interest rate cap		Interest Expense	—		(185	)	N/A
Interest rate cap		Earnings from equity method investments	(1	)	—		N/A		Earnings from equity method investments	(5	)	(5	)	N/A
Interest rate swaps		Interest Expense	(502	)	25		N/A		Interest Expense	467		(30	)	N/A
Interest rate swap		Earnings from equity method investments	(459	)	(97	)	N/A		Earnings from equity method investments	78		(87	)	N/A
Foreign exchange contracts		Earnings from equity method investments	(87	)	—		N/A		Earnings from equity method investments	(299	)	—		N/A

Amount of Gain (Loss)
Recognized in Income

Location of Gain
(Loss) Recognized in
Income
For the Three Months Ended March 31,
Derivatives not Designated in Hedging Relationships 2017 2016
Interest rate cap Other Expense $ 47
$ (803 )
Foreign exchange contracts Other Expense (125 ) (182 )

~~Foreign Exchange Contracts~~—The Company is exposed to fluctuations in foreign exchange rates on investments it holds in foreign entities. The Company uses foreign exchange contracts to hedge its exposure to changes in foreign exchange rates on its foreign investments. Foreign exchange contracts involve fixing the U.S. dollar ("USD") to the respective foreign currency exchange rate for delivery of a specified amount of foreign currency on a specified date. The foreign exchange contracts are typically cash settled in USD for their fair value at or close to their settlement date.

For derivatives designated as net investment hedges, the effective portion of changes in the fair value of the derivatives are reported in Accumulated Other Comprehensive Income as part of the cumulative translation adjustment. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. Amounts are reclassified out of Accumulated Other Comprehensive Income into earnings when the hedged foreign entity is either sold or substantially liquidated. As of ~~March 31, 2017, the Company had the following outstanding foreign currency derivatives that were used to hedge its net investments in foreign operations that were designated ($ and Rs in thousands):~~

Derivative Type
Notional
Amount

Notional
(USD Equivalent)
Maturity
Sells Indian rupee ("INR")/Buys USD Forward ₨ 350,000
$ 5,089
April 2017

For derivatives not designated as net investment hedges, the changes in the fair value of the derivatives are reported in the Company's consolidated statements of operations within "Other Expense." As of March 31, 2017, the Company had the following

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~~iStar Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~(unaudited)~~

~~outstanding foreign currency derivatives that were used to hedge its net investments in foreign operations that were not designated ($, €, and £ in thousands):~~

Derivative Type
Notional
Amount

Notional
(USD Equivalent)
Maturity
Sells euro ("EUR")/Buys USD Forward € 6,300
$ 6,549
April 2017
Sells pound sterling ("GBP")/Buys USD Forward £ 3,400
$ 4,168
April 2017

The Company marks its foreign investments each quarter based on current exchange rates and records the gain or loss through "Other expense" in its consolidated statements of operations for loan investments or "Accumulated other comprehensive income (loss)," on its consolidated balance sheets for net investments in foreign subsidiaries. The Company recorded net gains related to foreign investments of $0.1 million during the three months ended March 31, 2017 and 2016 in its consolidated statements of operations.

~~Interest Rate Hedges~~—For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivatives are reported in Accumulated Other Comprehensive Income (Loss). The ineffective portion of the change in fair value of the derivatives is recognized directly in the Company's consolidated statements of operations. As of March 31, 2017, the Company had the following outstanding interest rate swap that was used to hedge its variable rate debt that was designated as a cash flow hedge ($ in thousands):

Derivative Type
Notional
Amount
Variable Rate Fixed Rate Effective Date Maturity
Interest rate swap $ 26,254
LIBOR + 2.00% 3.47% October 2012 November 2019



		Amount of Gain (Loss) Recognized in Income For the Three Months Ended March 31, 2017
	Location of Gain (Loss) Recognized in Income
Derivatives not Designated in Hedging Relationships	Location of Gain (Loss) Recognized in Income
Interest rate cap	Other Expense	$	47
Foreign exchange contracts	Other Expense	(125		)

During the three months ended March 31, 2017, the Company entered into and settled a rate lock swap in connection with the 2017 Secured ~~Financing.~~Financing and a simultaneous rate lock swap with SAFE. As a result of the ~~settlement,~~settlements, the Company initially recorded a $0.4 million unrealized gain in “Accumulated other comprehensive income” on the Company’s consolidated balance ~~sheets. The unrealized~~sheets and subsequently derecognized the gain ~~will be amortized from accumulated other comprehensive as~~when third parties acquired a ~~reduction to~~controlling interest ~~expense over the term of the 2017 Secured Financing.~~

~~For derivatives not designated as cash flow hedges, the changes in the fair value of the derivatives are reported~~ in the Company's ~~consolidated statements of operations within "Other Expense." As of March 31, 2017, the Company had the following outstanding interest rate cap that was used~~Ground Lease business (refer to ~~hedge its variable rate debt that was not designated as a cash flow hedge ($ in thousands):~~

Derivative Type
Notional
Amount
Variable Rate Fixed Rate Effective Date Maturity
Interest rate cap $ 500,000
LIBOR 1.00% July 2014 July 2017

~~Over the next~~ ~~12 months, the Company expects that $0.1 million related to terminated cash flow hedges will be reclassified~~

from "Accumulated other comprehensive income (loss)" into interest expense and $0.3 million related to cash flow hedges will be reclassified from "Accumulated other comprehensive income (loss)" into earnings.

~~Credit Risk-Related Contingent Features~~—The Company has agreements with each of its derivative counterparties that contain a provision where if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations.

The Company reports derivative instruments on a gross basis in the consolidated financial statements. In connection with its foreign currency derivatives which were in a liability position as of March 31, 2017 and December 31, 2016, the Company has posted collateral of $1.8 million and $0.4 million, respectively, and is included in "Deferred expenses and other assets, net" on the Company's consolidated balance sheets. The Company's net exposure under these contracts was zero as of March 31, 2017.

Note 4).

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iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Note 13—Equity

Preferred Stock—The Company had the following series of Cumulative Redeemable and Convertible Perpetual Preferred Stock outstanding as of March 31, ~~2017~~2018 and December 31, ~~2016:~~2017:


				Cumulative Preferential Cash Dividends⁽¹⁾⁽²⁾									Cumulative Preferential Cash Dividends⁽¹⁾⁽²⁾
Series	Shares Issued and Outstanding (in thousands)	Par Value		Liquidation Preference⁽³⁾⁽⁴⁾		Rate per Annum		Equivalent to Fixed Annual Rate (per share)		Shares Issued and Outstanding (in thousands)	Par Value		Liquidation Preference⁽³⁾⁽⁴⁾		Rate per Annum		Equivalent to Fixed Annual Rate (per share)		Carrying Value (in thousands)
D	4,000	$	0.001	$	25.00	8.00	%	$	2.00	4,000	$	0.001	$	25.00	8.00	%	$	2.00	$	89,041
E	5,600	0.001		25.00		7.875	%	1.97
F	4,000	0.001		25.00		7.80	%	1.95
G	3,200	0.001		25.00		7.65	%	1.91		3,200	0.001		25.00		7.65	%	1.91		72,664
I	5,000	0.001		25.00		7.50	%	1.88		5,000	0.001		25.00		7.50	%	1.88		120,785
J (convertible)	4,000	0.001		50.00		4.50	%	2.25
J (convertible)⁽⁴⁾										4,000	0.001		50.00		4.50	%	2.25		193,510
	25,800									16,200									$	476,000

(1)

Holders of shares of the Series D, ~~E, F,~~ G, I and J preferred stock are entitled to receive dividends, when and as declared by the Company's Board of Directors, out of funds legally available for the payment of dividends. Dividends are cumulative from the date of original issue and are payable quarterly in arrears on or before the 15th day of each March, June, September and December or, if not a business day, the next succeeding business day. Any dividend payable on the preferred stock for any partial dividend period will be computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends will be payable to holders of record as of the close of business on the first day of the calendar month in which the applicable dividend payment date falls or on another date designated by the Company's Board of Directors for the payment of dividends that is not more than 30 nor less than 10 days prior to the dividend payment date.

(2)

The Company declared and paid dividends of $2.0 million, ~~$2.8 million, $2.0 million,~~ $1.5 million and $2.3 million on its Series D, ~~E, F,~~ G and I Cumulative Redeemable Preferred Stock during the three months ended March 31, 2018 and 2017, ~~and 2016.~~respectively. The Company declared and paid dividends of $2.3 million on its Series J Convertible Perpetual Preferred Stock during the three months ended March 31, ~~2017~~2018 and ~~2016.~~2017. The Company declared and paid dividends of $2.8 million and $2.0 million on its Series E and F Cumulative Redeemable Preferred Stock, respectively, during the three months ended March 31, 2017. The Company redeemed all of its issued and outstanding Series E and F Cumulative Redeemable Preferred Stock in October 2017. The character of the ~~2016~~2017 dividends ~~were as follows: 47.30% is a~~was 100% capital gain distribution, of which ~~76.15% represents~~27.90% represented unrecaptured section 1250 gain and ~~23.85%~~72.10% represented long term capital ~~gain, and 52.70% is ordinary income.~~gain. There are no dividend arrearages on any of the preferred shares currently outstanding.


(3)	The Company may, at its option, redeem the Series ~~D, E, F,~~ G and I Preferred Stock, in whole or in part, at any time and from time to time, for cash at a redemption price equal to 100% of the liquidation preference of $25.00 per share, plus accrued and unpaid dividends, if any, to the redemption date.

(4)

Each share of the Series J Preferred Stock is convertible at the holder's option at any time, initially into 3.9087 shares of the Company's common stock (equal to an initial conversion price of approximately $12.79 per share), subject to specified adjustments. ~~The Company may not redeem the Series J Preferred Stock prior to March 15, 2018.~~ On or after March 15, 2018, the Company may, at its option, redeem the Series J Preferred Stock, in whole or in part, at any time and from time to time, for cash at a redemption price equal to 100% of the liquidation preference of $50.00 per share, plus accrued and unpaid dividends, if any, to the redemption date.

Dividends—To maintain its qualification as a REIT, the Company must annually distribute, at a minimum, an amount equal to 90% of its taxable income, excluding net capital gains, and must distribute 100% of its taxable income (including net capital gains) to eliminate corporate federal income taxes payable by the REIT. The Company has recorded NOLs and may record NOLs in the future, which may reduce its taxable income in future periods and lower or eliminate entirely the Company's obligation to pay dividends for such periods in order to maintain its REIT qualification. As of December 31, ~~2015,~~2016, the Company had ~~$902.9~~$948.8 million of NOL carryforwards at the corporate REIT level that can generally be used to offset both ordinary taxable income and capital gain net income in future years. The NOL carryforwards will expire beginning in 2029 and through ~~2035~~2036 if unused. The Company estimates that the amount of NOL carryforwards as of December 31, ~~2016~~2017 will be approximately $588 million; however, the actual NOL carryforward as of December 31, 2017 will be determined upon ~~finalization of~~filing the Company's ~~2016~~2017 tax return. Because taxable income differs from cash flow from operations due to non-cash revenues and expenses (such as depreciation and certain asset impairments), in certain circumstances, the Company may generate operating cash flow in excess of its dividends, or alternatively, may need to make dividend payments in excess of operating cash flows. The 2016 Senior ~~Secured~~ Credit Facility and the 2015 ~~Secured~~ Revolving Credit Facility permit the Company to distribute 100% of its REIT taxable income on an annual basis (prior to deducting certain cumulative NOL carryforwards), as long as the Company maintains its REIT qualification. The 2016 Senior ~~Secured~~ Credit Facility and 2015 ~~Secured~~ Revolving Credit Facility restrict the Company from paying any common dividends if it ceases to qualify as a REIT. The Company did not declare or pay any common stock dividends for the three months ended March 31, ~~2017~~2018 and ~~2016~~2017.

Stock Repurchase Program—~~In February 2016, after having substantially utilized~~The Company may repurchase shares in negotiated transactions or open market transactions, including through one or more trading plans. During the ~~remaining availability previously authorized,~~three months ended March 31, 2018, the ~~Company's Board of Directors authorized a new $50.0~~Company repurchased 0.8 million stock repurchase program. After having substantially utilized the availability authorized in February 2016, the Company's Board of Directors authorized an increase to the stock repurchase program to $50.0 million, effective August 4, 2016. The program authorizes the repurchase of common stock from

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iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

time to time in open market and privately negotiated purchases, including pursuant to one or more trading plans. During the three months ended March 31, 2017, the Company did not repurchase any shares of common stock. During the three months ended March 31, 2016, the Company repurchased 5.8 million shares of its outstanding common stock for ~~$58.1~~$8.3 million, atrepresenting an average cost of ~~$9.94~~$10.22 per share. As of March 31, ~~2017,~~2018, the Company had remaining authorization to repurchase up to ~~$50.0~~$41.7 million of common stock ~~available to repurchase~~ under its stock repurchase program.

Accumulated Other Comprehensive Income (Loss)—"Accumulated other comprehensive income (loss)" reflected in the Company's shareholders' equity is comprised of the following ($ in thousands):

As of
March 31, 2017 December 31, 2016
Unrealized gains (losses) on available-for-sale securities $ 132
$ 149
Unrealized gains (losses) on cash flow hedges 689
27
Unrealized losses on cumulative translation adjustment (4,795 ) (4,394 )
Accumulated other comprehensive income (loss) $ (3,974 ) $ (4,218 )



	As of
	March 31, 2018			December 31, 2017
Unrealized gains on available-for-sale securities	$	640		$	1,335
Unrealized gains on cash flow hedges	3,068			707
Unrealized losses on cumulative translation adjustment	(4,633		)	(4,524		)
Accumulated other comprehensive income	$	(925	)	$	(2,482	)

Note 14—Stock-Based Compensation Plans and Employee Benefits

Stock-Based Compensation—The Company recorded stock-based compensation expense, including the effect of performance incentive plans (see below), of ~~$5.9~~$9.1 million and ~~$4.6~~$5.9 million for the three months ended March 31, ~~2017~~2018 and ~~2016,~~2017, respectively, in "General and administrative" in the Company's consolidated statements of operations. As of March 31, 2017, there was $3.0 million of total unrecognized compensation cost related to all unvested restricted stock units ("Units") that are expected to be recognized over a weighted average remaining vesting/service period of 2.1 years.

Performance Incentive Plans—The Company's Performance Incentive Plan ("iPIP") is designed to provide, primarily to senior executives and select professionals engaged in the Company's investment activities, long-term compensation which has a direct relationship to the realized returns on investments included in the plan. The fair value of points is determined using a model that forecasts the Company's projected investment performance. iPIP is a liability-classified award, which will be remeasured each reporting period at fair value until the awards are settled. The following is a summary of ~~granted~~the status of the Company’s iPIP ~~points.~~points and changes during the three months ended March 31, 2018 and the year ended December 31, 2017.

•~~In May 2014,~~



	Three Months Ended March 31, 2018						Year Ended December 31, 2017
	iPIP Investment Pool						iPIP Investment Pool
	2013-2014		2015-2016		2017-2018		2013-2014		2015-2016		2017-2018
Points at beginning of period	86.57		84.16		40.97		92.00		74.10		0
Granted	0.50		0		49.08		5.00		17.88		41.68
Forfeited	(0.15	)	(0.89	)	(4.56	)	(10.43	)	(7.82	)	(0.71	)
Points at end of period	86.92		83.27		85.49		86.57		84.16		40.97

During the three months ended March 31, 2018, the Company ~~granted 73 iPIP points in the~~made initial ~~2013-2014 investment pool.~~

~~In January 2015, the Company granted an additional 10 iPIP points~~distributions to participants in the 2013-2014 investment pool ~~and 34 iPIP points~~following a determination that, as of December 31, 2017, the Company had realized a return of all invested capital in the ~~2015-2016 investment pool.~~

~~In January 2016, the Company granted an additional 10 iPIP points~~assets included in the 2013-2014 investment pool, together with a return based on leverage and ~~an additional 40~~a preferred return hurdle of 9.0%. After the amount distributable to participants was reduced based on the Company's total shareholder return in accordance with the provisions of the iPIP, ~~points~~iPIP participants received total distributions in the ~~2015-2016 investment pool.~~

~~In June 2016,~~amount of $13.6 million as compensation, comprised of $6.8 million in cash and 595,869 shares of the ~~Company granted an additional~~ ~~2.5~~ ~~iPIP points in~~Company's common stock, with a fair value of $6.8 million or $11.41 per share, which are fully-vested and issued under the ~~2015-2016 investment pool.~~

~~In February 2017,~~2009 LTIP (see below). After deducting statutory minimum tax withholdings, a total of 328,074 shares of the ~~Company granted an additional~~ 5 ~~iPIP points in the 2013-2014 investment pool, an additional~~ 18 ~~iPIP points in the 2015-2016 investment pool, and 44 iPIP points in the 2017-2018 investment pool.~~

Company's common stock were issued. As of March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, the Company had accrued compensation costs relating to iPIP of ~~$28.3~~$32.2 million and ~~$22.4~~$38.1 million, respectively, which are included in "Accounts payable, accrued expenses and other liabilities" on the Company's consolidated balance sheets.

Long-Term Incentive Plan—The Company's 2009 Long-Term Incentive Plan (the "2009 LTIP") is designed to provide incentive compensation for officers, key employees, directors and advisors of the Company. The 2009 LTIP provides for awards of stock options, shares of restricted stock, phantom shares, restricted stock units, dividend equivalent rights and other share-based performance awards. All awards under the 2009 LTIP are made at the discretion of the Company's Board of Directors or a committee of the Board of Directors. The Company's shareholders approved the 2009 LTIP in 2009 and approved the performance-based provisions of the 2009 LTIP, as amended, in 2014.

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iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

As of March 31, ~~2017,~~2018, an aggregate of ~~3.4~~2.7 million shares remain available for issuance pursuant to future awards under the Company's 2009 LTIP.

Restricted Share Issuances—During the three months ended March 31, ~~2017,~~2018, the Company granted ~~97,967~~213,609 shares of common stock to certain employees under the 2009 LTIP as part of annual incentive awards that included a mix of cash and equity awards. The shares are fully-vested and ~~62,704~~135,503 shares were issued net of required, statutory minimum ~~required~~ tax withholdings. The employees are restricted from selling these shares for up to 18 months from the date of grant.

~~2017~~ Restricted Stock Unit Activity—~~During~~A summary of the ~~three months ended March 31, 2017, the Company granted new~~Company’s stock-based compensation awards to certain employees in the form of long-term incentive awards ~~comprised of~~for the ~~following:~~

~~115,571 service-based Units granted on February 22, 2017, representing~~three months ended March 31, 2018 and the right to receive an equivalent number of shares of the Company's common stock (after deducting shares for minimum required statutory withholdings) if and when the Units vest. The Units will cliff vest in one installment onyear ended December 31, ~~2019, if the employee remains employed by the Company on the vesting date, subject to certain accelerated vesting rights. Dividends will accrue~~2017, are as and when dividends are declared by the Company on shares of its common stock, but will not be paid unless and until the Units vest and are settled. As of March 31, 2017, 115,571 of such service-based Units were outstanding.follows (in thousands):



	Three Months Ended March 31, 2018		Year Ended December 31, 2017
Nonvested at beginning of period	282		290
Granted	264		116
Vested	(20	)	(75	)
Forfeited	(40	)	(49	)
Nonvested at end of period	486		282

As of March 31, ~~2017, the Company had the following additional stock-based~~2018, there was $3.5 million of total unrecognized compensation ~~awards outstanding:~~

~~80,000 service-based Units granted on June 15, 2016, representing the right~~cost related to ~~receive an equivalent number of shares of the Company's common~~all unvested restricted stock (after deducting shares for minimum required statutory withholdings) if and when the Units vest. The Units will vest in equal annual installments over four years on each anniversary of the grant date, if the employee remains employed by the Company on the vesting date, subjectunits that are expected to certain accelerated vesting rights. Upon vesting of these Units, the holder will receive shares of the Company's common stock in the amount of the vested Units, net of statutory minimum required tax withholdings. Dividends will accrue as and when dividends are declared by the Company on shares of its common stock, but will not be ~~paid unless and until the Units vest and are settled.~~

~~109,417~~ service-based Units granted on January 29, 2016, representing the right to receive an equivalent number of shares of the Company's common stock (after deducting shares for minimum required statutory withholdings) if and when the Units vest. The Units will cliff vest in one installment on December 31, 2018, if the employee remains employed by the Company on the vesting date, subject to certain accelerated vesting rights. Dividends will accrue as and when dividends are declared by the Company on shares of its common stock, but will not be paid unless and until the Units vest and are settled.

39,071 target amount of performance-based Units granted on January 30, 2015, representing the right to receive an equivalent number of shares of the Company's common stock (after deducting shares for minimum required statutory withholdings) if and when the Units vest. The performance is based on the Company's TSR, measuredrecognized over a ~~performance~~weighted average remaining vesting/service period ~~ending on December 31, 2017, which is the date the awards cliff vest. Vesting will range from 0% to 200%~~ of the target amount of the awards, depending on the Company’s TSR performance relative to the NAREIT All REITs Index (one-half of the target amount of the award) and the Russell 2000 Index (one-half of the target amount of the award) during the performance period. The Company, as well as any companies not included in each index at the beginning and end of the performance period, are excluded from calculation of the performance of such index. To the extent Units vest based on the Company's TSR performance, holders will receive an equivalent number of shares of common stock (after deducting shares for minimum required statutory withholdings), if the employee remains employed by the Company on the vesting date, subject to certain accelerated vesting rights. Dividends will accrue as and when dividends are declared by the Company on shares of its common stock, but will not be paid unless and until the Units vest and are settled. The fair values of the performance-based Units were determined by utilizing a Monte Carlo model to simulate a range of possible future stock prices for the Company's common stock. The assumptions used to estimate the fair value of these performance-based awards were 0.75% for risk-free interest rate and 28.14% for expected stock price volatility.

56,020 service-based Units granted on January 30, 2015, representing the right to receive an equivalent number of shares of the Company's common stock (after deducting shares for minimum required statutory withholdings) if and when the Units vest. The Units will cliff vest in one installment on December 31, 2017, if the employee remains employed by the Company on the vesting date, subject to certain accelerated vesting rights. Dividends will accrue as and when dividends

~~Table of Contents~~

~~iStar Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~(unaudited)~~

~~are declared by the Company on shares of its common stock, but will not be paid unless and until the Units vest and are settled.~~

4,751 service-based Units granted on various dates, representing the right to receive an equivalent number of shares of the Company's common stock (after deducting shares for minimum required statutory withholdings) if and when the Units vest. The Units have an original vesting term of three2.2 years. Upon vesting of these Units, holders will receive shares of the Company's common stock in the amount of the vested Units, net of statutory minimum required tax withholdings. Dividends will accrue as and when dividends are declared by the Company on shares of its common stock, but will not be paid unless and until the Units vest and are settled.

Directors' Awards—As of March 31, ~~2017,~~2018, a combined total of ~~333,384~~226,182 CSEs and restricted shares of common stock granted to members of the Company's Board of Directors remained outstanding under the Company's Non-Employee Directors Deferral Plan, with an aggregate intrinsic value of ~~$3.9~~$2.3 million.

401(k) Plan—The Company made gross contributions of $0.7 million and $0.6 million for the three months ended March 31, ~~2017~~2018 and ~~2016.~~2017, respectively.

Note 15—Earnings Per Share

Earnings per share ("EPS") is calculated using the two-class method, which allocates earnings among common stock and participating securities to calculate EPS when an entity's capital structure includes either two or more classes of common stock or common stock and participating securities.

The following table presents a reconciliation of income (loss) from continuing operations used in the basic and diluted ~~EPS~~Earnings per share ("EPS") calculations ($ in thousands, except for per share data):


	For the Three Months Ended March 31,						For the Three Months Ended March 31,
	2017			2016			2018			2017
Income (loss) from operations	$	(23,990	)	$	(19,757	)
Income (loss) from continuing operations							$	17,980		$	(28,248	)
Income from sales of real estate	8,618			10,458			17,048			8,110
Net (income) loss attributable to noncontrolling interests	1,100			942			(95		)	1,100
Preferred dividends	(12,830		)	(12,830		)	(8,124		)	(12,830		)
Income (loss) from operations attributable to iStar Inc. and allocable to common shareholders and Participating Security Holders for basic and diluted earnings per common share	$	(27,102	)	$	(21,187	)
Income (loss) from continuing operations attributable to iStar Inc. and allocable to common shareholders for basic earnings per common share⁽¹⁾							$	26,809		$	(31,868	)
Add: Effect of Series J convertible perpetual preferred stock							2,250			—
Income (loss) from continuing operations attributable to iStar Inc. and allocable to common shareholders for diluted earnings per common share⁽¹⁾							$	29,059		$	(31,868	)

Table of Contents

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

For the Three Months Ended March 31,
2017 2016
Earnings allocable to common shares:
Numerator for basic and diluted earnings per share:
Income (loss) from operations attributable to iStar Inc. and allocable to common shareholders $ (27,102 ) $ (21,187 )
Net income (loss) attributable to iStar Inc. and allocable to common shareholders $ (27,102 ) $ (21,187 )

Denominator for basic and diluted earnings per share:
Weighted average common shares outstanding for basic and diluted earnings per common share 72,065
77,060

Basic and diluted earnings per common share:
Income (loss) from operations attributable to iStar Inc. and allocable to common shareholders $ (0.38 ) $ (0.27 )
Net income (loss) attributable to iStar Inc. and allocable to common shareholders $ (0.38 ) $ (0.27 )



	For the Three Months Ended March 31,
	2018		2017
Earnings allocable to common shares:
Numerator for basic earnings per share:
Income (loss) from continuing operations attributable to iStar Inc. and allocable to common shareholders	$	26,809	$	(31,868	)
Income from discontinued operations	—		4,766
Net income (loss) attributable to iStar Inc. and allocable to common shareholders	$	26,809	$	(27,102	)

Numerator for diluted earnings per share:
Income (loss) from continuing operations attributable to iStar Inc. and allocable to common shareholders	$	29,059	$	(31,868	)
Income from discontinued operations	—		4,766
Net income (loss) attributable to iStar Inc. and allocable to common shareholders	$	29,059	$	(27,102	)

Denominator for basic and diluted earnings per share:
Weighted average common shares outstanding for basic earnings per common share	67,913		72,065
Add: Effect of assumed shares issued under treasury stock method for restricted stock units	122		—
Add: Effect of series J convertible perpetual preferred stock	15,635		—
Weighted average common shares outstanding for diluted earnings per common share	83,670		72,065

Basic earnings per common share:
Income (loss) from continuing operations attributable to iStar Inc. and allocable to common shareholders	$	0.39	$	(0.44	)
Income from discontinued operations	—		0.06
Net income (loss) attributable to iStar Inc. and allocable to common shareholders	$	0.39	$	(0.38	)

Diluted earnings per common share:
Income (loss) from continuing operations attributable to iStar Inc. and allocable to common shareholders	$	0.35	$	(0.44	)
Income from discontinued operations	—		0.06
Net income (loss) attributable to iStar Inc. and allocable to common shareholders	$	0.35	$	(0.38	)

Table of Contents

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

The following shares were not included in the diluted EPS calculation because they were anti-dilutive (in thousands)⁽¹⁾:


	For the Three Months Ended March 31,		For the Three Months Ended March 31,
	2017	2016	2018	2017
3.00% convertible senior unsecured notes	—	16,992
Series J convertible perpetual preferred stock	15,635	15,635	—	15,635
1.50% convertible senior unsecured notes	—	11,567
Joint venture shares	298	298	—	298

(1)

For the three months ended March 31, 2017, ~~and 2016,~~ the effect of the Company's Series J convertible preferred stock, unvested Units, performance-based Units, CSEs and restricted stock awards were ~~anti-dilutive.~~anti-dilutive due to the Company having a net loss for the period. The Company will settle conversions of the 3.125% Convertible Notes by paying the conversion value in cash up to the original principal amount of the notes being converted and shares of common stock to the extent of any conversion premium. The amount of cash and shares of common stock, if any, due upon conversion will be based on a daily conversion value calculated for each trading day in a 40 consecutive day observation period. Based upon the conversion price of the 3.125% Convertible Notes, no shares of common stock would have been issuable upon conversion of the 3.125% Convertible Notes for the three months ended March 31, 2018 and therefore the 3.125% Convertible Notes had no effect on diluted EPS for such periods.

Note 16—Fair Values

Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following fair value hierarchy prioritizes the inputs to be used in valuation techniques to measure fair value:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

Certain of the Company's assets and liabilities are recorded at fair value either on a recurring or non-recurring basis. Assets required to be marked-to-market and reported at fair value every reporting period are classified as being valued on a recurring basis. Assets not required to be recorded at fair value every period may be recorded at fair value if a specific provision or other impairment is recorded within the period to mark the carrying value of the asset to market as of the reporting date. Such assets are classified as being valued on a non-recurring basis.

Table of Contents

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

The following fair value hierarchy table summarizes the Company's assets and liabilities recorded at fair value on a recurring and non-recurring basis by the above categories ($ in thousands):

Fair Value Using
Total
Quoted market
prices in
active markets
(Level 1)

Significant other
observable
inputs
(Level 2)

Significant
unobservable
inputs
(Level 3)
As of March 31, 2017
Recurring basis:
Derivative assets⁽¹⁾
$ 129
$ —
$ 129
$ —
Derivative liabilities⁽¹⁾
571
—
571
—
Available-for-sale securities⁽¹⁾
21,639
—
—
21,639
Non-recurring basis:
Impaired real estate⁽²⁾
10,141
—
—
10,141

As of December 31, 2016
Recurring basis:
Derivative assets⁽¹⁾
$ 727
$ —
$ 727
$ —
Derivative liabilities⁽¹⁾
47
—
47
—
Available-for-sale securities⁽¹⁾
21,666
—
—
21,666
Non-recurring basis:
Impaired loans⁽³⁾
7,200
—
—
7,200
Impaired real estate⁽⁴⁾
3,063
—
—
3,063



			Fair Value Using
	Total		Quoted market prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
As of March 31, 2018
Recurring basis:
Available-for-sale securities⁽¹⁾	$	21,835	$	—	$	—	$	21,835
Non-recurring basis:
Impaired real estate available and held for sale⁽²⁾	6,041		—		—		6,041

As of December 31, 2017
Recurring basis:
Available-for-sale securities⁽¹⁾	$	22,842	$	—	$	—	$	22,842
Non-recurring basis:
Impaired real estate⁽³⁾	12,400		—		—		12,400
Impaired real estate available and held for sale⁽⁴⁾	800		—		—		800
Impaired land and development⁽⁵⁾	21,400		—		—		21,400


(1)	The fair value of the Company's derivatives are based upon widely accepted valuation techniques utilized by a third-party specialist using observable inputs such as interest rates and contractual cash flow and are classified as Level 2. The fair value of the Company's available-for-sale securities are based upon unadjusted third-party broker quotes and are classified as Level 3.


(2)	The Company recorded an impairment on ~~one~~a residential real estate asset available and held for sale with a fair value of ~~$10.1~~$6.0 million ~~based on a discount rate of~~ ~~11%~~ ~~using discounted cash flows over a two year sellout period.~~ due to impending contracts to sell the remaining four condominium units at the property.


(3)	The Company recorded an impairment on a ~~provision for loan losses on one loan~~real estate asset with a fair value of ~~$5.2~~$12.4 million ~~using an appraisal~~ based on market comparable sales. In

~~addition, the Company recorded a recovery of loan losses on one loan with a fair value of $2.0 million based on proceeds to be received.~~


(4)	The Company recorded an impairment on ~~one~~a residential real estate asset available and held for sale based on market comparable sales.


(5)	The Company recorded an impairment on a land and development asset with a fair value of ~~$3.1~~$21.4 million based on a discount rate of ~~11% using discounted cash flows over~~6% and a ~~two~~10 year ~~sellout~~holding period.

The following table summarizes changes in Level 3 available-for-sale securities reported at fair value on the Company's consolidated balance sheets for the three months ended March 31, ~~2017~~2018 and ~~2016~~2017 ($ in thousands):


	2017			2016			2018			2017
Beginning balance	$	21,666		$	1,161		$	22,842		$	21,666
Purchases	—			4,366
Repayments	(10		)	(10		)	(36		)	(10		)
Unrealized (losses) gains recorded in other comprehensive income	(17		)	19
Unrealized gains recorded in other comprehensive income							(971		)	(17		)
Ending balance	$	21,639		$	5,536		$	21,835		$	21,639

Fair values of financial instruments—The Company's estimated fair values of its loans receivable and other lending investments and outstanding debt was $1.4 billion and ~~$4.2~~$3.3 billion, respectively, as of March 31, ~~2017~~2018 and ~~$1.5~~$1.3 billion and ~~$3.6~~$3.7 billion, respectively, as of December 31, ~~2016.~~2017. The Company determined that the significant inputs used to value its loans receivable and other lending investments and debt obligations fall within Level 3 of the fair value hierarchy. The carrying value of other financial instruments including cash and cash equivalents, restricted cash, accrued interest receivable and accounts payable, approximate the fair values of the instruments. Cash and cash equivalents and restricted cash values are considered Level 1 on the

~~Table of Contents~~

~~iStar Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~(unaudited)~~

fair value hierarchy. The fair value of other financial instruments, including derivative assets and liabilities, ~~are~~is included in the fair value hierarchy table above.

Note 17—Segment Reporting

The Company has determined that it has four reportable segments based on how management reviews and manages its business. These reportable segments include: Real Estate Finance, Net Lease, Operating Properties and Land and Development. The Real Estate Finance segment includes all of the Company's activities related to senior and mezzanine real estate loans and real estate related securities. The Net Lease segment includes the Company's activities and operations related to the ownership of properties generally leased to single corporate tenants. The Operating Properties segment includes the Company's activities and operations related to its commercial and residential properties. The Land and Development segment includes the Company's activities related to its developable land portfolio.

~~Table of Contents~~

~~iStar Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~(unaudited)~~

The Company evaluates performance based on the following financial measures for each segment. The Company's segment information is as follows ($ in thousands):


	Real Estate Finance			Net Lease			Operating Properties			Land and Development			Corporate/Other⁽¹⁾			Company Total			Real Estate Finance			Net Lease			Operating Properties			Land and Development			Corporate/Other⁽¹⁾			Company Total
Three Months Ended March 31, 2017:
Three Months Ended March 31, 2018:																			Three Months Ended March 31, 2018:
Operating lease income	$	—		$	36,496		$	15,989		$	106		$	—		$	52,591		$	—		$	29,727		$	15,817		$	255		$	—		$	45,799
Interest income	29,058			—			—			—			—			29,058			26,697			—			—			—			—			26,697
Other income	76			506			10,355			386			541			11,864			384			1,049			12,144			471			1,272			15,320
Land development revenue	—			—			—			20,050			—			20,050			—			—			—			276,429			—			276,429
Earnings (loss) from equity method investments	—			981			632			3,842			247			5,702
Earnings (losses) from equity method investments																			—			3,556			(1,275		)	1,545			(494		)	3,332
Income from sales of real estate	—			6,720			1,898			—			—			8,618			—			414			16,634			—			—			17,048
Total revenue and other earnings	29,134			44,703			28,874			24,384			788			127,883			27,081			34,746			43,320			278,700			778			384,625
Real estate expense	—			(4,726		)	(21,518		)	(9,497		)	—			(35,741		)	—			(3,948		)	(21,626		)	(10,606		)	—			(36,180		)
Land development cost of sales	—			—			—			(15,910		)	—			(15,910		)	—			—			—			(223,407		)	—			(223,407		)
Other expense	(605		)	—			—			—			(1,264		)	(1,869		)	(400		)	—			—			—			(766		)	(1,166		)
Allocated interest expense	(11,888		)	(15,783		)	(5,606		)	(8,118		)	(9,798		)	(51,193		)	(11,765		)	(14,201		)	(5,528		)	(6,473		)	(7,215		)	(45,182		)
Allocated general and administrative⁽²⁾	(3,596		)	(4,642		)	(1,755		)	(3,926		)	(5,373		)	(19,292		)	(3,969		)	(4,586		)	(2,043		)	(3,805		)	(5,320		)	(19,723		)
Segment profit (loss)⁽³⁾	$	13,045		$	19,552		$	(5	)	$	(13,067	)	$	(15,647	)	$	3,878		$	10,947		$	12,011		$	14,123		$	34,409		$	(12,523	)	$	58,967
Other significant items:
Recovery of loan losses	$	(4,928	)	$	—		$	—		$	—		$	—		$	(4,928	)	$	(855	)	$	—		$	—		$	—		$	—		$	(855	)
Impairment of assets	—			—			4,413			—			—			4,413			—			—			4,100			—			—			4,100
Depreciation and amortization	—			8,428			4,039			270			330			13,067			—			6,309			3,926			515			360			11,110
Capitalized expenditures	—			771			8,210			26,592			—			35,573			—			478			7,700			31,447			—			39,625

Three Months Ended March 31, 2016:
Three Months Ended March 31, 2017:																			Three Months Ended March 31, 2017:
Operating lease income	$	—		$	35,750		$	19,081		$	106		$	—		$	54,937		$	—		$	31,252		$	15,989		$	106		$	—		$	47,347
Interest income	33,219			—			—			—			—			33,219			29,058			—			—			—			—			29,058
Other income	1,297			80			7,344			1,065			1,755			11,541			76			506			10,355			386			541			11,864
Land development revenue	—			—			—			14,947			—			14,947			—			—			—			20,050			—			20,050
Earnings (loss) from equity method investments	—			946			(142		)	6,661			802			8,267
Earnings from equity method investments																			—			981			632			3,842			247			5,702
Income from discontinued operations																			—			4,766			—			—			—			4,766
Income from sales of real estate	—			4,928			5,530			—			—			10,458			—			6,212			1,898			—			—			8,110
Total revenue and other earnings	34,516			41,704			31,813			22,779			2,557			133,369			29,134			43,717			28,874			24,384			788			126,897
Real estate expense	—			(4,508		)	(21,120		)	(8,677		)	—			(34,305		)	—			(4,575		)	(21,518		)	(9,497		)	—			(35,590		)
Land development cost of sales	—			—			—			(11,575		)	—			(11,575		)	—			—			—			(15,910		)	—			(15,910		)
Other expense	86			—			—			—			(826		)	(740		)	(605		)	—			—			—			(1,264		)	(1,869		)
Allocated interest expense	(14,702		)	(16,236		)	(6,620		)	(8,359		)	(11,104		)	(57,021		)	(11,888		)	(15,735		)	(5,606		)	(8,118		)	(9,798		)	(51,145		)
Allocated general and administrative⁽²⁾	(3,831		)	(4,296		)	(1,870		)	(3,270		)	(5,258		)	(18,525		)	(3,596		)	(4,642		)	(1,755		)	(3,926		)	(5,373		)	(19,292		)
Segment profit (loss)⁽³⁾	$	16,069		$	16,664		$	2,203		$	(9,102	)	$	(14,631	)	$	11,203		$	13,045		$	18,765		$	(5	)	$	(13,067	)	$	(15,647	)	$	3,091
Other significant items:
Provision for loan losses	$	1,506		$	—		$	—		$	—		$	—		$	1,506
Depreciation and amortization	—			8,851			5,283			300			274			14,708
Capitalized expenditures	—			851			15,797			34,268			—			50,916

3230

Table of Contents

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)


	Real Estate Finance		Net Lease		Operating Properties		Land and Development		Corporate/Other⁽¹⁾		Company Total		Real Estate Finance			Net Lease		Operating Properties		Land and Development		Corporate/Other⁽¹⁾		Company Total
Other significant items:
Recovery of loan losses													$	(4,928	)	$	—	$	—	$	—	$	—	$	(4,928	)
Impairment of assets													—			—		4,413		—		—		4,413
Depreciation and amortization													—			7,641		4,039		270		330		12,280
Capitalized expenditures													—			771		8,210		26,592		—		35,573

As of March 31, 2017
As of March 31, 2018
Real estate
Real estate, net	$	—	$	998,314	$	478,277	$	—	$	—	$	1,476,591	$	—		$	808,438	$	493,705	$	—	$	—	$	1,302,143
Real estate available and held for sale	—		—		71,934		—		—		71,934		—			—		41,857		—		—		41,857
Total real estate	—		998,314		550,211		—		—		1,548,525		—			808,438		535,562		—		—		1,344,000
Land and development, net	—		—		—		955,150		—		955,150		—			—		—		681,410		—		681,410
Loans receivable and other lending investments, net	1,381,227		—		—		—		—		1,381,227		1,400,474			—		—		—		—		1,400,474
Other investments	—		92,024		3,215		69,454		32,866		197,559		—			279,094		55,929		75,596		12,234		422,853
Total portfolio assets	$	1,381,227	$	1,090,338	$	553,426	$	1,024,604	$	32,866	4,082,461		$	1,400,474		$	1,087,532	$	591,491	$	757,006	$	12,234	3,848,737
Cash and other assets											1,212,055													601,322
Total assets											$	5,294,516												$	4,450,059

As of December 31, 2016
As of December 31, 2017
Real estate
Real estate, net	$	—	$	1,015,590	$	476,162	$	—	$	—	$	1,491,752	$	—		$	815,783	$	466,248	$	—	$	—	$	1,282,031
Real estate available and held for sale	—		1,284		82,480		—		—		83,764		—			—		68,588		—		—		68,588
Total real estate	—		1,016,874		558,642		—		—		1,575,516		—			815,783		534,836		—		—		1,350,619
Land and development, net	—		—		—		945,565		—		945,565		—			—		—		860,311		—		860,311
Loans receivable and other lending investments, net	1,450,439		—		—		—		—		1,450,439		1,300,655			—		—		—		—		1,300,655
Other investments	—		92,669		3,583		84,804		33,350		214,406		—			205,007		38,761		63,855		13,618		321,241
Total portfolio assets	$	1,450,439	$	1,109,543	$	562,225	$	1,030,369	$	33,350	4,185,926		$	1,300,655		$	1,020,790	$	573,597	$	924,166	$	13,618	3,832,826
Cash and other assets											639,588													898,252
Total assets											$	4,825,514												$	4,731,078


(1)	Corporate/Other represents all corporate level and unallocated items including any intercompany eliminations necessary to reconcile to consolidated Company totals. This caption also includes the Company's joint venture investments and strategic investments that are not included in the other reportable segments above.


(2)	General and administrative excludes stock-based compensation expense of ~~$5.9~~$9.1 million and ~~$4.6~~$5.9 million for the three months ended March 31, ~~2017~~2018 and ~~2016.~~2017, respectively.


(3)	The following is a reconciliation of segment profit to net income (loss) ($ in thousands):


	For the Three Months Ended March 31,						For the Three Months Ended March 31,
	2017			2016			2018			2017
Segment profit	$	3,878		$	11,203		$	58,967		$	3,091
Less: Recovery of (provision for) loan losses	4,928			(1,506		)
Add: Recovery of loan losses							855			4,928
Less: Impairment of assets	(4,413		)	—			(4,100		)	(4,413		)
Less: Stock-based compensation expense	(5,881		)	(4,577		)	(9,091		)	(5,881		)
Less: Depreciation and amortization	(13,067		)	(14,708		)	(11,110		)	(12,280		)
Less: Income tax (expense) benefit	(607		)	414
Less: Income tax expense							(121		)	(607		)
Less: Loss on early extinguishment of debt, net	(210		)	(125		)	(372		)	(210		)
Net income (loss)	$	(15,372	)	$	(9,299	)	$	35,028		$	(15,372	)

~~Table of Contents~~

~~iStar Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~(unaudited)~~

~~Note 18—Subsequent Events~~

On April 12, 2017, the Company repaid in full the $275.0 million principal amount of 9.00% senior unsecured notes due June 2017 at par. In connection with the repayment prior to maturity, the Company paid a $2.75 million make whole premium.

On April 14, 2017, two institutional investors acquired, through a merger and related transactions, a 51% interest in the Company's ground net lease business, a component of the Company's net lease segment, consisting of 12 properties subject to long-term net leases including seven ground net leases and one master lease (covering five properties). The Company will deconsolidate the 12 properties and own a 49% noncontrolling interest in the new entity and account for its investment in the new entity as an equity method investment. The Company received total consideration of $340.0 million, including the venture's assumption of the $227.0 million 2017 Secured Financing. The Company had a carrying value of approximately $156.0 million in the 12 properties and will recognize an approximate gain of $178.0 million in connection with the sale. The new entity, named Safety, Income and Growth, Inc., has filed a registration statement on Form S-11 for a possible initial public offering ("IPO") and the Company has committed to pay up to $25.0 million in offering costs in connection with an IPO.

On April 21, 2017, the Company and Lennar completed settlement of transfer of the land, pursuant to which we conveyed the land to Lennar and received net proceeds of $231.1 million after payment of $6.3 million in documentary transfer taxes, subject to certain holdbacks and subject also to final resolution of the amount of post-judgment interest owed by Lennar, consisting of $114.0 million of sales proceeds, $121.8 million of interest and $1.6 million of real estate tax reimbursements. The amount of attorneys’ fees and costs to be recovered by the Company will be determined through further proceedings before the District Court. A portion of the net proceeds received by the Company has been paid to the third party which holds a 4.3% participation interest in all proceeds received by the Company.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Certain statements in this report, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements are included with respect to, among other things, iStar Inc.'s (the "Company's") current business plan, business strategy, portfolio management, prospects and liquidity. These forward-looking statements generally are identified by the words "believe," "project," "expect," "anticipate," "estimate," "intend," "strategy," "plan," "may," "should," "will," "would," "will be," "will continue," "will likely result," and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results or outcomes to differ materially from those contained in the forward-looking statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. In assessing all forward-looking statements, readers are urged to read carefully all cautionary statements contained in this Form 10-Q and the uncertainties and risks described in Item 1A—"Risk Factors" in our ~~2016~~2017 Annual Report, all of which could affect our future results of operations, financial condition and liquidity. For purposes of Management's Discussion and Analysis of Financial Condition and Results of Operations, the terms "we," "our" and "us" refer to iStar Inc. and its consolidated subsidiaries, unless the context indicates otherwise.

The discussion below should be read in conjunction with our consolidated financial statements and related notes in this quarterly report on Form 10-Q and our ~~2016~~2017 Annual Report. These historical financial statements may not be indicative of our future performance. We have reclassified certain items in our consolidated financial statements of prior periods to conform to our current financial statements presentation.

Introduction

iStar Inc.~~, doing business as "iStar,"~~ ("iStar") finances, invests in and develops real estate and real estate related projects as part of its fully-integrated investment platform. We also provide management services for our ground lease ("Ground Lease") and net lease equity method investments. We have invested more than $35 billion over the past two decades and are structured as a real estate investment trust ("REIT") with a diversified portfolio focused on larger assets located in major metropolitan markets. Our primary business segments are real estate finance, net lease, operating properties and land and development.

Executive Overview

We ~~continued~~continue to ~~invest in what we believe~~focus on our net lease and real estate finance businesses to ~~be attractive~~find selective investment opportunities in ~~our real estate finance and net lease businesses while making~~these core businesses. We also continue to make significant progress in ~~stabilizing and/or~~ monetizing our commercial and residential operating ~~properties. Our land portfolio continues to make significant progress with almost all of~~properties as well as our land ~~projects being re-entitled and sales and leasing efforts gaining momentum. Our~~portfolio. In our continuing effort to find untapped investment ~~activity has focused on new originations within our core business segments of~~opportunities in real estate, ~~finance and net lease. In addition, we continue to make significant investments within our operating property and land and development portfolios~~ in ~~order to better position assets for sale and maximize value for our shareholders.~~

We have continued to strengthen our balance sheet through our financing activities. Access to the capital markets has allowed us to extend our debt maturity profile and remain primarily an unsecured borrower. In March 2017 we ~~issued $375.0 million principal amount of 6.00% senior unsecured notes due April 2022. Proceeds from~~conceived and ultimately launched Safety, Income & Growth Inc. ("SAFE"), a new, publicly traded REIT focused exclusively on the offering were primarily used to repay in full the $99.7 million principal amount of 5.85% senior unsecured notes due March 2017 and, subsequent to March 31, 2017, repay in full the $275.0 million principal amount of 9.00% senior unsecured notes due June 2017. In addition, also in March 2017, we entered into a $227.0 million secured financing (the "2017 Secured Financing") that accrues interest at 3.795% and matures in April 2027. The 2017 Secured Financing is collateralized by 12 properties including seven ground net leases and one master lease covering the accounts of five related properties. As of March 31, 2017, we had $897.5 million of cash, which we expect to use primarily to repay debt and fund future investment activities. In addition, we have additional borrowing capacity of $236.0 million at March 31, 2017.Ground Lease asset class.

Operating Results

During the three months ended March 31, ~~2017,~~2018, all of our ~~real estate finance and net lease~~ business segments contributed positively to our earnings. We sold two land parcels totaling 93 acres in San Jose, CA and San Pedro, CA, generating approximately $253.4 million in gross proceeds and $48.3 million in profit. We continue to work on repositioning or redeveloping our transitional operating properties and progressing on the entitlement and development of our land and development assets in order to maximize their value. We intend to continue these efforts, with the objective of increasing the contribution of these assets to our earnings in the future. Furthermore, we have sold and expect to continue to opportunistically sell operating assets and land in order to generate cash proceeds to reinvest into real estate finance and net lease assets, and in active development projects. For the three months ended March 31, ~~2017,~~2018, we recorded a net ~~loss~~income allocable to common shareholders of ~~$27.1~~$26.8 million, compared to a net loss of ~~$21.2~~$27.1 million during the same period in the prior year. Adjusted income (loss) allocable to common shareholders for the three months ended March 31, ~~2017~~2018 was ~~$(11.8)~~$132.3 million, compared to ~~$(0.3)~~$(11.8) million during the same period in the prior year (see "Adjusted Income" for a reconciliation of adjusted income to net income).

Capital Markets Activity

In the third and fourth quarters of 2017, we completed a comprehensive set of capital markets transactions that addressed all parts of our capital structure, resulting in our having:

repaid or refinanced all of our 2017 and 2018 corporate debt maturities, leaving no corporate debt maturities until July 2019;

extended our weighted average debt maturity by 1.5 years to 4.0 years;

reduced annual expenses;

lowered our cost of capital;

established new banking relationships;

increased liquidity to pursue new investment opportunities; and

received upgrades in our corporate credit ratings from all three major ratings agencies, which we expect will positively impact the marginal cost of our future borrowings and broaden our set of investment opportunities.

As of March 31, 2018, we had $366.7 million of cash which we expect to use primarily to fund future investment activities. In addition, we have additional borrowing capacity under the 2015 Revolving Credit Facility (refer to Note 10) of $325.0 million at March 31, 2018.

Portfolio Overview

As of March 31, ~~2017,~~2018, based on ~~gross~~ carrying values exclusive of accumulated depreciation and general loan loss reserves, our ~~$4.5 billion~~total investment portfolio has the following characteristics:

As of March 31, ~~2017,~~2018, based on ~~gross~~ carrying values exclusive of accumulated depreciation and general loan loss reserves, our total investment portfolio has the following property/collateral type and geographic characteristics ($ in thousands)⁽¹⁾:


Property/Collateral Types	Real Estate Finance		Net Lease		Operating Properties		Land & Development		Total		% of Total		Real Estate Finance		Net Lease		Operating Properties		Land & Development		Total		% of Total
Land and Development													$	166,894	$	—	$	—	$	764,845	$	931,739	21.9	%
Office / Industrial	$	207,205	$	747,788	$	122,605	$	—	$	1,077,598	23.9	%	55,266		682,759		119,694		—		857,719		20.3	%
Land and Development	—		—		—		1,031,361		1,031,361		22.8	%
Hotel	335,854		136,080		103,260		—		575,194		12.7	%
Entertainment / Leisure	—		489,671		—		—		489,671		10.8	%	—		489,394		—		—		489,394		11.6	%
Mixed Use / Mixed Collateral	297,636		—		173,906		—		471,542		10.4	%	299,374		—		230,336		—		529,710		12.5	%
Hotel													326,923		—		104,745		—		431,668		10.2	%
Condominium	314,608		—		71,304		—		385,912		8.5	%	340,189		—		40,911		—		381,100		9.0	%
Retail													24,907		57,348		140,795		—		223,050		5.3	%
Other Property Types	205,993		29,619		6		—		235,618		5.2	%	203,521		—		14,637		—		218,158		5.2	%
Retail	38,331		57,348		131,848		—		227,527		5.0	%
Ground Leases													—		155,912		—		—		155,912		3.7	%
Strategic Investments	—		—		—		—		32,866		0.7	%	—		—		—		—		12,234		0.3	%
Total	$	1,399,627	$	1,460,506	$	602,929	$	1,031,361	$	4,527,289	100.0	%	$	1,417,074	$	1,385,413	$	651,118	$	764,845	$	4,230,684	100.0	%


Geographic Region	Real Estate Finance		Net Lease		Operating Properties		Land & Development		Total		% of Total		Real Estate Finance		Net Lease		Operating Properties		Land & Development		Total		% of Total
Northeast	$	662,477	$	399,362	$	46,784	$	246,473	$	1,355,096	30.0	%	$	705,993	$	426,371	$	74,617	$	271,387	$	1,478,368	34.9	%
West	89,901		357,538		37,957		367,426		852,822		18.8	%	186,496		287,778		66,730		195,920		736,924		17.4	%
Southeast	167,589		251,123		149,199		138,475		706,386		15.6	%	232,553		266,670		140,429		108,106		747,758		17.7	%
Mid-Atlantic	174,046		154,296		49,561		221,859		599,762		13.2	%
Southwest	51,227		182,336		241,814		25,628		501,005		11.1	%	103,881		162,701		250,339		28,952		545,873		12.9	%
Central	164,367		67,196		67,473		31,500		330,536		7.3	%	162,420		79,327		84,898		31,500		358,145		8.5	%
Mid-Atlantic													—		159,703		34,105		128,980		322,788		7.6	%
Various⁽²⁾⁽¹⁾	90,020		48,655		10,141		—		148,816		3.3	%	25,731		2,863		—		—		28,594		0.7	%
Strategic Investments⁽²⁾⁽¹⁾	—		—		—		—		32,866		0.7	%	—		—		—		—		12,234		0.3	%
Total	$	1,399,627	$	1,460,506	$	602,929	$	1,031,361	$	4,527,289	100.0	%	$	1,417,074	$	1,385,413	$	651,118	$	764,845	$	4,230,684	100.0	%

(1)~~Based on the carrying value of our total investment portfolio gross of accumulated depreciation and general loan loss reserves.~~

~~(2)~~Combined, strategic investments and the various category include ~~$20.0~~$9.0 million of international assets.

Real Estate Finance

Our real estate finance business targets sophisticated and innovative owner/operators of real estate and real estate related projects by providing one-stop capabilities that encompass financing alternatives ranging from full envelope senior loans to mezzanine and preferred equity capital positions. As of March 31, ~~2017,~~2018, our real estate finance portfolio, ~~excluding~~including securities, totaled $1.4 billion, ~~gross~~exclusive of general loan loss reserves. The portfolio included ~~$1.1~~$1.2 billion of performing loans with a weighted average maturity of ~~1.5~~1.3 years.

The tables below summarize our loans and the reserves for loan losses associated with our loans ($ in thousands):


	March 31, 2017										March 31, 2018
	Number of Loans	Gross Carrying Value		Reserve for Loan Losses			Carrying Value		% of Total	Reserve for Loan Losses as a % of Gross Carrying Value	Number of Loans	Gross Carrying Value		Reserve for Loan Losses			Carrying Value		% of Total	Reserve for Loan Losses as a % of Gross Carrying Value
Performing loans	36	$	1,128,434	$	(18,400	)	$	1,110,034	85.4%	1.6%	44	$	1,205,114	$	(16,600	)	$	1,188,514	87.4%	1.4%
Non-performing loans	5	250,801		(60,989		)	189,812		14.6%	24.3%	4	224,113		(52,866		)	171,247		12.6%	23.6%
Total	41	$	1,379,235	$	(79,389	)	$	1,299,846	100.0%	5.8%	48	$	1,429,227	$	(69,466	)	$	1,359,761	100.0%	4.9%

	December 31, 2016										December 31, 2017
	Number of Loans	Gross Carrying Value		Reserve for Loan Losses			Carrying Value		% of Total	Reserve for Loan Losses as a % of Gross Carrying Value	Number of Loans	Gross Carrying Value		Reserve for Loan Losses			Carrying Value		% of Total	Reserve for Loan Losses as a % of Gross Carrying Value
Performing loans	35	$	1,202,127	$	(23,300	)	$	1,178,827	86.0%	1.9%	36	$	1,051,691	$	(17,500	)	$	1,034,191	85.4%	1.7%
Non-performing loans	6	253,941		(62,245		)	191,696		14.0%	24.5%	5	237,877		(60,989		)	176,888		14.6%	25.6%
Total	41	$	1,456,068	$	(85,545	)	$	1,370,523	100.0%	5.9%	41	$	1,289,568	$	(78,489	)	$	1,211,079	100.0%	6.1%

Performing Loans—The table below summarizes our performing loans ~~gross~~exclusive of reserves ($ in thousands):


	March 31, 2017			December 31, 2016			March 31, 2018			December 31, 2017
Senior mortgages	$	752,341		$	854,805		$	839,045		$	709,809
Corporate/Partnership loans	361,895			333,244			356,412			332,387
Subordinate mortgages	14,198			14,078			9,657			9,495
Total	$	1,128,434		$	1,202,127		$	1,205,114		$	1,051,691

Weighted average LTV	60		%	64		%	60		%	67		%
Yield	9.2		%	8.9		%	9.4		%	9.8		%

Non-Performing Loans—We designate loans as non-performing at such time as: (1) the loan becomes 90 days delinquent; (2) the loan has a maturity default; or (3) management determines it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan. All non-performing loans are placed on non-accrual status and income is only recognized in certain cases upon actual cash receipt. As of March 31, ~~2017,~~2018, we had non-performing loans with an aggregate carrying value of ~~$189.8~~$171.2 million compared to non-performing loans with an aggregate carrying value of ~~$191.7~~$176.9 million as of December 31, ~~2016.~~2017. We expect that our level of non-performing loans will fluctuate from period to period.

Reserve for Loan Losses—The reserve for loan losses was ~~$79.4~~$69.5 million as of March 31, ~~2017,~~2018, or ~~5.8%~~4.9% of total loans, compared to ~~$85.5~~$78.5 million or ~~5.9%~~6.1% as of December 31, ~~2016.~~2017. For the three months ended March 31, ~~2017,~~2018, the recovery of loan losses included a reduction in the general reserve of ~~$4.9~~$0.9 million due to an overall improvement in the risk ~~ratings of our loan portfolio.~~ratings. We expect that our level of reserve for loan losses will fluctuate from period to period. Due to the volatility of the commercial real estate market, the process of estimating collateral values and reserves requires the use of significant judgment. We currently believe there is adequate collateral and reserves to support the carrying values of the loans.

The reserve for loan losses includes an asset-specific component and a formula-based component. An asset-specific reserve is established for an impaired loan when the estimated fair value of the loan's collateral less costs to sell is lower than the carrying

value of the loan. As of March 31, ~~2017,~~2018, asset-specific reserves decreased to ~~$61.0~~$52.9 million compared to ~~$62.2~~$61.0 million as of December 31, ~~2016.~~2017.

The formula-based general reserve is derived from estimated principal default probabilities and loss severities applied to groups of performing loans based upon risk ratings assigned to loans with similar risk characteristics during our quarterly loan portfolio assessment. During this assessment, we perform a comprehensive analysis of our loan portfolio and assign risk ratings to loans that incorporate management's current judgments and future expectations about their credit quality based on all known and relevant factors that may affect collectability. We consider, among other things, payment status, lien position, borrower financial resources and investment in collateral, collateral type, project economics and geographical location as well as national and regional

economic factors. This methodology results in loans being segmented by risk classification into risk rating categories that are associated with estimated probabilities of default and principal loss. We estimate loss rates based on historical realized losses experienced within our portfolio and take into account current economic conditions affecting the commercial real estate market when establishing appropriate time frames to evaluate loss experience.

The general reserve decreased to ~~$18.4~~$16.6 million or ~~1.6%~~1.4% of performing loans as of March 31, ~~2017,~~2018, compared to ~~$23.3~~$17.5 million or ~~1.9%~~1.7% of performing loans as of December 31, ~~2016.~~2017. The decrease was primarily attributable to an overall improvement in the risk ~~ratings of our loan portfolio.~~ratings.

Net Lease

Our net lease business seeks to create stable cash flows through long-term net leases primarily to single tenants on our properties. We target mission-critical facilities leased on a long-term basis to tenants, offering structured solutions that combine our capabilities in underwriting, lease structuring, asset management and build-to-suit construction. We invest in new net lease investments primarily through our Net Lease Venture, in which we hold a 51.9% interest. The Net Lease Venture has a right of first offer on any new net lease investments that we source. ~~In the three months ended March 31, 2017, the~~The Net Lease Venture's investment period was extended ~~through February 1,~~from March 31, 2018 to June 30, 2018 during the first quarter 2018. The term of the Net Lease Venture extends through February 13, 2022, subject to two, one-year extension options at the discretion of ~~the Company~~us and ~~its~~our partner.

In April 2017, institutional investors acquired a controlling interest in our Ground Lease business through the merger of one of our subsidiaries and related transactions (the "Acquisition Transactions"). Our Ground Lease business was a component of our net lease segment and consisted of 12 properties subject to long-term net leases including seven Ground Leases and one master lease (covering five properties). As a result of the Acquisition Transactions, we: (i) recognized a gain of approximately $178.9 million; (ii) deconsolidated the 12 properties and the associated 2017 Secured Financing; and (iii) account for our investment in SAFE as an equity method investment (refer to Note 7).

On June 27, 2017, SAFE completed its initial public offering raising $205.0 million in gross proceeds and concurrently completed a $45.0 million private placement to us, its largest shareholder. We believe that SAFE is the first publicly-traded company formed primarily to acquire, own, manage, finance and capitalize ground leases. Ground leases generally represent ownership of the land underlying commercial real estate projects that is net leased by the fee owner of the land to the owners/operators of the real estate projects built thereon. We have an exclusivity agreement with SAFE pursuant to which we agreed, subject to certain exceptions, that we will not acquire, originate, invest in, or provide financing for a third party’s acquisition of, a Ground Lease unless we have first offered that opportunity to SAFE and a majority of its independent directors has declined the opportunity. In addition, a wholly-owned subsidiary of ours is the external manager of SAFE and our Chief Executive Officer is the Chairman of SAFE's board of directors.

As of March 31, ~~2017,~~2018, our wholly-owned net lease portfolio totaled $1.1 billion exclusive of $298.0 million of accumulated depreciation. Our net lease portfolio, including the carrying value of our equity method investments in SAFE and the Net Lease Venture, totaled ~~$1.46 billion, gross of $370.2 million of accumulated depreciation.~~$1.39 billion. The table below provides certain statistics for our net lease portfolio.

Net Lease Statistics
March 31, 2017 December 31, 2016
Square feet (mm)⁽¹⁾
17,078
17,214
Leased %⁽²⁾
99 % 98 %
Weighted average lease term (years)⁽³⁾
14.8
14.7
Yield⁽⁴⁾
8.4 % 8.3 %



	Wholly-owned Real Estate			SAFE				Net Lease Venture
Ownership %	100.0		%	39.9		%		51.9		%
Net book value (millions)	$	808		$	577		⁽¹⁾	$	659		⁽¹⁾
Accumulated depreciation (millions)	298			10				53
Gross carrying value (millions)	$	1,106		$	587			$	712

Occupancy	98.2		%	100.0		%		100.0		%
Square footage (thousands)	11,305			1,793				5,364
Weighted average lease term (years)	13.8			72.0				18.8
Weighted average yield	8.9		%	8.1		%	⁽²⁾	9.0		%	⁽²⁾


~~(1)~~	~~As of March 31, 2017 and December 31, 2016, includes 3,081 square feet at one of our equity method investments of which we own 51.9%.~~


~~(2)~~	~~Excluding equity method investments, our net lease portfolio was 98% leased as of March 31, 2017 and December 31, 2016.~~


~~(3)~~	~~Excluding equity method investments, our weighted average lease term was and 14.8 years as of March 31, 2017 and December 31, 2016.~~


~~(4)~~	~~Excludes equity method investments.~~

(1)Net book value represents the net book value of real estate and real estate-related intangibles.

(2)Represents the annualized asset yield.

Operating Properties

As of March 31, ~~2017,~~2018, our operating property portfolio, including equity method investments, totaled ~~$602.9~~$651.1 million, ~~gross~~exclusive of ~~$49.5~~$59.6 million of accumulated depreciation, and was comprised of ~~$531.0~~$610.2 million of commercial and ~~$71.9~~$40.9 million of residential real estate properties.

Commercial Operating Properties

Our commercial operating properties represent a diverse pool of assets across a broad range of geographies and collateral types including office, retail and hotel properties. We generally seek to reposition our transitional properties with the objective of maximizing their values through the infusion of capital and/or intensive asset management efforts resulting in value realization upon sale.

The table below provides certain statistics for our commercial operating property portfolio.


Commercial Operating Property Statistics
																			Commercial Operating Property Statistics
($ in millions)
	Stabilized Operating⁽¹⁾						Transitional Operating⁽¹⁾						Total						Stabilized Operating⁽¹⁾						Transitional Operating⁽¹⁾						Total
	March 31, 2017			December 31, 2016			March 31, 2017			December 31, 2016			March 31, 2017			December 31, 2016			March 31, 2018			December 31, 2017			March 31, 2018			December 31, 2017			March 31, 2018			December 31, 2017
Gross book value ($mm)⁽²⁾	$	339		$	337		$	192		$	189		$	531		$	526
Gross carrying value ($mm)⁽²⁾																			$	443		$	427		$	167		$	153		$	610		$	580
Occupancy⁽³⁾	88		%	86		%	55		%	54		%	75		%	74		%	85		%	85		%	56		%	61		%	80		%	78		%
Yield	7.9		%	8.5		%	3.7		%	1.5		%	6.4		%	5.5		%	7.8		%	6.0		%	4.3		%	3.7		%	6.9		%	5.5		%


(1)	Stabilized commercial properties generally have occupancy levels above 80% and/or generate yields resulting in a sufficient return based upon the properties’ risk profiles. Transitional commercial properties are generally those properties that do not meet these criteria.


(2)	Gross carrying value represents carrying value ~~gross~~exclusive of accumulated depreciation.


(3)	Occupancy is as of March 31, ~~2017~~2018 and December 31, ~~2016.~~2017.

Residential Operating Properties

As of March 31, ~~2017,~~2018, our residential operating portfolio ~~was~~is comprised of 41 condominium units generally located within luxury projects in major U.S. cities. The table below provides certain statistics for our residential operating property portfolio (excluding fractional units).

									Residential Operating Property Statistics	($ in millions)
	Three Months Ended				Three Months Ended March 31,
	March 31, 2017		March 31, 2016		2018		2017
Condominium units sold	7		14		3		7
Proceeds	$	10.2	$	19.2	$	7.1	$	10.2
Income from sales of real estate	$	1.9	$	4.8	$	1.2	$	1.9

Land and Development

~~At the end~~As of ~~the quarter,~~March 31, 2018, our land and development portfolio, ~~including equity~~exclusive of accumulated depreciation and including equity method investments, totaled ~~$1.02 billion,~~$764.8 million, with ~~seven~~six projects in production, ~~nine~~seven in development and 1413 in the pre-development phase. These projects are collectively entitled for approximately ~~15,000~~10,800 lots and units. The following tables ~~presents~~present certain statistics for our land and development portfolio.

													Land and Development Portfolio Rollforward	(in millions)
	Three Months Ended						Three Months Ended March 31,
	March 31, 2017			March 31, 2016			2018			2017
Beginning balance⁽¹⁾	$	945.5		$	1,002.0		$	860.3		$	945.5
Asset sales⁽²⁾	(15.3		)	(11.2		)	(186.9		)	(15.3		)
Asset transfers in (out)⁽³⁾							(21.3		)	—
Capital expenditures	26.6			34.2			31.4			26.6
Other	(1.6		)	(0.6		)	(2.1		)	(1.6		)
Ending balance⁽¹⁾	$	955.2		$	1,024.4		$	681.4		$	955.2

(1)As of March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, excludes ~~$69.5~~$75.6 million and ~~$84.8~~$63.9 million, respectively, of equity method investments.

~~(2)~~


(2)	Represents gross book value of the assets sold, rather than proceeds received. During the three months ended March 31, 2018, we received approximately $253.4 million in gross proceeds in connection with the sale of two land parcels totaling 93 acres in San Jose, CA and San Pedro, CA.

(3)Assets transferred into land and development segment or out to another segment.

									Land and Development Statistics	(in millions)
	Three Months Ended				Three Months Ended March 31,
	March 31, 2017		March 31, 2016		2018		2017
Land development revenue	$	20.1	$	14.9	$	276.4	$	20.1
Land development cost of sales	15.9		11.6		223.4		15.9
Gross margin	$	4.2	$	3.3
Earnings from land development equity method investments	3.8		6.7
Gross profit					$	53.0	$	4.2
Earnings from land and development equity method investments					1.5		3.8
Total	$	8.0	$	10.0	$	54.5	$	8.0

Results of Operations for the Three Months Ended March 31, ~~2017~~2018 compared to the Three Months Ended March 31, ~~2016~~2017


	For the Three Months Ended March 31,											For the Three Months Ended March 31,
	2017			2016			$ Change			% Change		2018			2017			$ Change			% Change
	(in thousands)											(in thousands)
Operating lease income	$	52,591		$	54,937		$	(2,346	)	(4	)%	$	45,799		$	47,347		$	(1,548	)	(3	)%
Interest income	29,058			33,219			(4,161		)	(13	)%	26,697			29,058			(2,361		)	(8	)%
Other income	11,864			11,541			323			3	%	15,320			11,864			3,456			29	%
Land development revenue	20,050			14,947			5,103			34	%	276,429			20,050			256,379			>100%
Total revenue	113,563			114,644			(1,081		)	(1	)%	364,245			108,319			255,926			>100%
Interest expense	51,193			57,021			(5,828		)	(10	)%	45,182			51,145			(5,963		)	(12	)%
Real estate expense	35,741			34,305			1,436			4	%	36,180			35,590			590			2	%
Land development cost of sales	15,910			11,575			4,335			37	%	223,407			15,910			207,497			>100%
Depreciation and amortization	13,067			14,708			(1,641		)	(11	)%	11,110			12,280			(1,170		)	(10	)%
General and administrative	25,173			23,102			2,071			9	%	28,814			25,173			3,641			14	%
(Recovery of) provision for loan losses	(4,928		)	1,506			(6,434		)	>(100%)
Recovery of loan losses												(855		)	(4,928		)	4,073			(83	)%
Impairment of assets	4,413			—			4,413			100	%	4,100			4,413			(313		)	(7	)%
Other expense	1,869			740			1,129			>100%		1,166			1,869			(703		)	(38	)%
Total costs and expenses	142,438			142,957			(519		)	—	%	349,104			141,452			207,652			>100%
Loss on early extinguishment of debt, net	(210		)	(125		)	(85		)	68	%	(372		)	(210		)	(162		)	77	%
Earnings from equity method investments	5,702			8,267			(2,565		)	(31	)%	3,332			5,702			(2,370		)	(42	)%
Income tax (expense) benefit	(607		)	414			(1,021		)	>100%
Income tax expense												(121		)	(607		)	486			(80	)%
Income from discontinued operations												—			4,766			(4,766		)	(100	)%
Income from sales of real estate	8,618			10,458			(1,840		)	(18	)%	17,048			8,110			8,938			>100%
Net income (loss)	$	(15,372	)	$	(9,299	)	$	(6,073	)	65	%	$	35,028		$	(15,372	)	$	50,400		>100%

Revenue—Operating lease income, which primarily includes income from net lease assets and commercial operating properties, decreased $1.5 million, or 3.3%, to ~~$52.6~~$45.8 million during the three months ended March 31, ~~2017~~2018 from ~~$54.9~~$47.3 million for the same period in ~~2016.~~2017. The following table summarizes our operating lease income by segment ($ in millions).



	Three Months Ended March 31,
	2018		2017		Change			Reason for Change
Net Lease	$	29.7	$	31.2	$	(1.5	)	Sale of net lease assets, partially offset by the execution of new leases.
Operating Properties	15.8		16.0		(0.2		)	Modification of leases from base rent to percentage rent.
Land and Development	0.3		0.1		0.2			Increase in operating lease income at one of our land and development properties.
Total	$	45.8	$	47.3	$	(1.5	)

~~Operating lease income from net lease assets increased to $36.5 million during the three months ended March 31, 2017 from $35.8 million for the same period in 2016.~~

The ~~increase was primarily due to the execution of new leases, partially offset by the sale of net lease assets since April 1, 2016. Operating lease income from~~following table shows certain same store ~~net lease~~statistics for our Net Lease and Operating Properties segments. Same store assets are defined as ~~net lease~~ assets we owned on or prior to January 1, ~~2016~~2017 and were in service through March 31, ~~2017, increased~~2018 (Operating lease income in millions).



	Three Months Ended March 31,
	2018			2017
Operating lease income
Net Lease	$	29.0		$	27.6
Operating Properties	$	13.4		$	13.1

Rent per square foot
Net Lease	$	10.47		$	9.78
Operating Properties	$	34.37		$	34.12

Occupancy⁽¹⁾
Net Lease	98.2		%	97.9		%
Operating Properties	80.3		%	79.4		%


(1)	Occupancy is as of March 31, 2018 and 2017.

Interest income decreased $2.4 million, or 8.1%, to ~~$35.4~~$26.7 million during the three months ended March 31, ~~2017~~2018 from ~~$34.3~~$29.1 million for the same period in 2016, an increase of 3.2%. This increase was primarily due to an increase in rent per occupied square foot to $10.48 for the three months ended March 31, 2017 from $10.07 for the same period in 2016, partially offset by a decrease in the occupancy rate, which was 98.2% as of March 31, 2017 and 99.0% as of March 31, 2016.

Operating lease income from operating properties decreased to $16.0 million during the three months ended March 31, 2017 from $19.1 million for the same period in 2016. The decrease was primarily due to commercial operating property sales since April 1, 2016, partially offset by the execution of new leases. Operating lease income from same store commercial operating properties, defined as commercial operating properties, excluding hotels and marinas, which we owned on or prior to January 1, 2016 and were in service through March 31, 2017, remained flat at $11.8 million during the three months ended March 31, 2017 as compared to the same period in 2016. Rent per occupied square foot for same store commercial operating properties was $25.14 for the three months ended March 31, 2017 and $25.19 for the same period in 2016. Occupancy rates for same store commercial operating properties were 73.9% as of March 31, 2017 and 74.1% as of March 31, 2016. Ancillary operating lease income for land and development assets was $0.1 million during the three months ended March 31, 2017 and 2016.

~~Interest income decreased to $29.1 million during the three months ended March 31, 2017 from $33.2 million for the same period in 2016.~~2017. The decrease was due primarily to a decrease in the average balance of our performing loans, which decreased to $1.14 billion in 2018 from $1.28 billion in ~~2017 from $1.57 billion in 2016.~~2017. The weighted average yield on our performing loans increased to ~~9.2%~~9.4% for the three months ended March 31, ~~2017~~2018 from ~~8.5%~~9.2% for the same period in ~~2016.~~

2017.

Other income increased $3.4 million, or 29.1%, to ~~$11.9~~$15.3 million during the three months ended March 31, ~~2017~~2018 from ~~$11.5~~$11.9 million for the same period in ~~2016.~~2017. Other income during the three months ended March 31, 2018 consisted primarily of income from our hotel properties, other ancillary income from our operating properties and interest income on our cash. Other income during the three months ended March 31, 2017 consisted of primarily ~~consisted~~ of income from our hotel properties and other ancillary income from our operating properties. ~~Other income during the three months ended March 31, 2016 consisted of~~The increase in 2018 was related primarily to an increase in income from our hotel properties ~~loan prepayment fees~~ and ~~property tax refunds.~~an increase in interest income earned on our cash.

Land development revenue and cost of sales—During the three months ended March 31, 2018, we sold land parcels and residential lots and units and recognized land development revenue of $276.4 million which had associated cost of sales of $223.4 million, representing a $53.0 million gross profit. During the three months ended March 31, 2017, we sold residential lots and units and recognized land development revenue of $20.1 million which had associated cost of sales of $15.9 ~~million. During the three months ended March 31, 2016, we sold residential lots and units and recognized land development revenue of $14.9~~ million, ~~which had associated cost of sales of $11.6 million.~~representing a $4.2 million gross profit. The increase in ~~2017 from 2016~~2018 was primarily ~~due to~~ the ~~progression~~result of ~~our~~two bulk land ~~and development business.~~parcel sales.

Costs and expenses—Interest expense decreased $5.9 million, or 11.7%, to ~~$51.2~~$45.2 million during the three months ended March 31, ~~2017~~2018 from ~~$57.0~~$51.1 million for the same period in ~~2016~~2017 due to a decrease in the balance of our average outstanding debt and lower average borrowing costs, which decreased to ~~$3.63~~$3.47 billion for the three months ended March 31, ~~2017~~2018 from ~~$4.21~~$3.63 billion for the same period in ~~2016.~~2017. Our weighted average cost of debt for the three months ended March 31, 2018 and 2017 was 5.4% and ~~2016 was~~ 5.9% ~~and 5.5%~~, respectively.

Real estate expenses increased $0.6 million, or 1.7%, to ~~$35.7~~$36.2 million during the three months ended March 31, ~~2017~~2018 from ~~$34.3~~$35.6 million for the same period in ~~2016.~~2017. The ~~increase was due~~following table summarizes our real estate expenses by segment ($ in millions).



	Three Months Ended March 31,
	2018		2017		Change			Reason for Change
Net Lease	$	3.9	$	4.6	$	(0.7	)	Sale of net lease assets.
Operating Properties	21.7		21.5		0.2			Slight increase in bad debt expense at one of our operating properties.
Land and Development	10.6		9.5		1.1			Increase in marketing and other costs at one of our land and development properties.
Total	$	36.2	$	35.6	$	0.6

Depreciation and amortization decreased $1.2 million, or 9.5%, to ~~an increase in carry costs and other expenses on our land assets, which increased to $9.5~~$11.1 million during the three months ended March 31, ~~2017~~2018 from ~~$8.7~~$12.3 million for the same period in 2016, primarily due to an increase in marketing costs on certain of our land assets. In addition, expenses for commercial operating properties increased to $19.7 million during the three months ended March 31, 2017, from $18.6 million for the same period in 2016. This increase was primarily due to an increase in expenses at certain of our hotel properties, partially offset by by property sales since April 1, 2016. Expenses from same store commercial operating properties, excluding hotels and marinas, decreased slightly to $7.3 million from $7.4 million for the same period in 2016. Expenses associated with residential operating properties decreased to $1.8 million during the three months ended March 31, 2017 from $2.6 million for the same period in 2016 due to the sale of residential units since March 31, 2016. Expenses for net lease assets increased to $4.7 million during the three months ended March 31, 2017 from $4.5 million for the same period in 2016. Expenses from same store net lease assets was $4.5 million and $3.8 million, respectively, for the three months ended March 31, 2017 and 2016.

~~Depreciation and amortization decreased to $13.1 million during the three months ended March 31, 2017 from $14.7 million for the same period in 2016,~~ primarily due to the sale of net lease and commercial operating properties in since April 1, ~~2016.~~2017.

General and administrative expenses increased $3.6 million, or 14.5%, to ~~$25.2~~$28.8 million during the three months ended March 31, ~~2017~~2018 from ~~$23.1~~$25.2 million for the same period in ~~2016, primarily due to a an increase in compensation expense related to performance incentive plans.~~2017. The following table summarizes our general and administrative expenses for the three months ended March 31, 2018 and 2017 (in millions):



	Three Months Ended March 31,
	2018			2017		Change
Payroll and related costs⁽¹⁾	$	15.3		$	14.5	$	0.8
Performance Incentive Plans⁽²⁾	7.9		5.0	5.0		2.9
Public company costs	1.5			1.8		(0.3		)
Occupancy costs	1.3			1.3		—
Other	2.8			2.6		0.2
Total	$	28.8		$	25.2	$	3.6


(1)	Increase primarily relates to severance related costs.


(2)	Represents the fair value of points issued and change in fair value of the plans during the periods presented. Such amounts may increase or decrease over time until the awards are settled. Please refer to Note 14 - Stock-Based Compensation Plans and Employee Benefits for a description of the Performance Incentive Plans.

The net recovery of loan losses was ~~$4.9~~$0.9 million during the three months ended March 31, ~~2017~~2018 as compared to a net ~~provision for~~recovery of loan losses of ~~$1.5~~$4.9 million for the same period in ~~2016.~~2017. The recovery of loan losses ~~included~~for the three months ended March 31, 2018 and 2017 was due to a ~~$4.9 million~~ reduction in the general reserve due to an overall improvement in the risk ratings of our loan portfolio. Included in the net provision for the three months ended March 31, 2016 were provisions for specific reserves of $0.9 million due to one non-performing loan and $0.6 million in the general reserve due primarily to new investment originations.

Impairment of assets was ~~$4.4~~$4.1 million during the three months ended March 31, ~~2017~~2018 and resulted from an impairment on a real estate asset held for sale due to impending contracts to sell the remaining four condominium units at the property. During the three months ended March 31, 2017 we recorded an aggregate impairment of $4.4 million resulting from shifting demand in the local condominium market along with a change in our exit strategy on a real estate asset held for sale.

Other expense ~~increased~~decreased to ~~$1.9~~$1.2 million during the three months ended March 31, ~~2017~~2018 from ~~$0.7~~$1.9 million for the same period in ~~2016.~~2017. The ~~increase~~decrease was primarily the result of costs ~~associated~~incurred in connection with the repricing of our 2016 Senior ~~Secured~~ Credit Facility ~~recorded~~ during the three months ended March 31, ~~2017.~~2017 (refer to Note 10).

Loss on early extinguishment of debt, net—During the three months ended March 31, 2018 and 2017, we incurred losses on early extinguishment of debt of $0.4 million and $0.2 million, respectively, resulting from ~~the repricing~~repayments of our 2016 Senior ~~Secured~~ Credit Facility. During the three months ended March 31, 2016, we incurred losses on the early extinguishment of debt related to accelerated amortization of discounts and fees in connection with amortization payments on our credit facilities.

Earnings from equity method investments—Earnings from equity method investments decreased $2.4 million, or 41.6%, to ~~$5.7~~$3.3 million during the three months ended March 31, ~~2017~~2018 from ~~$8.3~~$5.7 million for the same period in ~~2016.~~2017. During the three months ended March 31, 2018, we recognized $2.1 million related to operations at our Net Lease Venture, $1.5 million from our equity method investment in SAFE and $0.3 million was aggregate losses from our remaining equity method investments. During the three months ended March 31, 2017, we recognized $3.1 million related to sales activity on a land development venture, $1.0 million related to operations at our Net Lease Venture and $1.6 million was aggregate income from our remaining equity method investments. During the three months ended March 31, 2016, we recognized $8.2 million related to sales activity on a land development venture, $0.9 million related to leasing operations at our Net Lease Venture and aggregate losses of $0.8 million from our remaining equity method investments.

Income tax ~~(expense) benefit~~expense—Income ~~taxes are primarily generated by assets held by our taxable REIT subsidiaries ("TRSs"). An income~~ tax expense of ~~$0.6~~$0.1 million was recorded during the three months ended March 31, ~~2017~~2018 as compared to ~~an income tax benefit of $0.4~~$0.6 million for the same period in ~~2016.~~2017. The income tax expense for the three months ended March 31, 2018 and 2017 primarily related to state margins taxes and other minimum state franchise taxes. ~~The income tax benefit for~~

Discontinued Operations—In April 2017, institutional investors acquired a controlling interest in our Ground Lease business through the ~~three months ended March 31, 2016 primarily~~merger of one of our subsidiaries and related transactions. We received total consideration of $340.0 million, including $113.0 million in cash, including $55.5 million that we contributed to ~~taxable losses generated by sales of certain TRS properties. In each period, different TRS~~SAFE in its initial capitalization, and the proceeds from the $227.0 million 2017 Secured Financing (refer to Note 10). Income from discontinued operations represents the operating results from the 12 properties ~~were sold, each with a unique tax basis and sales value.~~comprising our Ground Lease business.

Income from sales of real estate—~~During~~Income from sales of real estate increased to $17.0 million during the three months ended March 31, ~~2017, we sold properties and recognized $8.6~~2018 from $8.1 million for the same period in 2017. The following table presents our income from sales of real ~~estate. During the three months ended March 31, 2017,we sold net lease assets that resulted~~estate by segment ($ in gains of $6.7 million and we sold residential condominiums that resulted in gains of $1.9 million. During the three months ended March 31, 2016, we sold properties and recognized $10.5 million in income from sales of real estate. During the three months ended March 31, 2016, we sold residential condominiums that resulted in income of $4.9 million, we sold net lease assets resulting in income of $4.9 million and we sold a commercial operating property resulting in income of $0.7 million.millions).



	Three Months Ended March 31,
	2018		2017
Net Lease	$	0.4	$	6.2
Operating Properties	16.6		1.9
Total	$	17.0	$	8.1

Adjusted Income

In addition to net income (loss) prepared in conformity with generally accepted accounting principles in the United States of America ("GAAP"), we use adjusted income, a non-GAAP financial measure, to measure our operating performance. Adjusted income is used internally as a supplemental performance measure adjusting for certain non-cash GAAP measures to give management a view of income more directly derived from current period activity. ~~Until the second quarter 2016, adjusted~~Adjusted income ~~was~~is calculated as net income (loss) allocable to common shareholders, prior to the effect of depreciation and amortization, provision for (recovery of) loan losses, impairment of assets, stock-based compensation expense, ~~and~~ the non-cash portion of gain (loss) on early extinguishment of ~~debt. Effective in the second quarter 2016, we modified our presentation of~~debt and is adjusted ~~income to reflect~~for the effect of gains or losses on charge-offs and dispositions on carrying value gross of loan loss reserves and impairments ("Adjusted Income"). In the third quarter 2017, we modified our presentation of Adjusted Income to exclude the effect of the amount of the liquidation preference that was recorded as a premium above book value on the redemption of preferred stock and the imputed non-cash interest expense recognized for the conversion feature of our senior convertible notes (refer to Note 10). Adjusted Income includes the impact to retained earnings (income that would have been recognized in prior periods had the accounting standards been effective during those prior periods) resulting from the adoption of new accounting standards on January 1, 2018 (refer to Note 3).

Adjusted Income should be examined in conjunction with net income (loss) as shown in our consolidated statements of operations. Adjusted Income should not be considered as an alternative to net income (loss) (determined in accordance with GAAP), or to cash flows from operating activities (determined in accordance with GAAP), as a measure of our liquidity, nor is Adjusted Income indicative of funds available to fund our cash needs or available for distribution to shareholders. Rather, Adjusted Income is an additional measure we use to analyze our business performance because it excludes the effects of certain non-cash charges that we believe are not necessarily indicative of our operating performance while including the effect of gains or losses on investments when realized. It should be noted that our manner of calculating Adjusted Income may differ from the calculations of similarly-titled measures by other companies.


	For the Three Months Ended March 31,						For the Three Months Ended March 31,
	2017			2016			2018				2017
	(in thousands)						(in thousands)
Adjusted Income
Net income (loss) allocable to common shareholders	$	(27,102	)	$	(21,187	)	$	26,809			$	(27,102	)
Add: Depreciation and amortization⁽¹⁾	15,052			17,172			20,069				15,052
Add: (Recovery of) provision for loan losses	(4,928		)	1,506
Less: Recovery of loan losses							(855		)		(4,928		)
Add: Impairment of assets⁽²⁾	4,413			915			4,100				4,413
Add: Stock-based compensation expense	5,881			4,577			9,091				5,881
Add: Loss on early extinguishment of debt, net	210			125			372				210
Add: Non-cash interest expense on senior convertible notes							1,160			—	—
Add: Impact from adoption of new accounting standards⁽²⁾							75,869				—
Less: Losses on charge-offs and dispositions⁽³⁾	(5,316		)	(3,416		)	(4,307		)		(5,316		)
Adjusted income (loss) allocable to common shareholders⁽⁴⁾	$	(11,790	)	$	(308	)
Adjusted income (loss) allocable to common shareholders							$	132,308			$	(11,790	)


(1)	Depreciation and amortization also includes our proportionate share of depreciation and amortization expense for equity method investments (including from the adoption of ASU 2017-05) and excludes the portion of depreciation and amortization expense allocable to noncontrolling interests.


(2)	~~For~~Represents an increase to retained earnings on January 1, 2018 upon the ~~three months ended March 31, 2016, impairment~~adoption of ~~assets includes impairments on cost and equity method investments recorded in "Other income" and "Earnings from equity method investments," respectively, in our consolidated statements of operations.~~ASU 2017-05 (refer to Note 3).


(3)	Represents the impact of charge-offs and dispositions realized during the period. These charge-offs and dispositions were on assets that were previously impaired for GAAP and reflected in net income but not Adjusted Income.


~~(4)~~	~~For the three months ended March 31, 2016, Adjusted Income under the previous presentation was $3.1 million.~~

Liquidity and Capital Resources

~~As of March 31, 2017, we had unrestricted cash of $897.5 million.~~ During the three months ended March 31, ~~2017,~~2018, we invested ~~$111.3~~$253.5 million associated with new investments, prior financing commitments ~~as well as~~and ongoing development during the quarter. Total investments included ~~$73.1~~$171.4 million in lending and other investments, ~~$29.4~~$33.7 million to develop our land and development assets, $36.2 million to invest in net lease assets and ~~$8.8~~$12.2 million of capital to reposition or redevelop our operating ~~properties and invest in net lease assets.~~properties. Also during the three months ended March 31, ~~2017,~~2018, we generated ~~$246.3~~$439.2 million of proceeds from loan repayments and asset sales within our portfolio, comprised of ~~$171.1~~$132.5 million from real estate finance, ~~$11.7~~$46.6 million from operating properties, ~~$20.8~~$18.9 million from net lease assets, ~~$42.2~~$240.4 million from land and development assets and ~~$0.5~~$0.8 million from other investments. These amounts are inclusive of fundings and proceeds from both consolidated investments and our pro rata share from equity method investments.

The following table outlines our capital expenditures on real estate and land and development assets as reflected in our consolidated statements of cash flows, by segment ($ in thousands):


	For the Three Months Ended March 31,				For the Three Months Ended March 31,
	2017		2016		2018		2017
Operating Properties	$	7,283	$	16,757	$	6,585	$	7,283
Net Lease	498		978		1,255		498
Total capital expenditures on real estate assets	$	7,781	$	17,735	$	7,840	$	7,781

Land and Development	$	27,604	$	29,375	$	30,954	$	27,604
Total capital expenditures on land and development assets	$	27,604	$	29,375	$	30,954	$	27,604

As of March 31, 2018, we had unrestricted cash of $366.7 million. Our primary cash uses over the next 12 months are expected to be ~~repayments of debt,~~ funding of investments, capital expenditures and funding ongoing business operations. Over the next 12 months, we currently expect to fund in the range of approximately ~~$175~~$175.0 million to ~~$225~~$225.0 million of capital expenditures within our portfolio. The majority of these amounts relate to our land and development and operating properties business segments and include multifamily and residential development activities which are expected to include approximately ~~$80~~$140.0 million in vertical construction. The amount spent will depend on the pace of our development activities as well as the extent to which we strategically partner with others to complete these projects. As of March 31, ~~2017,~~2018, we also had approximately ~~$385~~$481.3 million of maximum unfunded commitments associated with our investments of which we expect to fund the majority of over the next two years, assuming borrowers and tenants meet all milestones, ~~and~~ performance hurdles and all other conditions to fundings ~~are met~~ (see "Unfunded Commitments" below). Our capital sources to meet cash uses through the next 12 months and beyond will primarily be expected to include ~~capital raised through debt and/or equity capital raising transactions,~~ cash on hand, income from our portfolio, loan repayments from borrowers and proceeds from asset ~~sales and sales of interests in business lines.~~sales.

We cannot predict with certainty the specific transactions we will undertake to generate sufficient liquidity to meet our obligations as they come due. We will adjust our plans as appropriate in response to changes in our expectations and changes in market conditions. While economic trends have stabilized, it is not possible for us to predict whether these trends will continue or to quantify the impact of these or other trends on our financial results.

During the three months ended March 31, 2017, we repaid in full the $99.7 million principal amount of 5.85% senior unsecured notes due March 2017 and, subsequent to March 31, 2017, we repaid the $275.0 million principal amount of 9.00% senior unsecured notes due June 2017. We have other unsecured debt maturities of $1,125.0 million due before March 31, 2018.

Contractual Obligations—The following table outlines the contractual obligations related to our long-term debt obligations, loan participations payable and operating lease obligations as of March 31, ~~2017~~2018 (refer to Note 10 to the consolidated financial statements).


	Amounts Due By Period												Amounts Due By Period
	Total		Less Than 1 Year		1 - 3 Years		3 - 5 Years		5 - 10 Years		After 10 Years		Total		Less Than 1 Year		1 - 3 Years		3 - 5 Years		5 - 10 Years		After 10 Years
	(in thousands)												(in thousands)
Long-Term Debt Obligations:
Unsecured notes	$	2,845,000	$	1,125,000	$	1,070,000	$	275,000	$	375,000	$	—	$	2,507,500	$	—	$	1,170,000	$	1,337,500	$	—	$	—
Secured credit facilities	727,000		5,000		10,000		485,000		—		227,000		376,671		4,000		8,000		364,671		—		—
Mortgages	247,535		19,017		41,367		117,219		58,613		11,319		206,163		9,616		18,146		163,156		15,245		—
Trust preferred securities	100,000		—		—		—		—		100,000		100,000		—		—		—		—		100,000
Total principal maturities	3,919,535		1,149,017		1,121,367		877,219		433,613		338,319		3,190,334		13,616		1,196,146		1,865,327		15,245		100,000
Interest Payable⁽¹⁾	645,581		194,616		238,074		126,253		61,893		24,745		576,587		161,519		252,654		111,552		20,908		29,954
Loan Participations Payable⁽²⁾	160,251		—		157,424		2,827		—		—		85,621		72,986		12,635		—		—		—
Operating Lease Obligations	19,912		3,973		7,793		4,503		3,643		—		16,941		4,688		7,580		1,759		2,914		—
Total	$	4,745,279	$	1,347,606	$	1,524,658	$	1,010,802	$	499,149	$	363,064	$	3,869,483	$	252,809	$	1,469,015	$	1,978,638	$	39,067	$	129,954


(1)	Variable-rate debt assumes 1-month LIBOR of ~~0.98%~~1.88% and 3-month LIBOR of ~~1.15%~~2.31% that were in effect as of March 31, ~~2017.~~2018.


(2)	Refer to Note 9 to the consolidated financial statements.

~~2017 Secured Financing~~—In March 2017, we entered into a $227.0 million secured financing transaction (the "2017 Secured Financing") that bears interest at 3.795% and matures in April 2027. Subsequent to March 31, 2017, the 2017 Secured Financing was assumed by an entity in which we have a 49% noncontrolling interest.The 2017 Secured Financing is collateralized by 12 properties including seven ground net leases and one master lease covering the accounts of five related properties.

~~2016 Secured Term Loan~~—In December 2016, we arranged a $170.0 million delayed draw secured term loan (the "2016 Secured Term Loan"). During the three months ended March 31, 2017, we allowed the 2016 Secured Term Loan to expire and replaced the 2016 Secured Term Loan with the 2017 Secured Financing. The 2016 Secured Term Loan was collateralized by the 12 properties that now serve as collateral for the 2017 Secured Financing which were sold subsequent to March 31, 2017.

~~2016 Senior Secured Credit Facility~~—In June 2016, we entered into a senior secured credit facility of $450.0 million (the "2016 Senior Secured Credit Facility"). In August 2016, we upsized the facility to $500.0 million. The initial $450.0 million of the 2016 Senior Secured Credit Facility was issued at 99% of par and the upsize was issued at par. The 2016 Senior Secured Credit Facility initially accrued interest at a floating rate of LIBOR plus 4.50% with a 1.00% LIBOR floor. In January 2017, we repriced the 2016 Senior Secured Credit Facility to LIBOR plus 3.75% with a 1.00% LIBOR floor. The 2016 Senior Secured Credit Facility is collateralized 1.25x by a first lien on a fixed pool of assets. Proceeds from principal repayments and sales of collateral are applied to amortize the 2016 Senior Secured Credit Facility. Proceeds received for interest, rent, lease payments and fee income are retained by us. We may also make optional prepayments, subject to prepayment fees, and are required to repay 0.25% of the principal amount on the first business day of each quarter beginning on October 3, 2016. Proceeds from the 2016 Senior Secured Credit Facility, together with cash on hand, were primarily used to repay other secured debt.

~~2015 Secured Revolving Credit Facility~~—In March 2015, we entered into a secured revolving credit facility with a maximum capacity of $250.0 million (the "2015 Secured Revolving Credit Facility"). Borrowings under this credit facility bear interest at a floating rate indexed to one of several base rates plus a margin which adjusts upward or downward based upon our corporate credit rating. An undrawn credit facility commitment fee ranges from 0.375% to 0.50%, based on average utilization each quarter. During the three months ended March 31, 2017, the weighted average cost of the credit facility was 3.46%. Commitments under the revolving facility mature in March 2018. At maturity, we may convert outstanding borrowings to a one-year term loan which matures in quarterly installments through March 2019. As of March 31, 2017, based on our borrowing base of assets, we had $236.0 million of borrowing capacity available under the 2015 Secured Revolving Credit Facility.

~~Unsecured Notes~~—In March 2017, we issued $375.0 million principal amount of 6.00% senior unsecured notes due April 2022. Proceeds from the offering were primarily used to repay in full the $99.7 million principal amount of 5.85% senior unsecured notes due March 2017 and, subsequent to March 31, 2017, repay in full the $275.0 million principal amount of 9.00% senior unsecured notes due June 2017. In March 2016, we repaid our $261.4 million principal amount of 5.875% senior unsecured notes at maturity using available cash. In addition, we issued $275.0 million principal amount of 6.50% senior unsecured notes due July 2021. Proceeds from the offering were primarily used to repay $5.0 million of the 2015 Secured Revolving Credit Facility, pay

~~related financing costs, and subsequent to March 31, 2016, repay in full the $265.0 million principal amount of senior unsecured notes due July 2016.~~

~~Encumbered/Unencumbered~~Collateral Assets—The carrying value of our ~~encumbered and unencumbered~~ assets that are directly pledged or are held by subsidiaries whose equity is pledged as collateral to secure our obligations under our secured debt facilities are as follows, by asset type ~~are as follows~~ ($ in thousands):


	As of								As of
	March 31, 2017				December 31, 2016				March 31, 2018				December 31, 2017
	Encumbered Assets		Unencumbered Assets		Encumbered Assets		Unencumbered Assets		Collateral Assets⁽¹⁾		Non-Collateral Assets		Collateral Assets⁽¹⁾		Non-Collateral Assets
Real estate, net	$	1,005,826	$	470,765	$	881,212	$	610,540	$	790,545	$	511,598	$	795,321	$	486,710
Real estate available and held for sale	—		71,934		—		83,764		—		41,857		20,069		48,519
Land and development, net	35,165		919,985		35,165		910,400		25,100		656,310		25,100		835,211
Loans receivable and other lending investments, net⁽²⁾⁽³⁾	137,293		1,080,448		172,581		1,142,050		185,161		1,146,571		194,529		1,021,340
Other investments	—		197,559		—		214,406		—		422,853		—		321,241
Cash and other assets	—		1,212,055		—		639,588		—		601,322		—		898,252
Total	$	1,178,284	$	3,952,746	$	1,088,958	$	3,600,748	$	1,000,806	$	3,380,511	$	1,035,019	$	3,611,273

(1)

AsThe 2016 Senior Credit Facility and the 2015 Revolving Credit Facility are secured only by pledges of ~~March 31, 2017~~equity of certain of our subsidiaries and ~~December 31, 2016,~~not by pledges of the ~~amounts presented exclude general reserves for loan losses~~assets held by such subsidiaries. Such subsidiaries are subject to contractual restrictions under the terms of ~~$18.4 million and $23.3 million, respectively.~~such credit facilities, including restrictions on incurring new debt (subject to certain exceptions).


(2)	As of March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, the amounts presented exclude general reserves for loan losses of $16.6 million and $17.5 million, respectively.


(3)	As of March 31, 2018 and December 31, 2017, the amounts presented exclude loan participations of ~~$181.9~~$85.3 million and ~~$159.1~~$102.3 million, respectively.

Debt Covenants—Our outstanding unsecured debt securities contain corporate level covenants that include a covenant to maintain a ratio of unencumbered assets to unsecured indebtedness of at least 1.2x and a covenant not to incur additional indebtedness (except for incurrences of permitted debt), if on a pro forma basis our consolidated fixed charge coverage ratio, determined in accordance with the indentures governing our debt securities, is 1.5x or lower. If any of our covenants are breached and not cured within applicable cure periods, the breach could result in acceleration of our debt securities unless a waiver or modification is agreed upon with the requisite percentage of the bondholders. If our ability to incur additional indebtedness under the fixed charge coverage ratio is limited, we are permitted to incur indebtedness for the purpose of refinancing existing indebtedness and for other permitted purposes under the indentures.

The 2016 Senior ~~Secured~~ Credit Facility and the 2015 ~~Secured~~ Revolving Credit Facility contain certain covenants, including covenants relating to collateral coverage, dividend payments, restrictions on fundamental changes, transactions with affiliates, matters relating to the liens granted to the lenders and the delivery of information to the lenders. In particular, the 2016 Senior ~~Secured~~ Credit Facility requires us to maintain collateral coverage of at least 1.25x outstanding borrowings on the facility. The 2015 ~~Secured~~ Revolving Credit Facility is secured by a borrowing base of assets and requires us to maintain both ~~collateral coverage~~borrowing base asset value of at least 1.5x outstanding borrowings on the facility and a consolidated ratio of cash flow to fixed charges of at least 1.5x. The 2015 ~~Secured~~ Revolving Credit Facility does not require that proceeds from the borrowing base be used to pay down outstanding borrowings provided the ~~collateral coverage~~borrowing base asset value remains at least 1.5x outstanding borrowings on the facility. To satisfy this covenant, we have the option to pay down outstanding borrowings or substitute assets in the borrowing base. In addition, for so long as we maintain our qualification as a REIT, the 2016 Senior ~~Secured~~ Credit Facility and the 2015 ~~Secured~~ Revolving Credit Facility permit us to distribute 100% of our REIT taxable income on an annual basis (prior to deducting certain cumulative NOL carryforwards).

Derivatives—Our use of derivative financial instruments is primarily limited to the utilization of interest rate swaps, interest rate caps or other instruments to manage interest rate risk exposure and foreign exchange contracts to manage our risk to changes in foreign currencies. Refer to Note 12 to the consolidated financial statements.

Off-Balance Sheet Arrangements—We are not dependent on the use of any off-balance sheet financing arrangements for liquidity. We have made investments in various unconsolidated ventures. Refer to Note 7 to the consolidated financial statements for further details of our unconsolidated investments. Our maximum exposure to loss from these investments is limited to the carrying value of our investments and any unfunded commitments (see below).

Unfunded Commitments—We generally fund construction and development loans and build-outs of space in net lease assets over a period of time if and when the borrowers and tenants meet established milestones and other performance criteria. We refer to these arrangements as Performance-Based Commitments. In addition, we sometimes establish a maximum amount of additional funding which we will make available to a borrower or tenant for an expansion or addition to a project if we approve of the expansion or addition in our sole discretion. We refer to these arrangements as Discretionary Fundings. Finally, we have committed to invest capital in several real estate funds and other ventures. These arrangements are referred to as Strategic Investments. As of March 31, ~~2017~~2018, the maximum amounts of the fundings we may make under each category, assuming all performance hurdles and milestones are met under the Performance-Based Commitments ~~that we approve all Discretionary Fundings~~ and that 100% of our capital committed to Strategic Investments is drawn down, are as follows (in thousands):


	Loans and Other Lending Investments⁽¹⁾		Real Estate		Other Investments		Total		Loans and Other Lending Investments⁽¹⁾		Real Estate		Other Investments		Total
Performance-Based Commitments	$	305,862	$	9,814	$	24,059	$	339,735	$	436,639	$	10,630	$	24,587	$	471,856
Strategic Investments	—		—		45,564		45,564		—		—		9,427		9,427
Total⁽²⁾	$	305,862	$	9,814	$	69,623	$	385,299	$	436,639	$	10,630	$	34,014	$	481,283


(1)	Excludes ~~$155.3~~$83.7 million of commitments on loan participations sold that are not our obligation.


~~(2)~~	~~We did not have any Discretionary Fundings as of March 31, 2017.~~

Stock Repurchase Program—~~In February 2016, after having substantially utilized the remaining availability previously authorized, our Board of Directors authorized a new $50.0 million stock~~We may repurchase ~~program. After having substantially utilized the availability authorized~~shares in February 2016, our Board of Directors authorized an increase to the stock repurchase program to $50.0 million, effective August 4, 2016. The program authorizes the repurchase of common stock from time to time innegotiated transactions or open market ~~and privately negotiated purchases,~~transactions, including ~~pursuant to~~through one or more trading plans. ~~We did not repurchase any shares of common stock during the three months ended March 31, 2017.~~ During the three months ended March 31, ~~2016,~~2018, we repurchased ~~5.8~~0.8 million shares of our outstanding common stock for ~~$58.1~~$8.3 million, atrepresenting an average cost of ~~$9.94~~$10.22 per share. As of March 31, ~~2017,~~2018, we had remaining authorization to repurchase up to ~~$50.0~~$41.7 million of common stock under our stock repurchase program.

Critical Accounting Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and judgments in certain circumstances that affect amounts reported as assets, liabilities, revenues and expenses. We have established detailed policies and control procedures intended to ensure that valuation methods, including any judgments made as part of such methods, are well controlled, reviewed and applied consistently from period to period. We base our estimates on historical corporate and industry experience and various other assumptions that we believe to be appropriate under the circumstances. For all of these estimates, we caution that future events rarely develop exactly as forecasted, and, therefore, routinely require adjustment.

~~On January 1, 2017, we adopted Accounting Standards Update ("ASU") 2016-09,~~ ~~Compensation - Stock Compensation, Improvements~~For a discussion of our critical accounting policies, refer to ~~Employee Share-Based Payment Accounting,~~ ~~which simplified several aspects of~~Note 3 to the accounting for share-based payment transactions, including income tax, classification of awards as either equity or liabilities and classification on the statement of cash flows. The adoption did not have a material impact on our consolidated financial statements.

~~As of March 31, 2017, the remainder of our significant accounting policies, which are detailed in our 2016 Annual Report, have not changed materially.~~

New Accounting Pronouncements—For a discussion of the impact of new accounting pronouncements on our financial condition or results of operations, refer to Note 3 to the consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market Risks

Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates, commodity prices and equity prices. In pursuing our business plan, the primary market risk to which we are exposed is interest rate risk. Our operating results will depend in part on the difference between the interest and related income earned on our assets and the interest expense incurred in connection with our interest-bearing liabilities. Changes in the general level of interest rates prevailing in the financial markets will affect the spread between our floating rate assets and liabilities subject to the net amount of floating rate assets/liabilities and the impact of interest rate floors and caps. Any significant compression of the spreads between interest-earning assets and interest-bearing liabilities could have a material adverse effect on us.

In the event of a significant rising interest rate environment or economic downturn, defaults could increase and cause us to incur additional credit losses which would adversely affect our liquidity and operating results. Such delinquencies or defaults would likely have a material adverse effect on the spreads between interest-earning assets and interest-bearing liabilities. In addition, an increase in interest rates could, among other things, reduce the value of our fixed-rate interest-bearing assets and our ability to realize gains from the sale of such assets.

Interest rates are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political conditions, and other factors beyond our control. We monitor the spreads between our interest-earning assets and interest-bearing liabilities and may implement hedging strategies to limit the effects of changes in interest rates on our operations, including engaging in interest rate swaps, interest rate caps and other interest rate-related derivative contracts. Such strategies are designed to reduce our exposure, on specific transactions or on a portfolio basis, to changes in cash flows as a result of interest rate movements in the market. We do not enter into derivative contracts for speculative purposes or as a hedge against changes in our credit risk or the credit risk of our borrowers.

While a REIT may utilize derivative instruments to hedge interest rate risk on its liabilities incurred to acquire or carry real estate assets without generating non-qualifying income, use of derivatives for other purposes will generate non-qualified income for REIT income test purposes. This includes hedging asset related risks such as credit ~~foreign exchange~~ and interest rate exposure on our loan assets. As a result our ability to hedge these types of risks is limited. There can be no assurance that our profitability will not be materially adversely affected during any period as a result of changing interest rates.

The following table quantifies the potential changes in annual net income, assuming no change in our interest earning assets or interest bearing liabilities, should interest rates increase or decrease by 10, 50 or 100 ~~basis points or decrease by 10~~ basis points, assuming no change in the shape of the yield curve (i.e., relative interest rates). The base interest rate scenario assumes the one-month LIBOR rate of ~~0.98%~~1.88% as of March 31, ~~2017.~~2018. Actual results could differ significantly from those estimated in the table.

Estimated Change In Net Income

($ in thousands)


Change in Interest Rates	Net Income⁽¹⁾			Net Income⁽¹⁾
-100 Basis Points				$	(10,174	)
-50 Basis Points				(5,191		)
-10 Basis Points	$	(1,583	)	(1,061		)
Base Interest Rate	—			—
+10 Basis Points	1,583			1,067
+50 Basis Points	7,915			5,335
+100 Basis Points	15,830			10,669

(1)

We have an overall net variable-rate asset position, which results in an increase in net income when rates increase and a decrease in net income when rates decrease. As of March 31, ~~2017, $603.0~~2018, $498.0 million of our floating rate loans have a cumulative weighted average interest rate floor of ~~0.3%~~0.5% and ~~$682.9~~$462.3 million of our floating rate debt has a cumulative weighted average interest rate floor of ~~0.8%~~0.7%.

Item 4. Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The Company has formed a disclosure committee that is responsible for considering the

materiality of information and determining the disclosure obligations of the Company on a timely basis. The disclosure committee reports directly to the Company's Chief Executive Officer and Chief Financial Officer.

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the disclosure committee and other members of management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b) or Rule 15d-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective to provide reasonable assurance that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding disclosure.

In January 2017, the Company implemented a new accounting information system and, accordingly, has updated its internal controls over financial reporting for the new system. The Company has taken steps for establishing and maintaining effective internal control over financial reporting as of March 31, 2017.

~~Other than as noted above, there~~There have been no changes during the last fiscal quarter in the Company's internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in the Company's periodic reports.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company and/or one or more of its subsidiaries is party to various pending litigation matters that are considered ordinary routine litigation incidental to ~~its~~the Company's business as a finance and investment company focused on the commercial real estate ~~and real estate related business activities,~~industry, including ~~loan foreclosure and~~ foreclosure-related proceedings. In addition to such matters, the Company is a party to the following legal ~~proceedings:~~

~~Shareholder Action~~

U.S. Home Corporation ("Lennar") v. Settlers Crossing, LLC, et al. ~~(Civil Action No. DKC 08-1863)~~

~~On April 21, 2017, we and Lennar completed settlement~~issued an order denying Lennar’s petition for a writ of ~~transfer of the land, pursuant to which we conveyed the land to Lennar and received net proceeds of $231.1 million after payment of $6.3 million~~certiorari in documentary transfer taxes, subject to certain holdbacks and subject also to final resolution of the amount of post-judgment interest owed by Lennar, consisting of $114.0 million of sales proceeds, $121.8 million of interest and $1.6 million of real estate tax reimbursements.this matter. The amount of attorneys’ fees and costs to be recovered by usthe Company will be determined through further proceedings before the District Court. The Company has applied for attorney’s fees in excess of $17.0 million. A ~~portion of~~hearing on the ~~net proceeds received by us~~Company’s application for attorney’s fees has not yet been ~~paid~~scheduled. Please refer to the ~~third party which holds~~Company's 2017 Annual Report for a ~~4.3% participation interest in all proceeds received by us.~~more complete description of this matter.

Item 1a. Risk Factors

There were no material changes from the risk factors previously disclosed in ~~the Company's 2015~~our 2017 Annual Report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table sets forth the information with respect to purchases made by us or on our behalf of ~~the Company of its~~our common stock during the three months ended March 31, ~~2017.~~2018.


	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of a Publicly Announced Plan	Maximum Dollar Value of Shares that May Yet be Purchased Under the Plans⁽¹⁾		Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of a Publicly Announced Plan	Maximum Dollar Value of Shares that May Yet be Purchased Under the Plans⁽¹⁾
January 1 to January 31	—	$	—	—	$	50,000,000	35,000	$	—	35,000	$	49,625,690
February 1 to February 28	—	$	—	—	$	50,000,000	777,746	$	—	777,746	$	41,710,022
March 1 to March 31	—	$	—	—	$	50,000,000	—	$	—	—	$	—

(1)

~~In August 2016, the Company's Board of Directors authorized an increase to $50.0 million~~We may repurchase shares in ~~the stock repurchase program. The program authorizes the repurchase of common stock from time to time in~~negotiated transactions or open market ~~and privately negotiated purchases,~~transactions, including ~~pursuant to~~through one or more trading plans. ~~There is no fixed expiration date to this stock repurchase program.~~

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

INDEX TO EXHIBITS



Exhibit Number	Document Description
~~10.12~~3.2	~~iStar Inc.~~ Amended and Restated ~~Non-Employee's Directors' Deferral Plan~~ Bylaws of iStar Inc., dated April 3, 2018*
31.0	Certifications pursuant to Section 302 of the Sarbanes-Oxley Act.
32.0	Certifications pursuant to Section 906 of the Sarbanes-Oxley Act.
101**	The following financial information from the Company's Quarterly Report on Form 10-Q for the period ended March 31, ~~2017~~2018 is formatted in XBRL ("eXtensible Business Reporting Language"): (i) the Consolidated Balance Sheets (unaudited) as of March 31, ~~2017 (unaudited)~~2018 and December 31, ~~2016,~~2017, (ii) the Consolidated Statements of Operations (unaudited) for the three months ended March 31, ~~2017~~2018 and ~~2016,~~2017, (iii) the Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three months ended March 31, ~~2017~~2018 and ~~2016,~~2017, (iv) the Consolidated ~~Statement~~Statements of Changes in Equity (unaudited) for the three months ended March 31, ~~2017~~2018 and ~~2016,~~2017, (v) the Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, ~~2017~~2018 and ~~2016~~2017 and (vi) the Notes to the Consolidated Financial Statements (unaudited).


*	Incorporated by reference to the Company's Current Report on Form 8-K filed on April 3, 2018.


**	In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 is deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Exchange Act of 1934 and otherwise is not subject to liability under these sections.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



		iStar Inc. Registrant
Date:	May ~~4, 2017~~3, 2018	/s/ JAY SUGARMAN
		Jay Sugarman Chairman of the Board of Directors and Chief Executive Officer (principal executive officer)

		iStar Inc. Registrant
Date:	May ~~4, 2017~~3, 2018	/s/ ~~GEOFFREY G. JERVIS~~ANDREW C. RICHARDSON
		~~Geoffrey G. Jervis~~Andrew C. Richardson ~~Chief Operating Officer and~~ InterimChief Financial Officer (principal financial and accounting officer)

5351



	Derivative Assets as of						Derivative Liabilities as of
	March 31, 2017			December 31, 2016			March 31, 2017			December 31, 2016
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives Designated in Hedging Relationships
Foreign exchange contracts	N/A	$	—	N/A	$	—	Other Liabilities	$	307	Other Liabilities	$	8
Interest rate swaps	Other assets	58		N/A	—		N/A	—		Other Liabilities	39
Total		$	58		$	—		$	307		$	47

Derivatives not Designated in Hedging Relationships
Foreign exchange contracts	N/A	$	—	Other Assets	$	702	Other Liabilities	$	264	N/A	$	—
Interest rate cap	Other Assets	71		Other Assets	25		N/A	—		N/A	—
Total		$	71		$	727		$	264		$	—



Derivative Type	Notional Amount		Notional (USD Equivalent)		Maturity
Sells Indian rupee ("INR")/Buys USD Forward	₨	350,000	$	5,089	April 2017



Net Lease Statistics
	March 31, 2017		December 31, 2016
Square feet (mm)⁽¹⁾	17,078		17,214
Leased %⁽²⁾	99	%	98	%
Weighted average lease term (years)⁽³⁾	14.8		14.7
Yield⁽⁴⁾	8.4	%	8.3	%