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, ~~2019~~2020
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			95-6881527
(State or other jurisdiction of incorporation or organization)			~~95-6881527~~ (I.R.S. Employer Identification Number)
1114 Avenue of the Americas, 39th39th Floor
New York	,	NY	10036
(Address of principal executive offices)			~~10036~~ (Zip code)

Registrant's telephone number, including area code: ~~(212)~~ (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 every Interactive Data File required to be submitted 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 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~~ ýAccelerated Filer	Accelerated Filer	~~Accelerated filer~~ oNon‑accelerated Filer	Smaller Reporting Company	Emerging Growth Company
☒	☐	~~Non-accelerated~~ ☐ ~~filer~~ o	~~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☐

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

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value	STAR	New York Stock Exchange
8.00% Series D Cumulative Redeemable Preferred Stock, $0.001 par value	STAR-PD	New York Stock Exchange
7.65% Series G Cumulative Redeemable Preferred Stock, $0.001 par value	STAR-PG	New York Stock Exchange
7.50% Series I Cumulative Redeemable Preferred Stock, $0.001 par value	STAR-PI	New York Stock Exchange

As of ~~May 1, 2019,~~April 28, 2020, there were ~~64,693,932~~76,494,506 shares, $0.001 par value per share, of iStar Inc. common stock outstanding.

TABLE OF CONTENTS



		Page
PART I	Consolidated Financial Information
Item 1.	Financial Statements:
	Consolidated Balance Sheets (unaudited) as of March ~~31,2019~~31, 2020 and December 31, ~~2018~~2019	1
	Consolidated Statements of Operations (unaudited)—For the three months ended March 31, ~~2019~~2020 and ~~2018~~2019	2
	Consolidated Statements of Comprehensive Income (Loss) (unaudited)—For the three months ended March 31, ~~2019~~2020 and ~~2018~~2019	3
	Consolidated Statements of Changes in Equity (unaudited)—For the three months ended March 31, ~~2019~~2020 and ~~2018~~2019	4
	Consolidated Statements of Cash Flows (unaudited)—For the three months ended March 31, ~~2019~~2020 and ~~2018~~2019	5
	Notes to Consolidated Financial Statements (unaudited)	67
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3538
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	50
Item 4.	Controls and Procedures	50
PART II	Other Information	5251
Item 1.	Legal Proceedings	5251
Item 1A.	Risk Factors	5251
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52
Item 3.	Defaults Upon Senior Securities	52
Item 4.	Mine Safety Disclosures	52
Item 5.	Other Information	52
Item 6.	Exhibits	53
SIGNATURES		54

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, 2019			December 31, 2018			March 31, 2020			December 31, 2019
ASSETS
Real estate
Real estate, at cost	$	1,873,642		$	2,076,333		$	1,737,041		$	1,761,079
Less: accumulated depreciation	(252,638		)	(305,314		)	(235,952		)	(233,860		)
Real estate, net	1,621,004			1,771,019			1,501,089			1,527,219
Real estate available and held for sale	253,336			22,551			34,391			8,650
Total real estate	1,874,340			1,793,570			1,535,480			1,535,869
Net investment in leases ($10,403 of allowances as of March 31, 2020)							409,976			418,915
Land and development, net	616,350			598,218			514,064			580,545
Loans receivable and other lending investments, net	894,846			988,224
Loans receivable and other lending investments, net ($33,264 and $28,634 of allowances as of March 31, 2020 and December 31, 2019, respectively)							850,835			827,861
Other investments	521,999			304,275			1,029,552			907,875
Cash and cash equivalents	315,407			931,751			371,293			307,172
Accrued interest and operating lease income receivable, net	11,723			10,669			10,036			10,162
Deferred operating lease income receivable, net	68,712			98,302			48,812			54,222
Deferred expenses and other assets, net	368,036			289,268			452,533			442,488
Total assets	$	4,671,413		$	5,014,277		$	5,222,581		$	5,085,109
LIABILITIES AND EQUITY
Liabilities:
Accounts payable, accrued expenses and other liabilities	$	332,358		$	316,251		$	441,324		$	424,374
Liabilities associated with properties held for sale	234,267			2,341			61			57
Loan participations payable, net	25,021			22,484			37,767			35,638
Debt obligations, net	3,070,296			3,609,086			3,583,360			3,387,080
Total liabilities	3,661,942			3,950,162			4,062,512			3,847,149
Commitments and contingencies (refer to Note 11)
Commitments and contingencies (refer to Note 12)
Equity:
iStar Inc. shareholders' equity:
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
Common Stock, $0.001 par value, 200,000 shares authorized, 66,061 and 68,085 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively	66			68
Preferred Stock Series D, G and I, liquidation preference $25.00 per share (refer to Note 14)							12			12
Common Stock, $0.001 par value, 200,000 shares authorized, 77,059 and 77,810 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively							77			78
Additional paid-in capital	3,335,719			3,352,225			3,275,055			3,284,877
Accumulated deficit	(2,495,836		)	(2,472,061		)	(2,247,504		)	(2,205,838		)
Accumulated other comprehensive loss (refer to Note 13)	(29,594		)	(17,270		)
Accumulated other comprehensive loss (refer to Note 14)							(59,522		)	(38,707		)
Total iStar Inc. shareholders' equity	810,371			862,978			968,118			1,040,422
Noncontrolling interests	199,100			201,137			191,951			197,538
Total equity	1,009,471			1,064,115			1,160,069			1,237,960
Total liabilities and equity	$	4,671,413		$	5,014,277		$	5,222,581		$	5,085,109

Note - Refer to Note 2 for details on the Company's consolidated variable interest entities ("VIEs").

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,
	2020			2019
Revenues:
Operating lease income	$	47,346		$	58,915
Interest income	17,216			20,375
Interest income from sales-type leases	8,355			—
Other income	20,368			14,813
Land development revenue	80,176			12,699
Total revenues	173,461			106,802
Costs and expenses:
Interest expense	43,392			46,577
Real estate expense	22,498			25,940
Land development cost of sales	77,059			14,449
Depreciation and amortization	14,486			15,668
General and administrative	34,271			21,099
Provision for (recovery of) loan losses	4,003			(97		)
Provision for losses on net investment in leases	1,292			—
Impairment of assets	1,708			3,851
Other expense	74			508
Total costs and expenses	198,783			127,995
Income from sales of real estate	—			9,407
Loss from operations before earnings from equity method investments and other items	(25,322		)	(11,786		)
Loss on early extinguishment of debt, net	(4,115		)	(468		)
Earnings (losses) from equity method investments	16,612			5,309
Net loss before income taxes	(12,825		)	(6,945		)
Income tax expense	(60		)	(25		)
Net loss	(12,885		)	(6,970		)
Net (income) attributable to noncontrolling interests	(2,691		)	(2,471		)
Net loss attributable to iStar Inc.	(15,576		)	(9,441		)
Preferred dividends	(5,874		)	(8,124		)
Net loss allocable to common shareholders	$	(21,450	)	$	(17,565	)
Per common share data:
Net loss allocable to common shareholders:
Basic	$	(0.28	)	$	(0.26	)
Diluted	$	(0.28	)	$	(0.26	)
Weighted average number of common shares:
Basic	77,444			67,747
Diluted	77,444			67,747

For the Three Months Ended March 31,
2019 2018
Revenues:
Operating lease income $ 58,915
$ 45,799
Interest income 20,375
26,697
Other income 14,813
15,320
Land development revenue 12,699
276,429
Total revenues 106,802
364,245
Costs and expenses:
Interest expense 46,577
45,182
Real estate expense 25,940
36,180
Land development cost of sales 14,449
223,407
Depreciation and amortization 15,668
11,110
General and administrative 21,099
28,814
Recovery of loan losses (97 ) (855 )
Impairment of assets 3,851
4,100
Other expense 508
1,166
Total costs and expenses 127,995
349,104
Income from sales of real estate 9,407
17,048
Income (loss) from operations before earnings from equity method investments and other items (11,786 ) 32,189
Loss on early extinguishment of debt, net (468 ) (372 )
Earnings from equity method investments 5,309
3,332
Net income (loss) before income taxes (6,945 ) 35,149
Income tax expense (25 ) (121 )
Net income (loss) (6,970 ) 35,028
Net (income) attributable to noncontrolling interests (2,471 ) (95 )
Net income (loss) attributable to iStar Inc. (9,441 ) 34,933
Preferred dividends (8,124 ) (8,124 )
Net income (loss) allocable to common shareholders $ (17,565 ) $ 26,809
Per common share data:
Net income (loss) allocable to common shareholders:
Basic $ (0.26 ) $ 0.39
Diluted $ (0.26 ) $ 0.35
Weighted average number of common shares:
Basic 67,747
67,913
Diluted 67,747
83,670

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,
2019 2018
Net income (loss) $ (6,970 ) $ 35,028
Other comprehensive income (loss):
Impact from adoption of new accounting standards —
276
Reclassification of losses on cash flow hedges into earnings upon realization⁽¹⁾
7
9
Unrealized gains (losses) on available-for-sale securities 1,000
(971 )
Unrealized gains (losses) on cash flow hedges (15,012 ) 2,351
Unrealized losses on cumulative translation adjustment —
(108 )
Other comprehensive income (loss) (14,005 ) 1,557
Comprehensive income (loss) (20,975 ) 36,585
Comprehensive (income) attributable to noncontrolling interests (790 ) (95 )
Comprehensive income (loss) attributable to iStar Inc. $ (21,765 ) $ 36,490



	For the Three Months Ended March 31,
	2020			2019
Net loss	$	(12,885	)	$	(6,970	)
Other comprehensive income (loss):
Reclassification of losses on cash flow hedges into earnings upon realization⁽¹⁾	1,314			7
Unrealized gains on available-for-sale securities	203			1,000
Unrealized losses on cash flow hedges	(27,776		)	(15,012		)
Other comprehensive loss	(26,259		)	(14,005		)
Comprehensive loss	(39,144		)	(20,975		)
Comprehensive (income) loss attributable to noncontrolling interests	2,753			(790		)
Comprehensive loss attributable to iStar Inc.	$	(36,391	)	$	(21,765	)

(1)

~~Amount~~Amounts reclassified to "Interest expense" in the Company's consolidated statements of operations ~~is $151~~ for the three months ended March 31, ~~2019.~~2020 and 2019 are $1,088 and $151, respectively. Amounts reclassified to "Earnings (losses) from equity method investments" in the Company's consolidated statements of operations ~~are $(144) and $9~~ for the three months ended March 31, 2020 and 2019 are $226 and ~~2018,~~$(144), 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, 2019 and 2018~~

(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			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, 2019																							$	12	$	—	$	78		$	3,284,877		$	(2,205,838	)	$	(38,707	)	$	197,538		$	1,237,960
Impact from adoption of new accounting standards (refer to Note 3)																							—		—		—			—			(12,382		)	—			—			(12,382		)
Dividends declared—preferred																							—		—		—			—			(5,874		)	—			—			(5,874		)
Dividends declared—common ($0.10 per share)																							—		—		—			—			(7,834		)	—			—			(7,834		)
Issuance of stock/restricted stock unit amortization, net																							—		—		—			2,222			—			—			727			2,949
Net income (loss)																							—		—		—			—			(15,576		)	—			2,691			(12,885		)
Change in accumulated other comprehensive income (loss)																							—		—		—			—			—			(20,815		)	(5,444		)	(26,259		)
Repurchase of stock																							—		—		(1		)	(12,044		)	—			—			—			(12,045		)
Contributions from noncontrolling interests																							—		—		—			—			—			—			163			163
Distributions to noncontrolling interests																							—		—		—			—			—			—			(3,724		)	(3,724		)
Balance as of March 31, 2020																							$	12	$	—	$	77		$	3,275,055		$	(2,247,504	)	$	(59,522	)	$	191,951		$	1,160,069

Balance as of December 31, 2018	$	12	$	4	$	68		$	3,352,225		$	(2,472,061	)	$	(17,270	)	$	201,137		$	1,064,115		$	12	$	4	$	68		$	3,352,225		$	(2,472,061	)	$	(17,270	)	$	201,137		$	1,064,115
Dividends declared—preferred	—		—		—			—			(8,124		)	—			—			(8,124		)	—		—		—			—			(8,124		)	—			—			(8,124		)
Dividends declared—common ($.09 per share)	—		—		—			—			(6,210		)	—			—			(6,210		)
Dividends declared—common ($0.09 per share)																							—		—		—			—			(6,210		)	—			—			(6,210		)
Issuance of stock/restricted stock unit amortization, net	—		—		—			2,661			—			—			428			3,089			—		—		—			2,661			—			—			428			3,089
Net loss	—		—		—			—			(9,441		)	—			2,471			(6,970		)
Change in accumulated other comprehensive income (loss)	—		—		—			—			—			(12,324		)	(1,681		)	(14,005		)
Net income (loss)																							—		—		—			—			(9,441		)	—			2,471			(6,970		)
Change in accumulated other comprehensive income																							—		—		—			—			—			(12,324		)	(1,681		)	(14,005		)
Repurchase of stock	—		—		(2		)	(19,167		)	—			—			—			(19,169		)	—		—		(2		)	(19,167		)	—			—			—			(19,169		)
Distributions to noncontrolling interests	—		—		—			—			—			—			(3,255		)	(3,255		)	—		—		—			—			—			—			(3,255		)	(3,255		)
Balance as of March 31, 2019	$	12	$	4	$	66		$	3,335,719		$	(2,495,836	)	$	(29,594	)	$	199,100		$	1,009,471		$	12	$	4	$	66		$	3,335,719		$	(2,495,836	)	$	(29,594	)	$	199,100		$	1,009,471

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	—		—		—			—			34,933			—			95			35,028
Change in accumulated other comprehensive income (loss)	—		—		—			—			—			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	—		—		—			—			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


(1)	Refer to Note 1314 for details on the Company's Preferred Stock.

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,
	2020			2019
Cash flows from operating activities:
Net loss	$	(12,885	)	$	(6,970	)
Adjustments to reconcile net loss to cash flows from operating activities:
Provision for (recovery of) loan losses	4,003			(97		)
Provision for losses on net investment in leases	1,292			—
Impairment of assets	1,708			3,851
Depreciation and amortization	14,486			15,668
Non-cash interest income from sales-type leases	(1,570		)	—
Stock-based compensation expense	16,270			4,249
Amortization of discounts/premiums and deferred financing costs on debt obligations, net	3,320			3,616
Amortization of discounts/premiums and deferred interest on loans, net	(8,404		)	(9,853		)
Deferred interest on loans received	—			5,850
Earnings from equity method investments	(16,612		)	(5,309		)
Distributions from operations of other investments	5,009			1,389
Deferred operating lease income	(3,618		)	(4,222		)
Income from sales of real estate	—			(9,407		)
Land development revenue in excess of cost of sales	(3,117		)	1,750
Loss on early extinguishment of debt, net	4,115			468
Other operating activities, net	(9,710		)	(181		)
Changes in assets and liabilities:
Changes in accrued interest and operating lease income receivable	79			(954		)
Changes in deferred expenses and other assets, net	(3,039		)	(1,512		)
Changes in accounts payable, accrued expenses and other liabilities	(12,324		)	(44,869		)
Cash flows used in operating activities	(20,997		)	(46,533		)
Cash flows from investing activities:
Originations and fundings of loans receivable, net	(37,977		)	(58,318		)
Capital expenditures on real estate assets	(4,008		)	(5,184		)
Capital expenditures on land and development assets	(15,035		)	(37,762		)
Acquisitions of real estate, net investments in leases and land assets	—			(109,663		)
Repayments of and principal collections on loans receivable and other lending investments, net	18,346			157,915
Net proceeds from sales of real estate	7,493			58,529
Net proceeds from sales of land and development assets	76,776			11,455
Distributions from other investments	9,866			46,778
Contributions to and acquisition of interest in other investments	(118,991		)	(260,297		)
Other investing activities, net	769			(16,685		)
Cash flows provided by (used in) investing activities	(62,761		)	(213,232		)
Cash flows from financing activities:
Borrowings from debt obligations	306,180			63,500
Repayments and repurchases of debt obligations	(113,634		)	(379,797		)
Preferred dividends paid	(5,874		)	(8,124		)
Common dividends paid	(7,797		)	(6,127		)
Repurchase of stock	(18,153		)	(15,328		)
Payments for debt prepayment or extinguishment costs	(3,316		)	—
Payments for deferred financing costs	(2,382		)	—
Payments for withholding taxes upon vesting of stock-based compensation	(1,984		)	(1,842		)
Contributions from noncontrolling interests	163			—
Distributions to noncontrolling interests	(3,724		)	(3,255		)
Cash flows used in financing activities	149,479			(350,973		)
Effect of exchange rate changes on cash	(25		)	8
Changes in cash, cash equivalents and restricted cash	65,696			(610,730		)
Cash, cash equivalents and restricted cash at beginning of period	352,206			974,544
Cash, cash equivalents and restricted cash at end of period	$	417,902		$	363,814

iStar Inc.

Consolidated Statements of Cash Flows

(In thousands)

(unaudited)

For the Three Months Ended March 31,
2019 2018
Cash flows from operating activities:
Net income (loss) $ (6,970 ) $ 35,028
Adjustments to reconcile net income to cash flows from operating activities:
Recovery of loan losses (97 ) (855 )
Impairment of assets 3,851
4,100
Depreciation and amortization 15,668
11,110
Stock-based compensation expense 4,249
9,091
Amortization of discounts/premiums and deferred financing costs on debt obligations, net 3,616
3,943
Amortization of discounts/premiums and deferred interest on loans, net (9,853 ) (9,067 )
Deferred interest on loans received 5,850
17,930
Earnings from equity method investments (5,309 ) (3,332 )
Distributions from operations of other investments 1,389
3,101
Deferred operating lease income (4,222 ) (2,239 )
Income from sales of real estate (9,407 ) (17,048 )
Land development revenue in excess of cost of sales 1,750
(53,022 )
Loss on early extinguishment of debt, net 468
372
Other operating activities, net (181 ) 865
Changes in assets and liabilities:
Changes in accrued interest and operating lease income receivable (954 ) 617
Changes in deferred expenses and other assets, net (1,512 ) (2,016 )
Changes in accounts payable, accrued expenses and other liabilities (44,869 ) (45,144 )
Cash flows used in operating activities (46,533 ) (46,566 )
Cash flows from investing activities:
Originations and fundings of loans receivable, net (58,318 ) (103,288 )
Capital expenditures on real estate assets (5,184 ) (7,840 )
Capital expenditures on land and development assets (37,762 ) (30,954 )
Acquisitions of real estate assets (109,663 ) —
Repayments of and principal collections on loans receivable and other lending investments, net 157,915
114,525
Net proceeds from sales of real estate 58,529
48,469
Net proceeds from sales of land and development assets 11,455
130,304
Distributions from other investments 46,778
17,813
Contributions to and acquisition of interest in other investments (260,297 ) (43,391 )
Other investing activities, net (16,685 ) 491
Cash flows provided by (used in) investing activities (213,232 ) 126,129
Cash flows from financing activities:
Borrowings from debt obligations 63,500
—
Repayments and repurchases of debt obligations (379,797 ) (349,658 )
Preferred dividends paid (8,124 ) (8,124 )
Common dividends paid (6,127 ) —
Repurchase of stock (15,328 ) (8,304 )
Payments for deferred financing costs —
(252 )
Payments for withholding taxes upon vesting of stock-based compensation (1,842 ) (3,845 )
Distributions to noncontrolling interests

(3,255 ) —
Other financing activities, net —
9
Cash flows used in financing activities (350,973 ) (370,174 )
Effect of exchange rate changes on cash 8
22
Changes in cash, cash equivalents and restricted cash (610,730 ) (290,589 )
Cash, cash equivalents and restricted cash at beginning of period 974,544
677,733
Cash, cash equivalents and restricted cash at end of period $ 363,814
$ 387,144
Supplemental disclosure of non-cash investing and financing activity:
Fundings and repayments of loan receivables and loan participations, net

$ 2,502
$ (17,117 )
Accrued repurchase of stock 3,841
—
Contributions of land and development assets to equity method investments, net 4,073
—
Accounts payable for capital expenditures on real estate assets —
338
Developer fee payable —
28,831
Acquisitions of land and development assets through foreclosure —
4,600
Financing provided on sales of land and development assets, net —
142,639



	For the Three Months Ended March 31,
	2020		2019
Supplemental disclosure of non-cash investing and financing activity:
Fundings and repayments of loan receivables and loan participations, net	$	2,110	$	2,502
Contributions of land and development assets to equity method investments, net	—		4,073
Accrued repurchase of stock	250		3,841

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

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iStar Inc.

Notes to Consolidated Financial Statements

(unaudited)

Note 1—Business and Organization

Business—iStar Inc. (the "Company") finances, invests in and develops real estate and real estate related projects as part of its fully-integrated investment platform. The Company also manages entities focused on ground lease and net lease investments (refer to Note 7)8). The Company has invested ~~approximately~~over $40 billion of capital 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 net lease, real estate finance, ~~net lease,~~ operating properties and land and development (refer to Note ~~17)~~18).

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 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, ~~2018~~2019 (the ~~"2018 Annual~~"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 VIEs for which the Company is the primary beneficiary. All 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 provided no financial support to those VIEs that it was not previously contractually required to provide.

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iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Consolidated VIEs—The Company consolidates VIEs for which it is considered the primary beneficiary. 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, ~~2019.~~2020. The following table presents the assets and liabilities of the Company's consolidated VIEs as of March 31, ~~2019~~2020 and December 31, ~~2018~~2019 ($ in thousands):



	As of
	March 31, 2020			December 31, 2019
ASSETS
Real estate
Real estate, at cost	$	893,097		$	891,000
Less: accumulated depreciation	(43,617		)	(37,542		)
Real estate, net	849,480			853,458
Land and development, net	268,524			273,617
Other investments	44			45
Cash and cash equivalents	22,704			19,112
Accrued interest and operating lease income receivable, net	552			1,208
Deferred operating lease income receivable, net	22,064			19,547
Deferred expenses and other assets, net	133,556			134,117
Total assets	$	1,296,924		$	1,301,104
LIABILITIES
Accounts payable, accrued expenses and other liabilities	$	118,337		$	107,455
Debt obligations, net	487,445			482,918
Total liabilities	605,782			590,373

As of
March 31,
2019 December 31,
2018
ASSETS
Real estate
Real estate, at cost $ 848,059
$ 848,052
Less: accumulated depreciation (19,736 ) (15,365 )
Real estate, net 828,323
832,687
Land and development, net 305,800
279,031
Other investments 68
72
Cash and cash equivalents 15,963
25,219
Accrued interest and operating lease income receivable, net 1,781
1,302
Deferred operating lease income receivable, net 10,639
8,972
Deferred expenses and other assets, net 142,177
167,324
Total assets $ 1,304,751
$ 1,314,607
LIABILITIES
Accounts payable, accrued expenses and other liabilities $ 103,523
$ 106,907
Debt obligations, net 483,508
485,000
Total liabilities 587,031
591,907

Unconsolidated VIEs—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, ~~2019,~~2020, the Company's maximum exposure to loss from these investments does not exceed the sum of the ~~$70.4~~$123.8 million carrying value of the investments, which are classified in "Other investments" on the Company's consolidated balance sheets, and ~~$30.8~~$14.7 million of related unfunded commitments.

Note 3—Summary of Significant Accounting Policies

The following ~~paragraphs describe~~paragraph describes the impact on the Company's consolidated financial statements from the adoption of Accounting Standards Updates ("ASUs") on January 1, ~~2019.~~2020.

The Company adopted ASU ~~2016-02 and ASU 2018-11—Accounting Standards Update ("ASU") 2016-02, Leases~~2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments ("ASU ~~2016-02"~~2016-13") ~~required~~, as amended, on January 1, 2020 using the ~~recognition of right-of-use lease assets and lease liabilities by~~modified retrospective approach method. Under the Company as lessee for those leases classified as operating or finance leases, both measured at the present value of the lease payments, on its consolidated balance sheets. For operating lease arrangements as of December 31, 2018 for which the Company was the lessee, primarily under leases of office space and certain ground leases, and a finance lease the Company entered into during the three months ended March 31, 2019,modified retrospective approach, the Company recorded ~~operating lease right-of-use assets~~a cumulative effect adjustment to retained earnings by increasing its allowance for loan losses and recording an initial allowance for losses on net investment in leases. Periods presented that are prior to the adoption date of ~~$31.6~~January 1, 2020 will not be adjusted. ASU 2016-13 replaced the incurred loss impairment methodology with a methodology that reflects a current expected credit loss ("Expected Loss"). ASU 2016-13 impacted all of the Company’s investments held at amortized cost, which included its loans (including unfunded loan commitments), financing receivables, net investment in leases and held-to-maturity debt securities.Upon adoption of ASU 2016-13 on January 1, 2020, the Company recorded an increase to its allowance for loan losses of $3.3 million and an initial allowance for losses on net investment in leases of $9.1 million, both of which were recorded as a ~~finance lease right-of-use asset~~cumulative effect adjustment to retained earnings. Subsequent increases or decreases in the allowance for loan losses or the allowance for losses on net investment in leases will be charged to "Provision for (recovery of) loan losses" and "Provision for (recovery of) losses on net investment in leases," respectively, in the Company's consolidated statements of $68.1 million in "Deferred expenses and other assets, net" and operating lease liabilities of $31.6 million and a finance lease liability of $68.1 million in "Accounts payable, accrued expenses and other liabilities"operations. Refer to "Significant Accounting Policies" below for more information on ~~its consolidated balance sheets (refer to Significant Accounting Policies below). The accounting applied by~~how the Company ~~as a lessor is generally unchanged from that applied under previous GAAP.~~determines its allowance for loan losses and its allowance for losses on net investment in leases.

Management elected the practical expedient package that allowed the Company: (a) to not reassess whether any expired or existing contracts entered into prior to January 1, 2019 are or contain leases; (b) to not reassess the lease classification for any expired or existing leases entered into prior to January 1, 2019; and (c) to not reassess initial direct costs for any expired or existing leases entered into prior to January 1, 2019. In addition, the Company elected to not record on its consolidated balance sheets leases whose term is less than 12 months at lease inception.

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iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Significant Accounting Policies

Allowance for Loan Losses and Net Investment in Leases— The Company performs quarterly a comprehensive analysis of its loan and sales-type lease portfolios and assigns risk ratings that incorporate management's current judgments about credit quality based on all known and relevant internal and external factors that may affect collectability. The Company considers, among other things, payment status, lien position, borrower or tenant financial resources and investment collateral, collateral type, project economics and geographical location as well as national and regional economic factors. This methodology results in loans and sales-type leases being risk rated, with ratings ranging from "1" to "5" with "1" representing the lowest risk of loss and "5" representing the highest risk of loss. The Company estimates loss rates based on historical realized losses experienced within its portfolio taking into account current economic conditions affecting the commercial real estate market when establishing appropriate time frames to evaluate loss experience.

Upon adoption of ASU ~~2018-11, Leases amended ASU 2016-02 so that:~~2016-13 on January 1, 2020, the Company estimates its Expected Loss on its loans (including unfunded loan commitments), held-to-maturity debt securities and net investment in leases based on relevant information including historical realized loss rates, current market conditions and reasonable and supportable forecasts that affect the collectability of its investments. The estimate of the Company's Expected Loss requires significant judgment and the Company analyzes its loan portfolio based upon its different categories of financial assets, which includes (i) ~~entities could elect~~loans and held-to-maturity debt securities; (ii) construction loans; and (iii) net investment in leases and financings that resulted from the acquisition of properties that did not qualify as a sale leaseback transaction and, as such, are accounted for as financing receivables (refer to Note 5).

For the Company's loans and held-to-maturity debt securities, the Company utilized a loan loss model developed by Trepp LLC ("Trepp") to estimate its Expected Loss allowance. The model is a loss forecasting tool that utilizes loan level data including each loans position in the capital structure, interest rates, maturity dates, unfunded commitments, debt service coverage ratios, etc. and also utilizes forward looking macroeconomic variables and pool-level mean loss rates to produce an Expected Loss over the life each loan. The Company utilized the model to estimate its Expected Loss for this category of loans after inputting its individual loan level data for this category of loans into the model.

For the Company's construction loans, the Company analyzed its historical realized loss experience on its construction loan portfolio to estimate its Expected Loss allowance. The Company also utilized third-party market data that included historical loss rates on commercial real estate loans and forecasted economic trends, including interest and unemployment rates. The Company utilized the third-party market data to support the Expected Loss the Company calculated using its historical realized loss experience.

For the Company's net investment in leases and financings that resulted from the acquisition of properties that did not ~~recast~~qualify as sale leaseback transactions, the ~~comparative periods presented when transitioning to ASC 842 by allowing entities to change their initial application~~Company analyzed historical loss rates for lessors from tenants with a credit rating similar to the ~~beginning~~Company's tenant at these properties. The Company also utilized third-party market information as well as market data from Trepp which forecasted economic trends, including interest and unemployment rates, to assist in developing a probability of default and loss given default to calculate the Company's Expected Loss. The Company utilized the third-party market information to support the Expected Loss the Company calculated by analyzing the historical loss rates for lessors from tenants with a credit rating similar to the Company's tenant.

The Company considers a loan or sales-type lease to be non-performing and places it on non-accrual status at such time as: (1) it becomes 90 days delinquent; (2) it has a maturity default; or (3) management determines it is probable that it will be unable to collect all amounts due according to the contractual terms of the ~~period~~loan or sales-type lease. Non-accrual loans or sales-type leases are returned to accrual status when they have become contractually current and management believes all amounts contractually owed will be received. The Company will record a specific allowance if the Company determines that the collateral fair value less costs to sell is less than the carrying value of ~~adoption;~~a collateral-dependent asset. The specific allowance is increased (decreased) through "Provision for (recovery of) loan losses" or "Provision for losses on net investment in leases" in the Company's consolidated statements of operations and ~~(ii) provided lessors~~is decreased by charge-offs. During delinquency and the foreclosure process, there are typically numerous points of negotiation with the borrower or tenant as the Company works toward a settlement or other alternative resolution, which can impact the potential for repayment or receipt of collateral. The Company's policy is to charge off a loan when it determines, based on a variety of factors, that all commercially reasonable means of recovering the loan balance have been exhausted. This may occur at different times, including when the Company receives cash or other assets in a pre-foreclosure sale or takes control of the underlying collateral in full satisfaction of the loan upon foreclosure or deed-in-lieu, or when the Company has otherwise ceased significant collection efforts. The Company considers circumstances such as the foregoing to be indicators that the final steps in the loan collection process have occurred and that a loan is uncollectible. At this point, a loss is confirmed and the loan and related allowance will be charged off.

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iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

The Company made the accounting policy election to record accrued interest on its loan portfolio separate from its loans receivable and other lending investments and to exclude accrued interest from its amortized cost basis disclosures (refer to Note 7). As of March 31, 2020 and December 31, 2019, accrued interest was $4.8 million and $4.2 million, respectively, and is recorded in "Accrued interest and operating lease income receivable, net" on the Company's consolidated balance sheets. The Company places loans on non-accrual status once the loan becomes 90 days delinquent and reverses any accrued interest as a reduction to interest income at such time. As such, the Company elected the practical expedient to not ~~separate non-lease components from~~record an allowance against accrued interest receivable. During the ~~associated lease component of~~three months ended March 31, 2020, the ~~contractual payments if certain conditions are met. Management elected both of these provisions.~~

ASU 2018-16—ASU 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate ("SOFR") Overnight Index Swap ("OIS") Rate as a Benchmark Interest Rate for Hedge Accounting Purposes was issued in October 2018 and expands the list of U.S. benchmark interest rates permitted in the application of hedge accounting by adding the OIS rate based on SOFR as an eligible benchmark interest rate. The adoption of ASU 2018-16Company did not ~~have a material impact~~reverse any accrued interest on ~~the Company's consolidated financial statements.~~its loan portfolio.

~~Significant Accounting Policies~~

Restricted cash—The following table provides a reconciliation of the cash and cash equivalents and restricted cash reported in the Company's consolidated balance sheets that total to the same amount as reported in the consolidated statements of cash flows (in thousands):


	March 31, 2019		December 31, 2018		March 31, 2018		December 31, 2017		March 31, 2020		December 31, 2019		March 31, 2019		December 31, 2018
Cash and cash equivalents	$	315,407	$	931,751	$	366,723	$	657,688	$	371,293	$	307,172	$	315,407	$	931,751
Restricted cash included in deferred expenses and other assets, net⁽¹⁾	48,407		42,793		20,421		20,045		46,609		45,034		48,407		42,793
Total cash, cash equivalents and restricted cash reported in the consolidated statements of cash flows	$	363,814	$	974,544	$	387,144	$	677,733	$	417,902	$	352,206	$	363,814	$	974,544


(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.

~~Deferred expenses and other assets and accounts payable, accrued expenses and other liabilities—~~Effective January 1, 2019 with the adoption of ASU 2016-02, the Company, as lessee, records right-of-use lease assets in "Deferred expenses and other assets" and lease liabilities in "Accounts payable, accrued expenses and other liabilities" on its consolidated balance sheets for operating and finance leases, both measured at the present value of the lease payments. Some of the Company's lease agreements include extension options, which are not included in the lease payments unless the extensions are reasonably certain to be exercised.

For operating leases, the Company recognizes a single lease cost for office leases in "General and administrative" and a single lease cost for ground leases in "Real estate expense" in the consolidated statements of operations, calculated so that the cost of the lease is allocated generally on a straight-line basis over the term of the lease, and classifies all cash payments within operating activities in the consolidated statements of cash flows. For finance leases, the Company recognizes amortization of the right-of-use assets on a straight-line basis over the term of the lease in "Depreciation and amortization" and interest expense on the lease liability using the effective interest method in "Interest expense" in the consolidated statements of operations. Repayments of the principal portion of the finance lease liability are classified within financing activities in the consolidated statements of cash flows and payments of interest on a finance lease liability are classified within operating activities in the consolidated statement of cash flows.

For the remainder of the Company's significant accounting policies, refer to the Company's ~~2018~~ Annual Report.

New Accounting Pronouncements—In ~~June 2016~~, March 2020, the~~FASB~~ Financial Accounting Standards Board issued ASU ~~2016-13, Financial Instruments - Credit Losses: Measurement~~2020-04, Reference Rate Reform ("ASU 2020-04"). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. In March 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of ~~Credit Losses~~effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on ~~Financial Instruments ("ASU 2016-13"), which was issued to provide financial statement users~~the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent 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.past presentation. The Company ~~currently records a general reserve that covers performing loans~~continues to evaluate the impact of the guidance and ~~reserves for loan losses are recorded when: (i) available information~~may apply other elections as ~~of each balance sheet date indicates that it is probable a loss has occurred~~applicable as additional changes in the 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 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 experiencedmarket occur.

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iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

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. 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 is currently evaluating the impact from ASU 2016-13 on the Company's consolidated financial statements.

Note 4—Real Estate

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



	Net Lease⁽¹⁾			Operating Properties			Total
As of March 31, 2020
Land, at cost	$	188,418		$	106,186		$	294,604
Buildings and improvements, at cost	1,333,766			108,671			1,442,437
Less: accumulated depreciation	(221,008		)	(14,944		)	(235,952		)
Real estate, net⁽¹⁾	1,301,176			199,913			1,501,089
Real estate available and held for sale⁽²⁾	25,730			8,661			34,391
Total real estate	$	1,326,906		$	208,574		$	1,535,480
As of December 31, 2019
Land, at cost	$	199,710		$	106,187		$	305,897
Buildings and improvements, at cost	1,347,321			107,861			1,455,182
Less: accumulated depreciation	(219,949		)	(13,911		)	(233,860		)
Real estate, net⁽¹⁾	1,327,082			200,137			1,527,219
Real estate available and held for sale⁽²⁾	—			8,650			8,650
Total real estate	$	1,327,082		$	208,787		$	1,535,869

Net Lease
Operating
Properties
Total
As of March 31, 2019
Land, at cost $ 302,199
$ 105,771
$ 407,970
Buildings and improvements, at cost 1,389,332
76,340
1,465,672
Less: accumulated depreciation (241,686 ) (10,952 ) (252,638 )
Real estate, net 1,449,845
171,159
1,621,004
Real estate available and held for sale ⁽¹⁾
219,184
34,152
253,336
Total real estate $ 1,669,029
$ 205,311
$ 1,874,340
As of December 31, 2018
Land, at cost $ 336,740
$ 133,599
$ 470,339
Buildings and improvements, at cost 1,487,270
118,724
1,605,994
Less: accumulated depreciation (287,516 ) (17,798 ) (305,314 )
Real estate, net 1,536,494
234,525
1,771,019
Real estate available and held for sale ⁽¹⁾
1,055
21,496
22,551
Total real estate $ 1,537,549
$ 256,021
$ 1,793,570


(1)	As of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, real estate, net included $765.3 million and $768.6 million, respectively, of real estate of the Net Lease Venture (refer to Net Lease Venture below).


(2)	As of March 31, 2020 and December 31, 2019, the Company had ~~$16.1~~$8.7 million and ~~$20.6~~$8.6 million, respectively, of residential condominiums available for sale in its operating properties portfolio.

Net Lease Venture—In February 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 offer to the venture on all new net lease investments. The Company and its partner had joint decision making rights pertaining to the acquisition of new investments. Upon the expiration of the investment period on June 30, 2018, the Company obtained control of the venture through its unilateral rights of management and disposition of the assets. As a result, the expiration of the investment period resulted in a reconsideration event under GAAP and the Company determined that the Net Lease Venture is a VIE for which the Company is the primary beneficiary. Effective June 30, 2018, the Company consolidated the Net Lease Venture as an asset acquisition under ASC 810. The Net Lease Venture had previously been accounted for as an equity method investment. The Company has an equity interest in the Net Lease Venture of approximately 51.9%. The Company is responsible for sourcing new opportunities and managing the venture and its assets in exchange for a management fee and incentive 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% of any incentive fee received based on the 47.5% partner's interest.

The Company earned $0.4 million and $0.4 million, respectively, of management fees after the effect of eliminations during the three months ended March 31, 2020 and 2019 with respect to services provided to other investors in the Net Lease Venture, which was recorded as a reduction to "Net income attributable to noncontrolling interests" in the Company's consolidated statements of operations.

Acquisitions—During the three months ended March 31, 2019, the Company acquired a net lease asset for $11.5 ~~million and~~million. In addition, the Company acquired the leasehold interest in ~~another~~a net lease asset for $98.2 million, inclusive of closing costs, and simultaneously entered into a new 98-year Ground Lease with SAFE (refer to Note 7)8).

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iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Dispositions—~~The following table presents~~During the three months ended March 31, 2020, the Company sold a net lease asset for net proceeds of $7.5 million and recognized an impairment of $1.7 million in connection with the sale. During the three months ended March 31, 2019, the Company sold 2 operating properties for net proceeds of $58.5 million and recognized $9.4 million in income ~~recognized for properties sold, by property type ($~~from sales of real estate in ~~millions):~~its consolidated statements of operations.

Three Months Ended March 31,
2019 2018
Operating Properties
       Proceeds $ 58.5
$ 41.9
       Income from sales of real estate 9.4
16.6

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

Total
       Proceeds $ 58.5
$ 44.2
       Income from sales of real estate 9.4
17.0

Real Estate Available and Held for Sale—During the three months ended March 31, 2020, the Company transferred a net lease asset with an aggregate carrying value of $25.7 million to held for sale due to an executed contract with SAFE. During the three months ended March 31, 2019, the Company transferred a portfolio of net lease assets with an aggregate carrying value of $218.1 million and associated liabilities to held for sale due to an executed contract with a third party. In addition, the Company transferred a commercial operating property with a carrying value of $16.2 million to held for sale based on an executed purchase and sale agreement. All of the properties transferred as of March 31, 2019 were ultimately sold.

Impairments—During the three months ended March 31, 2020, the Company recorded an impairment of $1.7 million in connection with the sale of a net lease asset. During the three months ended March 31, 2019, the Company recorded an impairment of $3.2 million on a commercial operating property based on an executed purchase and sale agreement and recorded $0.7 million of impairments in connection with the sale of residential condominium units. During the three months ended March 31, 2018, the Company recorded an impairment of $4.1 million on a real estate asset held for sale due to contracts to sell the remaining four condominium units at the property.

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 ~~$5.4~~$5.9 million and ~~$5.6~~$5.4 million for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, 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, ~~2019~~2020 and December 31, ~~2018,~~2019, the allowance for doubtful accounts related to real estate tenant receivables was $1.1 million and ~~$1.5~~$1.0 million, respectively, and the allowance for doubtful accounts related to deferred operating lease income was ~~$1.3~~$1.0 million and ~~$1.8~~$1.0 million as of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, 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.

Note 5—Net Investment in Leases

In May 2019, the Company entered into a transaction with an operator of bowling entertainment venues, consisting of the purchase of 9 bowling centers for $56.7 million, of which 7 were acquired from the lessee for $44.1 million, and a commitment to invest up to $55.0 million in additional bowling centers over the next several years. The new centers were added to the Company's existing master leases with the tenant. In connection with this transaction, the maturities of the master leases were extended by 15 years to 2047.

As a result of the modifications to the leases, the Company classified the leases as sales-type leases and recorded $424.1 million in "Net investment in leases" on its consolidated balance sheet. The Company determined that the 7 bowling centers acquired did not qualify as a sale leaseback transaction and recorded $44.1 million in "Loans receivable and other lending investments, net" on its consolidated balance sheet (refer to Note 7). For the three months ended March 31, 2020, the Company recognized $6.9 million of cash interest income and $1.5 million of non-cash interest income in "Interest income from sales-type leases" in the Company's consolidated statements of operations.

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iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

The Company's net investment in leases were comprised of the following as of March 31, 2020 and December 31, 2019 ($ in thousands):



	March 31, 2020			December 31, 2019
Total undiscounted cash flows	$	1,035,128		$	1,042,019
Unguaranteed estimated residual value	340,620			340,620
Present value discount	(955,369		)	(963,724		)
Allowance for losses on net investment in leases	(10,403		)	—
Net investment in leases⁽¹⁾	409,976			418,915


(1)	As of March 31, 2020 and December 31, 2019, all of the Company's net investment in leases were current in their payment status and performing in accordance with the terms of the respective leases. As of March 31, 2020, the risk rating on the Company's net investment in leases was 1.5 (refer to Note 3).

Future Minimum Lease Payments under Sales-type Leases—Future minimum lease payments to be collected under sales-type leases, excluding lease payments that are not fixed and determinable, in effect as of March 31, 2020, are as follows by year ($ in thousands):



	Amount
2020 (remaining nine months)	$	20,674
2021	28,062
2022	30,549
2023	30,549
2024	30,549
Thereafter	894,745
Total undiscounted cash flows	$	1,035,128

Allowance for Losses on Net Investment in Leases—Changes in the Company's allowance for losses on net investment in leases for the three months ended March 31, 2020 were as follows ($ in thousands):



Initial allowance recorded upon adoption of new accounting standard⁽¹⁾	$	9,111
Provision for losses on net investment in leases⁽²⁾	1,292
Allowance for losses on net investment in leases at end of period	$	10,403


(1)	The Company recorded an initial allowance for losses on net investment in leases of $9.1 million upon the adoption of ASU 2016-13 on January 1, 2020 (refer to Note 3).


(2)	During thethree months ended March 31, 2020, the Company recorded a general allowance for losses on net investment in leases of $1.3 million due to the adoption of ASU 2016-13 (refer to Note 3).

Note 6—Land and Development

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



	As of
	March 31,			December 31,
	2020			2019
Land and land development, at cost	$	523,893		$	590,153
Less: accumulated depreciation	(9,829		)	(9,608		)
Total land and development, net	$	514,064		$	580,545

As of
March 31, December 31,
2019 2018
Land and land development, at cost $ 625,228
$ 606,849
Less: accumulated depreciation (8,878 ) (8,631 )
Total land and development, net $ 616,350
$ 598,218

~~Table of Contents~~

~~iStar Inc.~~

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

~~(unaudited)~~

~~Acquisitions—~~Dispositions—During the three months ended March 31, ~~2018, the Company acquired, via foreclosure, title to a land asset which had a total fair value of $4.6 million~~2020 and ~~had previously served as collateral for loans receivable held by the Company. No gain or loss was recorded in connection with this transaction.~~

~~Dispositions—During the three months ended March 31,~~ 2019, ~~and 2018,~~ the Company sold land parcels and residential lots and units and recognized land development revenue of $80.2 million and $12.7 million, ~~and $276.4 million,~~ respectively. In connection with the sale of two land parcels totaling 93 acres during the three months ended March 31, 2018, the Company provided an aggregate $145.0 million of financing to the buyers. $81.2 million was repaid in the second quarter 2018. During the three months

Table of Contents

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

ended March 31, ~~2019~~2020 and ~~2018,~~2019, the Company recognized land development cost of sales of ~~$14.4~~$77.1 million and ~~$223.4~~$14.4 million, respectively, from its land and development portfolio.

Note 6—7—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
	March 31, 2020			December 31, 2019
Construction loans
Senior mortgages	$	542,241		$	518,992
Corporate/Partnership loans	99,702			95,394
Subtotal - gross carrying value of construction loans	641,943			614,386
Loans
Senior mortgages	53,319			53,592
Corporate/Partnership loans	23,321			24,424
Subordinate mortgages	11,063			10,877
Subtotal - gross carrying value of loans	87,703			88,893
Other lending investments
Financing receivables (refer to Note 5)	44,445			44,339
Held-to-maturity debt securities	86,368			84,981
Available-for-sale debt securities	23,640			23,896
Subtotal - other lending investments	154,453			153,216
Total gross carrying value of loans receivable and other lending investments	884,099			856,495
Allowance for loan losses	(33,264		)	(28,634		)
Total loans receivable and other lending investments, net	$	850,835		$	827,861

As of
Type of Investment March 31,
2019 December 31,
2018
Senior mortgages $ 690,860
$ 760,749
Corporate/Partnership loans 143,426
148,583
Subordinate mortgages 10,338
10,161
Total gross carrying value of loans 844,624
919,493
Reserves for loan losses (53,298 ) (53,395 )
Total loans receivable, net 791,326
866,098
Other lending investments—securities 103,520
122,126
Total loans receivable and other lending investments, net $ 894,846
$ 988,224

~~Reserve~~Allowance for Loan Losses—Changes in the Company's ~~reserve~~allowance for loan losses were as follows for the three months ended March 31, 2020 ($ in thousands):



	General Allowance
		Construction Loans			Loans		Held to Maturity Debt Securities		Financing Receivables		Specific Allowance		Total
Allowance for loan losses at beginning of period		$	6,668		$	265	$	—	$	—	$	21,701	$	28,634
Adoption of new accounting standard⁽¹⁾		(353		)	98		20		964		—		729
Provision for loan losses⁽²⁾		3,409			323		33		136		—		3,901
Allowance for loan losses at end of period		$	9,724		$	686	$	53	$	1,100	$	21,701	$	33,264


(1)	On January 1, 2020, the Company recorded an increase to its allowance for loan losses of $3.3 million upon the adoption of ASU 2016-13 (refer to Note 3), of which $2.5 million related to expected credit losses for unfunded loan commitments and was recorded in "Accounts payable, accrued expenses and other liabilities."


(2)	During thethree months ended March 31, 2020, the Company recorded a provision for loan losses of $4.0 million due to the adoption of ASU 2016-13 (refer to Note 3), of which $0.1 million related to expected credit losses for unfunded loan commitments and was recorded in "Accounts payable, accrued expenses and other liabilities."

For the Three Months Ended March 31,
2019 2018
Reserve for loan losses at beginning of period $ 53,395
$ 78,489
Recovery of loan losses (97 ) (855 )
Charge-offs —
(8,168 )
Reserve for loan losses at end of period $ 53,298
$ 69,466

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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 other lending investments and the associated ~~reserve~~allowance for loan losses were as follows as of March 31, 2020 and December 31, 2019 ($ in thousands):

Individually
Evaluated for
Impairment⁽¹⁾

Collectively
Evaluated for
Impairment⁽²⁾
Total
As of March 31, 2019
Loans $ 66,500
$ 783,334
$ 849,834
Less: Reserve for loan losses (40,888 ) (12,410 ) (53,298 )
Total⁽³⁾
$ 25,612
$ 770,924
$ 796,536
As of December 31, 2018
Loans $ 66,725
$ 857,662
$ 924,387
Less: Reserve for loan losses (40,395 ) (13,000 ) (53,395 )
Total⁽³⁾
$ 26,330
$ 844,662
$ 870,992



	Individually Evaluated for Impairment⁽¹⁾			Collectively Evaluated for Impairment			Total
As of March 31, 2020
Construction loans⁽²⁾	$	—		$	641,943		$	641,943
Loans⁽²⁾	37,517			50,186			87,703
Financing receivables	—			44,445			44,445
Held-to-maturity debt securities	—			86,368			86,368
Available-for-sale debt securities⁽³⁾	—			23,640			23,640
Less: Allowance for loan losses	(21,701		)	(11,563		)	(33,264		)
Total	$	15,816		$	835,019		$	850,835
As of December 31, 2019
Construction loans⁽²⁾	$	—		$	614,386		$	614,386
Loans⁽²⁾	37,820			51,073			88,893
Financing receivables	—			44,339			44,339
Held-to-maturity debt securities	—			84,981			84,981
Available-for-sale debt securities⁽³⁾	—			23,896			23,896
Less: Allowance for loan losses	(21,701		)	(6,933		)	(28,634		)
Total	$	16,119		$	811,742		$	827,861

(1)

The carrying value of ~~these loans include~~this loan includes an unamortized ~~discounts, premiums, deferred fees and costs totaling net discounts~~discount of ~~$0.5 million and $0.5~~$0.1 million as of March 31, ~~2019~~2020 and December 31, ~~2018, respectively.~~2019. The Company's ~~loans~~one loan individually evaluated for impairment ~~primarily represent loans~~represents a loan on non-accrual status; therefore, the unamortized ~~amounts~~amount associated with ~~these loans are~~this loan is not currently being amortized into income.


(2)	The carrying value of these loans include unamortized discounts, premiums, deferred fees and costs totaling net discounts of ~~$2.5~~$0.2 million and ~~$3.1~~$0.7 million as of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

(3)

The Company's recorded investment in loans as of March 31, 2019 and December 31, 2018, including accrued interest of $5.2 million and $4.9 million, respectively, is included in "Accrued interest and operating lease income receivable, net" on the Company's consolidated balance sheets. As of March 31, 2019 and December 31, 2018, the total amounts exclude $103.5 million and $122.1 million, respectively, ofAvailable-for-sale debt securities ~~that~~ are evaluated for impairment under ASC ~~320.~~326-30.

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, 2019 As of December 31, 2018

Performing
Loans

Weighted
Average
Risk Ratings

Performing
Loans

Weighted
Average
Risk Ratings
Senior mortgages $ 628,408
2.81
$ 697,807
2.76
Corporate/Partnership loans 144,556
2.89
149,663
2.84
Subordinate mortgages 10,370
3.00
10,192
3.00
Total $ 783,334
2.83
$ 857,662
2.77

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iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

The Company's ~~recorded investment~~amortized cost basis in performing senior mortgages, corporate/partnership loans, subordinate mortgages and financing receivables, presented by year of origination and by credit quality, as indicated by risk rating, as of March 31, 2020 were as follows ($ in thousands):



	Year of Origination
	2020		2019		2018		2017		2016		Prior to 2016		Total
Senior mortgages
Risk rating
1	$	—	$	—	$	—	$	54,420	$	—	$	—	$	54,420
2	—		—		84,662		96,549		—		—		181,211
3	—		12,803		170,860		47,859		37,767		4,524		273,813
3.5	—		—		—		48,599		—		—		48,599
Subtotal⁽¹⁾	$	—	$	12,803	$	255,522	$	247,427	$	37,767	$	4,524	$	558,043
Corporate/partnership loans
Risk rating
1	$	—	$	—	$	—	$	8,205	$	—	$	—	$	8,205
2	—		938		17,708		—		—		—		18,646
3	—		—		58,405		—		37,767		—		96,172
Subtotal	$	—	$	938	$	76,113	$	8,205	$	37,767	$	—	$	123,023
Subordinate mortgages
Risk rating
3	$	—	$	—	$	—	$	—	$	—	$	11,063	$	11,063
Subtotal	$	—	$	—	$	—	$	—	$	—	$	11,063	$	11,063
Financing receivables
Risk rating
1.5	$	—	$	44,445	$	—	$	—	$	—	$	—	$	44,445
Subtotal	$	—	$	44,445	$	—	$	—	$	—	$	—	$	44,445
Total	$	—	$	58,186	$	331,635	$	255,632	$	75,534	$	15,587	$	736,574


(1)	As of March 31, 2020, excludes $37.5 million for one loan on non-accrual status.

Table of Contents

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

The Company's amortized cost basis in loans, aged by payment status and presented by class, 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, 2019
As of March 31, 2020
Senior mortgages	$	634,408	$	—	$	60,500	$	60,500	$	694,908	$	558,043			$	37,517	$	37,517	$	595,560
Corporate/Partnership loans	144,556		—		—		—		144,556		123,023		—		—		—		123,023
Subordinate mortgages	10,370		—		—		—		10,370		11,063		—		—		—		11,063
Total	$	789,334	$	—	$	60,500	$	60,500	$	849,834	$	692,129	$	—	$	37,517	$	37,517	$	729,646
As of December 31, 2018
As of December 31, 2019
Senior mortgages	$	703,807	$	—	$	60,725	$	60,725	$	764,532	$	534,765	$	—	$	37,820	$	37,820	$	572,585
Corporate/Partnership loans	149,663		—		—		—		149,663		119,818		—		—		—		119,818
Subordinate mortgages	10,192		—		—		—		10,192		10,877		—		—		—		10,877
Total	$	863,662	$	—	$	60,725	$	60,725	$	924,387	$	665,460	$	—	$	37,820	$	37,820	$	703,280

(1)

As of March 31, 2020 and December 31, 2019, the Company had ~~two loans~~1 loan which ~~were~~was greater than 90 days delinquent and ~~were~~was in various stages of resolution, including legal and ~~foreclosure-related proceedings and~~ environmental matters, and ~~ranged from 4.0 to 10.0~~was 10.8 years ~~outstanding. As of December 31, 2018, the Company had two 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 4.0 to 9.0~~10.5 years ~~outstanding.~~outstanding, respectively.

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


	As of March 31, 2019							As of December 31, 2018							As of March 31, 2020							As of December 31, 2019
	Recorded Investment		Unpaid Principal Balance		Related Allowance			Recorded Investment		Unpaid Principal Balance		Related Allowance			Amortized Cost		Unpaid Principal Balance		Related Allowance			Amortized Cost		Unpaid Principal Balance		Related Allowance
With an allowance recorded:
Senior mortgages	$	66,500	$	66,461	$	(40,888	)	$	66,725	$	66,777	$	(40,395	)	$	37,517	$	37,618	$	(21,701	)	$	37,820	$	37,923	$	(21,701	)
Total	$	66,500	$	66,461	$	(40,888	)	$	66,725	$	66,777	$	(40,395	)	$	37,517	$	37,618	$	(21,701	)	$	37,820	$	37,923	$	(21,701	)


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


(2)	The Company did not record any interest income on impaired loans for the three months ended March 31, 2020 and 2019.

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



	Face Value		Amortized Cost Basis		Net Unrealized Gain		Estimated Fair Value		Net Carrying Value
As of March 31, 2020
Available-for-Sale Securities
Municipal debt securities	$	20,680	$	20,680	$	2,960	$	23,640	$	23,640
Held-to-Maturity Securities
Debt securities	100,000		86,368		—		86,368		86,368
Total	$	120,680	$	107,048	$	2,960	$	110,008	$	110,008
As of December 31, 2019
Available-for-Sale Securities
Municipal debt securities	$	21,140	$	21,140	$	2,756	$	23,896	$	23,896
Held-to-Maturity Securities
Debt securities	100,000		84,981		—		84,981		84,981
Total	$	121,140	$	106,121	$	2,756	$	108,877	$	108,877

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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,
2019 2018
Average
Recorded
Investment Interest
Income
Recognized Average
Recorded
Investment Interest
Income
Recognized
With no related allowance recorded:
Subordinate mortgages $ —
$ —
$ —
$ 92
Subtotal —
—
—
92
With an allowance recorded:
Senior mortgages 66,612
—
74,390
—
Corporate/Partnership loans —
—
156,605
—
Subtotal 66,612
—
230,995
—
Total:
Senior mortgages 66,612
—
74,390
—
Corporate/Partnership loans —
—
156,605
—
Subordinate mortgages —
—
—
92
Total $ 66,612
$ —
$ 230,995
$ 92

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

Face
Value
Amortized Cost Basis Net Unrealized Gain Estimated Fair Value Net Carrying Value
As of March 31, 2019
Available-for-Sale Securities
Municipal debt securities $ 21,140
$ 21,140
$ 1,475
$ 22,615
$ 22,615
Held-to-Maturity Securities
Debt securities 100,000
80,905
—
80,905
80,905
Total $ 121,140
$ 102,045
$ 1,475
$ 103,520
$ 103,520
As of December 31, 2018
Available-for-Sale Securities
Municipal debt securities $ 21,185
$ 21,185
$ 476
$ 21,661
$ 21,661
Held-to-Maturity Securities
Debt securities 120,866
100,465
7
100,472
100,465
Total $ 142,051
$ 121,650
$ 483
$ 122,133
$ 122,126

~~Table of Contents~~

~~iStar Inc.~~

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

~~(unaudited)~~

Asof March 31, ~~2019,~~2020, the contractual maturities of the Company's securities were as follows ($ in thousands):



	Held-to-Maturity Debt Securities				Available-for-Sale Debt Securities
	Amortized Cost Basis		Estimated Fair Value		Amortized Cost Basis		Estimated Fair Value
Maturities
Within one year	$	—	$	—	$	—	$	—
After one year through 5 years	86,368		86,368		—		—
After 5 years through 10 years	—		—		—		—
After 10 years	—		—		20,680		23,640
Total	$	86,368	$	86,368	$	20,680	$	23,640

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 80,905
80,905
—
—
After 5 years through 10 years —
—
—
—
After 10 years —
—
21,140
22,615
Total $ 80,905
$ 80,905
$ 21,140
$ 22,615

Note 7—8—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)
	Carrying Value as of				For the Three Months Ended March 31,
	March 31, 2020		December 31, 2019		2020			2019
Real estate equity investments
Safehold Inc. ("SAFE")⁽¹⁾	$	834,351	$	729,357	$	19,338		$	7,316
iStar Net Lease II LLC ("Net Lease Venture II")	46,183		30,712		193			(86		)
Other real estate equity investments	96,681		104,553		(2,082		)	(2,123		)
Subtotal	977,215		864,622		17,449			5,107
Other strategic investments⁽²⁾	52,337		43,253		(837		)	202
Total	$	1,029,552	$	907,875	$	16,612		$	5,309

Equity in Earnings (Losses)
Carrying Value as of For the Three Months Ended March 31,
March 31, 2019 December 31, 2018 2019 2018
Real estate equity investments
Safehold Inc. ("SAFE") $ 402,052
$ 149,589
$ 7,316
$ 1,472
iStar Net Lease II LLC ("Net Lease Venture II") 5,630
16,215
(86 ) —
iStar Net Lease I LLC ("Net Lease Venture")⁽¹⁾
—
—
—
2,084
Other real estate equity investments 107,090
130,955
(2,123 ) 270
Subtotal 514,772
296,759
5,107
3,826
Other strategic investments 7,227
7,516
202
(494 )
Total $ 521,999
$ 304,275
$ 5,309
$ 3,332


(1)	~~The~~As of March 31, 2020, the Company owned 33.4 million shares of SAFE common stock which, based on the closing price of $63.23 on March 31, 2020, had a market value of $2.1 billion. For the three months ended March 31, 2020, equity in earnings includes a dilution gain of $7.9 million resulting from a SAFE equity offering in March 2020.

(2)

During the three months ended March 31, 2020, the Company identified an observable price change in an equity security held by the Company as evidenced by an orderly private issuance of similar securities by the same issuer. In accordance with ASC 321, the Company remeasured its equity investment at fair value and recognized a mark-to-market gain of $9.9 million in "Other income" in the Company's consolidated ~~the assets and liabilities~~statements of ~~the Net Lease Venture on June 30, 2018 (refer to Net Lease Venture below).~~operations.

Safehold Inc.—Safehold Inc. ("SAFE")~~, formerly known as Safety, Income & Growth Inc.,~~ is a publicly-traded company formed by the Company 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 ("Ground Leases"). As of March 31, ~~2019,~~2020, the Company owned approximately ~~42.4%~~65.4% of SAFE's common stock outstanding.

OnIn January 2, 2019, the Company purchased ~~12,500,000~~12.5 million newly designated limited partnership units (the "Investor Units") in SAFE's operating partnership ("SAFE OP"), at a purchase price of $20.00 per unit, for a total purchase price of $250.0 million. The purpose of the investment was to allow SAFE to fund additional Ground Lease acquisitions and originations.

~~The~~ Each Investor ~~Units have the following features:~~

~~the right~~Unit received distributions equivalent to ~~receive equivalent~~ distributions ~~per unit to those~~declared and paid on one share of ~~SAFE~~SAFE's common ~~stock;~~

stock. The Investor Units had no voting ~~rights;~~

~~non-transferable prior to June 30, 2019;~~

~~no automatic conversion or exchange rights; and~~

rights. They had limited protective consent ~~rights.~~rights over certain matters such as amendments to the terms of the Investor Units that would adversely affect the Investor Units. In May 2019, after the approval of SAFE's stockholders, the Investor Units were exchanged for shares of SAFE's common stock on a one-for-one basis. Following the exchange, the Investor Units were retired.

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iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

~~SAFE has agreed to seek stockholder approval to exchange the Investor Units for shares of SAFE common stock, on a one-for-one basis.~~

The Investor Units represent an approximate 40.6% fully diluted economic interest in SAFE. After giving effect to the issuance of the Investor Units, the Company's aggregate fully diluted economic interest in SAFE (including the shares of SAFE common stock and Investor Units owned by the Company) is approximately 65.8%; however, the Company's voting power in SAFE will remain capped at 41.9%, as a result of the limitations described below.

In connection with the Company's purchase of the Investor Units, it entered into a Stockholder's Agreement with SAFE on January 2, 2019. The Stockholder's Agreement:

limits the Company's discretionary voting power to 41.9% of the outstanding voting power of SAFE's common stock until its aggregate ownership of SAFE common stock is less than 41.9%;

requires the Company to cast all of its voting power in favor of ~~three~~3 director nominees to SAFE's board who are independent of each of the Company and SAFE for three years;

subjects the Company to certain standstill provisions for two years;

restricts the Company's ability to transfer shares of SAFE common stock issued in exchange for Investor Units, or "Exchange Shares," for one year after their issuance;

prohibits the Company from transferring shares of SAFE common stock representing more than 20% of the outstanding SAFE common stock in one transaction or a series of related transactions to any person or group, other than pursuant to a widely distributed public offering, unless SAFE's other stockholders have participation rights in the transaction; and

provides the Company certain preemptive rights.

In March 2020, the Company acquired 1.7 million shares of SAFE's common stock in a private placement for $80.0 million.

A wholly-owned subsidiary of the Company is the external manager of SAFE and is entitled to a management fee. In addition, the Company is also the external manager of a venture in which SAFE is a member. Following are the key terms of the management agreement:

~~The Company received no management fee through June 30, 2018, which covered the first year of the management agreement;~~

The Company receives a fee equal to 1.0% of total SAFE equity (as defined in the management agreement) up to $1.5 billion; 1.25% of total SAFE equity (for incremental equity of $1.5 billion - $3.0 billion); 1.375% of total SAFE equity (for incremental equity of $3.0 billion - $5.0 billion); and 1.5% of total SAFE equity (for incremental equity over $5.0 billion);

Fee to be paid in cash or in shares of SAFE common stock, at the discretion of SAFE's independent directors;

The stock is locked up for two years, subject to certain restrictions;

There is no additional performance or incentive fee;

~~From January 1, 2019 through June 30, 2022, the~~The management agreement is non-terminable by SAFE through June 30, 2023, except for cause; and

Automatic annual renewals thereafter, subject to non-renewal upon certain findings by SAFE's independent directors and payment of termination fee equal to ~~three~~3 times the prior year's management ~~fee, subject to SAFE having raised $820 million of total equity since inception.~~fee.

During the three months ended March 31, 2020 and 2019, the Company recorded $2.9 million and $1.5 million, ~~of management fees and during the three months ended March 31, 2018, the Company waived $0.9 million~~respectively, of management fees pursuant to its management agreement with SAFE.

The Company is also entitled to receive certain 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 waived or elected not to charge in full certain of the expense reimbursements ~~through June 30, 2018.~~while SAFE is growing its portfolio. For the three months ended March 31, 2020 and 2019, the Company ~~was reimbursed~~recognized $1.3 million and $0.5 million, ~~of expense reimbursements. For the three months ended March 31, 2018, the Company waived $0.4 million~~respectively, of expense reimbursements pursuant to its management agreement with SAFE.

The Company has an exclusivity agreement with SAFE pursuant to which it agreed, subject to certain exceptions, that it will not 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.

~~Table of Contents~~

~~iStar Inc.~~

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

~~(unaudited)~~

Following is a list of investments that the Company has transacted with SAFE, all of which were approved by the Company's and SAFE's independent directors, for the periods presented:

In August 2017, the Company committed to provide a $24.0 million loan to the ground lessee of a Ground Lease originated at SAFE. The loan iswas for the renovation of a medical office building in Atlanta, GA. ~~As of March 31, 2019, $18.0~~The Company funded $18.4 million of the loan, which was ~~funded.~~fully repaid in August 2019. During the three months ended March 31, 2019, ~~and 2018,~~ the Company recorded $0.5 million ~~and $0.2 million~~ of interest income ~~respectively,~~ on the loan. ~~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~~luxury multi-family project in San Jose, CA. The transaction includes a combination of: (i) a newly created Ground Lease and a $7.2 million leasehold improvement allowance, which was fully funded

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iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

as of March 31, ~~2019;~~2020; and (ii) a $80.5 million leasehold first mortgage. As of March 31, 2020, $48.1 million of the leasehold first mortgage was funded. During the three months ended March 31, 2020 and 2019, the Company recorded $0.7 million and $0.1 million, respectively, of interest income on the loan. 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.~~

In May 2018, the Company provided a $19.9 million leasehold mortgage loan to the ground lessee of a Ground Lease originated at SAFE. The loan was for the acquisition of ~~100 and 200 Glenridge Point, two~~2 multi-tenant office buildings in Atlanta, GA. ~~During~~The loan was repaid in full in November 2019 and during the three months ended March 31, 2019, the Company recorded $0.6 million of interest income on the loan. ~~The transaction was approved by the Company's and SAFE's independent directors.~~

In January 2019, the Company committed to provide a $13.3 million loan to the ground lessee of a Ground Lease originated at SAFE. The loan is for the conversion of an office building into a multi-family property in Washington, DC. As of March 31, ~~2019, $11.9~~2020, $12.8 million of the loan was funded. During the three months ended March 31, 2020 and 2019, the Company recorded $0.3 million and $0.2 million, respectively, of interest income on the loan. ~~The transaction was approved by the Company's and SAFE's independent directors.~~

In February 2019, the Company acquired the leasehold interest in ~~a net lease~~an office property and simultaneously entered into a new 98-year Ground Lease with SAFE (refer to Note 4). ~~The transaction was approved by the Company's and SAFE's independent directors.~~

~~Net Lease Venture~~—In February 2014, the Company partnered with a sovereign wealth fund to form the Net Lease Venture to acquire and develop net lease assets and gave a right of first offer to the venture on all new net lease investments. The Company and its partner had joint decision making rights pertaining to the acquisition of new investments. Upon the expiration of the investment period on June 30, 2018, the Company obtained control of the venture through its unilateral rights of management and disposition of the assets. As a result, the expiration of the investment period resulted in a reconsideration event under GAAP and the Company determined that the Net Lease Venture is a VIE for which the Company is the primary beneficiary. Effective June 30, 2018, the Company consolidated the Net Lease Venture as an asset acquisition under ASC 810. The Company recorded a gain of $67.9 million in "Gain on consolidation of equity method investment" in the Company's consolidated statement of operations as a result of the consolidation. The Net Lease Venture had previously been accounted for as an equity method investment. The Company has an equity interest in the Net Lease Venture of approximately 51.9% and recorded a $188.3 million increase to "Noncontrolling interests." The Company is responsible for sourcing new opportunities and managing the venture and its assets in exchange for a management fee and incentive 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% of any incentive fee received based on the 47.5% partner's interest.

During the three months ended March 31, 2018, the Company recorded $0.6 million of management fees from the Net Lease Venture. The management fees are included in "Other income" in the Company's consolidated statements of operations. Beginning after the Company's consolidation of the Net Lease Venture on June 30, 2018 and after the effect of eliminations, the Company earned $0.4 million of management fees during the three months ended March 31, 2019 with respect to services provided to other investors in the Net Lease Venture, which was recorded as a reduction to "Net income attributable to noncontrolling interests" in the Company's consolidated statements of operations.

Net Lease Venture II—In July 2018, the Company entered into a new venture ("Net Lease Venture II") with an investment strategy similar to the Net Lease Venture. The Net Lease Venture II has a right of first offer on all new net lease investments (excluding Ground Leases) originated by the Company. ~~The~~Net Lease Venture II's investment period ends in June 2021. Net Lease Venture II is a voting interest entity and the Company has an equity interest in the ~~new~~ venture of approximately 51.9%~~, which will be accounted~~. The Company does not have a controlling interest in Net Lease Venture II due to the substantive participating rights of its partner. The Company accounts for its investment in Net Lease Venture II as an equity method investment and is responsible for managing the venture in exchange for

~~Table of Contents~~

~~iStar Inc.~~

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

~~(unaudited)~~

a management fee and incentive fee.During the three months ended March 31, 2020 and 2019, the Company recorded $0.4 million and $0.4 million, respectively, of management fees from ~~the~~ Net Lease Venture II.

In December 2019, Net Lease Venture II closed on a commitment to provide up to $150.0 million in net lease financing for the construction of 3 industrial centers and entered into a 25 year master lease with the tenant. As of March 31, 2020, Net Lease Venture II had funded $47.8 million of its commitment.

In December 2019, Net Lease Venture II closed on the acquisition of 2 grocery distribution centers for $81.8 million, inclusive of assumed debt. The properties are 100% leased with 2 separate coterminous leveraged leases with 6.0 years remaining on the lease terms.

In December 2018, Net Lease Venture II acquired ~~four~~4 buildings comprising 168,636 square feet ~~(the "Properties")~~ located in Livermore, CA. Net Lease Venture II acquired the ~~Properties~~buildings for $31.2 million which are 100% leased with ~~four~~4 separate leases that expire in December 2028.

Other real estate equity investments—As of March 31, ~~2019,~~2020, the Company's other real estate equity investments include equity interests in real estate ventures ranging from ~~16.0%~~20% to ~~95.0%~~95%, comprised of investments of ~~$62.4~~$60.0 million in operating properties and ~~$44.7~~$36.7 million in land assets. As of December 31, ~~2018,~~2019, the Company's other real estate equity investments included ~~$65.6~~$61.7 million in operating properties and ~~$65.3~~$42.9 million in land assets.

In August 2018, the Company provided a mezzanine loan with a principal balance of ~~$31.2~~$33.0 million and ~~$30.5~~$33.0 million as of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively, to an unconsolidated entity in which the Company owns a 50% equity interest. As of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, the loan is included in "Loans receivable and other lending investments, net" on the Company's consolidated balance sheet. During the three months ended March 31, 2020 and 2019, the Company recorded $0.7 million and $0.7 million, respectively, of interest income on the mezzanine loan.

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. The Company provided financing to the entity in the form of a $27.0 million senior loan, all of which was funded as of March 31, 2019 and December 31, 2018 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, 2019 and 2018, the Company recorded $0.5 million and $0.5 million of interest income, respectively, on the senior loan.

Other strategic investments—As of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, the Company also had investments in real estate related funds and other strategic investments in real estate entities.

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iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Summarized investee financial information—The following table presents the investee level summarized financial information of the Company's equity method investments ~~which~~that were significant ~~subsidiaries for the three months ended~~as of March 31, ~~2019 and 2018~~2020 ($ in thousands):



	Revenues		Expenses		Net Income Attributable to Parent
For the Three Months Ended March 31, 2020
SAFE	$	40,165	$	23,587	$	17,347

For the Three Months Ended March 31, 2019
SAFE	$	21,820	$	10,683	$	6,619

Revenues Expenses Net Income Attributable to Parent Entities
For the Three Months Ended March 31, 2019
SAFE $ 21,820
$ (10,683 ) $ 6,619

For the Three Months Ended March 31, 2018
SAFE $ 11,693
$ (7,950 ) $ 3,720

1821

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iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Note 8—9—Other Assets and Other Liabilities

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



	As of
	March 31, 2020		December 31, 2019
Intangible assets, net⁽¹⁾	$	164,853	$	174,973
Restricted cash	46,609		45,034
Finance lease right-of-use assets⁽²⁾	144,839		145,209
Operating lease right-of-use assets⁽²⁾	52,295		34,063
Other assets⁽³⁾	17,315		17,534
Other receivables	18,895		16,846
Leasing costs, net⁽⁴⁾	3,130		3,793
Corporate furniture, fixtures and equipment, net⁽⁵⁾	2,467		2,736
Deferred financing fees, net	2,130		2,300
Deferred expenses and other assets, net	$	452,533	$	442,488

As of
March 31, 2019 December 31, 2018
Intangible assets, net⁽¹⁾
$ 170,701
$ 156,281
Restricted cash 48,407
42,793
Finance lease right-of-use assets⁽²⁾
68,005
—
Operating lease right-of-use assets⁽²⁾
30,294
—
Other assets⁽³⁾
22,120
32,333
Other receivables⁽⁴⁾
19,635
46,887
Leasing costs, net⁽⁵⁾
4,621
6,224
Corporate furniture, fixtures and equipment, net⁽⁶⁾
3,549
3,850
Deferred financing fees, net 704
900
Deferred expenses and other assets, net $ 368,036
$ 289,268

(1)

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 ~~$29.6~~$36.3 million and ~~$27.0~~$33.4 million as of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. The amortization of above market leases and lease incentive assets decreased operating lease income in the Company's consolidated statements of operations by ~~$0.6~~$0.4 million and ~~$0.4~~$0.6 million for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively. These intangible lease assets are amortized over the remaining term of the lease. The amortization expense for in-place leases was ~~$2.2~~$2.7 million and ~~$0.4~~$2.2 million for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively. These amounts are included in "Depreciation and amortization" in the Company's consolidated statements of operations. As of March 31, 2020, the weighted average amortization period for the Company's intangible assets was approximately 17.3 years.

(2)

Right-of-use lease assets relate primarily to the Company's leases of office space and certain of its ground leases. Right-of use lease assets initially equal the lease liability. The lease liability (see table below) equals the present value of the minimum rental payments due under the lease discounted at the rate implicit in the lease or the Company's incremental secured borrowing rate for similar collateral. For operating leases, lease liabilities were discounted at the Company's weighted average incremental secured borrowing rate for similar collateral estimated to be ~~5.6%~~5.1% and the weighted average lease term is ~~9.7~~7.5 years. For finance leases, lease liabilities were discounted at a weighted average rate implicit in the lease of ~~5.7%~~5.5% and the weighted average lease term is 9897.7 years. Right-of-use assets for finance leases are amortized on a straight-line basis over the term of the lease and are recorded in "Depreciation and amortization" in the Company's consolidated statements of operations. During the three months ended March 31, 2020 and 2019, the Company recognized $2.0 million and $0.4 million, respectively, in "Interest expense" and $0.4 million and $0.1 million, respectively, in "Depreciation and amortization" in its consolidated statement of operations relating to finance leases. ~~Right-of-use assets for~~For operating leases, ~~are amortized~~rent expense is recognized on a straight-line basis over the term of the lease and ~~are~~is recorded in "General and administrative" and "Real estate expense" in the Company's consolidated statements of operations (refer to Note 3). During the three months ended March 31, 2020 and 2019, the Company recognized $1.0 million and $0.9 million, respectively, in "General and administrative" and $0.8 million and $1.1 million, respectively, in "Real estate expense" in its consolidated statement of operations relating to operating leases.


(3)	Other assets primarily includes ~~derivative assets,~~ prepaid expenses and deposits for certain real estate assets.


(4)	AsAccumulated amortization of leasing costs was $2.2 million and $3.3 million as of March 31, 2020 and December 31, ~~2018, includes $26.0 million of reimbursements receivable related to the construction and development of an operating property that was received during the three months ended March 31, 2019.~~2019, respectively.


(5)	~~Accumulated amortization of leasing costs was $3.0 million and $4.4 million as of March 31, 2019 and December 31, 2018, respectively.~~


~~(6)~~	Accumulated depreciation on corporate furniture, fixtures and equipment was ~~$12.2~~$13.4 million and ~~$11.9~~$13.1 million as of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

1922

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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
	March 31, 2020		December 31, 2019
Other liabilities⁽¹⁾	$	83,833	81,709
Accrued expenses	76,283		83,778
Finance lease liabilities (see table above)	148,439		147,749
Intangible liabilities, net⁽²⁾	50,606		51,223
Operating lease liabilities (see table above)	52,456		34,182
Accrued interest payable	29,707		25,733
Accounts payable, accrued expenses and other liabilities	$	441,324	$	424,374

As of
March 31, 2019 December 31, 2018
Other liabilities⁽¹⁾
$ 90,682
143,325
Accrued expenses 71,305
95,149
Finance lease liabilities 68,184
—
Intangible liabilities, net⁽²⁾
48,925
35,108
Operating lease liabilities 30,294
—
Accrued interest payable 22,968
42,669
Accounts payable, accrued expenses and other liabilities $ 332,358
$ 316,251

(1)

As of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, other liabilities includes ~~$18.6~~$26.6 million and ~~$18.5~~$27.5 million, respectively, ~~related to profit sharing arrangements with developers for certain properties sold.~~of deferred income. As of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, other liabilities ~~also~~ includes ~~$9.3~~$20.7 million and ~~$9.4~~$8.7 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.~~derivative liabilities. As of March 31, 2020, other liabilities includes $2.6 million of expected credit losses for unfunded loan commitments.

(2)

Intangible liabilities, net includes below market lease liabilities related to the acquisition of real estate assets. Accumulated amortization on below market lease liabilities was ~~$3.3~~$5.6 million and ~~$2.8~~$5.0 million as of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. The amortization of below market leases increased operating lease income in the Company's consolidated statements of operations by ~~$0.5~~$0.6 million and ~~$0.1~~$0.5 million for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively.

Note 9—10—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, 2019			December 31, 2018			March 31, 2020			December 31, 2019
Loan participations payable⁽¹⁾	$	25,145		$	22,642		$	37,892		$	35,656
Debt discounts and deferred financing costs, net	(124		)	(158		)
Debt premiums, discounts and deferred financing costs, net							(125		)	(18		)
Total loan participations payable, net	$	25,021		$	22,484		$	37,767		$	35,638


(1)	As of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, the Company had ~~one~~1 loan participation payable with an interest rate of ~~7.0%.~~6.0% and 6.3%, respectively.

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 as of March 31, ~~2019~~2020 and December 31, ~~2018.~~2019. As of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, the corresponding loan receivable balances were ~~$25.1~~$37.8 million and ~~$22.5~~$35.6 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.

2023

Table of Contents

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Note ~~10—~~11—Debt Obligations, net

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


	Carrying Value as of						Stated Interest Rates			Scheduled Maturity Date	Carrying Value as of						Stated Interest Rates		Scheduled Maturity Date
	March 31, 2019			December 31, 2018			Stated Interest Rates			Scheduled Maturity Date	March 31, 2020			December 31, 2019			Stated Interest Rates		Scheduled Maturity Date
Secured credit facilities and mortgages:
2015 $325 million Revolving Credit Facility	$	—		$	—		LIBOR + 2.50%		⁽¹⁾	September 2020
2016 Senior Term Loan	645,125			646,750			LIBOR + 2.75%		⁽²⁾	June 2023
Revolving Credit Facility											$	300,000		$	—		LIBOR + 2.00%	⁽¹⁾	September 2022
Senior Term Loan											491,875			491,875			LIBOR + 2.75%	⁽²⁾	June 2023
Mortgages collateralized by net lease assets⁽³⁾	634,695			802,367			3.62% - 7.26%		⁽³⁾		724,209			721,118			2.54% - 7.26%	⁽³⁾
Total secured credit facilities and mortgages	1,279,820			1,449,117							1,516,084			1,212,993
Unsecured notes:
5.00% senior notes⁽⁴⁾	—			375,000			5.00	%		—
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
6.00% senior notes⁽⁴⁾											—			110,545			6.00%		—
5.25% senior notes⁽⁵⁾											400,000			400,000			5.25%		September 2022
3.125% senior convertible notes⁽⁶⁾											287,500			287,500			3.125%		September 2022
4.75% senior notes⁽⁷⁾											775,000			775,000			4.75%		October 2024
4.25% senior notes⁽⁸⁾											550,000			550,000			4.25%		August 2025
Total unsecured notes	1,737,500			2,112,500							2,012,500			2,123,045
Other debt obligations:
Trust preferred securities	100,000			100,000			LIBOR + 1.50%			October 2035	100,000			100,000			LIBOR + 1.50%		October 2035
Total debt obligations	3,117,320			3,661,617							3,628,584			3,436,038
Debt discounts and deferred financing costs, net	(47,024		)	(52,531		)					(45,224		)	(48,958		)
Total debt obligations, net⁽¹⁰⁾	$	3,070,296		$	3,609,086
Total debt obligations, net⁽⁹⁾											$	3,583,360		$	3,387,080

(1)

The ~~loan~~Revolving Credit Facility bears interest at the Company's election of either: (i) a base rate, which is the greater of (a) prime, (b) federal funds plus ~~0.5%~~0.50% or (c) LIBOR plus 1.0% and subject to a margin ranging from ~~1.25%~~1.00% to ~~1.75%~~1.50%; or (ii) LIBOR subject to a margin ranging from ~~2.25%~~2.00% to ~~2.75%~~2.50%. At maturity, the Company may convert outstanding borrowings to a one year term loan which matures in quarterly installments through September ~~2021.~~2023.


(2)	The loan bears interest at the Company's election of either: (i) a base rate, which is the greater of (a) prime, (b) federal funds plus ~~0.5%~~0.50% or (c) LIBOR plus 1.0% and subject to a margin of 1.75%; or (ii) LIBOR subject to a margin of 2.75%.


(3)	As of March 31, ~~2019, a non-recourse mortgage associated with a net lease asset was reclassified to “Liabilities associated with properties held for sale” (refer to Note 4). As of March 31, 2019,~~2020, the weighted average interest rate of these loans is 4.4%, inclusive of the effect of interest rate swaps.


(4)	The Company ~~prepaid~~repaid these senior notes in ~~March 2019 without penalty.~~January 2020.


(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.~~


~~(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)~~(6)

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 any time prior to the close of business on the business day immediately preceding September 15, 2022. The conversion rate as of March 31, ~~2019~~2020 was ~~66.1052~~68.3420 shares per $1,000 principal amount of 3.125% Convertible Notes, which equals a conversion price of ~~$15.13~~$14.63 per share. The conversion rate is subject to adjustment from time to time for specified events. 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~~At issuance in September 2017, the Company valued the ~~debt~~liability 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~~liability 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, ~~2019,~~2020, the carrying value of the 3.125% Convertible Notes was ~~$264.1~~$270.2 million, net of fees, and the unamortized discount of the 3.125% Convertible Notes was ~~$19.3~~$14.2 million, net of fees. As of December 31, 2019, the carrying value of the 3.125% Convertible Notes was $268.7 million, net of fees, and the unamortized discount of the 3.125% Convertible Notes was $15.5 million, net of fees. During the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, the Company recognized $2.2 million and $2.2 million, respectively, of contractual interest and ~~$1.2~~$1.3 million and $1.2 million, respectively, of discount amortization on the 3.125% Convertible Notes. The effective interest rate was 5.2%.


~~(10)~~(7)	The Company can prepay these senior notes without penalty beginning July 1, 2024.


(8)	The Company can prepay these senior notes without penalty beginning May 1, 2025.


(9)	The Company capitalized interest relating to development activities of ~~$3.0~~$0.5 million and ~~$2.4~~$3.0 million during the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively.

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iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Future Scheduled Maturities—As of March 31, ~~2019~~2020, future scheduled maturities of outstanding debt obligations are as follows ($ in thousands):



	Unsecured Debt			Secured Debt			Total
2020 (remaining nine months)	$	—		$	—		$	—
2021	—			158,358			158,358
2022	687,500			347,624			1,035,124
2023	—			491,875			491,875
2024	775,000			—			775,000
Thereafter	650,000			518,227			1,168,227
Total principal maturities	2,112,500			1,516,084			3,628,584
Unamortized discounts and deferred financing costs, net	(37,915		)	(7,309		)	(45,224		)
Total debt obligations, net	$	2,074,585		$	1,508,775		$	3,583,360

Unsecured Debt Secured Debt Total
2019 (remaining nine months) $ —
$ 116
$ 116
2020 400,000
—
400,000
2021 275,000
161,213
436,213
2022 1,062,500
48,698
1,111,198
2023 —
645,125
645,125
Thereafter 100,000
424,668
524,668
Total principal maturities 1,837,500
1,279,820
3,117,320
Unamortized discounts and deferred financing costs, net (37,818 ) (9,206 ) (47,024 )
Total debt obligations, net $ 1,799,682
$ 1,270,614
$ 3,070,296

~~2016~~ Senior Term Loan—In June 2016, the Company entered into a senior term loan of $450.0 million (the "2016 Senior Term Loan"). In August 2016, the Company upsized the facility to $500.0 million. The initial $450.0 million of the 2016 Senior Term Loan was issued at 99% of par and the upsize was issued at par. In September 2017, the Company reduced, repriced and extended the 2016 Senior Term Loan to $400.0 million priced at LIBOR plus 3.00% with a 0.75% LIBOR floor and maturing in October 2021. In June 2018, the Company ~~increased~~amended its senior term loan (the "Senior Term Loan") to increase the ~~2016 Senior Term Loan~~amount of the loan to $650.0 million, ~~re-priced at~~reduce the interest rate to LIBOR plus 2.75% and ~~extended~~extend its maturity to June 2023. The ~~facility was also modified to permit~~Senior Term Loan is secured by pledges of equity of certain subsidiaries that own a defined pool of assets. The Senior Term Loan permits substitution of collateral, subject to overall collateral pool coverage and concentration limits, over the life of ~~the facility. This modification eliminates the mandatory amortization upon payoff or sale of collateral which existed prior to the upsize and broadens the types of collateral permitted under~~ the facility. The Company may make optional prepayments, subject to prepayment fees, and is required to repay 0.25% of the principal amount each quarter.

~~During the three months ended March 31, 2018, repayments of the 2016 Senior Term Loan resulted in losses on early extinguishment of debt of $0.4 million.~~

~~2015~~ Revolving Credit Facility—In ~~March 2015,~~September 2019, the Company ~~entered into a~~amended its secured revolving credit facility ~~with a~~(the "Revolving Credit Facility") to increase the maximum capacity ~~of $250.0~~to $350.0 million, ~~(the "2015 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~~extend the maturity date to September ~~2020~~2022 and ~~made~~make certain other changes. ~~This facility is~~Outstanding borrowings under the Revolving Credit Facility are secured by a pledge of the equity ~~interest~~interests in the Company's subsidiaries that own a defined pool of ~~assets which provide asset value coverage for borrowings under the facility.~~assets. 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 the Company's corporate credit ~~rating. An~~rating, ranging from 1.0% to 1.5% in the case of base rate loans and from 2.0% to 2.5% in the case of LIBOR loans. In addition, there is an undrawn credit facility commitment fee that ranges from ~~0.30%~~0.25% to ~~0.50%~~0.45%, based on corporate credit ratings. At maturity, the Company may convert outstanding borrowings to a one year term loan which matures in quarterly installments through September ~~2021. As~~2023. During the three months ended March 31, 2020, the Company borrowed $300.0 million on the Revolving Credit Facility and as of March 31, ~~2019,~~2020, based on the Company's borrowing base of assets, had the ~~Company had $325.0~~ability to draw $50.0 million ~~of borrowing capacity available under~~without pledging any additional assets to the ~~2015 Revolving Credit Facility.~~facility.

Unsecured Notes—In ~~March~~September 2019, the Company ~~repaid~~issued $675.0 million principal amount of 4.75% senior unsecured notes due October 2024. Proceeds from the offering, together with cash on hand, were used to repay in full the ~~5.00%~~$400.0 million principal amount outstanding of the 4.625% senior unsecured notes due September 2020 and the $275.0 million principal amount outstanding of the 6.50% senior unsecured notes due July ~~2019.~~ 2021. In November 2019, the Company issued an additional $100.0 million principal amount of 4.75% senior unsecured notes due October 2024 at 102% of par, representing a yield to maturity of 4.29%.

In December 2019, the Company issued $550.0 million principal amount of 4.25% senior unsecured notes due August 2025. Proceeds from the offering were used to redeem the $375.0 million principal amount outstanding ($110.5 million was redeemed in January 2020) of the 6.00% senior unsecured notes due April 2022, repay a portion of the borrowings outstanding under the Senior Term Loan and pay related premiums and expenses in connection with the transaction.

During the three months ended March 31, ~~2019,~~2020, repayments of unsecured notes prior to maturity resulted in losses on early extinguishment of debt of ~~$0.5~~$4.1 million.

2225

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iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Collateral Assets—The carrying value of the Company's 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 ($ in thousands):


	As of								As of
	March 31, 2019				December 31, 2018				March 31, 2020				December 31, 2019
	Collateral Assets⁽¹⁾		Non-Collateral Assets		Collateral Assets⁽¹⁾		Non-Collateral Assets		Collateral Assets⁽¹⁾		Non-Collateral Assets		Collateral Assets⁽¹⁾		Non-Collateral Assets
Real estate, net	$	1,533,390	$	87,614	$	1,620,008	$	151,011	$	1,392,658	$	108,431	$	1,409,585	$	117,634
Real estate available and held for sale	219,184		34,152		1,055		21,496		—		34,391		—		8,650
Net investment in leases⁽²⁾									420,380		—		418,915		—
Land and development, net	42,300		574,050		12,300		585,918		—		514,064		—		580,545
Loans receivable and other lending investments, net⁽²⁾⁽³⁾	431,189		450,988		498,524		480,154
Loans receivable and other lending investments, net⁽³⁾⁽⁴⁾									234,612		590,019		233,104		566,050
Other investments	—		521,999		—		304,275		—		1,029,552		—		907,875
Cash and other assets	6,601		757,277		—		1,329,990		—		882,674		—		814,044
Total	$	2,232,664	$	2,426,080	$	2,131,887	$	2,872,844	$	2,047,650	$	3,159,131	$	2,061,604	$	2,994,798

(1)

The ~~2016~~ Senior Term Loan and the ~~2015~~ Revolving Credit Facility are secured only by pledges of equity of certain of the Company's subsidiaries and not by pledges of the assets held by such subsidiaries. Such subsidiaries are subject to contractual restrictions under the terms of such credit facilities, including restrictions on incurring new debt (subject to certain exceptions). As of March 31, ~~2019,~~2020, Collateral Assets includes ~~$406.2~~$428.5 million carrying value of assets held by entities whose equity interests are pledged as collateral for the ~~$325.0 million 2015~~ Revolving Credit ~~Facility that is undrawn as of March 31, 2019.~~Facility.


(2)	As of March 31, ~~2019 and December 31, 2018,~~2020, the ~~amounts~~amount presented ~~exclude~~excludes a general ~~reserves~~allowance for ~~loan losses~~net investment of ~~$12.4 million and $13.0 million, respectively.~~leases of $10.4 million.


(3)	As of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, the amounts presented exclude general allowance for loan losses of $11.6 million and $6.9 million, respectively.


(4)	As of March 31, 2020 and December 31, 2019, the amounts presented exclude loan participations of ~~$25.1~~$37.8 million and ~~$22.5~~$35.6 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.

The Company's ~~2016~~ Senior Term Loan and the ~~2015~~ Revolving Credit Facility contain certain covenants, including covenants relating to collateral coverage, 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 Term Loan requires the Company to maintain collateral coverage of at least 1.25x outstanding borrowings on the facility. The ~~2015~~ Revolving Credit Facility is secured by a borrowing base of assets and requires the Company to maintain both 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~~ Revolving Credit Facility does not require that proceeds from the borrowing base be used to pay down outstanding borrowings provided the 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. ~~The Company may not pay common dividends if it ceases to qualify as a REIT. In June 2018,~~Under both the ~~Company amended the terms of the 2016~~ Senior Term Loan and the ~~2015~~ Revolving Credit Facility ~~to include the ability to pay common dividends with no restrictions so long as~~ the Company is ~~not~~permitted to pay dividends provided that no material default (as defined in ~~default on any of~~the relevant agreement) has occurred and is continuing or would result therefrom and the Company remains in compliance with its ~~debt obligations.~~financial covenants after giving effect to the dividend.

The Company's ~~2016~~ Senior Term Loan and the ~~2015~~ 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

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iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Company's other recourse indebtedness in excess of specified thresholds is not paid at final maturity or if such indebtedness is accelerated.

~~Table of Contents~~

~~iStar Inc.~~

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

~~(unaudited)~~

Note ~~11—~~12—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 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, ~~2019~~2020, 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 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⁽²⁾		Other Investments		Total
Performance-Based Commitments	$	183,608	$	81,718	$	53,122	$	318,448
Strategic Investments	—		—		17,351		17,351
Total	$	183,608	$	81,718	$	70,473	$	335,799

Loans and Other Lending Investments⁽¹⁾
Real Estate
Other
Investments
Total
Performance-Based Commitments $ 385,215
$ 9,543
$ —
$ 394,758
Strategic Investments —
—
33,304
33,304
Total $ 385,215
$ 9,543
$ 33,304
$ 428,062


(1)	Excludes ~~$24.9~~$12.1 million of commitments on loan participations sold that are not the obligation of the Company.


(2)	Includes a commitment to invest up to $55.0 million in additional bowling centers over the next several years (refer to Note 5).

Other Commitments—Future minimum lease obligations under operating and finance leases as of March 31, 2020 are as follows ($ in thousands):


	Operating⁽¹⁾⁽²⁾		Finance⁽¹⁾		Operating⁽¹⁾⁽²⁾			Finance⁽¹⁾
2019	$	4,165	$	2,181
2020	3,841		2,633
2020 (remaining nine months)					$	3,095		$	4,052
2021	1,468		2,686		3,624			5,494
2022	869		2,740		6,561			5,604
2023	728		2,794		6,190			5,716
2024					6,080			5,830
Thereafter	2,074		759,082		6,576			1,573,771
Total undiscounted cash flows					32,126			1,600,467
Present value discount⁽¹⁾					(4,654		)	(1,452,028		)
Other adjustments⁽²⁾					24,984			—
Lease liabilities					$	52,456		$	148,439

(1)

~~Operating lease obligations for 2019 are as of January 1, 2019 and finance lease obligations are as of lease inception (refer to Note 4).~~ During the three months ended March 31, 2020 and 2019, the Company made payments of $1.1 million and $1.1 million, respectively, related to its operating leases and $1.3 million and $0.2 million, respectively, related to its ~~operating and~~ finance leases. The weighted average lease term for the Company's operating leases, excluding operating leases for which the Company's tenants pay rent on its behalf, was 6.3 years and the weighted average discount rate was 5.1%. The weighted average lease term for the Company's finance leases was 97.7 years and the weighted average discount rate was 5.5%.


(2)	The Company is obligated to pay ground rent under certain operating leases; however, the Company's tenants at the properties pay this expense directly under the terms of various subleases and these amounts are excluded from lease obligations. The amount shown above is the net present value of the payments to be made by the Company's tenants on its behalf.

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iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Future minimum lease obligations under non-cancelable operating and finance leases as of December 31, 2019 are as follows ($ in thousands):



	Operating⁽¹⁾⁽²⁾			Finance⁽¹⁾
2020	$	4,167		$	5,386
2021	1,803			5,494
2022	1,098			5,604
2023	728			5,716
2024	617			5,830
Thereafter	1,447			1,573,824
Total undiscounted cash flows	9,860			1,601,854
Present value discount⁽¹⁾	(1,057		)	(1,454,105		)
Other adjustments⁽²⁾	25,379			—
Lease liabilities	$	34,182		$	147,749


(1)	The Company is obligated to pay ground rent under certain operating leases; however, the Company's tenants at the properties pay this expense directly under the terms of various subleases and these amounts are excluded from lease obligations.


(2)	The Company is obligated to pay ground rent under certain operating leases; however, the Company's tenants at the properties pay this expense directly under the terms of various subleases and these amounts are excluded from lease obligations. The amount shown above is the net present value of the payments to be made by the Company's tenants on its behalf.

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 foreclosure-related proceedings. 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.

Note ~~12—~~13—Derivatives

The Company's use of derivative financial instruments 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. The Company may have derivatives that are not designated as hedges because they do not meet the strict hedge accounting requirements. Although not designated as hedges, such derivatives are entered into to manage the Company's exposure to interest rate movements ~~foreign exchange rate movements~~ and other identified risks.

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iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

The table below presents the fair value of the Company's derivative financial instruments as well as their classification on the consolidated balance sheets as of March 31, ~~2019~~2020 and December 31, ~~2018~~2019 ($ in thousands)⁽¹⁾:


		Derivative Assets			Derivative Liabilities				Derivative Assets			Derivative Liabilities
As of March 31, 2019		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
As of March 31, 2020									Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives Designated in Hedging Relationships	Derivatives Designated in Hedging Relationships							Derivatives Designated in Hedging Relationships
Interest rate swaps		Deferred expenses and other assets, net	$	2,279	Accounts payable, accrued expenses and other liabilities	$	14,297		Deferred expenses and other assets, net	$	—	Accounts payable, accrued expenses and other liabilities	$	20,685
Total			$	2,279		$	14,297			$	—		$	20,685


		Derivative Assets			Derivative Liabilities				Derivative Assets			Derivative Liabilities
As of December 31, 2018		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
As of December 31, 2019									Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives Designated in Hedging Relationships	Derivatives Designated in Hedging Relationships							Derivatives Designated in Hedging Relationships
Interest rate swaps		Deferred expenses and other assets, net	$	3,669	Accounts payable, accrued expenses and other liabilities	$	10,244		Deferred expenses and other assets, net	$	114	Accounts payable, accrued expenses and other liabilities	$	8,680
Total			$	3,669		$	10,244			$	114		$	8,680

_________________________________________________________

(1)

Over the next 12 months, the Company expects that ~~$2.8~~$8.8 million related to cash flow hedges will be reclassified from "Accumulated other comprehensive income (loss)" as ~~a reduction~~an increase to interest expense. As of March 31, 2019 and December 31, 2018, the Company posted cash collateral of $10.7 million and $6.4 million, respectively, in connection with its derivatives which were in a liability position and would not have been required to post any additional collateral to settle these contracts had the Company been declared in default on its derivative obligations.

~~Table of Contents~~

~~iStar Inc.~~

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

~~(unaudited)~~

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) When Recognized in Income	Amount of Gain (Loss) Recognized in Accumulated Other Comprehensive Income			Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Earnings
For the Three Months Ended March 31, 2020
Interest rate swaps	Earnings from equity method investments	$	(15,172	)	$	(226	)
Interest rate swaps	Interest expense	(12,604		)	(1,088		)

For the Three Months Ended March 31, 2019
Interest rate swaps	Interest Expense	(7,822		)	(151		)
Interest rate swaps	Earnings from equity method investments	(7,190		)	144

Derivatives Designated in Hedging Relationships
Location of Gain (Loss)
When Recognized in Income
Amount of Gain (Loss) Recognized in Accumulated Other Comprehensive Income Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Earnings
For the Three Months Ended March 31, 2019
Interest rate swaps Earnings from equity method investments $ (7,190 ) $ 144
Interest rate swaps Interest expense (7,822 ) (151 )

For the Three Months Ended March 31, 2018
Interest rate swaps Earnings from equity method investments 2,351
(9 )

Table of Contents

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Note ~~13—~~14—Equity

Preferred Stock—In December 2019, the Company issued an aggregate 16.5 million shares of its common stock upon conversion of its outstanding Series J Preferred Stock at a conversion rate of 4.125 shares of common stock per each share of Series J Preferred Stock. The total carrying value of the Series J Preferred Stock prior to redemption was $193.5 million, net of discounts and fees, and was recorded in "Additional paid-in-capital" and "Convertible Preferred Stock Series J, liquidation preference $50.00 per share" on the Company's consolidated balance sheet prior to the conversion.

The Company had the following series of Cumulative Redeemable ~~and Convertible Perpetual~~ Preferred Stock outstanding as of March 31, ~~2019~~2020 and December 31, ~~2018:~~2019:


				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)		Carrying Value (in thousands)		Shares Issued and Outstanding (in thousands)	Par Value		Liquidation Preference⁽³⁾⁽⁴⁾		Rate per Annum		Annual Dividend Per Share		Carrying Value (in thousands)
D	4,000	$	0.001	$	25.00	8.00	%	$	2.00	$	89,041	4,000	$	0.001	$	25.00	8.00	%	$	2.00	$	89,041
G	3,200	0.001		25.00		7.65	%	1.91		72,664		3,200	0.001		25.00		7.65	%	1.91		72,664
I	5,000	0.001		25.00		7.50	%	1.88		120,785		5,000	0.001		25.00		7.50	%	1.88		120,785
J (convertible)⁽⁴⁾	4,000	0.001		50.00		4.50	%	2.25		193,510
	16,200									$	476,000
Total												12,200									$	282,490

(1)

Holders of shares of the Series D, G I and JI 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, $1.5 million and $2.3 million on its Series D, G and I Cumulative Redeemable Preferred Stock during the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, 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, ~~2019 and 2018. The Company redeemed all of its issued and outstanding Series E and F Cumulative Redeemable Preferred Stock in October 2017.~~2019. The character of the ~~2018~~2019 dividends was 100% capital gain distribution, of which ~~26.02%~~34.01% represented unrecaptured section 1250 ~~gain and 73.98% represented long term capital~~ gain. There are no0 dividend arrearages on any of the preferred shares currently outstanding.


(3)	The Company may, at its option, redeem the Series 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 into shares of the Company's common stock. 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. The conversion rate as of March 31, 2019 was 4.0149 shares of the Company's common stock (equal to a conversion price of approximately $12.45 per share). The conversion rate is subject to adjustment from time to time for specified events.

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

~~Table of Contents~~

~~iStar Inc.~~

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

~~(unaudited)~~

pay dividends for such periods in order to maintain its REIT qualification. As of December 31, ~~2017,~~2018, the Company had ~~$582.4~~$567.7 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 begin to expire in ~~2029~~2031 and will fully expire in 2036 if unused. The amount of NOL carryforwards as of December 31, 2019 will be determined upon finalization of the Company's 2019 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 Term Loan and the ~~2015~~ Revolving Credit Facility permit the Company to pay common dividends with no restrictions so long as the Company is not in default on any of its debt obligations. The Company declared ~~and paid~~ common stock dividends of $7.8 million, or $0.10 per share, for the three months ended March 31, 2020 and $6.2 million, ~~and $6.1 million, respectively,~~ or $0.09 per share, for the three months ended March 31, 2019. ~~The Company did not declare or pay any common stock dividends for the three months ended March 31, 2018.~~

Stock Repurchase Program—The Company may repurchase shares in negotiated transactions or open market transactions, including through one or more trading plans. During the three months ended March 31, 2020, the Company repurchased 1.0 million shares of its outstanding common stock for $12.0 million, for an average cost of $12.51 per share. During the three months ended March 31, 2019, the Company repurchased 2.3 million shares of its outstanding common stock for $19.2 million, for an average cost of $8.46 per share. ~~During the three months ended March 31, 2018, the Company repurchased 0.8 million shares of its outstanding common stock for $8.3 million, for an average cost of $10.22 per share.~~ As of March 31, ~~2019,~~2020, the Company had remaining authorization to repurchase up to ~~$22.6~~$22.1 million of common stock under its stock repurchase program.

Table of Contents

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

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, 2020			December 31, 2019
Unrealized gains on available-for-sale securities	$	2,959		$	2,756
Unrealized losses on cash flow hedges	(58,282		)	(37,264		)
Unrealized losses on cumulative translation adjustment	(4,199		)	(4,199		)
Accumulated other comprehensive loss	$	(59,522	)	$	(38,707	)

As of
March 31, 2019 December 31, 2018
Unrealized gains on available-for-sale securities $ 1,476
$ 475
Unrealized losses on cash flow hedges (26,871 ) (13,546 )
Unrealized losses on cumulative translation adjustment (4,199 ) (4,199 )
Accumulated other comprehensive loss $ (29,594 ) $ (17,270 )

Note ~~14—~~15—Stock-Based Compensation Plans and Employee Benefits

Stock-Based Compensation—The Company recorded stock-based compensation expense, including the expense related to performance incentive plans (see below), of ~~$4.2~~$16.3 million and ~~$9.1~~$4.2 million for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively, in "General and administrative" in the Company's consolidated statements of operations.

Performance Incentive Plans—The Company's Performance Incentive Plans ("iPIP") are 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 plans. Awards vest over six years, with 40% being vested at the end of the second year and 15% each year thereafter.

2019-2020 iPIP Plan—The Company's 2019-2020 iPIP plan is an equity-classified award which is measured at the grant date fair value and recognized as compensation cost in "General and administrative" in the Company's consolidated statements of operations and "Noncontrolling interests" in the Company's consolidated statements of changes in equity over the requisite service period. Investments in the 2019-2020 iPIP plan will be held by a consolidated subsidiary of the Company that has ~~two~~2 ownership classes, class A units and class B units. The Company owns 100% of the class A units and the class B units were issued to employees as long-term compensation. Except for certain clawback provisions, participants can retain vested class B units upon their termination of employment with the Company. The class B units are entitled to distributions from the net cash realized from the investments in the plan after the Company, through its ownership of the class A units, has received a specified return on its invested capital and a return of its invested capital. Distributions on the class B units are also subject to reductions under a total shareholder return ("TSR") adjustment. The fair value of the class B units was determined using a model that forecasts the underlying cash flows from the investments within the entity to which the class B units have ownership rights. During the three months ended March 31, 2020 and 2019, the Company recorded $0.7 million and $0.4 million, respectively, of expense related to the 2019-2020 iPIP plan. Distributions on the class B units will be 50% in cash and 50% in shares of the Company's common ~~stock.~~stock or in shares of SAFE's common stock owned by the Company.

2013-2018 iPIP Plans—The remainder of the Company's iPIP plans, as shown in the table below, are liability-classified awards and are remeasured each reporting period at fair value until the awards are settled. Certain employees will be granted

~~Table of Contents~~

~~iStar Inc.~~

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

~~(unaudited)~~

awards that entitle employees to receive the residual cash flows from the investments in the plans after the Company has received a specified return on its invested capital and a return of its invested capital. Awards are also subject to reductions under a TSR adjustment. The fair value of awards is determined using a model that forecasts the Company's projected investment performance. Settlement of the awards will be 50% in cash and 50% in shares of the Company's common ~~stock.~~stock or in shares of SAFE's common stock owned by the Company.

The following is a summary of the status of the Company’s liability-classified iPIP plans and changes during the three months ended March 31, ~~2019~~2020.



	iPIP Investment Pool
	2013-2014		2015-2016		2017-2018
Points at beginning of period	81.17		73.28		77.27
Granted	—		—		—
Forfeited	(1.00	)	(1.13	)	(0.93	)
Points at end of period	80.17		72.15		76.34

Table of Contents

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

During the three months ended March 31, 2020, the Company made distributions to participants in the 2015-2016 investment pool. The iPIP participants received total distributions in the amount of $1.5 million as compensation, comprised of cash and 54,245 shares of the ~~year ended December 31, 2018.~~Company's common stock with a fair value of $14.51 per share, which are fully-vested and issued under the 2009 LTIP (see below). After deducting statutory minimum tax withholdings, a total of 32,825 shares of the Company's common stock were issued.

Three Months Ended March 31, 2019 Year Ended December 31, 2018
iPIP Investment Pool iPIP Investment Pool
2013-2014 2015-2016 2017-2018 2013-2014 2015-2016 2017-2018
Points at beginning of period 85.77
79.41
82.43
86.57
84.16
40.97
Granted —
—
—
0.50
—
49.33
Forfeited —
(0.82 ) (1.03 ) (1.3 ) (4.75 ) (7.87 )
Points at end of period 85.77
78.59
81.40
85.77
79.41
82.43

During the three months ended March 31, 2019, the Company made distributions to participants in the 2013-2014 investment pool. The iPIP participants received total distributions in the amount of $7.4 million as compensation, comprised of ~~$3.8 million in~~ cash and 389,545 shares of the Company's common stock, with a fair value of ~~$3.6 million or~~ $9.21 per share, which are fully-vested and issued under the 2009 LTIP (see below). After deducting statutory minimum tax withholdings, a total of 209,118 shares of the Company's common stock were issued.

As of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, the Company had accrued compensation costs relating to iPIP of ~~$33.0~~$54.7 million and ~~$37.5~~$41.9 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. In May 2019, the Company's shareholders approved an increase in the number of shares available for issuance under the 2009 LTIP from a maximum of 8.0 million to 8.9 million and extended the expiration date of the 2009 LTIP from May 2019 to May 2029.

As of March 31, ~~2019,~~2020, an aggregate of ~~2.1~~2.5 million shares remain available for issuance pursuant to future awards under the Company's 2009 LTIP.

Restricted Stock Unit Activity—A summary of the Company’s stock-based compensation awards to certain employees in the form of long-term incentive awards for the three months ended March 31, ~~2019 and the year ended December 31, 2018, are~~2020, is as follows (in thousands):



Nonvested at beginning of period	598
Granted	181
Vested	(105	)
Forfeited	—
Nonvested at end of period	674

Three Months Ended March 31, 2019
Year Ended
December 31, 2018
Nonvested at beginning of period 357
282
Granted 474
278
Vested (52 ) (142 )
Forfeited (9 ) (61 )
Nonvested at end of period 770
357

As of March 31, ~~2019,~~2020, there was ~~$5.4~~$4.6 million of total unrecognized compensation cost related to all unvested restricted stock units that are expected to be recognized over a weighted average remaining vesting/service period of ~~2.0~~1.7 years.

Directors' Awards—During the three months ended March 31, ~~2019,~~2020, the Company issued ~~1,899~~917 common stock equivalents ("CSEs") at a fair value of ~~$8.17~~$9.45 per CSE in respect of dividend equivalents on outstanding CSEs. As of March 31, ~~2019,~~2020, a combined total of ~~241,700~~153,431 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 ~~$2.0~~$1.6 million.

~~Table of Contents~~

~~iStar Inc.~~

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

~~(unaudited)~~

401(k) Plan—The Company made contributions of ~~$0.6~~$0.7 million and ~~$0.7~~$0.6 million for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively.

Note ~~15—~~16—Earnings Per Share

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



	For the Three Months Ended March 31,
	2020			2019
Net loss	$	(12,885	)	$	(6,970	)
Net income attributable to noncontrolling interests	(2,691		)	(2,471		)
Preferred dividends	(5,874		)	(8,124		)
Net loss allocable to common shareholders for basic and diluted earnings per common share	$	(21,450	)	$	(17,565	)

For the Three Months Ended March 31,
2019 2018
Net income (loss) $ (6,970 ) $ 35,028
Net income attributable to noncontrolling interests (2,471 ) (95 )
Preferred dividends (8,124 ) (8,124 )
Net income (loss) allocable to common shareholders for basic earnings per common share $ (17,565 ) $ 26,809
Add: Effect of Series J convertible perpetual preferred stock —
2,250
Net income (loss) allocable to common shareholders for diluted earnings per common share $ (17,565 ) $ 29,059



	For the Three Months Ended March 31,
	2020			2019
Earnings allocable to common shares:
Numerator for basic and diluted earnings per share:
Net loss allocable to common shareholders	$	(21,450	)	$	(17,565	)

Denominator for basic and diluted earnings per share:
Weighted average common shares outstanding for basic and diluted earnings per common share	77,444			67,747

Basic and diluted earnings per common share:
Net loss allocable to common shareholders	$	(0.28	)	$	(0.26	)

For the Three Months Ended March 31,
2019 2018
Earnings allocable to common shares:
Numerator for basic earnings per share:
Net income (loss) allocable to common shareholders $ (17,565 ) $ 26,809

Numerator for diluted earnings per share:
Net income (loss) allocable to common shareholders $ (17,565 ) $ 29,059

Denominator for basic and diluted earnings per share:
Weighted average common shares outstanding for basic earnings per common share 67,747
67,913
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 67,747
83,670

Basic earnings per common share:
Net income (loss) allocable to common shareholders $ (0.26 ) $ 0.39

Diluted earnings per common share:
Net income (loss) allocable to common shareholders $ (0.26 ) $ 0.35

~~Table of Contents~~

~~iStar Inc.~~

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

~~(unaudited)~~

~~The~~For the three months ended March 31, 2019, 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,
2019 2018
Series J convertible perpetual preferred stock 15,951
—



Series J convertible perpetual preferred stock	15,951

(1)

For the three monthsended March 31, 2019, the effect of certain of the Company's ~~unvested Units, performance-based Units, CSEs and~~ restricted stock awards were ~~anti-dilutive due to the Company having a net loss for the period.~~anti-dilutive. The Company will settle conversions of the 3.125% Convertible Notes (refer to Note 11) 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, ~~2019~~2020 and ~~2018~~2019 and therefore the 3.125% Convertible Notes had no effect on diluted EPS for such ~~periods.~~

period.

Note ~~16—~~17—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).

Table of Contents

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

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, 2020
Recurring basis:
Derivative liabilities⁽¹⁾	$	20,685	$	—	$	20,685	$	—
Available-for-sale securities⁽¹⁾	23,640		—		—		23,640
Non-recurring basis:
Other investments⁽²⁾	44,882		—		44,882		—

As of December 31, 2019
Recurring basis:
Derivative assets⁽¹⁾	$	114	$	—	$	114	$	—
Derivative liabilities⁽¹⁾	8,680		—		8,680		—
Available-for-sale securities⁽¹⁾	23,896		—		—		23,896
Non-recurring basis:
Impaired land and development⁽³⁾	40,000		—		—		40,000

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, 2019
Recurring basis:
Derivative assets⁽¹⁾
$ 2,279
$ —
$ 2,279
$ —
Derivative liabilities⁽¹⁾
14,297
—
14,297
—
Available-for-sale securities⁽¹⁾
22,615
$ —
$ —
22,615
Non-recurring basis:
Impaired real estate available and held for sale⁽²⁾
17,100
—
—
17,100

As of December 31, 2018
Recurring basis:
Derivative assets⁽¹⁾
$ 3,669
$ —
$ 3,669
$ —
Derivative liabilities⁽¹⁾
10,244
—
10,244
—
Available-for-sale securities⁽¹⁾
$ 21,661
$ —
$ —
$ 21,661
Non-recurring basis:
Impaired real estate⁽³⁾
29,400
—
—
29,400
Impaired real estate available and held for sale⁽⁴⁾
19,300
—
—
19,300
Impaired land and development⁽⁵⁾
78,400
—
—
78,400


(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~~During the three months ended March 31, 2020, the Company ~~recorded~~identified an ~~impairment~~observable price change in an equity security held by the Company as evidenced by an orderly private issuance of ~~$3.2 million on a commercial operating property based on an executed purchase~~similar securities by the same issuer and, ~~sale agreement.~~as such, classified such observable price change as Level 2.


(3)	The Company recorded aggregate impairments of ~~$76.3~~$5.3 million on ~~three real estate assets with an estimated aggregate fair value of $29.4 million. The impairments were as follows:~~


a.	A $23.2 million impairment on a commercial operating property based on a decline in expected operating performance. The fair value is based on the Company's estimate of the recoverability of its investment in the project.


b.	A $6.0 million impairment on a property based on a strategic decision to sell the asset. The fair value is based on purchase offers received from third parties, which is consistent with the Company's estimate of fair value.


c.	A $47.1 million impairment on a commercial operating property based on a strategic decision to sell the asset. The fair value is based on purchase offers received from third parties, which is consistent with the Company's estimate of fair value.


~~(4)~~	~~The Company recorded aggregate impairments of $3.7 million on two real estate assets held for sale. The fair values are based on market comparable sales.~~


~~(5)~~	~~The Company recorded aggregate impairments of $55.4 million on four~~2 land and development assets with an estimated aggregate fair value of ~~$78.4~~$40.0 million. The ~~impairments were as follows:~~


a.	~~A $25.0 million impairment on a waterfront land and development asset~~estimated fair values are based on ~~a strategic decision to sell the asset. The fair value is based on purchase offers received from third parties, which is consistent with the Company's estimate of fair value.~~


b.	A $21.6 million impairment on a master planned community based on a strategic decision to sell the asset. The fair value is based on purchase offers received from third parties, which is consistent with the Company's estimate of fair value.


c.	A $6.9 million impairment on an infill land and development asset based on the deterioration of the asset. The fair value is based on purchase offers received from third parties, which is consistent with the Company's estimate of fair value.


d.	~~A $1.9 million impairment on a waterfront land and development asset based on the sale of the asset in 2019.~~expected sales proceeds.

~~Table of Contents~~

~~iStar Inc.~~

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

~~(unaudited)~~

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, ~~2019~~2020 and ~~2018~~2019 ($ in thousands):



	2020			2019
Beginning balance	$	23,896		$	21,661
Repayments	(459		)	(46		)
Unrealized gains recorded in other comprehensive income	203			1,000
Ending balance	$	23,640		$	22,615

2019 2018
Beginning balance $ 21,661
$ 22,842
Repayments (46 ) (36 )
Unrealized gains (losses) recorded in other comprehensive income 1,000
(971 )
Ending balance $ 22,615
$ 21,835

Fair values of financial instruments—The Company's estimated fair values of its loans receivable and other lending investments and outstanding debt ~~including liabilities associated with properties held for sale,~~ was $0.9 billion and ~~$3.3~~$3.0 billion, respectively, as of March 31, ~~2019~~2020 and ~~$1.0~~$0.9 billion and ~~$3.5~~$3.6 billion, respectively, as of December 31, ~~2018.~~2019. 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, net investment in leases and accounts payable, approximate the fair values of the instruments. Cash and cash equivalents and restricted cash values are considered

Table of Contents

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Level 1 on the fair value hierarchy. The fair value of other financial instruments, including derivative assets and liabilities, isare included in the fair value hierarchy table above.

Note ~~17—~~18—Segment Reporting

The Company has determined that it has ~~four~~4 reportable segments based on how management reviews and manages its business. These reportable segments include: Net Lease, 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 and its investment in SAFE (refer to Note 7)8). 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 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			Net Lease			Real Estate Finance			Operating Properties			Land and Development			Corporate/Other⁽¹⁾			Company Total
Three Months Ended March 31. 2019:
Three Months Ended March 31, 2020:
Operating lease income																			$	41,464		$	—		$	5,774		$	108		$	—		$	47,346
Interest income																			823			16,393			—			—			—			17,216
Interest income from sales-type leases																			8,355			—			—			—			—			8,355
Other income																			4,293			306			3,157			624			11,988			20,368
Land development revenue																			—			—			—			80,176			—			80,176
Earnings (losses) from equity method investments																			19,531			—			(2,667		)	584			(836		)	16,612
Total revenue and other earnings																			74,466			16,699			6,264			81,492			11,152			190,073
Real estate expense																			(6,229		)	—			(7,663		)	(8,606		)	—			(22,498		)
Land development cost of sales																			—			—			—			(77,059		)	—			(77,059		)
Other expense																			—			(19		)	—			—			(55		)	(74		)
Allocated interest expense																			(24,478		)	(6,199		)	(2,259		)	(4,570		)	(5,886		)	(43,392		)
Allocated general and administrative⁽²⁾																			(6,989		)	(2,097		)	(789		)	(2,819		)	(5,307		)	(18,001		)
Segment profit (loss)⁽³⁾																			$	36,770		$	8,384		$	(4,447	)	$	(11,562	)	$	(96	)	$	29,049
Other significant items:
Provision for loan losses																			$	137		$	3,866		$	—		$	—		$	—		$	4,003
Provision for losses on net investment in leases																			1,292			—			—			—			—			1,292
Impairment of assets																			1,708			—			—			—			—			1,708
Depreciation and amortization																			12,656			—			1,284			243			303			14,486
Capitalized expenditures																			1,846			—			917			12,027			—			14,790

Three Months Ended March 31, 2019:
Operating lease income	$	—		$	49,482		$	9,356		$	77		$	—		$	58,915		$	49,482		$	—		$	9,356		$	77		$	—		$	58,915
Interest income	20,375			—			—			—			—			20,375			—			20,375			—			—			—			20,375
Other income	2,189			3,420			2,375			3,447			3,382			14,813			3,420			2,189			2,375			3,447			3,382			14,813
Land development revenue	—			—			—			12,699			—			12,699			—			—			—			12,699			—			12,699
Earnings (losses) from equity method investments	—			7,230			(2,410		)	287			202			5,309			7,230			—			(2,410		)	287			202			5,309
Income from sales of real estate	—			—			9,407			—			—			9,407			—			—			9,407			—			—			9,407
Total revenue and other earnings	22,564			60,132			18,728			16,510			3,584			121,518			60,132			22,564			18,728			16,510			3,584			121,518
Real estate expense	—			(6,106		)	(11,033		)	(8,801		)	—			(25,940		)	(6,106		)	—			(11,033		)	(8,801		)	—			(25,940		)
Land development cost of sales	—			—			—			(14,449		)	—			(14,449		)	—			—			—			(14,449		)	—			(14,449		)
Other expense	(265		)	—			—			—			(243		)	(508		)	—			(265		)	—			—			(243		)	(508		)
Allocated interest expense	(8,413		)	(21,766		)	(2,918		)	(5,127		)	(8,353		)	(46,577		)	(21,766		)	(8,413		)	(2,918		)	(5,127		)	(8,353		)	(46,577		)
Allocated general and administrative⁽²⁾	(2,209		)	(5,678		)	(761		)	(3,257		)	(4,945		)	(16,850		)	(5,678		)	(2,209		)	(761		)	(3,257		)	(4,945		)	(16,850		)
Segment profit (loss)⁽³⁾	$	11,677		$	26,582		$	4,016		$	(15,124	)	$	(9,957	)	$	17,194		$	26,582		$	11,677		$	4,016		$	(15,124	)	$	(9,957	)	$	17,194
Other significant items:
Recovery of loan losses	$	(97	)	$	—		$	—		$	—		$	—		$	(97	)	$	—		$	(97	)	$	—		$	—		$	—		$	(97	)
Impairment of assets	—			—			3,851			—			—			3,851			—			—			3,851			—			—			3,851
Depreciation and amortization	—			13,561			1,557			247			303			15,668			13,561			—			1,557			247			303			15,668
Capitalized expenditures	—			2,756			416			36,079			—			39,251			2,756			—			416			36,079			—			39,251

3235

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

Three Months Ended March 31, 2018:
Operating lease income $ —
$ 29,727
$ 15,817
$ 255
$ —
$ 45,799
Interest income 26,697
—
—
—
—
26,697
Other income 384
1,049
12,144
471
1,272
15,320
Land development revenue —
—
—
276,429
—
276,429
Earnings from equity method investments —
3,556
(1,275 ) 1,545
(494 ) 3,332
Income from sales of real estate —
414
16,634
—
—
17,048
Total revenue and other earnings 27,081
34,746
43,320
278,700
778
384,625
Real estate expense —
(3,948 ) (21,626 ) (10,606 ) —
(36,180 )
Land development cost of sales —
—
—
(223,407 ) —
(223,407 )
Other expense (400 ) —
—
—
(766 ) (1,166 )
Allocated interest expense (11,765 ) (14,201 ) (5,528 ) (6,473 ) (7,215 ) (45,182 )
Allocated general and administrative⁽²⁾
(3,969 ) (4,586 ) (2,043 ) (3,805 ) (5,320 ) (19,723 )
Segment profit (loss)⁽³⁾
$ 10,947
$ 12,011
$ 14,123
$ 34,409
$ (12,523 ) $ 58,967
Other significant items:
Recovery of loan losses $ (855 ) $ —
$ —
$ —
$ —
$ (855 )
Impairment of assets —
—
4,100
—
—
4,100
Depreciation and amortization —
6,309
3,926
515
360
11,110
Capitalized expenditures —
478
7,700
31,447
—
39,625

As of March 31, 2019
Real estate

Real estate, net $ —
$ 1,449,845
$ 171,159
$ —
$ —
$ 1,621,004
Real estate available and held for sale —
219,184
34,152
—
—
253,336
Total real estate —
1,669,029
205,311
—
—
1,874,340
Land and development, net —
—
—
616,350
—
616,350
Loans receivable and other lending investments, net 894,846
—
—
—
—
894,846
Other investments —
407,682
62,434
44,656
7,227
521,999
Total portfolio assets $ 894,846
$ 2,076,711
$ 267,745
$ 661,006
$ 7,227
3,907,535
Cash and other assets 763,878
Total assets

$ 4,671,413

As of December 31, 2018
Real estate

Real estate, net $ —
$ 1,536,494
$ 234,525
$ —
$ —
$ 1,771,019
Real estate available and held for sale —
1,055
21,496
—
—

22,551
Total real estate —
1,537,549
256,021
—
—
1,793,570
Land and development, net —
—
—
598,218
—
598,218
Loans receivable and other lending investments, net 988,224
—
—
—
—
988,224
Other investments —
165,804
65,643
65,312
7,516
304,275
Total portfolio assets $ 988,224
$ 1,703,353
$ 321,664
$ 663,530
$ 7,516
3,684,287
Cash and other assets 1,329,990
Total assets

$ 5,014,277



	Net Lease		Real Estate Finance		Operating Properties		Land and Development		Corporate/Other⁽¹⁾		Company Total
As of March 31, 2020
Real estate
Real estate, net	$	1,301,176	$	—	$	199,913	$	—	$	—	$	1,501,089
Real estate available and held for sale	25,730		—		8,661		—		—		34,391
Total real estate	1,326,906		—		208,574		—		—		1,535,480
Net investment in leases	409,976		—		—		—		—		409,976
Land and development, net	—		—		—		514,064		—		514,064
Loans receivable and other lending investments, net	43,344		807,491		—		—		—		850,835
Other investments	880,534		—		60,009		36,672		52,337		1,029,552
Total portfolio assets	$	2,660,760	$	807,491	$	268,583	$	550,736	$	52,337	4,339,907
Cash and other assets											882,674
Total assets											$	5,222,581

As of December 31, 2019
Real estate
Real estate, net	$	1,327,082	$	—	$	200,137	$	—	$	—	$	1,527,219
Real estate available and held for sale	—		—		8,650		—		—		8,650
Total real estate	1,327,082		—		208,787		—		—		1,535,869
Net investment in leases	418,915		—		—		—		—		418,915
Land and development, net	—		—		—		580,545		—		580,545
Loans receivable and other lending investments, net	44,339		783,522		—		—		—		827,861
Other investments	760,068		—		61,686		42,866		43,255		907,875
Total portfolio assets	$	2,550,404	$	783,522	$	270,473	$	623,411	$	43,255	4,271,065
Cash and other assets											814,044
Total assets											$	5,085,109

~~Table of Contents~~

~~iStar Inc.~~

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

~~(unaudited)~~


(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 ~~$4.2~~$16.3 million and ~~$9.1~~$4.2 million for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively.


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



	For the Three Months Ended March 31,
	2020			2019
Segment profit	$	29,049		$	17,194
Add/Less: (Provision for) recovery of loan losses	(4,003		)	97
Less: Provision for losses on net investment in leases	(1,292		)	—
Less: Impairment of assets	(1,708		)	(3,851		)
Less: Stock-based compensation expense	(16,270		)	(4,249		)
Less: Depreciation and amortization	(14,486		)	(15,668		)
Less: Income tax expense	(60		)	(25		)
Less: Loss on early extinguishment of debt, net	(4,115		)	(468		)
Net loss	$	(12,885	)	$	(6,970	)

Table of Contents

iStar Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

For the Three Months Ended March 31,
2019 2018
Segment profit $ 17,194
$ 58,967
Add: Recovery of loan losses 97
855
Less: Impairment of assets (3,851 ) (4,100 )
Less: Stock-based compensation expense (4,249 ) (9,091 )
Less: Depreciation and amortization (15,668 ) (11,110 )
Less: Income tax expense (25 ) (121 )
Less: Loss on early extinguishment of debt, net (468 ) (372 )
Net income (loss) $ (6,970 ) $ 35,028

Note 19—Subsequent Events

The coronavirus ("COVID-19") pandemic outbreak has rapidly and dramatically impacted the United States and global economies. Many countries, including the United States, have instituted quarantines, mandated business and school closures and restricted travel. The United States financial markets have experienced disruption, with heightened stock market volatility and constrained credit conditions within most sectors, including real estate. Many experts predict that the outbreak will trigger a period of global economic slowdown or a global recession. At this time, the Company cannot predict the extent of the impacts of the COVID-19 crisis on its business. The ultimate impact of COVID-19 on the Company's business, results of operations, financial condition and cash flows is dependent on future developments, including the duration of the pandemic and the extent of its impact on the global economy, which are uncertain and cannot be predicted at this time. See the Risk Factors section of this report for additional discussion of certain potential risks to the Company's business arising from the COVID-19 crisis.

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 ~~2018~~ Annual Report and in this 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 ~~2018~~ 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. ("iStar") finances, invests in and develops real estate and real estate related projects as part of its fully-integrated investment platform. We also manage entities focused on ground lease ("Ground Lease") and net lease investments. We have invested approximately $40 billion of capital 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

~~Capital remains cheap~~The coronavirus (COVID-19) outbreak has rapidly and ~~plentiful in most traditional lending sectors of~~dramatically impacted the ~~commercial real estate markets,~~US and ~~we expect that to continue for~~global economies. Many countries, including the ~~remainder of 2019. In addition, interest rates~~United States, have instituted quarantines, mandated business and ~~the equity~~school closures and restricted travel. The US financial markets have experienced ~~some volatility.~~significant disruption, with heightened stock market volatility and highly constrained credit conditions within most sectors, including real estate. We ~~have taken a cautious approach in these conditions, focusing~~are focused on ~~providing capital to customers with whom we have a pre-existing relationship, originating fewer traditional loans~~ensuring the health and ~~aggressively seeking to monetize legacy assets.~~

~~Consistent with our historical approach of offering differentiated capital where we believe we can capture better risk-adjusted returns, we have invested, and intend to continue to invest, more~~safety of our ~~capital~~personnel and ~~resources in~~ the ~~Ground Lease business. In January 2019, we expanded our relationship with~~continuity of business activities at iStar and SAFE, ~~through an additional $250.0 million equity investment and an amendment of our management agreement with SAFE that gives us greater protection against a termination~~monitoring the effects of the ~~agreement,~~crisis on our and ~~incentivizes us to grow~~ SAFE's ~~portfolio.~~customers, marshalling available liquidity at both companies, implementing appropriate cost containment measures and preparing for the eventual resumption of more normalized activities. At this time, we cannot predict the extent of the impacts of the COVID-19 crisis on our or SAFE's business. We ~~have also pursued and~~ will continue to ~~pursue joint~~monitor its effects on a daily basis and will adjust operations as necessary

The crisis began to materially affect our business in the latter part of the first quarter when we and most of our tenants and borrowers began working from home and normal business operations at companies throughout the United States ceased. There are no reliable forecasts as to how long these conditions will persist. While our financial results for the first quarter of 2020 were generally in line with our expectations, we may experience a material decline in rent and interest payments received in the second quarter and thereafter until more normalized business conditions resume. We increased our allowance for loan losses in the first quarter and expect that we will continue to do so in future quarters while the COVID-19 pandemic continues to materially affect the US economy.

In 2019, we took advantage of favorable interest rate and liquidity conditions to refinance and pay down outstanding debt through the issuance of an aggregate of $1.325 billion of unsecured notes. The refinancings reduced our interest costs and improved our debt maturity profile. We have no corporate debt maturities through September 2022. In addition, in the fourth quarter 2019 substantially all of our Series J preferred stock was converted by the holders thereof into approximately 16.5 million shares of our common stock, which increased our equity base. Subsequent to March 31, 2020, we repaid the Revolving Credit Facility in full and our liquidity position at the date of this report included approximately $85 million of unrestricted cash and $350 million of undrawn capacity on our Revolving Credit Facility (refer to Note 11).

The COVID-19 crisis may adversely affect our strategies of monetizing legacy assets and materially scaling SAFE's portfolio for the time being. Equity and debt financing for real estate transactions ~~with SAFE,~~generally is constrained. In addition, the crisis has made it more difficult to execute transactions as people are unable to visit properties, local governmental offices are closed and third parties such as ~~offering customers a SAFE Ground Lease~~survey, insurance, environmental and ~~an iStar leasehold loan.~~

~~In July 2018, we entered into "Net Lease Venture II" with total capital commitments~~similar services have more limited capacities. These conditions may adversely affect our strategy while they persist. See the Risk Factors section of ~~$526 million and an investment strategy similar to the Net Lease Venture. We have an equity interest in the new venture~~this report for additional discussion of ~~approximately 51.9% and are responsible for managing the venture in exchange for management and incentive fees.~~

For the three months ended March 31, 2019, we recorded net loss allocable to common shareholders of $17.6 million, compared to net income of $26.8 million during the same period in the prior year. Adjusted income (loss) allocable to common shareholders for the three months ended March 31, 2019 was $(120.0) thousand, compared to $132.3 million during the same period in the prior year (see "Adjusted Income" for a reconciliation of adjusted income to net income).

We continue to work on monetizing, repositioning or redeveloping our legacy portfolio, which includes transitional operating properties and land and development assets, such as the Asbury Park assemblage and the Magnolia Green community (refercertain potential risks to our ~~Annual Report on Form 10-K), in order to maximize their value.~~business arising from the COVID-19 crisis.

Portfolio Overview

As of March 31, 2019, we had $315.4 million of cash and $325.0 million of credit facility availability. We have no debt maturities for the remainder of 2019. We expect to use our unrestricted cash balance primarily to fund future investment activities, pay debt service, make distributions to shareholders and for general working capital needs.

~~Portfolio Overview~~

As of March 31, 2019, based on our gross book value, including the carrying value of our equity method investments exclusive of accumulated depreciation, our total investment portfolio has the following characteristics:

~~As of March 31, 2019,~~2020, based on our gross book value, including the carrying value of our equity method investments gross of accumulated depreciation, our total investment portfolio has the following property/collateral type and geographic characteristics ($ in thousands):



Property/Collateral Types	Net Lease			Real Estate Finance			Operating Properties			Land & Development			Total			% of Total
Office / Industrial	$	1,177,330		$	104,894		$	97,790		$	—		$	1,380,014		28.9	%
Entertainment / Leisure	933,689			—			16,162			—			949,851			19.8	%
Ground Leases	878,276			—			—			—			878,276			18.3	%
Land and Development	—			97,324			—			400,817			498,141			10.4	%
Condominium	—			187,848			20,937			145,558			354,343			7.4	%
Hotel	—			172,965			82,565			—			255,530			5.3	%
Multifamily	—			162,343			54,294			5,896			222,533			4.6	%
Retail	57,348			68,939			41,398			8,295			175,980			3.7	%
Other Property Types	—			23,640			—			—			23,640			0.5	%
Strategic Investments⁽¹⁾	—			—			—			—			52,337			1.1	%
Total	$	3,046,643		$	817,953		$	313,146		$	560,566		$	4,790,645		100.0	%
Percentage of Total	64		%	17		%	7		%	12		%	100		%

_______________________________________________________________________________

Property/Collateral Types Real Estate Finance Net Lease Operating Properties Land & Development Total % of
Total
Office / Industrial $ 89,536
$ 1,314,712
$ 110,691
$ —
$ 1,514,939
34.3 %
Land and Development 75,253
—
—
669,920
745,173
16.9 %
Entertainment / Leisure —
723,720
15,038
—
738,758
16.7 %
Ground Leases —
426,527
—
—
426,527
9.7 %
Hotel 254,648
—
47,384
—
302,032
6.8 %
Mixed Use / Mixed Collateral 213,225
—
31,728
—
244,953
5.6 %
Multifamily 98,541
—
30,813
—
129,354
2.9 %
Condominium 104,889
—
16,106
—
120,995
2.7 %
Other Property Types 48,344
57,348
—
—
105,692
2.4 %
Retail 22,819
—
54,784
—
77,603
1.8 %
Strategic Investments —
—
—
—
7,228
0.2 %
Total $ 907,255
$ 2,522,307
$ 306,544
$ 669,920
$ 4,413,254
100.0 %


(1)	Strategic Investments is comprised of $44.9 million of office/industrial and $7.4 million of other property types.


Geographic Region	Real Estate Finance		Net Lease		Operating Properties		Land & Development		Total		% of Total		Net Lease		Real Estate Finance		Operating Properties		Land & Development		Total		% of Total
Northeast	$	400,106	$	687,837	$	62,906	$	341,372	$	1,492,221	33.7	%	$	914,897	$	309,546	$	93,425	$	304,179	$	1,622,047	33.9	%
Southeast	123,728		550,479		17,898		70,422		762,527		17.3	%
West	171,325		397,878		55,014		77,019		701,236		15.9	%	482,959		262,353		56,489		38,809		840,610		17.5	%
Mid-Atlantic	11,784		438,835		1,599		129,577		581,795		13.2	%	506,309		12,803		—		123,763		642,875		13.4	%
Central													419,506		76,274		45,642		31,500		572,922		12.0	%
Southwest	54,256		224,156		117,484		19,994		415,890		9.4	%	388,075		15,385		104,307		43,611		551,378		11.5	%
Central	47,475		215,888		51,643		31,536		346,542		7.9	%
Southeast													325,435		55,224		13,283		18,704		412,646		8.6	%
Various	98,581		7,234		—		—		105,815		2.4	%	9,462		86,368		—		—		95,830		2.0	%
Strategic Investments	—		—		—		—		7,228		0.2	%	—		—		—		—		52,337		1.1	%
Total	$	907,255	$	2,522,307	$	306,544	$	669,920	$	4,413,254	100.0	%	$	3,046,643	$	817,953	$	313,146	$	560,566	$	4,790,645	100.0	%

~~Real Estate Finance~~

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

March 31, 2019
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 32
$ 778,124
$ (12,410 ) $ 765,714
96.8% 1.6%
Non-performing loans 3
66,500
(40,888 ) 25,612
3.2% 61.5%
Total 35
$ 844,624
$ (53,298 ) $ 791,326
100.0% 6.3%

December 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
Performing loans 35
$ 852,768
$ (13,000 ) $ 839,768
97.0% 1.5%
Non-performing loans 3
66,725
(40,395 ) 26,330
3.0% 60.5%
Total 38
$ 919,493
$ (53,395 ) $ 866,098
100.0% 5.8%

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

March 31, 2019 December 31, 2018
Senior mortgages $ 624,360
$ 694,025
Corporate/Partnership loans 143,426
148,583
Subordinate mortgages 10,338
10,160
Total $ 778,124
$ 852,768

Weighted average LTV 61 % 63 %
Yield 9.1 % 9.2 %

~~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, 2019, we had non-performing loans with an aggregate carrying value of $25.6 million compared to non-performing loans with an aggregate carrying value of $26.3 million as of December 31, 2018. 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 $53.3 million as of March 31, 2019, or 6.3% of total loans, compared to $53.4 million or 5.8% as of December 31, 2018. For the three months ended March 31, 2019, the recovery of loan losses included a decrease in the general reserve of $0.6 million offset by an increase in the specific reserve of $0.5 million. 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, 2019, asset-specific reserves increased to $40.9 million compared to $40.4 million as of December 31, 2018.

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 $12.4 million or 1.6% of performing loans as of March 31, 2019, compared to $13.0 million or 1.5% of performing loans as of December 31, 2018. The decrease was primarily attributable to an overall improvement in the risk 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. Leases typically provide for expenses at the facility to be paid by the tenant on a triple net lease basis. Under a typical net lease agreement, the tenant agrees to pay a base monthly operating lease payment and most or all of the facility operating expenses (including taxes, utilities, maintenance and insurance). We generally intend to hold our net lease assets for long-term investment. However, we may dispose of assets if we deem the disposition to be in our best interests.

The net lease segment includes our Ground Lease investments made primarily through SAFE and our traditional net lease ~~investments and our investment in SAFE.~~investments. As of March 31, ~~2019,~~2020, our consolidated net lease portfolio totaled $2.1 billion. Our net lease portfolio, including the carrying value of our equity method investments in SAFE and Net Lease Venture II, exclusive of accumulated depreciation, totaled ~~$2.5~~$3.0 billion. The table below provides certain statistics for our net lease portfolio.


	Consolidated Real Estate⁽¹⁾			Net Lease Venture II			SAFE⁽²⁾			Consolidated Real Estate⁽¹⁾			Net Lease Venture II			SAFE
Ownership %	100.0		%	51.9		%	42.4		%	100.0		%	51.9		%	65.4		%
Gross book value (millions)⁽³⁾⁽²⁾	$	2,107		$	31		$	1,016		$	2,146		$	175		$	2,705

% Leased	98.8		%	100.0		%	100.0		%	99.4		%	100.0		%	100.0		%
Square footage (thousands)⁽⁴⁾	17,242			169			1,801			15,738			1,998			N/A
Weighted average lease term (years)⁽⁵⁾⁽³⁾	15.0			9.8			84.1			17.8			6.5			89.6
Weighted average yield(4)	8.8		%	8.2		%				8.0		%	10.4		%	4.4		%

(1)We own 51.9% of the Net Lease Venture which is consolidated in our GAAP financial ~~statements.~~statements (refer to Note 4).

(2)

AsGross book value represents the acquisition cost of ~~March 31, 2019, we own 7,766,411 shares~~real estate and any additional capital invested into the property by us. Consolidated Real Estate includes amounts recorded as net investment in leases (refer to Note 5) and financing receivables in loans and other lending investments (refer to Note 7). SAFE includes its 54.8% pro rata share of its unconsolidated equity method investment.


(3)	Weighted average lease term is calculated using GAAP rent and the initial maturity and does not include extension options. SAFE ~~common stock, or 42.4%, and 12,500,000 Investor Units in SAFE OP, bringing our total economic interest in SAFE to 65.8%.~~includes its 54.8% pro rata share of its unconsolidated equity method investment.

~~(3)Gross book value represents the acquisition cost of real estate and any additional capital invested into the property by us.~~

(4)~~Square footage~~Yield for SAFE ~~represents~~is calculated over the ~~square footage of the leasehold improvements owned~~trailing twelve months and excludes management fees earned by ~~SAFE.~~us.

~~(5)Represents the initial maturity and does not include extension options.~~

Net Lease Venture—In February 2014, the Company partnered with a sovereign wealth fund to form a venture to acquire and develop net lease assets and gave a right of first refusal to the venture on all new net lease investments that met specified investment criteria (refer to Note 74 in our consolidated financial statements for more information on our Net Lease Venture). The Net Lease Venture's investment period expired on June 30, 2018 and the remaining term of the venture extends through February 13, 2022, subject to two, one-year extension options at the discretion of us and our partner. We obtained control over the Net Lease Venture when the investment period expired on June 30, 2018 and consolidated the assets and liabilities of the venture, which had previously been accounted for as an equity method investment.

Net Lease Venture II—In July 2018, we entered into Net Lease Venture II with similar investment strategies as the Net Lease Venture (refer to Note 7)8). The Net Lease Venture II has a right of first offer on all new net lease investments (excluding Ground Leases) originated by us. We have an equity interest in the new venture of approximately 51.9%, which is accounted for as an equity method investment, and are responsible for managing the venture in exchange for a management fee and incentive fee.

SAFE—SAFE is a publicly-traded company that originates and acquires Ground Leases in order to generate attractive long-term risk-adjusted returns from its investments. We believe its business has characteristics comparable to a high-grade fixed income investment business, but with certain unique advantages. Relative to alternative fixed income investments generally, SAFE's Ground Leases typically benefit from built-in growth derived from contractual rent increases, and the opportunity to realize value from residual rights to acquire the buildings and other improvements on its land at no additional cost. We believe that these features offer us the opportunity through our ownership in SAFE to realize superior risk-adjusted total returns when compared to certain alternative highly-rated investments. As of March 31, 2020, we owned approximately 65.4% of SAFE's common stock outstanding.

We account for our investment in SAFE as an equity method investment (refer to Note 7)8). We ~~are~~act as SAFE's external manager pursuant to a management agreement, and 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.

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. Our real estate finance portfolio consists of senior mortgage loans that are secured by commercial and residential real estate assets where we are the first lien holder, subordinated mortgage loans that are secured by second lien or junior interests in commercial and residential real estate assets, leasehold loans to Ground Lease tenants, including tenants of SAFE, and corporate/partnership loans, which represent mezzanine or subordinated loans to entities for which we do not have a lien on the underlying asset, but may have a pledge of underlying equity ownership of such assets. Our real estate finance portfolio includes loans on stabilized and transitional properties, Ground Leases and ground-up construction projects. In addition, we have preferred equity investments and debt securities classified as other lending investments.

As of March 31, 2020, our real estate finance portfolio, including securities and other lending investments, totaled $862.4 million, exclusive of general loan loss allowance. The portfolio, excluding securities and other lending investments, included $692.1 million of performing loans with a weighted average maturity of 1.4 years.

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



	March 31, 2020
	Number of Loans	Gross Carrying Value		Allowance for Loan Losses			Carrying Value		% of Total	Allowance for Loan Losses as a % of Gross Carrying Value
Performing loans	22	$	692,129	$	(11,563	)	$	680,566	97.7%	1.7%
Non-performing loans	1	37,517		(21,701		)	15,816		2.3%	57.8%
Total	23	$	729,646	$	(33,264	)	$	696,382	100.0%	4.6%

	December 31, 2019
	Number of Loans	Gross Carrying Value		Allowance for Loan Losses			Carrying Value		% of Total	Allowance for Loan Losses as a % of Gross Carrying Value
Performing loans	22	$	665,460	$	(6,933	)	$	658,527	97.6%	1.0%
Non-performing loans	1	37,820		(21,701		)	16,119		2.4%	57.4%
Total	23	$	703,280	$	(28,634	)	$	674,646	100.0%	4.1%

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



	March 31, 2020			December 31, 2019
Senior mortgages	$	558,043		$	534,765
Corporate/Partnership loans	123,023			119,818
Subordinate mortgages	11,063			10,877
Total	$	692,129		$	665,460

Weighted average LTV	60		%	61		%
Yield	8.2		%	8.8		%

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, 2020 and December 31, 2019, we ~~owned approximately 42.4%~~had one non-performing loan with a carrying value of ~~SAFE's common stock outstanding.~~$15.8 million and $16.1 million, respectively. We expect that our level of non-performing loans will fluctuate from period to period.

~~On January 2, 2019, we purchased 12,500,000 newly designated limited partnership units (the "Investor Units") in SAFE's operating partnership ("SAFE OP")~~

Allowance for Loan Losses—The allowance for loan losses was $33.3 million as of March 31, 2020, or 4.6% of total loans, compared to $28.6 million, or 4.1%, ~~at a purchase price~~as of ~~$20.00 per unit,~~December 31, 2019. We expect that our level of allowance for ~~a total purchase price of $250.0 million. The purpose~~loan losses will fluctuate from period to period. Due to the volatility of the ~~investment was~~commercial real estate market, the process of estimating collateral values and allowances requires the use of significant judgment. We currently believe there is adequate collateral and allowances to ~~provide SAFE with capital to fund additional Ground Lease acquisitions and originations.~~support the carrying values of the loans.

The ~~Investor Units have~~allowance for loan losses includes an asset-specific component and a formula-based component. An asset-specific allowance is established for an impaired loan when the ~~following features:~~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, 2020 and December 31, 2019, asset-specific allowances were $21.7 million.

~~the right~~

The formula-based general allowance is derived from estimated principal default probabilities and loss severities applied to ~~receive equivalent distributions per unit~~groups of performing loans based upon risk ratings assigned to ~~those paid on one share~~loans with similar risk characteristics during our quarterly loan portfolio assessment. During this assessment, we perform a comprehensive analysis of ~~SAFE common stock;~~

~~no voting rights;~~

~~non-transferable prior to June 30, 2019;~~

~~no automatic conversion or exchange rights;~~our loan portfolio and

~~limited protective consent rights.~~ assign risk ratings

~~SAFE has agreed~~ to ~~seek stockholder approval to exchange the Investor Units for shares of SAFE common stock, on a one-for-one basis.~~

The Investor Units represent an approximate 40.6% fully diluted economic interest in SAFE. After giving effect to the issuance of the Investor Units, our aggregate fully diluted economic interest in SAFE (including the shares of SAFE common stockloans that incorporate management's current judgments and ~~Investor Units owned by us) is approximately 65.8%; however, our voting power in SAFE will remain capped at 41.9%, as a result of the limitations described below.~~

~~In connection with our purchase of the Investor Units, we entered into a Stockholder's Agreement with SAFE on January 2, 2019. The Stockholder's Agreement:~~

~~limits our discretionary voting power to 41.9% of the outstanding voting power of SAFE's Common Stock until our aggregate ownership of SAFE common stock is less than 41.9%;~~

~~requires us to cast all of our voting power in favor of three director nominees to SAFE's board who are independent of each of us and SAFE for three years;~~

~~subjects us to certain standstill provisions for two years;~~

~~restricts our ability to transfer shares of SAFE common stock issued in exchange for Investor Units, or "Exchange Shares," for one year after~~future expectations about their ~~issuance;~~

prohibits us from transferring shares of SAFE common stock representing more than 20% of the outstanding SAFE common stock in one transaction or a series of related transactions to any person or group, other than pursuant to a widely distributed public offering, unless SAFE's other stockholders have participation rights in the transaction; and

~~provides us certain preemptive rights.~~

In connection with the new investment, SFTY Manager LLC (our wholly-owned subsidiary) and SAFE amended and restated the Management Agreement, dated as of June 27, 2017, between them, the "Amended and Restated Management Agreement". The Amended and Restated Management Agreement, dated January 2, 2019, generally provides for incremental increases in the base management fee payable to the manager from a minimum of 1.0% to a maximum of 1.5% of SAFE's Total Equity (as defined in the agreement) as it increases. The management fee will be payable in cash or SAFE common stock, at SAFE's election (as determined by SAFE's independent directors). SAFE common stock issued to pay the management fee will be valued at the greater of $20.00 or a recent volume weighted average market price.

The Amended and Restated Management Agreement has an initial term through June 30, 2022 during which the agreement is non-terminable, except for certain cause events. After the initial term, the agreement will be automatically renewed for additional one year terms, subject to certain rights of SAFE's independent directors to terminate the agreementcredit quality based on ~~the manager's materially detrimental long-term performance or, beginning with the seventh annual renewal term after the initial term, unfair management fees~~all known and relevant factors that the manager declines to renegotiate. SAFE will be obligated to pay the manager a termination fee equal to three times the annual management fee paid in respect of the last completed fiscal year prior to the termination if, by the time of such termination, SAFE has raised Total Equity of at least $820.0 million since inception, including from us.

~~In connection with our purchase of the Investor Units, the parties also entered into an Amended and Restated Registration Rights Agreement, dated January 2, 2019, which requires SAFE to,~~may affect collectability. We consider, among other things, ~~use commercially reasonable efforts~~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 ~~file~~evaluate loss experience.

The general allowance increased to $11.6 million or 1.7% of performing loans and other lending investments as of March 31, 2020, compared to $6.9 million or 1.0% of performing loans and other lending investments as of December 31, 2019. The increase was due to a ~~shelf registration statement with~~$0.7 million general allowance recorded upon the ~~Securities~~adoption of ASU 2016-13 on January 1, 2020 (refer to Note 3) and ~~Exchange Commission providing for resale~~an increase in the general allowance of ~~all shares of SAFE common stock held by us. The agreement also provides us with certain demand registration rights.~~$3.9 million during the three months ended March 31, 2020.

Operating Properties

Our ~~commercial~~ operating properties represent a pool of assets across a broad range of geographies and ~~collateral~~property types including office, retail, hotel and ~~hotel~~residential properties. As of March 31, ~~2019,~~2020, our operating property portfolio, including the carrying value of our equity method investments gross of accumulated depreciation, totaled ~~$306.5~~$313.1 million.

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

Gross Book
Value
(in millions)⁽¹⁾
Properties Yield
$ 225.5
12 6.2%


~~(1)~~	~~Gross book value represents the acquisition cost of real estate and any additional capital invested into the property by us.~~

Land and Development

The following table presents a land and development portfolio rollforward for the three months ended March 31, ~~2019.~~2020.

																											Land and Development Portfolio Rollforward	(in millions)
	Asbury Ocean Club		Asbury Park Waterfront			Magnolia Green			All Others			Total Segment			Asbury Ocean Club and Asbury Park Waterfront			Magnolia Green			All Others			Total Segment
Beginning balance⁽¹⁾	$	165.4	$	74.7		$	109.5		$	248.6		$	598.2		$	234.6		$	112.9		$	233.0		$	580.5
Asset sales⁽²⁾	—		(4.0		)	(1.9		)	(7.8		)	(13.7		)	(10.6		)	(5.4		)	(59.5		)	(75.5		)
Capital expenditures	29.0		1.7			2.8			2.5			36.0			5.6			5.6			0.9			12.1
Other	—		—			(0.4		)	(3.7		)	(4.1		)	—			(0.6		)	(2.4		)	(3.0		)
Ending balance⁽¹⁾	$	194.4	$	72.4		$	110.0		$	239.6		$	616.4		$	229.6		$	112.5		$	172.0		$	514.1

~~(1)As of March 31, 2019 and December 31, 2018, Total Segment excludes $44.7 million and $65.3 million, respectively, of equity method investments.~~


(1)	As of March 31, 2020 and December 31, 2019, Total Segment excludes $36.7 million and $42.9 million, respectively, of equity method investments.


(2)	Represents gross book value of the assets sold, rather than proceeds received.

Results of Operations for the Three Months Ended March 31, ~~2019~~2020 compared to the Three Months Ended March 31, ~~2018~~2019


	For the Three Months Ended March 31,											For the Three Months Ended March 31,
	2019			2018			$ Change			% Change		2020			2019			$ Change
	(in thousands)											(in thousands)
Operating lease income	$	58,915		$	45,799		$	13,116		29	%	$	47,346		$	58,915		$	(11,569	)
Interest income	20,375			26,697			(6,322		)	(24	)%	17,216			20,375			(3,159		)
Interest income from sales-type leases												8,355			—			8,355
Other income	14,813			15,320			(507		)	(3	)%	20,368			14,813			5,555
Land development revenue	12,699			276,429			(263,730		)	(95	)%	80,176			12,699			67,477
Total revenue	106,802			364,245			(257,443		)	(71	)%	173,461			106,802			66,659
Interest expense	46,577			45,182			1,395			3	%	43,392			46,577			(3,185		)
Real estate expense	25,940			36,180			(10,240		)	(28	)%	22,498			25,940			(3,442		)
Land development cost of sales	14,449			223,407			(208,958		)	(94	)%	77,059			14,449			62,610
Depreciation and amortization	15,668			11,110			4,558			41	%	14,486			15,668			(1,182		)
General and administrative	21,099			28,814			(7,715		)	(27	)%	34,271			21,099			13,172
Recovery of loan losses	(97		)	(855		)	758			(89	)%
Provision for (recovery of) loan losses												4,003			(97		)	4,100
Provision for losses on net investment in leases												1,292			—			1,292
Impairment of assets	3,851			4,100			(249		)	(6	)%	1,708			3,851			(2,143		)
Other expense	508			1,166			(658		)	(56	)%	74			508			(434		)
Total costs and expenses	127,995			349,104			(221,109		)	(63	)%	198,783			127,995			70,788
Income from sales of real estate	9,407			17,048			(7,641		)	(45	)%	—			9,407			(9,407		)
Loss on early extinguishment of debt, net	(468		)	(372		)	(96		)	26	%	(4,115		)	(468		)	(3,647		)
Earnings from equity method investments	5,309			3,332			1,977			59	%	16,612			5,309			11,303
Income tax expense	(25		)	(121		)	96			(79	)%	(60		)	(25		)	(35		)
Net income (loss)	$	(6,970	)	$	35,028		$	(41,998	)	>(100%)
Net loss												$	(12,885	)	$	(6,970	)	$	(5,915	)

Revenue—Operating lease income, which primarily includes income from net lease assets and commercial operating properties, ~~increased $13.1~~decreased $11.6 million, or ~~28.6%~~20%, to ~~$58.9~~$47.3 million during the three months ended March 31, ~~2019~~2020 from ~~$45.8~~$58.9 million for the same period in ~~2018.~~2019. The following table summarizes our operating lease income by segment ($ in millions).


	Three Months Ended March 31,							Three Months Ended March 31,
	2019		2018		Change			2020		2019		Change
Net Lease⁽¹⁾	$	49.5	$	29.7	$	19.8		$	41.5	$	49.5	$	(8.0	)
Operating Properties⁽²⁾	9.3		15.8		(6.5		)	5.7		9.3		(3.6		)
Land and Development	0.1		0.3		(0.2		)	0.1		0.1		—
Total	$	58.9	$	45.8	$	13.1		$	47.3	$	58.9	$	(11.6	)


(1)	Change primarily due to ~~a $20.9 million increase from~~ the ~~consolidation~~reclassification of ~~the Net Lease Venture~~certain operating leases to sales-type leases in May 2019 (refer to Note 5) and ~~acquiring a new~~ asset ~~during the three months ended March 31, 2019,~~sales, partially offset by ~~$1.4 million from asset sales.~~new acquisitions.


(2)	Change primarily due to asset sales.

The following table shows certain same store statistics for our consolidated Net Lease ~~and Operating Properties segments, excluding hotels.~~segment. Same store assets are defined as assets we owned on or prior to January 1, ~~2018~~2019 and were in service through March 31, ~~2019~~2020 (Operating lease income in millions).

Three Months Ended March 31,
2019 2018
Operating lease income
Net Lease $ 27.8
$ 28.3
Operating Properties $ 8.1
$ 8.7

Rent per square foot
Net Lease $ 10.22
$ 10.45
Operating Properties $ 42.84
$ 37.37

Occupancy⁽¹⁾

Net Lease 98.1 % 98.1 %
Operating Properties 65.8 % 80.2 %



	Three Months Ended March 31,
	2020			2019
Operating lease income	$	40.3		$	39.7
Rent per square foot	$	10.81		$	10.53
Occupancy⁽¹⁾	99.4		%	99.9		%


(1)	Occupancy as of March 31, ~~2019~~2020 and ~~2018.~~2019.

Interest income decreased ~~$6.3~~$3.2 million, or ~~23.7%~~16%, to ~~$20.4~~$17.2 million during the three months ended March 31, ~~2019~~2020 from ~~$26.7~~$20.4 million for the same period in ~~2018.~~2019. The decrease was due primarily to a decrease in the average balance of our performing loans and other lending investments, which was ~~$0.91 billion~~$792 million for the three months ended March 31, ~~2019~~2020 and ~~$1.14 billion~~$910 million for the three months ended March 31, ~~2018.~~2019. The weighted average yield on our performing loans and other lending investments was ~~9.1%~~8.2% and ~~9.4%~~9.1%, respectively, for the three months ended March 31, 2020 and 2019.

On January 1, 2019, we adopted new accounting standards and ~~2018, respectively.~~classified certain of our leases in 2019 as sales-type leases. Under sales-type leases, we accrue interest income from sales-type leases under the effective interest method as opposed to recognition of operating lease income under the straight-line rent method for our leases that do not qualify as sales-type leases. Interest income from sales-type leases was $8.4 million for the three months ended March 31, 2020.

Other income ~~decreased $0.5~~increased $5.6 million, or ~~3.3%~~38%, to ~~$14.8~~$20.4 million during the three months ended March 31, ~~2019~~2020 from ~~$15.3~~$14.8 million for the same period in ~~2018.~~2019. Other income during the three months ended March 31, 2020 consisted primarily of a gain we recognized in connection with an equity security, income from our hotel properties, other ancillary income from our operating properties, land and development projects and loan portfolio and interest income on our cash. Other income during the three months ended March 31, 2019 consisted primarily of income from our hotel properties, other ancillary income from our operating properties and ~~loan portfolio~~land and development projects and interest income on our cash. ~~Other~~The increase in 2020 was due primarily to a $9.9 million gain we recognized in connection with an equity security, partially offset by a decrease in ancillary income ~~during~~from our land and development projects.

Land development revenue and cost of sales—During the three months ended March 31, ~~2018 consisted primarily of income from our hotel properties, other ancillary income from our operating properties~~2020, we sold residential lots and ~~interest income on our cash.~~

~~Land~~units and recognized land development revenue ~~and~~of $80.2 million which had associated cost of sales— of $77.1 million. During the three months ended March 31, 2019, we sold residential lots and units and recognized land development revenue of $12.7 million which had associated cost of sales of $14.4 million. 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. The ~~decrease~~increase in ~~2019~~2020 was primarily the result of ~~two bulk parcel sales during~~$36.0 million in land development revenue from the ~~three months ended March 31, 2018.~~sale of a master planned community in California with a corresponding increase in cost of sales.

Costs and expenses—Interest expense ~~increased $1.4~~decreased $3.2 million, or ~~3.1%~~7%, to ~~$46.6~~$43.4 million during the three months ended March 31, ~~2019~~2020 from ~~$45.2~~$46.6 million for the same period in ~~2018~~2019 due primarily to ~~an increase~~a decrease in our weighted average cost of debt, which was 4.9% for the three months ended March 31, 2020 compared to 5.5% for the three months ended March 31, 2019. The balance of our average outstanding debt, inclusive of loan participations and lease liabilities associated with finance-type leases, ~~and debt classified within “Liabilities associated with properties held for sale” as of March 31, 2019, which increased~~decreased to ~~$3.60~~$3.57 billion for the three months ended March 31, ~~2019~~2020 from ~~$3.47~~$3.60 billion for the same period in 2018. Our weighted average cost of debt for the three months ended March 31, 2019 and 2018 was 5.5% and 5.4%, respectively. The increase in debt was primarily attributable to our consolidation of the Net Lease Venture on June 30, 2018, of which we own a 51.9% equity interest, which increased our interest expense by $5.6 million for the three months ended March 31, 2019. ~~This impact was offset by our repayment in full the 5.00% senior unsecured notes due July 2019.~~

Real estate expenses decreased ~~$10.3~~$3.4 million, or ~~28.3%~~13%, to ~~$25.9~~$22.5 million during the three months ended March 31, ~~2019~~2020 from ~~$36.2~~$25.9 million for the same period in ~~2018.~~2019. The following table summarizes our real estate expenses by segment ($ in millions).


	Three Months Ended March 31,							Three Months Ended March 31,
	2019		2018		Change			2020		2019		Change
Operating Properties⁽¹⁾	$	11.0	$	21.7	$	(10.7	)	$	7.7	$	11.0	$	(3.3	)
Land and Development⁽²⁾	8.8		10.6		(1.8		)	8.6		8.8		(0.2		)
Net Lease⁽³⁾	6.1		3.9		2.2			6.2		6.1		0.1
Total	$	25.9	$	36.2	$	(10.3	)	$	22.5	$	25.9	$	(3.4	)


(1)	Change primarily due to asset ~~sales.~~sales, partially offset by an asset beginning operations during 2019.


(2)	Change primarily due to a decrease in legal and ~~marketing costs at certain properties.~~consulting costs.


(3)	Change primarily due to ~~the consolidation of the Net Lease Venture.~~new acquisitions, partially offset by asset sales.

Depreciation and amortization ~~increased $4.6~~decreased $1.2 million, or ~~41.0%~~8%, to ~~$15.7~~$14.5 million during the three months ended March 31, ~~2019~~2020 from ~~$11.1~~$15.7 million for the same period in ~~2018,~~2019, primarily due to asset sales and the ~~consolidation~~reclassification of ~~the Net Lease Venture on June 30, 2018,~~certain operating leases to sales-type lease (refer to Note 5), partially offset by ~~the sale of commercial operating properties in since April 1, 2018.~~new acquisitions.

General and administrative expenses ~~decreased $7.7~~increased $13.2 million, or ~~26.8%~~62%, to ~~$21.1~~$34.3 million during the three months ended March 31, ~~2019~~2020 from ~~$28.8~~$21.1 million for the same period in ~~2018. We capitalized into our active development projects $0.6~~2019. Excluding performance based compensation, general and administrative expenses decreased to $13.3 million in 2020 from $13.7 million in 2019, which does not include $2.9 million and ~~$0.5~~$1.5 million, respectively, in management fees earned from SAFE that we record in other income. General and administrative expenses net of ~~payroll-related costs (including salaries, bonuses, LTIP awards, benefits~~performance based compensation and ~~taxes) for the three months ended March 31, 2019~~SAFE management fees was $10.4 million in 2020 and ~~2018, respectively.~~$12.2 million in 2019. The following table summarizes our general and administrative expenses for the three months ended March 31, ~~2019~~2020 and ~~2018~~2019 (in millions):


	Three Months Ended March 31,								Three Months Ended March 31,
	2019			2018		Change			2020			2019		Change
Payroll and related costs⁽¹⁾	$	12.3		$	15.3	$	(3.0	)	$	8.3		$	8.5	$	(0.2	)
Performance Incentive Plans⁽²⁾	3.6		5.0	7.9		(4.3		)
Performance based compensation⁽¹⁾									21.0		5.0	7.4		13.6
Public company costs	1.5			1.5		—			1.9			1.5		0.4
Occupancy costs	1.1			1.3		(0.2		)	1.1			1.1		—
Other	2.6			2.8		(0.2		)	2.0			2.6		(0.6		)
Total	$	21.1		$	28.8	$	(7.7	)	$	34.3		$	21.1	$	13.2


(1)	~~Decrease due~~Includes performance based compensation related to ~~a reduction in headcount to 156 employees as of March 31, 2019 from 186 employees as of December 31, 2017.~~

~~(2)~~

~~Represents the fair value of points issued~~our Performance Incentive Plans and ~~change in fair value of the plans during the periods presented. Such amounts may increase or decrease (except for 2019-2020 Plan) over time until the awards are settled.~~Annual Incentive Plan. Please refer to Note 1415 - Stock-Based Compensation Plans and Employee Benefits for a description of the Performance Incentive Plans.

The ~~recovery of~~provision for loan losses was ~~$0.1~~$4.0 million ~~during~~for the three months ended March 31, ~~2019~~2020 as compared to a ~~net~~ recovery of loan losses of ~~$0.9~~$0.1 million for the same period in ~~2018.~~2019. The provision for loan losses for the three months ended March 31, 2020 resulted from the adoption of ASU 2016-13 (refer to Note 3). The recovery of loan losses for the three months ended March 31, 2019 was due to a decrease in the general ~~reserve~~allowance of $0.6 million offset by an increase in the specific ~~reserve~~allowance of $0.5 ~~million.~~ million

The ~~recovery of loan~~provision for losses on net investment in leases for the three months ended March 31, ~~2018 was due~~2020 included a general allowance resulting from the adoption of ASU 2016-13 (refer to Note 3).

During the three months ended March 31, 2020, we recorded an impairment of $1.7 million in connection with the sale of a ~~reduction in the general reserve due to an overall improvement in the risk ratings of our loan portfolio.~~

~~Impairment of assets was $3.9 million during~~net lease asset. During the three months ended March 31, 2019, ~~and resulted from~~we recorded an impairment of $3.2 million onin connection with the sale of a commercial operating property ~~based on an executed purchase and sale agreement~~ and $0.7 million of impairments in connection with the sale of residential condominium units. During the three months ended March 31, 2018, we recorded an impairment of $4.1 million on a real estate asset held for sale due to impending contracts to sell the remaining four condominium units at the property.

Other expense decreased to ~~$0.5~~$0.1 million during the three months ended March 31, ~~2019~~2020 from ~~$1.2~~$0.5 million for the same period in ~~2018.~~2019.

Income from sales of real estate—Income from sales of real estate decreased to $9.4 million during the three months ended March 31, 2019 from $17.0 million for the same period in 2018. The following table presents our income from sales of real estate by segment ($ in millions).

Three Months Ended March 31,
2019 2018
Operating Properties $ 9.4
$ 16.6
Net Lease —
0.4
Total $ 9.4
$ 17.0

~~Loss on early extinguishment of debt, net—~~During the three months ended March 31, 2019, we recorded $9.4 million of income from sales of real estate in connection with the sale of operating properties.

Loss on early extinguishment of debt, net—During the three months ended March 31, 2020 and ~~2018,~~2019, we incurred losses on early extinguishment of debt of ~~$0.5~~$4.1 million and ~~$0.4~~$0.5 million, respectively, resulting from ~~repayments~~the repayment of senior notes prior to ~~maturity during the three months ended March 31, 2019 and repayments of our 2016 Senior Term Loan during the three months ended March 31, 2018.~~maturity.

Earnings from equity method investments—Earnings from equity method investments increased to ~~$5.3~~$16.6 million during the three months ended March 31, ~~2019~~2020 from ~~$3.3~~$5.3 million for the same period in ~~2018.~~2019. During the three months ended March 31, ~~2019,~~2020, we recognized ~~$7.3~~$19.3 million of income from our equity method investment in SAFE, ~~and $2.0~~which included a dilution gain of $7.9 million ~~was~~resulting from a SAFE equity offering in March 2020, offset by $2.7 million of aggregate losses from our remaining equity method investments. During the three months ended March 31, ~~2018,~~2019, we recognized ~~$2.1~~$7.3 million ~~of income related to operations at our Net Lease Venture (which was consolidated on June 30, 2018), $1.5 million of income~~ from our equity method investment in SAFE ~~and $0.3~~offset by $2.0 million of aggregate losses from our remaining equity method ~~investments~~investments.

Income tax expense—Income tax expense of $0.1 million was recorded during the three months ended March 31, ~~2019~~2020 as compared to an income tax expense of $0.1 million for the same period in ~~2018.~~2019. The income tax expense for the three months ended March 31, 2020 and 2019 ~~and 2018~~is related primarily ~~related~~ to state margins taxes and other minimum state franchise taxes.

Adjusted ~~Income~~Earnings

In ~~addition~~2019, we announced a new business strategy that would focus our management personnel and our investment resources primarily on scaling our Ground Lease platform. As part of this strategy, we accelerated the monetization of legacy assets, reducing our legacy portfolio to approximately 16% of our overall portfolio as of March 31, 2020, and deployed a substantial portion of the proceeds into additional investments in SAFE and new loan and net lease originations relating to the Ground Lease business. Management has determined that, effective for the quarter ended March 31, 2020, a modified non-GAAP earnings metric, designated "adjusted earnings," is the metric it uses to assess our execution of this strategy and the performance of our operations. Adjusted earnings reflects impairment charges and loan provisions in the same period in which they are recognized in net income (loss) prepared in conformity with generally accepted accounting principles in the United States of America ("GAAP"), ~~we use adjusted income,~~rather than in a ~~non-GAAP financial measure,~~later period when the asset is sold. We believe this change is appropriate as legacy asset sales become less central to ~~measure~~ our ~~operating performance.~~ business, even though sales may be material to particular periods when they occur.

Adjusted ~~income~~earnings is used internally as a supplemental performance measure adjusting for certain ~~non-cash GAAP measures~~items to give management a view of income more directly derived from ~~current~~operating activities in the period ~~activity.~~in which they occur. Adjusted ~~income~~earnings 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~~including our proportionate share of ~~assets,~~depreciation and amortization from equity method investments and excluding depreciation and amortization allocable to noncontrolling interests, stock-based compensation expense, the ~~imputed non-cash interest expense recognized for the conversion feature of our senior convertible notes, the~~ non-cash portion of ~~gain (loss)~~loss on early extinguishment of debt and ~~is adjusted for~~ the ~~effect~~liquidation preference recorded as a premium above book value on the redemption of ~~gains or losses on charge-offs and dispositions on carrying value gross of loan loss reserves and impairments~~preferred stock ("Adjusted ~~Income"~~Earnings"). ~~Adjusted Income also includes the impact to retained earnings (income that would~~All prior periods have been ~~recognized~~calculated 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.~~accordance with this definition.

Adjusted ~~Income~~Earnings should be examined in conjunction with net income (loss) as shown in our consolidated statements of operations. Adjusted ~~Income~~Earnings 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~~Earnings indicative of funds available to fund our cash needs or available for distribution to shareholders. Rather, Adjusted ~~Income~~Earnings 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.~~performance. It should be noted that our manner of calculating Adjusted ~~Income~~Earnings may differ from the calculations of similarly-titled measures by other companies.

For the Three Months Ended March 31,
2019 2018
(in thousands)
Adjusted Income
Net income (loss) allocable to common shareholders $ (17,565 ) $ 26,809
Add: Depreciation and amortization⁽¹⁾
15,437
20,069
Less: Recovery of loan losses (97 ) (855 )
Add: Impairment of assets⁽²⁾
3,851
4,100
Add: Stock-based compensation expense 4,249
9,091
Add: Loss on early extinguishment of debt, net 468
372
Add: Non-cash interest expense on senior convertible notes 1,222
—
1,160
Add: Impact from adoption of new accounting standards⁽³⁾
—
75,869
Less: Losses on charge-offs and dispositions⁽⁴⁾
(7,685 ) (4,307 )
Adjusted income (loss) allocable to common shareholders $ (120 ) $ 132,308



	For the Three Months Ended March 31,
	2020			2019			2018
	(in thousands)
Adjusted Earnings
Net income (loss) allocable to common shareholders	$	(21,450	)	$	(17,565	)	$	26,809
Add: Depreciation and amortization	15,056			15,437			16,767
Add: Stock-based compensation expense	16,270			4,249			9,091
Add: Non-cash portion of loss on early extinguishment of debt	799			468			372
Adjusted earnings allocable to common shareholders	$	10,675		$	2,589		$	53,039


~~(1)~~	Depreciation and amortization also includes our proportionate share of depreciation and amortization expense for equity method investments and excludes the portion of depreciation and amortization expense allocable to noncontrolling interests.


~~(2)~~	~~Impairment of assets includes impairments on equity method investments recorded in "Earnings from equity method investments" in our consolidated statements of operations.~~

~~(3)~~

Represents an increase to retained earnings on January 1, 2018 upon the adoption of new accounting standards, which allowed us to record a step-up in basis to fair value of our retained noncontrolling interests relating to the sale of our Ground Lease business in April 2017 and other transactions which occurred in prior periods prior to January 1, 2018 where we sold or contributed real estate to a venture and previously recognized partial gains.


~~(4)~~	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.

Liquidity and Capital Resources

During the three months ended March 31, ~~2019,~~2020, we invested ~~$479.5~~$182.9 million into new investments, prior financing commitments and ongoing real estate development. This amount includes ~~$65.6~~$42.5 million in ~~lending and other investments, $40.5~~real estate finance, $15.6 million to develop our land and development assets, ~~$366.9~~$124.0 million to invest in net lease assets inclusive of $105.5 million in SAFE, and ~~$6.5~~$0.7 million of capital to reposition or redevelop our operating ~~properties.~~properties and $0.1 million in other investments. Also during the three months ended March 31, ~~2019,~~2020, we generated ~~$280.9~~$114.8 million of proceeds from loan repayments and asset sales within our portfolio, comprised of ~~$163.8~~$18.2 million from real estate finance, ~~$77.3~~$10.1 million from operating properties and net lease assets and ~~$39.8~~$86.4 million from land and development assets. 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 operating properties, net lease 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,
	2019		2018		2020		2019
Operating Properties	$	1,242	$	6,585	$	716	$	1,242
Net Lease	3,942		1,255		3,292		3,942
Total capital expenditures on real estate assets	$	5,184	$	7,840	$	4,008	$	5,184

Land and Development	$	37,762	$	30,954	$	15,035	$	37,762
Total capital expenditures on land and development assets	$	37,762	$	30,954	$	15,035	$	37,762

~~As of~~Subsequent to March 31, ~~2019,~~2020, we repaid the Revolving Credit Facility in full and as of the date of this report, we had unrestricted cash of ~~$315.4 million.~~approximately $85.0 million and $350.0 million of borrowing capacity available under the Revolving Credit Facility. The COVID-19 crisis has for the time being adversely affected our strategies of monetizing legacy assets and materially scaling SAFE's portfolio as its Manager. These conditions may adversely affect our strategies while they persist. Our primary cash uses over the next 12 months are expected to be funding of investments, capital expenditures, distributions to shareholders and funding ongoing business operations. ~~Over~~In the ~~next 12 months,~~near term we ~~currently expect~~plan to ~~fund in~~limit cash expenditures to the range of approximately $75.0 million to $125.0 million of capital expenditures within our portfolio. The majority of these amounts relate to our land and development projects and operating properties, and include multifamily and residential development activities which are expected to include approximately $40.0 million in vertical construction.extent practicable. The amount we actually ~~invested~~invest will depend on the full impact of COVID-19 on our business and 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, 2019, we~~economic recovery. We also had approximately ~~$428.1~~$284.4 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, performance hurdles and all other conditions to fundings (see "Unfunded Commitments" below). We also have ~~$415.8~~$472.7 million principal amount of scheduled real estate finance maturities over the next 12 months, exclusive of any extension options that can be exercised by our borrowers. Our capital sources to meet cash uses through the next 12 months and beyond are expected to include cash on hand, income from our portfolio, loan repayments from borrowers and proceeds from asset 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.~~

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, ~~2019~~2020 (refer to Note 1011 to our 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	$	1,737,500	$	—	$	675,000	$	1,062,500	$	—	$	—	$	2,012,500	$	—	$	687,500	$	775,000	$	550,000	$	—
Secured credit facilities	645,125		6,500		13,000		625,625		—		—		491,875		—		—		491,875		—		—
Revolving credit facility													300,000		—		300,000		—		—		—
Mortgages	634,695		12,538		180,960		66,139		362,128		12,930		724,209		67,796		168,999		23,213		455,562		8,639
Trust preferred securities	100,000		—		—		—		—		100,000		100,000		—		—		—		—		100,000
Total principal maturities	3,117,320		19,038		868,960		1,754,264		362,128		112,930		3,628,584		67,796		1,156,499		1,290,088		1,005,562		108,639
Interest Payable⁽¹⁾	629,627		131,841		294,779		110,746		63,353		28,908		670,250		150,591		268,213		168,966		64,927		17,553
Loan Participations Payable⁽²⁾	25,145		—		25,145		—		—		—		37,892		37,892		—		—		—		—
Lease Obligations⁽³⁾	783,946		6,625		9,913		7,121		16,818		743,469		1,632,593		9,296		22,106		23,836		36,154		1,541,201
Total	$	4,556,038	$	157,504	$	1,198,797	$	1,872,131	$	442,299	$	885,307	$	5,969,319	$	265,575	$	1,446,818	$	1,482,890	$	1,106,643	$	1,667,393


(1)	Variable-rate debt assumes one-month LIBOR of ~~2.49%~~0.99% and three-month LIBOR of ~~2.60%~~1.45% that were in effect as of March 31, ~~2019.~~2020. Interest payable does not include payments that may be required under our interest rate derivatives.


(2)	Refer to Note 910 to the consolidated financial statements.


(3)	We are obligated to pay ground rent under certain operating leases; however, our tenants at the properties pay this expense directly under the terms of various subleases and these amounts are excluded from lease obligations.

Collateral Assets—The carrying value of our 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 ($ in thousands):


	As of								As of
	March 31, 2019				December 31, 2018				March 31, 2020				December 31, 2019
	Collateral Assets⁽¹⁾		Non-Collateral Assets		Collateral Assets⁽¹⁾		Non-Collateral Assets		Collateral Assets⁽¹⁾		Non-Collateral Assets		Collateral Assets⁽¹⁾		Non-Collateral Assets
Real estate, net	$	1,533,390	$	87,614	$	1,620,008	$	151,011	$	1,392,658	$	108,431	$	1,409,585	$	117,634
Real estate available and held for sale	219,184		34,152		1,055		21,496		—		34,391		—		8,650
Net investment in leases⁽²⁾									420,380		—		418,915		—
Land and development, net	42,300		574,050		12,300		585,918		—		514,064		—		580,545
Loans receivable and other lending investments, net⁽²⁾⁽³⁾	431,189		450,988		498,524		480,154
Loans receivable and other lending investments, net⁽³⁾⁽⁴⁾									234,612		590,019		233,104		566,050
Other investments	—		521,999		—		304,275		—		1,029,552		—		907,875
Cash and other assets	6,601		757,277		—		1,329,990		—		882,674		—		814,044
Total	$	2,232,664	$	2,426,080	$	2,131,887	$	2,872,844	$	2,047,650	$	3,159,131	$	2,061,604	$	2,994,798

(1)

The ~~2016~~ Senior Term Loan and the ~~2015~~ Revolving Credit Facility are secured only by pledges of equity of certain of our subsidiaries and not by pledges of the assets held by such subsidiaries. Such subsidiaries are subject to contractual restrictions under the terms of such credit facilities, including restrictions on incurring new debt (subject to certain exceptions). As of March 31, ~~2019,~~2020, Collateral Assets includes ~~$406.2~~$428.5 million carrying value of assets held by entities whose equity interests are pledged as collateral for the ~~$325.0 million 2015~~ Revolving Credit ~~Facility that is undrawn as of March 31, 2019.~~Facility.


(2)	As of March 31, ~~2019 and December 31, 2018,~~2020, the ~~amounts~~amount presented ~~exclude~~excludes a general ~~reserves~~allowance for ~~loan losses~~net investment of ~~$12.4 million and $13.0 million, respectively.~~leases of $10.4 million.


(3)	As of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, the amounts presented exclude general allowances for loan losses of $11.6 million and $6.9 million, respectively.


(4)	As of March 31, 2020 and December 31, 2019, the amounts presented exclude loan participations of ~~$25.1~~$37.8 million and ~~$22.5~~$35.6 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, 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 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 Term Loan and the ~~2015~~ Revolving Credit Facility contain certain covenants, including covenants relating to collateral coverage, 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 Term Loan requires us to maintain collateral coverage of at least 1.25x outstanding borrowings on the facility. The ~~2015~~ Revolving Credit Facility is secured by a borrowing base of assets and requires us to maintain both 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~~ Revolving Credit Facility does not require that proceeds from the borrowing base be used to pay down outstanding borrowings provided the 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. ~~We may not pay dividends if we cease to qualify as a REIT. In June 2018, we amended~~Under both the ~~terms of the 2016~~ Senior Term Loan and the ~~2015~~ Revolving Credit Facility ~~to include the ability~~we are permitted to pay ~~common~~ dividends provided that no material default (as defined in the relevant agreement) has occurred and is continuing or would result therefrom and we remain in compliance with ~~no restrictions so long as we are not in default on any of~~ our ~~debt obligations.~~financial covenants after giving effect to the dividend. We declared ~~and paid~~ common stock dividends of ~~$6.2~~$7.8 million, or ~~$0.09~~$0.10 per share, for the three months ended March 31, ~~2019.~~2020.

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 1213 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 78 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 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, ~~2019~~2020, the maximum amount of fundings we may be obligated to make under each category, assuming all performance hurdles and milestones are met under the Performance-Based Commitments and assuming 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⁽²⁾		Other Investments		Total⁽³⁾
Performance-Based Commitments	$	385,215	$	9,543	$	—	$	394,758	$	183,608	$	81,718	$	53,122	$	318,448
Strategic Investments	—		—		33,304		33,304		—		—		17,351		17,351
Total	$	385,215	$	9,543	$	33,304	$	428,062	$	183,608	$	81,718	$	70,473	$	335,799


(1)	Excludes ~~$24.9~~$12.1 million of commitments on loan participations sold that are not our obligation.


(2)	Includes a commitment to invest up to $55.0 million in additional bowling centers over the next several years (refer to Note 5).


(3)	Subsequent to March 31, 2020, total unfunded commitments was reduced by approximately $51.4 million through fundings and loans with unfunded commitments being repaid.

Stock Repurchase Program—We may repurchase shares in negotiated transactions or open market transactions, including through one or more trading plans. During the three months ended March 31, 2020, we repurchased 1.0 million shares of our outstanding common stock for $12.0 million, for an average cost of $12.51 per share. During the three months ended March 31, 2019, we repurchased 2.3 million shares of our outstanding common stock for $19.2 million, for an average cost of $8.46 per share. ~~During the three months ended March 31, 2018, we repurchased 0.8 million shares of our outstanding common stock for $8.3 million, for an average cost of $10.22 per share.~~ As of March 31, ~~2019,~~2020, we had remaining authorization to repurchase up to ~~$22.6~~$22.1 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.

For a discussion of our critical accounting policies, refer to Note 3 to the consolidated financial statements and our ~~2017~~ Annual Report on Form 10-K.

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 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 or 50 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 ~~2.49%~~0.99% as of March 31, ~~2019.~~2020. 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	$	(2,261	)
-50 Basis Points	(1,423		)	$	873
-10 Basis Points	(302		)	145
Base Interest Rate	—			—
+10 Basis Points	312			(145		)
+50 Basis Points	1,568			(707		)
+100 Basis Points	3,138			(1,081		)

(1)

WeAs of March 31, 2020, 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~~position. In addition, as of March 31, ~~2019, $447.6~~2020, $425.2 million of our floating rate loans have a weighted average interest rate floor of ~~1.1%~~1.5% and ~~$25.1~~$37.9 million of our floating rate debt obligations have a weighted average interest rate floor of ~~0.4%~~1.5%.

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.

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 the Company's business as a finance and investment company focused on the commercial real estate industry, including foreclosure-related proceedings. 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.

Item 1a. Risk Factors

In addition to the risk factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2019, you should consider carefully the following in evaluating an investment in the Company's securities. Any of these risks or the occurrence of any one or more of the uncertainties described below could have a material adverse effect on the Company's business, financial condition, results of operations, cash flows and market price of the Company's common stock.

The current novel coronavirus, or COVID-19, pandemic or the future outbreak of any other highly infectious or contagious diseases, could materially and adversely impact or cause disruption to our performance, financial condition, results of operations, stock price, cash flows and ability to pay distributions. Further, the pandemic has caused disruptions in the U.S. and global economies and financial markets and created widespread business continuity issues of an as yet unknown magnitude and duration.

The COVID-19 pandemic outbreak has rapidly and dramatically impacted the US and global economies. Many countries, including the United States, have instituted quarantines, mandated business and school closures and restricted travel. The US financial markets have experienced disruption, with heightened stock market volatility and constrained credit conditions within most sectors, including real estate. Many experts predict that the outbreak will trigger a period of global economic slowdown or a global recession. At this time, we cannot predict the extent of the impacts of the COVID-19 crisis on our business. We will continue to monitor its effects on a daily basis and will adjust our operations as necessary.

COVID-19 or another pandemic could have material and adverse effects on our ability to successfully operate due to, among other factors:


•	a complete or partial closure of, or other operational issues at, one or more of our operating properties resulting from government or tenant action;


•	the reduced economic activity impacts our tenants' and borrowers' businesses, financial condition and liquidity and may cause one or more of our tenants or borrowers to be unable to meet their obligations to us in full, or at all;

as of March 31, 2020, the entertainment/leisure and hotel sectors represented approximately 19.8% and 5.3%, respectively, of the gross book value of our investments. These sectors have been particularly stressed by the COVID-19 pandemic. One of our entertainment sector net lease tenants, representing approximately 0.7% of the gross book value of our investments as of March 31, 2020 and 0.4% of our revenues for the quarter, declared bankruptcy in April, which may result in the loss of all or a part of the future rent under this lease. There can be no assurance that additional tenant or borrower bankruptcies will not occur in these and other sectors;

the decline in real estate transaction activity and constrained credit conditions may adversely affect our strategies of monetizing legacy assets and scaling SAFE's portfolio as its Manager;

our earnings could be negatively impacted by increased allowances against potential future losses;

deteriorations in our financial condition may cause us to be unable to satisfy financial covenants in our debt obligations. If we are unable to meet our covenants, our lenders may declare us to be in default and require us to repay outstanding borrowings;

potential negative impact on the health of our employees, particularly if a significant number of them are impacted;

•

difficulty accessing debt and equity capital on attractive terms, or at all, and any disruption and instability in the global financial markets or deteriorations in credit and financing conditions may affect our or our tenants' and borrowers' access to capital necessary to fund business operations or address maturing liabilities on a timely basis and our tenants' or borrowers' ability to meet their obligations to us; and


•	a deterioration in our and our tenants' or borrowers' ability to operate in affected areas or delays in the supply of products or services to us and our tenants or borrowers from vendors that are needed for our and our tenants' and borrowers' efficient operations.

The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19. Nevertheless, COVID-19 presents material uncertainty and risk with respect to our performance, financial condition, results of operations and cash flows.

There were no other material changes from the risk factors previously disclosed in our ~~2018~~ 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 our common stock during the three months ended March 31, ~~2019.~~2020.


	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	—	$	—	—	$	41,710,022	403,164	$	14.39	403,164	$	28,364,587
February 1 to February 28	150,000	$	8.72	150,000	$	40,405,030
February 1 to February 29							46,900	$	15.93	46,900	$	27,618,162
March 1 to March 31	2,116,133	$	8.44	2,116,133	$	22,580,670	512,700	$	10.72	512,700	$	22,131,601


(1)	We may repurchase shares in negotiated transactions or open market transactions, including through one or more trading plans.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

On May 2, 2019, iStar Inc. announced that Andrew Richardson, iStar's President of Land and Development and Chief Financial Officer, will be leaving iStar to pursue other opportunities. iStar will initiate a search for a new chief financial officer. Other members of senior management will fulfill the chief financial officer's duties on an interim basis.None.

Item 6. Exhibits

INDEX TO EXHIBITS



Exhibit Number	Document Description
~~1.1~~	Investor Unit Purchase Agreement dated January 2, 2019, among the Company, SAFE and SAFE's Operating Partnership (incorporated by reference to Exhibit 1.1 to the Company's Form 8-K filed with the SEC on January 3, 2019)
~~4.1~~	Partnership Unit Designation of Investor Units issued by SAFE's Operating Partnership to the Company, dated January 2, 2019 (incorporated by reference to Exhibit 4.1 to the Company's Form 8-K filed with the SEC on January 3, 2019)
~~10.1~~	~~Stockholder's Agreement, dated January 2, 2019 between the Company and SAFE (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed with the SEC on January 3, 2019)~~
~~10.2~~	Amended and Restated Management Agreement, dated January 2, 2019, among SFTY Manager LLC, the Company and SAFE (incorporated by reference to Exhibit 10.2 to the Company's Form 8-K filed with the SEC on January 3, 2019)
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, ~~2019~~2020 is formatted in Inline XBRL ("eXtensible Business Reporting Language"): (i) the Consolidated Balance Sheets (unaudited) as of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, (ii) the Consolidated Statements of Operations (unaudited) for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, (iii) the Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, (iv) the Consolidated Statements of Changes in Equity (unaudited) for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, (v) the Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, ~~2019~~2020 and ~~2018~~2019 and (vi) the Notes to the Consolidated Financial Statements (unaudited).

_______________________________________________________________________________


*	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, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



		iStar Inc. Registrant
Date:	~~May 2, 2019~~April 30, 2020	/s/ JAY SUGARMAN
		Jay Sugarman Chairman of the Board of Directors and Chief Executive Officer (principal executive officer)

		iStar Inc. Registrant
Date:	~~May 2, 2019~~April 30, 2020	/s/ ~~ANDREW C. RICHARDSON~~JEREMY FOX-GEEN
		~~Andrew C. Richardson~~Jeremy Fox-Geen Chief Financial Officer ~~(principal~~ (principal financial ~~and~~officer)

		iStar Inc. Registrant
Date:	April 30, 2020	/s/ GARETT ROSENBLUM
		Garett Rosenblum Chief Accounting Officer (principal accounting officer)



	As of
Type of Investment	March 31, 2019			December 31, 2018
Senior mortgages	$	690,860		$	760,749
Corporate/Partnership loans	143,426			148,583
Subordinate mortgages	10,338			10,161
Total gross carrying value of loans	844,624			919,493
Reserves for loan losses	(53,298		)	(53,395		)
Total loans receivable, net	791,326			866,098
Other lending investments—securities	103,520			122,126
Total loans receivable and other lending investments, net	$	894,846		$	988,224



	Individually Evaluated for Impairment⁽¹⁾			Collectively Evaluated for Impairment⁽²⁾			Total
As of March 31, 2019
Loans	$	66,500		$	783,334		$	849,834
Less: Reserve for loan losses	(40,888		)	(12,410		)	(53,298		)
Total⁽³⁾	$	25,612		$	770,924		$	796,536
As of December 31, 2018
Loans	$	66,725		$	857,662		$	924,387
Less: Reserve for loan losses	(40,395		)	(13,000		)	(53,395		)
Total⁽³⁾	$	26,330		$	844,662		$	870,992



	As of March 31, 2019			As of December 31, 2018
	Performing Loans		Weighted Average Risk Ratings	Performing Loans		Weighted Average Risk Ratings
Senior mortgages	$	628,408	2.81	$	697,807	2.76
Corporate/Partnership loans	144,556		2.89	149,663		2.84
Subordinate mortgages	10,370		3.00	10,192		3.00
Total	$	783,334	2.83	$	857,662	2.77



	Revenues		Expenses			Net Income Attributable to Parent Entities
For the Three Months Ended March 31, 2019
SAFE	$	21,820	$	(10,683	)	$	6,619

For the Three Months Ended March 31, 2018
SAFE	$	11,693	$	(7,950	)	$	3,720



	Three Months Ended March 31, 2019					Year Ended December 31, 2018
	iPIP Investment Pool					iPIP Investment Pool
	2013-2014	2015-2016		2017-2018		2013-2014		2015-2016		2017-2018
Points at beginning of period	85.77	79.41		82.43		86.57		84.16		40.97
Granted	—	—		—		0.50		—		49.33
Forfeited	—	(0.82	)	(1.03	)	(1.3	)	(4.75	)	(7.87	)
Points at end of period	85.77	78.59		81.40		85.77		79.41		82.43



	Three Months Ended March 31, 2019		Year Ended December 31, 2018
Nonvested at beginning of period	357		282
Granted	474		278
Vested	(52	)	(142	)
Forfeited	(9	)	(61	)
Nonvested at end of period	770		357

Gross Book
Value
(in millions)⁽¹⁾

Properties