Aug 01, 2008 iStar Financial Inc. (SFI): 2Q08: Forward looking comments after earnings pre-announcement WHAT'S CHANGED: Following the recent earnings pre-announcement, iStar management used the 2Q08 earnings call to provide investors with significant details about recent credit developments in the portfolio, the company’s liquidity position, and guidance for the remainder of the year. The market conditions are challenging and uncertainty is still high. Remain Neutral. (1) iStar forecasts an adjusted EPS loss for the full year 2008 in the $1.00 to $1.75 range. Management anticipates $300-$400 mn in additional reserves over the next two quarters. This guidance assumes that difficult market conditions prevail through the end of the year. (2) Management currently estimates that the 3Q2008 dividend will be between $0.30 and $0.40 per share (down from $0.87 in 2Q0208). The 4Q2008 dividend will be based on the amount necessary to distribute 100% of the taxable income for the year. In addition, the Board of Directors authorized a $50 mn common stock repurchase program. (3) Assuming no new obligations, management anticipates that iStar will not need to access the debt or equity markets through the end of 2009. This forecast does not account for potential NPL resolutions or asset sales. IMPLICATIONS: iStar reported a 2Q2008 adjusted EPS loss of $1.46, relative to a pre-announced range of -$1.45 to -$1.50. We lower our 2008 estimate to a loss of $1.70 (from +$0.70) and lower our forecast to $1.50 in 2009 (from $2.70) and $2.25 in 2010 (from $3.15) mostly due to higher provisions than previously anticipated. VALUATION: We lower our 12-month EVA-derived price target to $9 (from $10). KEY RISKS: Unforeseen credit deterioration poses the key risk to our EPS forecasts.