Fitch Affirms iSTAR's IDR at 'BBB' On Fremont Assets Announcement.

NEW YORK -- Fitch Ratings has affirmed the following ratings for iStar Financial Inc. (NYSE:SFI):

--Issuer Default Rating (IDR) at 'BBB';

--Senior unsecured debt at 'BBB';

--Revolving and term loan facilities at 'BBB';

--Preferred stock at 'BB+'.

Fitch affirms SFI's ratings upon the company's announcement of its intent to acquire select assets of Fremont General Corporation (Fremont), including a $2.1 billion (principal balance) B-Participation interest in commercial real estate loans and its commercial lending platform. The deal which is scheduled to close in early summer will initially be funded with interim financing and then subsequently funded with both debt and equity, at which time the deal is expected to be leverage neutral.

The transaction will layer onto SFI's balance sheet a portfolio of geographically diverse first mortgages with a somewhat riskier concentration of apartment/residential exposures. Although Fitch anticipates some erosion in SFI's asset quality, Fitch is comforted by SFI's comprehensive credit review process, seasoned risk management team, and large and diverse asset profile. Moreover, although the deal will appropriately enhance loan loss reserves, Fitch would expect SFI to proactively scale reserves to buffer any future portfolio deterioration. Fitch notes that the addition of Fremont's commercial lending platform, which consists of eight domestic offices, will broaden SFI's geographic footprint and customer base, while the addition of the majority of the platform's employees will deepen the company's origination, servicing, underwriting and market research functions.

SFI's ratings center on the size and quality of its diverse loan portfolio and its strong management team. Asset quality metrics have historically been quite strong, albeit during a period punctuated by a strong economic environment. Nonetheless, on a forward looking basis, the addition of the Fremont loan portfolio could place some pressure on asset quality. Moreover, although the transaction does contain an element of execution risk, Fitch is comforted by SFI's successful history of executing and integrating past acquisitions.

Headquartered in New York City, SFI is a $12.1 billion (consolidated assets) real estate investment trust (REIT), focused on providing non-commodity senior and mezzanine debt, Corporate Tenant Lease (CTL) financing and equity. SFI's loan and CTL portfolios are geographically diverse and are represented across multiple business sectors, including apartment/residential, office, industrial, retail, entertainment and hotel facilities.

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