As filed with the Securities and Exchange Commission on November 16, 2001
                                                           REGISTRATION NO. 333-
================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                               -------------------

                                    FORM S-3
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933

                              ISTAR FINANCIAL INC.
             (Exact name of Registrants as specified in its charter)

                MARYLAND                                     95-6881527
     (State or other jurisdiction of                      (I.R.S. Employer
     incorporation or organization)                      Identification No.)

                               -------------------

                     1114 AVENUE OF THE AMERICAS, 27TH FLOOR
                            NEW YORK, NEW YORK 10036
                                 (212) 930-9400
               (Address, including zip code, and telephone number,
        including area code, of registrant's principal executive offices)

                               -------------------

                                  JAY SUGARMAN
                             CHIEF EXECUTIVE OFFICER
                              ISTAR FINANCIAL INC.
                       1114 AVENUE OF AMERICAS, 27TH FLOOR
                            NEW YORK, NEW YORK 10036
                                 (212) 930-9400
            (Name, address, including zip code, and telephone number,
                   including area code, of agent for service)

                               -------------------

                                   COPIES TO:
                            KATHLEEN L. WERNER, ESQ.
                       CLIFFORD CHANCE ROGERS & WELLS LLP
                                 200 PARK AVENUE
                            NEW YORK, NEW YORK 10166
                                 (212) 878-8000

         APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of this Registration Statement.
         If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: |_|
         If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. |X|
         If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
         If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
         If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|

                               -------------------
                         CALCULATION OF REGISTRATION FEE



===================================================================================================
                                                                  PROPOSED MAXIMUM     AMOUNT OF
        TITLE OF EACH CLASS OF SECURITIES        AMOUNT TO BE         AGGREGATE       REGISTRATION
                TO BE REGISTERED                  REGISTERED      OFFERING PRICE(2)     FEE (3)
---------------------------------------------------------------------------------------------------
                                                                                
Common Stock, par value $.001 per share .....  4,131,531 (1)(2)         $99,528,581      $24,882
===================================================================================================


         (1)      Pursuant to Rule 416 under the Securities Act, this
                  Registration Statement also covers such additional shares of
                  common stock as may be issued to prevent dilution of the
                  shares of common stock registered hereby resulting from stock
                  splits, stock dividends or similar transactions.
         (2)      Includes 1,488,111 shares issuable upon exercise of employee
                  stock options.
         (3)      Pursuant to Rule 457(c) under the Securities Act of 1933, as
                  amended, and estimated solely for the purpose of calculating
                  the registration fee, the proposed maximum aggregate offering
                  price is equal to the average of the high and low prices of
                  the shares of common stock of iStar Financial Inc. on the New
                  York Stock Exchange on November 9, 2001.

                               -------------------

       THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
       DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
       REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT
       THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN
       ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS
       REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
       COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.



--------------------------------------------------------------------------------
The information in this Prospectus is not complete and may be changed. The
Participating Securityholders may not sell these securities until the
Registration Statement filed with the Securities and Exchange Commission is
effective. This Prospectus is not an offer to sell these securities and it is
not soliciting an offer to buy these securities in any state in where the offer
or sale is not permitted prior to registration or qualification under the
securities laws of any such state.
--------------------------------------------------------------------------------

                 SUBJECT TO COMPLETION, DATED NOVEMBER 16, 2001

PROSPECTUS

                              ISTAR FINANCIAL INC.
                                   4,131,531
                             SHARES OF COMMON STOCK


         This prospectus relates to an aggregate of up to 4,131,531 shares of
our common stock, of which 1,488,111 shares are issuable upon the exercise of
employee stock options. These securities may be offered and sold from time to
time by the securityholders specified in this prospectus or their successors in
interest. See "Participating Securityholders." As of the date of this
prospectus, the Company has been advised that none of the Participating
Securityholders has a current intention to sell any of the shares of common
stock covered by this prospectus.

         The Participating Securityholders obtained substantially all of these
securities pursuant to either an acquisition transaction or an incentive
compensation arrangement. You should read this prospectus and any accompanying
prospectus supplement together with additional information described under the
heading "Where You Can Find More Information." We will not receive any proceeds
from sales of the securities.

         The Participating Securityholders may sell the common stock offered
hereby on the New York Stock Exchange or such other national securities exchange
or automated interdealer quotation system on which shares of our common stock
are then listed or quoted, through negotiated transactions or otherwise, at
market prices prevailing at the time of the sale or at negotiated prices.

         Our common stock is listed and traded on the New York Stock Exchange
under the symbol "SFI." On November 15, 2001, the closing sale price of our
common stock on the NYSE was $25.00 per share.

         An investment in our common stock involves risks that are described in
"RISK FACTORS" beginning on page five of this prospectus.

         Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.



                               November __, 2001


                                TABLE OF CONTENTS

                                                                            Page

WHERE YOU CAN FIND MORE INFORMATION............................................3

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE................................3

FORWARD-LOOKING STATEMENTS.....................................................4

THE COMPANY....................................................................5

RISK FACTORS...................................................................5

USE OF PROCEEDS...............................................................10

PARTICIPATING SECURITYHOLDERS.................................................10

PLAN OF DISTRIBUTION..........................................................11

MATERIAL FEDERAL INCOME TAX CONSEQUENCES......................................13

LEGAL MATTERS.................................................................25

EXPERTS.......................................................................25


                                       2


                       WHERE YOU CAN FIND MORE INFORMATION

         We file annual, quarterly and current reports, proxy statements and
other materials with the SEC. The public may read and copy any materials we file
with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The public may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC
maintains an Internet site that contains reports, proxy and information
statements and other information regarding issuers (including us) that file
electronically with the SEC. The address of that site is http://www.sec.gov.
Reports, proxy statements and other information we file also can be inspected at
the offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005.

         We have filed with the SEC a registration statement on Form S-3 under
the Securities Act of 1933, as amended, with respect to the securities offered
hereby. This prospectus does not contain all the information set forth in the
registration statement, certain portions of which have been omitted as permitted
by the rules and regulations of the SEC. Statements contained in this prospectus
as to the contents of any contract or other document filed as an exhibit to the
registration statement are not necessarily complete, and in each instance,
reference is made to the copy of such contract or document so filed, each such
statement being qualified in all respects by such reference. For further
information about us and the securities, please see the registration statement
and exhibits thereto.

                 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

         We are incorporating by reference in this prospectus the following
documents which we have previously filed with the Securities and Exchange
Commission under the File Number 1-10150:

         (1) our Annual Report on Form 10-K for the fiscal year ended December
31, 2000;

         (2) our Quarterly Reports on Form 10-Q for the quarters ended March 31,
2001, June 30, 2001 and September 30, 2001; and

         (3) the description of our common stock contained in our registration
statement on Form 8-A filed on October 5, 1999, as that description has been
altered by amendments or reports filed for the purpose of updating those
descriptions.

         Whenever after the date of this prospectus we file reports or documents
under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934,
as amended, those reports and documents will be deemed to be part of this
prospectus from the time they are filed. If anything in a report or document we
file after the date of this prospectus changes anything in it, this prospectus
will be deemed to be changed by that subsequently filed report or document
beginning on the date the report or document is filed.

         We will provide to each person to whom a copy of this prospectus is
delivered a copy of any or all of the information that has been incorporated by
reference in this prospectus, but not delivered with this prospectus. We will
provide this information at no cost to the requestor upon written or oral
request addressed to iStar Financial Inc., 1114 Avenue of the Americas, 27th
Floor, New York, New York 10036, attention: Investor Relations Department
(Telephone: (212) 930-9400).


                                       3


                           FORWARD-LOOKING STATEMENTS

         We make statements in this prospectus and the documents we incorporate
by reference that are considered "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, which are usually identified by the use of words such as
"will," "anticipates," "believes," "estimates," "expects," "projects," "plans,"
"intends," "should" or similar expressions. We intend those forward-looking
statements to be covered by the safe harbor provisions for forward-looking
statements contained in the Private Securities Reform Act of 1995 and are
including this statement for purposes of complying with these safe harbor
provisions. These forward-looking statements reflect our current views about the
Company's plans, strategies and prospects, which are based on the information
currently available to us and on assumptions we have made. Although we believe
that our plans, intentions and expectations as reflected in or suggested by
those forward-looking statements are reasonable, we can give no assurance that
the plans, intentions or expectations will be achieved. We have listed below and
have discussed elsewhere in this prospectus some important risks, uncertainties
and contingencies which could cause the Company's actual results, performances
or achievements to be materially different from the forward- looking statements
we make in this prospectus. These risks, uncertainties and contingencies
include, but are not limited to, the following:

1.       The success or failure of our efforts to implement our current business
         strategy.

2.       Economic conditions generally and in the commercial real estate and
         finance markets specifically.

3.       The performance and financial condition of borrowers and corporate
         tenants.

4.       The actions of our competitors and our ability to respond to those
         actions.

5.       The cost of our capital, which depends in part on our asset quality,
         the nature of our relationships with our lenders and other capital
         providers, our business prospects and outlook, and general market
         conditions.

6.       Changes in governmental regulations, tax rates and similar matters.

7.       Legislative and regulatory changes (including changes to laws governing
         the taxation of REITs).

8.       Other factors discussed under the heading "Risk Factors" and which may
         be discussed in a prospectus supplement.

         We assume no obligation to update publicly any forward-looking
statements, whether as a result of new information, future events or otherwise.
In evaluating forward-looking statements, you should consider these risks and
uncertainties, together with the other risks described from time to time in our
reports and documents filed with the SEC, and you should not place undue
reliance on those statements.


                                       4


                                   THE COMPANY

         We are the largest publicly traded finance company focused exclusively
on the commercial real estate industry. We provide structured financing to
private and corporate owners of real estate nationwide, including senior and
junior mortgage debt, corporate mezzanine and subordinated capital and corporate
net lease financing. We seek to deliver superior risk-adjusted returns on equity
to our stockholders by providing innovative and value-added financing solutions
to our customers. We are taxed as a real estate investment trust.

         Our principal executive offices are located at 1114 Avenue of the
Americas, New York, New York 10036, and our telephone number is (212) 930-9400.
Our website is istarfinancial.com. Our six primary regional offices are located
in Atlanta, Boston, Dallas, Denver, Hartford and San Francisco. iStar Asset
Services, our loan servicing subsidiary, is located in Hartford, and iStar Real
Estate Services, our corporate facilities management division, is headquartered
in Atlanta.

                                  RISK FACTORS

         THIS SECTION DESCRIBES SOME, BUT NOT ALL, OF THE RISKS OF PURCHASING
OUR COMMON STOCK. YOU SHOULD CAREFULLY CONSIDER THESE RISKS, IN ADDITION TO THE
OTHER INFORMATION CONTAINED IN THIS PROSPECTUS OR INCORPORATED BY REFERENCE,
BEFORE PURCHASING ANY OF THE SECURITIES OFFERED HEREBY. IN CONNECTION WITH THE
FORWARD-LOOKING STATEMENTS THAT APPEAR IN THIS PROSPECTUS, YOU SHOULD CAREFULLY
REVIEW THE FACTORS DISCUSSED BELOW AND THE CAUTIONARY STATEMENTS REFERRED TO IN
"FORWARD-LOOKING STATEMENTS."

WE ARE SUBJECT TO REAL ESTATE INVESTMENT RISKS

         Our real estate finance business is subject to risks, including the
following:

         1.       Defaults by borrowers on non-recourse loans where underlying
                  property values fall below the loan amount.

         2.       Costs and delays associated with the foreclosure process.

         3.       Borrower bankruptcies.

         4.       Possible unenforceability of loan terms, such as prepayment
                  provisions.

         5.       Acts or omissions by owners or managers of the underlying real
                  estate.

         6.       Borrower defaults on debt senior to our loans, if any.

         7.       Where debt senior to our loans exists, the presence of
                  intercreditor arrangements limiting our ability to amend our
                  loan documents, assign our loans, accept prepayments, exercise
                  our remedies (through "standstill" periods) and control
                  decisions made in bankruptcy proceedings relating to
                  borrowers.

         8.       Lack of control over the underlying asset prior to a default.

         The risks described above could impact our ability to realize on our
collateral or collect expected amounts on account of our portfolio. Where
applicable, these risks could also require us to expend funds in order to
protect our position as a subordinated lender. For example, we may determine
that it is in our


                                       5


interest to expend funds to keep a more senior lender current on our obligations
or to purchase a senior lender's position. Unanticipated costs may also be
incurred by us after a foreclosure. Bankruptcy and borrower litigation can
significantly increase the time needed for us to acquire underlying collateral
in the event of a default, during which time the collateral may decline in
value.

WE ARE SUBJECT TO RISKS RELATING TO OUR CREDIT TENANT LEASING BUSINESS

         Our credit tenant leasing business is subject to risks, including the
following:

         1.       Lease expirations may result in reduced revenues if prevailing
                  lease rates at the time of such expirations are less than the
                  contractual lease rates under the expiring leases. In
                  addition, if corporate tenants under expiring leases elect not
                  to renew their leases, we could experience long vacancy
                  periods and incur substantial capital expenditures in order to
                  obtain replacement customers. As of June 30, 2001, the
                  percentage of our revenues (based on total revenues for the
                  quarter ended June 30, 2001, annualized) that are subject to
                  expiring leases during each year from 2001 through 2005 is as
                  follows:

                           2001...................................0.5%
                           2002...................................2.3%
                           2003...................................3.2%
                           2004...................................5.0%
                           2005...................................2.9%

         2.       Lease defaults by one or more significant corporate tenants or
                  lease terminations by corporate tenants following events of
                  casualty or takings by eminent domain could result in long
                  vacancy periods and require us to incur substantial capital
                  expenditures in order to obtain replacement customers. In
                  addition, there can be no assurance that the lease rates
                  received from replacement customers will be equal to the lease
                  rates received from the defaulting or terminating customers.
                  As of June 30, 2001, 12.0% of our annualized total revenues
                  for the quarter ended June 30, 2001, were derived from our
                  five largest corporate tenants.

         3.       Illiquidity of ownership interests in real property.

         4.       Risks associated with joint ventures, such as lack of full
                  management control over venture activities and risk of
                  non-performance by venture partners.

         5.       Possible need for significant tenant improvements, including
                  conversions of single tenant buildings to multi-tenant
                  buildings.

         6.       Competition from newer, more updated buildings.

         Factors 1, 2 and 6 would likely have negative impacts on our net
income. Factors 3, 4 and 5 may decrease our flexibility to vary our portfolio
and investment strategy promptly to respond to changes in market conditions.

OUR GROWTH IS DEPENDENT ON LEVERAGE, WHICH MAY CREATE OTHER RISKS

         Our success is dependent, in part, upon our ability to grow invested
assets through the use of leverage. We currently intend to leverage our Company
primarily through secured and unsecured borrowings. Our ability to obtain the
leverage necessary for execution of our business plan will


                                       6


ultimately depend upon our ability to maintain interest coverage ratios meeting
market underwriting standards that will vary according to lenders' assessments
of our creditworthiness and the terms of the borrowings.

         The percentage of leverage used will vary depending on our estimate of
the stability of the Company's cash flow. To the extent that changes in market
conditions cause the cost of such financing to increase relative to the income
that can be derived from the assets originated, we may reduce the amount of our
leverage.

         Leverage creates an opportunity for increased net income, but at the
same time creates risks. For example, leveraging magnifies changes in our net
worth. We will incur leverage only when there is an expectation that it will
enhance returns, although there can be no assurance that our use of leverage
will prove to be beneficial. Moreover, there can be no assurance that we will be
able to meet our debt service obligations and, to the extent that we cannot, we
risk the loss of some or all of our assets or a financial loss if we are
required to liquidate assets at a commercially inopportune time.

         We and our subsidiaries are parties to agreements and debt instruments
that restrict future indebtedness and the payment of dividends, including
indirect restrictions (through, for example, covenants requiring the maintenance
of specified levels of net worth and earnings to debt service ratios) and direct
restrictions. As a result, in the event of a deterioration in our financial
condition, these agreements or debt instruments could restrict our ability to
pay dividends. Moreover, if we fail to pay dividends as required by the Internal
Revenue Code, whether as a result of restrictive covenants in our debt
instruments or otherwise, we may lose our status as a REIT. For more information
regarding the consequences of loss of REIT status, please read the risk factor
entitled "We May Be Subject to Adverse Consequences if We Fail to Qualify as a
Real Estate Investment Trust."

WE FACE A RISK OF LIABILITY UNDER ENVIRONMENTAL LAWS

         Under various federal, state and local environmental laws, ordinances
and regulations, a current or previous owner of real estate (including, in
certain circumstances, a secured lender that succeeds to ownership or control of
a property) may become liable for the costs of removal or remediation of certain
hazardous or toxic substances at, on, under or in its property. Those laws
typically impose cleanup responsibility and liability without regard to whether
the owner or control party knew of or was responsible for the release or
presence of such hazardous or toxic substances. The costs of investigation,
remediation or removal of those substances may be substantial. The owner or
control party of a site may be subject to common law claims by third parties
based on damages and costs resulting from environmental contamination emanating
from a site. Certain environmental laws also impose liability in connection with
the handling of or exposure to asbestos-containing materials, pursuant to which
third parties may seek recovery from owners of real properties for personal
injuries associated with asbestos-containing materials. Absent succeeding to
ownership or control of real property, a secured lender is not likely to be
subject to any of these forms of environmental liability.

CERTAIN PROVISIONS IN OUR CHARTER MAY INHIBIT A CHANGE IN CONTROL

         Generally, to maintain our qualification as a REIT under the Internal
Revenue Code, not more than 50% in value of our outstanding shares of stock may
be owned, directly or indirectly, by five or fewer individuals at any time
during the last half of our taxable year. The Internal Revenue Code defines
"individuals" for purposes of the requirement described in the preceding
sentence to include some types of entities. Under our charter, no person may own
more than 9.8% of the outstanding shares of stock, with some exceptions. The
restrictions on transferability and ownership may delay, deter or prevent a


                                       7


change in control or other transaction that might involve a premium price or
otherwise be in the best interest of the securityholders.

         Our Board of Directors is divided into two classes. Directors of each
class are chosen for two-year staggered terms. Staggered terms of directors may
reduce the possibility of a tender offer or an attempt to change control, even
though a tender offer or change in control might be in the best interest of our
securityholders. Our charter authorizes our Board of Directors:

         1.       To cause us to issue additional authorized but unissued shares
                  of common or preferred stock.

         2.       To classify or reclassify, in one or more series, any of our
                  unissued preferred shares.

         3.       To set the preferences, rights and other terms of any
                  classified or reclassified securities that we issue.

ADVERSE CHANGES IN GENERAL ECONOMIC CONDITIONS CAN ADVERSELY AFFECT OUR BUSINESS

         Our success is dependent upon the general economic conditions in the
geographic areas in which a substantial number of our investments are located.
Adverse changes in national economic conditions or in the economic conditions of
the regions in which we conduct substantial business likely would have an
adverse effect on real estate values and, accordingly, our business.

WE MAY BE SUBJECT TO ADVERSE CONSEQUENCES IF WE FAIL TO QUALIFY AS A REAL ESTATE
INVESTMENT TRUST

         We intend to operate so as to qualify as a real estate investment trust
for federal income tax purposes. We have received an opinion of our legal
counsel that, based on certain assumptions and representations described in
"Material Federal Income Tax Consequences," our existing legal organization and
our actual and proposed method of operation described in this prospectus, as set
forth in our organizational documents and as represented by us to our counsel,
enable us to satisfy the requirements for qualification as a real estate
investment trust under the Internal Revenue Code in the ordinary course of our
actual and proposed operations. Investors should be aware, however, that
opinions of counsel are not binding on the Internal Revenue Service or any
court. The real estate investment trust qualification opinion only represents
the view of our counsel based on such counsel's review and analysis of existing
law, which includes no controlling precedent. Furthermore, both the validity of
the opinion and our qualification as a real estate investment trust will depend
on our continuing ability to meet various requirements concerning, among other
things, the ownership of our outstanding stock, the nature of our assets, the
sources of our income and the amount of our distributions to our stockholders.
See "Material Federal Income Tax Consequences--Taxation of the Company."

         If we were to fail to qualify as a real estate investment trust for any
taxable year, we would not be allowed a deduction for distributions to our
stockholders in computing our taxable income and would be subject to federal
income tax, including any applicable minimum tax, on our taxable income at
regular corporate rates. Unless entitled to relief under certain Internal
Revenue Code provisions, we also would be disqualified from treatment as a real
estate investment trust for the four subsequent taxable years following the year
during which qualification was lost. As a result, cash available for
distribution would be reduced for each of the years involved. Furthermore, it is
possible that future economic, market, legal, tax or other considerations may
cause the Board of Directors to revoke the real estate investment trust
election. See "Material Federal Income Tax Consequences."


                                       8


         Even if we qualify as a real estate investment trust for federal income
tax purposes, we may be subject to certain state and local taxes on our income
and property, and may be subject to certain federal taxes. See "Material Federal
Income Tax Consequences--Taxation of the Company."

TAX-EXEMPT STOCKHOLDERS MAY BE SUBJECT TO TAXATION

         The Internal Revenue Service has issued a revenue ruling in which it
held that amounts distributed by a REIT to a tax-exempt employees' pension trust
do not constitute unrelated business taxable income ("UBTI"). In general,
subject to the discussion below regarding a "pension-held REIT" and subject to
the following sentence, based upon such ruling and the statutory framework of
the Internal Revenue Code, distributions to a stockholder of a real estate
investment trust that is a tax-exempt entity should not constitute UBTI,
provided that:

         1.       The tax-exempt entity has not financed the acquisition of its
                  shares of common stock with "acquisition indebtedness" within
                  the meaning of the Internal Revenue Code.

         2.       The shares of common stock are not otherwise used in an
                  unrelated trade or business of the tax-exempt entity.

         3.       The real estate investment trust does not hold a residual
                  interest in a real estate mortgage investment conduit
                  ("REMIC") within the meaning of Section 860D of the Internal
                  Revenue Code.

         Although we do not intend to invest a material amount of assets in
REMICS, certain taxable income produced by REMIC residual interests may cause
our stockholders to suffer certain adverse tax consequences. See "Material
Federal Income Tax Consequences."

         If any pension or other retirement trust that qualifies under Section
401(a) of the Internal Revenue Code holds more than 10% by value of the
interests in a pension-held REIT at any time during a taxable year, a portion of
the dividends paid to the qualified pension trust by such REIT may constitute
UBTI. For these purposes, a "pension-held REIT" is defined as a REIT: (1) that
would not have qualified as a REIT but for the provisions of the Internal
Revenue Code which look through such a qualified pension trust in determining
ownership of securities of the REIT; and (2) as to which at least one qualified
pension trust holds more than 25% by value of the interests of such REIT or one
or more qualified pension trusts (each owning more than a 10% interest by value
in the REIT) hold in the aggregate more than 50% by value of the interests in
such REIT.

         We do not expect that we will be a pension-held REIT. However,
notwithstanding our current belief that we will not be a "pension-held REIT," no
assurance can be given that we will not become a pension-held REIT in the
future.

         If we were to become a pension-held REIT in the future and were to
originate investments using debt, or otherwise were to engage in a transaction
resulting in UBTI, determined as though we were a qualified pension plan, any
qualified pension plan owning 10% or more of our shares, by value, would have a
portion of its dividend income from us taxed as UBTI. Even if we were not a
pension-held REIT, certain amounts received by a stockholder that is a
tax-exempt entity may be treated as UBTI. See "Material Federal Income Tax
Consequences."


                                       9


OUR OWNERSHIP IS CONCENTRATED

         SOFI-IV SMT Holdings, L.L.C. ("SOFI-IV") holds approximately 39.1% of
our outstanding shares of common stock on a diluted basis. Four of the 16
members of our Board of Directors are employed by an affiliate of SOFI-IV. As a
result of its ownership interests, SOFI-IV may have significant influence over
our business and affairs, including decisions regarding:

         o        Mergers or other business combinations.

         o        Issuance of equity securities, including additional shares of
                  our common stock.

         o        Payment of dividends.

         The influence held by SOFI-IV may result in various conflicts of
interest between SOFI-IV and us or between SOFI-IV and the holders of our common
stock. Certain individuals who own interests (direct or indirect) in SOFI-IV,
including Jay Sugarman, who serves as our Chairman and Chief Executive Officer;
and Jeffrey Dishner, Madison Grose, Merrick Kleeman and Barry Sternlicht, each
of whom is a director of our Company, own directly an aggregate of 2.5% of our
common stock and hold options to purchase an additional 0.8% of our common
stock, assuming cashless option exercises, in addition to their interests in
SOFI-IV. These people may be faced with decisions that have different
implications for SOFI-IV, on the one hand, and us or the holders of our common
stock, on the other hand, which could create, or appear to create, potential
conflicts of interest.

                                 USE OF PROCEEDS

         The Participating Securityholders will receive all of the proceeds if
and when they sell securities covered by this prospectus. See "Participating
Securityholders." We will not receive any of the proceeds.

                          PARTICIPATING SECURITYHOLDERS

         This prospectus relates to an aggregate of up to 4,131,531 shares of
common stock, including 1,488,111 shares issuable upon exercise of employee
stock options, which may be sold from time to time by the Participating
Securityholders. As of the date of this prospectus, the Company has been advised
that none of the Participating Securityholders has a current intention to sell
any of the shares of common stock covered by this prospectus. These current
intentions may change without notice to the Company and, as a result, there can
be no assurance as to whether or when the Participating Securityholders will
sell any or all of the shares of common stock.

         On March 17, 2000, we acquired American Corporate Real Estate, L.L.C.
and its affiliate, American Corporate Real Estate, Inc., a privately-held firm
focused on providing public and private corporations with highly-structured,
value-added financing solutions for their real estate facilities. As
consideration for the acquisition, we issued 220,652 shares of our common stock
to certain of the Participating Securityholders, with an additional 279,348
shares reserved for future issuance on or before December 31, 2001 to the extent
certain investment targets are achieved. In connection with the acquisition, we
entered into an investor rights agreement with those Participating
Securityholders which required us to use our reasonable best efforts to file a
registration statement, of which this prospectus is a part, covering resales of
the shares of common stock issued or to be issued in connection with the
acquisition.


                                       10


         The following chart shows, according to our records as of September 30,
2001, the number of shares of common stock beneficially owned by the
Participating Securityholders and the number of shares of common stock that may
be offered from time to time:



                                                            SHARES OF COMMON STOCK
                                                         OWNED PRIOR TO ANY OFFERING
                                                         ---------------------------
                                                                                  SHARES
                                                     NUMBER OF    PERCENTAGE    THAT MAY BE
           PARTICIPATING SECURITYHOLDER               SHARES       OF CLASS       OFFERED
-------------------------------------------------    ---------    ----------    -----------
                                                                      
H. Cabot Lodge, III (1)                               90,657          *          122,528(2)
R. Michael Dorsch, III (1)                            90,657          *          122,528(2)
Barclay G. Jones, III (1)                             73,610          *           99,207(2)
D.C. Capital-Acre, L.L.C.                             27,230          *           36,699(2)
Ann E. Carmel                                          6,808          *            9,176(2)
Tinicum Enterprises, G.P.                              6,808          *            9,176(2)
David E. Gibbons                                       3,411          *            4,597(2)
Kenneth G. Beitz                                       3,411          *            4,597(2)
Samantha K. Garbus                                     2,000          *            2,000
Jay Sugarman (3)                                   2,544,712       2.9%        2,544,712
Spencer B. Haber (4)                               1,176,311       1.4%        1,176,311


----------
*        Less than one percent.

(1) Mr. Lodge is a Director of the Company. Each of Messrs. Lodge, Dorsch and
Jones is an Executive Vice President-- Investments of the Company.
(2) Includes shares that may be issued by the Company on or before December 31,
2001 if certain investment targets are achieved.
(3) Mr. Sugarman is the Chairman and Chief Executive Officer of the Company. The
shares beneficially owned by Mr. Sugarman were issued to him pursuant to
incentive compensation arrangements, except for 21,399 shares which he purchased
in open market transactions. The shares beneficially owned by Mr. Sugarman
include 1,421,444 shares issuable upon the exercise of employee stock options.
(4) Mr. Haber is the President, Chief Financial Officer and a Director of the
Company. The shares beneficially owned by Mr. Haber were issued to him pursuant
to incentive compensation arrangements. The shares beneficially owned by Mr.
Haber include 66,667 shares issuable upon exercise of employee stock options.

                              PLAN OF DISTRIBUTION

         We are registering the securities on behalf of the Participating
Securityholders and we will bear all costs, expenses and fees in connection with
the registration of the securities. As used herein, "Participating
Securityholder" includes donees and pledgees selling securities received from a
named Participating Securityholder after the date of this prospectus. Brokerage
commissions and similar selling expenses, if any, attributable to the sale of
securities will be borne by the Participating Securityholders. Except as may be
set forth in any prospectus supplement, the Participating Securityholders have
advised us that they have not entered into any agreements, understandings or
arrangements with any underwriters or broker-dealers regarding the sale of their
securities, nor is there an underwriter or coordinating broker acting in
connection with the proposed sale of securities by the Participating
Securityholders.

         The Participating Securityholders may effect such transactions by
selling securities directly to purchasers or to or through broker-dealers, which
may act as agents or principals. Such broker-dealers may receive compensation in
the form of discounts, concessions, or commissions from the Participating
Securityholders and/or the purchasers of securities for whom such broker-dealers
may act as agents or to whom they sell as principals, or both (which
compensation as to a particular broker-dealer might be in excess of customary
commissions).


                                       11


         The Participating Securityholders and any broker-dealers that act in
connection with the sale of securities might be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act, and any commissions
received by such broker-dealers and any profit on the resale of the securities
sold by them while acting as principals might be deemed to be underwriting
discounts or commissions under the Securities Act. We have agreed to indemnify
each Participating Securityholder against certain liabilities, including
liabilities arising under the Securities Act. The Participating Securityholders
may agree to indemnify any agent, dealer or broker-dealer that participates in
transactions involving sales of the securities against certain liabilities,
including liabilities arising under the Securities Act. Brokers' commissions and
dealers' discounts, taxes and other selling expenses to be borne by the
Participating Securityholders are not expected to exceed normal selling
expenses.

         Because Participating Securityholders may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act, the
Participating Securityholders will be subject to the prospectus delivery
requirements of the Securities Act, which may include delivery through the
facilities of the NYSE pursuant to Rule 153 under the Securities Act. We have
informed the Participating Securityholders that the anti-manipulative provisions
of Regulation M promulgated under the Exchange Act may apply to their sales in
the market. The registration of the securities under the Securities Act shall
not be deemed an admission by the Participating Securityholders or the Company
that the Participating Securityholders are underwriters for purposes of the
Securities Act of any securities offered pursuant to this Prospectus.

         Upon the Company being notified by a Participating Securityholder that
any material arrangement has been entered into with a broker-dealer for the sale
of securities through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the Act,
disclosing: (1) the name of each such Participating Securityholder and of the
participating broker-dealer(s); (2) the number of securities involved; (3) the
price at which such securities were sold; (4) the commissions paid or discounts
or concessions allowed to such broker-dealer(s), where applicable; (5) that such
broker-dealer(s) did not conduct any investigation to verify the information set
out or incorporated by reference in this prospectus; and (6) other facts
material to the transaction. In addition, upon the Company being notified by a
Participating Securityholder that a donee or pledgee intends to sell more than
500 shares of common stock, a supplement to this prospectus will be filed.

         The securities may be sold or distributed in a variety of ways,
including:

         1.       Block trades (which may involve crosses) in which the broker
                  or dealer so engaged will attempt to sell the securities as
                  agent but may position and resell a portion of the block as
                  principal to facilitate the transaction.

         2.       Purchases by a broker or dealer as principal and resale by
                  such broker or dealer for its account pursuant to this
                  Prospectus.

         3.       Exchange distributions and/or secondary distributions in
                  accordance with the rules of the NYSE.

         4.       Ordinary brokerage transactions and transactions in which the
                  broker solicits purchasers.

         5.       Sales in the over-the-counter market.

         6.       Through short sales of securities.


                                       12


         7.       Pro-rata distributions in the ordinary course of business or
                  as part of the liquidation and winding up of the affairs of
                  the Participating Securityholders.

         8.       Privately negotiated transactions.

         The Participating Securityholders may from time to time deliver all or
a portion of the securities to cover a short sale or sales or upon the exercise,
settlement or closing of a call equivalent position or a put equivalent
position.

         Under the Exchange Act and the regulations thereunder, any person
engaged in a distribution of the securities offered by this Prospectus may not
simultaneously engage in market making activities with respect to the securities
during any applicable "cooling off" periods prior to the commencement of such
distribution. In addition, and without limiting the foregoing, the Participating
Securityholders will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder including, without limitation, Rules 101,
102, 103 and 104, which provisions may limit the timing of purchases and sales
of securities by the Participating Securityholders.

         Securities that qualify for sale pursuant to Rule 144 may be sold under
Rule 144 rather than pursuant to this prospectus. In addition, a Participating
Securityholder may devise, gift or otherwise transfer the securities by means
not described herein, in which event such transfer will not be pursuant to this
prospectus.

                    MATERIAL FEDERAL INCOME TAX CONSEQUENCES

         THE FOLLOWING IS A SUMMARY OF THE FEDERAL INCOME TAX CONSEQUENCES
ANTICIPATED TO BE MATERIAL TO AN INVESTOR IN iSTAR FINANCIAL. THIS SUMMARY IS
BASED ON CURRENT LAW, IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE.
YOUR TAX CONSEQUENCES RELATED TO AN INVESTMENT IN iSTAR FINANCIAL MAY VARY
DEPENDING ON YOUR PARTICULAR SITUATION AND THIS DISCUSSION DOES NOT PURPORT TO
DISCUSS ALL ASPECTS OF TAXATION THAT MAY BE RELEVANT TO A HOLDER OF OUR
SECURITIES IN LIGHT OF HIS OR HER PERSONAL INVESTMENT OR TAX CIRCUMSTANCES, OR
TO HOLDERS OF OUR SECURITIES SUBJECT TO SPECIAL TREATMENT UNDER THE FEDERAL
INCOME TAX LAWS, EXCEPT TO THE EXTENT DISCUSSED UNDER THE HEADINGS "--TAXATION
OF TAX-EXEMPT STOCKHOLDERS" AND "--TAXATION OF NON-U.S. STOCKHOLDERS." INVESTORS
SUBJECT TO SPECIAL TREATMENT INCLUDE, WITHOUT LIMITATION, INSURANCE COMPANIES,
FINANCIAL INSTITUTIONS, BROKER-DEALERS, TAX-EXEMPT ORGANIZATIONS, INVESTORS
HOLDING SECURITIES AS PART OF A CONVERSION TRANSACTION, OR A HEDGE OR HEDGING
TRANSACTION OR AS A POSITION IN A STRADDLE FOR TAX PURPOSES, FOREIGN
CORPORATIONS OR PARTNERSHIPS, AND PERSONS WHO ARE NOT CITIZENS OR RESIDENTS OF
THE UNITED STATES. IN ADDITION, THE SUMMARY BELOW DOES NOT CONSIDER THE EFFECT
OF ANY FOREIGN, STATE, LOCAL OR OTHER TAX LAWS THAT MAY BE APPLICABLE TO YOU AS
A HOLDER OF OUR SECURITIES.

         The information in this summary is based on the Internal Revenue Code
of 1986, as amended, current, temporary and proposed Treasury regulations
promulgated under the Internal Revenue Code, the legislative history of the
Internal Revenue Code, current administrative interpretations and practices of
the Internal Revenue Service, and court decisions, all as of the date of this
prospectus. The administrative interpretations and practices of the Internal
Revenue Service upon which this summary is based include its practices and
policies as expressed in private letter rulings which are not binding on the
Internal Revenue Service, except with respect to the taxpayers who requested and
received such rulings. Future


                                       13


legislation, Treasury regulations, administrative interpretations and practices,
and court decisions may affect the tax consequences contained in this summary,
possibly on a retroactive basis. We have not requested, and do not plan to
request, any rulings from the Internal Revenue Service concerning our tax
treatment or the tax consequences contained in this summary, and the statements
in this prospectus are not binding on the Internal Revenue Service or a court.
Thus, we can provide no assurance that the tax consequences contained in this
summary will not be challenged by the Internal Revenue Service or sustained by a
court if challenged by the Internal Revenue Service.

         YOU ARE URGED TO CONSULT YOUR TAX ADVISOR REGARDING THE SPECIFIC TAX
CONSEQUENCES TO YOU OF (1) THE ACQUISITION, OWNERSHIP AND SALE OR OTHER
DISPOSITION OF OUR SECURITIES, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND
OTHER TAX CONSEQUENCES, (2) OUR ELECTION TO BE TAXED AS A REAL ESTATE INVESTMENT
TRUST FOR FEDERAL INCOME TAX PURPOSES AND (3) POTENTIAL CHANGES IN APPLICABLE
TAX LAWS.

TAXATION OF ISTAR FINANCIAL- GENERAL

         We have elected to be taxed as a REIT under Sections 856 through 860 of
the Internal Revenue Code, commencing with our taxable year ended December 31,
1998. We believe we have been organized and have operated in a manner which
allows us to qualify for taxation as a REIT under the Internal Revenue Code, and
we intend to continue to be organized in this manner. Our qualification and
taxation as a REIT, however, depend upon our ability to meet, through actual
annual operating results, asset requirements, distribution levels, diversity of
stock ownership, and the various other qualification tests imposed under the
Internal Revenue Code. Accordingly, there can be no assurance that we have
operated or will continue to operate in a manner so as to qualify or remain
qualified as a REIT. See "--Failure to Qualify."

         The sections of the Internal Revenue Code that relate to the
qualification and taxation of REITs are highly technical and complex. The
following describes the material aspects of the sections of the Internal Revenue
Code that govern the federal income tax treatment of a REIT and its
stockholders. This summary is qualified in its entirety by the applicable
Internal Revenue Code provisions, rules and regulations promulgated under the
Internal Revenue Code, and administrative and judicial interpretations of the
Internal Revenue Code.

         Provided we qualify for taxation as a REIT, we generally will not be
subject to federal corporate income tax on our net income that is currently
distributed to our stockholders. This treatment substantially eliminates the
"double taxation" that generally results from an investment in a corporation.
Double taxation means taxation once at the corporate level when income is earned
and once again at the stockholder level when such income is distributed. Even if
we qualify for taxation as a REIT, however, we will be subject to federal income
taxation as follows:

         -        We will be required to pay tax at regular corporate rates on
                  any undistributed REIT taxable income, including undistributed
                  net capital gains.

         -        We may be subject to the "alternative minimum tax" on items of
                  tax preference, if any.

         -        If we have (1) net income from the sale or other disposition
                  of "foreclosure property" which is held primarily for sale to
                  customers in the ordinary course of business or (2) other
                  nonqualifying income from foreclosure property, we will be
                  required to pay tax at the highest corporate rate on this
                  income. In general, foreclosure property is property


                                       14


                  acquired through foreclosure after a default on a loan secured
                  by the property or on a lease of the property.

         -        We will be required to pay a 100% tax on any net income from
                  prohibited transactions. In general, prohibited transactions
                  are sales or other taxable dispositions of property, other
                  than foreclosure property, held for sale to customers in the
                  ordinary course of business

         -        If we fail to satisfy the 75% or 95% gross income tests, as
                  described below, but have maintained our qualification as a
                  REIT, we will be required to pay a 100% tax on an amount equal
                  to (1) the gross income attributable to the greater of the
                  amount by which we fail the 75% or 95% gross income test
                  multiplied by (2) a fraction intended to reflect our
                  profitability.

         -        We will be required to pay a 4% excise tax on the amount by
                  which our annual distributions to our stockholders is less
                  than the sum of (1) 85% of our ordinary income for the year,
                  (2) 95% of our real estate investment trust capital gain net
                  income for the year, and (3) any undistributed taxable income
                  from prior periods.

         -        If we acquire an asset from a corporation which is not a REIT
                  in a transaction in which the basis of the asset in our hands
                  is determined by reference to the basis of the asset in the
                  hands of the transferor corporation, and we subsequently sell
                  the asset within ten years, then under Treasury regulations
                  not yet issued, we would be required to pay tax at the highest
                  regular corporate tax rate on this gain to the extent (1) the
                  fair market value of the asset exceeds (2) our adjusted tax
                  basis in the asset, in each case, determined as of the date on
                  which we acquired the asset. The results described in this
                  paragraph assume that we will elect this treatment in lieu of
                  an immediate tax when the asset is acquired.

         -        We will generally be subject to tax on the portion of any
                  "excess inclusion" income derived from an investment in
                  residual interests in real estate mortgage investment conduits
                  to the extent our stock is held by specified tax exempt
                  organizations not subject to tax on unrelated business taxable
                  income.

REQUIREMENTS FOR QUALIFICATION AS A REAL ESTATE INVESTMENT TRUST

         GENERAL

         The Internal Revenue Code defines a REIT as a corporation, trust or
association:

         (1)      that is managed by one or more trustees or directors;

         (2)      that issues transferable shares or transferable certificates
                  to its owners;

         (3)      that would be taxable as a regular corporation, but for its
                  election to be taxed as a REIT;

         (4)      that is not a financial institution or an insurance company
                  under the Internal Revenue Code;

         (5)      that is owned by 100 or more persons;


                                       15


         (6)      not more than 50% in value of the outstanding stock of which
                  is owned, actually or constructively, by five or fewer
                  individuals, as defined in the Internal Revenue Code to
                  include some entities, during the last half of each year; and

         (7)      that meets other tests, described below, regarding the nature
                  of its income and assets, and the amount of its distributions.

         The Internal Revenue Code provides that conditions (1) to (4) must be
met during the entire year and that condition (5) must be met during at least
335 days of a year of twelve months, or during a proportionate part of a shorter
taxable year. Conditions (5) and (6) do not apply to the first taxable year for
which an election is made to be taxed as a REIT. For purposes of condition (6),
tax-exempt entities are generally treated as individuals, subject to a
"look-through" exception for pension funds.

         Our Charter provides for restrictions regarding ownership and transfer
of our stock. These restrictions are intended to assist us in satisfying the
share ownership requirements described in (5) and (6) above. These restrictions,
however, may not ensure that we will, in all cases, be able to satisfy the share
ownership requirements described in (5) and (6) above. If we fail to satisfy
these share ownership requirements, our status as a REIT would terminate. If,
however, we comply with the rules contained in applicable Treasury regulations
that require us to determine the actual ownership of our shares and we do not
know, or would not have known through the exercise of reasonable diligence, that
we failed to meet the requirement described in condition (6) above, we would not
be disqualified as a REIT.

         In addition, a corporation may not qualify as a REIT unless its taxable
year is the calendar year. We have and will continue to have a calendar taxable
year.

         OWNERSHIP OF A PARTNERSHIP INTEREST

         The Treasury regulations provide that if we are a partner in a
partnership, we will be deemed to own our proportionate share of the assets of
the partnership, and we will be deemed to be entitled to our proportionate share
of the gross income of the partnership. The character of the assets and gross
income of the partnership generally retains the same character in our hands for
purposes of satisfying the gross income and asset tests described below.

         QUALIFIED REIT SUBSIDIARIES

         A "qualified REIT subsidiary" is a corporation, all of the stock of
which is owned by a REIT. Under the Internal Revenue Code, a qualified REIT
subsidiary is not treated as a separate corporation from the REIT. Rather, all
of the assets, liabilities, and items of income, deduction, and credit of the
qualified REIT subsidiary are treated as the assets, liabilities, and items of
income, deduction, and credit of the REIT for purposes of the REIT income and
asset tests described below.

         INCOME TESTS

         We must meet two annual gross income requirements to qualify as a REIT.
First, each year we must derive, directly or indirectly, at least 75% of our
gross income, excluding gross income from prohibited transactions, from
investments relating to real property or mortgages on real property, including
"rents from real property" and mortgage interest, or from specified temporary
investments. Second, each year we must derive at least 95% of our gross income,
excluding gross income from prohibited transactions, from investments meeting
the 75% test described above, or from dividends, interest and gain from the sale
or disposition of stock or securities. For these purposes, the term "interest"
generally does not include any interest of which the amount received depends on
the income or profits of


                                       16


any person. An amount will generally not be excluded from the term "interest,"
however, if such amount is based on a fixed percentage of gross receipts or
sales.

         Any amount includable in gross income by us with respect to a regular
or residual interest in a real estate mortgage investment conduit is generally
treated as interest on an obligation secured by a mortgage on real property for
purposes of the 75% gross income test. If, however, less than 95% of the assets
of a real estate mortgage investment conduit consist of real estate assets, we
will be treated as receiving directly our proportionate share of the income of
the real estate mortgage investment conduit, which would generally include
non-qualifying income for purposes of the 75% gross income test. In addition, if
we receive interest income with respect to a mortgage loan that is secured by
both real property and other property and the principal amount of the loan
exceeds the fair market value of the real property on the date we made the
mortgage loan, interest income on the loan will be apportioned between the real
property and the other property, which apportionment would cause us to recognize
income that is not qualifying income for purposes of the 75% gross income test.

         We may make loans that have shared appreciation provisions. To the
extent interest on a loan is based on the cash proceeds from the sale or value
of property, income attributable to such provision would be treated as gain from
the sale of the secured property, which generally should qualify for purposes of
the 75% and 95% gross income tests.

         We may employ, to the extent consistent with the REIT provisions of the
Code, forms of securitization of our assets under which a "sale" of an interest
in a mortgage loan occurs, and a resulting gain or loss is recorded on our
balance sheet for accounting purposes at the time of sale. In a "sale"
securitization, only the net retained interest in the securitized mortgage loans
would remain on our balance sheet. We may elect to conduct certain of our
securitization activities, including such sales, through one or more taxable
subsidiaries, or through qualified REIT subsidiaries, formed for such purpose.
To the extent consistent with the REIT provisions of the Code, such entities
could elect to be taxed as real estate mortgage investment conduits or financial
asset securitization investment trusts.

         Lease income we receive will qualify as "rents from real property" only
if the following conditions are met:

         -        the amount of lease income may not be based in whole or in
                  part on the income or profits of any person. "Rents from real
                  property" may, however, include lease income based on a fixed
                  percentage of receipts or sales;

         -        lease income received from a corporate tenant will not qualify
                  as "rents from real property" if the Company, or an actual or
                  constructive owner of 10% or more of the Company, actually or
                  constructively owns 10% or more of such corporate tenant;

         -        if lease income attributable to personal property leased in
                  connection with a lease of real property is greater than 15%
                  of the total lease income received under the lease, then the
                  portion of lease income attributable to personal property will
                  not qualify as "rents from real property"; and

         -        to qualify as "rents from real property," the Company
                  generally may not render services to corporate tenants of the
                  property, other than through an independent contractor from
                  whom the Company derives no revenue. The Company may, however,
                  provide services that are "usually or customarily rendered" in
                  connection with the rental of space for occupancy only and are
                  not otherwise considered "rendered to the occupant" of the
                  property. In addition, we may provide a DE MINIMIS amount of
                  non-customary services.


                                       17


                  Finally, we may provide certain non-customary services to
                  corporate tenants through a "taxable Company subsidiary,"
                  which is a taxable corporation wholly or partly owned by the
                  Company.

         If we fail to satisfy one or both of the 75% or 95% gross income tests
for any year, we may still qualify as a REIT if we are entitled to relief under
the Internal Revenue Code. Generally, we may be entitled to relief if:

         -        our failure to meet the gross income tests was due to
                  reasonable cause and not due to willful neglect;

         -        we attach a schedule of the sources of our income to our
                  federal income tax return; and

         -        any incorrect information on the schedule was not due to fraud
                  with the intent to evade tax.

         It is not possible to state whether in all circumstances we would be
entitled to rely on these relief provisions. If these relief provisions do not
apply to a particular set of circumstances, we would not qualify as a REIT. As
discussed above in "--Taxation of iStar Financial--General," even if these
relief provisions apply, and we retain our status as a REIT, a tax would be
imposed with respect to our income that does not meet the gross income tests. We
may not always be able to maintain compliance with the gross income tests for
REIT qualification despite periodically monitoring our income.

         FORECLOSURE PROPERTY

         Net income realized by us from foreclosure property would generally be
subject to tax at the maximum federal corporate tax rate (currently 35%).
Foreclosure property means real property and related personal property that (1)
is acquired by us through foreclosure following a default on a lease of such
property or a default on indebtedness owed to us that is secured by the property
and (2) for which we make an election to treat the property as foreclosure
property.

         PROHIBITED TRANSACTION INCOME

         Any gain realized by us on the sale of any property, other than
foreclosure property, held as inventory or otherwise held primarily for sale to
customers in the ordinary course of business will be prohibited transaction
income, and subject to a 100% penalty tax. Prohibited transaction income may
also adversely affect our ability to satisfy the gross income tests for
qualification as a REIT. Whether property is held as inventory or primarily for
sale to customers in the ordinary course of a trade or business depends on all
the facts and circumstances surrounding the particular transaction. While the
Treasury regulations provide standards which, if met, would not result in
prohibited transaction income, we may not be able to meet these standards in all
circumstances.

         HEDGING TRANSACTIONS

         We may enter into hedging transactions with respect to one or more of
our assets or liabilities. Our hedging transactions could take a variety of
forms, including interest rate swaps or cap agreements, options, futures
contracts, forward rate agreements, or similar financial instruments. To the
extent that we enter into hedging transactions to reduce our interest rate risk
on indebtedness incurred to acquire or carry real estate assets, any income, or
gain from the disposition of hedging transactions should be qualifying income
for purposes of the 95% gross income test, but not the 75% gross income test.


                                       18


         ASSET TESTS

         At the close of each quarter of each year, we also must satisfy four
tests relating to our assets. First, at least 75% of the value of our total
assets must be real estate assets, cash, cash items and government securities.
For purposes of this test, real estate assets include real estate mortgages,
real property, interests in other REITs and stock or debt instruments held for
one year or less that are purchased with the proceeds of a stock offering or a
long-term public debt offering. Second, not more than 25% of our total assets
may be represented by securities, other than those securities includable in the
75% asset class. Third, not more than 20% of the value of our total assets may
be represented by securities in one or more taxable REIT subsidiaries. Fourth,
of the investments included in the 25% asset class, the value of any one
issuer's securities that we hold may not exceed 5% of the value of our total
assets, and we may not own more than 10% of the total vote or value of the
outstanding securities of any one issuer.

         We expect that any real property and temporary investments that we
acquire will generally be qualifying assets for purposes of the 75% asset test,
except to the extent that less than 95% of the assets of a real estate mortgage
investment conduit in which we own an interest consists of "real estate assets."
Mortgage loans, including distressed mortgage loans, mezzanine loans, bridge
loans, and construction loans also will generally be qualifying assets for
purposes of the 75% asset test to the extent that the principal balance of each
mortgage loan does not exceed the value of the associated real property.

         After meeting the asset tests at the close of any quarter, we will not
lose our status as a REIT if we fail to satisfy the asset tests at the end of a
later quarter solely by reason of changes in asset values. In addition, if we
fail to satisfy the asset tests because we acquire assets during a quarter, we
can cure this failure by disposing of sufficient nonqualifying assets within 30
days after the close of that quarter.

         We will monitor the status of the assets that we acquire for purposes
of the various asset tests and we will manage our portfolio in order to comply
with such tests.

         ANNUAL DISTRIBUTION REQUIREMENTS

         To qualify as a REIT, we are required to distribute dividends, other
than capital gain dividends, to our stockholders in an amount at least equal to
the sum of (1) 90% of our "REIT taxable income" and (2) 90% of our after tax net
income, if any, from foreclosure property, minus (3) the sum of certain items of
noncash income. In general,"REIT taxable income" means taxable ordinary income
without regard to the dividends paid deduction.

         We are required to distribute income in the taxable year in which it is
earned, or in the following taxable year before we timely file our tax return if
such dividend distributions are declared and paid on or before our first regular
dividend payment. Except as provided in "--Taxation of Taxable U.S.
Stockholders" below, these distributions are taxable to holders of common stock
in the year in which paid, even though these distributions relate to our prior
year for purposes of our 90% distribution requirement. To the extent that we do
not distribute all of our net capital gain or distribute at least 90%, but less
than 100% of our "REIT taxable income," we will be subject to tax at regular
corporate tax rates.

         From time to time we may not have sufficient cash or other liquid
assets to meet the above distribution requirements due to timing differences
between the actual receipt of cash and payment of expenses, and the inclusion of
income and deduction of expenses in arriving at our taxable income. If these
timing differences occur, in order to meet the REIT distribution requirements,
we may need to arrange for short-term, or possibly long-term, borrowings, or to
pay dividends in the form of taxable stock dividends.


                                       19


         Under certain circumstances, we may be able to rectify a failure to
meet a distribution requirement for a year by paying "deficiency dividends" to
our stockholders in a later year, which may be included in our deduction for
dividends paid for the earlier year. Thus, we may be able to avoid being subject
to tax on amounts distributed as deficiency dividends. We will be required,
however, to pay interest based upon the amount of any deduction claimed for
deficiency dividends. In addition, we will be subject to a 4% excise tax on the
excess of the required distribution over the amounts actually distributed if we
should fail to distribute each year at least the sum of 85% of our ordinary
income for the year, 90% of our capital gain income for the year, and any
undistributed taxable income from prior periods.

         RECORDKEEPING REQUIREMENTS

         We are required to maintain records and request on an annual basis
information from specified stockholders. This requirement is designed to
disclose the actual ownership of our outstanding stock.

         FAILURE TO QUALIFY

         If we fail to qualify for taxation as a REIT in any taxable year, and
the relief provisions of the Internal Revenue Code described above do not apply,
we will be subject to tax, including any applicable alternative minimum tax, and
possibly increased state and local taxes, on our taxable income at regular
corporate rates. Such taxation would reduce the cash available for distribution
by us to our stockholders. Distributions to our stockholders in any year in
which we fail to qualify as a REIT will not be deductible by us and we will not
be required to distribute any amounts to our stockholders. If we fail to qualify
as a REIT, distributions to our stockholders will be subject to tax as ordinary
income to the extent of our current and accumulated earnings and profits and,
subject to certain limitations of the Internal Revenue Code, corporate
stockholders may be eligible for the dividends received deduction. Unless
entitled to relief under specific statutory provisions, we would also be
disqualified from taxation as a REIT for the four taxable years following the
year during which we lost our qualification. It is not possible to state whether
in all circumstances we would be entitled to statutory relief.

TAXATION OF TAXABLE U.S. STOCKHOLDERS

         When we use the term "U.S. stockholders," we mean a holder of shares of
our stock who is, for United States federal income tax purposes:

         -        a citizen or resident of the United States;

         -        a corporation, partnership, or other entity created or
                  organized in or under the laws of the United States or of any
                  state thereof or in the District of Columbia, unless Treasury
                  regulations provide otherwise;

         -        an estate the income of which is subject to United States
                  federal income taxation regardless of its source; or

         -        a trust whose administration is subject to the primary
                  supervision of a United States court and which has one or more
                  United States persons who have the authority to control all
                  substantial decisions of the trust.

         DISTRIBUTIONS GENERALLY

         Distributions out of our current or accumulated earnings and profits,
other than capital gain dividends will be taxable to our U.S. stockholders as
ordinary income. Provided we qualify as a REIT,


                                       20


our dividends will not be eligible for the dividends received deduction
generally available to U.S. stockholders that are corporations.

         To the extent that we make distributions in excess of our current and
accumulated earnings and profits, these distributions will be treated as a
tax-free return of capital to each U.S. stockholder, and will reduce the
adjusted tax basis which each U.S. stockholder has in its shares of stock by the
amount of the distribution, but not below zero. Return of capital distributions
in excess of a U.S. stockholder's adjusted tax basis in its shares will be
taxable as capital gain, provided that the shares have been held as capital
assets, and will be taxable as long-term capital gain if the shares have been
held for more than one year. Dividends we declare in October, November, or
December of any year and pay to a stockholder of record on a specified date in
any of those months will be treated as both paid by us and received by the
stockholder on December 31 of that year, provided we pay the dividend in January
of the following year. Stockholders may not include in their own income tax
returns any of our net operating losses or capital losses.

         CAPITAL GAIN DISTRIBUTIONS

         Distributions designated as net capital gain dividends will be taxable
to our U.S. stockholders as capital gain income. Such capital gain income will
be taxable to non-corporate U.S. stockholders at a 20% or 25% rate based on the
characteristics of the asset we sold that produced the gain. U.S. stockholders
that are corporations may be required to treat up to 20% of certain capital gain
dividends as ordinary income.

         RETENTION OF NET CAPITAL GAINS

         We may elect to retain, rather than distribute as a capital gain
dividend, our net capital gains. If we make this election, we would pay tax on
such retained capital gains. In such a case, our stockholders would generally:

         -        include their proportionate share of our undistributed net
                  capital gains in their taxable income;

         -        receive a credit for their proportionate share of the tax paid
                  by us; and

         -        increase the adjusted basis of their stock by the difference
                  between the amount of their capital gain and their share of
                  the tax paid by us;

         PASSIVE ACTIVITY LOSSES AND INVESTMENT INTEREST LIMITATIONS

         Distributions we make and gain arising from the sale or exchange by a
U.S. stockholder of our shares will not be treated as passive activity income.
As a result, U.S. stockholders will not be able to apply any "passive losses"
against income or gain relating to our stock. Distributions we make, to the
extent they do not constitute a return of capital, generally will be treated as
investment income for purposes of computing the investment interest limitation.

         DISPOSITIONS OF STOCK

         If you are a U.S. stockholder and you sell or dispose of your shares of
stock, you will recognize gain or loss for federal income tax purposes in an
amount equal to the difference between the amount of cash and the fair market
value of any property you receive on the sale or other disposition and your
adjusted tax basis in the shares of stock. This gain or loss will be capital
gain or loss if you have held the stock as a capital asset, and will be
long-term capital gain or loss if you have held the stock for more than


                                       21


one year. In general, if you are a U.S. stockholder and you recognize loss upon
the sale or other disposition of stock that you have held for six months or
less, the loss you recognize will be treated as a long-term capital loss to the
extent you received distributions from us which were required to be treated as
long-term capital gains.

         BACKUP WITHHOLDING

         We report to our U.S. stockholders and the Internal Revenue Service the
amount of dividends paid during each calendar year, and the amount of any tax
withheld. Under the backup withholding rules, a stockholder may be subject to
backup withholding with respect to dividends paid unless the holder is a
corporation or comes within other exempt categories and, when required,
demonstrates this fact, or provides a taxpayer identification number or social
security number, certifies as to no loss of exemption from backup withholding,
and otherwise complies with applicable requirements of the backup withholding
rules. A U.S. stockholder that does not provide us with his correct taxpayer
identification number or social security number may also be subject to penalties
imposed by the Internal Revenue Service. Backup withholding is not an additional
tax. Any amount paid as backup withholding will be creditable against the
stockholder's income tax liability. In addition, we may be required to withhold
a portion of capital gain distributions to any stockholders who fail to certify
their non-foreign status.

TAXATION OF TAX-EXEMPT STOCKHOLDERS

         The Internal Revenue Service has ruled that amounts distributed as
dividends by a REIT do not constitute unrelated business taxable income when
received by a tax-exempt entity. Based on that ruling, provided that a
tax-exempt stockholder has not held its shares as "debt financed property"
within the meaning of the Internal Revenue Code and the shares are not otherwise
used in a unrelated trade or business, dividend income on our stock and income
from the sale of our stock should not be unrelated business taxable income to a
tax-exempt stockholder. Generally, debt financed property is property, the
acquisition or holding of which was financed through a borrowing by the
tax-exempt stockholder.

         For tax-exempt stockholders which are social clubs, voluntary employee
benefit associations, supplemental unemployment benefit trusts, and qualified
group legal services plans exempt from federal income taxation under Sections
501(c)(7), (c)(9), (c)(17) and (c)(20) of the Internal Revenue Code,
respectively, income from an investment in our shares will constitute unrelated
business taxable income unless the organization is able to claim properly a
deduction for amounts set aside or placed in reserve for certain purposes so as
to offset the income generated by its investment in our shares. These
prospective investors should consult their tax advisors concerning these "set
aside" and reserve requirements.

         Notwithstanding the above, however, a portion of the dividends paid by
a "pension-held REIT" may be treated as unrelated business taxable income as to
any pension trust which:

         -        is described in Section 401(a) of the Internal Revenue Code;

         -        is tax-exempt under Section 501(a) of the Internal Revenue
                  Code; and

         -        holds more than 10%, by value, of the interests in the REIT.

         Tax-exempt pension funds that are described in Section 401(a) of the
Internal Revenue Code are referred to below as "qualified trusts."

         A REIT is a "pension held REIT" if:


                                       22


         -        it would not have qualified as a REIT but for the fact that
                  Section 856(h)(3) of the Internal Revenue Code provides that
                  stock owned by a qualified trust is treated, for purposes of
                  the 5/50 rule, as owned by the beneficiaries of the trust,
                  rather than by the trust itself; and

         -        either at least one qualified trust holds more than 25%, by
                  value, of the interests in the REIT, or one or more qualified
                  trusts, each of which owns more than 10%, by value, of the
                  interests in the REIT, holds in the aggregate more than 50%,
                  by value, of the interests in the REIT.

         The percentage of any REIT dividend treated as unrelated business
taxable income is equal to the ratio of:

         -        the unrelated business taxable income earned by the REIT,
                  treating the REIT as if it were a qualified trust and
                  therefore subject to tax on unrelated business taxable income,
                  to

         -        the total gross income of the REIT.

         A DE MINIMIS exception applies where the percentage is less than 5% for
any year. As a result of the limitations on the transfer and ownership of stock
contained in our Charter, we do not expect to be classified as a "pension-held
REIT."

TAXATION OF NON-U.S. STOCKHOLDERS

         The rules governing federal income taxation of nonresident alien
individuals, foreign corporations, foreign partnerships, and other foreign
stockholders (collectively, "Non-U.S. stockholders") are complex and no attempt
will be made herein to provide more than a summary of such rules.

         PROSPECTIVE NON-U.S. STOCKHOLDERS SHOULD CONSULT THEIR TAX ADVISORS TO
DETERMINE THE IMPACT OF FOREIGN, FEDERAL, STATE, AND LOCAL INCOME TAX LAWS WITH
REGARD TO AN INVESTMENT IN OUR SECURITIES AND OF OUR ELECTION TO BE TAXED AS A
REAL ESTATE INVESTMENT TRUST INCLUDING ANY REPORTING REQUIREMENTS.

         Distributions to Non-U.S. stockholders that are not attributable to
gain from sales or exchanges by us of U.S. real property interests and are not
designated by us as capital gain dividends or retained capital gains will be
treated as dividends of ordinary income to the extent that they are made out of
our current or accumulated earnings and profits. Such distributions will
generally be subject to a withholding tax equal to 30% of the distribution
unless an applicable tax treaty reduces or eliminates that tax. However, if
income from an investment in our stock is treated as effectively connected with
the Non-U.S. stockholder's conduct of a U.S. trade or business, the Non-U.S.
stockholder generally will be subject to federal income tax at graduated rates,
in the same manner as U.S. stockholders are taxed with respect to such
distributions (and also may be subject to the 30% branch profits tax in the case
of a Non-U.S. stockholder that is a corporation). We expect to withhold U.S.
income tax at the rate of 30% on the gross amount of any distributions made to a
Non-U.S. stockholder unless (1) a lower treaty rate applies and any required
form, such as IRS Form W-8BEN, evidencing eligibility for that reduced rate is
filed by the Non-U.S. stockholder with us or (2) the Non-U.S. stockholder files
an IRS Form W-8ECI with us claiming that the distribution is effectively
connected income.

         Any portion of the dividends paid to Non-U.S. stockholders that is
treated as excess inclusion income from a real estate mortgage investment
conduit will not be eligible for exemption from the 30%


                                       23


withholding tax or a reduced treaty rate. In addition, if Treasury regulations
are issued allocating our excess inclusion income from non-real estate mortgage
investment conduits among our stockholders, some percentage of the our dividends
would not be eligible for exemption from the 30% withholding tax or a reduced
treaty withholding tax rate in the hands of Non-U.S. stockholders.

         Distributions in excess of our current and accumulated earnings and
profits will not be taxable to a stockholder to the extent that such
distributions do not exceed the adjusted basis of the stockholder's stock, but
rather will reduce the adjusted basis of such shares. To the extent that
distributions in excess of current and accumulated earnings and profits exceed
the adjusted basis of a Non-U.S. stockholder's stock, such distributions will
give rise to tax liability if the Non-U.S. stockholder would otherwise be
subject to tax on any gain from the sale or disposition of its stock, as
described below. Because it generally cannot be determined at the time a
distribution is made whether or not such distribution will be in excess of
current and accumulated earnings and profits, the entire amount of any
distribution normally will be subject to withholding at the same rate as a
dividend. However, amounts so withheld are refundable to the extent it is
subsequently determined that such distribution was, in fact, in excess of our
current and accumulated earnings and profits. We are also required to withhold
10% of any distribution in excess of our current and accumulated earnings and
profits. Consequently, although we intend to withhold at a rate of 30% on the
entire amount of any distribution, to the extent that we do not do so, any
portion of a distribution not subject to withholding at a rate of 30% will be
subject to withholding at a rate of 10%.

         For any year in which we qualify as a REIT, distributions that are
attributable to gain from sales or exchanges of a U.S. real property interest,
which includes certain interests in real property, but generally does not
include mortgage loans, will be taxed to a Non-U.S. stockholder under the
provisions of the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). Under FIRPTA, distributions attributable to gain from sales of U.S.
real property interests are taxed to a Non-U.S. stockholder as if such gain were
effectively connected with a U.S. business. Non-U.S. stockholders thus would be
taxed at the normal capital gain rates applicable to U.S. stockholders (subject
to applicable alternative minimum tax and a special alternative minimum tax in
the case of nonresident alien individuals). Distributions subject to FIRPTA also
may be subject to the 30% branch profits tax in the hands of a Non-U.S.
stockholder that is a corporation. We are required to withhold 35% of any
distribution that is designated by us as a U.S. real property capital gains
dividend. The amount withheld is creditable against the Non-U.S. stockholder's
FIRPTA tax liability.

         Gain recognized by a Non-U.S. stockholder upon a sale of our stock
generally will not be taxed under FIRPTA if we are a "domestically controlled
REIT," which is a REIT in which at all times during a specified testing period
less than 50% in value of the stock was held directly or indirectly by Non-U.S.
persons. Although we currently believe that we are a "domestically controlled
REIT," because our stock is publicly traded, no assurance can be given that we
are or will remain a "domestically controlled REIT." Even if we do not qualify
as a "domestically controlled REIT," a Non-U.S. stockholder that owns, actually
or constructively, 5% or less of our stock throughout a specified testing period
will not recognize taxable gain on the sale of his stock under FIRPTA if the
shares are traded on an established securities market.

         Gain not subject to FIRPTA will be taxable to a Non-U.S. stockholder if
(1) the Non-U.S. stockholder's investment in the stock is effectively connected
with a U.S. trade or business, in which case the Non-U.S. stockholder will be
subject to the same treatment as U.S. stockholders with respect to such gain, or
(2) the Non-U.S. stockholder is a nonresident alien individual who was present
in the U.S. for 183 days or more during the taxable year and other conditions
are met, in which case the nonresident alien individual will be subject to a 30%
tax on the individual's capital gains. If the gain on the sale of the stock were
to be subject to taxation under FIRPTA, the Non-U.S. stockholder would be
subject to the same treatment as U.S. stockholders with respect to such gain
(subject to applicable alternative minimum


                                       24


tax, a special alternative minimum tax in the case of nonresident alien
individuals, and the possible application of the 30% branch profits tax in the
case of Non-U.S. corporations).

STATE, LOCAL AND FOREIGN TAXATION

         We may be required to pay state, local and foreign taxes in various
state, local and foreign jurisdictions, including those in which we transact
business or make investments, and our stockholders may be required to pay state,
local and foreign taxes in various state, local and foreign jurisdictions,
including those in which they reside. Our state, local and foreign tax treatment
may not conform to the federal income tax consequences summarized above. In
addition, your state, local and foreign tax treatment may not conform to the
federal income tax consequences summarized above. Consequently, you should
consult your tax advisor regarding the effect of state, local and foreign tax
laws on an investment in our securities.

POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS

         The rules dealing with federal income taxation are constantly under
review by persons involved in the legislative process and by the Internal
Revenue Service and the U.S. Treasury Department. Changes to the tax law, which
may have retroactive application, could adversely affect us and our investors.
It cannot be predicted whether, when, in what forms, or with what effective
dates, the tax law applicable to us or our investors will be changed.

                                  LEGAL MATTERS

         Ballard Spahr Andrews & Ingersoll, LLP will pass on the validity of the
shares and certain legal matters relating to Maryland law. If the validity of
any securities is also passed upon by counsel for the underwriters of an
offering of those securities, that counsel will be named in the prospectus
supplement relating to that offering. Clifford Chance Rogers & Wells LLP, 200
Park Avenue, New York, New York, 10166, will pass upon certain tax matters.

                                     EXPERTS

         The financial statements incorporated in this Registration Statement by
reference to the Annual Report on Form 10-K for the year ended December 31, 2000
have been so incorporated in reliance on the report of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.


                                       25


                                     PART II

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

         The following table sets forth the estimated expenses in connection
with the distribution by the Participating Securityholders of the shares
registered hereby, all of which the Company will pay:


                                                                     
SEC registration fee..............................................      $24,882
Legal fees and expenses(1)........................................       35,000
Accounting fees and expenses(1)...................................        8,000
Miscellaneous(1)..................................................        1,025
                                                                        -------
 Total ...........................................................      $68,907
                                                                        =======


----------
(1) Estimated


ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.

         As permitted by the General Corporation Law of the State of Maryland
("MGCL"), our Amended and Restated Charter ("Charter") provides that an officer,
director, employee or agent of our company is entitled to be indemnified for the
expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him by reason of any action, suit or proceeding brought
against him by virtue of his acting as such officer, director, employee or
agent, provided he acted in good faith or in a manner he reasonably believed to
be in or not opposed to the best interests of our company and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful, except that in any action or suit by or in the right of
our company that person shall be indemnified only for the expenses actually and
reasonably incurred by him and, if that person shall have been adjudged to be
liable for negligence or misconduct, he shall not be indemnified unless and only
to the extent that a court of appropriate jurisdiction shall determine that such
indemnification is fair and reasonable.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

         (a)      Exhibits:

  EXHIBITS     DESCRIPTION

      4        Investor Rights Agreement dated March 17, 2000, among Starwood
               Financial Inc., H. Cabot Lodge, III, R. Michael Dorsch, III,
               Barclay G. Jones, III, D.C. Capital-Acre, LLC, Ann E. Carmel,
               David E. Gibbons, Kenneth G. Beitz, and Tinicum Enterprises, G.P.

      5        Opinion of Ballard Spahr Andrews & Ingersoll, LLP as to legality.

      8        Opinion of Clifford Chance Rogers & Wells LLP as to tax matters.

    23.1       Consent of Ballard Spahr Andrews & Ingersoll, LLP (included in
               Exhibit 5).

    23.2       Consent of Clifford Chance Rogers & Wells LLP (included in
               Exhibit 8).

    23.3       Consent of PricewaterhouseCoopers LLP.

     24        Powers of Attorney (included on the signature page of the
               Registration Statement).


                                      II-1


ITEM 17. UNDERTAKINGS.

         (1)      The undersigned registrant hereby undertakes:

                  (a)      To file, during any period in which offers or sales
                           are being made, a post-effective amendment to this
                           registration statement: (i) To include any prospectus
                           required by Section 10(a)(3) of the Securities Act of
                           1933; (ii) To reflect in the prospectus any facts or
                           events arising after the effective date of the
                           registration statement (or the most recent
                           post-effective amendment thereof) which, individually
                           or in the aggregate, represent a fundamental change
                           in the information set forth in the registration
                           statement. Notwithstanding the foregoing, any
                           increase or decrease in volume of shares offered (if
                           the total dollar value of shares offered would not
                           exceed that which was registered) and any deviation
                           from the low or high end of the estimated maximum
                           offering range may be reflected in the form of
                           prospectus filed with the SEC pursuant to Rule 424(b)
                           if, in the aggregate, the changes in volume and price
                           represent no more than a 20% change in the maximum
                           aggregate offering price set forth in the
                           "Calculation of Registration Fee" table in the
                           effective registration statement; and (iii) To
                           include any material information with respect to the
                           plan of distribution not previously disclosed in the
                           registration statement or any material change to such
                           information in the registration statement; provided,
                           however, that the undertakings set forth in
                           paragraphs (1)(i) and (1)(ii) do not apply if the
                           registration statement is on Form S-3 or Form S-8,
                           and the information required to be included in a
                           post-effective amendment by those paragraphs is
                           contained in periodic reports filed with or furnished
                           to the SEC by the registrant pursuant to Section 13
                           or Section 15(d) of the Shares Exchange Act of 1934
                           that are incorporated by reference in the
                           registration statement.

                  (b)      That, for the purpose of determining any liability
                           under the Securities Act of 1933, each such
                           post-effective amendment shall be deemed to be a new
                           registration statement relating to the shares offered
                           therein, and the offering of such shares at that time
                           shall be deemed to be the initial bona fide offering
                           thereof.

                  (c)      To remove from registration by means of a
                           post-effective amendment any of the shares being
                           registered which remain unsold at the termination of
                           the offering.

                  (d)      The undersigned registrant hereby further undertakes
                           that, for purposes of determining any liability under
                           the Securities Act of 1933, each filing of the
                           registrant's annual reports pursuant to Section 13(a)
                           or Section 15(d) of the Exchange Act of 1934 (and,
                           where applicable, each filing of an employee benefit
                           plan's annual report pursuant to Section 15(d) of the
                           Securities Exchange Act of 1934) that is incorporated
                           by reference in the registration statement will be
                           deemed to be a new registration statement relating to
                           the shares offered therein, and the offering of such
                           shares at that time shall be deemed to be the initial
                           bona fide offering thereof.

         (2)      The undersigned registrant further undertakes that:


                                      II-2


                  (a)      For purposes of determining any liability under the
                           Securities Act of 1933, the information omitted from
                           the form of prospectus filed as part of this
                           registration statement in reliance upon Rule 430A and
                           contained in a form of prospectus filed by the
                           registrants pursuant to Rule 424(b)(1) or (4) or
                           497(h) under the Shares Act shall be deemed to be
                           part of this registration statement as of the time it
                           was declared effective.

                  (b)      For the purpose of determining any liability under
                           the Securities Act of 1933, each post-effective
                           amendment that contains a form of prospectus shall be
                           deemed to be a new registration statement relating to
                           the shares offered therein, and the offering of such
                           shares at that time shall be deemed to be the initial
                           bona fide offering thereof.

         The undersigned registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act of 1939 in accordance
with the rules and regulations prescribed by the Commission under Section
305(b)(2) of the Trust Indenture Act of 1939.

         Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of iStar
Financial pursuant to the foregoing provisions, or otherwise, iStar Financial
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by iStar Financial of expenses incurred or
paid by a director, officer or controlling person of iStar Financial in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, iStar Financial will, unless in the opinion of counsel for iStar
Financial the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.


                                      II-3


                                   SIGNATURES

         Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the city of New York, State of New York, on November 16, 2001.

                                          iSTAR FINANCIAL INC.


                                          By:  /s/ Jay Sugarman
                                              ----------------------------------
                                              Name:  Jay Sugarman
                                              Title: Chairman of the Board and
                                                     Chief Executive Officer


                                      II-4


                                POWER OF ATTORNEY

         KNOW THAT ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below hereby constitutes and appoints Jay Sugarman and Spencer
Haber (each with full power to act alone), his or her true and lawful
attorney-in-fact and agent with full power of substitution, in the name and on
behalf of the undersigned, to do any and all acts and things and to execute any
and all instruments which said attorney and agent, may deem necessary or
advisable to enable iStar Financial Inc. (the "Registrant") to comply with the
Securities Act of 1933, and with the Securities Exchange Act of 1934, and any
rules, regulations and requirements of the Securities and Exchange Commission in
respect thereof in connection with this Registration Statement and any and all
amendments thereto or reports that the Registrant is required to file pursuant
to the requirements of federal or state shares laws or any rules and regulations
thereunder. The authority granted under this Power of Attorney shall include,
but not be limited to, the power and authority to sign the name of the
undersigned in the capacity or capacities set forth below to a Registration
Statement on Form S-3 to be filed with the Securities and Exchange Commission,
to any and all amendments (including post-effective amendments) to that
Registration Statement in respect of the same, and to any and all instruments
filed as a part of or in connection with that Registration Statement; and each
of the undersigned hereby ratifies and confirms all that the attorney-in-fact
and agent, shall lawfully do or cause to be done by virtue hereof.

         Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.

             NAME                          TITLE                     DATE
             ----                          -----                     ----

                                 Chairman of the Board and
 /s/ Jay Sugarman                Chief Executive Officer       November 15, 2001
--------------------------------
         Jay Sugarman

                                 President, Chief Financial
 /s/ Spencer B. Haber            Officer and Director          November 15, 2001
--------------------------------
       Spencer B. Haber

 /s/ Willis Andersen, Jr.        Director                      November 15, 2001
--------------------------------
     Willis Andersen, Jr.

 /s/ Jeffrey G. Dishner          Director                      November 15, 2001
--------------------------------
      Jeffrey G. Dishner

 /s/ Andrew L. Farkas            Director                      November 15, 2001
--------------------------------
       Andrew L. Farkas

 /s/ Madison F. Grose            Director                      November 15, 2001
--------------------------------
       Madison F. Grose

 /s/ Robert W. Holman, Jr.       Director                      November 15, 2001
--------------------------------
     Robert W. Holman, Jr.



                                      II-5


 /s/ Merrick R. Kleeman          Director                      November 15, 2001
--------------------------------
      Merrick R. Kleeman

 /s/ H. Cabot Lodge              Executive Vice President--    November 15, 2001
-------------------------------- Investments and Director
        H. Cabot Lodge

 /s/ William M. Matthes          Director                      November 15, 2001
--------------------------------
      William M. Matthes

 /s/ John G. McDonald            Director                      November 15, 2001
--------------------------------
       John G. McDonald

 /s/ Michael G. Medzigian        Director                      November 15, 2001
--------------------------------
     Michael G. Medzigian

 /s/ Stephen B. Oresman          Director                      November 15, 2001
--------------------------------
      Stephen B. Oresman

 /s/ George R. Puskar            Director                      November 15, 2001
--------------------------------
       George R. Puskar

 /s/ Barry S. Sternlicht         Director                      November 15, 2001
--------------------------------
      Barry S. Sternlicht


                                      II-6