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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2003

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 1-11918

TRINET CORPORATE REALTY TRUST, INC.
(Exact name of registrant as specified in its charter)

Maryland (State or other jurisdiction of incorporation or organization)		94-3175659 (I.R.S. Employer Identification Number)
1114 Avenue of the Americas, 27^th Floor New York, NY (Address of principal executive offices)		10036 (Zip code)

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

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirement for the past 90 days. Yes /x/ No / /

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12-b-2). Yes /x/ No / /

As of August 8, 2003, there were 100 shares of common stock outstanding.

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL
INSTRUCTIONS H (1) (a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING
THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.

TriNet Corporate Realty Trust, Inc.
(A wholly-owned subsidiary of iStar Financial Inc.)

Index to Form 10-Q

		Page
PART I.	Consolidated Financial Information	3
Item 1.	Financial Statements:
	Consolidated Balance Sheets at June 30, 2003 and December 31, 2002	3
	Consolidated Statements of Operations—For the three and six months ended June 30, 2003 and 2002	4
	Consolidated Statement of Changes in Shareholder's Equity—For the six months ended June 30, 2003	5
	Consolidated Statements of Cash Flows—For the three and six months ended June 30, 2003 and 2002	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	20
Item 4.	Controls and Procedures	23
PART II.	Other Information	24
Item 1.	Legal Proceedings	24
Item 2.	Changes in Securities and Use of Proceeds	24
Item 3.	Defaults Upon Senior Securities	24
Item 4.	Submission of Matters to a Vote of Security Holders	24
Item 5.	Other Information	24
Item 6.	Exhibits and Reports on Form 8-K	24
SIGNATURES		25

PART I. CONSOLIDATED FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TriNet Corporate Realty Trust, Inc.

(A wholly-owned subsidiary of iStar Financial Inc.)

Consolidated Balance Sheets

(In thousands, except share and per share data)

(unaudited)

		As of June 30, 2003			As of December 31, 2002
ASSETS
Loans and other lending investments, net		$	—		$	1,900
Corporate tenant lease assets, net			781,392			914,317
Investments in and advances to joint ventures and unconsolidated subsidiaries			24,356			24,865
Assets held for sale			—			28,501
Cash and cash equivalents			7,933			12,219
Accrued interest and operating lease income receivable			1,904			5,495
Deferred operating lease income receivable			15,434			19,845
Deferred expenses and other assets			34,089			26,421

	Total assets	$	865,108		$	1,033,563

LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
Accounts payable, accrued expenses and other liabilities		$	37,518		$	54,806
Debt obligations			415,509			543,470

	Total liabilities		453,027			598,276

Commitments and contingencies			—			—
Minority interest in consolidated entities			2,496			2,496
Shareholder's equity:
Common stock, $0.01 par value, 100 shares authorized: 100 shares issued and outstanding at June 30, 2003 and December 31, 2002, respectively			—			—
Additional paid-in capital			453,940			479,859
Retained earnings			—			—
Accumulated other comprehensive income (losses) (See Note 8)			(4,059	)		(6,772	)
Common stock of iStar Financial (parent) held in treasury (at cost)			(40,296	)		(40,296	)

	Total shareholder's equity		409,585			432,791

	Total liabilities and shareholder's equity	$	865,108		$	1,033,563

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

TriNet Corporate Realty Trust, Inc.

(A wholly-owned subsidiary of iStar Financial Inc.)

Consolidated Statements of Operations

(In thousands)

(unaudited)

			For the Three Months Ended June 30,						For the Six Months Ended June 30,
			2003			2002*			2003			2002*
Revenue:
	Interest income		$	156		$	972		$	405		$	3,690
	Operating lease income			24,173			21,782			48,619			44,341
	Other income			775			150			1,070			1,300

		Total revenue		25,104			22,904			50,094			49,331

Costs and expenses:
	Interest expense			7,366			9,368			16,727			19,172
	Operating costs—corporate tenant lease assets			3,538			2,555			6,943			5,241
	Depreciation and amortization			4,555			3,708			9,087			7,363
	General and administrative			1,079			1,521			1,999			3,794

		Total costs and expenses		16,538			17,152			34,756			35,570

Net income before equity in earnings from joint ventures and unconsolidated subsidiaries, minority interest and other items				8,566			5,752			15,338			13,761
Equity in earnings from joint ventures and unconsolidated subsidiaries				1,042			1,395			2,019			3,243
Minority interest in consolidated entities				(40	)		(41	)		(79	)		(81	)

Net income from continuing operations				9,568			7,106			17,278			16,923
(Loss) income from discontinued operations				(3	)		8,652			3,318			19,257
Gain from discontinued operations				—			595			264			595

Net income			$	9,565		$	16,353		$	20,860		$	36,775

*: Reclassified to conform to 2003 presentation.

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

TriNet Corporate Realty Trust, Inc.

(A wholly-owned subsidiary of iStar Financial Inc.)

Consolidated Statement of Changes in Shareholder's Equity

(In thousands)

(unaudited)

	Additional Paid-In Capital			Retained Earnings (Deficit)			Accumulated Other Comprehensive Income (Losses)			Treasury Stock			Total
Balance at December 31, 2002	$	479,859		$	—		$	(6,772	)	$	(40,296	)	$	432,791
Non-cash distribution of net assets to iStar Financial		(149,222	)		—			—			—			(149,222	)
Debt obligation assumed by iStar Financial		128,135			—			—			—			128,135
Dividends paid to iStar Financial		(4,832	)		(22,368	)		—			—			(27,200	)
Dividends received on iStar Financial shares held in treasury		—			1,508			—						1,508
Net income for the period		—			20,860			—			—			20,860
Change in accumulated other comprehensive income (losses)		—			—			2,713			—			2,713

Balance at June 30, 2003	$	453,940		$	—		$	(4,059	)	$	(40,296	)	$	409,585

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

TriNet Corporate Realty Trust, Inc.

(A wholly-owned subsidiary of iStar Financial Inc.)

Consolidated Statements of Cash Flows

(In thousands)

(unaudited)

			For the Three Months Ended June 30,						For the Six Months Ended June 30,
			2003			2002*			2003			2002*
Cash flows from operating activities:
Net income			$	9,565		$	16,353		$	20,860		$	36,775
Adjustments to reconcile net income to cash flows provided by operating activities:
	Minority interest in consolidated entities			40			41			79			81
	Depreciation and amortization			5,198			5,185			10,962			10,369
	Depreciation and amortization from discontinued operations			—			1,828			474			4,212
	Amortization of discounts/premiums			—			(281	)		—			(1,057	)
	Equity in earnings from joint ventures and unconsolidated subsidiaries			(1,042	)		(1,395	)		(2,019	)		(3,243	)
	Distributions from operations of joint ventures			554			1,005			2,406			4,384
	Deferred operating lease income receivable			(423	)		(2,390	)		(1,320	)		(5,161	)
	Gain from discontinued operations			—			(595	)		(264	)		(595	)
	Changes in assets and liabilities:
		Decrease (increase) in accrued interest and operating lease income receivable		910			(647	)		2,823			(2,359	)
		(Increase) decrease in deferred expenses and other assets		(429	)		2,009			(8,304	)		(8,300	)
		(Decrease) increase in accounts payable, accrued expenses and other liabilities		(850	)		5,905			(5,920	)		(1,614	)

		Cash flows provided by operating activities		13,523			27,018			19,777			33,492

Cash flows from investing activities:
	Net investment originations			(1,007	)		—			(1,007	)		—
	Net proceeds from sale of corporate tenant lease assets			—			3,702			3,965			3,702
	Repayments of and principal collections on loans and other lending investments			2,000			—			2,000			—
	Investments in and advances to unconsolidated joint ventures			—			—			—			(127	)
	Capital improvements for build-to-suit projects			—			—			—			(326	)
	Capital improvement projects on corporate tenant lease assets			(409	)		(121	)		(476	)		(1,088	)
	Other capital expenditures on corporate tenant lease assets			(1,145	)		(1,075	)		(1,910	)		(1,944	)

		Cash flows (used in) provided by investing activities		(561	)		2,506			2,572			217

Cash flows from financing activities:
	Repayments under term loans			(436	)		(202	)		(864	)		(431	)
	Decrease (increase) in restricted cash held in connection with debt obligations			—			11			—			(115	)
	Distributions to minority interest in consolidated entities			(39	)		(111	)		(79	)		(151	)
	Dividends paid to iStar Financial			(15,000	)		(23,500	)		(27,200	)		(31,052	)
	Dividends received on iStar Financial shares held in treasury			1,508			1,433			1,508			1,433

	Cash flows used in financing activities			(13,967	)		(22,369	)		(26,635	)		(30,316	)

(Decrease) increase in cash and cash equivalents				(1,005	)		7,155			(4,286	)		3,393
Cash and cash equivalents at beginning of period				8,938			5,110			12,219			8,872

Cash and cash equivalents at end of period			$	7,933		$	12,265		$	7,933		$	12,265

Supplemental disclosure of cash flow information:
	Cash paid during the period for interest, net of capitalized interest		$	5,815		$	5,652		$	17,703		$	17,753

*: Reclassified to conform to 2003 presentation.

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

TriNet Corporate Realty Trust, Inc.

(A wholly-owned subsidiary of iStar Financial Inc.)

Notes to Consolidated Financial Statements

Note 1—Business and Organization

Business—TriNet Corporate Realty Trust, Inc., a Maryland Corporation (the "Company"), is a wholly-owned subsidiary of iStar Financial Inc., a Maryland Corporation ("iStar Financial"). iStar Financial and its subsidiaries provide custom-tailored financing to high-end private and corporate owners of real estate nationwide, including senior and junior mortgage debt, senior, mezzanine and subordinated corporate capital, and corporate net lease financing. The Company typically provides capital to corporations, as well as borrowers, who control facilities leased to single creditworthy tenants. The Company's net leased assets are generally mission-critical headquarters or distribution facilities that are subject to long-term leases with rated corporate credit tenants, and which provide for all expenses at the property to be paid by the corporate tenant on a triple net lease basis. Corporate tenant lease transactions have terms generally ranging from ten to 20 years and typically range in size from $20 million to $150 million. As of June 30, 2003, the Company's portfolio consisted of 82 facilities principally subject to net leases to approximately 109 customers, comprising 8.6 million square feet in 18 states. Of the 82 total facilities, there are nine facilities held in two unconsolidated joint ventures.

Organization—The Company became a wholly-owned subsidiary of iStar Financial through a merger on November 4, 1999. As a wholly-owned subsidiary of iStar Financial, a real estate investment trust ("REIT"), the Company operates as a qualified real estate investment trust subsidiary ("QRS") under the Internal Revenue Code of 1986, as amended (the "Code").

Note 2—Basis of Presentation

The accompanying unaudited Consolidated Financial Statements have been prepared in conformity with the instructions to Form 10-Q and Article 10, Rule 10-01 of Regulation S-X for interim financial statements. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles in the United States of America ("GAAP") for complete financial statements. The Consolidated Financial Statements include the accounts of the Company, its wholly-owned subsidiary corporations and partnerships, and its majority-owned and controlled partnership.

Certain other investments in partnerships or joint ventures which the Company does not control are also accounted for under the equity method (see Note 6). All significant intercompany balances and transactions have been eliminated in consolidation.

In the opinion of management, the accompanying Consolidated Financial Statements contain all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the Company's consolidated financial position at June 30, 2003 and December 31, 2002 and the results of its operations, changes in shareholder's equity and its cash flows for the three and six months ended June 30, 2003 and 2002, respectively. Such operating results are not necessarily indicative of the results that may be expected for any other interim periods or the entire year.

Note 3—Summary of Significant Accounting Policies

Loans and other lending investments, net—As described in Note 4, "Loans and Other Lending Investments," includes corporate/partnership loans. Management considers its investments in this category to be either held-to-maturity or available-for-sale. Items classified as held-to-maturity are reflected at amortized historical cost. Items classified as available-for-sale are reported at fair value, with unrealized

gains and losses included in "Accumulated other comprehensive income (losses)" on the Company's Consolidated Balance Sheets, and are not included in the Company's net income.

Corporate tenant lease assets and depreciation—Corporate tenant lease assets are generally recorded at cost less accumulated depreciation. Certain improvements and replacements are capitalized when they extend the useful life, increase capacity or improve the efficiency of the asset. Repairs and maintenance items are expensed as incurred. Depreciation is computed using the straight-line method of cost recovery over estimated useful lives of 40.0 years for facilities, five years for furniture and equipment, the shorter of the remaining lease term or expected life for tenant improvements and the remaining life of the facility for facility improvements.

Corporate tenant lease assets to be disposed of are reported at the lower of their carrying amount or fair value less cost to sell. The Company also periodically reviews long-lived assets to be held and used for an impairment in value whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. In management's opinion, corporate tenant lease assets to be held and used are not carried at amounts in excess of their estimated recoverable amounts.

Capitalized interest—The Company capitalizes interest costs incurred during the construction period on qualified build-to-suit projects for corporate tenants, including investments in joint ventures accounted for under the equity method. No interest was capitalized during the three months ended June 30, 2003 and 2002, and approximately $0 and $70,000 was capitalized during the six months ended June 30, 2003 and 2002, respectively.

Cash and cash equivalents—Cash and cash equivalents include all cash held in banks or invested in money market funds with original maturity terms of less than 90 days.

Non-cash activity—On March 3, 2003, a remarketing agent purchased all of the outstanding 6.75% Dealer Remarketable Securities and agreed to amend the notes to substitute iStar Financial as the obligor. The remarketing agent subsequently exchanged these notes with iStar Financial for newly issued iStar Financial notes. The 6.75% Dealer Remarketable Securities were immediately retired after this exchange and the liability was effectively eliminated through a contribution from iStar Financial to the Company of approximately $128.1 million.

During the six months ended June 30, 2003, the Company disposed of 17 corporate tenant lease assets and their related liabilities by transferring them to iStar Financial at their respective carrying values.

The following is a summary of the effects of these transactions on the Company's consolidated financial position for the six months ended June 30, 2003:

Carrying value of:
	Assets	$	159,536
	Liabilities		(10,314	)

	Non-cash distribution of net assets to iStar Financial	$	149,222

Revenue recognition—The Company's revenue recognition policies are as follows:

Loans and other lending investments: The Company classifies loans and other lending investments as either held-to-maturity or available-for-sale. The Company reflects held-to-maturity investments at amortized cost less acquisition premiums or discounts, deferred loan fees and undisbursed loan funds. Unrealized gains and losses on available-for-sale investments are included in "Accumulated other comprehensive income (losses)" on the Company's Consolidated Balance Sheets and are not included in the Company's net income. On occasion, the Company may acquire loans at small premiums or discounts based on the credit characteristics of such loans. These premiums or discounts are recognized as yield adjustments over the lives of the related loans. If loans that were acquired at a premium or discount are prepaid, the Company immediately recognizes the unamortized premium or discount as a decrease or increase, respectively, in the prepayment gain or loss. Loan origination or exit fees, as well as direct loan origination costs, are also deferred and recognized over the lives of the related loans as a yield adjustment. Interest income is recognized using the effective interest method applied on a loan-by-loan basis.

Leasing investments: Operating lease revenue is recognized on the straight-line method of accounting from the later of the date of the origination of the lease or the date of acquisition of the facility subject to existing leases. Accordingly, contractual lease payment increases are recognized evenly over the term of the lease. The cumulative difference between lease revenue recognized under this method and contractual lease payment terms is recorded as "Deferred operating lease income receivable" on the Company's Consolidated Balance Sheets.

Accounting for derivative instruments and hedging activity—In accordance with Statement of Financial Accounting Standards No. 133 ("SFAS No. 133"), "Accounting for Derivative Instruments and Hedging Activities" as amended by Statement of Financial Accounting Standards No. 137 "Accounting for Derivative Instruments and Hedging Activity—Deferral of the Effective date of FASB 133," Statement of Financial Accounting Standards No. 138 "Accounting for Certain Derivative Instruments and Certain Hedging Activities—an Amendment of FASB Statement 133" and Statement of Financial Accounting Standards No. 149 "Amendment of Statement 133 on Derivative Instruments and Hedging Activities," the Company recognizes all derivatives as either assets or liabilities in the statement of financial position and measures those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as: (1) a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment; (2) a hedge of the exposure to variable cash flows of a forecasted transaction; or (3) in certain circumstances, a hedge of a foreign currency exposure.

Income taxes—The Company is taxed as a QRS under the Code. As a QRS, the Company is included in the consolidated tax return of iStar Financial. Accordingly, no provision has been made for federal income taxes in the accompanying Consolidated Financial Statements.

Interest rate risk management—The Company has entered into various interest rate protection agreements that, together with a swap agreement, fix the interest rate on a portion of the Company's LIBOR-based borrowings. The related cost of these agreements is amortized over their respective lives and such amortization is recorded as "Interest expense" on the Company's Consolidated Statements of Operations. The Company enters into interest rate risk management arrangements with financial

institutions meeting certain minimum financial criteria, and the related credit risk of non-performance by counterparties is not considered to be significant.

Credit risk concentration—The Company underwrites the credit of prospective customers and may require them to provide some form of additional credit support such as corporate guarantees, letters of credit and/or cash security deposits. Although the Company's assets are geographically diverse and its customers operate in a variety of industries, to the extent the Company has a significant concentration of operating lease revenue from any single customer, the inability of that customer to make its payments could have an adverse effect on the Company.

Reclassifications—Certain prior year amounts have been reclassified in the Consolidated Financial Statements and the related notes to conform to the 2003 presentation.

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

New accounting standards—In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150 ("SFAS No. 150"), "Accounting for Certain Financial Instruments With Characteristics of Both Liabilities and Equity." This standard requires issuers to classify as liabilities the following three types of freestanding financial instruments: (1) mandatorily redeemable financial instruments, (2) obligations to repurchase the issuer's equity shares by transferring assets; and (3) certain obligations to issue a variable number of shares. The Company will adopt the provisions of this statement, as required, on July 1, 2003, and it is not expected to have a significant financial impact on the Company's Consolidated Financial Statements.

In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities," an interpretation of ARB 51. FIN 46 provides guidance on identifying entities for which control is achieved through means other than through voting rights (a "variable interest entity" or "VIE"), and how to determine when and which business enterprise should consolidate a VIE. In addition, FIN 46 requires that both the primary beneficiary and all other enterprises with a significant variable interest in a VIE make additional disclosures. The transitional disclosure requirements took effect immediately and were required for all financial statements initially issued or modified after January 31, 2003. Immediate consolidation is required for VIEs entered into or modified after February 1, 2003 in which the Company is deemed the primary beneficiary. For VIEs in which the Company entered into prior to February 1, 2003, consolidation will be required by the Company effective with the Company's third quarter 2003 reporting. The adoption of the additional consolidation provisions of FIN 46 is not expected to have a material impact on the Company's financial statements.

In December 2002, the FASB issued Statement of Financial Accounting Standards No. 148 ("SFAS No. 148"), "Accounting for Stock-Based Compensation—Transition and Disclosure," an amendment of FASB Statement No. 123 ("SFAS No. 123"). This statement provides alternative transition methods for a voluntary change to the fair value basis of accounting for stock-based employee compensation. However, this Statement does not permit the use of the original SFAS No. 123 prospective method of transition for

changes to fair value based method made in fiscal years beginning after December 15, 2003. In addition, this Statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation, description of transition method utilized and the effect of the method used on reported results. The transition and annual disclosure provisions of SFAS No. 148 shall be applied for fiscal years ending after December 15, 2002. The new interim disclosure provisions are effective for the first interim period beginning after December 15, 2002. The Company adopted SFAS No. 148 with retroactive application to January 1, 2002 with no material effect on the Company's Consolidated Financial Statements.

In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others," an interpretation of FASB Statement of Financial Accounting Standards No. 5 ("SFAS No. 5"), "Accounting for Contingencies," Statement of Financial Accounting Standards No. 57, "Related Party Disclosures," Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments" and rescinds FASB Interpretation No. 34, "Disclosure of Indirect Guarantees of Indebtedness of Others, an Interpretation of SFAS No. 5." It requires that upon issuance of a guarantee, the guarantor must recognize a liability for the fair value of the obligation it assumes under that guarantee regardless if the Company receives separately identifiable consideration (i.e., a premium). The new disclosure requirements became effective December 31, 2002. The adoption of FIN 45 did not have a material impact on the Company's Consolidated Financial Statements, nor is it expected to have a material impact in the future.

In September 2002, the FASB issued Statement of Financial Accounting Standards No. 147 ("SFAS No. 147"), "Acquisitions of Certain Financial Institutions," an amendment of FASB Statements No. 72 and 144 and FASB Interpretation No. 9. SFAS No. 147 provides guidance on the accounting for the acquisitions of financial institutions, except those acquisitions between two or more mutual enterprises. SFAS No. 147 removes acquisitions of financial institutions from the scope of both FASB No. 72, "Accounting for Certain Acquisitions of Banking or Thrift Institutions," and FASB Interpretation No. 9, Applying APB Opinions No. 16 and 17, "When a Savings and Loan Association or a Similar Institution is Acquired in a Business Combination Accounted for by the Purchase Method," and requires that those transactions be accounted for in accordance with SFAS No. 141 and SFAS No. 142. SFAS No. 147 also amends SFAS No. 144 to include in its scope long-term, customer-relationship intangible assets of financial institutions such as depositor-relationship and borrower-relationship intangible assets and credit cardholder intangible assets. The Company adopted the provisions of this statement, as required, on October 1, 2002, and it did not have a significant financial impact on the Company's Consolidated Financial Statements.

In June 2002, the FASB issued Statement of Financial Accounting Standards No. 146 ("SFAS No. 146"), "Accounting for Exit or Disposal Activities," to address significant issues regarding the recognition, measurement, and reporting of costs that are associated with exit and disposal activities, including restructuring activities that are currently accounted for pursuant to the guidance that the Emerging Issues Task Force ("EITF") has set forth in EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." The scope of SFAS No. 146 also includes: (1) costs related to terminating a contract that is not a capital lease; and (2) termination benefits received by employees involuntarily

terminated under the terms of a one-time benefit arrangement that is not an on-going benefit arrangement or an individual deferred-compensation contract. The Company adopted the provisions of SFAS No. 146 on December 31, 2002, as required, and it did not have a material effect on the Company's Consolidated Financial Statements.

In April 2002, the FASB issued Statement of Financial Accounting Standards No. 145 ("SFAS No. 145"), "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." SFAS No. 145 rescinds both FASB Statements No. 4 ("SFAS No. 4"), "Reporting Gains and Losses from Extinguishment of Debt," and the amendment to SFAS No. 4, FASB Statement No. 64 ("SFAS No. 64"), "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements." Through this rescission, SFAS No. 145 eliminates the requirement (in both SFAS No. 4 and SFAS No. 64) that gains and losses from the extinguishment of debt be aggregated and, if material, classified as an extraordinary item, net of the related income tax effect. An entity is not prohibited from classifying such gains and losses as extraordinary items, so long as they meet the criteria in paragraph 20 of Accounting Principles Board Opinion No. 30 ("APB 30"), "Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions"; however, due to the nature of the Company's operations, such treatment may not be available to the Company. Any gains or losses on extinguishments of debt that were previously classified as extraordinary items in prior periods presented that do not meet the criteria in APB 30 for classification as an extraordinary item will be reclassified to income from continuing operations. The provisions of SFAS No. 145 are effective for financial statements issued for fiscal years beginning after May 15, 2002. The Company adopted the provisions of this statement, as required, on January 1, 2003 and it did not have a significant financial impact on the Company.

In October 2001, the FASB issued Statement of Financial Accounting Standards No. 144 ("SFAS No. 144"), "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 provides new guidance on the recognition of impairment losses on long-lived assets to be held and used or to be disposed of, and also broadens the definition of what constitutes a discontinued operation and how the results of a discontinued operation are to be measured and presented. SFAS No. 144 requires that current operations prior to the disposition of corporate tenant lease assets and prior period results of such operations be presented in discontinued operations in the Company's Consolidated Statements of Operations. The provisions of SFAS No. 144 are effective for financial statements issued for fiscal years beginning after December 15, 2001, and must be applied at the beginning of a fiscal year. The Company adopted the provisions of this statement on January 1, 2002, as required, and it did not have a significant financial impact on the Company.

In July 2001, the FASB issued Statement of Financial Accounting Standards No. 141 ("SFAS No. 141"), "Business Combinations" and Statement of Financial Accounting Standards No. 142 ("SFAS No. 142"), "Goodwill and Other Intangible Assets." SFAS No. 141 requires the purchase method of accounting to be used for all business combinations initiated after June 30, 2001. SFAS No. 141 also addresses the initial recognition and measurement of goodwill and other intangible assets acquired in business combinations and requires intangible assets to be recognized apart from goodwill if certain tests are met. SFAS No. 142 requires that goodwill not be amortized but instead be measured for impairment at least annually, or when events indicate that there may be an impairment. The Company adopted the

provisions of both statements for transactions initiated after June 30, 2001, as required, and the adoption did not have a significant impact on the Company.

In July 2001, the SEC released Staff Accounting Bulletin No. 102. ("SAB 102"), "Selected Loan Loss Allowance and Documentation Issues." SAB 102 summarizes certain of the SEC's views on the development, documentation and application of a systematic methodology for determining allowances for loan and lease losses. Adoption of SAB 102 by the Company did not have a significant impact on the Company.

In September 2000, the FASB issued Statement of Financial Accounting Standards No. 140 ("SFAS No. 140"), "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." This statement is applicable for transfers of assets and extinguishments of liabilities occurring after June 30, 2001. The Company adopted the provisions of this statement as required for all transactions entered into on or after April 1, 2001. The adoption of SFAS No. 140 did not have a significant impact on the Company.

Note 4—Loans and Other Lending Investments

On March 30, 2003, $2.0 million of convertible debt securities of a real estate company that trades on the Mexican Stock Exchange was transferred to the Company's loans and lending investments as a result of the consolidation of the TriNet Management Operating Company, Inc. ("TMOC") unconsolidated subsidiary (see Note 6). On June 30, 2003, the note was fully repaid.

On July 6, 2001, the Company financed a $75.0 million term preferred investment in a publicly-traded real estate company with a $50.0 million term loan bearing interest at LIBOR + 2.50%. The investment had a maturity of July 2006, including a one-year extension at the Company's option. The Company's investment carried an initial current yield of 10.50%, with annual increases of 0.50% in each of the next two years. In addition, the Company's investment was convertible into the customer's common stock at a strike price of $25.00 per share. During the second quarter of 2002, the asset was transferred to iStar Financial at its carrying value of $86.7 million.

Note 5—Corporate Tenant Lease Assets

The Company's investments in corporate tenant lease assets, at cost, were as follows (in thousands):

		June 30, 2003			December 31, 2002
Facilities and improvements		$	650,561		$	722,764
Land and land improvements			187,960			246,107
Less: accumulated depreciation			(57,129	)		(54,554	)

	Corporate tenant lease assets, net	$	781,392		$	914,317

The Company receives reimbursements from customers for certain facility operating expenses including common area costs, insurance and real estate taxes. Customer expense reimbursements for the three months ended June 30, 2003 and 2002 were approximately $5.1 million and $4.8 million, respectively, and $9.7 million and $8.8 million for the six months ended June 30, 2003 and 2002, respectively, and are

included as a reduction of "Operating costs—corporate tenant lease assets" on the Company's Consolidated Statements of Operations.

The Company is subject to expansion option agreements with one existing customer which could require the Company to fund and to construct up to 126,100 square feet of additional adjacent space on which the Company would receive additional operating lease income under the terms of the option agreements. In addition, upon exercise of such expansion option agreements, the corporate tenant would be required to simultaneously extend its existing lease terms for an additional six years.

During the second quarter of 2003, the Company disposed of 17 corporate tenant lease assets at their respective carrying value by transferring them to iStar Financial. No gain or loss resulted from these transfers. On January 7, 2003, the Company sold one corporate tenant lease asset for net proceeds of $4.0 million, and realized a gain of approximately $264,000.

On September 30, 2002, one of the Company's customers exercised an option to terminate its lease on 50.00% of the land leased from the Company. In connection with this termination, the Company realized $17.5 million in cash lease termination payments, offset by a $17.4 million impairment charge in connection with the termination, resulting in a net gain of approximately $123,000. In the fourth quarter of 2002, the customer completed a recapitalization transaction that significantly enhanced its credit. In connection with this recapitalization, the Company agreed to amend the customer's lease, effective October 1, 2002. In the lease amendment, the Company received $12.5 million in cash as prepaid lease payments and the customer agreed to fixed minimum increases on future lease payments. In exchange, the Company agreed to reduce the customer's lease obligations for a period not to exceed nine quarters. Following the reduction period, the customer is required to make additional lease payments over a 10-year period sufficient to reimburse the Company for a portion of the temporary reduction in lease payments. During the second quarter of 2003, this asset that was classified as "Asset held for sale" on the Company's Consolidated Balance Sheets was transferred to iStar Financial at its carrying value.

On May 30, 2002, the Company sold one corporate tenant lease asset for net proceeds of $3.7 million, and realized a gain of approximately $595,000. As of December 31, 2002, there were two corporate tenant lease assets with a combined book value of $28.5 million classified as "Assets held for sale" on the Company's Consolidated Balance Sheets.

The results of operations from corporate tenant lease assets sold and transferred in the current and prior periods are classified as "(Loss) income from discontinued operations," even though such income or loss was recognized by the Company prior to the asset sale. Gains on sale from corporate tenant lease assets are classified as "Gain from discontinued operations" on the Company's Consolidated Statements of Operations.

Note 6—Joint Ventures and Unconsolidated Subsidiaries

Income generated from the Company's joint venture investments and unconsolidated subsidiaries is included in "Equity in earnings from joint ventures and unconsolidated subsidiaries" on the Company's Consolidated Statements of Operations.

The Company's ownership percentages, its investments in and advances to unconsolidated joint ventures, the Company's pro rata share of its ventures' third-party, non-recourse debt as of June 30, 2003 and its respective income for the three months ended June 30, 2003 are presented below (in thousands):

						JV Income for the Three Months Ended June 30, 2003		Pro Rata Share of Third-Party Non-Recourse Debt(1)		Third-Party Debt
Unconsolidated Joint Ventures		Ownership %		Equity Investment		JV Income for the Three Months Ended June 30, 2003		Pro Rata Share of Third-Party Non-Recourse Debt(1)		Interest Rate	Scheduled Maturity Date
	Sunnyvale	44.70	%	$	11,340	$	545	$	10,728	LIBOR + 1.25%	November 2004(2)
	CTC I	50.00	%		13,016		497		59,845	7.66% – 7.87%	Various through 2011

	Total			$	24,356	$	1,042	$	70,573

Explanatory Notes:

(1): The Company reflects its pro rata share of third-party, non-recourse debt, rather than the total amount of the joint venture debt, because the third-party, non-recourse debt held by the joint ventures is not guaranteed by the Company nor does the Company have any additional commitments to fund such debt obligations.
(2): Maturity date reflects a one-year extension at the venture's option.

Investments in and advances to unconsolidated joint ventures: At June 30, 2003, the Company had investments in two joint ventures: (1) TriNet Sunnyvale Partners, L.P. ("Sunnyvale"), whose external partners are John D. O'Donnell, Trustee, John W. Hopkins, and Donald S. Grant, Trustee; and (2) Corporate Technology Centre Associates LLC ("CTC I"), whose external member is Corporate Technology Centre Partners LLC. These ventures were formed for the purpose of operating, acquiring and, in certain cases, developing corporate tenant lease facilities.

At June 30, 2003, the ventures comprised nine net leased facilities. The Company's combined investment in these joint ventures at June 30, 2003 was $24.4 million. The joint ventures' carrying value for the nine facilities owned at June 30, 2003 was $153.9 million. In aggregate, the joint ventures had total assets of $191.5 million and total liabilities of $151.5 million as of June 30, 2003, and net income of $1.9 million and $3.7 million for the three and six months ended June 30, 2003, respectively. The Company accounts for these investments under the equity method because the Company's joint venture partners have certain participating rights giving them shared control over the ventures.

On July 2, 2002, the Company paid approximately $27.9 million in cash to the former member of TriNet Milpitas Associates ("Milpitas") joint venture in exchange for its 50.00% ownership interest. Pursuant to the terms of the joint venture agreement, the former external member had the right to convert its interest into 984,476 shares of common stock of iStar Financial at any time during the period February 1, 2002 through January 31, 2003. On May 2, 2002, the former Milpitas external member exercised this right. Upon the external member's exercise of its conversion right, the Company had the option to acquire the partner's interest for cash, instead of shares, for a payment equal to the value of 984,476 shares of common stock of iStar Financial multiplied by the ten-day average closing stock price as of the transaction date. The Company made such election and, as of July 2, 2002, owns 100.00% of Milpitas, and therefore consolidates these assets for accounting purposes. The Company accounted for the acquisition of the external interest using the purchase method.

On April 1, 2002, the former Sierra Land Ventures ("Sierra") joint venture partner assigned its 50.00% ownership interest in Sierra to the Company. There was no cash or shares exchanged in this

transaction. As of April 1, 2002, the Company owns 100.00% of the corporate tenant lease asset previously held by Sierra and therefore consolidates this asset for accounting purposes.

Effective September 29, 2000, iStar Sunnyvale Partners, LP, which is wholly owned by Sunnyvale, entered into an interest rate cap agreement limiting the venture's exposure to interest rate movements on its $24.0 million LIBOR-based mortgage loan to an interest rate of 9.00% through November 9, 2003. Currently, the limited partners of Sunnyvale have the option to convert their partnership interest into cash; however, the Company may elect to deliver 297,728 shares of common stock of iStar Financial in lieu of cash.

Investments in and advances to unconsolidated subsidiaries: The Company had an investment in TMOC, an entity originally formed to make a $2.0 million investment in the convertible debt securities of a real estate company that trades on the Mexican Stock Exchange. Prior to March 29, 2003, the Company owned 95.00% of the outstanding voting and non-voting common stock (representing 1.00% voting power and 95.00% of the economic interest) in TMOC. The owners of the remaining TMOC stock were two executives of the Company. On March 29, 2003, the Company purchased the remaining 5.00% interest from the executives for approximately $2,000, an amount equal to the current carrying value, which was less than their original investment. Following this purchase, the Company owned 100.00% of TMOC and therefore consolidated the entity for accounting purposes. On June 30, 2003, the $2.0 million investment was fully repaid.

Note 7—Debt Obligations

As of June 30, 2003 and December 31, 2002, the Company has debt obligations under various arrangements with financial institutions as follows (in thousands):

		Carrying Value as of
		June 30, 2003			December 31, 2002			Stated Interest Rates(1)	Scheduled Maturity Date
Secured term loans:
	Secured by corporate tenant lease assets	$	193,000		$	193,000		LIBOR + 1.85%	July 2006(2)
	Secured by corporate tenant lease assets		86,416			87,309		6.00% – 11.38%	Various through 2011

	Total term loans		279,416			280,309
	Less: debt discount		(154	)		(236	)

Total secured term loans			279,262			280,073
Unsecured notes(3):
	6.75% Dealer Remarketable Securities(4)		—			125,000		6.75%	March 2013
	7.70% Notes		100,000			100,000		7.70%	July 2017
	7.95% Notes		50,000			50,000		7.95%	May 2006

	Total unsecured notes		150,000			275,000
	Less: debt discount(5)		(13,753	)		(11,603	)

	Total unsecured notes		136,247			263,397

Total debt obligations		$	415,509		$	543,470

Explanatory Notes:

(1): Substantially all variable-rate debt obligations are based on 30-day LIBOR and reprice monthly. The 30-day LIBOR rate on June 30, 2003 was 1.12% per annum.
(2): Maturity date reflects two one-year extensions at the Company's option.
(3): The notes are callable by the Company at any time for an amount equal to the total of principal outstanding, accrued interest and the applicable make-whole prepayment premium.
(4): On March 3, 2003, a remarketing agent purchased all of the outstanding 6.75% Dealer Remarketable Securities and agreed to amend the notes to substitute iStar Financial as the obligor. The remarketing agent subsequently exchanged these notes with iStar Financial for newly issued iStar Financial notes. The 6.75% Dealer Remarketable Securities were immediately retired after this exchange and the liability was effectively eliminated through a contribution from iStar Financial to the Company.
(5): As part of the accounting for the merger, these fixed-rate obligations were considered to have stated interest rates which were below the then-prevailing market rates at which the Company could issue new debt obligations and, accordingly, the Company ascribed a market discount to each obligation. Such discounts are amortized as an adjustment to interest expense using the effective interest method over the related term of the obligations. As adjusted, the effective annual interest rates on these obligations were 8.81%, 9.51% and 9.04% for the 6.75% Dealer Remarketable Securities, 7.70% Notes and 7.95% Notes, respectively.

On March 3, 2003, a remarketing agent purchased all of the outstanding 6.75% Dealer Remarketable Securities and agreed to amend the notes to substitute iStar Financial as the obligor. The remarketing agent subsequently exchanged these notes with iStar Financial for newly issued iStar Financial notes. The

6.75% Dealer Remarketable Securities were immediately retired after this exchange and the liability was effectively eliminated through a contribution from iStar Financial to the Company.

On July 2, 2002 the Company purchased the remaining interest in the Milpitas joint venture from the former Milpitas external member for $27.9 million. Upon purchase of the interest, the Milpitas venture became fully consolidated for accounting purposes and approximately $79.1 million of secured term debt is reflected on the Company's Consolidated Balance Sheets.

On July 6, 2001, the Company financed a $75.0 million structured finance asset with a $50.0 million term loan bearing interest at LIBOR + 2.50%. The loan had a maturity of July 2006, including a one-year extension at the Company's option. The Company's investment carried an initial current yield of 10.50%, with annual increases of 0.50% in each of the next two years. In addition, the Company's investment was convertible into the customer's common stock at a strike price of $25.00 per share. During the second quarter of 2002, this asset was transferred to iStar Financial along with the associated liability.

On June 14, 2001, the Company closed $193.0 million of term loan financing secured by 15 corporate tenant lease assets. The variable-rate loan bears interest at LIBOR + 1.85% (not to exceed 10.00% in aggregate) and has two one-year extensions at the Company's option. The Company used these proceeds to repay a $77.8 million secured term loan maturing in June 2001 and to pay down a portion of its revolving credit facilities.

The Company has entered into an interest rate swap agreement which, together with an existing LIBOR interest rate cap agreement struck at 7.75%, effectively fixes the interest rate on $75.0 million of the Company's LIBOR-based borrowings at 5.58% plus the applicable margin through December 1, 2004. The actual borrowing cost to the Company with respect to indebtedness covered by the protection agreements will depend upon the applicable margin over LIBOR for such indebtedness, which will be determined by the terms of the relevant debt instruments. The Company has also entered into a LIBOR interest rate cap struck at 7.75% in the notional amount of $35.0 million, which expires in December 2004.

As of June 30, 2003, future expected/scheduled maturities of outstanding long-term debt obligations are as follows (in thousands)(1):

2003 (remaining six months)	$	—
2004		—
2005		81,573
2006		243,000
2007		2,945
Thereafter		101,898

Total principal maturities		429,416
Net unamortized debt discounts		(13,907	)

Total debt obligations	$	415,509

Explanatory Note:

(1): Assumes exercise of extensions to the extent such extensions are at the Company's option.

Note 8—Comprehensive Income

In June 1997, the FASB issued Statement of Financial Accounting Standards No. 130 ("SFAS No. 130"), "Reporting Comprehensive Income" effective for fiscal years beginning after December 15, 1997. The statement changes the reporting of certain items currently reported as changes in the shareholder's equity section of the balance sheet and establishes standards for the reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. SFAS No. 130 requires that all components of comprehensive income shall be reported in the financial statements in the period in which they are recognized. Furthermore, a total amount for comprehensive income shall be displayed in the financial statements. Total comprehensive income was $11.8 million and $5.7 million for the three months ended June 30, 2003 and 2002, respectively, and $23.6 million and $30.5 million for the six months ended June 30, 2003 and 2002, respectively. The primary component of comprehensive income other than net income was the adoption and continued application of SFAS No. 133 to the Company's cash flow hedges and changes in the fair value of the Company's available-for-sale investments.

For the three and six months ended June 30, 2003, the change in the fair market value of the Company's unrealized gains (losses) on available-for-sale investments and cash flow hedges was an increase of $2.3 million and $2.7 million, respectively, and was recorded as an adjustment to other comprehensive income. The reconciliation to other comprehensive income is as follows (in thousands):

		For the Three Months Ended June 30,					For the Six Months Ended June 30,
		2003		2002			2003		2002
Net income		$	9,565	$	16,353		$	20,860	$	36,775
Other comprehensive income:
	Unrealized gains (losses) on available-for-sale investments		1,680		(9,379	)		1,680		(5,715	)
	Unrealized gains (losses) on cash flow hedges		575		(1,303	)		1,033		(574	)

Comprehensive income		$	11,820	$	5,671		$	23,573	$	30,486

Unrealized gains (losses) on available-for-sale investments and cash flow hedges are recorded as adjustments to shareholder's equity (through "Accumulated other comprehensive income (losses)" on the Company's Consolidated Balance Sheets), and are not included in net income unless realized.

As of June 30, 2003 and December 31, 2002, accumulated other comprehensive income (losses) reflected in the Company's shareholder's equity is comprised of the following (in thousands):

	As of June 30, 2003			As of December 31, 2002
Unrealized gains on available-for-sale investments	$	1,680		$	—
Unrealized losses on cash flow hedges		(5,739	)		(6,772	)

Accumulated other comprehensive income (losses)	$	(4,059	)	$	(6,772	)

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

As a wholly-owned subsidiary of iStar Financial, the Company specializes in providing investment capital to major corporations and real estate owners nationwide by structuring sale/leaseback transactions and acquiring corporate tenant lease assets subject to existing long-term leases to creditworthy customers occupying office and industrial facilities. The Company uses its corporate credit and real estate underwriting expertise to structure investments that it believes will generate attractive risk-adjusted returns. As of June 30, 2003, the Company's portfolio consisted of 82 facilities principally subject to net leases to approximately 109 customers, comprising 8.6 million square feet in 18 states. Of the 82 total facilities, there are nine facilities held in two joint venture partnerships.

Results of Operations

Three Months Ended June 30, 2003 Compared to the Three Months Ended June 30, 2002

Interest income—For the three months ended June 30, 2003, interest income decreased by $816,000 to $156,000 from $972,000 for the same period in 2002. The decrease is primarily due to the transfer of a $75.0 million lending investment to iStar Financial in the second quarter of 2002 (see Note 4 to the Company's Consolidated Financial Statements).

Operating lease income—Operating lease income increased by $2.4 million to $24.2 million for the three months ended June 30, 2003 from $21.8 million for the same period in 2002. Of this increase, $3.3 million was attributable to the consolidation of one of the Company's corporate tenant lease joint venture investments. This increase was partially offset by lower operating lease income on certain corporate tenant lease assets.

Other income—Other income generally consists of lease termination fees, project management fees, dividend income, unamortized loan discounts, financial advisory fees, earnest deposit forfeitures, credit enhancement fees, bankruptcy claims, and insurance proceeds. During the three months ended June 30, 2003, other income consisted of a lease termination fee of $650,000 and dividend income of $125,000.

During the three months ended June 30, 2002, other income consisted of dividend income of $150,000.

Interest expense—For the three months ended June 30, 2003, interest expense decreased by $2.0 million to $7.4 million from $9.4 million for the same period in 2002. This decrease in interest expense is primarily the result of the transfer of a $75.0 million lending investment (and the related indebtedness) in the second quarter of 2002 (see Note 4 to the Company's Consolidated Financial Statements) and the assumption of an unsecured debt obligation in the first quarter of 2003 by iStar Financial. The decrease was partially offset by increased interest expense related to the consolidation of one of the Company's corporate tenant lease joint venture investments.

Operating costs—corporate tenant lease assets—For the three months ended June 30, 2003, operating costs increased by approximately $983,000 from $2.6 million to $3.5 million for the same period in 2002. This increase is related to the consolidation of one of the Company's corporate tenant lease joint venture investments and higher operating costs on certain corporate tenant lease assets.

Depreciation and amortization—Depreciation and amortization increased by approximately $847,000 to $4.6 million for the three months ended June 30, 2003 from $3.7 million for the same period in 2002. This increase is primarily due to the consolidation of one of the Company's corporate tenant lease joint venture investments (see Note 6 to the Company's Consolidated Financial Statements).

General and administrative—For the three months ended June 30, 2003, general and administrative expenses decreased by approximately $442,000 to $1.1 million, compared to $1.5 million for the same period in 2002.

Equity in earnings from joint ventures and unconsolidated subsidiaries—For the three months ended June 30, 2003, equity in earnings from joint ventures and unconsolidated subsidiaries decreased by approximately $353,000 to $1.0 million from $1.4 million for the same period in 2002. This decrease is primarily due to the consolidation of one of the Company's corporate tenant lease joint venture investments.

(Loss) income from discontinued operations—For the three months ended June 30, 2003, operating loss incurred by the Company on corporate tenant lease assets sold (prior to their sale) and assets transferred to iStar Financial was approximately $(3,000). For the three months ended June 30, 2002, operating income earned by the Company on corporate tenant lease assets sold (prior to their sale) and assets transferred to iStar Financial was $8.7 million. The income or loss from these assets is classified as "discontinued operations," even though such income or loss was recognized by the Company prior to the asset dispositions or transfers.

Gain from discontinued operations—During the three months ended June 30, 2003, the Company did not dispose of any corporate tenant lease assets.

During the three months ended June 30, 2002, the Company disposed of one corporate tenant lease asset for net proceeds of $3.7 million and recognized a gain of approximately $595,000.

Six Months Ended June 30, 2003 Compared to the Six Months Ended June 30, 2002

Interest income—For the six months ended June 30, 2003, interest income decreased by $3.3 million to $405,000 from $3.7 million for the same period in 2002. The decrease is primarily due to the transfer of a $75.0 million lending investment to iStar Financial in the second quarter of 2002 (see Note 4 to the Company's Consolidated Financial Statements).

Operating lease income—Operating lease income increased by $4.3 million to $48.6 million for the six months ended June 30, 2003 from $44.3 million for the same period in 2002. Of this increase, $6.5 million was attributable to the consolidation of one of the Company's corporate tenant lease joint venture investments. This increase was partially offset by lower operating lease income on certain corporate tenant lease assets.

Other income—Other income generally consists of lease termination fees, project management fees, dividend income, unamortized loan discounts, financial advisory fees, earnest deposit forfeitures, credit enhancement fees, bankruptcy claims, and insurance proceeds. During the six months ended June 30, 2003, other income consisted of a lease termination fee of $650,000, dividend income of $238,000 and bankruptcy claims of $183,000.

During the six months ended June 30, 2002, other income consisted of financial advisory fees of $1.0 million and dividend income of $300,000.

Interest expense—For the six months ended June 30, 2003, interest expense decreased by $2.5 million to $16.7 million from $19.2 million for the same period in 2002. This decrease in interest expense is primarily the result of the transfer of a $75.0 million lending investment (and the related indebtedness) in the second quarter of 2002 (see Note 4 to the Company's Consolidated Financial Statements) and the assumption of an unsecured debt obligation in the first quarter of 2003 by iStar Financial. The decrease was partially offset by increased interest expense related to the consolidation of one of the Company's corporate tenant lease joint venture investments.

Operating costs—corporate tenant lease assets—For the six months ended June 30, 2003, operating costs increased by $1.7 million from $5.2 million to $6.9 million for the same period in 2002. This increase

is related to the consolidation of one of the Company's corporate tenant lease joint venture investments and higher operating costs on certain corporate tenant lease assets.

Depreciation and amortization—Depreciation and amortization increased by $1.7 million to $9.1 million for the six months ended June 30, 2003 from $7.4 million for the same period in 2002. This increase is primarily due to the consolidation of one of the Company's corporate tenant lease joint venture investments (see Note 6 to the Company's Consolidated Financial Statements).

General and administrative—For the six months ended June 30, 2003, general and administrative expenses decreased by approximately $1.8 million to $2.0 million, compared to $3.8 million for the same period in 2002.

Equity in earnings from joint ventures and unconsolidated subsidiaries—For the six months ended June 30, 2003, equity in earnings from joint ventures and unconsolidated subsidiaries decreased by $1.2 million to $2.0 million from $3.2 million for the same period in 2002. This decrease is primarily due to the consolidation of one of the Company's corporate tenant lease joint venture investments.

(Loss) income from discontinued operations—For the six months ended June 30, 2003 and 2002, operating income earned by the Company on corporate tenant lease assets sold (prior to their sale) and assets transferred to iStar Financial of $3.3 million and $19.3 million, respectively is classified as "discontinued operations," even though such income was recognized by the Company prior to the asset dispositions or transfers.

Gain from discontinued operations—During the six months ended June 30, 2003, the Company disposed of one corporate tenant lease asset for net proceeds of $4.0 million and recognized a gain of approximately $264,000.

During the six months ended June 30, 2002, the Company disposed of one corporate tenant lease asset for net proceeds of $3.7 million and recognized a gain of approximately $595,000.

Liquidity and Capital Resources

Omitted pursuant to General Instruction H(2) of Form 10-Q.

ITEM 4. CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Securities and Exchange Act of 1934 (the "Exchange Act") reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The Company has formed a disclosure committee that is responsible for considering the materiality of information and determining the disclosure obligations of the Company on a timely basis. The disclosure committee reports directly to the Company's Chief Executive Officer and Chief Financial Officer. The Chief Financial Officer is currently a member of the disclosure committee.

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision of members of management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective to timely alert them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's Exchange Act filings.

There have been no significant changes in the Company's internal controls that could significantly affect internal controls subsequent to the date that the Company carried out its evaluation.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Omitted pursuant to General Instruction H (2) of Form 10-Q.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Omitted pursuant to General Instruction H (2) of Form 10-Q.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Omitted pursuant to General Instruction H (2) of Form 10-Q.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

a.

Exhibits

31.0: Certifications pursuant to Section 302 of the Sarbanes-Oxley Act.
32.0: Certifications pursuant to Section 906 of the Sarbanes-Oxley Act.

b.

Reports on Form 8-K

On April 11, 2003, a Current Report on Form 8-K was filed in connection with the transfer of corporate tenant lease assets to another subsidiary of the Company's parent company.

SIGNATURES

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

		TRINET CORPORATE REALTY TRUST, INC.
		Registrant

Date: August 14, 2003		/s/ JAY SUGARMAN Chairman of the Board of Directors and Chief Executive Officer
Date: August 14, 2003		/s/ CATHERINE D. RICE Chief Financial Officer

QuickLinks

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS H (1) (a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.
TriNet Corporate Realty Trust, Inc. (A wholly-owned subsidiary of iStar Financial Inc.) Index to Form 10-Q
TriNet Corporate Realty Trust, Inc. (A wholly-owned subsidiary of iStar Financial Inc.) Consolidated Balance Sheets (In thousands, except share and per share data) (unaudited)
TriNet Corporate Realty Trust, Inc. (A wholly-owned subsidiary of iStar Financial Inc.) Consolidated Statements of Operations (In thousands) (unaudited)
TriNet Corporate Realty Trust, Inc. (A wholly-owned subsidiary of iStar Financial Inc.) Consolidated Statement of Changes in Shareholder's Equity (In thousands) (unaudited)
TriNet Corporate Realty Trust, Inc. (A wholly-owned subsidiary of iStar Financial Inc.) Consolidated Statements of Cash Flows (In thousands) (unaudited)
TriNet Corporate Realty Trust, Inc. (A wholly-owned subsidiary of iStar Financial Inc.) Notes to Consolidated Financial Statements
PART II. OTHER INFORMATION
SIGNATURES

TRINET CORPORATE REALTY TRUST INC 10-Q