In a conference call, CEO Jay Sugarman called the Q1 results "a small glimpse of blue sky," but cautioned that the challenges that have faced the company over the past two years remain in place. Despite improving conditions and the company's efforts to shrink its balance sheet, iStar still has large debt maturities to contend with in 2011 and 2012, and a large number of nonperforming loans, he said.

At the end of Q1, 42.3% of the company's total managed loans, representing a balance of $3.5 billion, were NPL, according to financial results released Thursday. That represents a slight reduction from the 45.3% that NPLs represented at the end of Q4 '09.

A large chunk of iStar's NPL pool is condominium and land loans, and chief accounting officer David DiStaso said during Thursday's call that the company has reduced its exposure in these sectors. At the end of Q1, the company had 12 performing loans on its watch list representing $673.9 million, or 8.1% of total managed loans.