8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 27, 2010

CAPITAL TRUST, INC.

(Exact name of registrant as specified in its charter)

Maryland	1-14788	94-6181186
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

410 Park Avenue, 14th Floor, New York, NY	10022
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (212) 655-0220

N/A

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition

On July 27, 2010, Capital Trust, Inc. (the “Company”) issued a press release reporting the financial results for its fiscal quarter ended June 30, 2010. A copy of the press release is attached to this Current Report on Form 8-K (this “Current Report”) as Exhibit 99.1 and is incorporated herein solely for purposes of this Item 2.02 disclosure.

On July 28, 2010, the Company held a conference call to discuss the financial results of the Company for its second fiscal quarter ended June 30, 2010. A copy of the transcript of the call is attached to this Current Report as Exhibit 99.2 and is incorporated herein solely for purposes of this Item 2.02 disclosure. The transcript has been selectively edited to facilitate the understanding of the information communicated during the conference call.

The information in this Current Report, including the exhibits attached hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of such section. The information in this Current Report, including the exhibits, shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended or the Exchange Act, regardless of any incorporation by reference language in any such filing.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits

Exhibit Number		Description
	99.1	Press release dated July 27, 2010
	99.2	Transcript from second quarter earnings conference call held on July 28, 2010

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

CAPITAL TRUST, INC.
By:	/s/ Geoffrey G. Jervis
	Name:	Geoffrey G. Jervis
	Title:	Chief Financial Officer

Date: July 29, 2010

Exhibit Index

Exhibit Number		Description
	99.1	Press release dated July 27, 2010
	99.2	Transcript from second quarter earnings conference call held on July 28, 2010

EX-99.1

Exhibit 99.1

Contact: Douglas Armer
(212) 655-0220

Capital Trust Reports Second Quarter 2010 Results

NEW YORK, NY — July 27, 2010 — Capital Trust, Inc. (NYSE: CT) today reported results for the quarter ended June 30, 2010.

• Operating Results:

• Reported net income of $2.9 million or $0.13 per share for the second quarter.

• Net income was driven primarily by $6.4 million of operating income, partially offset by net loan provisions and securities impairments of $4.0 million for the quarter.

• Portfolio Performance:

• At quarter end, the Company’s loan portfolio consisted of 134 assets with an aggregate net book value of $3.8 billion. During the second quarter, performance-related activity included:

• Recorded $2.0 million of net provisions for loan losses on nine loans. Provisions in the second quarter of 2010 included $19.0 million of loan provisions against four loans offset by $17.0 million of recoveries associated with loan dispositions and restructurings.

• Four loans with an aggregate outstanding principal balance of $82.4 million were added to the watch list.

• The Company’s securities portfolio was comprised of 65 securities with an aggregate net book value of $588.4 million. During the second quarter, performance-related activity included:

• $2.0 million of impairments recorded on four securities

• Two securities with an aggregate book value of $9.8 million were added to the Company’s watch list.

• Originations/Repayments/Dispositions:

• During the quarter, the Company originated two new investments ($25.0 million face value) for its investment management vehicles and did not originate any new balance sheet investments.

• Full and partial repayments during the second quarter totaled $67.0 million, and fundings pursuant to previously existing loan commitments totaled $700,000.

• Recourse Debt Obligations:

• During the second quarter, the company reduced the aggregate outstanding balance under its three repurchase agreements by $16.4 million, including net interest income redirection of $3.9 million, net collateral principal proceeds of $12.4 million and other payments pursuant to the Company’s March 2009 restructuring of $145,000.

• The Company’s senior credit facility balance was reduced by $257,000; the result of $1.25 million of amortization payments offset by $993,000 of deferred interest accrual (the excess of 7.20% over the cash pay interest rate).

Balance Sheet

Total assets were $4.5 billion at June 30, 2010. The Company’s Interest Earning Assets, defined as Loans receivable and Securities on the Company’s balance sheet, are summarized below:

Interest Earning Assets

• Interest earning assets totaled $4.3 billion of book value and had a weighted average yield of 3.23%.

• $3.7 billion (86%) of the portfolio was comprised of loan investments with a weighted average yield of 2.65%.

• $588.4 million (14%) of the portfolio was comprised of securities investments with a weighted average yield of 6.92%.

Total loan-specific reserves were $604.7 million against 23 loans with an unreserved book value of $864.6 million. 12 of the loans against which the Company booked reserves were non-performing and 11 of the loans were performing. The Company does not accrue interest on loans against which it has provisions unless collection of interest is reasonably certain.

29 loans with an aggregate book balance of $1.0 billion were categorized as watch list loans. Watch list loans are performing loans (with no credit loss provisions) that the Company aggressively monitors and manages due to increased risk of potential future non-performance and/or loss.

Net credit impairments in the securities portfolio totaled $55.7 million against 13 bonds. Additionally, mark-to-market adjustments on impaired securities charged through other comprehensive income totaled $26.0 million. The Company periodically updates its income amortization schedules to reflect changes in expected cash flows as a result of securities impairments.

14 securities with an aggregate book value of $99.5 million were identified as watch list securities. Watch list securities are securities (with no credit impairments) that the Company aggressively monitors and manages due to increased risk of potential future impairments and/or loss.

Page 2 of 9

The Company had two equity investments in unconsolidated subsidiaries with an aggregate book value of $5.2 million. Both investments are co-investments in funds sponsored and managed by the Company.

Interest Bearing Liabilities

On March 16, 2009, the Company entered into a restructuring of substantially all of its recourse liabilities. Under the terms of the restructuring, $527.5 million of the Company’s recourse debt (substantially all of its secured recourse liabilities) matures in March 2011. Detailed terms of the debt restructuring are available in the Company’s SEC filings.

The book value of the Company’s Interest Bearing Liabilities totaled $4.5 billion at June 30, 2010 and were comprised of non-recourse securitized debt obligations ($3.8 billion, 85% of total), repurchase obligations ($428.5 million, 10%), borrowings under its senior credit facility ($98.7 million, 2%) and junior subordinated notes ($130.1 million, 3%). At quarter end, the Company’s $4.5 billion of Interest Bearing Liabilities carried a weighted average cash cost of 1.44% and a weighted average all-in cost of 1.65%.

During 2009 and continuing into 2010, CMBS downgrades and loan non-performance caused cash flow to the retained classes of the Company’s CDOs to be either wholly or partially redirected to amortize the balances of the senior bondholders in these CDOs. As of quarter end, the Company currently receives cash collateral management fees from all four of its CDOs but cash interest payments and dividends from only one, CDO III.

Other Items

At June 30, 2010, the Company’s GAAP shareholders’ deficit was $(293.7) million. Based on 22.4 million shares outstanding (fully diluted basis) at quarter end, book value per share was $(13.11).

GAAP shareholders’ equity declined by $3.0 million during the quarter primarily due to (i) a $2.0 million provision for loan losses, (ii) $3.8 million of non-credit-related impairments of securities, and (iii) a $4.3 million decline in the fair value of interest rate swaps.

In light of the credit reserve activity at the Company, and available tax-basis net operating losses from prior periods, it is not expected that the Company will have taxable income for 2010 and, therefore, will likely not be required to pay a dividend to continue to maintain its REIT status. Furthermore, any dividend payment is subject to the terms of the debt restructuring and would be payable, to the maximum extent possible, in stock (in lieu of cash).

Current and prospective sources of liquidity, as of June 30, 2010, include unrestricted cash ($26.5 million), net operating cash flow, as well as principal payments and asset disposition proceeds. Prospective uses of liquidity include operating expenses, interest expense, debt repayments, unfunded loan commitments ($1.5 million), and capital commitments to the Company’s managed funds ($16.3 million).

Page 3 of 9

Investment Management

All of the Company’s investment management activities are conducted through its wholly-owned, taxable, investment management subsidiary, CT Investment Management Co., LLC (“CTIMCO”). CTIMCO’s management activities include: (i) managing its parent, Capital Trust, Inc., (ii) CDO collateral management: CTIMCO is the collateral manager for five CDOs, which are consolidated on the Company’s balance sheet as variable interest entities, (iii) special servicing: CTIMCO is the named special servicer on $2.6 billion of loans, and (iv) private equity fund management: at June 30, 2010, CTIMCO managed five private equity funds and one separate account with total investments of $1.2 billion and undeployed equity commitments of approximately $694.8 million. Three of these funds and the separate account have ended their investment periods and are liquidating in the ordinary course of business. The other funds, CT Opportunity Partners I (“CTOPI”) and CT High Grade Partners II (“High Grade II”), are currently investing and capitalized with $540 million and $667 million of total equity commitments, respectively. Capital Trust, Inc. has committed to invest $25.0 million as a limited partner in CTOPI, of which $8.7 million has already been funded and $16.3 million remains undrawn. The Company does not have a co-investment in High Grade II.

Revenues from third party investment management fees totaled $3.2 million in the second quarter of 2010 on a gross basis, which amount is adjusted down by $1.1 million due to a retroactive amendment to the Company’s management agreement with CTOPI. In addition, inter-company fees of $264,000 were eliminated in the consolidation of CTIMCO.

Page 4 of 9

Comparison of Results of Operations: Three Months Ended June 30, 2010 vs. June 30, 2009
(in thousands, except per share data)

	2010			2009			$ / % Change			% Change
Income from loans and other investments:
Interest and related income	$	39,428		$	30,575		$	8,853			29.0	%
Less: Interest and related expenses		31,653			20,244			11,409			56.4	%
Income from loans and other investments, net		7,775			10,331			(2,556	)		(24.7	%)
Other revenues:
Management fees from affiliates		924			2,929			(2,005	)		(68.5	%)
Servicing fees		1,226			155			1,071			691.0	%
Other interest income		97			8			89			—	%
Total other revenues		2,247			3,092			(845	)		(27.3	%)
Other expenses:
General and administrative		4,504			4,503			1			—	%
Depreciation and amortization		5			7			(2	)		(28.6	%)
Total other expenses		4,509			4,510			(1	)		—	%
Total other-than-temporary impairments of securities		(3,848	)		(4,000	)		152			(3.8	%)
Portion of other-than-temporary impairments of securities recognized in other comprehensive income		1,852			—			1,852			N/A
Impairment of goodwill		—			(2,235	)		2,235			(100.0	%)
Impairment of real estate held-for-sale		—			(899	)		899			(100.0	%)
Net impairments recognized in earnings		(1,996	)		(7,134	)		5,138			(72.0	%)
Provision for loan losses		(2,010	)		(7,730	)		5,720			(74.0	%)
Gain on extinguishment of debt		463			—			463			100.0	%
Income (loss) from equity investments		932			(445	)		1,377			N/A
Income (loss) before income taxes		2,902			(6,396	)		9,298			N/A
Income tax provision		—			—			—			N/A
Net income (loss)	$	2,902		$	(6,396	)	$	9,298			N/A
Net income (loss) per share — diluted	$	0.13		$	(0.29	)	$	0.42			N/A
Dividend per share	$	0.00		$	0.00		$	0.00			N/A
Average LIBOR		0.32	%		0.37	%		(0.05	%)		(14.7	%)

Income from loans and other investments, net

As discussed in Note 2 to the Company’s consolidated financial statements, recent accounting guidance has required the Company to consolidate additional entities beginning January 1, 2010. As a result, an increase in interest earning assets of $2.0 billion from June 30, 2009 to June 30, 2010 resulted in a material increase in interest income for the second quarter of 2010 compared to the second quarter of 2009. Similarly, an increase in interest bearing liabilities of $2.6 billion resulted in a material increase in interest expense for the second quarter of 2010 compared to the second quarter of 2009. In addition, an increase in non-performing loans and a decrease in average LIBOR contributed to a decrease in net interest income during the second quarter of 2010 compared to the second quarter of 2009.

Management fees from affiliates

Base management fees from the Company’s investment management business decreased $2.0 million, or 69%, during the second quarter of 2010 compared to the second quarter of 2009. The decrease was attributed primarily to a decrease of $2.1 million in fees from CTOPI due to an amendment to the management agreement with the fund, partially offset by increased fees at CT High Grade II due to additional investment activity.

Page 5 of 9

Servicing fees

Servicing fees increased $1.1 million during the second quarter of 2010 compared to the second quarter of 2009. The increase in fees was primarily due to fees for modifications to loans for which the Company is named special servicer.

General and administrative expenses

General and administrative expenses include personnel costs, operating expenses, professional fees and, for the second quarter of 2010, $510,000 of expenses associated with newly consolidated VIEs, as described in Note 2 to the Company’s consolidated financial statements. Excluding expenses from newly consolidated VIEs, general and administrative expenses decreased 11% between the second quarter of 2010 and the second quarter of 2009 due to lower personnel costs (including stock-based compensation), and lower professional fees and other operating costs.

Net impairments recognized in earnings

During the second quarter of 2010, the Company recorded a gross other-than-temporary impairment of $3.8 million on four Securities that had an adverse change in cash flow expectations. Of this amount, $1.9 million (the amount considered fair value adjustments in excess of credit impairment) was included in other comprehensive income, resulting in a net $2.0 million impairment (the amount considered credit impairment) included in earnings.

During the second quarter of 2009, the Company similarly recorded a gross other-than-temporary impairment of $4.0 million on one Security, of which all $4.0 million was included in earnings. During the second quarter of 2009, the Company also recorded an other-than-temporary impairment of $899,000 on our Real Estate Held-for-Sale to reflect the property at fair value and a $2.2 million impairment of goodwill related to its June 2007 acquisition of a healthcare loan origination platform.

Provision for loan losses

During the second quarter of 2010, the Company recorded an aggregate $2.0 million provision for loan losses. This net provision included $19.0 million of provisions against four loans, offset by $17.0 million of recoveries of four loans that had previously been impaired. These recoveries include $7.0 million on two loans held by consolidated VIEs. During the second quarter of 2009, the Company recorded an aggregate $7.7 million provision for loan losses against four loans.

Gain on extinguishment of debt

During the second quarter of 2010, the Company recorded a $463,000 gain on the extinguishment of debt due to realized losses from collateral assets held by consolidated securitization trusts. The Company recorded no such gains in 2009.

Income (loss) from equity investments

The income from equity investments during the second quarter of 2010 resulted primarily from the Company’s $1.0 million share of income from CTOPI, primarily due to fair value adjustments on the underlying investments in the fund. The loss from equity investments during the second quarter of 2009 resulted primarily from the Company’s share of losses from CTOPI, also primarily due to fair value adjustments on the underlying investments.

Income tax provision

The Company did not record an income tax provision in the second quarter of 2010 or 2009.

Dividends

The Company did not pay any dividends in the second quarter of 2010 or 2009.

Page 6 of 9

******

The Company will conduct a management conference call at 10:00 a.m. Eastern Time on Wednesday, July 28, 2010 to discuss second quarter 2010 results. Interested parties can access the call toll free by dialing (800) 895-0231 or 785-424-1054 for international participants. The conference ID is “CAPITAL.” A recorded replay will be available from noon on Wednesday, July 28, 2010 through midnight on Wednesday, August 11, 2010. The replay call number is (800) 688-9445 or (402) 220-1371 for international callers.

Forward-Looking Statements

This news release contains certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, including statements relating to future financial results and business prospects. The forward-looking statements contained in this news release are subject to certain risks and uncertainties including, but not limited to, the success of the Company’s debt restructuring and its ability to meet the amortization required thereby, demands on liquidity, the impact of the current turmoil in the financial markets, the continued deterioration in the commercial real estate market, the continued credit performance of the Company’s loan and CMBS investments, its asset/liability mix, the effectiveness of the Company’s hedging strategy and the rate of repayment of the Company’s portfolio assets and the impact of these events on the Company’s cash flow, as well as other risks indicated from time to time in the Company’s Form 10-K and Form 10-Q filings with the Securities and Exchange Commission. The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events or circumstances.

About Capital Trust

Capital Trust, Inc. is a real estate finance and investment management company that specializes in credit sensitive structured financial products. To date, the Company’s investment programs have focused primarily on loans and securities backed by commercial real estate assets, and the Company has executed its business both as a balance sheet investor and as an investment manager. Capital Trust is a real estate investment trust traded on the New York Stock Exchange under the symbol “CT.” The Company is headquartered in New York City.

Page 7 of 9

Capital Trust, Inc. and Subsidiaries
Consolidated Balance Sheets
June 30, 2010 and December 31, 2009
(in thousands except per share data)

	June 30,			December 31,
	2010			2009
	(unaudited)
Assets
Cash and cash equivalents	$	26,495		$	27,954
Securities held-to-maturity		17,695			17,332
Loans receivable, net		717,598			766,745
Loans held-for-sale, net		5,488			—
Equity investments in unconsolidated subsidiaries		5,181			2,351
Accrued interest receivable		2,591			3,274
Deferred income taxes		1,711			2,032
Prepaid expenses and other assets		6,959			8,391
Subtotal		783,718			828,079
Assets of Consolidated Variable Interest Entities (“VIEs”)
Securities held-to-maturity		570,722			697,864
Loans receivable, net		3,125,398			391,499
Loans held-for-sale, net		—			17,548
Real estate held-for-sale		12,055			—
Accrued interest receivable and other assets		10,990			1,645
Subtotal		3,719,165			1,108,556
Total assets	$	4,502,883		$	1,936,635
Liabilities & Shareholders’ Deficit
Liabilities:
Accounts payable and accrued expenses	$	7,943		$	8,228
Repurchase obligations		428,489			450,137
Senior credit facility		98,665			99,188
Junior subordinated notes		130,112			128,077
Participations sold		288,447			289,144
Interest rate hedge liabilities		4,344			4,184
Subtotal		958,000			978,958
Non-Recourse Liabilities of Consolidated VIEs
Accounts payable and accrued expenses		4,718			1,798
Securitized debt obligations		3,801,225			1,098,280
Interest rate hedge liabilities		32,600			26,766
Subtotal		3,838,543			1,126,844
Total liabilities		4,796,543			2,105,802
Shareholders’ deficit:
Class A common stock $0.01 par value 100,000 shares authorized, 21,907 and 21,796 shares issued and outstanding as of June 30, 2010 and December 31, 2009, respectively (“class A common stock”)		219			218
Restricted class A common stock $0.01 par value, 59 and 79 shares issued and outstanding as of June 30, 2010 and December 31, 2009, respectively (“restricted class A common stock” and together with class A common stock, “common stock”)		1			1
Additional paid-in capital		559,267			559,145
Accumulated other comprehensive loss		(57,585	)		(39,135	)
Accumulated deficit		(795,562	)		(689,396	)
Total shareholders’ deficit		(293,660	)		(169,167	)
Total liabilities and shareholders’ deficit	$	4,502,883		$	1,936,635

Page 8 of 9

Capital Trust, Inc. and Subsidiaries
Consolidated Statements of Operations
Three and Six Months Ended June 30, 2010 and 2009
(in thousands, except share and per share data)
(unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2010			2009			2010			2009
Income from loans and other investments:
Interest and related income	$	39,428		$	30,575		$	79,398		$	63,814
Less: Interest and related expenses		31,653			20,244			62,905			41,512
Income from loans and other investments, net		7,775			10,331			16,493			22,302
Other revenues:
Management fees from affiliates		924			2,929			3,940			5,809
Servicing fees		1,226			155			2,737			1,334
Other interest income		97			8			105			136
Total other revenues		2,247			3,092			6,782			7,279
Other expenses:
General and administrative		4,504			4,503			9,241			12,959
Depreciation and amortization		5			7			10			14
Total other expenses		4,509			4,510			9,251			12,973
Total other-than-temporary impairments of securities		(3,848	)		(4,000	)		(39,835	)		(18,646	)
Portion of other-than-temporary impairments of securities recognized in other comprehensive income		1,852			—			18,015			5,624
Impairment of goodwill		—			(2,235	)		—			(2,235	)
Impairment of real estate held-for-sale		—			(899	)		—			(2,233	)
Net impairments recognized in earnings		(1,996	)		(7,134	)		(21,820	)		(17,490	)
Provision for loan losses		(2,010	)		(7,730	)		(54,227	)		(66,493	)
Valuation allowance on loans held-for-sale		—			—			—			(10,363	)
Gain on extinguishment of debt		463			—			463			—
Income (loss) from equity investments		932			(445	)		1,302			(2,211	)
Income (loss) before income taxes		2,902			(6,396	)		(60,258	)		(79,949	)
Income tax provision (benefit)		—			—			293			(408	)
Net income (loss)	$	2,902		$	(6,396	)	$	(60,551	)	$	(79,541	)
Per share information:
Net income (loss) per share of common stock:
Basic	$	0.13		$	(0.29	)	$	(2.71	)	$	(3.56	)
Diluted	$	0.13		$	(0.29	)	$	(2.71	)	$	(3.56	)
Weighted average shares of common stock outstanding:
Basic		22,344,552			22,368,539			22,340,071			22,327,895
Diluted		22,667,326			22,368,539			22,340,071			22,327,895

Page 9 of 9

EX-99.2

Exhibit 99.2

Capital Trust Q2 ’10 Earnings Call
July 28, 2010
10:00 AM ET

Operator:	Hello and welcome to the Capital Trust second quarter 2010 results conference call. Before we begin, please be advised that the forward-looking statements contained in the news release are subject to certain risks and uncertainties including, but not limited to, the success of the Company’s debt restructuring, the continued credit performance of the Company’s loan and CMBS investments, its asset/liability mix, the effectiveness of the Company’s hedging strategy, the rate of repayment of the Company’s portfolio assets and the impact of these events on the Company’s cash flow, as well as other risks indicated from time to time in the Company’s Form 10-K and Form 10-Q filings with the Securities and Exchange Commission. The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events or circumstances. There will be a Q&A session following the conclusion of this presentation. At that time, I will provide instructions for submitting a question to management. I will now turn the call over to Steve Plavin, CEO of Capital Trust. Please go ahead.
Steve Plavin:	Thank you. Good morning everyone. Thank you for joining us and for your continued interest in Capital Trust.
	With me are Geoff Jervis, our Chief Financial Officer and Tom Ruffing our Chief Credit Officer and Head of Asset Management.
	Last night we reported our results for the second quarter and filed our 10Q. CT reported net income of $2.9 million or $0.13 per share. Operating income of $6.4 million was primarily reduced by $4 million, the amount by which current period provisions and impairments exceeded the recovery of prior loan loss provisions.

During the quarter we added four loans totaling $82 million and two securities with a book value of $10 million to our loan and security watch lists in addition to recording $19 million of loan loss provisions and $2 million of securities impairments.

The recoveries we achieved during the quarter primarily emanated from transactions with existing sponsors hoping to preserve or enhance their equity in properties acquired at or near the peak of the market. Many sponsors of similar vintage loans do not have the liquidity to make such investments or have incurred such steep losses that maintaining control of the underlying real estate will be very difficult. Nonetheless, working with motivated sponsors to maximize loan recoveries continues to be one of our primary asset management strategies.

Despite persistent uncertainty in the overall economy, lenders and investors are continuing to return to commercial real estate. Many of the street conduit programs are re-starting and loan terms for borrowers are improving with the increased competition and low rates. But most sponsors are still unable to achieve sufficient proceeds to repay their existing loans so borrower demand is weak. Property cash flows remain under intense pressure, substantially below the peak levels anticipated at loan origination. Even with lower cap rates and greater market liquidity, very significant cash flow improvement remains necessary for the full repayment of most loans originated in 2006 and 2007. Many of the loans from these vintages are being kept afloat by low Libor and will be unable to sufficiently recover in order to avoid a workout or foreclosure as final maturity dates approach in 2011 and 2012.

The challenges of the commercial real estate finance markets create new investment opportunities and CT’s asset management business continues to grow. Including our balance sheet assets and all of our third-party managed vehicles, we now manage over $6 billion of commercial real estate loans and securities. As a rated special servicer, we are named on $2.6 billion of loans. The scale and quality of our asset management operation is recognized by our investors. The investment periods for CT Opportunity Partners and CT High Grade Partners II were both extended by a year during the second quarter and we have over $500 million of equity remaining to invest in those vehicles.

Our second quarter results continue to reflect the challenges of CT balance sheet loans and securities originated at or near the peak of the market. We expect challenging market conditions to persist for the next several quarters as commercial property performance typically lags the general economy which is still not yet in full recovery.

And with that, I will turn it over to Geoff to run you through the second quarter financials.

Geoffrey Jervis: Thank you Steve and good morning everyone.

As Steve mentioned, last night we reported results for the second quarter, recording net income of $2.9 million or $0.13 per share.

Net income for the quarter was primarily the result of income from operations, offset partially by $4 million of net reserves and impairments that we took against our loan and security portfolios.

Specifically, we recorded $2.0 million of impairments on four securities and $2.0 million of net provisions for loan losses on nine loans. Loan loss provisions in the second quarter included $19.0 million of provisions against four loans offset by $17.0 million of recoveries associated with loan dispositions and restructurings.

Exclusive of credit provisions, impairments and a $463,000 gain on the extinguishment of debt associated with our consolidated VIEs, operating income was $6.4 million or 29 cents per share during the period......the primary components of this quarter’s operating income were:

Net interest margin of $7.8 million, down over $900,000 from last quarter and $2.6 million from the second quarter of 2009, with the reduction due to asset level non performance, loan and security repayments and, when comparing to 2009, impacts from our new consolidation regime as we are now consolidating additional variable interest entities or VIEs – the accounting change that I discussed last quarter and will review when I discuss the balance sheet.

...other components of operating income were...

Other revenues of $2.2 million, down $2.3 million from the prior period, primarily due to an amendment to the Company’s management agreement with one of the private equity funds it sponsors and manages, CT Opportunity Partners I, LP, the major elements of which were a retroactive reduction in the fees paid to us by the fund and an extension of the fund’s investment period.

...continuing down the income statement...

Other expenses, primarily G&A, were $4.5 million, down $200,000 from the prior quarter, and we recorded $932,000 of income from equity investments, up almost $600,000 from the prior period, as we picked up changes, primarily non cash, in the capital accounts at two of our private equity funds in which we have co-investments.

In total, as mentioned before, net income for the quarter was $2.9 million, however, for the first six months of 2010, net income was ($60.6 million) due primarily to reserve activity in the first quarter.

From a cash flow standpoint, it is important to note that CT’s liabilities include required amortization provisions, in addition to those related to principal repayments. In the second quarter, we redirected over $8.5 million of income to additional amortization of our CDOs and repurchase agreements through net interest margin sweeps and other arrangements and paid $1.25 million of scheduled amortization on our senior credit facility. These provisions obviously put an enormous strain on the Company in terms of its ability to generate net, available cash flow.

Turning to the investment management business, our wholly owned subsidiary, CTIMCO, recorded total third party revenues of $3.2 million for the quarter on a gross basis, which amount is adjusted down by $1.1 million due to the retroactive amendment of the CT Opportunity Partners management agreement that I referred to earlier. In addition to managing its parent, Capital Trust, CTIMCO operates 5 third party private equity vehicles, two of which, CT Opportunity Partners I and CT High Grade Partners II, are currently investing and have over $500 million of uncalled equity capital available for investment. CTIMCO also earns revenue as a CDO collateral manager, and as a special servicer. During the quarter, special servicing fees were $1.2 million, down $300,000 from the previous quarter.

Over to the balance sheet,

As we mentioned last quarter, on January 1st, we adopted FAS 167, requiring us to materially change the presentation of our financial statements. Specifically, the company’s assets and liabilities are segregated into those held directly and those representing the assets and liabilities of certain CMBS and CDO trusts, or variable interest entities (referred to as VIEs), that we are required to consolidate. At year-end, these seven trusts were carried, as securities, at $79 million, and at June 30 these securities were recorded as $2.78 billion of loans and securitized debt obligations of $2.76 billion. In the past, the only VIEs that we consolidated were the 4 CDOs that were issued by CT. Now, with the consolidation of the 7 new VIEs, our total VIE assets are $3.7 billion and our total VIE liabilities are $3.8 billion.

Starting at the top of the balance sheet, Cash at quarter end was $26.5 million. Uses of cash during the quarter included the funding of $700,000 under one existing loan commitment and the funding of a $1.5 million capital call to CT Opportunity Partners. Under the terms of our March debt restructuring, our only “financial” covenant requires maintenance of a minimum cash balance of $5 million, a test that we complied with this quarter. Cash represents the primary source of CT’s liquidity and is earmarked to meet the Company’s unfunded commitments that include $1 million on its loan portfolio and $16 million to its private equity fund co-investments. As I mentioned before, the cash flow that is redirected under the provisions of our CDOs and repurchase agreements, as well as the cash flow used to pay amortization under our senior credit facility, while showing up on our financial statements as income and operating cash flow, are not available to us. When combined with the decline in performance of the portfolio, cash flow available to us is expected to be negative. Therefore, the Company will likely be required to use its existing cash balances to fund not only its loan and fund level commitments, but also to pay for some portion of operating expenses.

At quarter end, our Securities portfolio was comprised of 65 securities with a total net book value of $588 million (7 securities with a carrying value of $17.7 million being held directly and the balance being in VIEs). Activity for the quarter included $7.6 million of principal repayments, and $3.8 million of impairments. In total, we have 13 impaired securities in the portfolio with total gross book value of $102 million and total impairments of $82 million. In addition, we have 14 securities with a total book value of $100 million on our watch list. The directly held, non VIE portfolio has 4 impaired securities with total gross book value of $19.4 million and total impairments of $16.3 million. In addition, the remaining 3 securities in the direct portfolio with a total book value of $14.6 million are on our watch list.

Over to Loans, at quarter end, we held 134 loans with a total carrying value of $3.8 billion. Significant activity for the quarter included $59.4 million of loan satisfactions and principal repayments, one loan with a book balance of $12.1 million was transferred to REO when we foreclosed on the property, one loan with a book balance of $5.5 million was classified as held-for-sale, and one loan with a book balance of $6.6 million was transferred to other assets when we converted our investment to equity in conjunction with a restructuring of a loan. We recorded $19 million of provisions for loan losses against four loans and experienced $17 million in recoveries of previously recorded reserves. In total, 23 of the Company’s loans totaling $865 million of gross book value have recorded reserves of $605 million. In addition to the loans with reserves, the Company maintains a “loan watch list” that is comprised of performing loans of concern that do not carry credit reserves, this watchlist contains 29 loans with a total book balance of $1.0 billion. Looking only at the directly held portfolio, the Company held 34 loans with a carrying value of $723 million and the net reserve activity on this portfolio was $4 million for the quarter ($14 million of provisions less a $10 million recovery of prior period losses). In the aggregate, 10 loans with $477 million of gross book value have recorded reserves of $373 million and 10 of the direct portfolio’s loans with carrying values of $232 million are on the watchlist.

Equity investments in unconsolidated subsidiaries reflects our co-investments in certain of our investment management funds. The balance is comprised of a small remaining position in CT Mezzanine Partners III, and our $25 million co-investment in CT Opportunity Partners, of which we have funded $8.7 million to date. Differences between our fundings and the carrying value of this account are almost exclusively due to the pick up of non cash fair value adjustments at the fund. The fund carries its assets and liabilities at fair value, as opposed to amortized cost, with periodic changes in these values flowing though the fund’s income statement — changes that we pick up under the equity method of accounting.

On the liability side, our recourse debt is comprised of repurchase obligations, a senior credit facility and junior subordinated notes, for aggregate recourse debt of $671 million.

During the quarter, we continued to reduce borrowings under our repurchase agreements through principal and net interest margin sweeps, with total outstanding balances at quarter end of $429 million, down $16 million from the prior quarter. These facilities all mature in March of 2011 and, given the subordinate nature of our investments, the performance of these investments and the levels of current leverage against these investments, there can be no assurances that we will be able to find replacement financing.

Our senior credit facility balance declined slightly during the quarter, as mandatory amortization payments exceeded capitalized interest provisions. This facility is co-terminus with our repurchase agreements and, like the repurchase agreements, there can be no assurances that we will be able to find replacement financing.

Our junior subordinated notes, the most subordinate part of our debt capital structure, also restructured in 2009, continue to accrete to their restructured face balance of $144 million. These debentures carry an interest rate of 1% through 2012, when they revert back to their prior coupon of 7.2%, and ultimately mature in 2036.

Looking at our securitized debt, this account represents the liabilities of our consolidated VIEs, our 4 CT CDOs and the 7 newly consolidated VIE trusts. During the quarter, this account decreased by $59 million, a result of $54 million from repayments due to the application of collateral principal proceeds and $5 million in interest income redirection.

Interest rate hedge liabilities increased by $4.3 million from quarter to quarter with the change in value picked up as a decrease to equity.

	Finally, our shareholders equity account ended the quarter at a deficit of $294 million, a decrease of $3 million from March 31st due primarily to $1.9 million of non-credit related impairments on securities, and the $4.3 million decline in the fair value of interest rate swaps, all of which were partially offset by net income.... and...on a per share basis, book value per share stood at negative $13.11 at June 30th.
	With that, I will turn it back to Steve.
Steve Plavin:	Thank you Geoff. Natasha you can open the call for questions.
Operator:	At this time, if you would like to ask a question, please press the “star” and “one” on your touchtone phone. You may withdraw yourself from the queue at any time by pressing the “pound” key. Once again, it’s “star” and “one” to ask a question. We’ll pause momentarily to allow questions to enter the queue.
Operator:	It appears we have no questions at this time.
Steve Plavin:	Thank you very much. We look forward to reporting to you next quarter.
Operator:	That concludes today’s conference. You may disconnect at this time.

END