10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2007
OR
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 Number 1-14788

Capital Trust, Inc.

(Exact name of registrant as specified in its charter)

Maryland	94-6181186
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	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

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 requirements for the past 90 days. Yes x  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer x Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o  No x

APPLICABLE ONLY TO CORPORATE ISSUERS:

The number of outstanding shares of the registrant’s class A common stock, par value $0.01 per share, as of November 6, 2007 was 17,509,459.

CAPITAL TRUST, INC.

INDEX

Part I.	Financial Information
	Item 1:	Financial Statements
		Consolidated Balance Sheets – September 30, 2007 (unaudited) and December 31, 2006 (audited)
		Consolidated Statements of Income – Three and Nine Months Ended September 30, 2007 and 2006 (unaudited)
		Consolidated Statements of Changes in Shareholders’ Equity – Nine Months Ended September 30, 2007 and 2006 (unaudited)
		Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2007 and 2006 (unaudited)
		Notes to Consolidated Financial Statements (unaudited)
	Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3:	Quantitative and Qualitative Disclosures About Market Risk
	Item 4:	Controls and Procedures
Part II.	Other Information
	Item 1:	Legal Proceedings
	Item 1A:	Risk Factors
	Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds
	Item 3:	Defaults Upon Senior Securities
	Item 4:	Submission of Matters to a Vote of Security Holders
	Item 5:	Other Information
	Item 6:	Exhibits
	Signatures

Capital Trust, Inc. and Subsidiaries

Consolidated Balance Sheets

September 30, 2007 and December 31, 2006

(in thousands)

	September 30,		December 31,
	2007		2006
	(unaudited)		(audited)
Assets
Cash and cash equivalents	$	23,877	$	26,142
Restricted cash	3,741		1,707
Commercial mortgage backed securities	884,222		810,970
Loans receivable	2,101,116		1,754,536
Total return swaps	—		1,815
Equity investment in unconsolidated subsidiaries	17,057		11,485
Deposits and other receivables	27,656		3,128
Accrued interest receivable	15,271		14,888
Interest rate hedge assets	1,126		2,565
Deferred income taxes	3,659		3,609
Prepaid and other assets	21,822		17,719
Total assets	$	3,099,547	$	2,648,564
Liabilities and Shareholders’ Equity
Liabilities:
Accounts payable and accrued expenses	$	31,392	$	38,061
Repurchase obligations	888,877		704,444
Collateralized debt obligations	1,195,251		1,212,500
Participations sold	332,638		209,425
Senior unsecured credit facility	75,000		—
Junior subordinated debentures	128,875		51,550
Interest rate hedge liabilities	4,393		1,688
Deferred origination fees and other revenue	2,727		4,624
Total liabilities	2,659,153		2,222,292
Commitments and contingencies
Shareholders’ equity:
Class A common stock, $0.01 par value, 100,000 shares authorized, 17,086 and 16,933 shares issued and outstanding at September 30, 2007 and December 31, 2006, respectively (“class A common stock”)	171		169
Restricted class A common stock, $0.01 par value, 423 and 481 shares issued and outstanding at September 30, 2007 and December 31, 2006, respectively (“restricted class A common stock” and together with class A common stock, “common stock”)	4		5
Additional paid-in capital	422,870		417,641
Accumulated other comprehensive gain	7,865		12,717
Accumulated earnings/(deficit)	9,484		(4,260		)
Total shareholders’ equity	440,394		426,272
Total liabilities and shareholders’ equity	$	3,099,547	$	2,648,564

See accompanying notes to unaudited consolidated financial statements.

1

Capital Trust, Inc. and Subsidiaries

Consolidated Statements of Income

Three and Nine Months Ended September 30, 2007 and 2006

 (in thousands, except share and per share data)

(unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006
Income from loans and other investments:
Interest and related income	$	64,712		$	46,011		$	190,959		$	123,862
Less: Interest and related expenses	43,716			28,838			120,008			72,374
Income from loans and other investments, net	20,996			17,173			70,951			51,488
Other revenues:
Management fees	1,115			748			2,446			1,984
Incentive management fees	—			—			962			212
Servicing fees	173			—			285			—
Other interest income	173			440			754			790
Total other revenues	1,461			1,188			4,447			2,986
Other expenses:
General and administrative	6,840			5,879			21,483			16,706
Depreciation and amortization	61			357			1,450			2,696
Total other expenses	6,901			6,236			22,933			19,402
Recovery of provision for losses	—			—			4,000			—
Income/(loss) from equity investments	(109		)	328			(1,042		)	1,050
Income before income taxes	15,447			12,453			55,423			36,122
(Benefit)/provision for income taxes	(50		)	(984		)	(304		)	(2,455		)
Net income	$	15,497		$	13,437		$	55,727		$	38,577
Per share information:
Net earnings per share of common stock:
Basic	$	0.88		$	0.87		$	3.17		$	2.51
Diluted	$	0.87		$	0.86		$	3.14		$	2.48
Weighted average shares of common stock outstanding:
Basic	17,594,047			15,407,132			17,555,724			15,394,663
Diluted	17,717,282			15,585,880			17,719,881			15,542,306
Dividends declared per share of common stock	$	0.80		$	0.75		$	2.40		$	2.05

See accompanying notes to unaudited consolidated financial statements.

2

Capital Trust, Inc. and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity

For the Nine Months Ended September 30, 2007 and 2006

(in thousands)

(unaudited)

						Restricted						Accumulated
				Class A		Class A			Additional			Other
	Comprehensive			Common		Common			Paid-In			Comprehensive			Accumulated
	Income/(Loss)			Stock		Stock			Capital			Income/(Loss)			Deficit			Total
Balance at January 1, 2006				$	149	$	4		$	326,299		$	14,879		$	(2,481	)	$	338,850
Net income	$	38,577		—		—			—			—			38,577			38,577
Unrealized loss on derivative financial instruments	(1,315		)	—		—			—			(1,315		)	—			(1,315		)
Unrealized loss on available for sale security	(96		)	—		—			—			(96		)	—			(96		)
Amortization of unrealized gain on CMBS	(1,226		)	—		—			—			(1,226		)	—			(1,226		)
Currency translation adjustment	1			—		—			—			1			—			1
Sale of shares of class A common stock under stock option agreements	—			—		—			368			—			—			368
Deferred gain on settlement of swap, net of amortization	—			—		—			—			1,003			—			1,003
Reimbursement of offering expenses	—			—		—			124			—			—			124
Restricted class A common stock earned	—			—		—			2,818			—			—			2,818
Restricted class A common stock forfeited	—			—		—			(45		)	—			—			(45		)
Issuance of restricted stock	—			—		1			—			—			—			1
Dividends declared on class A common stock	—			—		—			—			—			(31,467		)	(31,467		)
Balance at September 30, 2006	$	35,941		$	149	$	5		$	329,564		$	13,246		$	4,629		$	347,593
Balance at January 1, 2007				$	169	$	5		$	417,641		$	12,717		$	(4,260	)	$	426,272
Net income	$	55,727		—		—			—			—			55,727			55,727
Unrealized loss on derivative financial instruments	(4,158		)	—		—			—			(4,158		)	—			(4,158		)
Unrealized gain on available for sale security	108			—		—			—			108			—			108
Amortization of unrealized gain on CMBS	(1,259		)	—		—			—			(1,259		)	—			(1,259		)
Currency translation adjustments	810			—		—			—			810			—			810
Issuance of common stock relating to business purchase	—			—		—			707			—			—			707
Sale of class A common stock under stock upon stock option exercise	—			—		—			952			—			—			952
Deferred gain/(loss) on settlement of swap, net of amortization	—			—		—			—			(353		)	—			(353		)
Restricted class A common stock earned	—			2		(1		)	3,570			—			—			3,571
Dividends declared on class A common stock	—			—		—			—			—			(41,983		)	(41,983		)
Balance at September 30, 2007	$	51,228		$	171	$	4		$	422,870		$	7,865		$	9,484		$	440,394

See accompanying notes to unaudited consolidated financial statements.

3

Capital Trust, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

Nine months ended September 30, 2007 and 2006

(in thousands)

(unaudited)

	Nine Months Ended September 30,
	2007			2006
Cash flows from operating activities:
Net income	$	55,727		$	38,577
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1,450			2,696
(Income)/loss from equity investments in unconsolidated subsidiaries	1,042			(1,050		)
Distributions of income from equity investments in unconsolidated subsidiaries	425			1,009
Restricted class A common stock earned	3,570			2,818
Amortization of premiums and discounts on loans, CMBS, and debt, net	(1,542		)	(1,131		)
Amortization of deferred gains on interest rate hedges	(200		)	(182		)
Stock based compensation	—			(45		)
Changes in assets and liabilities, net:
Deposits and other receivables	1,909			5,237
Accrued interest receivable	(383		)	(994		)
Deferred income taxes	(50		)	(1,651		)
Prepaid and other assets	3,730			2,261
Deferred origination fees and other revenue	(1,897		)	5,301
Accounts payable and accrued expenses	3,701			(814		)
Net cash provided by operating activities	67,482			52,032
Cash flows from investing activities:
Purchases of commercial mortgage-backed securities	(110,550		)	(384,732		)
Principal collections on and proceeds from sale of commercial mortgage-backed securities	37,089			26,548
Origination and purchase of loans receivable	(869,623		)	(579,763		)
Principal collections on loans receivable	620,189			421,617
Equity investments in unconsolidated subsidiaries	(9,122		)	(3,208		)
Return of capital from investments in unconsolidated subsidiaries	1,616			3,752
Purchase of total return swaps	—			(4,138		)
Proceeds from total return swaps	1,815			5,138
Purchases of equipment and leasehold improvements	(546		)	—
Payments for business purchase	(1,853		)	—
Payment of capitalized costs	(115		)	—
Decrease/(increase) in restricted cash	(2,034		)	(6,946		)
Net cash used in investing activities	(333,134		)	(521,732		)
Cash flows from financing activities:
Proceeds from repurchase obligations	1,307,512			878,534
Repayment of repurchase obligations	(1,123,078		)	(896,852		)
Proceeds from credit facilities	125,000			—
Repayment of credit facilities	(50,000		)	—
Issuance of junior subordinated debentures	77,325			51,550
Purchase of common equity in CT Preferred Trust I & CT Preferred Trust II	(2,325		)	(1,550		)
Proceeds from issuance of collateralized debt obligations	—			429,399
Repayments of collateralized debt obligations	(17,017		)	(11,194		)
Proceeds from participations sold	—			56,700
Settlement of interest rate hedges	(153		)	1,186
Payment of deferred financing costs	(2,474		)	(4,681		)
Sale of class A common stock upon stock option exercise	952			368
Reimbursement of offering expenses	—			124
Dividends paid on class A common stock	(52,355		)	(32,138		)
Net cash provided by financing activities	263,387			471,446
Net decrease in cash and cash equivalents	(2,265		)	1,746
Cash and cash equivalents at beginning of year	26,142			24,974
Cash and cash equivalents at end of period	$	23,877		$	26,720

See accompanying notes to unaudited consolidated financial statements

4

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited)

1.     Organization

References herein to “we,” “us” or “our” refer to Capital Trust, Inc. and its subsidiaries unless the context specifically requires otherwise.

We are a fully integrated, self-managed finance and investment management company that specializes in credit -sensitive structured financial products. To date, our investment programs have focused on loans and securities backed by commercial real estate assets. We invest for our own account directly on our balance sheet and for third parties through a series of investment management vehicles. From the commencement of our finance business in 1997 through September 30, 2007, we have completed over $10.1 billion of investments in the commercial real estate debt arena. We conduct our operations as a real estate investment trust, or REIT, for federal income tax purposes and we are headquartered in New York City.

2.     Summary of Significant Accounting Policies

The accompanying unaudited consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The accompanying unaudited consolidated interim financial statements should be read in conjunction with the financial statements and the related management discussion and analysis of financial condition and results of operations filed with our Annual Report on Form 10-K for the fiscal year ended December 31, 2006. In our opinion, all material adjustments (consisting of normal, recurring accruals) considered necessary for a fair presentation have been included. The results of operations for the three and nine months ended September 30, 2007 are not necessarily indicative of results that may be expected for the entire year ending December 31, 2007. Our accounting and reporting policies conform in all material respects to accounting principles generally accepted in the United States.

Principles of Consolidation

The accompanying unaudited consolidated interim financial statements include, on a consolidated basis, our accounts, the accounts of our wholly-owned subsidiaries and our interests in variable interest entities in which we are the primary beneficiary. All significant intercompany balances and transactions have been eliminated in consolidation. Our interests in CT Preferred Trust I and CT Preferred Trust II, the issuers of trust securities backed by our junior subordinated debentures, are accounted for using the equity method and their assets and liabilities are not consolidated into our financial statements due to our determination that CT Preferred Trust I and CT Preferred Trust II are variable interest entities in which we are not the primary beneficiary under Financial Accounting Standards Board, or FASB, Interpretation No. 46(R), or FIN 46. We account for our co-investment interest in a private equity fund we
co-sponsored and continue to manage, CT Mezzanine Partners III, Inc., or Fund III, under the equity method of accounting. We also account for our investment in Bracor Investimentos Imobiliarios Ltda., or Bracor, under the equity method of accounting. As such, we report a percentage of the earnings of Fund III and Bracor equal to our ownership percentage on a single line item in the consolidated statement of operations as income from equity investments.

Revenue Recognition

Interest income from our loans receivable is recognized over the life of the investment using the effective interest method and is recorded on the accrual basis. Fees, premiums, discounts and direct costs in connection with these investments are deferred until the loan is advanced and are then recognized over the term of the loan as an adjustment to yield. Fees on commitments that expire unused are recognized at expiration. For loans where we have unfunded commitments, we amortize the appropriate items on a straight line basis. Income recognition is generally suspended for loans at the earlier of the date at which payments become 90 days past due or when, in the opinion of management, a full recovery of income and principal becomes doubtful. Income recognition is resumed when the loan becomes contractually current and performance is demonstrated to be resumed.

Fees from special servicing and asset management services are recognized as services are rendered. We account for incentive fees we can potentially earn from our investment management business in accordance with Method 1 of Emerging Issues Task Force Topic
D-96. Under Method 1, no incentive income is recorded until all contingencies have been eliminated.

5

2.     Summary of Significant Accounting Policies, continued

Cash and Cash Equivalents

We classify highly liquid investments with original maturities of three months or less from the date of purchase as cash equivalents. At September 30, 2007 and December 31, 2006, a majority of the cash and cash equivalents consisted of overnight investments in commercial paper. As of, and for the periods ended, September 30, 2007 and December 31, 2006, we had bank balances in excess of federally insured amounts. We have not experienced any losses on our demand deposits, commercial paper or money market investments.

Restricted Cash

Restricted cash is comprised of $3.7 million that is on deposit with the trustee for our collateralized debt obligations, or CDOs, and is expected to be used to pay contractual interest and principal and to purchase replacement collateral for our reinvesting CDOs during their respective reinvestment periods.

Commercial Mortgage Backed Securities

We classify our commercial mortgage backed securities, or CMBS, investments pursuant to FASB Statement of Financial Accounting Standards No. 115, or FAS 115, on the date of acquisition of the investment. On August 4, 2005, we made a decision to change the accounting classification of our CMBS investments from available for sale to held to maturity. Held to maturity investments are stated at cost plus the amortization of any premiums or discounts and any premiums or discounts are amortized through the consolidated statements of income using the level yield method. Other than in the instance of impairment, these held to maturity investments are shown in our financial statements at their adjusted values pursuant to the methodology described above.

We may also invest in CMBS and certain other securities which may be classified as available for sale. Available for sale securities are carried at estimated fair value with the net unrealized gains or losses reported as a component of accumulated other comprehensive income/(loss) in shareholders’ equity. Many of these investments are relatively illiquid and management must estimate their values. In making these estimates, management utilizes market prices provided by dealers who make markets in these securities, but may, under certain circumstances, adjust these valuations based on management’s judgment. Changes in the valuations do not affect our reported income or cash flows, but impact shareholders’ equity and, accordingly, book value per share.

Income on these securities is recognized based upon a number of assumptions that are subject to uncertainties and contingencies. Examples include, among other things, the rate and timing of principal payments, including prepayments, repurchases, defaults and liquidations, the pass-through or coupon rate and interest rates. Additional factors that may affect our reported interest income on our mortgage backed securities include interest payment shortfalls due to delinquencies on the underlying mortgage loans and the timing and magnitude of credit losses on the mortgage loans underlying the securities that are impacted by, among other things, the general condition of the real estate market, including competition for tenants and their related credit quality, and changes in market rental rates. These uncertainties and contingencies are difficult to predict and are subject to future events that may alter the assumptions.

We account for CMBS under Emerging Issues Task Force 99-20, “Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets”, or EITF 99-20. Under EITF 99-20, when significant changes in estimated cash flows from the cash flows previously estimated occur due to actual prepayment and/or credit loss experience and the present value of the revised cash flows using the current expected yield is less than the present value of the previously estimated remaining cash flows, adjusted for cash receipts during the intervening period, an other-than-temporary impairment is deemed to have occurred. Accordingly, the security is written down to fair value with the resulting change being included in income and a new cost basis established with the original discount or premium written off when the new cost basis is established. In accordance with this guidance, on a quarterly basis, when significant changes in estimated cash flows from the cash flows previously estimated occur due to actual prepayment and/or credit loss experience, we calculate a revised yield based upon the current amortized cost of the investment, including any other-than-temporary impairments recognized to date, and the revised cash flows. The revised yield is then applied prospectively to recognize interest income. Management must also assess whether unrealized losses on securities reflect a decline in value that is other-than-temporary, and, accordingly, write down the impaired security to its fair value, through a charge to earnings.

6

2.     Summary of Significant Accounting Policies, continued

Significant judgment of management is required in this analysis that includes, but is not limited to, making assumptions regarding the collectibility of the principal and interest, net of related expenses, on the underlying loans.

During the fourth quarter of 2004, we concluded that two of our CMBS investments had incurred other-than-temporary impairment and we incurred a charge of $5.9 million through the income statement. At September 30, 2007, we believe there has not been any adverse change in cash flows since December 31, 2004, therefore we did not recognize any additional other-than-temporary impairment on any CMBS investments. Significant judgment of management is required in this analysis that includes, but is not limited to, making assumptions regarding the collectibility of the principal and interest, net of related expenses, on the underlying loans.

From time to time we purchase CMBS and other investments in which we have a level of control over the issuing entity; we refer to these investments as Controlling Class Investments. The presentation of Controlling Class Investments in our financial statements is governed in part by FIN 46. FIN 46 could require that certain Controlling Class Investments be presented on a consolidated basis. Based upon the specific circumstances of certain of our CMBS investments that are Controlling Class Investments and our interpretation of FIN 46, specifically the exemption for qualifying special purpose entities as defined under FASB Statement of Financial Accounting Standard No. 140, or FAS 140, we have concluded that the entities that have issued the Controlling Class Investments should not be presented on a consolidated basis. We are aware that FAS 140 is currently under review by standard setters and that, as a result of this review, our current interpretation of FIN 46 and FAS 140 may change.

Loans Receivable and Reserve for Possible Credit Losses

We purchase and originate commercial real estate debt and related instruments, or Loans, to be held as long term investments at amortized cost. Management must periodically evaluate each of these Loans for possible impairment. Impairment is indicated when it is deemed probable that we will not be able to collect all amounts due according to the contractual terms of the Loan. If a Loan were determined to be permanently impaired, we would write down the Loan through a charge to the reserve for possible credit losses. Given the nature of our Loan portfolio and the underlying commercial real estate collateral, significant judgment on the part of management is required in determining the permanent impairment and the resulting charge to the reserve, which includes but is not limited to making assumptions regarding the value of the real estate that secures the loan. Each Loan in our portfolio is evaluated at least quarterly using our loan risk rating system which considers loan-to-value, debt yield, cash flow stability, exit plan, loan sponsorship, loan structure and other factors deemed necessary by management to assess the likelihood of delinquency or default. If we believe that there is a potential for delinquency or default, a downside analysis is prepared to estimate the value of the collateral underlying our Loan, and this potential loss is multiplied by the default likelihood to determine the size of the reserve. Actual losses, if any, could ultimately differ from these estimates.

Deferred Financing Costs

The deferred financing costs which are included in other assets on our consolidated balance sheets include issuance costs related to our debt and are amortized using the effective interest method or a method that approximates the effective interest method.

Repurchase Obligations

In certain circumstances, we have financed the purchase of investments from a counterparty through a repurchase agreement with that same counterparty. We currently record these investments in the same manner as other investments financed with repurchase agreements, with the investment recorded as an asset and the related borrowing under any repurchase agreement as a liability on our consolidated balance sheet. Interest income earned on the investments and interest expense incurred on the repurchase obligations are reported separately on the consolidated statements of income. There is a position under consideration by standard setters, based upon a technical interpretation of FAS 140, that these transactions will not qualify as a purchase by us. We believe, consistent with industry practice, that we are accounting for these transactions in an appropriate manner; however, if these investments do not qualify as a purchase under FAS 140, we would be required to present the net investment (asset balance less the repurchase obligation balance) on our balance sheet together with an embedded derivative with the corresponding change in fair value of the derivative being recorded in the consolidated statements of income.

7

2.     Summary of Significant Accounting Policies, continued

The value of the derivative would reflect not only changes in the value of the underlying investment, but also changes in the value of the underlying credit provided by the counterparty. Income from these arrangements would be presented on a net basis. Furthermore, hedge instruments related to these assets and liabilities, currently deemed effective, may no longer be effective and may have to be accounted for as non-hedge derivatives. As of September 30, 2007, we had entered into 24 such transactions, with a book value of the associated assets of $602.7 million financed with repurchase obligations of $435.1 million. Adoption of the aforementioned treatment would result in a reduction in total assets and liabilities on our consolidated balance sheet of $435.1 million and $395.8 million at September 30, 2007 and December 31, 2006, respectively.

Interest Rate Derivative Financial Instruments

In the normal course of business, we use interest rate derivative financial instruments to manage, or hedge, cash flow variability caused by interest rate fluctuations. Specifically, we currently use interest rate swaps to effectively convert variable rate liabilities, that are financing fixed rate assets, to fixed rate liabilities. The differential to be paid or received on these agreements is recognized on the accrual basis as an adjustment to the interest expense related to the attendant liability. The swap agreements are generally accounted for on a held to maturity basis, and, in cases where they are terminated early, any gain or loss is generally amortized over the remaining life of the hedged item. These swap agreements must be effective in reducing the variability of cash flows of the hedged items in order to qualify for the aforementioned hedge accounting treatment. Changes in value of effective cash flow hedges are reflected in our financial statements through accumulated other comprehensive income/(loss) and do not affect our net income. To the extent a derivative does not qualify for hedge accounting, and is deemed a non-hedge derivative, the changes in its value are included in net income.

To determine the fair value of derivative instruments, we use third parties to periodically value our interests.

Income Taxes

Our financial results generally do not reflect provisions for current or deferred income taxes on our REIT taxable income. Management believes that we operate in a manner that will continue to allow us to be taxed as a REIT and, as a result, do not expect to pay substantial corporate level taxes (other than taxes payable by our taxable REIT subsidiaries which are accounted for in accordance with FASB Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes”, or FAS 109). Many of these requirements, however, are highly technical and complex. If we were to fail to meet these requirements, we may be subject to federal, state and local income tax on current and past income, and we may also be subject to penalties.

In June 2006, the FASB issued Financial Interpretation No. 48, or FIN 48. This interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FAS 109. This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. This interpretation was effective January 1, 2007 for the company. The adoption of FIN 48 did not have a material impact on our financial results.

Accounting for Stock-Based Compensation

We account for stock based compensation in accordance with FASB Statement of Financial Accounting Standards No. 123(R). We have elected to utilize the modified prospective method, and there was no material impact from this adoption. Compensation expense for the time vesting of stock based compensation grants is recognized on the accelerated attribution method and compensation expense for performance vesting of stock based compensation grants is recognized on a straight-line basis.

Comprehensive Income

We comply with the provisions of the FASB Statement of Financial Accounting Standards No. 130, “Reporting Comprehensive Income”, or FAS 130, in reporting comprehensive income and its components in the full set of general-purpose financial statements. Total comprehensive income was $51.2 million and $35.9 million, for the periods ended September 30, 2007 and 2006, respectively. The primary component of comprehensive income other than net income was the unrealized gain/(loss) on derivative financial instruments and CMBS. At September 30, 2007, accumulated other comprehensive income was $7.9 million, comprised of

8

2.     Summary of Significant Accounting Policies, continued

unrealized gains on CMBS of $8.8 million, unrealized losses on cash flow swaps of $3.3 million, $1.6 million of deferred realized gains on the settlement of cash flow swaps, and $810,000 of currency translation adjustments.

Earnings per Share of Common Stock

Earnings per share of common stock are presented based on the requirements of the FASB Statement of Accounting Standards No. 128, or FAS 128. Basic EPS is computed based on the income applicable to common stock and stock units divided by weighted average number of shares of common stock and stock units outstanding during the period. Diluted EPS is based on the net earnings applicable to common stock and stock units, divided by weighted average number of shares of common stock and stock units and potentially dilutive common stock options.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may ultimately differ from those estimates.

Reclassifications

Certain reclassifications have been made in the presentation of the prior periods consolidated financial statements to conform to the September 30, 2007 presentation.

Segment Reporting

We operate in two reportable segments. We have an internal information system that produces performance and asset data for the two segments along service lines.

The “Balance Sheet Investment” segment includes our portfolio of interest earning assets (including our co-investments in investment management vehicles and our investment in Bracor) and the financing thereof.

The “Investment Management” segment includes the activities of our wholly-owned investment management subsidiary, CT Investment Management Co. LLC, or CTIMCO and its subsidiaries. CTIMCO is a taxable REIT subsidiary and serves as the investment manager of Capital Trust, Inc., all of our investment management vehicles, all of our CDOs and serves as senior servicer and special servicer on certain of our investments and for third parties. In addition, CTIMCO owns certain of our assets.

Related Party Transactions

On November 9, 2006, we commenced our CT High Grade Mezzanine^SM investment management initiative and entered into three separate account agreements with affiliates of W. R. Berkley Corporation, or WRBC, for an aggregate of $250 million.  On July 25, 2007, we amended the agreements to increase the aggregate commitment of the WRBC affiliates to $350 million.  Pursuant to these agreements, we invest, on a discretionary basis, capital on behalf of WRBC in low risk commercial real estate mortgages, mezzanine loans and participations therein. The separate accounts are entirely funded with committed capital from WRBC and are managed by a subsidiary of CTIMCO.  Each separate account has a one-year investment period with extension provisions. CTIMCO earns a management fee equal to 0.25% per annum on invested assets.

On April 27, 2007, we purchased a $20 million subordinated interest in a mortgage from a dealer.  Proceeds from the original mortgage financing provide for the construction and leasing of an office building in Washington, D.C that is owned by a joint venture in which an entity 80% controlled by WRBC is one of the two joint venture partners.  WRBC beneficially owns approximately 17.9% of our outstanding class A common stock as of October 19, 2007 and a member of our board of directors is an employee of WRBC.

9

2.     Summary of Significant Accounting Policies, continued

We believe that the terms of the foregoing transactions are no less favorable than could be obtained by us from unrelated parties on an arm’s length basis.

Business Combination

On June 15, 2007, we purchased a healthcare loan origination platform with 18 employees, located in Birmingham, Alabama. We paid a $2.6 million initial purchase price ($1.9 million in cash and $707,000 in common stock) and we have a contingent obligation to pay up to an additional $1.8 million ($1.1 million in cash and $700,000 in stock) on March 15, 2009, if the acquired business meets certain performance criteria. We have recorded $2.1 million of goodwill associated with the initial purchase price.

New Accounting Pronouncements

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” or FAS 157. FAS 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. FAS 157 applies to reporting periods beginning after November 15, 2007. The Company is currently evaluating the potential effect of the adoption of FAS 157 on its consolidated financial statements.

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities”, or FAS 159. FAS 159 permits entities to choose to measure many financial instruments, and certain other items, at fair value. FAS 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. FAS 159 applies to reporting periods beginning after November 15, 2007. The Company is currently evaluating the potential effect of the adoption of SFAS 159 on its consolidated financial statements.

10

3.Commercial Mortgage Backed Securities

Activity relating to our CMBS investments for the nine months ended September 30, 2007 was as follows ($ values in thousands):

							Weighted Average
Asset Type	Face Value		Book Value		Number of  Securities	Number of  Issues	Rating (1)	Coupon(2)		Yield(2)		Maturity (Years)(3)
December 31, 2006
Floating Rate	$	86,012	$	84,807	11	9	BBB-	7.42	%	7.51	%	2.0
Fixed Rate	764,607		726,163		66	48	BB+	6.68	%	7.13	%	8.5
Total/Average	850,619		810,970		77	57	BB+	6.75	%	7.17	%	7.8
Originations - Nine Months
Floating Rate	109,621		109,617		7	4	BB-	9.66	%	9.66	%	3.8
Fixed Rate	1,000		933		1	1	BB+	6.13	%	6.57	%	3.3
Total/Average	110,621		110,550		8	5	BB-	9.63	%	9.63	%	3.8
Repayments & Other (4) - Nine Months
Floating Rate	23,968		23,965		4	2	N/A	N/A		N/A		N/A
Fixed Rate	13,190		13,333		1	1	N/A	N/A		N/A		N/A
Total/Average	37,158		37,298		5	3	N/A	N/A		N/A		N/A
September 30, 2007
Floating Rate	171,665		170,459		14	11	BB	8.88	%	8.92	%	2.7
Fixed Rate	752,417		713,763		66	48	BB+	6.68	%	7.13	%	7.8
Total/Average	$	924,082	$	884,222	80	59	BB+	7.09	%	7.48	%	6.8

(1)   Weighted average ratings are based on the lowest rating published by Fitch Ratings, Standard & Poor’s or Moody’s Investors Service for each security and exclude $37.9 million face value ($36.9 million book value) of unrated equity investments in collateralized debt obligations.

(2)   Calculations based on LIBOR of 5.12% as of September 30, 2007 and LIBOR of 5.32% as of December 31, 2006.

(3)   Represents the maturity of the investment assuming all extension options are executed.

(4)   Includes full repayments, sale, partial repayments, mark-to-market adjustments on available for sale securities, and the impact of premium and discount amortization and losses, if any. The figures shown in “Number of Securities” and “Number of Issues” represent the full repayments/sales, if any.

As detailed in Note 2, on August 4, 2005, pursuant to the provisions of FAS 115, we made a decision to change the accounting classification of our then portfolio of CMBS investments from available for sale to held to maturity.

While we typically account for our CMBS investments on a held to maturity basis, under certain circumstances we will account for CMBS on an available for sale basis. At September 30, 2007, we had one CMBS investment that we designated and account for on an available for sale basis with a face value of $10.0 million. The security earns interest at a fixed rate of 7.87%. As of September 30, 2007, the security was carried at its fair market value of $10.5 million. The investment matures in February 2010.

Quarterly, we reevaluate our CMBS portfolio to determine if there has been an other-than-temporary impairment based upon our assessment of future cash flow receipts. For the nine months ended September 30, 2007, we believe that there has not been any adverse change in cash flows for our CMBS portfolio and, therefore, did not recognize any other-than-temporary impairments. Significant judgment of management is required in this analysis that includes, but is not limited to, making assumptions regarding the collectibility of principal and interest, net of related expenses, on the underlying loans.

Certain of our CMBS investments are carried at values in excess of their market values. This difference can be caused by, among other things, changes in interest rates, changes in credit spreads, realized/unrealized losses and general market conditions. At September 30, 2007, 69 CMBS investments with an aggregate carrying value of $701.4 million were carried at values in excess of their market values. Market value for these CMBS investments was $659.9 million at September 30, 2007. In total, we had 80 CMBS investments with an aggregate carrying value of $884.2 million that have an estimated market value of $853.0 million (this valuation does not include the value of interest rate swaps entered into in conjunction with the purchase/financing of these investments).

11

4.Loans Receivable

Activity relating to our loans receivable for the nine months ended September 30, 2007 was as follows ($ values in thousands):

							Weighted Average
Asset Type	Face Value(1)		Book Value(1)			Number of Investments(1)	Coupon(2)		Yield(2)		Maturity (Years)(3)
December 31, 2006
Floating rate (4)
Mortgage loans	$	234,419	$	234,419		14	7.85	%	8.47	%	4.0
Subordinate mortgage interests	669,532		668,365			28	8.29	%	8.37	%	3.9
Mezzanine loans	622,055		621,877			23	9.57	%	9.76	%	4.3
Total/Average	1,526,006		1,524,661			65	8.75	%	8.96	%	4.1
Fixed rate
Mortgage loans	—		—			—	—		—		—
Subordinate mortgage interests	42,309		41,486			4	7.78	%	7.85	%	16.0
Mezzanine loans	187,161		185,751			11	9.07	%	9.25	%	4.9
Total/Average	229,470		227,237			15	8.80	%	8.96	%	7.2
Total/Average - December 31, 2006	1,755,476		1,751,898			80	8.75	%	8.96	%	4.5
Originations(5) - Nine Months
Floating rate
Mortgage loans	422,494		422,494			11	7.49	%	7.78	%	4.0
Subordinate mortgage interests	226,230		226,080			9	7.97	%	8.05	%	4.6
Mezzanine loans	461,647		461,647			11	8.50	%	8.46	%	3.1
Total/Average	1,110,371		1,110,221			31	8.01	%	8.12	%	3.7
Fixed rate
Mortgage loans	—		—			—	—		—		—
Subordinate mortgage interests	—		—			—	—		—		—
Mezzanine loans	—		—			—	—		—		—
Total/Average	—		—			—	—		—		—
Total/Average	1,110,371		1,110,221			31	8.01	%	8.12	%	3.7
Repayments & Other(6) - Nine Months
Floating rate
Mortgage loans	53,158		53,158			4	N/A		N/A		N/A
Subordinate mortgage interests	396,013		395,028			9	N/A		N/A		N/A
Mezzanine loans	289,203		289,176			10	N/A		N/A		N/A
Total/Average	738,374		737,362			23	N/A		N/A		N/A
Fixed rate
Mortgage loans	—		—			—
Subordinate mortgage interests	59		(39		)	1	N/A		N/A		N/A
Mezzanine loans	25,921		23,680			3	N/A		N/A		N/A
Total/Average	25,980		23,641			4	N/A		N/A		N/A
Total/Average	764,354		761,003			27	N/A		N/A		N/A
September 30, 2007
Floating rate
Mortgage loans	603,755		603,755			21	7.43	%	7.73	%	3.8
Subordinate mortgage interests	499,749		499,417			28	7.82	%	7.85	%	3.8
Mezzanine loans	794,499		794,348			24	8.81	%	8.85	%	3.5
Total/Average	1,898,003		1,897,520			73	8.11	%	8.23	%	3.7
Fixed rate
Mortgage loans	—		—			—	—		—		—
Subordinate mortgage interests	42,250		41,525			3	7.72	%	7.80	%	17.5
Mezzanine loans	161,240		162,071			8	8.85	%	8.84	%	4.5
Total/Average	203,490		203,596			11	8.62	%	8.63	%	7.1
Total/Average - September 30, 2007	$	2,101,493	$	2,101,116		84	8.16	%	8.27	%	4.0

(1)December 31, 2006 values do not include one non performing loan that was successfully resolved in the second quarter of 2007.

(2)Calculations based on LIBOR of 5.12% as of September 30, 2007 and LIBOR of 5.32% as of December 31, 2006.

(3)Represents the maturity of the investment assuming all extension options are executed.

(4)During the second quarter of 2007, one subordinate mortgage interest with a book value of $6,866 switched from a fixed rate to a floating rate.

(5)Includes additional fundings on prior period originations. The figures shown in “Number of Investments” represent the actual number of originations during the period.

(6)Includes full repayments, sales, partial repayments and the impact of premium and discount amortization and losses, if any. The figures shown in “Number of Investments” represent only the full repayments/sales, if any.

12

4.Loans Receivable, continued

During the second quarter of 2007, we successfully resolved our only non-performing loan. The loan was a first mortgage with an original principal balance of $8.0 million that reached maturity on July 15, 2000. In December 2002, the loan was written down to $4.0 million. From 2002 to March 31, 2007, we had received $1.4 million in cash collections, which further reduced the carrying value of the loan to $2.6 million. During the second quarter of 2007, we received net proceeds of $10.9 million which resulted in reducing the carrying value of the loan to zero and recording $4.0 million of a recovery of provision for losses and $4.3 million of interest income.

In some instances, we have a further obligation to fund additional amounts under our loan arrangements; we refer to these funding commitments as Unfunded Loan Commitments. At September 30, 2007, we had 15 such Unfunded Loan Commitments for a total future funding obligation of $237.6 million.

In connection with the loan portfolio, at September 30, 2007, we have deferred origination fees, net of direct costs of $2.7 million which are being amortized into income over the life of the loans.

At September 30, 2007, we had $26.4 million included in deposits and other receivables which represented loans that were satisfied and repaid prior to September 30, the proceeds of which had not been remitted to us by our servicers at quarter end.

Quarterly, management reevaluates the reserve for possible credit losses based upon our current portfolio of loans. Each loan in our portfolio is evaluated using our loan risk rating system which considers loan-to-value, debt yield, cash flow stability, exit plan, loan sponsorship, loan structure and any other factors necessary to assess the likelihood of delinquency or default. If we believe that there is a potential for delinquency or default, a downside analysis is prepared to estimate the value of the collateral underlying our loan, and this potential loss is multiplied by the default likelihood. Management performed its customary detailed review of the entire portfolio for September 30, 2007 and concluded that a reserve for possible credit losses was not warranted.

5.Total Return Swaps

Total return swaps are derivative contracts in which one party agrees to make payments that replicate the total return of a defined underlying asset, typically in return for another party agreeing to bear the risk of performance of the defined underlying asset. Under our current total return swaps, we bear the risk of performance of the underlying asset and receive payments from our counterparty as compensation. In effect, these total return swaps allow us to receive the leveraged economic benefits of asset ownership without our acquiring, or our counterparty selling, the actual underlying asset. Our total return swaps reference commercial real estate loans and contain a put provision whereby our counterparty has the right to require us to buy the entire reference loan at its par value under certain reference loan performance scenarios. The put obligation imbedded in these arrangements constitutes a recourse obligation for us to perform under the terms of the contract.

Activity relating to our total return swaps for the nine months ended September 30, 2007 was as follows ($ values in thousands):

								Weighted Average
	Fair Market Value (Book Value)		Cash Collateral		Reference/Loan Participation		Number of Investments	Yield(1)		Maturity (Years) (2)
December 31, 2006	$	1,815	$	1,815	$	40,000	2	20.55	%	1.4
Originations- Nine Months	—		—		—		—	—		—
Repayments- Nine Months	1,815		1,815		20,000		1	—		—
September 30, 2007(3)	$	—	$	—	$	20,000	1	—		—

(1) Calculations based on LIBOR of 5.12% as of September 30, 2007 and LIBOR of 5.32% as of December 31, 2006.

(2) Maturity (years) based on initial maturity date of the commitments.

(3) The total return swaps currently have no outstanding balance and a $3.0 million unfunded commitment exists.

The total return swaps are treated as non-hedge derivatives for accounting purposes and, as such, changes in their market value are recorded through the consolidated statements of income. At September 30, 2007, our total return swaps were valued at par and no such consolidated statement of income impact was recorded.

13

6.Equity Investment in Unconsolidated Subsidiaries

Pursuant to a venture agreement with a joint venture partner, or the Venture Agreement, entered into in 2000 and subsequently amended in 2003, we have co-sponsored two private equity funds:  CT Mezzanine Partners II LP and CT Mezzanine Partners III, Inc., or Fund II and Fund III, respectively. On March 30, 2007, Fund II was liquidated and as of September 30, 2007, Fund III is the only active fund operating under the aforementioned joint venture. We are a co-investor in  Fund III and our wholly-owned subsidiary, CTIMCO, serves as the investment manager to the fund. The fund has concluded its investment period and is liquidating in the ordinary course. In connection with entering into the Venture Agreement and the formation of the funds, we capitalized certain costs. These costs are being amortized over the expected life of the fund.

In September 2006, we made a founding equity investment in Bracor. During the third quarter of 2007, we increased our commitment in Bracor by $15.0 million. Our total commitment is $30.0 million and at September 30, 2007, we had funded $15.0 million of our commitment. Bracor is owned 24% by us, 47% by Equity International Properties, Ltd., or EIP, and 29% by third parties. Our chairman, Sam Zell, is the chairman of EIP and has an ownership position in EIP. Bracor’s operations are conducted in Brazilian Reais and changes in the USD/Reais exchange rate will impact the carrying value of our investment. At September 30, 2007, the currency translation adjustment for our investment was $812,000 that included a $810,000 change for the nine months ended September 30, 2007 and was recorded as an adjustment to accumulated other comprehensive income/(loss) in shareholders’ equity. Our share of profits and losses from Bracor will be reported one quarter subsequent to the period earned by Bracor.

Activity relating to our equity investment in unconsolidated subsidiaries for the nine months ended September 30, 2007 was as follows ($ values in thousands):

	Fund II			Fund II GP			Fund III			Bracor(1)			Total
Equity Investment
Beginning Balance	$	635		$	573		$	2,929		$	5,675		$	9,812
Equity investment	—			—			—			9,122			9,122
Company portion of income/(loss)	(152		)	(534		)	271			(641		)	(1,056		)
Currency translation adjustments	—			—			—			810			810
Amortization of capitalized costs	—			—			—			—			—
Distributions from funds	(483		)	—			(1,558		)	—			(2,041		)
Ending Balance	$	—		$	39		$	1,642		$	14,966		$	16,647
Capitalized Costs
Beginning Balance	$	1,264		$	—		$	368		$	41		$	1,673
Capitalized costs	—			—			—			115			115
Amortization of capitalized costs	(1,264		)	—			(114		)	—			(1,378		)
Ending Balance	$	—		$	—		$	254		$	156		$	410
Total Balance	$	—		$	39		$	1,896		$	15,122		$	17,057

(1) Includes $258,000 of additional basis that represents a difference between our share of net assets at Bracor and our carrying value.

During 2007, in conjunction with the liquidation of Fund II, we received our final payment of incentive fees from the fund of $962,000, bringing total incentive fees paid to us from Fund II to $10.6 million. In addition, during the first quarter of 2007, we expensed the remaining capitalized cost associated with Fund II, $1.3 million from our consolidated balance sheet and $384,000 through our equity interest in Fund II GP.

14

7.Debt

At September 30, 2007 and December 31, 2006, we had $2.3 billion and $2.0 billion of total debt outstanding, respectively. The balances of each category of debt and their respective coupons and all in effective costs, including the amortization of fees and expenses were as follows ($ values in thousands):

	September 30, 2007								December 31, 2006
	Face Value		Book Value		Coupon(1)		All In Cost		Face Value		Book Value		Coupon(1)		All In Cost
Repurchase Obligations	$	888,877	$	888,877	6.02	%	6.27	%	$	704,444	$	704,444	6.34	%	6.53	%
Collateralized Debt Obligations
CDO I (Floating)	252,778		252,778		5.74	%	6.19	%	252,778		252,778		5.94	%	6.39	%
CDO II (Floating)	298,913		298,913		5.61	%	5.84	%	298,913		298,913		5.81	%	6.04	%
CDO III (Fixed)	261,102		263,031		5.22	%	5.35	%	264,594		266,754		5.22	%	5.25	%
CDO IV (Floating)(2)	380,529		380,529		5.58	%	5.66	%	394,055		394,055		5.74	%	5.81	%
Total CDOs	1,193,322		1,195,251		5.54	%	5.75	%	1,210,340		1,212,500		5.69	%	5.86	%
Senior Unsecured Credit Facility	75,000		75,000		6.62	%	6.93	%	—		—		—		—
Junior Subordinated Debentures	128,875		128,875		7.20	%	7.30	%	51,550		51,550		7.45	%	7.53	%
Total	$	2,286,074	$	2,288,003	5.86	%	6.08	%	$	1,966,334	$	1,968,494	5.97	%	6.15	%

(1) Calculations based on LIBOR of 5.12% as of September 30, 2007 and LIBOR of 5.32% as of December 31, 2006.

(2) Comprised of $365.8 million of floating rate notes sold and $14.7 million of fixed rate notes sold.

Repurchase Obligations

At September 30, 2007, we were party to nine master repurchase agreements with nine counterparties that provide total commitments of $1.8 billion. At September 30, 2007, we borrowed $794.5 million under these agreements and had the ability to borrow an additional $159.0 million without pledging additional collateral.

We were also a party to asset specific repurchase obligations. The term of these agreements are generally one year or less and advance rates are up to 75% with cash costs ranging from LIBOR plus 0.20% to LIBOR plus 2.50%. At September 30, 2007, these asset specific repurchase obligations represent borrowings of $94.4 million and we had the ability to borrow an additional $7.1 million without pledging additional collateral.

In total our borrowings at September 30, 2007 under repurchase agreements were $888.9 million and we had the ability to borrow an additional $166.1 million without pledging additional collateral.

In July 2007, we entered into a master repurchase agreement with Citigroup Financial Products Inc. and Citigroup Global Markets Inc.  The agreement provides for a maximum aggregate commitment of $250 million with a rolling one-year term and individual financing commitments of up to three years.  The agreement is designed to provide us with recourse financing for our general loan and securities investment activity.  Under the agreement, advance rates are up to 92.0% and cash costs of funds range from LIBOR plus 0.40% to LIBOR plus 2.00%.  At September 30, 2007, we had incurred borrowings under the agreement of $10.2 million.

In February 2007, we amended and restated our master repurchase agreements with Bear Stearns & Co., Inc. increasing the combined commitment by $250 million to $450 million. The agreements expire in August 2008 and are designed to finance, on a recourse basis, our general investment activity as well as assets designated for one or more of our CDOs. Under the agreements, advance rates are up to 85.0% and cash costs of funds range from LIBOR plus 0.65% to LIBOR plus 1.25%. At September 30, 2007, we had incurred borrowings under the agreements of $342.7 million and had the ability to borrow an additional $300,000 against the assets collateralizing the borrowings under the agreement.

15

7.Debt, continued

In February 2007, we amended and restated one of our master repurchase agreements with Morgan Stanley increasing the commitment by $100 million to $300 million. The agreement expires in July 2009 and is designed to finance, on a recourse basis, our general investment activity. Under the agreement, advance rates are up to 85.0% and cash costs of funds range from LIBOR plus 1.00% to LIBOR plus 2.00%. At September 30, 2007, we had incurred borrowings under the agreements of $108.9 million and had the ability to borrow an additional $127.6 million against the assets collateralizing the borrowings under the agreements.

Collateralized Debt Obligations

At September 30, 2007, we had CDOs outstanding from four separate issuances with a total face value of $1.2 billion. Our existing CDOs are financing vehicles for our assets and, as such, are consolidated on our balance sheet, representing the amortized sales price of the securities we sold to third parties. In total, our two reinvesting CDOs provide us with $551.7 million of debt financing at a cash cost of LIBOR plus 0.55% (5.67% at September 30, 2007) and an all in effective interest rate (including the amortization of issuance costs) of LIBOR plus 0.87% (6.00% at September 30, 2007). Our two static CDOs provide us with $643.6 million of financing with a cash cost of 5.43% and an all in effective interest rate of 5.53% at September 30, 2007. On a combined basis, our CDOs provide us with $1.2 billion of non-recourse, non-mark-to-market, index matched financing at a weighted average cash cost of 0.42% over the applicable index (5.54% at September 30, 2007) and a weighted average all in cost of 0.63% over the applicable index (5.75% at September 30, 2007).

Senior Unsecured Credit Facility

In March 2007, we closed a $50 million senior unsecured revolving credit facility with WestLB AG, which we amended in June 2007, increasing the size to $100 million and adding new lenders to the syndicate. The facility has an initial term of one year (with a one year term out provision at our option) and a maximum term of four years (including extension options). The facility bears interest at LIBOR plus 1.50% (LIBOR plus 1.81% on an all in basis) and we expect to use the facility borrowings for general corporate purposes and working capital needs, including providing additional flexibility for funding loan originations. At September 30, 2007, we had borrowed $75 million under this facility.

Junior Subordinated Debentures

At September 30, 2007, we had a total of $128.9 million of junior subordinated debentures outstanding (that back $125 million of trust preferred securities sold to third parties). Junior subordinated debentures are comprised of two issuances of debentures, $77.3 million backing $75 million of trust preferred securities sold to third parties in March 2007 and $51.6 million backing $50 million of trust preferred securities sold to third parties in 2006. On a combined basis the securities provide us with $125 million of financing at a cash cost of 7.20% and an all in effective rate of 7.30%.

In March 2007, our statutory trust subsidiary, CT Preferred Trust II sold $75 million of trust preferred securities to third parties and $2.3 million common securities to us. The trust preferred securities have a 30 year term, maturing in April 2037, are redeemable at par on or after April 30, 2012 and pay distributions at a fixed rate of 7.03% (or 7.14% including the amortization of fees and expenses) for the first ten years ending April 2017, and thereafter, at a floating rate of three month LIBOR plus 2.25%.

Our interests in CT Preferred Trust I and CT Preferred Trust II are accounted for using the equity method and the assets and liabilities are not consolidated into our financial statements due to our determination that CT Preferred Trust I and CT Preferred Trust II are variable interest entities under FIN 46 and that we are not the primary beneficiary of the entities.  Interest on the junior subordinated debentures is included in interest and related expenses on our consolidated statements of income while the junior subordinated notes are presented as a separate item in our consolidated balance sheet.

8.Participations Sold

Participations sold represent interests in loans that we originated and subsequently sold to CT Large Loan 2006, Inc and third parties. We present these sold interests as both assets and liabilities (in equal amounts) in conformity with GAAP on the basis that these arrangements do not qualify as sales under FAS 140. At September 30, 2007, we had six such participations sold with a total book balance of $332.6 million at a weighted average coupon of LIBOR plus 3.24% (8.36% at September 30, 2007) and a weighted average yield of LIBOR plus 3.25% (8.37% at September 30, 2007).

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8. Participations Sold, continued

The income earned on the loans is recorded as interest income and an identical amount is recorded as interest expense on the consolidated statements of income.

9.Derivative Financial Instruments

To manage interest rate risk, we typically employ interest rate swaps or other arrangements, to convert a portion of our floating rate debt to fixed rate debt in order to index match our assets and liabilities. The net payments due under these swap contracts are recognized as interest expense over the life of the contracts.

During the nine months ended September 30, 2007, we paid $153,000 to counterparties in settlement of two interest rate swaps. Recognition of this settlement has been deferred and is being amortized over the remaining life of the previously hedged item using an approximation of the level yield basis.

The following table summarizes the notional and fair values of our derivative financial instruments as of September 30, 2007. The notional value provides an indication of the extent of our involvement in the instruments at that time, but does not represent exposure to credit or interest rate risk ($ values in thousands):

Hedge	Type	Notional Value		Interest Rate		Maturity	Fair Value
Swap	Cash Flow Hedge	$	319,250	5.10	%	2015	$	(2,924	)
Swap	Cash Flow Hedge	73,893		4.58	%	2014	632
Swap	Cash Flow Hedge	18,782		3.95	%	2011	439
Swap	Cash Flow Hedge	18,270		5.14	%	2014	(299		)
Swap	Cash Flow Hedge	16,894		4.83	%	2014	45
Swap	Cash Flow Hedge	16,377		5.52	%	2018	(624		)
Swap	Cash Flow Hedge	13,861		5.05	%	2016	(81		)
Swap	Cash Flow Hedge	12,310		5.02	%	2009	(119		)
Swap	Cash Flow Hedge	8,007		4.77	%	2011	(28		)
Swap	Cash Flow Hedge	7,062		5.10	%	2016	(69		)
Swap	Cash Flow Hedge	6,328		4.78	%	2007	6
Swap	Cash Flow Hedge	5,104		5.18	%	2016	(75		)
Swap	Cash Flow Hedge	4,134		4.76	%	2007	4
Swap	Cash Flow Hedge	3,325		5.45	%	2015	(110		)
Swap	Cash Flow Hedge	2,870		5.08	%	2011	(46		)
Swap	Cash Flow Hedge	780		5.31	%	2011	(18		)
Total/Weighted Average		$	527,247	4.98	%	2014	$	(3,267	)

As of September 30, 2007, the derivative financial instruments were reported at their fair value of $1.1 million as interest rate hedge assets and $4.4 million as interest rate hedge liabilities. Income and expense associated with these instruments is recorded as interest and related expenses on our consolidated statements of income. The amount of hedge ineffectiveness was not material during any of the periods presented.

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10.Earnings Per Share

The following table sets forth the calculation of Basic and Diluted EPS for the nine months ended September 30, 2007 and 2006 (in thousands, except share and per share amounts):

	Nine Months Ended September 30, 2007					Nine Months Ended September 30, 2006
	Net Income		Shares	Per Share Amount		Net Income		Shares	Per Share Amount
Basic EPS:
Net earnings per share of common stock	$	55,727	17,555,724	$	3.17	$	38,577	15,394,663	$	2.51
Effect of Dilutive Securities:
Options outstanding for the purchase of common stock	—		164,157			—		147,643
Diluted EPS:
Net earnings per share of common stock and assumed conversions	$	55,727	17,719,881	$	3.14	$	38,577	15,542,306	$	2.48

The following table sets forth the calculation of Basic and Diluted EPS for the three months ended September 30, 2007 and 2006 (in thousands, except share and per share amounts):

	Three Months Ended September 30, 2007					Three Months Ended September 30, 2006
	Net Income		Shares	Per Share Amount		Net Income		Shares	Per Share Amount
Basic EPS:
Net earnings per share of common stock	$	15,497	17,594,047	$	0.88	$	13,437	15,407,132	$	0.87
Effect of Dilutive Securities:
Options outstanding for the purchase of common stock	—		123,235			—		178,748
Diluted EPS:
Net earnings per share of common stock and assumed conversions	$	15,497	17,717,282	$	0.87	$	13,437	15,585,880	$	0.86

11.Income Taxes

We made an election to be taxed as a REIT under Section 856(c) of the Internal Revenue Code of 1986, as amended, commencing with the tax year ending December 31, 2003. As a REIT, we generally are not subject to federal income tax except for the operations of our taxable REIT subsidiary, CTIMCO. To maintain qualification as a REIT, we must distribute at least 90% of our REIT taxable income to our shareholders and meet certain other requirements. If we fail to qualify as a REIT in any taxable year, we will be subject to federal, state and local income tax on our taxable income at regular corporate rates. Under certain circumstances, federal income and excise taxes may be due on our undistributed taxable income. At September 30, 2007, we were in compliance with all REIT requirements.

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12.Shareholders’ Equity

On September 14, 2007, we declared a dividend of approximately $14.0 million, or $0.80 per share of common stock applicable to the three-month period ended September 30, 2007, which was paid on October 15, 2007 to shareholders of record on September 30, 2007.

On June 15, 2007, we declared a dividend of approximately $14.0 million, or $0.80 per share of common stock applicable to the three-month period ended June 30, 2007, which was paid on July 13, 2007 to shareholders of record on June 30, 2007.

On February 28, 2007, we declared a dividend of approximately $14.0 million, or $0.80 per share of common stock applicable to the three-month period ended March 31, 2007, which was paid on April 13, 2007 to shareholders of record on March 31, 2007.

13.Employee Benefit and Incentive Plans

We had four incentive plans in effect at September 30, 2007:  (1) the second amended and restated 1997 long-term incentive stock plan, or 1997 Employee Plan, (2) the amended and restated 1997 non-employee director stock plan, or 1997 Director Plan, (3) the amended and restated 2004 long-term incentive plan, or 2004 Employee Plan and (4) the 2007 long-term incentive plan, or 2007 Plan. Activity under these four plans for the nine month period ended September 30, 2007 is summarized in the chart below in share and share equivalents:

Benefit Type	1997 Employee Plan		1997 Director Plan		2004 Employee Plan		2007 Long Term Incentive Plan	Total
Options(1)
Beginning Balance	323,457		76,668		—		—	400,125
Granted	—		—		—		—	—
Exercised	(47,979	)	(8,334	)	—		—	(56,313	)
Canceled	(1,667	)	—		—		—	(1,667	)
Ending Balance	273,811		68,334		—		—	342,145
Restricted Stock(2)
Beginning Balance	—		—		480,967		—	480,967
Granted	—		—		23,015		—	23,015
Vested	—		—		(80,051	)	—	(80,051	)
Forfeited	—		—		—		—	—
Ending Balance	—		—		423,931		—	423,931
Stock Units(3)
Beginning Balance	—		73,848		—		—	73,848
Granted	—		6,169		—		8,632	14,801
Converted	—		—		—		—	—
Ending Balance	—		80,017		—		8,632	88,649
Total Outstanding Shares	273,811		148,351		423,931		8,632	854,725

(1)All options are fully vested as of September 30, 2007.

(2)Comprised of both performance based awards that vest upon the attainment of certain common equity return thresholds and time based awards that vest based upon an employee’s continued employment on vesting dates.

(3)Stock units are granted to certain members of our board of directors in lieu of cash compensation for services and in lieu of dividends earned on previously granted stock units.

At our 2007 annual meeting of shareholders held on June 7, 2007, the shareholders approved the adoption of the 2007 Plan. Under the 2007 Plan, a maximum of 700,000 shares of class A common stock may be issued. Effective upon the adoption of shareholders no future awards will occur under our prior plans. At September 30, 2007, there were 691,368 shares available under the 2007 Plan.

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13.Employee Benefit and Incentive Plans, continued

The following table summarizes the outstanding options as of September 30, 2007:

	Options Outstanding		Weighted Average Exercise Price per Share				Weighted Average Remaining Life
Exercise Price per Share	1997 Employee Plan	1997 Director  Plan	1997 Employee Plan		1997 Director  Plan		1997 Employee Plan	1997 Director Plan
$10.00 - $15.00	43,530	—	$	13.41	$	—	3.26	—
$15.00 - $20.00	143,613	—	16.43		—		3.59	—
$20.00 - $30.00	86,668	68,334	28.85		30.00		0.54	0.33
Total/W. Average	273,811	68,334	$	19.88	$	30.00	2.57	0.33

In addition to the equity interests detailed above, we have granted percentage interests in the incentive compensation received by us from certain investment management vehicles that we manage. At September 30, 2007, we had granted to employees, net of forfeitures, 43% of such incentive compensation received by us from Fund III.

14.Supplemental Disclosures for Consolidated Statements of Cash Flows

Interest paid on our outstanding debt during the nine months ended September 30, 2007 and 2006 was $119.1 million and $70.6 million, respectively. Income taxes recovered (paid) by us during the nine months ended September 30, 2007 and 2006 were $1.5 million and ($197,000), respectively. Non-cash investing and financing activity during the nine months ended September 30, 2007 resulted from investments we made in loans where we sold participations. During the period, we sold $240.7 million of such participations and recorded repayments of $117.5 million on participations previously sold.

At September 30, 2007, we had $26.4 million included in deposits and other receivables which represented loans that were satisfied and repaid prior to September 30, 2007, the proceeds of which had not been remitted to us by our servicers. The reclassification from loans receivable to deposits and other receivables resulted in a non-cash investing activity.

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15.Segment Reporting

We have two reportable segments. We have an internal information system that produces performance and asset data for the two segments along service lines.

The “Balance Sheet Investment” segment includes all activities related to direct investment activities (including direct investments in Funds) and the financing thereof.

The “Investment Management” segment includes all activities related to investment management services provided to us and third party funds under management and includes our taxable REIT subsidiary, CTIMCO and its subsidiaries.

The following table details each segment’s contribution to our overall profitability and the identified assets attributable to each such segment for the nine months ended, and as of, September 30, 2007, respectively (in thousands):

	Balance Sheet Investment			Investment Management			Inter-Segment Activities			Total
Income from loans and other investments:
Interest and related income	$	189,801		$	1,158		$	—		$	190,959
Less: Interest and related expenses	120,008			—			—			120,008
Income from loans and other investments, net	69,793			1,158			—			70,951
Other revenues:
Management fees	—			11,787			(9,341		)	2,446
Incentive management fees	—			962			—			962
Servicing fees	—			285			—			285
Other interest income	1,095			54			(395		)	754
Total other revenues	1,095			13,088			(9,736		)	4,447
Other expenses:
General and administrative	12,812			18,012			(9,341		)	21,483
Other interest expense	—			395			(395		)	—
Depreciation and amortization	1,264			186			—			1,450
Total other expenses	14,076			18,593			(9,736		)	22,933
Recovery of provision for losses	4,000			—			—			4,000
Income/(loss) from equity investments	(508		)	(534		)	—			(1,042		)
Income (loss) before income taxes	60,304			(4,881		)	—			55,423
(Benefit) provision for income taxes	(254		)	(50		)	—			(304		)
Net (loss) income	$	60,558		$	(4,831	)	$	—		$	55,727
Total Assets	$	3,059,131		$	52,349		$	(11,933	)	$	3,099,547

All revenues, except for $4.3 million included in interest and related income, were generated from external sources within the United States. The “Investment Management” segment earned fees of $9.3 million for management of the “Balance Sheet Investment” segment and was charged $395,000 for inter-segment interest for the nine months ended September 30, 2007 which is reflected as offsetting adjustments to other interest income and other interest expense in the inter-segment activities column in the table above.

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14.Segment Reporting, continued

The following table details each segment’s contribution to our overall profitability and the identified assets attributable to each such segment for the nine months ended, and as of, September 30, 2006, respectively (in thousands):

	Balance Sheet Investment		Investment Management			Inter-Segment Activities			Total
Income from loans and other investments:
Interest and related income	$	123,862	$	—		$	—		$	123,862
Less: Interest and related expenses	72,374		—			—			72,374
Income from loans and other investments, net	51,488		—			—			51,488
Other revenues:
Management fees	—		7,846			(5,862		)	1,984
Incentive management fees	—		212			—			212
Other interest income	830		(7		)	(33		)	790
Total other revenues	830		8,051			(5,895		)	2,986
Other expenses:
General and administrative	9,467		13,101			(5,862		)	16,706
Other interest expense	—		33			(33		)	—
Depreciation and amortization	2,501		195			—			2,696
Total other expenses	11,968		13,329			(5,895		)	19,402
Income/(loss) from equity investments	1,120		(70		)	—			1,050
Income before income taxes	41,470		(5,348		)	—			36,122
(Benefit)/provision for income taxes	—		(2,455		)	—			(2,455		)
Net income (loss)	$	41,470	$	(2,893	)	$	—		$	38,577
Total Assets	$	2,269,723	$	6,481		$	(6,539	)	$	2,269,665

All revenues were generated from external sources within the United States. The “Investment Management” segment earned fees of $5.9 million for management of the “Balance Sheet Investment” segment and $33,000 for inter-segment interest for the nine months ended September 30, 2006.

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14.Segment Reporting, continued

The following table details each segment’s contribution to our overall profitability and the identified assets attributable to each such segment for the three months ended, and as of, September 30, 2007, respectively (in thousands):

	Balance Sheet Investment			Investment Management			Inter-Segment Activities			Total
Income from loans and other investments:
Interest and related income	$	63,554		$	1,158		$	—		$	64,712
Less: Interest and related expenses	43,716			—			—			43,716
Income from loans and other investments, net	19,838			1,158			—			20,996
Other revenues:
Management fees	—			2,663			(1,548		)	1,115
Servicing fees	—			173			—			173
Other interest income	304			8			(139		)	173
Total other revenues	304			2,844			(1,687		)	1,461
Other expenses:
General and administrative	2,619			5,769			(1,548		)	6,840
Other interest expense	—			139			(139		)	—
Depreciation and amortization	—			61			—			61
Total other expenses	2,619			5,969			(1,687		)	6,901
Income/(loss) from equity investments	(109		)	—			—			(109		)
Income (loss) before income taxes	17,414			(1,967		)	—			15,447
(Benefit)/provision for income taxes	—			(50		)	—			(50		)
Net income (loss)	$	17,414		$	(1,917	)	$	—		$	15,497
Total Assets	$	3,059,131		$	52,349		$	(11,933	)	$	3,099,547

All revenues were generated from external sources within the United States. The “Investment Management” segment earned fees of $1.5 million for management of the “Balance Sheet Investment” segment and $139,000 for inter-segment interest for the three months ended September 30, 2007.

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14.Segment Reporting, continued

The following table details each segment’s contribution to our overall profitability and the identified assets attributable to each such segment for the three months ended, and as of, September 30, 2006, respectively (in thousands):

	Balance Sheet Investment		Investment Management			Inter-Segment Activities			Total
Income from loans and other investments:
Interest and related income	$	46,011	$	—		$	—		$	46,011
Less: Interest and related expenses	28,838		—			—			28,838
Income from loans and other investments, net	17,173		—			—			17,173
Other revenues:
Management fees	—		2,604			(1,856		)	748
Other interest income	500		(27		)	(33		)	440
Total other revenues	500		2,577			(1,889		)	1,188
Other expenses:
General and administrative	3,027		4,708			(1,856		)	5,879
Other interest expense	—		33			(33		)	—
Depreciation and amortization	292		65			—			357
Total other expenses	3,319		4,806			(1,889		)	6,236
Income/(loss) from equity investments	348		(20		)	—			328
Income (loss) before income taxes	14,702		(2,249		)	—			12,453
(Benefit)/provision for income taxes	—		(984		)	—			(984		)
Net income (loss)	$	14,702	$	(1,265	)	$	—		$	13,437
Total Assets	$	2,269,723	$	6,481		$	(6,539	)	$	2,269,665

All revenues were generated from external sources within the United States. The “Investment Management” segment earned fees of $1.9 million for management of the “Balance Sheet Investment” segment and $33,000 for inter-segment interest for the three months ended September 30, 2006.

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ITEM 2.                  Management’s Discussion and Analysis of Financial Condition and Results of Operations

References herein to “we,” “us” or “our” refer to Capital Trust, Inc. and its subsidiaries unless the context specifically requires otherwise.

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this quarterly report on Form 10-Q. Historical results set forth are not necessarily indicative of our future financial position and results of operations.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Our accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements. Actual results could differ from these estimates. There have been no material changes to our Critical Accounting Policies described in our annual report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2007.

Introduction

Our business model is designed to produce a mix of net interest margin from our balance sheet investments and fee income plus co-investment income from our investment management operations — with our primary goals being the generation of stable net income and the growth of our dividend. In managing our operations, we focus on originating investments, managing our portfolios and capitalizing our businesses.

Originations

We allocate investment opportunities between our balance sheet and investment management vehicles based upon our assessment of risk and return profiles, the availability and cost of capital, and applicable regulatory restrictions associated with each opportunity. The combination of balance sheet and investment management capabilities allows us to maximize the scope of opportunities upon which we can capitalize. The table below summarizes our gross originations and the allocation of opportunities between our balance sheet and the investment management business for the nine month period ended September 30, 2007 and the year ended December 31, 2006.

Gross Originations(1) (2)	Nine months ended		Year ended
(in thousands)	September 30, 2007		December 31, 2006
Balance sheet	$	1,229,557	$	2,054,233
Investment management	885,900		65,000
Total originations	$	2,115,457	$	2,119,233

(1)Includes total commitments both funded and unfunded.

(2)Includes $239,656 and $237,964 of participations sold recorded on our balance sheet relating to participations that we sold to CT Large Loan, Inc. for the nine months ended September 30, 2007 and the year ended December 31, 2006, respectively. We have included these originations in balance sheet originations and not in investment management originations in order to avoid double counting.

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Our balance sheet investments include commercial mortgage backed securities or CMBS, commercial real estate debt and related instruments, or Loans, and total return swaps which we collectively refer to as our Interest Earning Assets. Originations of Interest Earning Assets for our balance sheet for the nine months ended September 30, 2007 and the year ended December 31, 2006 are detailed in the table below:

Balance Sheet Originations	Nine months ended September 30, 2007					Year ended December 31, 2006
(in thousands)	Originations(1)		Yield(2)	LTV / Rating(3)	Originations(1)			Yield(2)	LTV / Rating(3)
CMBS	$	110,621	9.63%	BB-	$		394,703	6.45%	BBB-
Loans(4)	1,118,936		8.33	69.0%	1,655,392			9.19	72.1%
Total return swaps	—		—	—	4,138			19.55	N/A
Total / Weighted Average	$	1,229,557	8.45%		$		2,054,233	8.68%

(1)Includes total commitments both funded and unfunded.

(2)Yield on floating rate originations assumes LIBOR at September 30, 2007 and December 31, 2006, of 5.12% and 5.32%, respectively.

(3)Weighted average ratings are based on the lowest rating published by Fitch Ratings, Standard & Poor’s or Moody’s Investors Service for each security and exclude $37.9 million face value ($36.9 million book value)  of unrated equity investments in collateralized debt obligations.

(4)Includes $239,656 and $237,964 of participations sold recorded on our balance sheet relating to participations that we sold to CT Large Loan, Inc. for the nine months ended September 30, 2007 and the year ended December 31, 2006, respectively. We have included these originations in balance sheet originations and not in investment management originations in order to avoid double counting.

The table below shows our Interest Earning Assets at September 30, 2007 and December 31, 2006. In any period, the ending balance of Interest Earning Assets will be impacted not only by new balance sheet originations, but also by repayments, advances, sales and losses, if any. As the table below shows, we grew Interest Earning Assets by $420.7 million, or 16%, from year end 2006 to September 30, 2007.

Interest Earning Assets	September 30, 2007				December 31, 2006
(in thousands)	Book Value		Yield(1)	LTV / Rating(3)	Book Value(2)		Yield(1)	LTV / Rating(3)
CMBS	$	884,222	7.48%	BB+	$	810,970	7.17%	BB+
Loans	2,101,116		8.27	69.0%	1,751,898		8.96	70.4%
Total return swaps	—		—	—	1,815		20.55	N/A
Total / Weighted Average	$	2,985,338	8.04%		$	2,564,683	8.40%

(1)Yield on floating rate Interest Earning Assets assumes LIBOR at September 30, 2007 and December 31, 2006, of 5.12% and 5.32%, respectively.

(2)December 31, 2006 values do not include one non performing loan that was successfully resolved in the second quarter of 2007.

(3)Weighted average ratings are based on the lowest rating published by Fitch Ratings, Standard & Poor’s or Moody’s Investors Service for each security and exclude $36.9 million of unrated equity investments in collateralized debt obligations.

Some of our originations are not fully funded at closing, creating an obligation for us to make future fundings, which we refer to as Unfunded Loan Commitments. Typically, Unfunded Loan Commitments are part of construction or transitional loans and, as the amount of such loans has increased in our portfolio, so has the amount of our Unfunded Loan Commitments. At September 30, 2007, our gross Unfunded Loan Commitments were $237.6 million and, net of in place financing commitments from our lenders, our net Unfunded Loan Commitments were $46.9 million.

In addition to our investments in Interest Earning Assets, we have two equity investments in unconsolidated subsidiaries as of September 30, 2007. The first is an equity co-investment in a private equity fund that we manage, CT Mezzanine Partners III, Inc., or Fund III. The second is an equity investment we made in 2006 in a Brazilian net lease commercial real estate company, Bracor Investimentos Imobiliarios Ltda., or Bracor, that we helped co-found. The table below details the carrying value of those investments, as well as their capitalized costs.

Equity Investments
(in thousands)	September 30, 2007			December 31, 2006
Fund II	$	—		$	1,208
Fund III	1,642			2,929
Bracor	14,966			5,675
Capitalized costs/other	449		(1)	1,673		(2)
Total	$	17,057		$	11,485

(1)Includes $254,000 and $156,000 of capitalized costs associated with Fund III and Bracor, respectively.

(2)Includes $1.3 million, $368,000 and $41,000 associated with CT Mezzanine Partners II, LP, Fund III and Bracor, respectively.

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Asset Management

We actively manage our balance sheet portfolio and the assets held by our investment management vehicles. While our investments are primarily in the form of debt, which generally means that we have limited influence over the operations of the collateral securing our portfolios, we are aggressive in exercising the rights afforded to us as a lender. These rights can include collateral level budget approval, lease approvals, loan covenant enforcement, escrow/reserve management/collection, collateral release approvals and other rights that we may negotiate. The table below details balance sheet Interest Earning Assets loss experience for the nine months ended September 30, 2007 and the twelve months ended December 31, 2006, and the percentage of non-performing investments at September 30, 2007 and December 31, 2006.

Portfolio Performance
(in thousands)	September 30, 2007			December 31, 2006
Interest Earning Assets	$	2,985,338		$	2,564,683
Losses
$ Value	$	0		$	0
Percentage	0.0		%	0.0		%
Non-performing loans(1)
$ Value	$	0		$	2,638
Percentage	0.0		%	0.1		%

(1)At December 31, 2006, our non-performing loans were comprised of one defaulted first mortgage with an original principal balance of $8.0 million that has since been successfully resolved.

In 2005, we put in place a proprietary risk rating system to assess and track the risk of each of our loans. There was no material change to the weighted average risk rating of the portfolio between December 31, 2006 and September 30, 2007. Based upon our review of the portfolio, we concluded that a reserve for possible credit losses was not warranted on any of our loans for the nine months ended September 30, 2007.

We actively manage our CMBS investments using a combination of quantitative tools and loan/property level analysis in order to monitor the performance of the securities and their collateral versus our original expectations. Securities are analyzed on a monthly basis for delinquency, transfers to special servicing, and changes to the servicer’s watchlist population. Realized loan losses are tracked on a monthly basis and compared to our original loss expectations. On a periodic basis, individual loans of concern are also re-underwritten. Updated collateral loss projections are then compared to our original loss expectations to determine how each investment is performing. Based on our review of the portfolio, we concluded that no impairments were warranted in the nine months ended September 30, 2007.

The ratings performance of our CMBS portfolio over the nine months ended September 30, 2007 and the year ended December 31, 2006 is detailed below:

CMBS Rating Activity(1)	Nine months ended September 30, 2007	Year ended December 31, 2006
Upgrades	25	67
Downgrades	2	3

(1) Represents activity from any of Fitch Ratings, Standard & Poor’s and/or Moody’s Investors Service.

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Capitalization

Our balance sheet investment activities are capital intensive and the availability and cost of capital is a critical component of our business. We capitalize our business with a combination of debt and equity. Our debt sources, which we refer to as Interest Bearing Liabilities, currently include repurchase agreements, CDOs, a senior unsecured credit facility, and junior subordinated debentures (which we also refer to as trust preferred securities). Our equity capital is currently comprised entirely of common equity. The chart below shows our capitalization mix as of September 30, 2007 and December 31, 2006:

Capital Structure(1)
(in thousands)	September 30, 2007		December 31, 2006
Repurchase obligations	$	888,877	$	704,444
Collateralized debt obligations	1,195,251		1,212,500
Senior unsecured credit facility	75,000		—
Junior subordinated debentures	128,875		51,550
Total Interest Bearing Liabilities	$	2,288,003	$	1,968,494
All In Cost of debt(2)	6.08%		6.15%
Shareholders’ Equity	$	440,394	$	426,272
Ratio of Interest Bearing Liabilities to Shareholders’ Equity	5.2:1		4.6:1

(1)   Excludes participations sold.

(2)   Floating rate liabilities assume LIBOR at September 30, 2007 and December 31, 2006, of 5.12% and 5.32%, respectively.

We use leverage to enhance our returns on equity, attempting to:  (i) maximize the differential between the yield of our Interest Earning Assets and the cost of our Interest Bearing Liabilities, and (ii) optimize the amount of leverage employed. The use of leverage, however, adds risk to our business, magnifying our shareholders’ exposure to asset level risk by subordinating our equity interests to our debt capital providers. The level of leverage we utilize is based upon the risk associated with our assets, as well as the structure of our liabilities. In general, we will apply greater amounts of leverage to lower risk assets and vice versa. In addition, structural features of our leverage, such as recourse, mark-to-market provisions and duration, factor into the amounts of leverage we are comfortable applying to our assets. Our sources of recourse financing generally require financial covenants, including restrictions on corporate guarantees, the maintenance of certain financial ratios (such as specified debt-to-equity and debt service coverage ratios) as well as the maintenance of a minimum net worth. A summary of selected structural features of our debt as of September 30, 2007 and December 31, 2006 is detailed in the table below:

Interest Bearing Liabilities	September 30, 2007	December 31, 2006
Weighted average maturity (1)	4.2 yrs.	4.0 yrs.
% Recourse	45.9%	36.9%
% Mark-to-market	38.9%	35.8%

(1) Based upon balances as of September 30, 2007 and December 31, 2006.

Over the past few years, we have used CDOs as one method to finance our business.  While we expect to continue to utilize CDOs to finance both our balance sheet and our investment management businesses going forward, the current state of the debt capital markets makes it unlikely that, in the near term, we will be able to issue CDO liabilities similar to our existing CDOs and makes us more reliant on other financing options such as our repurchase facilities.  Unlike our CDOs, our repurchase facilities are shorter term, mark-to-market, recourse liabilities.  Given the additional liquidity risks associated with a portfolio of assets financed with these types of liabilities, we believe that a higher degree of balance sheet liquidity is necessary to manage these liabilities.

Our CDOs are non-recourse, non-mark-to-market, index matched financings that generally carry a lower cost of debt and allow for higher levels of leverage than our other financing sources. During the first nine months of 2007, we did not issue any new CDOs for our balance sheet, however, we continued contributing assets to our previously issued reinvesting CDOs, which have reinvestment periods extending through July 2008 for CDO I and April 2010 for CDO II. Our CDO liabilities as of September 30, 2007 and December 31, 2006 are described below:

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Collateralized Debt Obligations			September 30, 2007				December 31, 2006
(in thousands)	Issuance Date	Type	Book Value		All in Cost		Book Value		All in Cost
CDO I(1)	7/20/04	Reinvesting	$	252,778	6.19	%	$	252,778	6.39	%
CDO II (1)	3/15/05	Reinvesting	298,913		5.84		298,913		6.04
CDO III	8/04/05	Static	263,031		5.35		266,754		5.25
CDO IV(1)	3/15/06	Static	380,529		5.66		394,055		5.81
Total			$	1,195,251	5.75	%	$	1,212,500	5.86	%

(1)Floating rate CDO liabilities assume LIBOR at September 30, 2007 and December 31, 2006, of 5.12% and 5.32%, respectively.

Repurchase obligation financings provide us with an important revolving component to our liability structure. Our repurchase agreements provide stand alone financing for certain assets and interim, or warehouse financing for assets that we plan to contribute to our CDOs. At any point in time, the amounts and the cost of our repurchase borrowings are based upon the assets being financed — higher risk assets will attract lower levels of leverage at higher costs and vice versa. The table below summarizes our repurchase agreement liabilities as of September 30, 2007 and December 31, 2006:

Repurchase Agreements

($ in thousands)	September 30, 2007			December 31, 2006
Repurchase commitments	$	1,800,000		$	1,200,000
Counterparties	9			7
Outstanding repurchase borrowings	$	888,877		$	704,444
All in cost	L + 1.15		%	L + 1.21		%

In March 2007, we closed a $50 million senior unsecured revolving credit facility with WestLB AG, which we amended in June 2007, increasing the size to $100 million and adding new lenders to the syndicate. The facility has an initial term of one year (with a one year term out provision at our option) and a maximum term of four years (including extension options). The facility has a cash cost of LIBOR plus 1.50% (LIBOR plus 1.81% on an all-in effective basis) and we expect to use the facility borrowings for general corporate purposes and working capital needs, including providing additional flexibility for funding loan originations. At September 30, 2007, we had borrowed $75 million under this facility.

The most subordinated component of our debt capital structure are junior subordinated debentures that back trust preferred securities issued to third parties. These securities represent long term, subordinated, unsecured financing and generally carry limited operational covenants. At September 30, 2007 we had issued $128.9 million of junior subordinated debentures that back $125 million of trust preferred securities sold to third parties in two separate issuances. On a combined basis, the junior subordinated debentures provide us with financing at a cash cost of 7.20% and an all in effective rate of 7.30%. In March 2007, our statutory trust subsidiary, CT Preferred Trust II sold $75 million of trust preferred securities to third parties and $2.3 million common securities to us. These trust preferred securities have a 30 year term, maturing in April 2037, are redeemable at par on or after April 30, 2012 and pay distributions at a cash cost of 7.03% and an all-in effective rate of 7.14% for the first ten years ending April 2017, and thereafter, at a floating rate of three month LIBOR plus 2.25%.

During the first nine months of 2007 we did not raise new common equity. Changes in the number of shares resulted from option exercises, restricted stock grants and vesting, stock unit grants, and the purchase of the healthcare loan origination platform.

Shareholders’ Equity

	September 30, 2007		December 31, 2006
Book value (in thousands)	$	440,394	$	426,272
Shares
Class A common stock	17,085,528		16,932,892
Restricted stock	423,931		480,967
Stock units	88,649		73,848
Options(1)	131,066		230,399
Total	17,729,174		17,718,106
Book value per share	$	24.84	$	24.06

(1)Dilutive shares issuable upon the exercise of outstanding options assuming a September 30, 2007 stock price and the treasury stock method.

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At September 30, 2007, we had 17,509,459 of our class A common stock outstanding including unearned restricted stock.

Other Balance Sheet Items

Participations sold represent interests in loans that we originated and subsequently sold to CT Large Loan 2006, Inc. and third parties. We present these sold interests as both assets and liabilities (in equal amounts) in conformity with GAAP on the basis that these arrangements do not qualify as sales under FAS 140. At September 30, 2007, we had six such participations sold with a total book balance of $332.6 million at a weighted average yield of LIBOR plus 3.25% (8.37% at September 30, 2007). The income earned on the loans is recorded as interest income and an identical amount is recorded as interest expense on the consolidated statements of income.

Interest Rate Exposure

We endeavor to manage a book of assets and liabilities that are generally matched with respect to interest rates, typically financing floating rate assets with floating rate liabilities and fixed rate assets with fixed rate liabilities. In some cases, we finance fixed rate assets with floating rate liabilities and, in those cases, we may use interest rate derivatives, such as swaps, to effectively convert the floating rate debt to fixed rate debt. In such instances, the equity we have invested in fixed rate assets is not typically swapped, leaving a portion of our equity capital exposed to changes in value of the fixed rate assets due to interest rate fluctuations. The balance of our assets earn interest at floating rates and are financed with floating rate liabilities, leaving a portion of our equity capital exposed to cash flow variability from fluctuations in rates. Generally, these assets and liabilities earn interest at rates indexed to one month LIBOR.

The table below details our interest rate exposure as of September 30, 2007 and December 31, 2006:

Interest Rate Exposure

(in thousands)	September 30, 2007			December 31, 2006
Value Exposure to Interest Rates(1)
Fixed rate assets	$	955,907		$	1,000,942
Fixed rate liabilities	(404,744		)	(331,434		)
Interest rate swaps	(527,247		)	(560,240		)
Net fixed rate exposure	$	23,916		$	109,268
Weighted average maturity (assets)	7.7 yrs			8.2 yrs
Weighted average coupon (assets)	7.09%			7.18%
Cash Flow Exposure to Interest Rates(1)
Floating rate assets(2)	$	2,069,666		$	1,606,969
Floating rate debt less cash	(2,186,350		)	(1,816,476		)
Interest rate swaps	527,247			560,240
Net floating rate exposure	$	410,563		$	350,733
Net income impact from 100 bps change in LIBOR	$	4,106		$	3,507

(1)	All values are in terms of face or notional amounts.
(2)	December 31, 2006 values do not including one non performing loan that was successfully resolved in the second quarter of 2007.

Investment Management Overview

In addition to our balance sheet investment activities, we act as an investment manager for third parties. The purpose of our investment management business is to leverage our platform, generating fee revenue from investing third party capital and in certain instances co-investment income. Our third party investment management mandates are designed to be complementary to our balance sheet programs and are built around opportunities that we do not pursue directly on balance sheet due to their scale/concentration, risk/return profile and/or regulatory constraints. In some instances, we co-invest in our investment management vehicles (as described below). At September 30, 2007, we managed three private equity funds and one separate account through our wholly-owned, taxable, investment management subsidiary, CT Investment Management Co., LLC, or CTIMCO.

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Investment Management Mandates

							Incentive Management Fee(1)
	Type	Total Equity Commitments (in millions)		Co- Investment%		Base Management Fee	Company %		Employee %(2)
Fund III	Fund	$	425	4.71	%	1.42% (Equity)	57	%	43	%
CT Large Loan	Fund	$	325	(4	)	0.75% (Assets)(3)	N/A		N/A
CT High Grade	Sep. Acct.	$	350	0	%	0.25% (Assets)	N/A		N/A
CTX Fund	Fund	$	50	(4	)	(5)	(5	)	(5	)

(1)	Fund III earns incentive management fees of 20% of profit after a 10% preferred return on capital and a 100% return of capital, subject to a catch up.
(2)	Portions of the Fund III incentive management fees received by us have been allocated to our employees as long term performance awards.
(3)	Capped at 1.5% of equity.
(4)	We co-invest on a pari passu, asset by asset basis with CT Large Loan Fund and CTX Fund.
(5)	CTIMCO serves as collateral manager of the CDOs in which the CTX Fund invests and CTIMCO earns base and incentive management fees as CDO collateral manager.

Fund III is a co-sponsored vehicle with a joint venture partner. We have a co-investment in the fund and we split incentive management fees with our partner – our partner receives 37.5% of Fund III incentive management fees. The other funds, CT Large Loan and CTX Fund, and our separate account, CT High Grade, are exclusively sponsored by us and we do not co-invest in these vehicles. The table below describes the status of our investment management vehicles as of September 30, 2007 and December 31, 2006.

Investment Management Snapshot

(in thousands)	September 30, 2007		December 31, 2006
Fund III
Assets	$	113,928	$	194,818
Equity	$	21,790	$	50,223
Incentive fee collected	$	—	$		—
Incentive fees projected(1)	$	8,162	$	7,511
Status(2)	Liquidating		Liquidating
CT Large Loan
Assets	$	244,934	$	157,262
Equity	$	129,718	$	79,416
Status(3)	Investing		Investing
CT High Grade
Assets	$	231,598	$	64,929
Equity	$	231,598	$	64,929
Status(3)	Investing		Investing
CTX Fund
Assets(4)	$	500,000	N/A
Equity	$	7,362	N/A
Status(3)	Investing		N/A

(1)Assumes assets were sold and liabilities were settled on October 1, 2007 and January 1, 2007, respectively, at the recorded book value, and the fund’s equity and income was distributed for the respective period ends.

(2)Fund III’s investment period ended in June 2005.

(3)CT Large Loan, CT High Grade, and CTX Fund investment periods expire in May 2008, July 2008, and April 2008, respectively.

(4)Represents the total notional cash exposure to CTX CDO I collateral.

We expect to continue to grow our investment management business, sponsoring additional investment management vehicles consistent with the theme of developing mandates that are complementary to our balance sheet activities.

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Comparison of Results of Operations: Three Months Ended September 30, 2007 to September 30, 2006(in thousands, except for per share data)

	2007			2006			$	Change		% Change
Income from loans and other investments:
Interest and related income	$	64,712		$	46,011		$	18,701		40.6	%
Less: Interest and related expenses	43,716			28,838			14,878			51.6	%
Income from loans and other investments, net	20,996			17,173			3,823			22.3	%
Other revenues:
Management fees	1,115			748			367			49.1	%
Incentive management fees	—			—			—			N/A
Servicing fees	173			—			173			N/A
Other	173			440			(267		)	(60.7	)%
Total other revenues	1,461			1,188			273			23.0	%
Other expenses:
General and administrative	6,840			5,879			961			16.3	%
Depreciation and amortization	61			357			(296		)	(82.9	)%
Total other expenses	6,901			6,236			665			10.7	%
Recovery of provision for losses	—			—			—			N/A
Income/(loss) from equity investments	(109		)	328			(437		)	(133.2	)%
(Benefit)/provision for income taxes	(50		)	(984		)	934			N/A
Net income	$	15,497		$	13,437		$	2,060		15.3	%
Net income per share - diluted	$	0.87		$	0.86		$	0.01		1.2	%
Dividends per share	$	0.80		$	0.75		$	0.05		6.7	%
Average LIBOR	5.43		%	5.35		%	0.08		%	1.5	%

Income from loans and other investments

Growth in Interest Earning Assets ($803 million or 37% from September 30, 2006 to September 30, 2007) along with a 1.5% increase in average LIBOR, drove a $18.7 million (41%) increase in interest income between the third quarter of 2006 and the third quarter of 2007. These same factors, combined with generally higher levels of leverage, resulted in a $14.9 million, or 52%, increase in interest expense for the same period. On a net basis, net interest income increased by $3.8 million, or 22%, which was the primary driver of net income growth from the third quarter of 2006 to the third quarter of 2007.

Management  fees

Base management fees from the investment management business increased $367,000 (49%) during the third quarter of 2007 compared with the third quarter of 2006. The increase was attributed to increased management fees earned from CT Large Loan, new fee revenue from CT High Grade and CTX Fund, offset by declining fees increased from Fund III.

Servicing  fees

Servicing fee income during the third quarter of 2007 was $173,000 compared with no such revenue in the third quarter of 2006 as we recognized revenue relating to the servicing contracts acquired as part of our purchase of the healthcare origination platform in June 2007.

General and administrative expenses

General and administrative expenses include compensation and benefits for employees, operating expenses and professional fees. Total general and administrative expenses increased 16% between the third quarter of 2006 and the third quarter of 2007, primarily as a result of higher levels of employment costs (due primarily to the acquisition of the healthcare origination platform, which added 18 new employees) as well as increased professional fees.

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Depreciation and amortization

Depreciation and amortization decreased by $296,000 between the third quarter of 2006 and the third quarter of 2007 due primarily to the elimination of the depreciation expense associated with the remaining capitalized costs relating to an investment management joint venture that were fully amortized by the first quarter of 2007.

Income/(loss) from equity investments

The loss from equity investments in the third quarter of 2007 resulted primarily from a net loss of $157,000 at Bracor, representing our share of operating losses for the period from April 1, 2007 through June 30, 2007 (we report Bracor’s operating results on a one fiscal quarter lag). During the third quarter of 2006, income from equity investments was primarily comprised of co-investment income from Fund II and Fund III.

Income taxes

We did not pay any taxes at the REIT level in either third quarter 2006 or 2007. However, CTIMCO, our investment management subsidiary, is a taxable REIT subsidiary and subject to taxes on its earnings. In the third quarter of 2007, CTIMCO recorded an operating loss before income taxes of $2.0 million, which resulted in an income tax benefit of $955,000, $905,000 of which we reserved and $50,000 of which we recorded. In the third quarter of 2006, CTIMCO recorded an operating loss before income taxes of $2.2 million, which resulted in an income tax benefit of $984,000, which we recorded.

Net income

Net income grew by $2.1 million or 15% from the third quarter of 2006 to the third quarter of 2007, based in large part upon increased net interest income generated by a higher level of Interest Earning Assets. On a diluted per share basis, net income was $0.87 and $0.86 in the third quarter of 2007 and 2006, respectively, representing an increase of 1%, as the Company’s shares outstanding increased primarily in association with its equity offerings in November 2006.

Dividends

Our third quarter 2007 and 2006 dividends were $0.80 and $0.75 per share, respectively. The increase of $0.05 per share (7%) was driven by growth in our recurring income from operations.

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Comparison of Results of Operations: Nine Months Ended September 30, 2007 to September 30, 2006 (in thousands, except for per share data)

	2007			2006			$	Change		% Change
Income from loans and other investments:
Interest and related income	$	190,959		$	123,862		$	67,097		54.2	%
Less: Interest and related expenses	120,008			72,374			47,634			65.8	%
Income from loans and other investments, net	70,951			51,488			19,463			37.8	%
Other revenues:
Management fees	2,446			1,984			462			23.3	%
Incentive management fees	962			212			750			353.8	%
Servicing fees	285			—			285			N/A
Other	754			790			(36		)	(4.6	)%
Total other revenues	4,447			2,986			1,461			48.9	%
Other expenses:
General and administrative	21,483			16,706			4,777			28.6	%
Depreciation and amortization	1,450			2,696			(1,246		)	(46.2	)%
Total other expenses	22,933			19,402			3,531			18.2	%
Recovery of provision for losses	4,000			—			4,000			N/A
Income (loss) from equity investments	(1,042		)	1,050			(2,092		)	(199.2	)%
(Benefit) provision for income taxes	(304		)	(2,455		)	2,151			(87.6	)%
Net income	$	55,727		$	38,577		$	17,150		44.5	%
Net income per share - diluted	$	3.14		$	2.48		$	0.66		26.6	%
Dividends per share	$	2.40		$	2.05		$	0.35		17.1	%
Average LIBOR	5.36		%	5.02		%	0.34		%	6.8	%

Income from loans and other investments

Growth in Interest Earning Assets ($803 million or 37% from September 30, 2006 to September 30, 2007) and a $4.3 million interest payment from the successful resolution of our only non-performing loan, along with a 6.8% increase in average LIBOR, drove a $67.1 million (54%) increase in interest income between  2006 and 2007. These same factors, combined with generally higher levels of leverage, resulted in a $47.6 million, or 66%, increase in interest expense for the same period. On a net basis, net interest income increased by $19.5 million, or 38%, which was the primary driver of net income growth.

Management  fees

Base management fees from the investment management business increased $462,000 (23%) as management fees from CT Large Loan, new fee revenue from CT High Grade, and CTX Fund offset the decrease in the base management fees from Fund II and Fund III. Fund II paid its final base management fee to us during the first quarter of 2007.

Incentive management fees

We received a final incentive management fee distribution from Fund II of $962,000 in March 2007 as the fund’s last investment repaid and the fund was liquidated. In 2006, we received $212,000 of Fund II incentive management fees.

Servicing  fees

Servicing fee income for the nine months ended September 30, 2007 was $285,000 compared with no such revenue in the nine months ended September 30, 2006 as we recognized revenue relating to the servicing contracts acquired as part of our purchase of the healthcare origination platform in June 2007.

General and administrative expenses

General and administrative expenses include compensation and benefits for employees, operating expenses and professional fees. Total general and administrative expenses increased 29% between the nine months ended September 30, 2006 and the nine months

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ended September 30, 2007, primarily as a result of higher levels of employment costs as well as increased professional fees.

Depreciation and amortization

Depreciation and amortization decreased by $1.2 million between the nine months ended September 30, 2006 and the nine months ended September 30, 2007 due primarily to the write off of $1.8 million of capitalized costs in the third quarter of 2006 as we expensed all of the capitalized costs relating to an investment management joint venture. This was partially offset by the write off of $1.3 million of capitalized costs related to the liquidation of Fund II in the first quarter of  2007.

Recovery of provision for losses

The $4.0 million recovery recorded in the second quarter of 2007 related to the successful resolution of our only non-performing loan. We received net proceeds of $10.9 million that resulted in the following: (a) reduced the carrying value of the loan from $2.6 million to zero (b) recorded a $4.0 million recovery of a provision for losses and (c) recorded $4.3 million of interest income.

Income/(loss) from equity investments

The loss from equity investments in the nine months ended September 30, 2007 resulted primarily from the amortization of $384,000 of capitalized costs passed through to us from the general partner of Fund II and a net loss of $641,000 at Bracor, representing our share of operating losses for the period from October 1, 2006 through June 30, 2007 (we report Bracor’s operating results on a one fiscal quarter lag). During the nine months ended September 30, 2006, income from equity investments was primarily comprised of co-investment income from Fund II and Fund III.

Income taxes

$254,000 of the tax benefit recorded for the nine months ended September 30, 2007 was a result of the reversal of a tax liability reserve at Capital Trust, Inc. We did not pay any taxes at the REIT level in either the nine months ended September 30, 2006 or 2007. However, CTIMCO, our investment management subsidiary, is a taxable REIT subsidiary and subject to taxes on its earnings. In the nine months ended September 30, 2007, CTIMCO recorded an operating loss before income taxes of $4.9 million, which resulted in an income tax benefit of $3.1 million, $2,950,000 of which we reserved and $50,000 of which we recorded. In the nine months ended September 30, 2006, CTIMCO recorded an operating loss before income taxes of $5.3 million, which resulted in an income tax benefit of $2.5 million, which we recorded.

Net income

Net income grew by $17.2 million or 45% from the nine months ended September 30, 2006 to the nine months ended September 30, 2007, based in large part upon increased net interest income generated by a higher level of Interest Earning Assets and $8.3 million of income from the successful resolution of our only non performing loan. On a diluted per share basis, net income was $3.14 and $2.48 in the nine months ended September 30, 2007 and 2006, respectively, representing an increase of 27%, as the Company’s shares outstanding increased primarily in association with its equity offerings in November 2006.

Dividends

Our dividends declared for the nine months ended September 30, 2007 and 2006 were $2.40 and $2.05 per share, respectively. The increase of $0.35 or 17% was driven by growth in our recurring income from operations.

Liquidity and Capital Resources

We expect to continue to use a significant amount of our available capital resources to originate or purchase new loans and investments for our balance sheet. We intend to continue to employ leverage on our balance sheet to enhance our return on equity. At September 30, 2007, our net liquidity was as follows:

Net Liquidity

($ in thousands)	September 30, 2007
Available cash	$	23,877
Available borrowings	191,101
Net unfunded commitments	(64,948		)
Net liquidity	$	150,030

35

At September 30, 2007, we had total immediate liquidity of $218.7 million comprised of $23.9 million in cash, $3.7 million in restricted cash and $166.1 million of immediately available liquidity from our repurchase agreements ($159.0 million from master repurchase agreements and $7.1 million from asset specific repurchase agreements) and $25 million from our senior unsecured credit facility. Our primary sources of liquidity during the next 12 months are expected to be cash on hand, cash generated from operations, principal and interest payments received on loans and investments, additional borrowings under our repurchase agreements and senior unsecured credit facility, and funds raised through CDO issuances, stock offerings, junior subordinated debenture issuances and other capital raising activities. We believe these sources of capital will be adequate to meet both short term and long term cash requirements.

We experienced a net decrease in cash of $2.3 million for the nine months ended September 30, 2007, compared to a net increase of $1.7 million for the nine months ended September 30, 2006. Cash provided by operating activities during the nine months ended September 30, 2007 was $67.5 million, compared to cash provided by operating activities of $52.0 million during the same period of 2006. The change was primarily due to increased net interest income due to our increased investment originations. For the nine months ended September 30, 2007, cash used in investing activities was $333.1 million, compared to $521.7 million during the same period in 2006. The change was primarily due to our receiving $209.1 million more in principal repayments during the nine months ended September 30, 2007 compared to the nine months ended September 30, 2006, as well as originating $15.7 million more in Interest Earning Assets. For the nine months ended September 30, 2007, cash provided by financing activities was $263.4 million, compared to $471.4 million during the same period in 2006. The change was primarily due to our net borrowing activity on repurchase obligations and the proceeds in March 2006 from the issuance of CDO IV, and activity on other debt.

At September 30, 2007, under our repurchase agreements, we had pledged assets that enable us to borrow an additional $166.1 million. We had $796.5 million of credit available for the financing of new and existing unpledged assets pursuant to these sources of financing. Furthermore, at September 30, 2007, we had $25 million of liquidity available under our senior unsecured credit facility. At September 30, 2007, we had outstanding borrowings under our CDOs of $1.2 billion and outstanding repurchase obligations totaling $888.9 million. The terms of these agreements are described in Note 7 of the consolidated financial statements and in the capitalization discussion in this Item 2. Additional liquidity will be generated when assets that are currently pledged under repurchase obligations are contributed to our CDOs. CDOs generally have higher borrowing advance rates than corresponding repurchase obligations. At September 30, 2007, we had additional liquidity of $3.7 million in our CDOs in the form of restricted cash.

The following table sets forth information about certain of our contractual obligations as of September 30, 2007:

Contractual Obligations
	Payments due by period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(in thousands)
Long-Term Debt Obligations
Repurchase Obligations	$	888,877	$	458,387	$	430,490	$	—	$	—
Collateralized Debt Obligations	1,193,322		83,915		364,751		321,564		423,092
Participations Sold	332,789		130,064		161,515		—		41,210
Senior Unsecured Credit Facility	75,000		—		75,000		—		—
Junior Subordinated Debentures	128,875		—		—		—		128,875
Total Long-Term Debt Obligations	2,618,863		672,366		1,031,756		321,564		593,177
Operating Lease Obligations	15,180		975		4,041		2,780		7,384
Total	$	2,634,043	$	673,341	$	1,035,797	$	324,344	$	600,561

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

36

Impact of Inflation

Our operating results depend in part on the difference between the interest income earned on our interest-earning assets and the interest expense incurred in connection with our interest-bearing liabilities. Changes in the general level of interest rates prevailing in the economy in response to changes in the rate of inflation or otherwise can affect our income by affecting the spread between our interest-earning assets and interest-bearing liabilities, as well as, among other things, the value of our interest-earning assets and our ability to realize gains from the sale of assets and the average life of our interest-earning assets. Interest rates are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations, and other factors beyond our control. We employ the use of correlated hedging strategies to limit the effects of changes in interest rates on our operations, including engaging in interest rate swaps and interest rate caps to minimize our exposure to changes in interest rates. There can be no assurance that we will be able to adequately protect against the foregoing risks or that we will ultimately realize an economic benefit from any hedging contract into which we enter.

Note on Forward-Looking Statements

Except for historical information contained herein, this quarterly report on Form 10-Q contains forward-looking statements within the meaning of the Section 21E of the Securities and Exchange Act of 1934, as amended, which involve certain risks and uncertainties. Forward-looking statements are included with respect to, among other things, our current business plan, business and investment strategy and portfolio management. These forward-looking statements are identified by their use of such terms and phrases as “intends,” “intend,” “intended,” “goal,” “estimate,” “estimates,” “expects,” “expect,” “expected,” “project,” “projected,” “projections,” “plans,” “anticipates,” “anticipated,” “should,” “designed to,” “foreseeable future,” “believe,” “believes” and “scheduled” and similar expressions. Our actual results or outcomes may differ materially from those anticipated. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. We assume no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Important factors that we believe might cause actual results to differ from any results expressed or implied by these forward-looking statements are discussed in the cautionary statements contained in Exhibit 99.1 to this Form 10-Q, which are incorporated herein by reference. In assessing forward-looking statements contained herein, readers are urged to read carefully all cautionary statements contained in this Form 10-Q.

37

ITEM 3.Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

The principal objective of our asset/liability management activities is to maximize net interest income, while managing levels of interest rate risk. Net interest income and interest expense are subject to the risk of interest rate fluctuations. In certain instances, to mitigate the impact of fluctuations in interest rates, we use interest rate swaps to effectively convert variable rate liabilities to fixed rate liabilities for proper matching with fixed rate assets. The swap agreements are generally held-to-maturity and we do not use interest rate derivative financial instruments for trading purposes. The differential to be paid or received on these agreements is recognized as an adjustment to the interest expense related to debt and is recognized on the accrual basis.

Credit Risk

Our loans and investments, including our fund investments, are also subject to credit risk. The ultimate performance and value of our loans and investments depends upon the owner’s ability to operate the properties that serve as our collateral so that they produce cash flows adequate to pay interest and principal due us. To monitor this risk, our asset management team continuously reviews the investment portfolio and in certain instances is in constant contact with our borrowers, monitoring performance of the collateral and enforcing our rights as necessary.

The following table provides information about our financial instruments that are sensitive to changes in interest rates at September 30, 2007. For financial assets and debt obligations, the table presents cash flows (in certain cases, face adjusted for expected losses) to the expected maturity and weighted average interest rates. For interest rate swaps, the table presents notional amounts and weighted average fixed pay and variable receive interest rates by contractual maturity dates. Notional amounts are used to calculate the contractual cash flows to be exchanged under the contract. Weighted average variable rates are based on rates in effect as of the reporting date.

38

	Expected Maturity Dates
	2007			2008			2009			2010			2011			Thereafter			Total			Fair Value
	(dollars in thousands )
Assets:
CMBS
Fixed Rate	$	5,460		$	48,192		$	6,866		$	16,596		$	76,232		$	578,457		$	731,803		$	691,179
Average interest rate	6.90		%	6.39		%	7.65		%	7.00		%	7.47		%	6.56		%	6.68		%
Variable Rate	$	10,163		$	24,877		$	29,419		$	86,765		—			$	20,142		$	171,366		$	161,853
Average interest rate	7.07		%	6.83		%	7.45		%	9.18		%	—			11.02		%	8.63		%
Loans receivable
Fixed Rate	$	464		$	61,385		$	17,967		$	1,997		$	24,864		$	96,813		$	203,490		$	211,732
Average interest rate	9.19		%	10.68		%	8.52		%	8.23		%	8.42		%	7.38		%	8.62		%
Variable Rate	$	121,605		$	941,177		$	570,814		$	118,557		$	10,429		$	135,421		$	1,898,003		$	1,871,794
Average interest rate	8.58		%	7.96		%	8.08		%	8.93		%	7.87		%	8.19		%	8.11		%
Total return swaps
Variable Rate	—			—			—			—			—			—			—			—
Average interest rate	—			—			—			—			—			—			—			—
Interest rate swaps
Notional amounts	$	14,204		$	41,825		$	49,553		$	14,280		$	50,023		$	357,362		$	527,247		$	(3,267	)
Average fixed pay rate	4.80		%	5.08		%	4.77		%	5.04		%	4.66		%	5.04		%	4.98		%
Average variable receive rate	5.12		%	5.12		%	5.12		%	5.12		%	5.12		%	5.12		%	5.12		%
Liabilities:
Repurchase obligations
Variable Rate	$	73,387		$	591,715		$	202,525		$	21,250		—			—			$	888,877		$	888,877
Average interest rate	5.78		%	5.97		%	6.26		%	6.12		%	—			—			6.02		%
CDOs
Fixed Rate	$	295		$	6,539		$	4,396		$	2,603		$	38,609		$	223,428		$	275,870		$	261,707
Average interest rate	6.82		%	5.52		%	5.69		%	5.28		%	5.10		%	5.33		%	5.31		%
Variable Rate	$	11,476		$	121,226		$	201,423		$	151,803		$	191,314		$	240,210		$	917,452		$	869,816
Average interest rate	5.50		%	5.47		%	5.74		%	5.53		%	5.71		%	5.58		%	5.62		%
Senior unsecured credit facility
Variable Rate	—			$	75,000		—			—			—			—			$	75,000		$	75,000
Average interest rate	—			6.62		%	—			—			—			—			6.62		%
Junior Subordinated Debentures
Fixed Rate	—			—			—			—			—			$	128,875		$	128,875		$	103,891
Average interest rate	—			—			—			—			—			7.20		%	7.20		%
Participations sold
Variable Rate	—			$	165,064		$	97,465		$	29,050		—			$	41,210		$	332,789		$	328,171
Average interest rate	—			7.83		%	8.77		%	9.62		%	—			8.62		%	8.36		%

39

ITEM 4.Controls and Procedures

Evaluation of Disclosure Controls and Procedures

An evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (“the Exchange Act”) as of the end of the period covered by this quarterly report was made under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (a) are effective to ensure that information required to be disclosed by us in reports filed or submitted under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified  by Securities and Exchange Commission rules and forms and (b) include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submitted under the Securities Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls

There have been no significant changes in our “internal control over financial reporting” (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the period covered by this quarterly report that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

40

PART II. OTHER INFORMATION

ITEM 1:Legal Proceedings

None

ITEM 1A:Risk Factors

In addition to the other information discussed in this quarterly report on Form 10-Q, please consider the risk factors provided in our updated risk factors attached as Exhibit 99.1 which could materially affect our business, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may adversely affect our business, financial condition or operating results.

ITEM 2:Unregistered Sales of Equity Securities and Use of Proceeds

None.

ITEM 3:Defaults Upon Senior Securities

None.

ITEM 4:Submission of Matters to a Vote of Security Holders

None.

ITEM 5:Other Information

None.

41

ITEM 6:Exhibits

•*	10.1	Master Repurchase Agreement, dated as of July 30, 2007, by and among Capital Trust, Inc., Citigroup Global Markets Inc. and Citigroup Financial Products Inc.
+	10.2	Capital Trust, Inc. 2007 Long-Term Incentive Plan (the “2007 Plan”) (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 1-14788) filed on June 12, 2007 and incorporated herein by reference).
•+	10.3	Form of Award Agreement granting Restricted Shares and Performance Units under the 2007 Plan.
•+	10.4	Form of Restricted Share Award Agreement under the 2007 Plan.
•+	10.5	Form of Performance Unit and Performance Share Award Agreement under the 2007 Plan.
•+	10.6	Form of Stock Option Award Agreement under the 2007 Plan.
•+	10.7	Form of SAR Award Agreement under the 2007 Plan.
•+	10.8	Form of Restricted Share Unit Award Agreement under the 2007 Plan.
•+	10.9	Deferral Election Agreement for Deferred Share Units under the 2007 Plan.
•	31.1	Certification of John R. Klopp, Chief Executive Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
•	31.2	Certification of Geoffrey G. Jervis, Chief Financial Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
•	32.1	Certification of John R. Klopp, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
•	32.2	Certification of Geoffrey G. Jervis, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
•	99.1	Updated Risk Factors from the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, filed on February 28, 2007 with the Securities and Exchange Commission.

•Filed herewith

+Represents a management contract or compensatory plan or arrangement.

*Portions of this exhibit has been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request under Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

42

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 thereunto duly authorized.

	CAPITAL TRUST, INC.
November 6, 2007	/s/ John R. Klopp
Date	John R. Klopp
	Chief Executive Officer
November 6, 2007	/s/ Geoffrey G. Jervis
Date	Geoffrey G. Jervis
	Chief Financial Officer

43

EX-10.1

Exhibit 10.1

$250,000,000





MASTER REPURCHASE AGREEMENT


Dated as of July 30, 2007


between

CAPITAL TRUST, INC.

as Seller,


and


CITIGROUP GLOBAL MARKETS INC.


as Securities Buyer


and


CITIGROUP FINANCIAL PRODUCTS INC.


as Loan Buyer

TABLE OF CONTENTS

		Page
1.	APPLICABILITY	4
2.	DEFINITIONS	4
3.	INITIATION; CONFIRMATION; TERMINATION; FEES	19
4.	MARGIN MAINTENANCE	24
5.	INCOME PAYMENTS AND PRINCIPAL PAYMENTS	25
6.	SECURITY INTEREST	27
7.	PAYMENT, TRANSFER AND CUSTODY	29
8.	SALE, TRANSFER, HYPOTHECATION OR PLEDGE OF PURCHASED LOANS AND PURCHASED SECURITIES	36
9.	[INTENTIONALLY OMITTED]	36
10.	REPRESENTATIONS	36
11.	NEGATIVE COVENANTS OF SELLER	41
12.	AFFIRMATIVE COVENANTS OF SELLER	42
13.	[INTENTIONALLY OMITTED]	45
14.	EVENTS OF DEFAULT; REMEDIES	45
15.	SINGLE AGREEMENT	51
16.	RECORDING OF COMMUNICATIONS	51
17.	NOTICES AND OTHER COMMUNICATIONS	51
18.	ENTIRE AGREEMENT; SEVERABILITY	52
19.	NON-ASSIGNABILITY	52
20.	GOVERNING LAW	52
21.	NO WAIVERS, ETC.	53
22.	USE OF EMPLOYEE PLAN ASSETS	53
23.	INTENT	53
24.	DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS	54
25.	CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL	54
26.	NO RELIANCE	55
27.	INDEMNITY	56
28.	DUE DILIGENCE	57
29.	SERVICING	58
30.	MISCELLANEOUS	58

2

ANNEXES, EXHIBITS AND SCHEDULES

ANNEX I	Names and Addresses for Communications between Parties
SCHEDULE I-A	Purchase Percentages and Applicable Spreads
EXHIBIT I	Form of Confirmation
EXHIBIT II	Authorized Representatives of Seller
EXHIBIT III	Form of Redirection Letter
EXHIBIT IV	Form of Custodial Delivery
EXHIBIT V	Form of Power of Attorney
EXHIBIT VI	Representations and Warranties Regarding Individual Purchased Loans and Purchased Securities
EXHIBIT VII	Asset Information
EXHIBIT VIII	Purchase Procedure

3

MASTER REPURCHASE AGREEMENT, dated as of July 30, 2007, by and among CAPITAL TRUST, INC., a Maryland corporation (the “Seller”) and CITIGROUP GLOBAL MARKETS, INC., a Delaware corporation (the “Securities Buyer”), and CITIGROUP FINANCIAL PRODUCTS INC., a Delaware corporation (the “Loan Buyer”; each of Loan Buyer and Securities Buyer, a “Buyer” and collectively, the “Buyers”).

1.             APPLICABILITY

From time to time the parties hereto may enter into transactions in which the Seller agrees to transfer to the applicable Buyer loans and/or participations, securities or other assets against the transfer of funds by such Buyer, with a simultaneous agreement by such Buyer to transfer to Seller such loans and/or participations, securities and other assets at a date certain, against the transfer of funds by Seller.  Each such transaction shall be referred to herein as a “Transaction” and, unless otherwise agreed in writing, shall be governed by this Agreement, including any supplemental terms or conditions contained in any exhibits identified herein as applicable hereunder.

2.             DEFINITIONS

“Acceptable Attorney” means any attorney-at-law to which the Seller or the Custodian, as applicable, has sent an Attorney Bailee Letter, except for an attorney whom a Buyer has notified the Custodian and the Seller is not reasonably satisfactory to such Buyer; provided, that Paul, Hastings, Janofsky & Walker, LLP shall be an Acceptable Attorney.

“Accepted Servicing Practices” shall mean with respect to any Purchased Loan, those mortgage servicing practices of prudent mortgage lending institutions which service mortgage loans and/or mezzanine lending institutions which service mezzanine loans, as applicable, of the same type as such Purchased Loan in the jurisdiction where the related Mortgaged Property is located.

“Accelerated Repurchase Date” shall have the meaning specified in Section 14(b)(i) of this Agreement.

“Act of Insolvency” shall mean with respect to any party, (i) the commencement by such party as debtor of any case or proceeding under any bankruptcy, insolvency, reorganization, liquidation, moratorium, dissolution, delinquency or similar law, or such party seeking the appointment or election of a receiver, conservator, trustee, custodian or similar official for such party or any substantial part of its property, or the convening of any meeting of creditors for purposes of commencing any such case or proceeding or seeking such an appointment or election, (ii) the commencement of any such case or proceeding against such party, or another seeking such an appointment or election, or the filing against a party of an application for a protective decree under the provisions of the Securities Investor Protection Act of 1970, which (A) is consented to or not timely contested by such party, (B) results in the entry of an order for relief, such an appointment or election, the issuance of such a protective decree or the entry of an order having a similar effect, or (C) is not dismissed within 21 days, (iii) the making by such party of a general assignment for the benefit of creditors, or (iv) the admission in writing by such party of such party’s inability to pay such party’s debts as they become due.

“Affiliate” shall mean, when used with respect to any specified Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person.  Control shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise and “controlling” and “controlled” shall have meanings correlative thereto.

“Agreement” shall mean this Master Repurchase Agreement, dated as of July 30, 2007, by and between Capital Trust, Inc. and Citigroup Financial Products Inc. and Citigroup Global Markets Inc., as such agreement may be modified or supplemented from time to time.

“Alternative Rate” shall have the meaning specified in Section 3(g) of this Agreement.

“Alternative Rate Transaction” shall mean, with respect to any Pricing Rate Period, any Transaction with respect to which the Pricing Rate for such Pricing Rate Period is determined with reference to the Alternative Rate.

“Applicable Spread” shall mean, with respect to a Transaction involving Purchased Securities and/or Purchased Loans in any Asset Type Grouping:

(i)            so long as no Event of Default (other than with respect to a Buyer) shall have occurred and be continuing, the incremental per annum rate (expressed as a number of “basis points”, each basis point being equivalent to 1/100 of 1%) specified in Schedule I-A attached to this Agreement as being the “Applicable Spread” for Purchased Loans in such Asset Type Grouping and Leverage Category (it being understood and agreed that with respect to a Purchased Loan (e.g. a B Note or Mezzanine Loan) which spans two or more Leverage Categories with respect to first and last Dollar LTVs, the Applicable Spread shall be determined based on the weighted average “Applicable Spread” for such Purchased Loan (i.e. be determined in proportion to the respective products of a Purchased Loan’s balance and the applicable Purchase Percentage in each Leverage Category)), or Purchased Securities in such Asset Type Grouping and Rating Category or another “Applicable Spread” set forth in the Confirmation, and

(ii)           after the occurrence and during the continuance of an Event of Default (other than with respect to a Buyer), the applicable incremental per annum rate described in clause (i) of this definition, plus [****].

“Assets” shall have the meaning specified in Section 6 of this Agreement.

“Asset Information” shall mean, with respect to each Purchased Loan, the information set forth in Exhibit VII attached hereto.

“Asset Type Grouping” shall mean, with respect to the Eligible Loans, any of the types of Eligible Loans listed in Schedule I-A attached to this Agreement.

**** Material omitted pursuant to a request for confidential treatment under Rule 24b-2 of the Exchange Act of 1934.  Material filed separately with the Securities and Exchange Commission.

2

“Assignment of Leases” shall mean, with respect to any Mortgage, an assignment of leases thereunder, notice of transfer or equivalent instrument in recordable form, sufficient under

the laws of the jurisdiction wherein the Mortgaged Property is located to reflect the assignment of leases.

“Assignment of Mortgage” shall mean, with respect to any Mortgage, an assignment of the mortgage, notice of transfer or equivalent instrument in recordable form, sufficient under the laws of the jurisdiction wherein the related property is located to reflect the assignment and pledge of the Mortgage, subject to the terms, covenants and provisions of this Agreement.

“Attorney’s Bailee Letter” means a letter from an Acceptable Attorney, in form and substance acceptable to the applicable Buyer, wherein such Acceptable Attorney in possession of a Purchased Loan File (i) acknowledges receipt of such Purchased Loan File, (ii) confirms that such Acceptable Attorney is holding the same as bailee of the applicable Buyer under such letter and (iii) agrees that such Acceptable Attorney shall deliver such Purchased Asset File to the Custodian by not later than the third (3^rd) Business Day following the Purchase Date for the related Purchased Asset.

“Availability Period” shall mean the period commencing on the date of this Agreement and ending 364 days after the date of this Agreement; provided, that, upon request by the Seller made no greater than thirty (30) days prior to the last day of the Availability Period in each succeeding year, the Buyers shall within ten (10) Business Days notify the Seller in writing whether or not the Availability Period has been extended for a new Availability Period commencing on the day on which the current Availability Period ends and ending 364 days after such date in the succeeding year.

“B Note” has the meaning given to such term in clause (ii) of the definition of Eligible Loan.

“Business Day” shall mean a day other than (i) a Saturday or Sunday, or (ii) a day in which the New York Stock Exchange or banks in the State of New York, the State of Illinois, or the Cayman Islands are authorized or obligated by law or executive order to be closed.

“Buyer” shall mean either Citigroup Financial Products Inc. or Citigroup Global Markets Inc., as applicable, or any successor.

“Buyers” shall mean both of Citigroup Financial Products Inc. and Citigroup Global Markets Inc., or any successor.

“Buyer’s Margin Amount” shall mean, with respect to the Transactions as of any date, the sum of the amounts, calculated separately with respect to each Purchased Asset, obtained by application of the Buyer’s Margin Percentage for such Purchased Asset to the Repurchase Price (excluding accrued Price Differential) for such Purchased Asset as of such date.

“Buyer’s Margin Percentage” shall mean, with respect to any Transaction as of any date, the reciprocal of the “Purchase Percentage” specified for the applicable Asset Type Grouping and, in the case of an Eligible Loan, Leverage Category or, in the case of an Eligible Security,

3

Rating Category, as set forth in Schedule I-A attached to this Agreement (i.e., the percentage that when multiplied by the applicable percentage set forth in Schedule I-A under the heading “Purchase Percentage” equals 1.00).  The Buyer’s Margin Percentage for each of the applicable percentages set forth in Schedule I-A is set forth below:

Margin Maintenance Percentage Set Forth on Schedule I-A	Buyer’s Margin Percentage
50%	200.0000%
55%	181.8181%
60%	166.6666%
65%	153.8462%
70%	142.8571%
75%	133.3333%
80%	125.0000%
85%	117.6471%
90%	111.1111%
95%	105.2632%

With respect to a Purchased Loan (e.g., a B Note or Mezzanine Loan) which spans two or more Leverage Categories with respect to first and last Dollar LTVs, the Buyer’s Margin Percentage shall be determined based on the weighted average Buyer’s Margin Percentage for such Purchased Loan (i.e. be determined in proportion to the respective balance in each Leverage Category).

“Capital Lease Obligations” shall mean, for any Person, all obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) property to the extent such obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP, and, for purposes of the Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP.

“Capital Stock” shall mean any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent equity ownership interests in a Person which is not a corporation, including, without limitation, any and all member or other equivalent interests in any limited liability company, and any and all warrants or options to purchase any of the foregoing.

“Cash Management Account” shall mean a segregated interest bearing account, in the name of both Buyers, established at the Depository.

“Change of Control” shall mean either of the following events have occurred:

(i)a majority of the members of the board of directors of Seller changes during any twelve (12) month period after the date hereof; or

4

(ii)a merger, consolidation or other transaction in which a Person which is not an Affiliate acquires in excess of 50% of the voting common equity of Seller.

“Collection Period” shall mean with respect to the Remittance Date in any month, the period beginning on but excluding the Cut-off Date in the month preceding the month in which such Remittance Date occurs and continuing to and including the Cut-off Date immediately preceding such Remittance Date.

“Confirmation” shall have the meaning specified in Section 3(b) of this Agreement.

“Custodial Agreement” shall mean the Custodial Agreement, dated as of July 30, 2007, by and among the Custodian, the Seller and the Buyers.

“Custodial Delivery” shall mean the form executed by the Seller in order to deliver the Purchased Loan Schedule and the Purchased Loan File to Buyer or its designee (including the Custodian) pursuant to Section 7, a form of which is attached hereto as Exhibit IV.

“Custodian” shall mean LaSalle Bank National Association, or any successor Custodian appointed by the Buyers with the prior written consent of Seller (which consent shall not be unreasonably withheld or delayed).

“Cut-off Date” shall mean the second Business Day preceding each Remittance Date.

“Default” shall mean any event which, with the giving of notice, the passage of time, or both, would constitute an Event of Default.

“Deficit Cure Amount” shall mean, with respect to the Purchased Assets as of any date, the sum of the amounts (expressed in dollars), calculated separately with respect to each Purchased Asset, obtained by dividing (i) the Repurchase Price (excluding accrued Price Differential) of such Purchased Asset as of such date by (ii) the Purchase Percentage for such Purchased Asset, as set forth in Schedule I-A attached to this Agreement.

“Depository” shall mean LaSalle Bank National Association, or any successor Depository appointed by the Buyers with the prior written consent of Seller (which consent shall not be unreasonably withheld or delayed).

“Diligence Materials” shall mean the Preliminary Due Diligence Package together with the Supplemental Due Diligence List.

“Draft Appraisal” shall mean a short form appraisal, “letter opinion of value,” or any other form of draft appraisal reasonably acceptable to the Loan Buyer.

“Early Repurchase Date” shall have the meaning specified in Section 3(d) of this Agreement.

“EBITDA” shall mean, for each fiscal quarter, with respect to Seller and its consolidated Subsidiaries, an amount equal to (a) Net Income for such period (excluding the effect of any extraordinary gains or losses resulting from the sale of property or non-cash gains or losses

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outside the ordinary course of business) plus (b), without duplication, an amount which, in the determination of Net Income for such period, has been deducted for (i) interest expense for such period, (ii) total federal, state, foreign or other income or franchise taxes for such period, and (iii) all depreciation and amortization for such period, all as determined with respect to any consolidated subsidiary in accordance with the methodology specified in the definition of Net Income, plus (c) any nonrecurring fees and expenses incurred on or prior to the date of the execution and delivery of the Agreement, excluding (d) any non-cash reserve activity and (e) income related to participation interests which are classified as sold on the liabilities side of Seller’s balance sheet.

“Eligible Loans” shall mean any of the following types of loans, which loans are acceptable to the Loan Buyer in the good faith exercise of its sole discretion and are secured directly or indirectly by a property that is a multifamily, retail, office, industrial and hospitality property (or any other commercial property type acceptable to the Loan Buyer) and is located in the United States of America, its territories or possessions or in any other location acceptable to the Buyer in its sole discretion:

(i)performing mortgage loans (including senior interests and pari passu participation interests in mortgage loans) secured by first liens on multifamily, retail, office, industrial, senior living, healthcare or hospitality properties or any other commercial property type acceptable to the Loan Buyer (referred to on Schedule I-A as the “First Mortgage” Asset Type Grouping);

(ii)junior participation interests in or subordinate notes from performing whole mortgage loans secured by first liens on multifamily, retail, office, industrial, senior living, healthcare or hospitality properties or any other commercial property type acceptable to the Loan Buyer (referred to on Schedule I-A as the “B-Note” Asset Type Grouping);

(iii)performing mezzanine loans (or participation interests in mezzanine loans) secured by pledges of the entire (or such lesser percentage as the Loan Buyer may agree to) equity ownership interests in entities that directly or indirectly through one or more intervening subsidiaries own multifamily, retail, office, industrial, senior living, healthcare or hospitality properties or any other commercial property type acceptable to the Loan Buyer (referred to on Schedule I-A as the “Mezzanine Loan” Asset Type Grouping); and

(iv)any other loan (including Preferred Equity) which does not conform to the criteria set forth in clauses (i)–(iii) above and the Loan Buyer elects in the good faith exercise of its sole discretion to purchase; provided, however, that non-performing loans shall not be Eligible Loans for purposes of this Agreement.

“Eligible Securities” shall mean commercial mortgage backed securities that (a) have a rating of B+ or higher from Standard & Poor’s Ratings Services, a Division of The McGraw-Hill Companies, Inc. or Fitch, Inc. and/or B1 or higher from Moody’s Investors Services, Inc. and (b) are otherwise acceptable to the Securities Buyer in its sole discretion; provided, however, that

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with respect to any commercial mortgage backed securities which are rated by more than one Rating Agency, the lowest rating shall apply.

“Environmental Law” shall mean, any federal, state, foreign or local statute, law, rule, regulation, ordinance, code, guideline, written policy and rule of common law now or hereafter in effect and in each case as amended, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, relating to the environment, employee health and safety or Hazardous Materials, including, without limitation, CERCLA; RCRA; the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq.; the Clean Air Act, 42 U.S.C. § 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. § 3803 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. § 2701 et seq.; the Emergency Planning the Community Right-to-Know Act of 1986, 42 U.S.C. § 11001 et seq.; the Hazardous Material Transportation Act, 49 U.S.C. § 1801 et seq.; and the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq.; and any state and local or foreign counterparts or equivalents, in each case as amended from time to time.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated thereunder. Section references to ERISA are to ERISA, as in effect at the date of this Agreement and, as of the relevant date, any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor.

“ERISA Affiliate” shall mean any corporation or trade or business that is a member of any group of organizations (i) described in Section 414(b) or (c) of the Code of which Seller is a member and (ii) solely for purposes of potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of the Code and the lien created under Section 302(f) of ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of which Seller is a member.

“Event of Default” shall have the meaning specified in Section 14 of this Agreement.

“Extension Fee” shall mean the fee, payable on the last day of the final Availability Period hereunder, equal to the product of (x) [****] multiplied by (y) the aggregate Repurchase Price for the outstanding Transactions for which the Seller has exercised its right to extend the Repurchase Date (as described in the definition of “Repurchase Date”).

“Facility Amount” shall mean $250,000,000. Notwithstanding the foregoing, the Seller shall have the unilteral right at any time to notify the Buyers in writing that the Facility Amount is being reduced below $250,000,000.

“Filings” shall have the meaning specified in Section 6 of this Agreement.

“First Mortgage” has the meaning given to such term in clause (i) of the definition of Eligible Loan.

**** Material omitted pursuant to a request for confidential treatment under Rule 24b-2 of the Exchange Act of 1934. Material filed separately with the Securities and Exchange Commission.

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“Funding Fee” shall mean, with respect to each Transaction, the fee equal to the product of (x) [****] multiplied by (y) the related Purchase Price (or funds transferred to Seller as Margin Excess, if applicable), which shall be due and payable pursuant to Section 3(f) of this Agreement.  Notwithstanding anything in this Agreement to the contrary, the maximum amount of Funding Fees which the Buyer shall be entitled to receive under this Agreement shall equal [****] (i.e. once the Buyer shall have received an aggregate amount of Funding Fees equal to such amount, then from and after such date, no additional Funding Fees shall be due and payable on any Purchase Date).

“Fixed Charge Ratio” shall mean, with respect to any period, the ratio of (a) EBITDA for such period to (b) the sum of (i) interest expense (excluding interest expense attributable to participation interests which are classified as sold on the liabilities side of Seller’s balance sheet) and (ii) preferred dividends (specifically excluding any convertible trust preferred dividends) paid by Seller during such period.

“GAAP” shall mean United States generally accepted accounting principles consistently applied as in effect from time to time.

“Governmental Authority” shall mean any national or federal government, any state, regional, local or other political subdivision thereof with jurisdiction and any Person with jurisdiction exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

“Ground Lease” shall mean a ground lease containing the following terms and conditions: (a) a remaining term (exclusive of any unexercised extension options) of the greater of the remaining amortization term of the Purchased Loan plus ten years or, if there is no amortization term in the underlying Purchased Loan, 40 years; (b) the right of the lessee to mortgage and encumber its interest in the leased property without the consent of the lessor or with such consent given; (c) the obligation of the lessor to give the holder of any mortgage lien on such leased property written notice of any defaults on the part of the lessee and agreement of such lessor that such lease will not be terminated until such holder has had a reasonable opportunity to cure or complete foreclosures, and fails to do so; (d) reasonable transferability of the lessee’s interest under such lease, including ability to sublease; and (e) such other rights customarily required by mortgagees making a loan secured by the interest of the holder of the leasehold estate demised pursuant to a ground lease.

“Hedging Transactions” shall mean, with respect to any or all of the Purchased Loans, any short sale of U.S. Treasury Securities or mortgage-related securities, futures contract (including Eurodollar futures) or options contract or any interest rate swap, cap or collar agreement or similar arrangements providing for protection against fluctuations in interest rates or the exchange of nominal interest obligations, either generally or under specific contingencies, entered into by Seller with Buyer or an Affiliate of Buyer or one or more other counterparties reasonably acceptable to the Buyer.

**** Material omitted pursuant to a request for confidential treatment under Rule 24b-2 of the Exchange Act of 1934.  Material filed separately with the Securities and Exchange Commission.

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 “Income” shall mean, with respect to any Purchased Asset at any time, the sum of (x) any principal thereof and all interest, dividends or other distributions thereon and (y) all net sale proceeds received by Seller or any Affiliate of Seller in connection with a sale of such Purchased Asset.

“Indebtedness” shall mean, for any Person: (a) obligations created, issued or incurred by such Person for borrowed money (whether by loan, the issuance and sale of debt securities or the sale of property to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such property from such Person); (b) obligations of such Person to pay the deferred purchase or acquisition price of property or services, other than trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business so long as such trade accounts payable are payable within 90 days of the date the respective goods are delivered or the respective services are rendered; (c) Indebtedness of others secured by a lien on the property of such Person, whether or not the respective Indebtedness so secured has been assumed by such Person; (d) obligations (contingent or otherwise) of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for account of such Person; (e) Capital Lease Obligations of such Person; (f) obligations of such Person under repurchase agreements or like arrangements; (g) Indebtedness of others guaranteed by such Person; (h) all obligations of such Person incurred in connection with the acquisition or carrying of fixed assets by such Person; and (i) Indebtedness of general partnerships of which such Person is a general partner.

“Indemnified Amounts” and “Indemnified Parties” shall have the meaning specified in Section 27 of this Agreement.

“ISDA Master Agreement” shall mean any ISDA Master Agreement (including respective schedules, annexes and confirmations) executed by the Seller and Buyer or an Affiliate of the Buyer in connection with a Hedging Transaction.

“Leverage Category” shall mean any of the categories, based on the applicable LTV Range, designated as “Less than 50%,” “50.01% to 55.00%,” “55.01% to 60.00%,” “60.01% to 65.00,” “65.01 to 70.00%,” “70.01% to 75.00%,” “75.01% to 80.00%,” “80.01% to 85.00%” and “85.01% to 90.00%,” listed in Schedule I-A attached to this Agreement.

“LIBOR” shall mean the rate per annum calculated as set forth below:

(i)On each Pricing Rate Determination Date, LIBOR for the next Pricing Rate Period will be the rate for deposits in United States dollars for a one-month period which appears on Dow Jones Market Service (formerly Telerate) Page 3750 as of 11:00 a.m., London time, on such date; or

(ii)On any Pricing Rate Determination Date on which no such rate appears on Dow Jones Market Service (formerly Telerate) Page 3750 as described above, LIBOR for the next Pricing Rate Period will be determined on the basis of the arithmetic mean of the rates at which deposits in United States dollars are offered by the Reference Banks at approximately 11:00 a.m., London time, on such date to prime banks in the London interbank market for a one-month period.

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All percentages resulting from any calculations or determinations referred to in this definition will be rounded upwards, if necessary, to the nearest multiple of 1/100 of 1% and all U.S. dollar amounts used in or resulting from such calculations will be rounded to the nearest cent (with one-half cent or more being rounding upwards).

“LIBO Rate” shall mean, with respect to any Pricing Rate Period pertaining to a Transaction, a rate per annum determined for such Pricing Rate Period in accordance with the following formula (rounded upward to the nearest 1/100th of 1%):

LIBOR

1 – Reserve Requirement

“LIBOR Transaction” shall mean, with respect to any Pricing Rate Period, any Transaction with respect to which the Pricing Rate for such Pricing Rate Period is determined with reference to the LIBO Rate.

“LTV” and “LTV Range” shall have the respective meanings given to such terms in Schedule I-A attached hereto.

“Margin Deficit” shall have the meaning specified in Section 4(a) hereof.

“Margin Excess” shall have the meaning specified in Section 4(b) hereof.

“Margin Notice Deadline” shall mean 10:00 a.m. (New York City time).

“Market Value” shall mean (A) with respect to any Purchased Security as of any relevant date, the market value for such Purchased Security on such date, as determined by Securities Buyer in its good faith business judgment or (B) with respect to any Purchased Loan as of any relevant date, the lesser of (x) the market value for such Purchased Loan on such date, as determined by Loan Buyer in its good faith business judgment and (y) 100% of the outstanding principal balance of such Purchased Loan

“Mezzanine Asset,” “Mezzanine Borrower” and “Mezzanine Collateral” shall have the respective meanings specified in Exhibit VI.

“Mezzanine Loan” has the meaning given to such term in clause (iii) of the definition of Eligible Loan.

“Mezzanine Loan Documents” shall have the meaning specified in Exhibit VI.

“Mezzanine Note” shall mean a note or other evidence of indebtedness of the direct or indirect owner or owners of all (or such lesser percentage as the Loan Buyer may agree to) equity or ownership interests in an underlying real property owner secured by a pledge of such ownership interests.

“Moody’s” shall mean Moody’s Investor Service, Inc.

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“Mortgage” shall mean a mortgage, deed of trust, deed to secure debt or other instrument, creating a valid and enforceable first lien on or a first priority ownership interest in an estate in fee simple in real property and the improvements thereon, securing a mortgage note or similar evidence of indebtedness.

“Mortgage Note” shall mean a note or other evidence of indebtedness of a Mortgagor secured by a Mortgage.

“Mortgaged Property” shall mean the real property securing repayment of the debt evidenced by a Mortgage Note.

“Mortgagee” shall  mean the record holder of a Mortgage Note secured by a Mortgage.

“Mortgagor” shall mean the obligor on a Mortgage Note and the grantor of the related Mortgage.

“Multiemployer Plan” shall mean a multiemployer plan defined as such in Section 3(37) of ERISA to which contributions have been, or were required to have been, made by Seller or any ERISA Affiliate and which is covered by Title IV of ERISA.

“Net Income” shall mean, for any period, the consolidated net income for such period of Seller as reported in Seller’s public financial statements prepared in accordance with GAAP.

“New Asset” shall mean an Eligible Loan or Eligible Security that Seller proposes to be included as a Purchased Asset.

“Originated Asset” shall mean any Eligible Loan whose Purchased Loan Documents were prepared by Seller.

“Permitted Purchased Loan Modification” shall mean any modification or amendment of a Purchased Loan which is not a Significant Purchased Loan Modification.

“Person” shall mean an individual, corporation, limited liability company, business trust, partnership, joint tenant or tenant-in-common, trust, unincorporated organization, or other entity, or a federal, state or local government or any agency or political subdivision thereof.

“Plan” shall mean an employee benefit or other plan established or maintained by Seller or any ERISA Affiliate during the five year period ended prior to the date of this Agreement or to which Seller or any ERISA Affiliate makes, is obligated to make or has, within the five year period ended prior to the date of this Agreement, been required to make contributions and that is covered by Title IV of ERISA or Section 302 of ERISA or Section 412 of the Code, other than a Multiemployer Plan.

“PML” shall have the meaning specified in Exhibit VI.

“Pre-Existing Asset” shall mean any Eligible Loan that is not an Originated Asset.

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“Preferred Equity” shall mean a performing current pay preferred equity position (with a put or synthetic maturity date structure replicating a debt instrument) representing the entire equity ownership interest in entities that own income producing commercial real estate.

“Preliminary Due Diligence Package” shall mean with respect to any New Asset, a summary memorandum outlining the proposed transaction, including, to the best of Seller’s knowledge, potential transaction benefits and all material underwriting risks, all Underwriting  Issues and all other characteristics of the proposed transaction that a reasonable buyer would consider material, together with the following due diligence information relating to the New Asset to be provided by Seller to the applicable Buyer pursuant to this Agreement (to the extent applicable):

With respect to each Eligible Loan:

(i)all material documents which Seller has in its possession that relate to such New Asset, which material documents shall, as a general guideline, contain information consistent with the Asset Information;

(ii)current rent roll, if applicable;

(iii)cash flow pro-forma, plus historical information, if available;

(iv)description of the Mortgaged Property and the ownership structure of the borrower and the sponsor (including, without limitation, the board of directors, if applicable);

(v)indicative debt service coverage ratios;

(vi)indicative loan-to-value ratio;

(vii)term sheet outlining the transaction generally;

(viii)Seller’s relationship with the Mortgagor, if any; and

(ix)with respect to any New Asset that is Pre-Existing Asset, a complete description of the legal structure and documentation thereof; and

(x)any exceptions to the representations and warranties set forth in Exhibit VI to this Agreement as may be contained in an internal memorandum or offering document prepared by a third party.

With respect to each Eligible Security:

(i)            to the extent in the possession of the Seller, the following:

(A)          term sheet

(B)           pre-sale report

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(C)           private placement memorandum, offering memorandum, preliminary prospectus, final prospectus or similar documentation;

(ii)           loan data disk;

(iii)          materials furnished to the Rating Agencies in connection with the issuance of the Eligible Securities, to the extent provided to Seller;

(iv)          Securitization Documents;

(v)           remittance report for most recent period in Seller’s possession;

(vi)          quarterly remittance reports in Seller’s possession;

(vii)         accounting reports delivered with respect to the Eligible Security in Seller’s possession; and

(viii)        legal opinions delivered with respect to the Eligible Security in Seller’s possession.

“Price Differential” shall mean, with respect to any Transaction as of any date, the aggregate amount obtained by daily application of the Pricing Rate for such Transaction to the Repurchase Price (excluding accrued Price Differential) for such Transaction on a 360-day-per-year basis for the actual number of days during the period commencing on (and including) the Purchase Date for such Transaction and ending on (but excluding) the date of determination (reduced by any amount of such Price Differential previously paid by Seller to the applicable Buyer with respect to such Transaction).

“Pricing Rate” shall mean, for any Pricing Rate Period, an annual rate equal to the LIBO Rate for such Pricing Rate Period plus the relevant Applicable Spread for such Transaction and shall be subject to adjustment and/or conversion as provided in Sections 3(g) and 3(h) of this Agreement.

“Pricing Rate Determination Date” shall mean with respect to any Pricing Rate Period with respect to any Transaction, the second (2nd) Business Day preceding the first day of such Pricing Rate Period.

“Pricing Rate Period” shall mean, (a) in the case of the first Pricing Rate Period with respect to any Transaction, the period commencing on and including the Purchase Date for such Transaction and ending on and excluding the following Remittance Date, and (b) in the case of any subsequent Pricing Rate Period, the period commencing on and including such Remittance Date and ending on and excluding the following Remittance Date.

“Prime Rate” shall mean the prime rate of U.S. commercial banks as published in The Wall Street Journal (or, if more than one such rate is published, the average of such rates).

“Principal Payment” shall mean, with respect to any Purchased Loan or Purchased Security, any payment or prepayment of principal received by the Depository in respect thereof.

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“Purchase Date” shall mean any date on which Purchased Loans or Purchased Securities are to be transferred by Seller to the applicable Buyer.

“Purchase Percentage” shall mean, with respect to any Transaction as of any day, the “Purchase Percentage” specified for the applicable Asset Type Grouping and, in the case of an Eligible Loan, Leverage Category or, in the case of an Eligible Security, Rating Category, as set forth in Schedule I-A attached to this Agreement or another amount agreed upon by the applicable Buyer and Seller.  With respect to a Purchased Loan (e.g., a B-Note or Mezzanine Loan) which spans two or more Leverage Categories with respect to first and last Dollar LTVs, the Purchase Price shall be determined based on the weighted average Purchase Percentage for such Purchased Loan (i.e. be determined in proportion to the respective balance in each Leverage Category).

“Purchase Price” shall mean, with respect to any Purchased Asset, the price at which such Purchased Asset is transferred by Seller to Buyer on the applicable Purchase Date.  The Purchase Price as of any Purchase Date for any Purchased Asset shall be an amount (expressed in dollars) equal to the product obtained by multiplying (i) the Market Value of such Purchased Asset by (ii) the “Purchase Percentage” for such Purchased Asset, as set forth in Schedule I-A attached to this Agreement; provided, that notwithstanding the foregoing, the Seller may request that the Purchase Price set forth in a Confirmation be determined by applying a percentage lower than the Purchase Percentage set forth in Schedule I-A attached to this Agreement (and in such event the Seller shall have the right from time to time thereafter to request that the Buyer increase the related Purchase Price in a new Transaction subject only to the satisfaction of clauses (A), (C) and (E) of the definition of Transaction Conditions Precedent).

“Purchased Asset” shall mean the Purchased Securities and/or the Purchased Loans.

“Purchased Loan File” shall mean the documents specified as the “Purchased Loan File” in Section 7(e), together with any additional documents and information required to be delivered to Buyer or its designee (including the Custodian) pursuant to this Agreement.

“Purchased Loan Documents” shall mean, with respect to a Purchased Loan, the documents comprising the Purchased Loan File for such Purchased Loan.

“Purchased Loans” shall mean (i) with respect to any Transaction, the Eligible Loans sold by Seller to Buyer in such Transaction and (ii) with respect to the Transactions in general, all Eligible Loans sold by Seller to Buyer and any additional assets delivered by Seller to Buyer pursuant to Section 4(a) of this Agreement.

“Purchased Loan Schedule” shall mean a schedule of Purchased Loans attached to each Trust Receipt and Custodial Delivery, which may but is not required to, contain information substantially similar to the Asset Information.

“Purchased Securities” shall mean, (i) with respect to any Transaction, the Eligible Securities sold by Seller to Buyer in such Transaction, and (ii) with respect to the Transactions in general, all Eligible Securities sold by Seller to Buyer and any additional collateral delivered by Seller to Buyer pursuant to Section 4(a) of this Agreement.

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“Rating Agency” shall mean any of Fitch Inc., Moody’s Investor Services, Inc. and Standard & Poor’s Ratings Group, a division of The McGraw-Hill Companies.

“Rating Category” shall mean any of the categories, based on the applicable rating, designated as “unrated,” “B-,” “B,” “B+,” “BB-,” “BB,” “BB+,” “BBB-,” “BBB,” listed in Schedule I-A attached to this Agreement.

“Recourse Debt to Equity Ratio” shall mean the ratio of Total Recourse Indebtedness to Tangible Net Worth.

“Reference Banks” shall mean banks each of which shall (i) be a leading bank engaged in transactions in Eurodollar deposits in the international Eurocurrency market and (ii) have an established place of business in London.  Initially, the Reference Banks shall be JPMorgan Chase Bank, Barclays Bank, Plc and Citibank, N.A.  If any such Reference Bank should be unwilling or unable to act as such or if the applicable Buyer shall terminate the appointment of any such Reference Bank or if any of the Reference Banks should be removed from the Reuters Monitor Money Rates Service or in any other way fail to meet the qualifications of a Reference Bank, the applicable Buyer in the exercise of its good faith business judgment may designate alternative banks meeting the criteria specified in clauses (i) and (ii) above.

“Relevant System” shall mean (a) The Depository Trust Company in New York, New York, or (b) such other clearing organization or book-entry system as is designated in writing by the Buyer.

“REMIC” shall mean a real estate mortgage investment conduit, within the meaning of Section 860D(a) of the Code.

“Remittance Date” shall mean the twentieth (20th) calendar day of each month, or the next succeeding Business Day, if such calendar day shall not be a Business Day, or such other day as is mutually agreed to by Seller and the applicable Buyer.

“Replacement Asset” shall have the meaning specified in Section 14(b)(ii) of this Agreement.

“Repurchase Date” shall mean, with respect to each Transaction, the [twentieth (20^th)] day of each calendar month or if such day is not a Business Day, the immediately succeeding Business Day; provided, that notwithstanding the foregoing, so long as no Event of Default on the part of the Seller has occurred and is continuing, the aforementioned Repurchase Date shall be automatically extended and recur on the [twentieth (20^th)] day (or if such day is not a Business Day, the immediately succeeding Business Day) in each succeeding calendar month; provided further, that in the event the Availability Period is not extended as described in the proviso to the definition of “Availability Period,” then (x) the Seller shall have the one time right exercisable at or prior to the end of the then-current Availability Period to notify the applicable Buyer in writing that it is extending the Repurchase Date with respect to any or all outstanding Transactions to the second (2^nd) anniversary of the end of the then current Availability Period subject to payment of the Extension Fee set forth in Section 3(f) or (y) if the Seller does not deliver the extension notice pursuant to the immediately preceding clause (x), the Repurchase Date shall be accelerated and shall occur on the last day of the Availability Period.

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“Repurchase Price” shall mean, with respect to any Purchased Securities or Purchased Loans as of any date, the price at which such Purchased Securities or Purchased Loans are to be transferred from the applicable Buyer to Seller upon termination of the related Transaction; such price will be determined in each case as the sum of the Purchase Price of such Purchased Securities or Purchased Loans and the accrued but unpaid Price Differential with respect to such Purchased Securities or Purchased Loans as of the date of such determination, minus all Income and cash actually received by the applicable Buyer in respect of such Transaction pursuant to Sections 4(a), 4(d), 5(c), 5(d) and 5(e) of this Agreement all as shall be notified by the applicable Buyer to the Custodian in writing or electronic transmission.

“Requirement of Law” shall mean any law, treaty, rule, regulation, code, directive, policy, order or requirement or determination of an arbitrator or a court or other governmental authority whether now or hereafter enacted or in effect.

“Reserve Requirement” shall mean, with respect to any Pricing Rate Period, the aggregate (without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect during such Pricing Rate Period (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve System or other governmental authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of such Board of Governors) maintained by the Buyer.

“Reset Date” shall mean, with respect to any Pricing Rate Period, the second Business Day preceding the first day of such Pricing Rate Period with respect to any Transaction.

“Securities Buyer” shall mean Citigroup Global Markets Inc., or any successor.

“Securitization Document” shall mean, with respect to any Eligible Securities, any pooling and servicing agreement or other agreement governing the issuance and administration of such Eligible Securities.

“Seller” shall mean Capital Trust, Inc., a Maryland corporation.

“Servicing Agreement” shall have the meaning specified in Section 29(b).

“Servicing Records” shall have the meaning specified in Section 29(b).

“Significant Purchased Loan Modification” means any modification or amendment of a Purchased Loan which

(i)            reduces the principal amount of the Purchased Loan in question other than (1) with respect to a dollar-for-dollar principal payment or (2) reductions of principal to the extent of deferred, accrued or capitalized interest added to principal which additional amount was not taken into account by Loan Buyer in determining the related Purchase Price,

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(ii)           increases the principal amount of a Purchased Loan other than increases which are derived from accrual or capitalization of deferred interest which is added to principal or protective advances,

(iii)          modifies the regularly scheduled payments of principal and non-contingent interest of the Purchased Loan in question,

(iv)          changes the frequency of scheduled payments of principal and interest in respect of a Purchased Loan,

(v)           subordinates the lien priority of the Purchased Loan in question or the payment priority of the Purchased Loan in question other than subordinations required under the then existing terms and conditions of the Purchased Loan in question (provided, however, the foregoing shall not preclude the execution and delivery of subordination, nondisturbance and attornment agreements with tenants, subordination to tenant leases, easements, plats of subdivision and condominium declarations and similar instruments which in the commercially reasonable judgment of the Seller do not materially adversely affect the rights and interest of the holder of the Purchased Loan in question),

(vi)          releases any asset for the Purchased Loan in question other than releases required under the then existing Purchased Loan documents or releases in connection with eminent domain or under threat of eminent domain,

(vii)         waives, amends or modifies any cash management or reserve account requirements of the Purchased Loan other than changes required under the then existing Purchased Loan documentation, or

(viii)        waives any due-on-sale or due-on-encumbrance provisions of the Purchased Loan in question other than waivers required to be given under the then existing Purchased Loan documents, or

(ix)           with respect to Preferred Equity only, modifies or amends in any material respect the organizational agreement or other document that creates and establishes the rights and remedies of the Preferred Equity.

“Subsidiary” shall mean, with respect to any Person, any corporation, partnership or other entity of which at least a majority of the securities or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such corporation, partnership or other entity (irrespective of whether or not at the time securities or other ownership interests of any other class or classes of such corporation, partnership or other entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person.

“Supplemental Due Diligence List” shall mean, with respect to any New Asset, information or deliveries concerning the New Asset that Buyer shall reasonably request in addition to the Preliminary Due Diligence Package.

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“Survey” shall mean a certified ALTA/ACSM (or applicable state standards for the state in which the Asset is located) survey of a Mortgaged Property prepared by a registered independent surveyor or engineer and in form and content satisfactory to the Buyer and the company issuing the Title Policy for such Property.

“Tangible Net Worth” shall mean, as of any date of determination, (a) all amounts which would be included under capital (it being agreed that any convertible trust preferred securities and any unfunded commitments or capital which can be drawn will be included as capital) on the balance sheet of Seller at such date, determined in accordance with GAAP as of such date, less (b)(i) amounts owing to Seller from Affiliates and (ii) intangible assets of the Seller as of such date.

“Target Price” shall mean, with respect to any Purchased Asset as of any date, the amount (expressed in dollars) obtained by multiplying (i) the Market Value of such Purchased Asset as of such date by (ii) the Purchase Percentage for such Purchased Asset, as set forth in Schedule I-A attached to this Agreement.

“Title Exceptions” shall have the meaning specified in Exhibit VI.

“Total Debt to Equity Ratio” shall mean the ratio of Total Indebtedness to Tangible Net Worth.

“Total Indebtedness” shall mean, for any period, the aggregate Indebtedness of Seller and its consolidated Subsidiaries during such period (including, without limitation, off-balance sheet Indebtedness), less the amount of any nonspecific balance sheet reserves maintained in accordance with GAAP, provided that the calculation of Total Indebtedness will exclude (i) amounts of liabilities resulting from the sale of participation interests classified as participations sold on the liabilities side of Seller’s balance sheet, (ii) liabilities resulting from consolidation of debt associated with securitizations where Seller has no recourse obligation for the debt and which debt was not issued by Seller or its Subsidiaries and (iii) liabilities resulting from the consolidation of vehicles managed by Seller or a Subsidiary of Seller where Seller has less than a 50% equity interest.

“Total Recourse Indebtedness” shall mean, for any period, the aggregate Indebtedness of Seller and its consolidated Subsidiaries during such period (including, without limitation, off-balance sheet Indebtedness), less the amount of any nonspecific balance sheet reserves maintained in accordance with GAAP, provided that the calculation of Total Indebtedness will exclude (i) amounts of liabilities resulting from the sale of participation interests classified as participations sold on the liabilities side of Seller’s balance sheet, (ii) liabilities resulting from consolidation of debt incurred by wholly owned Subsidiaries of the Seller where Seller has no recourse obligation for the debt and (iii) liabilities resulting from the consolidation of vehicles managed by Seller or a Subsidiary of the Seller where Seller has less than a 50% equity interest.

“Transaction Conditions Precedent” shall have the meaning specified in Section 3(b) of this Agreement.

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“Transaction Documents” shall mean, collectively, this Agreement, any applicable Annexes to this Agreement, the Custodial Agreement and all Confirmations executed pursuant to this Agreement in connection with specific Transactions.

“Trustee” shall mean, with respect to any Eligible Securities, the trustee under the Securitization Document applicable to such Eligible Securities for each Transaction.

“Trust Receipt” shall mean a trust receipt issued by Custodian to the applicable Buyer confirming the Custodian’s possession of certain Purchased Loan Files which are the property of and held by Custodian for the benefit of the applicable Buyer (or any other holder of such trust receipt) or a bailment arrangement with counsel or other third party acceptable to the applicable Buyer in its sole discretion.

“UCC” shall have the meaning specified in Section 6 of this Agreement.

“UCC-9 Policy” and “Underlying Property Owner” shall have the meanings specified in Exhibit VI.

“Underlying Mortgaged Property” shall mean, in the case of any:

(a)B Note, the Mortgaged Property securing such B Note (if the B Note is a debt instrument), or the Mortgaged Property securing the Mortgage Loan in which such B Note represents a junior participation (if the B Note is a participation interest); or

(b)Mezzanine Loan, the Mortgaged Property that is owned by the Person the Capital Stock of which is pledged as security for such Mezzanine Loan; or

(c)Preferred Equity, Mortgaged Property that is owned by the entity whose equity ownership interest is represented by such Preferred Equity.

“Underwriting Issues” shall mean, with respect to any Asset as to which Seller intends to request a Transaction, all material information that has come to Seller’s attention that, based on the making of reasonable inquiries and the exercise of reasonable care and diligence under the circumstances, would be considered a materially “negative” factor (either separately or in the aggregate with other information), or a material defect in loan documentation or closing deliveries (such as any absence of any material Purchased Loan Document(s)), to a reasonable institutional mortgage buyer in determining whether to originate or acquire the Asset in question.

3.             INITIATION; CONFIRMATION; TERMINATION; FEES

(a)           Subject to the terms and conditions set forth in this Agreement (including, without limitation, the “Transaction Conditions Precedent” specified in Section 3(b) of this Agreement), an agreement to enter into a Transaction shall be made in writing at the initiation of Seller as provided below; provided, however, that (i) the aggregate Repurchase Price (excluding accrued Price Differential with respect to the Purchased Securities and Purchased Loans as of the date of determination) for all Transactions shall not exceed the Facility Amount and (ii) the Buyers shall not have any obligation to enter into Transactions with the Seller after the end of the Availability

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Period.  Seller shall give the applicable Buyer written notice of each proposed Transaction and the applicable Buyer shall inform Seller of its determination with respect to any assets proposed to be sold to the applicable Buyer by Seller solely in accordance with Exhibit VIII attached hereto.  The applicable Buyer shall have the right to review all Eligible Loans and Eligible Securities proposed to be sold to such Buyer in any Transaction and to conduct its own due diligence investigation of such Eligible Loans and Eligible Securities as such Buyer reasonably determines.  Each Buyer shall be entitled to make a determination, in the exercise of its good faith sole discretion, that it shall or shall not purchase any or all of the assets proposed to be sold to such Buyer by Seller.  Notwithstanding the foregoing, Seller shall not initiate, and Securities Buyer shall not have any obligation to enter into, any Transaction with respect to Eligible Securities rated below investment grade by any Rating Agency, if the aggregate outstanding Repurchase Price of all Purchased Securities rated below investment grade would exceed 20% of the Facility Amount.

(b)           Upon agreeing to enter into a Transaction hereunder, provided each of the Transaction Conditions Precedent (as hereinafter defined) shall have been satisfied (or waived by the applicable Buyer), Seller shall promptly deliver to the applicable Buyer a written confirmation in the form of Exhibit I attached hereto of each Transaction or such other form as may be provided by Buyers from time to time (a “Confirmation”).  Such Confirmation shall describe the Purchased Securities (including CUSIP number, if any) and/or Purchased Loans, shall identify the applicable Buyer and Seller, and shall set forth:

(i)the Purchase Date,

(ii)the Purchase Price for such Purchased Securities and/or Purchased Loans,

(iii)the Repurchase Date,

(iv)the Pricing Rate applicable to the Transaction (including the Applicable Spread) and

(v)any additional terms or conditions not inconsistent with this Agreement.

With respect to any Transaction, the Pricing Rate shall be determined initially on the Pricing Rate Determination Date applicable to the first Pricing Rate Period for such Transaction, and shall be reset on each Reset Date for the next succeeding Pricing Rate Period for such Transaction. The applicable Buyer or its agent shall determine in accordance with the terms of this Agreement the Pricing Rate on each Pricing Rate Determination Date for the related Pricing Rate Period and notify Seller of such rate for such period on the Reset Date.  For purposes of this Section 3(b), the “Transaction Conditions Precedent” shall be deemed to have been satisfied with respect to any proposed Transaction if:

(A)no Default or Event of Default (in each case, other than with respect to a Buyer) under this Agreement shall have occurred and be continuing as of the Purchase Date for such proposed Transaction;

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(B)Seller shall have demonstrated to the reasonable satisfaction of the applicable Buyer in writing the acquisition cost of such Purchased Asset (including therein reasonable supporting documentation required by the applicable Buyer, if any);

(C)the representations and warranties made by Seller in any of the Transaction Documents shall be true and correct in all material respects as of the Purchase Date for such Transaction (except to the extent such representations and warranties are made as of a particular date);

(D)the applicable Buyer shall have (A) determined, in accordance with the applicable provisions of Section 3(a) of this Agreement, that the assets proposed to be sold to the applicable Buyer by Seller in such Transaction are Eligible Securities and/or Eligible Loans and (B) approved the inclusion of such Eligible Loan as a Purchased Loan in a Transaction;

(E)Seller and Buyer shall have executed the related Confirmation; and

(F)Seller shall have paid to Buyer the Funding Fee, if any, due and payable (which amount, upon the agreement of Buyer and Seller, may be held back from funds remitted to Seller by Buyer).

(c)           Each Confirmation, together with this Agreement, shall be conclusive evidence of the terms of the Transaction(s) covered thereby.  In the event of any conflict between the terms of such Confirmation and the terms of this Agreement, the Confirmation shall prevail.

(d)           No Transaction shall be terminable on demand by a Buyer (other than upon the occurrence and during the continuance of an Event of Default by Seller).  Seller shall be entitled to terminate a Transaction on demand, in whole or in part, and repurchase any or all of the Purchased Securities and/or Purchased Loans subject to a Transaction on any Business Day prior to the Repurchase Date (an “Early Repurchase Date”); provided, however, that:

(i)Seller notifies Buyer in writing of its intent to terminate such Transaction and repurchase such Purchased Securities and/or Purchased Loans no later than two (2) Business Days (or such shorter period of time as Buyer may consent to, such consent not to be unreasonably withheld, delayed or conditioned) prior to such Early Repurchase Date, and

(ii)on such Early Repurchase Date Seller pays to the applicable Buyer an amount equal to the sum of the Repurchase Price for such Transaction and any other amounts payable under this Agreement (including, without limitation, Section 3(i) of this Agreement) with respect to such Transaction against transfer to the Seller or its agent of such Purchased Securities and/or Purchased Loans.

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Such notice shall set forth the Early Repurchase Date and shall identify with particularity the Purchased Securities and/or Purchased Loans to be repurchased on such Early Repurchase Date.

(e)           On the Repurchase Date, termination of the Transactions will be effected by transfer to Seller or its agent of the Purchased Securities and Purchased Loans and any Income in respect thereof received by the applicable Buyer (and not previously credited or transferred to, or applied to the obligations of, Seller pursuant to Section 5 of this Agreement) against the simultaneous transfer of the Repurchase Price to an account of the applicable Buyer.

(f)            On each Purchase Date and on each date on which funds representing Margin Excess are transferred by Buyer to Seller, Seller shall pay to Buyer the related Funding Fee, if any.  Seller shall pay to Buyer a non-refundable Extension Fee on the date on which the Seller delivers to the Buyer the extension notice contemplated in the second proviso to the definition of “Repurchase Date” if Seller elects to extend the Repurchase Date to the second anniversary of the end of the then current Availability Period pursuant to the definition of “Repurchase Date”.

(g)           If prior to the first day of any Pricing Rate Period with respect to any Transaction, (i) Buyer shall have determined in the exercise of its reasonable business judgment (which determination shall be conclusive and binding upon Seller) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the LIBO Rate for such Pricing Rate Period, or (ii) the LIBO Rate determined or to be determined for such Pricing Rate Period will not adequately and fairly reflect the cost to the applicable Buyer (as determined and certified by such Buyer) of making or maintaining Transactions during such Pricing Rate Period, the applicable Buyer shall give telecopy or telephonic notice thereof to Seller as soon as practicable thereafter.  If such notice is given, the Pricing Rate with respect to such Transaction for such Pricing Rate Period, and for any subsequent Pricing Rate Periods until such notice has been withdrawn by the applicable Buyer, shall be a per annum rate equal to the Prime Rate (the “Alternative Rate”).

(h)           Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for a Buyer to effect Transactions as contemplated by the Transaction Documents, (a) the commitment of such Buyer hereunder to enter into new Transactions and to continue Transactions as such shall forthwith be canceled, and (b) the Transactions then outstanding shall be converted automatically to Alternative Rate Transactions on the last day of the then current Pricing Rate Period or within such earlier period as may be required by law.  If any such conversion of a Transaction occurs on a day which is not the last day of the then current Pricing Rate Period with respect to such Transaction, Seller shall pay to the applicable Buyer such amounts, if any, as may be required pursuant to Section 3(i) of this Agreement.

(i)            Upon demand by a Buyer, Seller shall indemnify such Buyer and hold such Buyer harmless from any net actual, out-of-pocket loss or expense (not to include any lost profit or opportunity) (including, without limitation, actual reasonable attorneys’ fees and disbursements) which such Buyer may sustain or incur as a consequence of (i) default by the Seller in terminating any Transaction after the Seller has given a notice in accordance with Section 3(d) of a termination of a Transaction, (ii) any payment of the Repurchase Price on any day other than a Remittance Date or the Repurchase Date (including, without limitation, any such actual,

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out-of-pocket loss or expense arising from the reemployment of funds obtained by such Buyer to maintain Transactions hereunder or from customary and reasonable fees payable to terminate the deposits from which such funds were obtained) or (iii) a default by Seller in selling Eligible Loans or Eligible Securities after Seller has notified such Buyer of a proposed Transaction and such Buyer has agreed to purchase such Eligible Loans or Eligible Securities in accordance with the provisions of this Agreement.  A certificate as to such actual costs, losses, damages and expenses, setting forth the calculations therefor shall be submitted promptly by the applicable Buyer to Seller and shall be prima facie evidence of the information set forth therein.

(j)            If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof by any Governmental Authority or compliance by a Buyer with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority having jurisdiction over such Buyer made subsequent to the date hereof:

(i)shall subject such Buyer to any tax of any kind whatsoever with respect to the Transaction Documents, any Purchased Security or Purchased Loan or any Transaction, or change the basis of taxation of payments to such Buyer in respect thereof (except for income taxes and any changes in the rate of tax on such Buyer’s overall net income);

(ii)shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of a Buyer which is not otherwise included in the determination of the LIBO Rate hereunder; or

(iii)shall impose on a Buyer any other condition;

and the result of any of the foregoing is to increase the cost to such Buyer, by an amount which such Buyer deems, in the exercise of its reasonable business judgment, to be material, of entering into, continuing or maintaining Transactions or to reduce any amount receivable under the Transaction Documents in respect thereof, then, in any such case, Seller shall promptly pay such Buyer, upon its demand, any additional amounts necessary to compensate Buyer for such increased cost or reduced amount receivable.  If a Buyer becomes entitled to claim any additional amounts pursuant to this Section 3(j), it shall, within ten (10) Business Days of such event, notify Seller of the event by reason of which it has become so entitled except that Seller shall not be liable for any additional amounts under this Section 3(j) with respect to any period more than 90 days prior to the date that Seller receives notice thereof from a Buyer.  Such notification as to the calculation of any additional amounts payable pursuant to this subsection shall be submitted by the applicable Buyer to Seller and shall be prima facie evidence of such additional amounts.  This covenant shall survive the termination of this Agreement and the repurchase by Seller of any or all of the Purchased Securities and Purchased Loans.

(k)           If a Buyer shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or

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compliance by such Buyer or any corporation controlling such Buyer with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof does or shall have the effect of reducing the rate of return on such Buyer’s or such corporation’s capital as a consequence of its obligations hereunder to a level below that which such Buyer or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Buyer’s or such corporation’s policies with respect to capital adequacy) by an amount deemed by such Buyer, in the exercise of its reasonable business judgment, to be material, then from time to time, after submission by such Buyer to Seller of a written request therefor, Seller shall pay to such Buyer such additional amount or amounts as will compensate such Buyer for such reduction.  Such notification as to the calculation of any additional amounts payable pursuant to this subsection shall be submitted by such Buyer to Seller and shall be prima facie evidence of such additional amounts.  This covenant shall survive the termination of this Agreement and the repurchase by Seller of any or all of the Purchased Securities and Purchased Loans.

(l)            If any of the events described in Section 3(g), Section 3(h), Section 3(j) or Section 3(k) result in Buyer’s election to use the Alternative Rate or Buyer’s request for additional amounts, then Seller shall have the option to notify Buyer in writing of its intent to terminate the Transactions and repurchase the Purchased Loans and Purchased Securities no later than one (1) Business Day after notice is given to Buyer in accordance with Section 3(l).  The election by Seller to terminate the Transactions in accordance with this Section 3(l) shall not relieve Seller for liability with respect to any additional amounts or increased costs actually incurred by Buyer prior to the actual repurchase of the Purchased Loans and Purchased Securities.

(m)          Seller shall have the right, from time to time, to notify Buyer that Seller intends on transferring cash to Buyer for the purpose of reducing the Repurchase Price on, but not terminating, a Transaction for a Purchased Security or Purchased Loan on any date before the Repurchase Date (and, in such event, the Seller shall have the right from time to time thereafter to request that the Buyer increase the related Purchase Price as Margin Excess in a new Transaction).  If any notice is given by Seller under Section 3(m) of this Agreement at or prior to 3:00 p.m. (New York City time), then the Seller may transfer cash as provided above on the next following Business Day after the giving of such notice.  If any notice is given by Seller under Section 3(m) of this Agreement after 3:00 p.m. (New York City time), then the Seller may transfer cash as provided above on the second following Business Day after the giving of such notice.

4.             MARGIN MAINTENANCE

(a)           If at any time, the Market Value of all of the Purchased Securities or all of the Purchased Loans in the aggregate shall be less than the Buyer’s Margin Amount for all of the Purchased Securities or all of the Purchased Loans in the aggregate (a “Margin Deficit”), then the applicable Buyer may by notice to Seller (which notice shall set forth in reasonable detail such Buyer’s calculation of such Margin Deficit) require Seller to transfer to such Buyer (A) cash or (B) additional assets acceptable to such Buyer in its sole and absolute discretion, so that the sum obtained by adding the Market Value of all of the Purchased Securities or all of the Purchased Loans in the aggregate plus such cash and additional assets shall equal or exceed the

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Deficit Cure Amount for all of the Purchased Securities or all of the Purchased Loans as of the same date.

(b)           If at any time the Market Value of any Purchased Asset multiplied by the Purchase Percentage for such Purchased Asset shall be greater than the Repurchase Price (excluding Price Differential) for the Transaction relating to such Purchased Asset (a “Margin Excess”) then the Seller may by notice to Buyer require Buyer to transfer to Seller cash in an amount up to the Margin Excess; provided, that any such transfer of cash (1) shall not be in an amount less than $500,000, (2) shall be deemed a new Transaction for purposes of this Agreement with a new Purchase Date and be evidenced by amended and restated Confirmations, (3) shall not be available to Seller if an Event of Default on the part of Seller has occurred and is continuing and (4) shall be subject to payment of the Funding Fee, if any (other than in the circumstance where the Seller has reduced the Repurchase Price pursuant to Section 3(m) of this Agreement and such transfer of cash represents a re-advance of amounts for which a Funding Fee was previously paid).

(c)           If any notice is given by a Buyer under Section 4(a) of this Agreement on any Business Day at or prior to the Margin Notice Deadline, the Seller shall transfer cash or additional assets as provided in Section 4(a) by no later than the next following Business Day after the giving of such notice.  If any notice is given by a Buyer under Section 4(a) of this Agreement on any Business Day after the Margin Notice Deadline, the Seller shall transfer cash or additional assets as provided in Section 4(a) by no later than the second following Business Day after the giving of such notice.  If any notice is given by Seller under Section 4(b) of this Agreement prior to the close of business on any Business Day, the Buyer shall transfer cash as provided in Section 4(b) no later than the close of business in the relevant market on the following Business Day.  Notice required pursuant to Section 4(a) or 4(b) of this Agreement may be given by any means of telecopier or telegraphic transmission and shall be delivered in accordance with the terms of this Agreement.  The failure of a Buyer or Seller, on any one or more occasions, to exercise its rights under Section 4(a) or 4(b) of this Agreement shall not change or alter the terms and conditions to which this Agreement is subject or limit the right of a Buyer or Seller to do so at a later date.  Each Buyer and Seller agree that any failure or delay by a Buyer or Seller to exercise its rights under Section 4(a) or 4(b) of this Agreement shall not limit such party’s rights under this Agreement or otherwise existing by law or in any way create additional rights for such party.

(d)           Any cash transferred to a Buyer pursuant to Section 4(a) of this Agreement with respect to any Purchased Securities or any Purchased Loans shall be attributed to the Repurchase Price of such Purchased Security or Purchased Loan, respectively, for which there was a Margin Deficit.  The amount of any cash transferred by Buyer pursuant to Section 4(b) of this Agreement with respect to any Purchased Security or Purchased Loan, respectively, shall increase the Repurchase Price of the relevant Transaction by such amount.

5.             INCOME PAYMENTS AND PRINCIPAL PAYMENTS

(a)           The Cash Management Account shall be established at the Depository concurrently with the execution and delivery of this Agreement by Seller and the Buyers.  The Buyers shall have sole dominion and control over the Cash Management Account.  All Income in

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respect of the Purchased Assets and any payments in respect of associated Hedging Transactions, as well as any interest received from the reinvestment of such Income, shall be deposited directly into the Cash Management Account and shall be remitted by the Depository in accordance with the applicable provisions of Sections 5(b), 5(c), 5(d), 5(e) and 14(b)(i) of this Agreement.

(b)           With respect to each Purchased Loan, Seller shall deliver to each Mortgagor, issuer of a participation or borrower under a Purchased Loan an irrevocable direction letter in the form attached as Exhibit III to this Agreement instructing the Mortgagor, issuer of a participation or borrower to pay all amounts payable under the related Purchased Loan to the Cash Management Account and shall provide to Loan Buyer proof of such delivery.  If a Mortgagor, issuer of a participation or borrower forwards any Income with respect to a Purchased Loan to Seller rather than directly to the Cash Management Account, Seller shall (i) deliver an additional irrevocable direction letter to the applicable Mortgagor, issuer of a participation or borrower and make other commercially reasonable efforts to cause such Mortgagor, issuer of a participation or borrower to forward such amounts directly to the Cash Management Account and (ii) immediately deposit in the Cash Management Account any such amounts.

(c)           So long as no Event of Default (other than with respect to a Buyer) shall have occurred and be continuing, all Income received by the Depository in respect of the Purchased Assets (other than Principal Payments) during each Collection Period shall be remitted on a daily basis to the Seller.  On each Remittance Date, Seller shall pay to the Buyers an amount equal to the Price Differential which has accrued and is unpaid as of such Remittance Date.

(d)           So long as no Event of Default (other than with respect to a Buyer) shall have occurred and be continuing, any Principal Payment (other than a Principal Payment representing a scheduled amortization payment) received by the Depository with respect to a Purchased Loan or Purchased Security shall be applied by not later than the Business Day following the Business Day on which such Principal Payment is received by the Depository to make a payment to the related Buyer on account of the Repurchase Price of the Purchased Securities or Purchased Loans in respect of which such Principal Payment has been received, until the Repurchase Price for such Purchased Securities or Purchased Loans has been reduced to the Target Price (or to zero in the case of any Principal Payments in full) for such Purchased Securities or Purchased Loans, respectively as of the date of such payment (as determined by such Buyer in its good faith business judgment after giving effect to such Principal Payment).  In addition to such application of the Principal Payment, Seller shall pay to the Buyers an amount equal to the Price Differential which has accrued and is unpaid with respect to the amount of such Principal Payment on the Business Day on which such Principal Payment is applied as described above.  So long as no Event of Default (other than with respect to a Buyer) shall have occurred and be continuing, any Principal Payment representing a scheduled amortization payment which is a portion of the Income received by the Depository during each Collection Period shall be applied by the Depository on the related Remittance Date in the following order of priority:

(i)first, to make a payment to the related Buyer on account of the Repurchase Price of the Purchased Securities or Purchased Loans in respect of which such Principal Payment has been received, until the Repurchase Price for such Purchased Securities or Purchased Loans has been reduced to the Target Price (or to zero in the case of any Principal Payments in full) for

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such Purchased Securities or Purchased Loans, respectively as of the date of such payment (as determined by such Buyer in its good faith business judgment after giving effect to such Principal Payment);

(ii)second, to make a payment on account of the Repurchase Price of any other Purchased Securities or Purchased Loans of the related Buyer as to which the Repurchase Price exceeds the Target Price (for this purpose, making such payment in the order of those Purchased Securities or Purchased Loans with the largest to smallest excess of Repurchase Price over Target Price), until the aggregate Repurchase Price for all of such Purchased Securities or Purchased Loans has been reduced to the aggregate Target Price for all of the Purchased Securities or Purchased Loans, respectively as of the date of such payment (as determined by such Buyer in its good faith business judgment after giving effect to such Principal Payment) and application of net sale proceeds; and

(iii)third, to remit to Seller the remainder of such Principal Payment or net sale proceeds.

(e)           If an Event of Default (other than with respect to a Buyer) shall have occurred and be continuing, all Income received by the Depository in respect of the Purchased Assets and the associated Hedging Transactions shall be applied by the Depository on the Business Day next following the Business Day on which such funds are deposited in the Cash Management Account as follows:

(i)first, to remit to the applicable Buyer an amount equal to the Price Differential which has accrued and is outstanding in respect of either all of the Purchased Loans or all of the Purchased Securities as of such Business Day;

(ii)second, to make a payment to applicable Buyer on account of the Repurchase Price of the Purchased Loans or Purchased Securities until the Repurchase Price for all of the Purchased Loans or Purchased Securities has been reduced to zero; and

(iii)third, to remit to Seller the remainder.

6.             SECURITY INTEREST

The Buyers and Seller intend that all Transactions hereunder be sales to the applicable Buyer of the Purchased Securities and Purchased Loans and not loans from a Buyer to Seller secured by the Purchased Securities and Purchased Loans.  However, in the event any such Transaction with respect to a Purchased Loan is deemed to be a loan, Seller hereby pledges all of its right, title, and interest in, to and under and grants a first priority lien on, and security interest in, all of the following property, whether now owned or hereafter acquired, now existing or hereafter created and wherever located (collectively, the “Assets”) to the Loan Buyer, and on a subordinated basis to the Securities Buyer, to secure the payment and performance of all other

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amounts or obligations owing to the Loan Buyer, and on a subordinated basis to the Securities Buyer, pursuant to this Agreement and the related documents described herein:

(a)           the Purchased Loans, Servicing Agreements, Servicing Records, insurance relating to the Purchased Loans, and collection and escrow accounts relating to the Purchased Loans;

(b)           the Hedging Transactions entered into with respect to the Purchased Loans;

(c)           the Cash Management Account and all monies from time to time on deposit in the Cash Management Account;

(d)           all “general intangibles”, “accounts” and “chattel paper” as defined in the UCC relating to or constituting any and all of the foregoing; and

(e)           all replacements, substitutions or distributions on or proceeds, payments, Income and profits of, and records (but excluding any financial models or other proprietary information) and files relating to any and all of any of the foregoing.

In the event any such Transaction with respect to a Purchased Security is deemed to be a loan, Seller hereby pledges all of its right, title, and interest in, to and under and grants a first priority lien on, and security interest in, all of the following property, whether now owned or hereafter acquired, now existing or hereafter created and wherever located (also, collectively, the “Assets”) to the Securities Buyer, and on a subordinated basis to the Loan Buyer, to secure the payment and performance of all amounts or obligations owing to the Securities Buyer, and on a subordinated basis to the Loan Buyer, pursuant to this Agreement and the related documents described herein:

(a)           the Purchased Securities;

(b)           the Hedging Transactions entered into with respect to the Purchased Securities;

(c)           the Cash Management Account and all financial assets (including without limitation all security entitlements with respect to all financial assets) from time to time on deposit in or credited to the Cash Management Account;

(d)           all “general intangibles”, “accounts” and “chattel paper” as defined in the UCC relating to or constituting any and all of the foregoing; and

(e)           all replacements, substitutions or distributions on or proceeds, payments, Income and profits of, and records (but excluding any financial models or other proprietary information) and files relating to any and all of any of the foregoing.

The Buyers’ security interest in the Assets shall terminate only upon termination of the Seller’s obligations under this Agreement and the documents delivered in connection herewith and therewith.  Upon such termination, each Buyer shall deliver to Seller such UCC termination statements and other release documents as may be commercially reasonable and to return the Purchased Assets to Seller.  For purposes of the grant of the security interest pursuant to Section

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6 of this Agreement, this Agreement shall be deemed to constitute a security agreement under the New York Uniform Commercial Code (the “UCC”).  Each Buyer shall have all of the rights and may exercise all of the remedies of a secured creditor under the UCC and the other laws of the State of New York.  In furtherance of the foregoing, (a) each Buyer, at Seller’s sole cost and expense, shall cause to be filed in such locations as may be reasonably necessary to perfect and maintain perfection and priority of the security interest granted hereby, UCC financing statements and continuation statements (collectively, the “Filings”), and shall forward copies of such Filings to Seller upon completion thereof, and (b) Seller shall from time to time take such further actions as may be reasonably requested by Buyer to maintain and continue the perfection and priority of the security interest granted hereby (including marking its records and files to evidence the interests granted to Buyer hereunder).

7.             PAYMENT, TRANSFER AND CUSTODY

(a)           On the Purchase Date for each Transaction, ownership of the Purchased Securities and/or Purchased Loans shall be transferred to Buyer or its designee (including the Custodian) against the simultaneous transfer of the Purchase Price to an account specified by Seller relating to such Transaction and indicated on the Confirmation; provided, that if such account is not:

Bank:
City/State:
ABA:
Account Name:
Account #:
Attention:

then such Confirmation shall require the signature of two (2) Authorized Representatives (as set forth on Exhibit II hereto) of the Seller.

(b)           On or prior to the applicable Purchase Date, Seller shall deliver the related Purchased Securities (and in the case of the Purchased Securities that are traded through The Depository Trust Company, registered in the name of the Custodian) and all necessary documentation to the Custodian in accordance with the Custodial Agreement so that, upon the occurrence and continuation of an Event of Default, the Securities Buyer may, without any further action of Seller, re-register such Purchased Securities in the name of the Securities Buyer and have all rights of conversions, exchange, subscription and any other rights, privileges and options pertaining to such Purchased Securities as the owner thereof, and in connection therewith, the right to deposit and deliver any and all of the Purchased Securities with any committee, depositary transfer, agent, register or other designated agency upon such terms and conditions as the Securities Buyer may reasonably determine.  The Purchased Securities shall be held by the Custodian as exclusive bailee and agent for the Securities Buyer, either directly or through the facilities of a Relevant System, as “securities intermediary” (as defined in Section 8-102(a)(14) of the UCC and 31 C.F.R. Section 357.2) and credited to the “securities account” (as defined in Section 8-501(a) of the UCC) of Securities Buyer.  The Securities Buyer, as “entitlement holder” (as defined in Section 8-102(a)(7) of the UCC) with respect to the Purchased Securities, shall be entitled to receive all cash dividends and distributions paid in respect thereof.

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(c)           With respect to Purchased Securities that shall be delivered or held in uncertificated form and the ownership of which is registered on books maintained by the issuer thereof or its transfer agent, Seller shall execute and deliver such documents or instruments, in each case in blank, necessary so that such Purchased Securities are able to be legally and validly transferred to Securities Buyer without any further action of Seller upon the occurrence and continuation of an Event of Default.  With respect to Purchased Securities that shall be delivered or held in definitive, certificated form, Seller shall deliver to the Custodian the original of the relevant certificate along with all other documentation so that such Purchased Securities may be registered in the name of Securities Buyer without any further action of Seller upon the occurrence and continuation of an Event of Default.  With respect to Purchased Securities that shall be delivered through a Relevant System in book entry form and credited to or otherwise held in a securities account, Seller shall take such actions necessary to provide instruction to the relevant financial institution or other entity, which instruction shall be sufficient if complied with to register the transfer of Purchased Securities from Seller to Securities Buyer or its designee.  Any delivery of a Purchased Security in accordance with this paragraph, or any other method acceptable to Securities Buyer, shall be sufficient to cause Securities Buyer to be the “entitlement holder” (as defined in Section 8-102(a)(7) of the UCC) with respect to the Purchased Securities and, if the Transaction is recharacterized as a secured financing, to have a perfected first priority security interest therein.  No Purchased Securities, whether certificated or uncertificated, shall remain in the name, or possession, of Seller or any of its agents or in any securities account in the name of Seller or any of its agents.

(d)           Except to the extent waived by the applicable Buyer in its sole discretion, as a condition to the Buyer’s purchase of any Purchased Securities or Purchased Loans, as applicable, Seller shall deliver to the applicable Buyer on or prior to the Purchase Date:

With respect to each Security, to the extent reasonably available to Seller:

(i)copies of the executed Securitization Document governing such Purchased Securities, and the offering documents related to such Purchased Securities, each certified by Seller as a true, correct and complete copy of the original document delivered to Seller, and any ancillary documents required to be delivered to holders of the Purchased Securities under such Securitization Document;

(ii)one or more officer’s certificates with respect to the completeness of the documents delivered as may be reasonably requested by Securities Buyer,

(iii)an instruction letter from Seller to the Trustee under such Securitization Document, instructing the Trustee to remit all sums required to be remitted to the holder of such Purchased Securities under such Securitization Document to the Depository or as otherwise directed in a written notice signed by Seller and Securities Buyer,

(iv)copies of all distribution statements, if any, delivered to Seller pursuant to such Securitization Document during the three-month period immediately preceding such Purchase Date, and

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(v)any other documents or instruments necessary in the reasonable opinion of Securities Buyer to consummate the sale of such Purchased Securities to Buyer or, if such Transaction is recharacterized as a secured financing, to create and perfect in favor of Securities Buyer a valid perfected first priority security interest in such Purchased Securities.

(e)           On or before each Purchase Date, Seller shall deliver or cause to be delivered to the applicable Buyer or its designee the Custodial Delivery in the form attached hereto as Exhibit IV; provided, that notwithstanding the foregoing, upon request of the Seller, the applicable Buyer in its sole discretion may elect to permit the Seller to make such delivery by not later than the third (3rd) Business Day after the related Purchase Date, so long as the Seller causes an Acceptable Attorney to deliver to the applicable Buyer and the Custodian an Attorney’s Bailee Letter on or prior to such Purchase Date.  In connection with each sale, transfer, conveyance and assignment of a Purchased Loan, on or prior to each Purchase Date with respect to such Purchased Loan, the Seller shall deliver or cause to be delivered and released to the Custodian the following documents (collectively, the “Purchased Loan File”) pertaining to each of the Purchased Loans identified in the Custodial Delivery delivered therewith; provided, that Seller shall deliver a certificate of an Authorized Representative of Seller certifying that any copies of documents delivered represent true and correct copies of the originals of such documents:

With respect to each Purchased Loan secured directly by a Mortgage (other than a B Note or Mezzanine Loan as set forth in clauses (ii) and (iii), respectively, of the definition of Eligible Loan):

(i)The original Mortgage Note bearing all intervening endorsements, endorsed “Pay to the order of _________ without recourse” and signed in the name of the last endorsee (the “Last Endorsee”) by an authorized Person (in the event that the Purchased Loan was acquired by the Last Endorsee in a merger, the signature must be in the following form:  “[Last Endorsee], successor by merger to [name of predecessor]”; in the event that the Purchased Loan was acquired or originated by the Last Endorsee while doing business under another name, the signature must be in the following form:  “[Last Endorsee], formerly known as [previous name]”).

(ii)An original or copy of any guarantee executed in connection with the Mortgage Note (if any).

(iii)An original or copy of the Mortgage with evidence of recordation, or submission for recordation, from the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located.

(iv)Originals or copies of all assumption, modification, consolidation or extension agreements with evidence of recordation, or submission for recordation, from the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located.

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(v)An original or copy of the Assignment of Mortgage in blank for each Purchased Loan, in form and substance acceptable to Buyer and signed in the name of the Last Endorsee (in the event that the Purchased Loan was acquired by the Last Endorsee in a merger, the signature must be in the following form:  “[Last Endorsee], successor by merger to [name of predecessor]”; in the event that the Purchased Loan was acquired or originated while doing business under another name, the signature must be in the following form: “[Last Endorsee], formerly known as [previous name]”).

(vi)Originals or copies of all intervening assignments of mortgage with evidence of recordation, or submission for recordation, from the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located.

(vii)An original or copy of the attorney’s opinion of title and abstract of title or the original mortgagee title insurance policy, or if the original mortgagee title insurance policy has not been issued, the irrevocable marked commitment to issue the same.

(viii)An original or copy of any security agreement, chattel mortgage or equivalent document executed in connection with the Purchased Loan.

(ix)An original or copy of the assignment of leases and rents, if any, with evidence of recordation, or submission for recordation, from the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located.

(x)Originals or copies of all intervening assignments of assignment of leases and rents, if any, or copies thereof, with evidence of recordation, or submission for recordation, from the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located.

(xi)A copy of the UCC financing statements and all necessary UCC continuation statements with evidence of filing or submission for filing thereon, and UCC assignments prepared by Seller in blank, which UCC assignments shall be in form and substance acceptable for filing.

(xii)An environmental indemnity agreement (if any).

(xiii)An omnibus assignment in blank (if any).

(xiv)A disbursement letter from the Mortgagor to the original mortgagee (if any).

(xv)Mortgagor’s certificate or title affidavit (if any).

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(xvi)A survey of the Mortgaged Property (if any) as accepted by the title company for issuance of the Title Policy.

(xvii)A copy of the Mortgagor’s opinion of counsel (if any).

(xviii)An assignment of permits, contracts and agreements (if any).

With respect to each Purchased Loan which is a mezzanine loan secured by a pledge of the entire (or such lesser amount as Loan Buyer may agree to) direct or indirect equity ownership interest of Seller in an entity that owns a multifamily or commercial property:

(i)The original Mezzanine Note signed in connection with the Purchased Loan bearing all intervening endorsements, endorsed “Pay to the order of __________ without recourse” and signed in the name of the Last Endorsee by an authorized Person (in the event that the Mezzanine Note was acquired by the Last Endorsee in a merger, the signature must be in the following form:  “[Last Endorsee], successor by merger to [name of predecessor]”; in the event that the Purchased Loan was acquired or originated by the Last Endorsee while doing business under another name, the signature must be in the following form:  “[Last Endorsee], formerly known as [previous name]”).

(ii)An original or copy of the mezzanine loan agreement and the guarantee, if any, executed in connection with the Purchased Loan.

(iii)An original or copy of the intercreditor or loan coordination agreement, if any, executed in connection with the Purchased Loan.

(iv)An original or copy of the security agreement executed in connection with the Purchased Loan.

(v)Copies of all documents relating to the formation and organization of the borrower of such Purchased Loan, together with all consents and resolutions delivered in connection with such borrower’s obtaining the Purchased Loan.

(vi)All other documents and instruments evidencing, guaranteeing, insuring or otherwise constituting or modifying or otherwise affecting such Purchased Loan, or otherwise executed or delivered in connection with, or otherwise relating to, such Purchased Loan, including all documents establishing or implementing any lockbox pursuant to which Seller is entitled to receive any payments from cash flow of the underlying real property.

(vii)The assignment of Purchased Loan sufficient to transfer to Buyer all of Seller’s rights, title and interest in and to the Purchased Loan.

(viii)A copy of the borrower’s opinion of counsel (if any).

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(ix)A copy of the UCC financing statements and all necessary UCC continuation statements with evidence of filing or submission for filing thereon, and UCC assignments prepared by Seller in blank, which UCC assignments shall be in form and substance acceptable for filing.

(x)The original certificates representing the pledged equity interests (if any).

(xi)Stock powers relating to each pledged equity interest, executed in blank, if an original stock certificate is provided.

(xii)Assignment of any management agreements, agreements among equity interest holders or other material contracts.

(xiii)If no original stock certificate is provided, evidence (which may be an officer’s certificate confirming such circumstances) that the pledged ownership interests have been transferred to, or otherwise made subject to a first priority security interest in favor of, the Seller.

With respect to each Purchased Loan which is a junior participation interest in or a subordinate note from a commercial mortgage loan secured by a first or second lien on a multifamily or commercial property or a mezzanine loan:

(i)the original or a copy of all of the documents described above with respect to a Purchased Loan secured by a Mortgage or which is a mezzanine loan as applicable (in the case of such Purchased Loan which is in a second lien position, then for both the first lien position and the second lien position);

(ii)if such Purchased Loan is a participation interest, an original participation certificate bearing all intervening endorsements, endorsed “Pay to the order of ______ without recourse” and signed in the name of the Last Endorsee by an authorized Person;

(iii)an original or copy of any participation agreement and an original or copy of any intercreditor agreement, co-lender agreement and/or servicing agreement executed in connection with the Purchased Loan; and

(iv)the omnibus assignment of Purchased Loan sufficient to transfer to Loan Buyer all of Seller’s rights, title and interest in and to the Purchased Loan.

With respect to each Purchased Loan which is of the type described in clause (iv) of the definition of Eligible Loan:  any of the documentation referred to above in this Section 7(e) of this Agreement which is determined by Loan Buyer to be reasonably necessary to effectuate the sale, transfer, conveyance and assignment of such Purchased Loan.

In addition, with respect to each Purchased Loan, the Seller shall deliver an instruction letter from the Seller to either the Mortgagor or the borrower under such Purchased Loan or the servicer with respect to such Purchased Loan, instructing the Mortgagor, the borrower or the servicer, as applicable, to remit all sums required to be remitted to the holder of such Purchased

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Loan under the loan documents to the Depository for deposit in the Cash Management Account or as otherwise directed in a written notice signed by Seller and Loan Buyer.

From time to time, Seller shall forward to the Custodian additional original documents or additional documents evidencing any assumption, modification, consolidation or extension of a Purchased Loan approved in accordance with the terms of this Agreement, and upon receipt of any such other documents, the Custodian shall hold such other documents as Loan Buyer shall request from time to time.  With respect to any documents which have been delivered or are being delivered to recording offices for recording and have not been returned to Seller in time to permit their delivery hereunder at the time required, in lieu of delivering such original documents, Seller shall deliver to Loan Buyer a true copy thereof with an officer’s certificate certifying that such copy is a true, correct and complete copy of the original, which has been transmitted for recordation.  Seller shall deliver such original documents to the Custodian promptly when they are received.  With respect to all of the Purchased Loans delivered by Seller to Loan Buyer or its designee (including the Custodian), Seller shall execute an omnibus power of attorney substantially in the form of Exhibit V attached hereto irrevocably appointing Loan Buyer its attorney-in-fact with full power to (i) complete and record the Assignment of Mortgage, (ii) complete the endorsement of the Mortgage Note or Mezzanine Note and (iii) take such other steps as may be reasonably necessary or desirable to enforce Loan Buyer’s rights against such Purchased Loans and the related Purchased Loan Files and the Servicing Records.  Loan Buyer shall deposit the Purchased Loan Files representing the Purchased Loans, or direct that the Purchased Loan Files be deposited directly, with the Custodian.  The Purchased Loan Files shall be maintained in accordance with the Custodial Agreement.  Any Purchased Loan Files not delivered to Loan Buyer or its designee (including the Custodian) are and shall be held in trust by Seller or its designee for the benefit of Loan Buyer as the owner thereof.  Seller or its designee shall maintain a copy of the Purchased Loan File and the originals of the Purchased Loan File not delivered to Loan Buyer or its designee.  The possession of the Purchased Loan File by Seller or its designee is at the will of Loan Buyer for the sole purpose of servicing the related Purchased Loan, and such retention and possession by the Seller or its designee is in a custodial capacity only.  The books and records (including, without limitation, any computer records or tapes) of Seller or its designee shall be marked appropriately to reflect clearly the sale of the related Purchased Loan to Loan Buyer.  Seller or its designee (including the Custodian) shall release its custody of the Purchased Loan File only in accordance with written instructions from Loan Buyer, unless such release is required as incidental to the servicing of the Purchased Loans, is in connection with a repurchase of any Purchased Loan by Seller or as otherwise required by law.

(f)            Unless an Event of Default (other than with respect to a Buyer) shall have occurred and be continuing, with respect to Purchased Securities that shall be delivered through a Relevant System in book entry form and credited to or otherwise held in a securities account, the Securities Buyer shall exercise all rights with respect to such Purchased Securities in accordance with Seller’s written instructions.  Unless an Event of Default (other than with respect to a Buyer) shall have occurred and be continuing, Seller shall be entitled to exercise all rights with respect to Purchased Assets (other than the Purchased Securities referred to in the immediately preceding sentence), subject in all cases to the terms and conditions of this Agreement.  Upon the occurrence and during the continuation of an Event of Default (other than with respect to a

35

Buyer), Buyers shall be entitled to exercise all rights with respect to the Purchased Assets without regard to Seller’s instructions.

8.             SALE, TRANSFER, HYPOTHECATION OR PLEDGE OF PURCHASED LOANS AND PURCHASED SECURITIES

(a)           Title to all Purchased Securities and Purchased Loans shall pass to the applicable Buyer on the applicable Purchase Date, and Buyer shall have free and unrestricted use of all Purchased Securities and Purchased Loans, subject to the terms and conditions of this Agreement.  Nothing in this Agreement or any other Transaction Document shall preclude the applicable Buyer from engaging in repurchase transactions with the Purchased Securities and Purchased Loans or otherwise selling, transferring, pledging, repledging, hypothecating, or rehypothecating the Purchased Securities and Purchased Loans, but no such transaction shall relieve the applicable Buyer of its obligations to transfer the Purchased Securities and/or Purchased Loans to Seller pursuant to Sections 3 or 11 of this Agreement or of the applicable Buyer’s obligation to credit or pay Income to, or apply Income to the obligations of, Seller pursuant to Section 5 hereof.

(b)           Nothing contained in this Agreement or any other Transaction Document shall obligate a Buyer to segregate any Purchased Securities or Purchased Loans delivered to such Buyer by Seller.  Notwithstanding anything to the contrary in this Agreement or any other Transaction Document, no Purchased Security or Purchased Loan shall remain in the custody of the Seller or an Affiliate of the Seller.

9.             [INTENTIONALLY OMITTED]

10.          REPRESENTATIONS

(a)           Each of Buyer and Seller represents and warrants to the other that (i) it is duly authorized to execute and deliver this Agreement, to enter into Transactions contemplated hereunder and to perform its obligations hereunder and has taken all necessary action to authorize such execution, delivery and performance, (ii) it will engage in such Transactions as principal (or, if agreed in writing, in the form of an annex hereto or otherwise, in advance of any Transaction by the other party hereto, as agent for a disclosed principal), (iii) the person signing this Agreement on its behalf is duly authorized to do so on its behalf (or on behalf of any such disclosed principal), (iv) it has obtained all authorizations of any governmental body required in connection with this Agreement and the Transactions hereunder and such authorizations are in full force and effect and (v) the execution, delivery and performance of this Agreement and the Transactions hereunder will not violate any law, ordinance or rule applicable to it or its organizational documents or any agreement by which it is bound or by which any of its assets are affected.  On the Purchase Date for any Transaction, the related Buyer and Seller shall each be deemed to repeat all the foregoing representations made by it.

(b)           In addition to the representations and warranties in subsection (a) above, Seller represents and warrants to each Buyer that as of the Purchase Date for the purchase of any Purchased Securities or Purchased Loans by a Buyer from Seller and any Transaction thereunder

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and as of the date of this Agreement and at all times while this Agreement and any Transaction thereunder is in full force and effect:

(i)Organization.  Seller is duly incorporated, validly existing and in good standing under the laws and regulations of the state of Seller’s incorporation and is duly licensed, qualified, and in good standing in every state where such licensing or qualification is necessary for the transaction of Seller’s business.  Seller has the power to own and hold the assets it purports to own and hold, and to carry on its business as now being conducted and proposed to be conducted, and Seller has the power to execute, deliver, and perform its obligations under this Agreement and the other Transaction Documents.

(ii)Due Execution; Enforceability.  The Transaction Documents have been or will be duly executed and delivered by Seller, for good and valuable consideration.  The Transaction Documents constitute the legal, valid and binding obligations of Seller, enforceable against Seller in accordance with their respective terms subject to bankruptcy, insolvency, and other limitations on creditors’ rights generally and to equitable principles.

(iii)Non-Contravention.  Neither the execution and delivery of the Transaction Documents, nor consummation by Seller of the transactions contemplated by the Transaction Documents (or any of them), nor compliance by Seller with the terms, conditions and provisions of the Transaction Documents (or any of them) will conflict with or result in a breach of any of the terms, conditions or provisions of (i) the organizational documents of Seller, (ii) any contractual obligation to which Seller is now a party or the rights under which have been assigned to Seller or the obligations under which have been assumed by Seller or to which the assets of Seller are subject or constitute a default thereunder, or result thereunder in the creation or imposition of any lien upon any of the assets of Seller, other than pursuant to the Transaction Documents, (iii) any judgment or order, writ, injunction, decree or demand of any court applicable to Seller, or (iv) any applicable Requirement of Law, in the case of clauses (ii)-(iv) above, to the extent that such conflict or breach would have a material adverse effect upon Seller’s ability to perform its obligations hereunder.  Seller has all necessary licenses, permits and other consents from Governmental Authorities necessary to acquire, own and sell the Purchased Assets and for the performance of its obligations under the Transaction Documents.

(iv)Litigation; Requirements of Law.  There is no action, suit, proceeding, investigation, or arbitration pending or, to the best knowledge of Seller, threatened against Seller, the Sponsor or any of their respective assets, nor is there any action, suit, proceeding, investigation, or arbitration pending or threatened against the Sponsor which may result in any material adverse change in the business, operations, financial condition, properties, or assets of Seller or the Sponsor, or which may have an adverse effect on

37

the validity of the Transaction Documents or the Purchased Assets or any action taken or to be taken in connection with the obligations of Seller under any of the Transaction Documents.  Seller is in compliance in all material respects with all Requirements of Law.  Neither Seller nor the Sponsor is in default in any material respect with respect to any judgment, order, writ, injunction, decree, rule or regulation of any arbitrator or Governmental Authority.

(v)No Broker.  Seller has not dealt with any broker, investment banker, agent, or other Person (other than a Buyer or an Affiliate of a Buyer) who may be entitled to any commission or compensation in connection with the sale of Purchased Loans or Purchased Securities pursuant to any of the Transaction Documents.

(vi)Good Title.  Immediately prior to the purchase of any Purchased Securities or Purchased Loans by the applicable Buyer from Seller, such Purchased Securities and Purchased Loans are free and clear of any lien, encumbrance or impediment to transfer (including any “adverse claim” as defined in Section 8-102(a)(1) of the UCC), and Seller is the record and beneficial owner of and has good and marketable title to and the right to sell and transfer such Purchased Securities and Purchased Loans to the applicable Buyer and, upon transfer of such Purchased Securities and Purchased Loans to the applicable Buyer, such Buyer shall be the owner of such Purchased Securities and Purchased Loans free of any adverse claim, subject to the rights of Seller pursuant to the terms of this Agreement.  In the event the related Transaction is recharacterized as a secured financing of the Purchased Securities or Purchased Loans, the provisions of this Agreement are effective to create in favor of the applicable Buyer a valid security interest in all rights, title and interest of the Seller in, to and under the Assets and the Buyer shall have a valid, perfected first priority security interest in the Purchased Securities or Purchased Loans.

(vii)No Default.  No Default or Event of Default (in each case, other than with respect to a Buyer) exists under or with respect to the Transaction Documents.

(viii)Representations and Warranties Regarding Purchased Securities.  Seller represents and warrants to Securities Buyer that each Purchased Security sold hereunder (other than a Purchased Security issued or underwritten by an Affiliate of Securities Buyer), as of each Purchase Date for a Transaction, conform to the applicable representations and warranties set forth in Exhibit VI attached hereto in all material respects, except as disclosed to Securities Buyer in writing; provided, that notwithstanding the foregoing, with respect to any Purchased Security which Seller acquired from Securities Buyer or its Affiliates, Seller shall not be required to make such representations and warranties set forth in Exhibit

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VI and, in lieu thereof, shall be deemed to provide the representations that Securities Buyer or its Affiliates in turn provided to Seller.

(ix)Representations and Warranties Regarding Purchased Loans; Delivery of Purchased Loan File.  Seller represents and warrants to Loan Buyer that each Purchased Loan sold hereunder and each pool of Purchased Loans sold in a Transaction hereunder, as of each Purchase Date for a Transaction conform to the applicable representations and warranties set forth in Exhibit VI attached hereto in all material respects, except as disclosed to Loan Buyer in writing; provided, that notwithstanding the foregoing, with respect to any Purchased Loan which Seller acquired from Loan Buyer or its Affiliates, Seller shall not be required to make such representations and warranties set forth in Exhibit VI and, in lieu thereof, shall be deemed to provide the representations that Loan Buyer or its Affiliates in turn provided to Seller.  It is understood and agreed that the representations and warranties set forth in Exhibit VI hereto, if any, shall survive delivery of the respective Purchased Loan File to Loan Buyer or its designee (including the Custodian) to the extent permitted by applicable law.  With respect to each Purchased Loan, the Mortgage Note or Mezzanine Note, the Mortgage (if any), the Assignment of Mortgage (if any) and any other documents required to be delivered under this Agreement and the Custodial Agreement for such Purchased Loan have been delivered to Loan Buyer or the Custodian on its behalf.  Seller or its designee is in possession of a complete, true and accurate Purchased Loan File with respect to each Purchased Loan, except for such documents the originals of which have been delivered to the Custodian and except for exceptions as have been disclosed to Buyer.

(x)Adequate Capitalization; No Fraudulent Transfer.  Seller has adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations.  Seller is generally able to pay, and as of the date hereof is paying, its debts as they come due.  Seller has not become, or is presently, financially insolvent nor will Seller be made insolvent by virtue of Seller’s execution of or performance under any of the Transaction Documents within the meaning of the bankruptcy laws or the insolvency laws of any jurisdiction.  Seller has not entered into any Transaction Document or any Transaction pursuant thereto in contemplation of insolvency or with intent to hinder, delay or defraud any creditor.

(xi)Consents.  No consent, approval or other action of, or filing by Seller with, any Governmental Authority or any other Person is required to authorize, or is otherwise required in connection with, the execution, delivery and performance of any of the Transaction Documents (other than consents, approvals and filings that have been obtained or made, as applicable).

(xii)[INTENTIONALLY OMITTED]

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(xiii)Organizational Documents.  Seller has delivered to Buyer certified copies of its organizational documents, together with all amendments thereto, if any.

(xiv)No Encumbrances.  Subject to the terms of this Agreement, and except as disclosed to Buyer, there are (i) no outstanding rights, options, warrants or agreements on the part of Seller for a purchase, sale or issuance, in connection with the Purchased Loans and (ii) no agreements on the part of the Seller to issue, sell or distribute the Purchased Securities and Purchased Loans.

(xv)Federal Regulations.  Seller is not required to register as (A) an “investment company,” or a company “controlled by an investment company,” within the meaning of the Investment Company Act of 1940, as amended, or (B) a “holding company,” or a “subsidiary company of a holding company,” or an “affiliate” of either a “holding company” or a “subsidiary company of a holding company,” as such terms are defined in the Public Utility Holding Company Act of 1935, as amended.

(xvi)Taxes.  Seller has filed or caused to be filed all tax returns which to the knowledge of Seller would be delinquent if they had not been filed on or before the date hereof and has paid all taxes shown to be due and payable on or before the date hereof on such returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it and any of its assets by any Governmental Authority except for any such taxes as are being appropriately contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been provided in accordance with GAAP; no tax liens have been filed against any of Seller’s assets and, to Seller’s knowledge, no claims are being asserted with respect to any such taxes, fees or other charges.

(xvii)ERISA.  Seller does not have any Plans or any ERISA Affiliates and makes no contributions to any Plans or any Multiemployer Plans.

(xviii)Judgments/Bankruptcy.  There are no judgments against Seller or the Sponsor unsatisfied of record or docketed in any court located in the United States of America and no Act of Insolvency has ever occurred with respect to Seller or the Sponsor.

(xix)Full and Accurate Disclosure.  No information contained in the Transaction Documents, or any written statement furnished by Seller pursuant to the terms of the Transaction Documents, contains any untrue statement of a material fact or, to Seller’s actual knowledge, omits to state a material fact necessary to make the statements contained herein or therein not misleading in light of the circumstances under which they were made.

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(xx)Financial Information.  All financial data concerning Seller that has been delivered by or on behalf of Seller to Buyer is true, complete and correct in all material respects and has been prepared in accordance with GAAP.  To Seller’s knowledge, all financial data concerning the Purchased Securities and Purchased Loans that has been delivered by or on behalf of Seller to each Buyer is true, complete and correct in all material respects. Since the delivery of such data, except as otherwise disclosed in writing to each Buyer, there has been no change in the financial position of Seller or in the operations of the Seller or, to Seller’s knowledge, the financial position of the Purchased Securities and Purchased Loans, which change is reasonably likely to have in a material adverse effect on Seller.

(xxi)Notice Address; Jurisdiction of Organization.  On the date of this Agreement, the Seller’s address for notices is located at c/o 410 Park Avenue, 14^th Floor, New York, New York  10022.  Seller’s jurisdiction of organization is Maryland.  The location where the Seller keeps its books and records, including all computer tapes and records relating to the Assets, is its notice address.

(c)           On the Purchase Date for any Transaction and on any date on which the Repurchase Date for any Transaction is automatically extended as described in the definition of “Repurchase Date”, Seller shall be deemed to have made all of the representations set forth in Section 10(b) of this Agreement as of such date.

11.          NEGATIVE COVENANTS OF SELLER

On and as of the date hereof and each Purchase Date and until this Agreement are no longer in force with respect to any Transaction, Seller shall not without the prior written consent of the applicable Buyer:

(a)           take any action which would directly or indirectly impair or adversely affect such Buyer’s title to the Purchased Securities or the Purchased Loans;

(b)           transfer, assign, convey, grant, bargain, sell, set over, deliver or otherwise dispose of, or pledge or hypothecate, directly or indirectly, any interest in the Purchased Securities or Purchased Loans (or any of them) to any Person other than such Buyer, or engage in repurchase transactions or similar transactions with respect to the Purchased Securities or Purchased Loans (or any of them) with any Person other than such Buyer;

(c)           [intentionally omitted];

(d)           create, incur or permit to exist any lien, encumbrance or security interest in or on the Purchased Securities or the Purchased Loans, except as described in Section 6 of this Agreement;

(e)           create, incur or permit to exist any lien, encumbrance or security interest in or on any of the other Assets subject to the security interest granted by Seller pursuant to Section 6 of this Agreement;

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(f)            [intentionally omitted];

(g)           consent or assent to any amendment or supplement to, or termination of, any Securitization Document, any note, loan agreement, mortgage or guaranty relating to the Purchased Loans or other material agreement or instrument relating to the Purchased Securities or the Purchased Loans other than Permitted Purchased Loan Modifications;

(h)           permit a majority of the members of the board of directors of the Seller to change during any twelve month period after the date hereof; or

(i)            after the occurrence and during the continuation of any Event of Default (in each case, other than with respect to Buyer), make any distribution, payment on account of, or set apart assets for, a sinking or other analogous fund for the purchase, redemption, defeasance, retirement or other acquisition of any equity or ownership interest of Seller, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of Seller, in each case, in excess of the minimum amounts required to be distributed by Seller in order to enable Seller to maintain its status as a real estate investment trust.

12.          AFFIRMATIVE COVENANTS OF SELLER

(a)           Seller shall promptly notify each Buyer of any material adverse change in its business operations and/or financial condition; provided, however, that nothing in this Section 12 shall relieve Seller of its obligations under this Agreement.

(b)           Seller shall provide each Buyer with copies of such documents as such Buyer may reasonably request evidencing the truthfulness of the representations set forth in Section 10.

(c)           Seller (1) shall defend the right, title and interest of each Buyer in and to the Assets against, and take such other action as is necessary to remove, the Liens, security interests, claims and demands of all Persons (other than security interests by or through a Buyer) and (2) shall, at such Buyer’s reasonable request, take all action necessary to ensure that such Buyer will have a first priority security interest in the Purchased Securities and Purchased Loans subject to any of the Transactions in the event such Transactions are recharacterized as secured financings.

(d)           Seller shall notify such Buyer and the Depository of the occurrence of any Default or Event of Default with respect to Seller as soon as possible but in no event later than the second (2nd) Business Day after obtaining actual knowledge of such event.

(e)           [Intentionally Omitted].

(f)            [Intentionally Omitted].

(g)           Seller shall promptly (and in any event not later than two (2) Business Days following receipt) deliver to the applicable Buyer (i) any written notice of the occurrence of an event of default received by Seller pursuant to the Securitization Documents or Purchased Loan Documents; (ii) any notice of transfer of servicing under the Securitization Documents and (iii)

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any other information with respect to the Purchased Assets as may be reasonably requested by the applicable Buyer from time to time.

(h)           Seller will permit the applicable Buyer or its designated representative to inspect Seller’s records with respect to the Assets and the conduct and operation of its business related thereto upon reasonable prior written notice from such Buyer or its designated representative, at such reasonable times and with reasonable frequency (but not more than two times during any twelve consecutive month period so long as an Event of Default has not occurred and is not continuing), and to make copies of extracts of any and all thereof.  Buyer shall act in a commercially reasonable manner in requesting and conducting any inspection relating to the conduct and operation of Seller’s business.

(i)            If Seller shall at any time become entitled to receive or shall receive any rights, whether in addition to, in substitution of, as a conversion of, or in exchange for the Purchased Securities, or otherwise in respect thereof, Seller shall accept the same as Securities Buyer’s agent, hold the same in trust for Securities Buyer and deliver the same forthwith to Securities Buyer in the exact form received, duly endorsed by Seller to Securities Buyer, if required, together with an undated bond power covering such certificate duly executed in blank to be held by Securities Buyer hereunder as additional asset security for the Transactions.  If any sums of money or property so paid or distributed in respect of the Purchased Securities shall be received by Seller, Seller shall, until such money or property is paid or delivered to Securities Buyer, hold such money or property in trust for Securities Buyer, segregated from other funds of Seller, as additional asset security for the Transactions.

(j)            At any time from time to time upon the reasonable request of the applicable Buyer, at the sole expense of Seller, Seller will promptly and duly execute and deliver such further instruments and documents and take such further actions as the applicable Buyer may reasonably request for the purposes of obtaining or preserving the full benefits of this Agreement including the first priority security interest granted hereunder and of the rights and powers herein granted (including, among other things, filing such UCC financing statements as the applicable Buyer may reasonably request).  If any amount payable under or in connection with any of the Assets shall be or become evidenced by any promissory note, other instrument or chattel paper, such note, instrument or chattel paper shall be immediately delivered to the applicable Buyer, duly endorsed in a manner reasonably satisfactory to the applicable Buyer, to be held as Assets pursuant to this Agreement, and the documents delivered in connection herewith.

(k)           Seller shall provide each Buyer with the following financial and reporting information:

(i)Within 60 days after the last day of each of the first three fiscal quarters in any fiscal year, Seller’s unaudited consolidated balance sheets as of the end of such quarter, in each case certified as being true and correct by an officer’s certificate;

(ii)Within 120 days after the last day of its fiscal year, Seller’s audited consolidated statements of income and statements of changes in cash flow for such year and balance sheets as of the end of such year, in each case

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presented fairly in accordance with GAAP, and accompanied, in all cases, by an unqualified report of a nationally recognized independent certified public accounting firm consented to by Buyer in its reasonable discretion;

(iii)Within 60 days after the last day of each calendar quarter in any fiscal year, any and all property level financial information with respect to the Purchased Loans that is in the possession of the Seller or an Affiliate, including, without limitation, rent rolls and income statements; and

(iv)Within 60 days after the last day of each calendar quarter in any fiscal year, an officer’s certificate from the Seller addressed to each Buyer certifying that, as of such calendar month, (x) Seller is in compliance in all material respects with all of the terms, conditions and requirements of this Agreement, and (y) no Event of Default (other than with respect to a Buyer) exists.

(l)            Seller shall at all times comply in all material respects with all laws, ordinances, rules and regulations of any federal, state, municipal or other public authority having jurisdiction over Seller or any of its assets and Seller shall do or cause to be done all things reasonably necessary to preserve and maintain in full force and effect its legal existence, and all licenses material to its business.

(m)          Seller shall at all times keep proper books of records and accounts in which full, true and correct entries shall be made of its transactions in accordance with GAAP and set aside on its books from its earnings for each fiscal year all such proper reserves in accordance with GAAP.

(n)           Seller shall observe, perform and satisfy all the terms, provisions, covenants and conditions required to be observed, performed or satisfied by it, and shall pay when due all costs, fees and expenses required to be paid by it, under the Transaction Documents.  Seller shall pay and discharge all taxes, levies, liens and other charges on its assets and on the Assets that, in each case, in any manner would create any lien or charge upon the Assets, except for any such taxes as are being appropriately contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been provided in all material respects in accordance with GAAP.

(o)           Seller will maintain records with respect to the Assets and the conduct and operation of its business with no less a degree of prudence than if the Assets were held by Seller for its own account and will furnish the applicable Buyer, upon reasonable request by such Buyer or its designated representative, with reasonable information reasonably obtainable by Seller with respect to the Assets and the conduct and operation of its business.

(p)           Seller shall provide Loan Buyer with reasonable access to operating statements, the occupancy status and other property level information, with respect to the Mortgaged Properties, plus any such additional reports (to the extent in Seller’s possession) as Loan Buyer may reasonably request.

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13.          [INTENTIONALLY OMITTED]

14.          EVENTS OF DEFAULT; REMEDIES

(a)           After the occurrence and during the continuance of an Event of Default (other than with respect to Buyer), Seller hereby appoints Buyer as attorney-in-fact of Seller for the purpose of carrying out the provisions of this Agreement and taking any action and executing or endorsing any instruments that Buyer may deem necessary or advisable to accomplish the purposes hereof, which appointment as attorney-in-fact is irrevocable and coupled with an interest.  Each of the following clauses (i) through (xvii) shall be deemed an “Event of Default” hereunder:

(i)Seller fails to repurchase Purchased Assets upon the applicable Repurchase Date;

(ii)Seller fails to comply with Section 4 hereof;

(iii)Seller fails, after two (2) Business Days’ notice, to comply with Section 5 hereof;

(iv)an Act of Insolvency occurs with respect to Seller;

(v)Seller shall admit in writing to the Buyer its inability to, or its intention not to, perform any of its obligations hereunder;

(vi)either (A) the Transaction Documents shall for any reason not cause, or shall cease to cause, Buyer to be the owner free of any adverse claim of any of the Purchased Assets (other than Seller’s right to repurchase the Purchased Assets under this Agreement), or (B) if a Transaction is recharacterized as a secured financing, the Transaction Documents with respect to any Transaction shall for any reason cease to create a valid first priority security interest in favor of a Buyer in any of the Purchased Assets;

(vii)in the event that the Buyer or any of its Affiliates is a party to an ISDA Master Agreement with Seller and an event occurs which would constitute (a) an Event of Default (other than with respect to Buyer) or (b) a Termination Event or an Additional Termination Event (and, in the case of this clause (b), Seller has failed to meet its obligation to pay the Early Termination Amount, if any, pursuant to the terms of Section 6 of such ISDA Master Agreement) under any Transaction between Seller and the Buyer or any of its Affiliates, regardless of whether such Transaction is in effect on the date of such occurrence (capitalized terms used in this paragraph (vii) shall have the respective meanings ascribed to them in the ISDA Master Agreement (including respective Schedules and Confirmations) between Seller and the Buyer and/or any of its Affiliates);

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(viii)failure of a Buyer to receive on any Remittance Date the accreted value of the Price Differential (less any amount of such Price Differential previously paid by Seller to such Buyer) (including, without limitation, in the event the Income paid or distributed on or in respect of the Purchased Securities and Purchased Loans is insufficient to make such payment and the Seller does not make such payment or cause such payment to be made) (except that such failure shall not be an Event of Default by Seller if sufficient Income, other than Principal Payments, is on deposit in the Cash Management Account and the Depository fails to remit such funds to such Buyer);

(ix)failure of the Seller to make any other payment owing to a Buyer which has become due, whether by acceleration or otherwise under the terms of this Agreement which failure is not remedied within the applicable period (in the case of a failure pursuant to Section 4) or five (5) Business Days after notice from Buyer to Seller (in the case of any other such failure);

(x)any governmental, regulatory, or self-regulatory authority shall have removed, restricted, suspended or terminated the rights, privileges, or operations of Seller which has a material adverse effect on the financial condition or business operations of Seller;

(xi)a Change of Control shall have occurred;

(xii)any representation made by Seller or a Buyer shall have been incorrect or untrue in any material respect when made or repeated or deemed to have been made or repeated (other than the representations and warranties set forth in Section 10(b)(viii), (ix) or (xx) (in the case of (xx), with respect to the affected Purchased Assets only) made by the Seller, which shall not be considered an Event of Default if incorrect or untrue in any material respect, and shall only be used for purposes of marking such Purchased Asset to market, unless the Seller shall have made any such representation with actual knowledge that it was materially incorrect or untrue at the time made);

(xiii)the Seller shall fail to observe any of the following financial covenants as of the end of any fiscal quarter:

(A)a Fixed Charge Ratio of at least 1.2:1;

(B)a Recourse Debt to Equity Ratio of less than 5:1;

(C)a Total Debt to Equity Ratio of less than 10:1;

(D)a Minimum Net Worth of at least $375,000,000.

(xiv)a final judgment by any competent court in the United States of America for the payment of money in an amount greater than $5,000,000 shall have

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been rendered against Seller, and remained undischarged or unpaid for a period of sixty (60) days, during which period execution of such judgment is not effectively stayed by bonding over or other means acceptable to Buyer;

(xv)Seller shall have defaulted or failed to perform under any note, indenture, loan agreement, guaranty, swap agreement or any other contract, agreement or transaction to which it is a party, which default (A) involves the failure to pay a monetary obligation in excess of $5,000,000, or (B) permits the acceleration of the maturity of obligations in excess of $5,000,000 by any other party to or beneficiary of such note, indenture, loan agreement, guaranty, swap agreement or other contract agreement or transaction; provided, however, that any such default, failure to perform or breach shall not constitute an Event of Default if Seller cures such default, failure to perform or breach, as the case may be, within the grace period, if any, provided under the applicable agreement; or

(xvi)Seller shall have defaulted or failed to perform under any note, indenture, loan agreement, guaranty, swap agreement or any other contract, agreement or transaction to which it is a party with an Affiliate of a Buyer that results in the acceleration of such note, indenture, loan agreement, guaranty, swap agreement, contract, agreement or transaction; or

(xvii)if Seller or Buyer shall breach or fail to perform any of the terms, covenants, obligations or conditions of this Agreement, other than as specifically otherwise referred to in this definition of “Event of Default”, and such breach or failure to perform is not remedied within thirty (30) days after notice thereof to Seller or Buyer from the applicable party or its successors or assigns.

(b)           If an Event of Default shall occur and be continuing with respect to Seller, the following rights and remedies shall be available to each Buyer:

(i)At the option of each Buyer, exercised by written notice to Seller (which option shall be deemed to have been exercised, even if no notice is given, immediately upon the occurrence of an Act of Insolvency), the Repurchase Date for each Transaction hereunder shall, if it has not already occurred, be deemed immediately to occur (the date on which such option is exercised or deemed to have been exercised being referred to hereinafter as the “Accelerated Repurchase Date”).

(ii)If Buyer exercises or is deemed to have exercised the option referred to in Section 14(b)(i) of this Agreement:

(A)Seller’s obligations hereunder to repurchase all Purchased Securities and Purchased Loans shall become immediately due and payable on and as of the Accelerated Repurchase Date; and

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(B)to the extent permitted by applicable law, the Repurchase Price with respect to each Transaction (determined as of the Accelerated Repurchase Date) shall be increased by the aggregate amount obtained by daily application of, on a 360 day per year basis for the actual number of days during the period from and including the Accelerated Repurchase Date to but excluding the date of payment of the Repurchase Price (as so increased), (x) the Pricing Rate for such Transaction multiplied by (y) the Repurchase Price for such Transaction (decreased by (I) any amounts actually remitted to Buyer by the Depository or Seller from time to time pursuant to Section 5 of this Agreement and applied to such Repurchase Price, and (II) any amounts applied to the Repurchase Price pursuant to Section 14(b)(iii) of this Agreement); and (C) the Custodian shall, upon the request of a Buyer, deliver to such Buyer all instruments, certificates and other documents then held by the Custodian relating to the Purchased Securities and Purchased Loans.

(iii)Upon the occurrence of an Event of Default with respect to Seller, each Buyer may (A) immediately sell, at a public or private sale in a commercially reasonable manner and at such price or prices as the applicable Buyer may reasonably deem satisfactory any or all of the Purchased Securities and Purchased Loans or (B) in its sole discretion elect, in lieu of selling all or a portion of such Purchased Securities and Purchased Loans, to give Seller credit for such Purchased Securities and Purchased Loans in an amount equal to the Market Value of such Purchased Securities and Purchased Loans against the aggregate unpaid Repurchase Price for such Purchased Securities and Purchased Loans and any other amounts owing by Seller under the Transaction Documents.  The proceeds of any disposition of any Purchased Securities or Purchased Loans effected pursuant to this Section 14(b)(iii) shall be applied, (v) first, to the actual out-of-pocket costs and expenses reasonably incurred by Buyer in connection with Seller’s default; (w) second, to actual out-of-pocket costs of cover and/or Hedging Transactions, if any; (x) third, to the Repurchase Price; (y) fourth, to any other outstanding obligation of Seller to the related Buyer or its Affiliates pursuant to the Transaction Documents; and (z) fifth, to return any excess to Seller.  For the purposes of subclause (y) immediately above, “Affiliates” shall not include any entity that controls or is under common control with Citigroup Global Markets Inc., but may include Citigroup Global Markets Inc. and any entity controlled by it.

(iv)The parties recognize that it may not be possible to purchase or sell all of the Purchased Securities and Purchased Loans on a particular Business Day, or in a transaction with the same purchaser, or in the same manner because the market for such Purchased Securities and Purchased Loans may not be liquid.  In view of the nature of the Purchased Securities and Purchased Loans, the parties agree that liquidation of a Transaction or the

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Purchased Securities and Purchased Loans does not require a public purchase or sale and that a good faith private purchase or sale shall be deemed to have been made in a commercially reasonable manner.  Accordingly, each Buyer may elect, in its sole discretion, the time and manner of liquidating any Purchased Securities and Purchased Loans, and nothing contained herein shall (A) obligate Buyer to liquidate any Purchased Securities and Purchased Loans on the occurrence and during the continuance of an Event of Default or to liquidate all of the Purchased Securities and Purchased Loans in the same manner or on the same Business Day or (B) constitute a waiver of any right or remedy of each Buyer.

(v)Seller shall be liable to each Buyer for (A) the amount of all actual out-of-pocket expenses, including reasonable legal fees and expenses, actually incurred such Buyer in connection with or as a consequence of an Event of Default with respect to Seller, (B) all actual costs incurred in connection with covering transactions or Hedging Transactions, and (C) any other actual loss, damage, cost or expense directly arising or resulting from the occurrence of an Event of Default with respect to Seller.

(vi)Each Buyer shall have, in addition to its rights and remedies under the Transaction Documents, all of the rights and remedies provided by applicable federal, state, foreign, and local laws (including, without limitation, if the Transactions are recharacterized as secured financings, the rights and remedies of a secured party under the UCC of the State of New York, to the extent that the UCC is applicable, and the right to offset any mutual debt and claim), in equity, and under any other agreement between such Buyer and Seller.  Without limiting the generality of the foregoing, each Buyer shall be entitled to set off the proceeds of the liquidation of the Purchased Securities and Purchased Loans against all of Seller’s obligations to the applicable Buyer pursuant to the Transaction Documents, whether or not such obligations are then due, without prejudice to such Buyer’s right to recover any deficiency.

(vii)Subject to the notice and grace periods set forth herein, each Buyer may exercise any or all of the remedies available to such Buyer immediately upon the occurrence of an Event of Default (other than with respect to Buyer) and at any time during the continuance thereof.  All rights and remedies arising under the Transaction Documents, as amended from time to time, are cumulative and not exclusive of any other rights or remedies which each Buyer may have.

(viii)Each Buyer may enforce its rights and remedies hereunder without prior judicial process or hearing, and Seller hereby expressly waives any defenses Seller might otherwise have to require each Buyer to enforce its rights by judicial process.  Seller also waives any defense Seller might otherwise have arising from the use of nonjudicial process, disposition of

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any or all of the Purchased Securities and Purchased Loans, or from any other election of remedies.  Seller recognizes that nonjudicial remedies are consistent with the usages of the trade, are responsive to commercial necessity and are the result of a bargain at arm’s length.

(ix)Upon the designation of any Accelerated Repurchase Date, each Buyer may, without prior notice to the Seller, set off any sum or obligation (whether or not arising under this Agreement, whether matured or unmatured, whether or not contingent and irrespective of the currency, place of payment or booking office of the sum or obligation) owed by Seller to such Buyer or any Affiliate of such Buyer against any sum or obligation (whether or not arising under this Agreement, whether matured or unmatured, whether or not contingent and irrespective of the currency, place of payment or booking office of the sum or obligation) owed by such Buyer or any Affiliate of such Buyer to Seller.  Each Buyer will give notice to the other party of any set off effected under this Section 14(b)(ix).  If a sum or obligation is unascertained, each Buyer may in good faith estimate that obligation and set-off in respect of the estimate, subject to the relevant party accounting to the other when the obligation is ascertained.  Nothing in this Section 14(b)(ix) shall be effective to create a charge or other security interest.  This Section 14(b)(ix) shall be without prejudice and in addition to any right of set-off, combination of accounts, lien or other rights to which any party is at any time otherwise entitled (whether by operation of law, contract or otherwise).

(c)           If an Event of Default occurs and is continuing with respect to a Buyer, the following rights and remedies shall be available to Seller:

(i)Upon tender by Seller of payment of the aggregate Repurchase Price for all Purchased Securities and Purchased Loans, the applicable Buyer’s right, title and interest in such Purchased Securities and Purchased Loans shall be deemed transferred to Seller, and the applicable Buyer shall deliver such Purchased Securities and Purchased Loans to Seller at the applicable Buyer’s expense.

(ii)If Seller exercises the option referred to in Section 14(b)(i) hereof and the applicable Buyer fails to deliver any Purchased Securities or Purchased Loans to Seller, after three (3) Business Days’ notice to such Buyer, Seller may (A) purchase securities or loans, as applicable (“Replacement Assets”), that are in as similar an amount and interest rate as is reasonably practicable and in the same Rating Category as such Purchased Securities or the same Asset Type Grouping as such Purchased Loans or (B) in its sole discretion elect, in lieu of purchasing Replacement Assets, to be deemed to have purchased Replacement Assets at a price therefor equal to the Market Value of such Purchased Securities or Purchased Loans as of such date.

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(iii)The applicable Buyer shall be liable to Seller for any excess of the price paid (or deemed paid) by Seller for Replacement Assets therefor over the Repurchase Price for the Purchased Securities and Purchased Loans replaced thereby.

15.          SINGLE AGREEMENT

Each Buyer and Seller acknowledge that, and have entered hereinto and will enter into each Transaction hereunder in consideration of and in reliance upon the fact that, all Transactions hereunder constitute a single business and contractual relationship and have been made in consideration of each other.  Accordingly, each of Buyer and Seller agree (i) to perform all of its obligations in respect of each Transaction hereunder, and that a default in the performance of any such obligations shall constitute a default by it in respect of all Transactions hereunder, (ii) that each of them shall be entitled to set off claims and apply property held by them in respect of any Transaction against obligations owing to them in respect of any other Transactions hereunder and (iii) that payments, deliveries and other transfers made by either of them in respect of any Transaction shall be deemed to have been made in consideration of payments, deliveries and other transfers in respect of any other Transactions hereunder, and the obligations to make any such payments, deliveries and other transfers may be applied against each other and netted.

16.          RECORDING OF COMMUNICATIONS

EACH OF BUYER AND SELLER SHALL HAVE THE RIGHT (BUT NOT THE OBLIGATION) FROM TIME TO TIME TO MAKE OR CAUSE TO BE MADE TAPE RECORDINGS OF COMMUNICATIONS BETWEEN ITS EMPLOYEES, IF ANY, AND THOSE OF THE OTHER PARTY WITH RESPECT TO TRANSACTIONS; PROVIDED, HOWEVER, THAT SUCH RIGHT TO RECORD COMMUNICATIONS SHALL BE LIMITED TO COMMUNICATIONS OF EMPLOYEES TAKING PLACE ON THE TRADING FLOOR OF THE APPLICABLE PARTY.  EACH OF BUYER AND SELLER HEREBY CONSENTS TO THE ADMISSIBILITY OF SUCH TAPE RECORDINGS IN ANY COURT, ARBITRATION, OR OTHER PROCEEDINGS, AND AGREES THAT A DULY AUTHENTICATED TRANSCRIPT OF SUCH A TAPE RECORDING SHALL BE DEEMED TO BE A WRITING CONCLUSIVELY EVIDENCING THE PARTIES’ AGREEMENT.

17.          NOTICES AND OTHER COMMUNICATIONS

Unless otherwise provided in this Agreement, all notices, consents, approvals and requests required or permitted hereunder shall be given in writing and shall be effective for all purposes if hand delivered or sent by (a) hand delivery, with proof of attempted delivery, (b) certified or registered United States mail, postage prepaid, (c) expedited prepaid delivery service, either commercial or United States Postal Service, with proof of attempted delivery, or (d) by telecopier (with answerback acknowledged) provided that such telecopied notice must also be delivered by one of the means set forth in (a), (b) or (c) above, to the address specified in Annex I hereto or at such other address and person as shall be designated from time to time by any party hereto, as the case may be, in a written notice to the other parties hereto in the manner provided

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for in this Section.  A notice shall be deemed to have been given: (a) in the case of hand delivery, at the time of delivery, (b) in the case of registered or certified mail, when delivered or the first attempted delivery on a Business Day, (c) in the case of expedited prepaid delivery upon the first attempted delivery on a Business Day, or (d) in the case of telecopier, upon receipt of answerback confirmation, provided that such telecopied notice was also delivered as required in this Section.  A party receiving a notice which does not comply with the technical requirements for notice under this Section may elect to waive any deficiencies and treat the notice as having been properly given.

18.          ENTIRE AGREEMENT; SEVERABILITY

This Agreement shall supersede any existing agreements between the parties containing general terms and conditions for repurchase transactions.  Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.

19.          NON-ASSIGNABILITY

(a)           The rights and obligations of the Seller under the Transaction Documents and under any Transaction shall not be assigned by the Seller without the prior written consent of each Buyer.

(b)           Each Buyer shall be entitled to assign its rights and obligations under the Transaction Documents and/or under any Transaction to any other Person or issue one or more participation interests with respect to any or all of the Transactions and, in connection therewith, may bifurcate or allocate (i.e. senior/subordinate) amounts due to Buyer with five (5) days notice to Seller; provided, however, that (i) such Buyer (x) shall act as exclusive agent for all assignees and participants in any dealings with Seller in connection with such Transactions and (y) shall be solely responsible for all determinations of whether an Eligible Loan or Eligible Security is approved for inclusion in a Transaction and of the Market Value of each Purchased Asset from time to time and (ii) Seller shall not be obligated to deal directly with any party other than such Buyer in connection with such Transactions, or, with respect to participations, or to pay or reimburse such Buyer for any costs that would not have been incurred by such Buyer had no participation interests in such Transactions been issued.

(c)           Subject to the foregoing, the Transaction Documents and any Transactions shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns.  Nothing in the Transaction Documents, express or implied, shall give to any Person, other than the parties to the Transaction Documents and their respective successors, any benefit or any legal or equitable right, power, remedy or claim under the Transaction Documents.

20.          GOVERNING LAW

This Agreement shall be governed by the laws of the State of New York without giving effect to the conflict of law principles thereof.

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21.          NO WAIVERS, ETC.

No express or implied waiver of any Event of Default by either party shall constitute a waiver of any other Event of Default and no exercise of any remedy hereunder by any party shall constitute a waiver of its right to exercise any other remedy hereunder.  No modification or waiver of any provision of this Agreement and no consent by any party to a departure herefrom shall be effective unless and until such shall be in writing and duly executed by both of the parties hereto.  Without limitation on any of the foregoing, the failure to give a notice pursuant to Section 4(a) or 4(b) hereof will not constitute a waiver of any right to do so at a later date.

22.          USE OF EMPLOYEE PLAN ASSETS

(a)           If assets of an employee benefit plan subject to any provision of the Employee Retirement Income Security Act of 1974 (“ERISA”) are intended to be used by either party hereto (the “Plan Party”) in a Transaction, the Plan Party shall so notify the other party prior to the Transaction.  The Plan Party shall represent in writing to the other party that the Transaction does not constitute a prohibited transaction under ERISA or is otherwise exempt therefrom, and the other party may proceed in reliance thereon but shall not be required so to proceed.

(b)           Subject to the last sentence of subparagraph (a) of this Section, any such Transaction shall proceed only if Seller furnishes or has furnished to each Buyer its most recent available audited statement of its financial condition and its most recent subsequent unaudited statement of its financial condition.

(c)           By entering into a Transaction pursuant to this Section, Seller shall be deemed (i) to represent to each Buyer that since the date of Seller’s latest such financial statements, there has been no material adverse change in Seller’s financial condition which Seller has not disclosed to each Buyer, and (ii) to agree to provide each Buyer with future audited and unaudited statements of its financial condition as they are issued, so long as it is a Seller in any outstanding Transaction involving a Plan Party.

23.          INTENT

(a)           The parties recognize that each Transaction is a “repurchase agreement” as that term is defined in Section 101 of Title 11 of the United States Code, as amended (except insofar as the type of Securities subject to such Transaction or the term of such Transaction would render such definition inapplicable), and a “securities contract” as that term is defined in Section 741 of Title 11 of the United States Code, as amended (except insofar as the type of assets subject to such Transaction would render such definition inapplicable).

(b)           It is understood that either party’s right to liquidate Purchased Securities delivered to it in connection with Transactions hereunder or to exercise any other remedies pursuant to Section 11 hereof is a contractual right to liquidate such Transaction as described in Sections 555 and 559 of Title 11 of the United States Code, as amended.

(c)           The parties agree and acknowledge that if a party hereto is an “insured depository institution,” as such term is defined in the Federal Deposit Insurance Act, as amended (“FDIA”), then each Transaction hereunder is a “qualified financial contract,” as that term is defined in

53

FDIA and any rules, orders or policy statements thereunder (except insofar as the type of assets subject to such Transaction would render such definition inapplicable).

(d)           It is understood that this Agreement constitutes a “netting contract” as defined in and subject to Title IV of the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) and each payment entitlement and payment obligation under any Transaction hereunder shall constitute a “covered contractual payment entitlement” or “covered contractual payment obligation”, respectively, as defined in and subject to FDICIA (except insofar as one or both of the parties is not a “financial institution” as that term is defined in FDICIA).

24.          DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS

The parties acknowledge that they have been advised that:

(a)           in the case of Transactions in which one of the parties is a broker or dealer registered with the Securities and Exchange Commission (“SEC”) under Section 15 of the Securities Exchange Act of 1934 (“1934 Act”), the Securities Investor Protection Corporation has taken the position that the provisions of the Securities Investor Protection Act of 1970 (“SIPA”) do not protect the other party with respect to any Transaction hereunder;

(b)           in the case of Transactions in which one of the parties is a government securities broker or a government securities dealer registered with the SEC under Section 15C of the 1934 Act, SIPA will not provide protection to the other party with respect to any Transaction hereunder; and

(c)           in the case of Transactions in which one of the parties is a financial institution, funds held by the financial institution pursuant to a Transaction hereunder are not a deposit and therefore are not insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund, as applicable.

25.          CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL

(a)           Each party irrevocably and unconditionally (i) submits to the non-exclusive jurisdiction of any United States Federal or New York State court sitting in Manhattan, and any appellate court from any such court, solely for the purpose of any suit, action or proceeding brought to enforce its obligations under this Agreement or relating in any way to this Agreement or any Transaction under this Agreement and (ii) waives, to the fullest extent it may effectively do so, any defense of an inconvenient forum to the maintenance of such action or proceeding in any such court and any right of jurisdiction on account of its place of residence or domicile.

(b)           To the extent that either party has or hereafter may acquire any immunity (sovereign or otherwise) from any legal action, suit or proceeding, from jurisdiction of any court or from set off or any legal process (whether service or notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) with respect to itself or any of its property, such party hereby irrevocably waives and agrees not to plead or claim such immunity in respect of any action brought to enforce its obligations under this Agreement or relating in any way to this Agreement or any Transaction under this Agreement.

54

(c)           The parties hereby irrevocably waive, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding and irrevocably consent to the service of any summons and complaint and any other process by the mailing of copies of such process to them at their respective address specified herein.  The parties hereby agree that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.  Nothing in this Section 25 shall affect the right of the Buyers to serve legal process in any other manner permitted by law or affect the right of the Buyers to bring any action or proceeding against the Seller or its property in the courts of other jurisdictions.

(d)           EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR ANY INSTRUMENT OR DOCUMENT DELIVERED HEREUNDER OR THEREUNDER.

26.          NO RELIANCE

Each of the Buyers and Seller hereby acknowledges, represents and warrants to the other that, in connection with the negotiation of, the entering into, and the performance under, the Transaction Documents and each Transaction thereunder:

(a)           It is not relying (for purposes of making any investment decision or otherwise) upon any advice, counsel or representations (whether written or oral) of the other party to the Transaction Documents, other than the representations expressly set forth in the Transaction Documents;

(b)           It has consulted with its own legal, regulatory, tax, business, investment, financial and accounting advisors to the extent that it has deemed necessary, and it has made its own investment, hedging and trading decisions (including decisions regarding the suitability of any Transaction) based upon its own judgment and upon any advice from such advisors as it has deemed necessary and not upon any view expressed by the other party;

(c)           It is a sophisticated and informed Person that has a full understanding of all the terms, conditions and risks (economic and otherwise) of the Transaction Documents and each Transaction thereunder and is capable of assuming and willing to assume (financially and otherwise) those risks;

(d)           It is entering into the Transaction Documents and each Transaction thereunder for the purposes of managing its borrowings or investments or hedging its underlying assets or liabilities and not for purposes of speculation; and

(e)           It is not acting as a fiduciary or financial, investment or commodity trading advisor for the other party and has not given the other party (directly or indirectly through any other Person) any assurance, guaranty or representation whatsoever as to the merits (either legal, regulatory, tax, business, investment, financial accounting or otherwise) of the Transaction Documents or any Transaction thereunder.

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27.          INDEMNITY

(a)           The Seller hereby agrees to indemnify each Buyer, each Buyer’s designees and each of their officers, directors, employees and agents (“Indemnified Parties”) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, taxes (including stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Assets or in connection with any of the transactions contemplated by this Agreement and the documents delivered in connection herewith, other than income taxes of each Buyer), fees, costs, expenses (including reasonable attorneys fees and disbursements) or disbursements (all of the foregoing, collectively “Indemnified Amounts”) which may at any time (including, without limitation, such time as this Agreement shall no longer be in effect and the Transactions shall have been repaid in full) be imposed on or asserted against any Indemnified Party in any way whatsoever on an actual, out-of-pocket basis arising out of or in connection with, or relating to, this Agreement or any Transactions thereunder or any action taken or omitted to be taken by any Indemnified Party under or in connection with any of the foregoing; provided, that Seller shall not be liable for Indemnified Amounts resulting from the gross negligence or willful misconduct of any Indemnified Party.  Without limiting the generality of the foregoing, Seller agrees to hold each Buyer harmless from and indemnify each Buyer against all Indemnified Amounts with respect to all Purchased Loans relating to or arising out of any violation or alleged violation of any environmental law, rule or regulation or any consumer credit laws, including without limitation ERISA, the Truth in Lending Act and/or the Real Estate Settlement Procedures Act, that, in each case, results from anything other than Buyers’ gross negligence or willful misconduct.  In any suit, proceeding or action brought by Buyer in connection with any Purchased Loan for any sum owing thereunder, or to enforce any provisions of any Purchased Loan, Seller will save, indemnify and hold such Buyer harmless from and against all expense (including reasonable attorneys’ fees), loss or damage suffered by reason of any defense, set-off, counterclaim, recoupment or reduction or liability whatsoever of the account debtor or obligor thereunder, arising out of a breach by Seller of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to or in favor of such account debtor or obligor or its successors from Seller.  Seller also agrees to reimburse each Buyer as and when billed by such Buyer for (A) all of the Buyer’s actual costs and out-of-pocket expenses incurred in connection (x) with Buyer’s due diligence reviews (provided, Seller approves third party costs and expenses) and (y) document preparation including reasonable attorney’s fees (up to $[****] per Purchased Asset other than Purchased Assets which are “table-funded”, which maximum shall be $[****] per Purchased Asset in each case unless otherwise agreed to by Seller) with respect to the Purchased Assets (including, without limitation, those incurred pursuant to Section 28) and (B) the enforcement or the preservation of each Buyer’s rights under this Agreement or any Transaction contemplated hereby, including without limitation the reasonable fees and disbursements of its counsel.  Seller agrees to pay each Buyer on demand all reasonable actual out-of-pocket costs and expenses (including reasonable expenses for legal services of every kind) of any subsequent enforcement of any of the provisions hereof, or of the performance by the Buyers of any obligations of Seller in respect of the Purchased Loans and Purchased Securities, or any actual or attempted sale, or

**** Material omitted pursuant to a request for confidential treatment under Rule 24b-2 of the Exchange Act of 1934.  Material filed separately with the Securities and Exchange Commission.

56

(b)           any exchange, enforcement, collection, compromise or settlement in respect of any of the Purchased Assets and for the custody, care or preservation of the Purchased Assets (including insurance costs) and defending or asserting rights and claims of Buyer in respect thereof, by litigation or otherwise.  Seller hereby acknowledges that, the obligation of Seller hereunder is a recourse obligation of Seller.

(c)           Without limiting the rights and remedies of the Buyers under the Transaction Documents, Seller shall pay each Buyer’s reasonable actual out-of-pocket costs and expenses, including reasonable fees and expenses of accountants, attorneys and advisors, incurred in connection with the preparation, negotiation, execution and consummation of, and any amendment, supplement or modification to, the Transaction Documents and the Transactions thereunder.  In addition, Seller agrees to pay each Buyer on demand all reasonable actual, out-of-pocket costs and expenses (including reasonable expenses for legal services) incurred in connection with the maintenance of the Cash Management Account and registering the Assets in the name of the applicable Buyer or its nominee.  All such expenses shall be recourse obligations of Seller to each Buyer under this Agreement.

28.          DUE DILIGENCE

                Seller acknowledges that, at reasonable times and upon reasonable prior notice to Seller, each Buyer has the right to perform continuing due diligence reviews with respect to the Purchased Securities and the Purchased Loans, for purposes of verifying compliance with the representations, warranties and specifications made hereunder, or otherwise, and Seller agrees that upon reasonable prior notice to Seller, the applicable Buyer or its authorized representatives will be permitted during normal business hours to examine, inspect, and make copies and extracts of, the Purchased Loan Files, Servicing Records and any and all documents, records, agreements, instruments or information relating to such Purchased Securities and Purchased Loans in the possession or under the control of Seller, any other servicer or subservicer and/or the Custodian.  Seller also shall make available to each Buyer a knowledgeable financial or accounting officer for the purpose of answering questions respecting the Purchased Loan Files and the Purchased Securities and Purchased Loans.  Without limiting the generality of the foregoing, Seller acknowledges that each Buyer may enter into Transactions with the Seller based solely upon the information provided by Seller to such Buyer and the representations, warranties and covenants contained herein, and that each Buyer, at its option, has the right at any time to conduct a partial or complete due diligence review on some or all of the Purchased Securities and Purchased Loans.  Each Buyer may underwrite such Purchased Loans itself or engage a third party underwriter to perform such underwriting.  Seller agrees to reasonably cooperate with each Buyer and any third party underwriter reasonably acceptable to Seller in connection with such underwriting, including, but not limited to, providing such Buyer and any third party underwriter with access to any and all documents, records, agreements, instruments or information relating to such Purchased Securities and Purchased Loans in the possession, or under the control, of Seller.  Seller further agrees that Seller shall reimburse Buyer, as set forth in and subject to the limits on liability contained in, Section 27, for any and all actual costs and expenses reasonably incurred by Buyer in connection with Buyer’s activities pursuant to this Section 28.

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29.          SERVICING

(a)           Notwithstanding the purchase and sale of the Purchased Loans hereby, Seller, Midland Loan Services, Inc. or any other third party servicer rated at least “above average” or otherwise approved by the Loan Buyer shall continue to service the Purchased Loans for the benefit of Loan Buyer and, if Loan Buyer shall exercise its rights to pledge or hypothecate the Purchased Loans prior to the Repurchase Date pursuant to Section 8, Loan Buyer’s assigns; provided, however, that the obligations of Seller to service any of the Purchased Loans shall cease, at Seller’s option, upon the payment by Seller to Loan Buyer of the Repurchase Price therefor.  Seller shall service or cause the servicer to service the Purchased Loans in accordance with Accepted Servicing Practices approved by Loan Buyer in the exercise of its reasonable business judgment and maintained by other prudent mortgage lenders with respect to mortgage loans or mezzanine loans, as applicable, similar to the Purchased Loans.

(b)           Seller agrees that the applicable Buyer is the owner of all servicing records, including but not limited to any and all servicing agreements (the “Servicing Agreements”), files, documents, records, data bases, computer tapes, copies of computer tapes, proof of insurance coverage, insurance policies, appraisals, other closing documentation, payment history records, and any other records relating to or evidencing the servicing of Purchased Loans (the “Servicing Records”) so long as the Purchased Loans are subject to this Agreement.  Seller grants the applicable Buyer a security interest in all servicing fees and rights relating to the Purchased Loans and all Servicing Records to secure the obligation of the Seller or its designee to service in conformity with this Section and any other obligation of Seller to such Buyer.  Seller covenants to safeguard such Servicing Records and to deliver them promptly to the applicable Buyer or its designee (including the Custodian) at such Buyer’s request.

(c)           Upon the occurrence and during the continuance of an Event of Default (other than with respect to Buyer), each Buyer may, in its sole discretion, (i) sell its right to the Purchased Loans on a servicing released basis or (ii) terminate the Seller or any sub-servicer of the Purchased Loans with or without cause, in each case without payment of any termination fee.

(d)           Seller shall not employ sub-servicers to service the Purchased Loans without the prior written approval of Buyer.  If the Purchased Loans are serviced by a sub-servicer, Seller shall irrevocably assign all rights, title and interest in the Servicing Agreements in the Purchased Loans to Buyer.

(e)           Seller shall cause any sub-servicers engaged by Seller to execute a letter agreement with the Loan Buyer acknowledging Loan Buyer’s security interest and agreeing that it shall deposit all Income with respect to the Purchased Loans in the Cash Management Account.

(f)            The payment of servicing fees shall be subordinate to payment of amounts outstanding under any Transaction and this Agreement.

30.          MISCELLANEOUS

(a)           All rights, remedies and powers of each Buyer hereunder and in connection herewith are irrevocable and cumulative, and not alternative or exclusive, and shall be in addition

58

to all other rights, remedies and powers of each Buyer whether under law, equity or agreement.  In addition to the rights and remedies granted to it in this Agreement, to the extent this Agreement is determined to create a security interest, each Buyer shall have all rights and remedies of a secured party under the UCC.

(b)           The Transaction Documents may be executed in counterparts, each of which so executed shall be deemed to be an original, but all of such counterparts shall together constitute but one and the same instrument.

(c)           The headings in the Transaction Documents are for convenience of reference only and shall not affect the interpretation or construction of the Transaction Documents.

(d)           Each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or be invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

(e)           This Agreement contains a final and complete integration of all prior expressions by the parties with respect to the subject matter hereof and thereof and shall constitute the entire agreement among the parties with respect to such subject matter, superseding all prior oral or written understandings.

(f)            The parties understand that this Agreement is a legally binding agreement that may affect such party’s rights.  Each party represents to the other that it has received legal advice from counsel of its choice regarding the meaning and legal significance of this Agreement and that it is satisfied with its legal counsel and the advice received from it.

(g)           Should any provision of this Agreement require judicial interpretation, it is agreed that a court interpreting or construing the same shall not apply a presumption that the terms hereof shall be more strictly construed against any Person by reason of the rule of construction that a document is to be construed more strictly against the Person who itself or through its agent prepared the same, it being agreed that all parties have participated in the preparation of this Agreement.

(h)           The parties recognize that each Transaction is a “securities contract” as that term is defined in Section 741 of Title 11 of the United States Code, as amended.

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day first written above.

LOAN BUYER:
CITIGROUP FINANCIAL PRODUCTS INC., a Delaware corporation
By:	/s/ Richard B. Schlenger
	Name: Richard B. Schlenger
	Title: Director
SECURITIES BUYER:
CITIGROUP GLOBAL MARKETS INC., a Delaware corporation
By:	/s/ Paul Vanderslice
	Name: Paul Vanderslice
	Title: Managing Director
SELLER:
CAPITAL TRUST, INC.,
a Maryland corporation
By:	/s/ Geoffrey G. Jervis
	Name: Geoffrey G. Jervis
	Title: Chief Financial Officer

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ANNEXES, EXHIBITS AND SCHEDULES

ANNEX I	Names and Addresses for Communications between Parties
SCHEDULE I-A	Purchase Percentages and Applicable Spreads
EXHIBIT I	Form of Confirmation
EXHIBIT II	Authorized Representatives of Seller
EXHIBIT III	Form of Re-Direction Letter
EXHIBIT IV	Form of Custodial Delivery
EXHIBIT V	Form of Power of Attorney
EXHIBIT VI	Representations and Warranties Regarding Individual Purchased Loans
EXHIBIT VII	Asset Information
EXHIBIT VIII	Purchase Procedure

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ANNEX I

Names and Addresses for Communications Between Parties

Buyer:

Citigroup Financial Products Inc.
388 Greenwich Street
New York, NY  10013
Attention:  Richard Schlenger
Telephone:       (212) 816-7806
Facsimile:         (212) 816-8307

With copies to:

Sidley Austin  LLP
787 Seventh Avenue
New York, NY  10019
Attention:  Brian Krisberg, Esq.
Telephone:       (212) 839-8735
Facsimile:         (212) 839-5599

Seller:

Capital Trust, Inc.
410 Park Avenue, 14^th Floor
New York, NY  10022
Attention:        Geoffrey G. Jervis
Telephone:       (212) 655-0247
Facsimile:         (212) 655-0044

With a copy to:

Paul Hastings Janofsky &Walker LLP
75 East 55^th Street
New York, NY  10022
Attention:        Robert J. Grados, Esq.
Telephone:       (212) 318-6923
Facsimile:         (212) 230-7830

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SCHEDULE I-A

Purchase Percentages and Applicable Spreads

ELIGIBLE LOANS:

Asset Type Grouping	Leverage Category(1)(2)	Purchase Percentage	Applicable Spread
First Mortgage	Greater than 7% NOI Yield & Less than 85% LTV(3)	[****]	[****]
First Mortgage	Less than 7% NOI Yield & Less than 80% LTV(3)	[****]	[****]
B-Notes & Mezzanine Loans	Less than 50%(4)	[****]	[****]
B-Notes & Mezzanine Loans	50.01% to 55%(4)	[****]	[****]
B-Notes & Mezzanine Loans	55.01% to 60%(4)	[****]	[****]
B-Notes & Mezzanine Loans	60.01% to 65%(4)	[****]	[****]
		[****]	[****]
		[****]	[****]
B-Notes & Mezzanine Loans	65.01% to 70%(4)	[****]	[****]
		[****]	[****]
		[****]	[****]
B-Notes & Mezzanine Loans	70.01% to 75%(4)	[****]	[****]
		[****]	[****]
		[****]	[****]
B-Notes & Mezzanine Loans	75.01% to 80%(4)	[****]	[****]
		[****]	[****]
		[****]	[****]
B-Notes & Mezzanine Loans	80.01% to 85%(4)	[****]	[****]
		[****]	[****]
		[****]	[****]

**** Material omitted pursuant to a request for confidential treatment under Rule 24b-2 of the Exchange Act of 1934.  Material filed separately with the Securities and Exchange Commission.

B-Notes & Mezzanine Loans	85.01% to 90%(4)	[****]	[****]
		[****]	[****]
		[****]	[****]
Preferred Equity & Other	Case by case	[****]	[****]

ELIGIBLE SECURITIES ⁽⁵⁾:

Asset Type Grouping	Rating Category	Purchase Percentages	Applicable Spread
CMBS	BBB	[****]	[****]
		[****]	[****]
CMBS	BBB-	[****]	[****]
		[****]	[****]
CMBS	BB+	[****]	[****]
		[****]	[****]
CMBS	BB	[****]	[****]
		[****]	[****]
CMBS	BB-	[****]	[****]
		[****]	[****]
CMBS	B+	[****]	[****]
		[****]	[****]
CMBS	B	[****]	[****]
		[****]	[****]
CMBS	B-	[****]	[****]
		[****]	[****]

**** Material omitted pursuant to a request for confidential treatment under Rule 24b-2 of the Exchange Act of 1934.  Material filed separately with the Securities and Exchange Commission.

2

CMBS	Unrated	[****]	[****]
		[****]	[****]

Footnotes

(1)Leverage Category is determined by Buyer based on LTV Range.

(2)[****]

(3)“LTV” for purposes of the First Mortgages means the ratio of the unpaid principal balance of the entire related mortgage loan to the value of the property securing such mortgage loan as determined by Buyer in its sole discretion.

(4)“LTV” for purposes of the B-Notes and Mezzanine Loans means the ratio of the aggregate indebtedness, including the Purchased Loan and indebtedness pari passu or senior to it, secured directly or indirectly by the related property (i.e. such B-Note or Mezzanine Loan and all other debt senior to such B-Note or Mezzanine Loan ) to the value of the property securing directly or indirectly such indebtedness as determined by Buyer in its sole discretion.

(5)The Purchase Percentages and Applicable Spreads set forth in the matrix above shall apply to floating rate Purchased Securities.  With respect to fixed rate Purchased Securities, Buyer shall determine the applicable Purchase Percentage and Applicable Spread on a case by case basis.

**** Material omitted pursuant to a request for confidential treatment under Rule 24b-2 of the Exchange Act of 1934.  Material filed separately with the Securities and Exchange Commission.

3

EXHIBIT I

CONFIRMATION STATEMENT

Ladies and Gentlemen:

Capital Trust, Inc., is pleased to deliver our written CONFIRMATION of our agreement to enter into the Transaction pursuant to which [Citigroup Global Markets Inc.] [Citigroup Financial Products Inc.] shall purchase from Capital Trust, Inc. the Purchased Assets identified in the Master Repurchase Agreement, dated as of July 30, 2007 (the “Agreement”), between [Citigroup Global Markets Inc.] [Citigroup Financial Products Inc.] (the “Buyer”) and Capital Trust, Inc. (“Seller”) as follows below and on the attached Schedule 1.  Capitalized terms used herein without definition have the meanings given in the Agreement.

Buyer:	[                                   ]
Seller:	Capital Trust, Inc.
Purchase Date:	, 200
Purchased Assets:	As identified on attached Schedule 1
Aggregate Principal Amount of Purchased Assets:
Purchase Price:	$
Previous Purchase Price:	$
Change in Purchase Price:	$
Requested Wire Amount:	$
Purchase Percentage:	%
Pricing Rate:	one month LIBOR plus            %
Buyer’s Margin Percentage:
Capital Trust, Inc. Wire Instructions:	Bank: City/State: ABA: Account Name: Account #: Attention:
Name and address for communications:	Buyer:[Citigroup Global Markets Inc.] [Citigroup Financial Products Inc.] 388 Greenwich Street New York, NY 10013 Attention: Richard Schlenger Telephone: (212) 816-7806

Facsimile: (212) 816-8307

Seller:Capital Trust, Inc.
410 Park Avenue, 14^th Floor
New York, NY 10022
Attention: Geoffrey G. Jervis
Telephone: (212) 655-0247
Facsimile: (212) 655-0044

CAPITAL TRUST, INC.,
a Maryland corporation
By:
	Name:
	Title:

AGREED AND ACKNOWLEDGED:

[CITIGROUP FINANCIAL PRODUCTS INC.,
a Delaware corporation]

[CITIGROUP GLOBAL MARKETS INC.,
a Delaware corporation]

By:

Name:

Title:

2

Schedule 1 to Confirmation Statement

Purchased Securities:

Aggregate Principal Amount:

CUSIP NO.:

Securitization Document (including trustee):

Purchased Loans:

Aggregate Principal Amount:

3

EXHIBIT II

AUTHORIZED REPRESENTATIVES OF SELLER

Name Specimen Signature

EXHIBIT III

FORM OF RE-DIRECTION LETTER

[SELLER]

[LETTERHEAD]

REDIRECTION LETTER

AS OF [          ], 200[ ]

Ladies and Gentlemen:

Please refer to: (a) that certain [Loan Agreement], dated [                  ], 200[ ], by and among [                            ] (the “Borrower”), as borrower, and [               ] (the “Lender”), as lender; and (b) all documents securing or relating to that certain $[              ] loan made by the Lender to the Borrower on [           ], 200[ ] (the “Loan”).

You are advised as follows, effective as of the date of this letter.

Assignment of the Loan.  The Lender has entered into a Master Repurchase Agreement, dated as July 30, 2007 (as the same may be amended and/or restated from time to time, the “Repo Agreement”), with Citigroup Financial Products Inc. (“Buyer”), [address], and has assigned its rights and interests in the Loan (and all of its rights and remedies in respect of the Loan) to Buyer.  This assignment shall remain in effect unless and until Buyer has notified Borrower otherwise in writing.

Direction of Funds.  In connection with Lender’s obligations under the Repo Agreement, Lender hereby directs Borrower to disburse, by wire transfer, any and all payments to be made under or in respect of the Loan to the following account at LaSalle Bank for the benefit of Buyer:

LaSalle Bank
ABA [                        ]
Account # [                          ]
FFC: [                 ]
Attn:       [BUYER] —
                Buyer’s Repurchase Account
Attn: [                           ]

This direction shall remain in effect unless and until Buyer has notified Borrower otherwise in writing.

Modifications, Waivers, Etc.  No modification, waiver, deferral, or release (in whole or in part) of any party’s obligations in respect of the Loan, or of any asset for any obligations in respect of the Loan, shall be effective without the prior written consent of Buyer.

Please acknowledge your acceptance of the terms and directions contained in this correspondence by executing a counterpart of this correspondence and returning it to the undersigned.

[Signature Page Follows]

	Very truly yours,
	CAPITAL TRUST, INC.,
	a Maryland corporation
	By:
		Name:
		Title:
		Date: [               ], 200[ ]
Agreed and accepted this [ ]
day of [                 ], 200[ ]
[                                             ]
By:
Name:
Title:

2

EXHIBIT IV

FORM OF CUSTODIAL DELIVERY

On this                of                 , 200   , Capital Trust, Inc., as Seller under that certain Master Repurchase Agreement, dated as of July 30, 2007 (the “Repurchase Agreement”) between Citigroup Financial Products Inc. and Citigroup Global Markets Inc. (together, “Buyer”) and Capital Trust, Inc., does hereby deliver to LaSalle Bank National Association (“Custodian”), as custodian under that certain Custodial Agreement, dated as of July 30, 2007 (the “Custodial Agreement”), among Buyer, Custodian and Capital Trust, Inc., the Purchased Loan Files with respect to the Purchased Loans to be purchased by Buyer pursuant to the Repurchase Agreement, which Purchased Loans are listed on the Purchased Loan Schedule attached hereto and which Purchased Loans shall be subject to the terms of the Custodial Agreement on the date hereof.

With respect to the Purchased Loan Files delivered hereby, for the purposes of issuing the Trust Receipt, the Custodian shall review the Purchased Loan Files to ascertain delivery of the documents listed in Section 3(g) to the Custodial Agreement.

Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Custodial Agreement.

IN WITNESS WHEREOF, the Seller has caused its name to be signed hereto by its officer thereunto duly authorized as of the day and year first above written.

CAPITAL TRUST, INC.,
a Maryland corporation
By:
	Name:
	Title:

EXHIBIT V

FORM OF POWER OF ATTORNEY

“Know All Men by These Presents, that Capital Trust, Inc. (“Seller”), does hereby appoint Citigroup Financial Products Inc. (“Loan Buyer”), and Citigroup Global Markets, Inc. (“Securities Buyer”, each of Loan Buyer and Securities Buyer, a “Buyer’ and collectively, the “Buyers”), its attorney-in-fact to act in Seller’s name, place and stead in any way which Seller could do with respect to (i) the completion of the endorsements of the Mortgage Notes and the Mezzanine Notes and the Assignments of Mortgages, (ii) the recordation of the Assignments of Mortgages and (iii) the enforcement of the Seller’s rights under the Purchased Loans purchased by Buyer pursuant to the Master Repurchase Agreement dated as of July 30, 2007 (the “Repurchase Agreement”), between Buyers and Capital Trust, Inc., and to take such other steps as may be necessary or desirable to enforce Buyer’s rights against such Purchased Loans, the related Purchased Loan Files and the Servicing Records to the extent that Seller is permitted by law to act through an agent.

TO INDUCE ANY THIRD PARTY TO ACT HEREUNDER, SELLER HEREBY AGREES THAT ANY THIRD PARTY RECEIVING A DULY EXECUTED COPY OF FACSIMILE OF THIS INSTRUMENT MAY ACT HEREUNDER, AND THAT REVOCATION OR TERMINATION HEREOF SHALL BE INEFFECTIVE AS TO SUCH THIRD PARTY UNLESS AND UNTIL ACTUAL NOTICE OR KNOWLEDGE OR SUCH REVOCATION OR TERMINATION SHALL HAVE BEEN RECEIVED BY SUCH THIRD PARTY, AND SELLER ON ITS OWN BEHALF AND ON BEHALF OF SELLER’S ASSIGNS, HEREBY AGREES TO INDEMNIFY AND HOLD HARMLESS ANY SUCH THIRD PARTY FROM AND AGAINST ANY AND ALL CLAIMS THAT MAY ARISE AGAINST SUCH THIRD PARTY BY REASON OF SUCH THIRD PARTY HAVING RELIED ON THE PROVISIONS OF THIS INSTRUMENT.

IN WITNESS WHEREOF Seller has caused this Power of Attorney to be executed as a deed this July    , 2007.

CAPITAL TRUST, INC.,
a Maryland corporation
By:
	Name:
	Title:

EXHIBIT VI

REPRESENTATIONS AND WARRANTIES
RE:  PURCHASED LOANS CONSISTING OF FIRST MORTGAGES

1.             The First Mortgage is a performing mortgage loan secured by a first priority security interest in a commercial or multifamily property.

2.             As of the Purchase Date, such First Mortgage complies in all material respects with, or is exempt from, all requirements of federal, state or local law relating to such First Mortgage.

3.             Immediately prior to the sale, transfer and assignment to Buyer thereof, Seller had good and marketable title to, and was the sole owner and holder of, such First Mortgage, and Seller is transferring such First Mortgage free and clear of any and all liens, pledges, encumbrances, charges, security interests or any other ownership interests of any nature encumbering such First Mortgage. Upon consummation of the purchase contemplated to occur in respect of such First Mortgage on the Purchase Date therefor, Seller will have validly and effectively conveyed to Buyer all legal and beneficial interest in and to such First Mortgage free and clear of any pledge, lien, encumbrance or security interest.

4.             No fraudulent acts were committed by Seller in connection with its acquisition or origination of such First Mortgage nor were any fraudulent acts committed by any Person in connection with the origination of such First Mortgage.

5.             All information contained in the related Preliminary Due Diligence Package (or as otherwise provided to Buyer) in respect of such First Mortgage is accurate and complete in all material respects.

6.             Except as included in the Preliminary Due Diligence Package or otherwise disclosed to Buyer, Seller is not a party to any document, instrument or agreement, and there is no document, that by its terms modifies or affects the rights and obligations of any holder of such First Mortgage and Seller has not consented to any material change or waiver to any term or provision of any such document, instrument or agreement and no such change or waiver exists.

7.             Except as included in the Preliminary Due Diligence Package or otherwise disclosed to Buyer, such First Mortgage is presently outstanding, the proceeds thereof have been fully and properly disbursed and, except for amounts held in escrow by Seller, there is no requirement for any future advances thereunder.

8.             Seller has full right, power and authority to sell and assign such First Mortgage and such First Mortgage or any related Mortgage Note has not been cancelled, satisfied or rescinded in whole or part nor has any instrument been executed that would effect a cancellation, satisfaction or rescission thereof.

9.             Other than consents and approvals obtained as of the related Purchase Date or those already granted in the related Mortgage and/or Mortgage Note, no consent or approval by any Person is required in connection with Seller’s sale and/or Buyer’s acquisition of

such First Mortgage, for Buyer’s exercise of any rights or remedies in respect of such First Mortgage or for Buyer’s sale, pledge or other disposition of such First Mortgage. No third party holds any “right of first refusal”, “right of first negotiation”, “right of first offer”, purchase option, or other similar rights of any kind, and no other impediment exists to any such transfer or exercise of rights or remedies.

10.           No consent, approval, authorization or order of, or registration or filing with, or notice to, any court or governmental agency or body having jurisdiction or regulatory authority is required for any transfer or assignment by the holder of such First Mortgage.

11.           Seller has not received written notice of any outstanding liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind for which the holder of such First Mortgage is or may become obligated.

12.           Seller has not advanced funds, or knowingly received any advance of funds from a party other than the Mortgagee relating to such First Mortgage, directly or indirectly, for the payment of any amount required by such First Mortgage.

13.           Each related Mortgage Note, Mortgage, Assignment of Leases (if a document separate from the Mortgage) and other agreement executed by the related Mortgagor in connection with such First Mortgage is legal, valid and binding obligation of the related Mortgagor (subject to any non-recourse provisions therein and any state anti-deficiency or market value limit deficiency legislation), enforceable in accordance with its terms, except (i) that certain provisions contained in such First Mortgage documents are or may be unenforceable in whole or in part under applicable state or federal laws, but neither the application of any such laws to any such provision nor the inclusion of any such provisions renders any of the First Mortgage documents invalid as a whole and such First Mortgage documents taken as a whole are enforceable to the extent necessary and customary for the practical realization of the rights and benefits afforded thereby and (ii) as such enforcement may be limited by bankruptcy, insolvency, receivership, reorganization, moratorium, redemption, liquidation or other laws relating to or affecting the enforcement of creditors’ rights generally, or by general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law). The related Mortgage Note and Mortgage contain no provision limiting the right or ability of Seller to assign, transfer and convey the related First Mortgage to any other Person, except, however, for customary intercreditor restrictions limiting assignees to “Qualified Transferees”. With respect to any Mortgaged Property that has tenants, there exists as either part of the Mortgage or as a separate document, an assignment of leases.

14.           As of the date of its origination, there was no valid offset, defense, counterclaim, abatement or right to rescission with respect to any related Mortgage Note, Mortgage or other agreements executed in connection therewith, and, as of the Purchase Date, there is no valid offset, defense, counterclaim or right to rescission with respect to any such Mortgage Note, Mortgage or other agreements, except in each case, with respect to the enforceability of any provisions requiring the payment of default interest, late fees, additional interest, prepayment premiums or yield maintenance charges.

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15.           Seller has delivered to Buyer or its designee the original Mortgage Note(s) made in respect of such First Mortgage, together with an original endorsement thereof executed by Seller in blank.

16.           Each related assignment of Mortgage and assignment of Assignment of Leases from Seller in blank constitutes the legal, valid and binding first priority assignment from Seller (assuming the insertion of the Buyer’s name), except as such enforcement may be limited by bankruptcy, insolvency, receivership, reorganization, moratorium, redemption, liquidation or other laws relating to or affecting the enforcement of creditors’ rights generally, or by general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law). Each Mortgage and Assignment of Leases is freely assignable.

17.           The First Mortgage is secured by one or more Mortgages and each such Mortgage is a valid and enforceable first lien on the related Mortgaged Property subject only to the exceptions set forth in paragraph (13) above and the following title exceptions (each such title exception, a “Title Exception”, and collectively, the “Title Exceptions”):  (a) the lien of current real property taxes, water charges, sewer rents and assessments not yet due and payable, (b) covenants, conditions and restrictions, rights of way, easements and other matters of public record, none of which, individually or in the aggregate, materially and adversely interferes with the current use of the Mortgaged Property or the security intended to be provided by such Mortgage or with the Mortgagor’s ability to pay its obligations under the First Mortgage when they become due or materially and adversely affects the value of the Mortgaged Property, (c) the exceptions (general and specific) and exclusions set forth in the applicable policy described in paragraph (21) below or appearing of record, none of which, individually or in the aggregate, materially and adversely interferes with the current use of the Mortgaged Property or the security intended to be provided by such Mortgage or with the Mortgagor’s ability to pay its obligations under the First Mortgage when they become due or materially and adversely affects the value of the Mortgaged Property, (d) other matters to which like properties are commonly subject, none of which, individually or in the aggregate, materially and adversely interferes with the current use of the Mortgaged Property or the security intended to be provided by such Mortgage or with the Mortgagor’s ability to pay its obligations under the First Mortgage when they become due or materially and adversely affects the value of the Mortgaged Property, (e) the right of tenants (whether under ground leases, space leases or operating leases) at the Mortgaged Property to remain following a foreclosure or similar proceeding (provided that such tenants are performing under such leases) and (f) if such First Mortgage is cross-collateralized with any other First Mortgage, the lien of the Mortgage for such other First Mortgage, none of which, individually or in the aggregate, materially and adversely interferes with the current use of the Mortgaged Property or the security intended to be provided by such Mortgage or with the Mortgagor’s ability to pay its obligations under the First Mortgage when they become due or materially and adversely affects the value of the Mortgaged Property. Except with respect to cross-collateralized and cross-defaulted First Mortgages and as provided below, there are no mortgage loans that are senior or pari passu with respect to the related Mortgaged Property or such First Mortgage.

18.           UCC Financing Statements have been filed and/or recorded (or, if not filed and/or recorded, have been submitted in proper form for filing and recording), in all public places necessary to perfect a valid security interest in all items of personal property located on the Mortgaged Property that are owned by the Mortgagor and either (i) are reasonably necessary

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to operate the Mortgaged Property or (ii) are (as indicated in the appraisal obtained in connection with the origination of the related First Mortgage) material to the value of the Mortgaged Property (other than any personal property subject to a purchase money security interest or a sale and leaseback financing arrangement permitted under the terms of such First Mortgage or any other personal property leases applicable to such personal property), to the extent perfection may be effected pursuant to applicable law by recording or filing, and the Mortgages, security agreements, chattel Mortgages or equivalent documents related to and delivered in connection with the related First Mortgage establish and create a valid and enforceable lien and priority security interest on such items of personalty except as such enforcement may be limited by bankruptcy, insolvency, receivership, reorganization, moratorium, redemption, liquidation or other laws relating to or affecting the enforcement of creditor’s rights generally, or by general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law). Notwithstanding any of the foregoing, no representation is made as to the perfection of any security interest in rents or other personal property to the extent that possession or control of such items or actions other than the filing of UCC Financing Statements are required in order to effect such perfection.

19.           All real estate taxes and governmental assessments, or installments thereof, which would be a lien on the Mortgaged Property and that prior to the Purchase Date have become delinquent in respect of the Mortgaged Property have been paid, or an escrow of funds in an amount sufficient to cover such payments has been established. For purposes of this representation and warranty, real estate taxes and governmental assessments and installments thereof shall not be considered delinquent until the earlier of (a) the date on which interest and/or penalties would first be payable thereon and (b) the date on which enforcement action is entitled to be taken by the related taxing authority.

20.           As of the Purchase Date, the related Mortgaged Property was free and clear of any material damage (other than deferred maintenance) that would affect materially and adversely the value of such Mortgaged Property as security for the First Mortgage and there was no proceeding pending or, based solely upon the delivery of written notice thereof from the appropriate condemning authority, threatened for the total or partial condemnation of such Mortgaged Property.

21.           The lien of each related Mortgage as a first priority lien in the original principal amount of such First Mortgage after all advances of principal is insured by an ALTA lender’s title insurance policy (or a binding commitment therefor), or its equivalent as adopted in the applicable jurisdiction, insuring Seller, its successors and assigns, subject only to the Title Exceptions; the Mortgagee or its successors or assigns is the sole named insured of such policy; such policy is assignable without consent of the insurer and will inure to the benefit of the Buyer Mortgagee of record; such title policy is in full force and effect upon the consummation of the transactions contemplated by this Agreement; all premiums thereon have been paid; no claims have been made under such policy and no circumstance exists which would impair or diminish the coverage of such policy. The insurer issuing such policy is either (x) a nationally-recognized title insurance company or (y) qualified to do business in the jurisdiction in which the related Mortgaged Property is located to the extent required; such policy contains no material exclusions for, or affirmatively insures (except for any Mortgaged Property located in a jurisdiction where

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such insurance is not available) (a) access to public road or (b) against any loss due to encroachments of any material portion of the improvements thereon.

22.           As of the date of its origination, all insurance coverage required under each related Mortgage, which insurance covered such risks as were customarily acceptable to prudent commercial and multifamily mortgage lending institutions lending on the security of property comparable to the related Mortgaged Property in the jurisdiction in which such Mortgaged Property is located, and with respect to a fire and extended perils insurance policy, is in an amount (subject to a customary deductible) at least equal to the lesser of (i) the replacement cost of improvements located on such Mortgaged Property, or (ii) the outstanding principal balance of the First Mortgage, and in any event, the amount necessary to prevent operation of any co-insurance provisions; and, except if such Mortgaged Property is operated as a mobile home park, is also covered by business interruption or rental loss insurance, in an amount at least equal to 12 months of operations of the related Mortgaged Property, all of which was in full force and effect with respect to the related Mortgaged Property; and all insurance coverage required under each Mortgage, which insurance covers such risks and is in such amounts as are customarily acceptable to prudent commercial and multifamily mortgage lending institutions lending on the security of property comparable to the related Mortgaged Property in the jurisdiction in which such Mortgaged Property is located, is in full force and effect with respect to the related Mortgaged Property; all premiums due and payable through the Purchase Date have been paid; and no notice of termination or cancellation with respect to any such insurance policy has been received by Seller; and except for certain amounts not greater than amounts which would be considered prudent by an institutional commercial and/or multifamily mortgage lender with respect to a similar First Mortgage and which are set forth in the related Mortgage, any insurance proceeds in respect of a casualty loss, will be applied either (i) to the repair or restoration of all or part of the related Mortgaged Property or (ii) the reduction of the outstanding principal balance of the First Mortgage, subject in either case to requirements with respect to leases at the related Mortgaged Property and to other exceptions customarily provided for by prudent institutional lenders for similar loans. The Mortgaged Property is also covered by comprehensive general liability insurance against claims for personal and bodily injury, death or property damage occurring on, in or about the related Mortgaged Property, in an amount customarily required by prudent institutional lenders. An architectural or engineering consultant has performed an analysis of the Underlying Mortgaged Properties located in seismic zone 3 or 4 in order to evaluate the structural and seismic condition of such property, for the sole purpose of assessing the probable maximum loss (“PML”) for the Mortgaged Property in the event of an earthquake. In such instance, the PML was based on a 475 year lookback with a 10% probability of exceedance in a 50 year period. If the resulting report concluded that the PML would exceed 20% of the amount of the replacement costs of the improvements, earthquake insurance on such Mortgaged Property was obtained by an insurer rated at least A-:V by A.M. Best Company or “BBB-” (or the equivalent) from S&P and Fitch or “Baa3” (or the equivalent) from Moody’s. If the Mortgaged Property is located in Florida or within 25 miles of the coast of Texas, Louisiana, Mississippi, Alabama, Georgia, North Carolina or South Carolina such Mortgaged Property is insured by windstorm insurance in an amount at least equal to the lesser of (i) the outstanding principal balance of such First Mortgage and (ii) 100% of the full insurable value, or 100% of the replacement cost, of the improvements located on the related Mortgaged Property.  The insurance policies contain a standard Mortgagee clause naming Seller, its successors and assigns as loss payee, in the case of a property insurance policy, and additional insured in the case of a

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liability insurance policy and provide that they are not terminable without 30 days prior written notice to the Mortgagee (or, with respect to non-payment, 10 days prior written notice to the Mortgagee) or such lesser period as prescribed by applicable law. Each Mortgage requires that the Mortgagor maintain insurance as described above or permits the Mortgagee to require insurance as described above, and permits the Mortgagee to purchase such insurance at the Mortgagor’s expense if Mortgagor fails to do so.

23.           (a) Other than payments due but not yet 30 days or more delinquent, there is no material default, breach, violation or event of acceleration existing under the related Mortgage or the related Mortgage Note, and no event has occurred (other than payments due but not yet delinquent) which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a material default, breach, violation or event of acceleration, provided, however, that this representation and warranty does not address or otherwise cover any default, breach, violation or event of acceleration that specifically pertains to any matter otherwise covered by any other representation and warranty made by Seller in any paragraph of this Exhibit VI and (b) Seller has not waived any material default, breach, violation or event of acceleration under such Mortgage or Mortgage Note and pursuant to the terms of the related Mortgage or the related Mortgage Note and other documents in the related Mortgage Loan documents no Person or party other than the holder of such Mortgage Note may declare any event of default or accelerate the related indebtedness under either of such Mortgage or Mortgage Note.

24.           As of the Purchase Date, such First Mortgage is not, since origination, and has not been, 30 days or more past due in respect of any scheduled payment.

25.           Each related Mortgage does not provide for or permit, without the prior written consent of the holder of the Mortgage Note, the related Mortgaged Property to secure any other promissory note or obligation except as expressly described in such Mortgage.

26.           Such First Mortgage constitutes a “qualified mortgage” within the meaning of Section 860G(a)(3) of the Code (without regard to Treasury Regulations Sections 1.860G-2(a)(3) or 1.860G-2(f)(2)), is directly secured by a Mortgage on a commercial property or a multifamily residential property, and either (1) substantially all of the proceeds of such First Mortgage were used to acquire, improve or protect the portion of such commercial or multifamily residential property that consists of an interest in real property (within the meaning of Treasury Regulations Sections 1.856-3(c) and 1.856-3(d)) and such interest in real property was the only security for such First Mortgage as of the Testing Date (as defined below), or (2) the fair market value of the interest in real property which secures such First Mortgage was at least equal to 80% of the principal amount of the First Mortgage (a) as of the Testing Date, or (b) as of the Purchase Date. For purposes of the previous sentence, (1) the fair market value of the referenced interest in real property shall first be reduced by (a) the amount of any lien on such interest in real property that is senior to the First Mortgage, and (b) a proportionate amount of any lien on such interest in real property that is on a parity with the First Mortgage, and (2) the “Testing Date” shall be the date on which the referenced First Mortgage was originated unless (a) such First Mortgage was modified after the date of its origination in a manner that would cause a “significant modification” of such First Mortgage within the meaning of Treasury Regulations Section 1.1001-3(b), and (b) such “significant modification” did not occur at a time

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when such First Mortgage was in default or when default with respect to such First Mortgage was reasonably foreseeable. However, if the referenced First Mortgage has been subjected to a “significant modification” after the date of its origination and at a time when such First Mortgage was not in default or when default with respect to such First Mortgage was not reasonably foreseeable, the Testing Date shall be the date upon which the latest such “significant modification” occurred.

27.           There is no material and adverse environmental condition or circumstance affecting the Mortgaged Property; there is no material violation of any applicable Environmental Law with respect to the Mortgaged Property; neither Seller nor the Underlying Property Owner has taken any actions which would cause the Mortgaged Property not to be in compliance with all applicable Environmental Laws; the Underlying Mortgage Loan documents require the borrower to comply with all Environmental Laws; and each Mortgagor has agreed to indemnify the Mortgagee for any losses resulting from any material, adverse environmental condition or failure of the Mortgagor to abide by such Environmental Laws or has provided environmental insurance.

28.           Each related Mortgage and Assignment of Leases, together with applicable state law, contains customary and enforceable provisions for comparable mortgaged properties similarly situated such as to render the rights and remedies of the holder thereof adequate for the practical realization against the Mortgaged Property of the benefits of the security, including realization by judicial or, if applicable, non judicial foreclosure, subject to the effects of bankruptcy, insolvency, receivership, reorganization, moratorium, redemption, liquidation or other laws relating to or affecting the enforcement of creditors’ rights generally, or by general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law).

29.           No Mortgagor is a debtor in any state or federal bankruptcy or insolvency proceeding.

30.           Such First Mortgage is a First Mortgage and contains no equity participation by the lender or shared appreciation feature and does not provide for any contingent or additional interest in the form of participation in the cash flow of the related Mortgaged Property.  Seller holds no preferred equity interest.

31.           Subject to certain exceptions, which are customarily acceptable to prudent commercial and multifamily mortgage lending institutions lending on the security of property comparable to the related Mortgaged Property, each related Mortgage or loan agreement contains provisions for the acceleration of the payment of the unpaid principal balance of such First Mortgage if, without complying with the requirements of the Mortgage or loan agreement, (a) the related Mortgaged Property, or any controlling interest in the related Mortgagor, is directly transferred or sold (other than by reason of family and estate planning transfers, transfers by devise, descent or operation of law upon the death of a member, general partner or shareholder of the related borrower and transfers of less than a controlling interest (as such term is defined in the related First Mortgage documents) in a mortgagor, issuance of non-controlling new equity interests, transfers among existing members, partners or shareholders in the Mortgagor or an affiliate thereof, transfers among affiliated Mortgagors with respect to First Mortgages which are

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cross-collateralized or cross-defaulted with other mortgage loans or multi-property First Mortgages or transfers of a similar nature to the foregoing meeting the requirements of the First Mortgage (such as pledges of ownership interests that do not result in a change of control) or a substitution or release of collateral within the parameters of paragraph (34) below), or (b) the related Mortgaged Property or controlling interest in the borrower is encumbered in connection with subordinate financing by a lien or security interest against the related Mortgaged Property, other than any existing permitted additional debt. The First Mortgage documents require the borrower to pay all reasonable costs incurred by the Mortgagor with respect to any transfer, assumption or encumbrance requiring lender’s approval.

32.           Except as set forth in the related Mortgage Loan documents delivered to Buyer, the terms of the related Mortgage Note(s) and Mortgage(s) have not been waived, modified, altered, satisfied, impaired, canceled, subordinated or rescinded in any manner which materially interferes with the security intended to be provided by such Mortgage and no such waiver, modification, alteration, satisfaction, impairment, cancellation, subordination or recission has occurred since the date upon which the due diligence file related to the applicable First Mortgage was delivered to Buyer or its designee.

33.           Each related Mortgaged Property was inspected by or on behalf of the related originator or an affiliate during the 12 month period prior to the related origination date.

34.           Since origination, no material portion of the related Mortgaged Property has been released from the lien of the related Mortgage in any manner which materially and adversely affects the value of the First Mortgage or materially interferes with the security intended to be provided by such Mortgage, and, except with respect to First Mortgages (a) which permit defeasance by means of substituting for the Mortgaged Property (or, in the case of a First Mortgage secured by multiple Underlying Mortgaged Properties, one or more of such Underlying Mortgaged Properties) “government securities” as defined in the Investment Company Act of 1940, as amended, sufficient to pay the First Mortgages (or portions thereof) in accordance with its terms, (b) where a release of the portion of the Mortgaged Property was contemplated at origination and such portion was not considered material for purposes of Preliminary Due Diligence the First Mortgage, (c) where release is conditional upon the satisfaction of certain Preliminary Due Diligence and legal requirements and the payment of a release price that represents adequate consideration for such Mortgaged Property or the portion thereof that is being released, (d) which permit the related Mortgagor to substitute a replacement property in compliance with REMIC Provisions or (e) which permit the release(s) of unimproved out-parcels or other portions of the Mortgaged Property that will not have a material adverse effect on the underwritten value of the security for the First Mortgage or that were not allocated to any value in the Preliminary Due Diligence during the origination of the First Mortgage, the terms of the related Mortgage do not provide for release of any portion of the Mortgaged Property from the lien of the Mortgage except in consideration of payment in full therefor.

35.           There are no material violations of any applicable zoning ordinances, building codes or land laws applicable to the Mortgaged Property or the use and occupancy thereof which (i) are not insured by an ALTA lender’s title insurance policy (or a binding commitment therefor), or its equivalent as adopted in the applicable jurisdiction, or a law and ordinance insurance policy or (ii) would have a material adverse effect on the value, operation or

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net operating income of the Mortgaged Property. The First Mortgage documents require the Mortgaged Property to comply with all applicable laws and ordinances.

36.           None of the material improvements which were included for the purposes of determining the appraised value of the related Mortgaged Property at the time of the origination of the First Mortgage lies outside of the boundaries and building restriction lines of such property (except Underlying Mortgaged Properties which are legal non-conforming uses), to an extent which would have a material adverse affect on the value of the Mortgaged Property or related Mortgagor’s use and operation of such Mortgaged Property (unless affirmatively covered by title insurance) and no improvements on adjoining properties encroached upon such Mortgaged Property to any material and adverse extent (unless affirmatively covered by title insurance).

37.           The related Mortgagor has covenanted in its organizational documents and/or the First Mortgage documents to own no significant asset other than the related Underlying Mortgaged Properties, as applicable, and assets incidental to its ownership and operation of such Underlying Mortgaged Properties, and to hold itself out as being a legal entity, separate and apart from any other Person.

38.           No advance of funds has been made other than pursuant to the loan documents, directly or indirectly, by Seller to the Mortgagor and no funds have been received from any Person other than the Mortgagor, for or on account of payments due on the Mortgage Note or the Mortgage.

39.           As of the Purchase Date, there was no pending action, suit or proceeding, or governmental investigation of which Seller has received notice, against the Mortgagor or the related Mortgaged Property the adverse outcome of which could reasonably be expected to materially and adversely affect such Mortgagor’s ability to pay principal, interest or any other amounts due under such First Mortgage or the security intended to be provided by the First Mortgage documents or the current use of the Mortgaged Property.

40.           As of the Purchase Date, if the related Mortgage is a deed of trust, a trustee, duly qualified under applicable law to serve as such, has either been properly designated and serving under such Mortgage or may be substituted in accordance with the Mortgage and applicable law.

41.           The First Mortgage and the interest (exclusive of any default interest, late charges or prepayment premiums) contracted for complied as of the date of origination with, or is exempt from, applicable state or federal laws, regulations and other requirements pertaining to usury.

42.           Each First Mortgage that is cross-collateralized is cross-collateralized only with other First Mortgages sold pursuant to this Agreement.

43.           The improvements located on the Mortgaged Property are either not located in a federally designated special flood hazard area or, if so located, the Mortgagor is required to maintain or the Mortgagee maintains, flood insurance with respect to such improvements and such policy is in full force and effect in an amount no less than the lesser of

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(i) the original principal balance of the First Mortgage, (ii) the value of such improvements on the related Mortgaged Property located in such flood hazard area or (iii) the maximum allowed under the related federal flood insurance program.

44.           All escrow deposits and payments required pursuant to the First Mortgage as of the Purchase Date required to be deposited with Seller in accordance with the First Mortgage documents have been so deposited, are in the possession, or under the control, of Seller or its agent and there are no deficiencies in connection therewith.

45.           As of the Purchase Date, the related Mortgagor, the related lessee, franchisor or operator was in possession of all material licenses, permits and authorizations then required for use of the related Mortgaged Property by the related Mortgagor. The First Mortgage documents require the borrower to maintain all such licenses, permits and authorizations.

46.           The origination (or acquisition, as the case may be), servicing and collection practices used by Seller with respect to the First Mortgage have been in all respects legal and have met customary industry standards for servicing of commercial mortgage loans for conduit loan programs.

47.           Except for Mortgagors under First Mortgages the Mortgaged Property with respect to which includes a Ground Lease, the related Mortgagor (or its affiliate) has title in the fee simple interest in each related Mortgaged Property.

48.           The First Mortgage documents for such First Mortgage provide that such First Mortgage is non-recourse to the related Mortgagor except that the related Mortgagor and an additional guarantor accepts responsibility for any loss incurred due to fraud on the part of the Mortgagor and/or other intentional material misrepresentation. Furthermore, the First Mortgage documents for each First Mortgage provide that the related Mortgagor and an additional guarantor shall be liable to the lender for losses incurred due to the misapplication or misappropriation of rents collected in advance or received by the related Mortgagor after the occurrence of an event of default and not paid to the Mortgagee or applied to the Mortgaged Property in the ordinary course of business, misapplication or conversion by the Mortgagor of insurance proceeds or condemnation awards or breach of the environmental covenants in the related First Mortgage documents.

49.           Subject to the exceptions set forth in paragraph (13) and upon possession of the Mortgaged Property as required under applicable state law, any Assignment of Leases set forth in the Mortgage or separate from the related Mortgage and related to and delivered in connection with such First Mortgage establishes and creates a valid, subsisting and enforceable lien and security interest in the related Mortgagor’s interest in all leases, subleases, licenses or other agreements pursuant to which any Person is entitled to occupy, use or possess all or any portion of the real property.

50.           With respect to such First Mortgage, any prepayment premium and yield maintenance charge constitutes a “customary prepayment penalty” within the meaning of Treasury Regulations Section 1.860G-1 (b)(2).

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51.           If such First Mortgage contains a provision for any defeasance of mortgage collateral, such First Mortgage permits defeasance (1) no earlier than two years after any securitization of such First Mortgage and (2) only with substitute collateral constituting “government securities” within the meaning of Treasury Regulations Section 1.860G-2(a)(8)(i) in an amount sufficient to make all scheduled payments under the Mortgage Note. Such First Mortgage was not originated with the intent to collateralize a REMIC offering with obligations that are not real estate mortgages. In addition, if such Mortgage contains such a defeasance provision, it provides (or otherwise contains provisions pursuant to which the holder can require) that an opinion be provided to the effect that such holder has a first priority perfected security interest in the defeasance collateral. The related First Mortgage documents permit the lender to charge all of its expenses associated with a defeasance to the Mortgagor (including rating agencies’ fees, accounting fees and attorneys’ fees), and provide that the related Mortgagor must deliver (or otherwise, the First Mortgage documents contain certain provisions pursuant to which the lender can require) (a) an accountant’s certification as to the adequacy of the defeasance collateral to make payments under the related First Mortgage for the remainder of its term, (b) an opinion of counsel that the defeasance complies with all applicable REMIC Provisions, and (c) assurances from each applicable Rating Agency that the defeasance will not result in the withdrawal, downgrade or qualification of the ratings assigned to any certificates backed by the related First Mortgage. Notwithstanding the foregoing, some of the First Mortgage documents may not affirmatively contain all such requirements, but such requirements are effectively present in such documents due to the general obligation to comply with the REMIC Provisions and/or deliver a REMIC opinion of counsel.

52.           To the extent required under applicable law as of the date of origination, and necessary for the enforceability or collectability of the First Mortgage, the originator of such First Mortgage was authorized to do business in the jurisdiction in which the related Mortgaged Property is located at all times when it originated and held the First Mortgage.

53.           Neither Seller nor any affiliate thereof has any obligation to make any capital contributions to the Mortgagor under the First Mortgage.

54.           The related Mortgaged Property is not encumbered, and none of the First Mortgage documents permits the related Mortgaged Property to be encumbered subsequent to the Purchase Date without the prior written consent of the holder of such First Mortgage, by any lien securing the payment of money junior to or of equal priority with, or superior to, the lien of the related Mortgage (other than Title Exceptions, taxes, assessments and contested mechanics and materialmens liens that become payable after the Purchase Date of the related First Mortgage).

55.           Each related Mortgaged Property constitutes one or more complete separate tax lots (or the related Mortgagor has covenanted to obtain separate tax lots and a Person has indemnified the Mortgagee for any loss suffered in connection therewith or an escrow of funds in an amount sufficient to pay taxes resulting from a breach thereof has been established) or is subject to an endorsement under the related title insurance policy.

56.           An appraisal of the related Mortgaged Property was conducted in connection with the origination of such First Mortgage; and such appraisal satisfied either (A)

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the requirements of the “Uniform Standards of Professional Appraisal Practice” as adopted by the Appraisal Standards Board of the Appraisal Foundation, or (B) the guidelines in Title XI of the Financial Institutions Reform, Recovery and Enforcement Act or 1989, in either case as in effect on the date such First Mortgage was originated.

57.           The related First Mortgage documents require the Mortgagor to provide the Mortgagee with certain financial information at the times required under the related First Mortgage documents.

58.           The related Mortgaged Property is served by public utilities, water and sewer (or septic facilities) and otherwise appropriate for the use in which the Mortgaged Property is currently being utilized.

59.           With respect to each related Mortgaged Property consisting of a Ground Lease, Seller represents and warrants the following with respect to the related Ground Lease:

(i)            Such Ground Lease or a memorandum thereof has been or will be duly recorded no later than 30 days after the Purchase Date and such Ground Lease permits the interest of the lessee thereunder to be encumbered by the related Mortgage or, if consent of the lessor thereunder is required, it has been obtained prior to the Purchase Date.

(ii)           Upon the foreclosure of the First Mortgage (or acceptance of a deed in lieu thereof), the Mortgagor’s interest in such Ground Lease is assignable to the Mortgagee under the leasehold estate and its assigns without the consent of the lessor thereunder (or, if any such consent is required, it has been obtained prior to the Purchase Date).

(iii)          Such Ground Lease may not be amended, modified, canceled or terminated without the prior written consent of the Mortgagee and any such action without such consent is not binding on the Mortgagee, its successors or assigns, except termination or cancellation if (i) an event of default occurs under the Ground Lease, (ii) notice thereof is provided to the Mortgagee and (iii) such default is curable by the Mortgagee as provided in the Ground Lease but remains uncured beyond the applicable cure period.

(iv)          Such Ground Lease is in full force and effect, there is no material default under such Ground Lease, and there is no event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a material default under such Ground Lease.

(v)           The Ground Lease or ancillary agreement between the lessor and the lessee requires the lessor to give notice of any default by the lessee to the Mortgagee. The Ground Lease or ancillary agreement further provides that no notice given is effective against the Mortgagee unless a copy has been given to the Mortgagee in a manner described in the Ground Lease or ancillary agreement.

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(vi)          The Ground Lease (i) is not subject to any liens or encumbrances superior to, or of equal priority with, the Mortgage, subject, however, to only the Title Exceptions or (ii) is subject to a subordination, non-disturbance and attornment agreement to which the Mortgagee on the lessor’s fee interest in the Mortgaged Property is subject.

(vii)         A Mortgagee is permitted a reasonable opportunity (including, where necessary, sufficient time to gain possession of the interest of the lessee under the Ground Lease) to cure any curable default under such Ground Lease before the lessor thereunder may terminate such Ground Lease.

(viii)        Such Ground Lease has an original term (together with any extension options, whether or not currently exercised, set forth therein all of which can be exercised by the Mortgagee if the Mortgagee acquires the lessee’s rights under the Ground Lease) that extends not less than 20 years beyond the stated maturity date.

(ix)           Under the terms of such Ground Lease, any estoppel or consent letter received by the Mortgagee from the lessor, and the related Mortgage, taken together, any related insurance proceeds or condemnation award (other than in respect of a total or substantially total loss or taking) will be applied either to the repair or restoration of all or part of the related Mortgaged Property, with the Mortgagee or a trustee appointed by it having the right to hold and disburse such proceeds as repair or restoration progresses, or to the payment or defeasance of the outstanding principal balance of the First Mortgage, together with any accrued interest (except in cases where a different allocation would not be viewed as commercially unreasonable by any commercial mortgage lender, taking into account the relative duration of the Ground Lease and the related Mortgage and the ratio of the market value of the related Mortgaged Property to the outstanding principal balance of such First Mortgage).

(x)            The Ground Lease does not impose any restrictions on subletting that would be viewed as commercially unreasonable by a prudent commercial lender.

(xi)           The ground lessor under such Ground Lease is required to enter into a new lease upon termination of the Ground Lease for any reason, including the rejection of the Ground Lease in bankruptcy.

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REPRESENTATIONS AND WARRANTIES
RE:  PURCHASED LOANS CONSISTING OF B NOTES

1.             The B Note is (a) a junior participation interest in a First Mortgage or (b) a “B-note” in an “A/B structure” in a First Mortgage.

2.             As of the Purchase Date, such B Note complies in all material respects with, or is exempt from, all requirements of federal, state or local law relating to such B Note.

3.             Immediately prior to the sale, transfer and assignment to Buyer thereof, Seller had good and marketable title to, and was the sole owner and holder of, such B Note, and Seller is transferring such B Note free and clear of any and all liens, pledges, encumbrances, charges, security interests or any other ownership interests of any nature encumbering such B Note. Upon consummation of the purchase contemplated to occur in respect of such B Note on the Purchase Date therefor, Seller will have validly and effectively conveyed to Buyer all legal and beneficial interest in and to such B Note free and clear of any pledge, lien, encumbrance or security interest.

4.             No fraudulent acts were committed by Seller in connection with its acquisition or origination of such B Note nor were any fraudulent acts committed by any Person in connection with the origination of such B Note.

5.             All information contained in the related Preliminary Due Diligence Package (or as otherwise provided to Buyer) in respect of such B Note is accurate and complete in all material respects.

6.             Except as included in the Preliminary Due Diligence Package or otherwise disclosed to Buyer, Seller is not a party to any document, instrument or agreement, and there is no document, that by its terms modifies or affects the rights and obligations of any holder of such B Note and Seller has not consented to any material change or waiver to any term or provision of any such document, instrument or agreement and no such change or waiver exists.

7.             Seller has full right, power and authority to sell and assign such B Note and such B Note or any related Mortgage Note has not been cancelled, satisfied or rescinded in whole or part nor has any instrument been executed that would effect a cancellation, satisfaction or rescission thereof.

8.             Other than consents and approvals obtained as of the related Purchase Date or those already granted in the related Mortgage and/or Mortgage Note, no consent or approval by any Person is required in connection with Seller’s sale and/or Buyer’s acquisition of such B Note, for Buyer’s exercise of any rights or remedies in respect of such B Note or for Buyer’s sale, pledge or other disposition of such B Note.  Except as included in the Preliminary Due Diligence Package or otherwise disclosed to Buyer, no third party holds any “right of first refusal”, “right of first negotiation”, “right of first offer”, purchase option, or other similar rights of any kind, and no other impediment exists to any such transfer or exercise of rights or remedies.

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9.             No consent, approval, authorization or order of, or registration or filing with, or notice to, any court or governmental agency or body having jurisdiction or regulatory authority is required for any transfer or assignment by the holder of such B Note.

10.           Seller has delivered to Buyer or its designee the original promissory note, certificate or other similar indicia of ownership of such B Note, however denominated, together with an original assignment thereof, executed by Seller in blank, or, with respect to a participation interest, reissued in Buyer’s name (or such other name as designated by the Buyer).

11.           No default or event of default has occurred under any agreement pertaining to any lien or other interest that ranks pari passu with or senior to the interests of the holder of such B Note in respect of the related Mortgaged Property and there is no provision in any such agreement which would provide for any increase in the principal amount of any such lien or other interest.

12.           No (i) monetary default, breach or violation exists with respect to any agreement or other document governing or pertaining to such B Note, the related First Mortgage or any other obligation of the Underlying Property Owner, (ii) material non-monetary default, breach or violation exists with respect to such B Note, the related First Mortgage or any other obligation of the Underlying Property Owner, or (iii) event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration.

13.           Such B Note has not been and shall not be deemed to be a Security within the meaning of the Securities Act of 1933, as amended or the Securities Exchange Act of 1934, as amended.

14.           Each related Underlying Mortgage Loan complies in all material respects with, or is exempt from, all requirements of federal, state or local law relating to the origination of such Underlying Mortgage Loan.

15.           Seller has not received written notice of any outstanding liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind for which the holder of such B Note is or may become obligated.

16.           Seller has not advanced funds, or knowingly received any advance of funds from a party other than the Mortgagee relating to such B Note, directly or indirectly, for the payment of any amount required by such B Note.

17.           With respect to each related Underlying Mortgage Loan, each related Mortgage Note, Mortgage, Assignment of Leases (if a document separate from the Mortgage) and other agreement executed by the related Mortgagor in connection with such Underlying Mortgage Loan is legal, valid and binding obligation of the related Mortgagor (subject to any non-recourse provisions therein and any state anti-deficiency or market value limit deficiency legislation), enforceable in accordance with its terms, except (i) that certain provisions contained in such Underlying Mortgage Loan

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documents are or may be unenforceable in whole or in part under applicable state or federal laws, but neither the application of any such laws to any such provision nor the inclusion of any such provisions renders any of the Underlying Mortgage Loan documents invalid as a whole and such Underlying Mortgage Loan documents taken as a whole are enforceable to the extent necessary and customary for the practical realization of the rights and benefits afforded thereby and (ii) as such enforcement may be limited by bankruptcy, insolvency, receivership, reorganization, moratorium, redemption, liquidation or other laws affecting the enforcement of creditors’ rights generally, or by general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law). The related Mortgage Note and Mortgage contain no provision limiting the right or ability of any holder thereof to assign, transfer and convey all or any portion of the related Underlying Mortgage Loan or the related B Note to any other Person, except, however, for customary intercreditor restrictions limiting assignees to “Qualified Transferees”. With respect to any Mortgaged Property that has tenants, there exists as either part of the Mortgage or as a separate document, an assignment of leases.

18.           With respect to the B Note and each related Underlying Mortgage Loan, as of the date of its origination, there was no valid offset, defense, counterclaim, abatement or right to rescission with respect to any related Mortgage Note, Mortgage or other agreements executed in connection therewith, and, as of the Purchase Date for the related Purchased Loan, there is no valid offset, defense, counterclaim or right to rescission with respect to any such Mortgage Note, Mortgage or other agreements, except in each case, with respect to the enforceability of any provisions requiring the payment of default interest, late fees, additional interest, prepayment premiums or yield maintenance charges.

19.           With respect to the Underlying Mortgage Loan, each related Assignment of Mortgage and assignment of Assignment of Leases from Seller in blank constitutes the legal, valid and binding first priority assignment from Seller (assuming the insertion of the Buyer’s name), except as such enforcement may be limited by bankruptcy, insolvency, receivership, reorganization, moratorium, redemption, liquidation or other laws relating to or affecting the enforcement of creditors’ rights generally, or by general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law). Each Mortgage and Assignment of Leases is freely assignable.

20.           The Underlying Mortgage Loan is secured by one or more Mortgages and each such Mortgage is a valid and enforceable first lien on the related Mortgaged Property subject only to the exceptions set forth in paragraph (17) above and the following title exceptions (each such title exception, a “Title Exception”, and collectively, the “Title Exceptions”):  (a) the lien of current real property taxes, water charges, sewer rents and assessments not yet due and payable, (b) covenants, conditions and restrictions, rights of way, easements and other matters of public record, none of which, individually or in the aggregate, materially and adversely interferes with the current use of the Mortgaged Property or the security intended to be provided by such Mortgage or with the Mortgagor’s ability to pay its obligations under the Underlying Mortgage Loan when they become due or materially and adversely affects the value of the Mortgaged Property, (c) the exceptions (general and specific) and exclusions set forth in the applicable policy described in paragraph (24) below or appearing of record, none of which, individually or in the aggregate, materially and adversely interferes with the current use of the Mortgaged Property or the security intended to be provided by such Mortgage or with the Mortgagor’s ability to pay its obligations under the Underlying Mortgage Loan when they become due or materially and adversely affects the value of the Mortgaged Property, (d) other matters to which

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like properties are commonly subject, none of which, individually or in the aggregate, materially and adversely interferes with the current use of the Mortgaged Property or the security intended to be provided by such Mortgage or with the Mortgagor’s ability to pay its obligations under the Underlying Mortgage Loan when they become due or materially and adversely affects the value of the Mortgaged Property, (e) the right of tenants (whether under ground leases, space leases or operating leases) at the Mortgaged Property to remain following a foreclosure or similar proceeding (provided that such tenants are performing under such leases) and (f) if such Underlying Mortgage Loan is cross-collateralized with any other Underlying Mortgage Loan, the lien of the Mortgage for such other Underlying Mortgage Loan, none of which, individually or in the aggregate, materially and adversely interferes with the current use of the Mortgaged Property or the security intended to be provided by such Mortgage or with the Mortgagor’s ability to pay its obligations under the Underlying Mortgage Loan when they become due or materially and adversely affects the value of the Mortgaged Property. Except with respect to cross-collateralized and cross-defaulted Underlying Mortgage Loans and as provided below, there are no mortgage loans that are senior or pari passu with respect to the related Mortgaged Property or such Underlying Mortgage Loan.

21.           UCC Financing Statements have been filed and/or recorded (or, if not filed and/or recorded, have been submitted in proper form for filing and recording), in all public places necessary to perfect a valid security interest in all items of personal property located on each related Mortgaged Property that are owned by the Mortgagor and either (i) are reasonably necessary to operate such Mortgaged Property or (ii) are (as indicated in the appraisal obtained in connection with the origination of the related Underlying Mortgage Loan) material to the value of such Mortgaged Property (other than any personal property subject to a purchase money security interest or a sale and leaseback financing arrangement permitted under the terms of such Underlying Mortgage Loan or any other personal property leases applicable to such personal property), to the extent perfection may be effected pursuant to applicable law by recording or filing, and the Mortgages, security agreements, chattel Mortgages or equivalent documents related to and delivered in connection with the related Underlying Mortgage Loan establish and create a valid and enforceable lien and priority security interest on such items of personalty except as such enforcement may be limited by bankruptcy, insolvency, receivership, reorganization, moratorium, redemption, liquidation or other laws affecting the enforcement of creditor’s rights generally, or by general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law). Notwithstanding any of the foregoing, no representation is made as to the perfection of any security interest in rents or other personal property to the extent that possession or control of such items or actions other than the filing of UCC Financing Statements are required in order to effect such perfection.

22.           All real estate taxes and governmental assessments, or installments thereof, which would be a lien on any related Mortgaged Property and that prior to the Purchase Date for the related Purchased Loan have become delinquent in respect of such Mortgaged Property have been paid, or an escrow of funds in an amount sufficient to cover such payments has been established. For purposes of this representation and warranty, real estate taxes and governmental assessments and installments thereof shall not be considered delinquent until the earlier of (a) the date on which interest and/or penalties would first be payable thereon and (b) the date on which enforcement action is entitled to be taken by the related taxing authority.

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23.           As of the Purchase Date for the related Purchased Loan, each related Mortgaged Property was free and clear of any material damage (other than deferred maintenance) that would affect materially and adversely the value of such Mortgaged Property as security for the related Underlying Mortgage Loan and there was no proceeding pending or, based solely upon the delivery of written notice thereof from the appropriate condemning authority, threatened for the total or partial condemnation of such Mortgaged Property.

24.           With respect to each related Underlying Mortgage Loan, the lien of each related Mortgage as a first priority lien in the original principal amount of such Underlying Mortgage Loan after all advances of principal is insured by an ALTA lender’s title insurance policy (or a binding commitment therefor), or its equivalent as adopted in the applicable jurisdiction, insuring the Mortgagee, its successors and assigns, subject only to the Title Exceptions; the Mortgagee or its successors or assigns is the sole named insured of such policy; such policy is assignable without consent of the insurer and will inure to the benefit of the trustee as Mortgagee of record; such title policy is in full force and effect upon the consummation of the transactions contemplated by this Agreement; all premiums thereon have been paid; no claims have been made under such policy and no circumstance exists which would impair or diminish the coverage of such policy. The insurer issuing such policy is either (x) a nationally-recognized title insurance company or (y) qualified to do business in the jurisdiction in which the related Mortgaged Property is located to the extent required; such policy contains no material exclusions for, or affirmatively insures (except for any Mortgaged Property located in a jurisdiction where such insurance is not available) (a) access to public road or (b) against any loss due to encroachments of any material portion of the improvements thereon.

25.           With respect to each related Underlying Mortgage Loan, as of the date of its origination, all insurance coverage required under each related Mortgage, which insurance covered such risks as were customarily acceptable to prudent commercial and multifamily mortgage lending institutions lending on the security of property comparable to the related Mortgaged Property in the jurisdiction in which such Mortgaged Property is located, and with respect to a fire and extended perils insurance policy, is in an amount (subject to a customary deductible) at least equal to the lesser of (i) the replacement cost of improvements located on such Mortgaged Property, or (ii) the outstanding principal balance of the Underlying Mortgage Loan, and in any event, the amount necessary to prevent operation of any co-insurance provisions; and, except if such Mortgaged Property is operated as a mobile home park, is also covered by business interruption or rental loss insurance, in an amount at least equal to 12 months of operations of the related Mortgaged Property, all of which was in full force and effect with respect to each related Mortgaged Property; and, as of the Purchase Date for the related Purchased Loan, all insurance coverage required under each Mortgage, which insurance covers such risks and is in such amounts as are customarily acceptable to prudent commercial and multifamily mortgage lending institutions lending on the security of property comparable to the related Mortgaged Property in the jurisdiction in which such Mortgaged Property is located, is in full force and effect with respect to each related Mortgaged Property; all premiums due and payable through the Purchase Date for the related Purchased Loan have been paid; and no notice of termination or cancellation with respect to any such insurance policy has been received by Seller; and except for certain amounts not greater than amounts which would be considered prudent by an institutional commercial and/or multifamily mortgage lender with respect to a similar mortgage loan and which are set forth in the related Mortgage, any insurance proceeds in

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respect of a casualty loss, will be applied either (i) to the repair or restoration of all or part of the related Mortgaged Property or (ii) the reduction of the outstanding principal balance of the Underlying Mortgage Loan, subject in either case to requirements with respect to leases at the related Mortgaged Property and to other exceptions customarily provided for by prudent institutional lenders for similar loans. The Mortgaged Property is also covered by comprehensive general liability insurance against claims for personal and bodily injury, death or property damage occurring on, in or about the related Mortgaged Property, in an amount customarily required by prudent institutional lenders. An architectural or engineering consultant has performed an analysis of the Underlying Mortgaged Properties located in seismic zone 3 or 4 in order to evaluate the structural and seismic condition of such property, for the sole purpose of assessing the probable maximum loss (“PML”) for the Mortgaged Property in the event of an earthquake. In such instance, the PML was based on a 475 year lookback with a 10% probability of exceedance in a 50 year period. If the resulting report concluded that the PML would exceed 20% of the amount of the replacement costs of the improvements, earthquake insurance on such Mortgaged Property was obtained by an insurer rated at least A-:V by A.M. Best Company or “BBB-” (or the equivalent) from S&P and Fitch or “Baa3” (or the equivalent) from Moody’s. If the Mortgaged Property is located in Florida or within 25 miles of the coast of Texas, Louisiana, Mississippi, Alabama, Georgia, North Carolina or South Carolina such Mortgaged Property is insured by windstorm insurance in an amount at least equal to the lesser of (i) the outstanding principal balance of such Underlying Mortgage Loan and (ii) 100% of the full insurable value, or 100% of the replacement cost, of the improvements located on the related Mortgaged Property.

26.           The insurance policies contain a standard Mortgagee clause naming the Mortgagee, its successors and assigns as loss payee, in the case of a property insurance policy, and additional insured in the case of a liability insurance policy and provide that they are not terminable without 30 days prior written notice to the Mortgagee (or, with respect to non-payment, 10 days prior written notice to the Mortgagee) or such lesser period as prescribed by applicable law. Each Mortgage requires that the Mortgagor maintain insurance as described above or permits the Mortgagee to require insurance as described above, and permits the Mortgagee to purchase such insurance at the Mortgagor’s expense if Mortgagor fails to do so.

27.           With respect to any Underlying Mortgage Loan (a) other than payments due but not yet 30 days or more delinquent, there is no material default, breach, violation or event of acceleration existing under the related Mortgage or the related Mortgage Note, and no event has occurred (other than payments due but not yet delinquent) which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a material default, breach, violation or event of acceleration, provided, however, that this representation and warranty does not address or otherwise cover any default, breach, violation or event of acceleration that specifically pertains to any matter otherwise covered by any other representation and warranty made by Seller in any paragraph of this Schedule (a) and (b) Seller has not waived any material default, breach, violation or event of acceleration under the related Mortgage or Mortgage Note and, pursuant to the terms of such Mortgage or Mortgage Note and other Underlying Mortgage Loan documents, no Person or party other than the holder of the related Mortgage Note may declare any event of default or accelerate the related indebtedness under either of such Mortgage or Mortgage Note.

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28.           As of the Purchase Date, the Underlying Mortgage Loan is not, since origination, and has not been, 30 days or more past due in respect of any scheduled payment.

29.           Each Mortgage related to the Underlying Mortgage Loan does not provide for or permit, without the prior written consent of the holder of the Mortgage Note, the related Mortgaged Property to secure any other promissory note or obligation except as expressly described in such Mortgage.

30.           Each related Underlying Mortgage Loan secured by commercial or multifamily residential property constitutes a “qualified mortgage” within the meaning of Section 860G(a)(3) of the Code (without regard to Treasury Regulations Sections 1.860G-2(a)(3) or 1.860G-2(f)(2)), is directly secured by a Mortgage on such commercial property or a multifamily residential property, and either (1) substantially all of the proceeds of such Underlying Mortgage Loan were used to acquire, improve or protect the portion of such commercial or multifamily residential property that consists of an interest in real property (within the meaning of Treasury Regulations Sections 1.856-3(c) and 1.856-3(d)) and such interest in real property was the only security for such Underlying Mortgage Loan as of the Testing Date (as defined below), or (2) the fair market value of the interest in real property which secures such Underlying Mortgage Loan was at least equal to 80% of the principal amount of the Underlying Mortgage Loan (a) as of the Testing Date, or (b) as of the Purchase Date for the related Purchased Loan. For purposes of the previous sentence, (1) the fair market value of the referenced interest in real property shall first be reduced by (a) the amount of any lien on such interest in real property that is senior to the Underlying Mortgage Loan, and (b) a proportionate amount of any lien on such interest in real property that is on a parity with the Underlying Mortgage Loan, and (2) the “Testing Date” shall be the date on which the referenced Underlying Mortgage Loan was originated unless (a) such Underlying Mortgage Loan was modified after the date of its origination in a manner that would cause a “significant modification” of such Underlying Mortgage Loan within the meaning of Treasury Regulations Section 1.1001-3(b), and (b) such “significant modification” did not occur at a time when such Underlying Mortgage Loan was in default or when default with respect to such Underlying Mortgage Loan was reasonably foreseeable. However, if the referenced Underlying Mortgage Loan has been subjected to a “significant modification”, after the date of its origination and at a time when such Underlying Mortgage Loan was not in default or when default with respect to such Underlying Mortgage Loan was not reasonably foreseeable, the Testing Date shall be the date upon which the latest such “significant modification” occurred.

31.           There is no material and adverse environmental condition or circumstance affecting the Mortgaged Property; there is no material violation of any applicable Environmental Law with respect to the Mortgaged Property; neither Seller nor the Underlying Property Owner has taken any actions which would cause the Mortgaged Property not to be in compliance with all applicable Environmental Laws; the Underlying Mortgage Loan documents require the borrower to comply with all Environmental Laws; and each Mortgagor has agreed to indemnify the Mortgagee for any losses resulting from any material, adverse environmental condition or failure of the Mortgagor to abide by such Environmental Laws or has provided environmental insurance.

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32.           With respect to each related Underlying Mortgage Loan, each related Mortgage and Assignment of Leases, together with applicable state law, contains customary and enforceable provisions for comparable mortgaged properties similarly situated such as to render the rights and remedies of the holder thereof adequate for the practical realization against the Mortgaged Property of the benefits of the security, including realization by judicial or, if applicable, non judicial foreclosure, subject to the effects of bankruptcy, insolvency, receivership, reorganization, moratorium, redemption, liquidation or other laws relating to or affecting the enforcement of creditors’ rights generally, or by general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law).

33.           No issuer of the Purchased Loan, no co-participant and no Mortgagor related to any Underlying Mortgage Loan, is a debtor in any state or federal bankruptcy or insolvency proceeding.

34.           Except for the related Purchased Loan, each related Underlying Mortgage Loan is a First Mortgage and contains no equity participation by the lender or shared appreciation feature and does not provide for any contingent or additional interest in the form of participation in the cash flow of the related Mortgaged Property.

35.           With respect to each related Underlying Mortgage Loan, subject to certain exceptions, which are customarily acceptable to prudent commercial and multifamily mortgage lending institutions lending on the security of property comparable to the related Mortgaged Property, each related Mortgage or loan agreement contains provisions for the acceleration of the payment of the unpaid principal balance of such Underlying Mortgage Loan if, without complying with the requirements of the Mortgage or loan agreement, (a) the related Mortgaged Property, or any controlling interest in the related Mortgagor, is directly transferred or sold (other than by reason of family and estate planning transfers, transfers by devise, descent or operation of law upon the death of a member, general partner or shareholder of the related borrower and transfers of less than a controlling interest (as such term is defined in the related Underlying Mortgage Loan documents) in a mortgagor, issuance of non-controlling new equity interests, transfers among existing members, partners or shareholders in the Mortgagor or an affiliate thereof, transfers among affiliated Mortgagors with respect to Underlying Mortgage Loans which are cross-collateralized or cross-defaulted with other mortgage loans or transfers of a similar nature to the foregoing meeting the requirements of the Underlying Mortgage Loan (such as pledges of ownership interests that do not result in a change of control) or a substitution or release of collateral within the parameters of paragraph (38) below), or (b) the related Mortgaged Property or controlling interest in the borrower is encumbered in connection with subordinate financing by a lien or security interest against the related Mortgaged Property, other than any existing permitted additional debt. The Underlying Mortgage Loan documents require the borrower to pay all reasonable costs incurred by the Mortgagor with respect to any transfer, assumption or encumbrance requiring lender’s approval.

36.           With respect to each Purchased Loan and the related Underlying Mortgage Loan, except as set forth in the related Mortgage Asset documents delivered to Buyer, the terms of the related documents have not been waived, modified, altered, satisfied, impaired, canceled, subordinated or rescinded in any manner which materially interferes with the security intended to be provided by such documents and no such waiver, modification, alteration, satisfaction,

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impairment, cancellation, subordination or recission has occurred since the date upon which the due diligence file related to the applicable Purchased Loan was delivered to Buyer or its designee.

37.           Each related Mortgaged Property was inspected by or on behalf of the related originator or an affiliate during the 12 month period prior to the related origination date.

38.           Since origination, no material portion of any related Mortgaged Property has been released from the lien of the related Mortgage in any manner which materially and adversely affects the value of the Underlying Mortgage Loan or the Purchased Loan or materially interferes with the security intended to be provided by such Mortgage, and, except with respect to Underlying Mortgage Loans (a) which permit defeasance by means of substituting for the Mortgaged Property (or, in the case of an Underlying Mortgage Loan secured by multiple Underlying Mortgaged Properties, one or more of such Underlying Mortgaged Properties) “government securities” as defined in the Investment Company Act of 1940, as amended, sufficient to pay the Underlying Mortgage Loan (or portions thereof) in accordance with its terms, (b) where a release of the portion of the Mortgaged Property was contemplated at origination and such portion was not considered material for purposes of Preliminary Due Diligence the Underlying Mortgage Loan, (c) where release is conditional upon the satisfaction of certain Preliminary Due Diligence and legal requirements and the payment of a release price that represents adequate consideration for such Mortgaged Property or the portion thereof that is being released, (d) which permit the related Mortgagor to substitute a replacement property in compliance with REMIC Provisions or (e) which permit the release(s) of unimproved out-parcels or other portions of the Mortgaged Property that will not have a material adverse effect on the underwritten value of the security for the Underlying Mortgage Loan or that were not allocated to any value in the Preliminary Due Diligence during the origination of the Underlying Mortgage Loan, the terms of the related Mortgage do not provide for release of any portion of the Mortgaged Property from the lien of the Mortgage except in consideration of payment in full therefor.

39.           With respect to each related Underlying Mortgage Loan, there are no material violations of any applicable zoning ordinances, building codes and land laws applicable to the Mortgaged Property or the use and occupancy thereof which (i) are not insured by an ALTA lender’s title insurance policy (or a binding commitment therefor), or its equivalent as adopted in the applicable jurisdiction, or a law and ordinance insurance policy or (ii) would have a material adverse effect on the value, operation or net operating income of the Mortgaged Property. The Underlying Mortgage Loan documents require the Mortgaged Property to comply with all applicable laws and ordinances.

40.           None of the material improvements which were included for the purposes of determining the appraised value of any related Mortgaged Property at the time of the origination of the respective Underlying Mortgage Loan lies outside of the boundaries and building restriction lines of such property (except Underlying Mortgaged Properties which are legal non-conforming uses), to an extent which would have a material adverse affect on the value of the Mortgaged Property or related Mortgagor’s use and operation of such Mortgaged Property (unless affirmatively covered by title insurance) and no improvements on adjoining properties

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encroached upon such Mortgaged Property to any material and adverse extent (unless affirmatively covered by title insurance).

41.           The related Mortgagor has covenanted in its respective organizational documents and/or the underlying Mortgage Loan documents to own no significant asset other than the related Underlying Mortgaged Properties, as applicable, and assets incidental to its respective ownership and operation of such Underlying Mortgaged Properties, and to hold itself out as being a legal entity, separate and apart from any other Person.

42.           With respect to each related Underlying Mortgage Loan, no advance of funds has been made other than pursuant to the loan documents, directly or indirectly, by Seller to the Mortgagor and no funds have been received from any Person other than the Mortgagor, for or on account of payments due on the Mortgage Note or the Mortgage related thereto.

43.           With respect to each related Underlying Mortgage Loan, as of the Purchase Date for the related Purchased Loan, there was no pending action, suit or proceeding, or governmental investigation of which it has received notice, against the Mortgagor or the related Mortgaged Property the adverse outcome of which could reasonably be expected to materially and adversely affect such Mortgagor’s ability to pay principal, interest or any other amounts due under such Underlying Mortgage Loan or the security intended to be provided by the Underlying Mortgage Loan documents or the current use of the Mortgaged Property.

44.           With respect to each related Underlying Mortgage Loan, if the related Mortgage is a deed of trust, a trustee, duly qualified under applicable law to serve as such, has either been properly designated and serving under such Mortgage or may be substituted in accordance with the Mortgage and applicable law.

45.           With respect to the Purchased Loan and each related Underlying Mortgage Loan, such Underlying Mortgage Loan and the Purchased Loan and all interest thereon (exclusive of any default interest, late charges or prepayment premiums) contracted for complied as of the date of origination with, or is exempt from, applicable state or federal laws, regulations and other requirements pertaining to usury.

46.           Each Underlying Mortgage Loan that is cross-collateralized is cross-collateralized only with other Underlying Mortgage Loans sold pursuant to this Agreement.

47.           The improvements located on the Mortgaged Property are either not located in a federally designated special flood hazard area or, if so located, the Mortgagor is required to maintain or the Mortgagee maintains, flood insurance with respect to such improvements and such policy is in full force and effect in an amount no less than the lesser of (i) the original principal balance of the Underlying Mortgage Loan, (ii) the value of such improvements on the related Mortgaged Property located in such flood hazard area or (iii) the maximum allowed under the related federal flood insurance program.

48.           All escrow deposits and payments required pursuant to the Underlying Mortgage Loan as of the Purchase Date required to be deposited with Seller in accordance with the Underlying Mortgage Loan documents have been so deposited, are in the possession, or under the control, of Seller or its agent and there are no deficiencies in connection therewith.

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49.           With respect to each related Underlying Mortgage Loan, as of the Purchase Date, the related Mortgagor, the related lessee, franchisor or operator was in possession of all material licenses, permits and authorizations then required for use of the related Mortgaged Property by the related Mortgagor. The Underlying Mortgage Loan documents require the borrower to maintain all such licenses, permits and authorizations.

50.           With respect to the B Note and each related Underlying Mortgage Loan, the origination (or acquisition, as the case may be), servicing and collection practices used by Seller with respect to such Underlying Mortgage Loan have been in all respects legal and have met customary industry standards for servicing of commercial mortgage loans for conduit loan programs.

51.           With respect to each related Underlying Mortgage Loan, except for Mortgagors under Underlying Mortgage Loans the Mortgaged Property with respect to which includes a Ground Lease, the related Mortgagor (or its affiliate) has title in the fee simple interest in each related Mortgaged Property.

52.           The documents for each related Underlying Mortgage Loan provide that each such Underlying Mortgage Loan is non-recourse to the related Mortgagor except that the related Mortgagor and an additional guarantor accepts responsibility for any loss uncured due to fraud on the part of the Mortgagor and/or other intentional material misrepresentation. Furthermore, the documents for each related Underlying Mortgage Loan provide that the related Mortgagor and an additional guarantor shall be liable to the lender for losses incurred due to the misapplication or misappropriation of rents collected in advance or received by the related Mortgagor after the occurrence of an event of default and not paid to the Mortgagee or applied to the Mortgaged Property in the ordinary course of business, misapplication or conversion by the Mortgagor of insurance proceeds or condemnation awards or breach of the environmental covenants in the related Underlying Mortgage Loan documents.

53.           Subject to the exceptions set forth in paragraph (17) and upon possession of the Mortgaged Property as required under applicable state law, any Assignment of Leases set forth in the Mortgage or separate from the related Mortgage and related to and delivered in connection with each Underlying Mortgage Loan establishes and creates a valid, subsisting and enforceable lien and security interest in the related Mortgagor’s interest in all leases, subleases, licenses or other agreements pursuant to which any Person is entitled to occupy, use or possess all or any portion of the real property.

54.           With respect to each related Underlying Mortgage Loan, any prepayment premium and yield maintenance charge constitutes a “customary prepayment penalty” within the meaning of Treasury Regulations Section 1.860G-1(b)(2).

55.           If any related Underlying Mortgage Loan contains a provision for any defeasance of mortgage collateral, such Underlying Mortgage Loan permits defeasance (1) no earlier than two years after any securitization of the Underlying Mortgage Loan or the B Note and (2) only with substitute collateral constituting “government securities” within the meaning of Treasury Regulations Section 1.860G-2(a)(8)(i) in an amount sufficient to make all scheduled payments under the Mortgage Note. No related Underlying Mortgage Loan was originated with

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the intent to collateralize a REMIC offering with obligations that are not real estate mortgages. In addition, if the Mortgage related to any such Underlying Mortgage Loan contains such a defeasance provision, it provides (or otherwise contains provisions pursuant to which the holder can require) that an opinion be provided to the effect that such holder has a first priority perfected security interest in the defeasance collateral. The related Underlying Mortgage Loan documents permit the lender to charge all of its expenses associated with a defeasance to the Mortgagor (including rating agencies’ fees, accounting fees and attorneys’ fees), and provide that the related Mortgagor must deliver (or otherwise, the Underlying Mortgage Loan documents contain certain provisions pursuant to which the lender can require) (a) an accountant’s certification as to the adequacy of the defeasance collateral to make payments under the related Underlying Mortgage Loan for the remainder of its term, (b) an opinion of counsel that the defeasance complies with all applicable REMIC Provisions, and (c) assurances from each applicable Rating Agency that the defeasance will not result in the withdrawal, downgrade or qualification of the ratings assigned to any certificates backed by the related Underlying Mortgage Loan or the B Note. Notwithstanding the foregoing, some of the Underlying Mortgage Loan documents may not affirmatively contain all such requirements, but such requirements are effectively present in such documents due to the general obligation to comply with the REMIC Provisions and/or deliver a REMIC opinion of counsel.

56.           With respect to each related Underlying Mortgage Loan, to the extent required under applicable law as of the date of origination, and necessary for the enforceability or collectability of such Underlying Mortgage Loan, the originator of such Underlying Mortgage Loan was authorized to do business in the jurisdiction in which the related Mortgaged Property is located at all times when it originated and held the Underlying Mortgage Loan.

57.           Neither Seller nor any affiliate thereof has any obligation to make any capital contributions to the Mortgagor under any related Underlying Mortgage Loan.

58.           With respect to each related Underlying Mortgage Loan, the related Mortgaged Property is not encumbered, and none of the Underlying Mortgage Loan documents permits the related Mortgaged Property to be encumbered subsequent to the Purchase Date of the related Purchased Loan without the prior written consent of the holder thereof, by any lien securing the payment of money junior to or of equal priority with, or superior to, the lien of the related Mortgage (other than Title Exceptions, taxes, assessments and contested mechanics and materialmens liens that become payable after such Purchase Date).

59.           With respect to each related Underlying Mortgage Loan, each related Mortgaged Property constitutes one or more complete separate tax lots (or the related Mortgagor has covenanted to obtain separate tax lots and a Person has indemnified the Mortgagee for any loss suffered in connection therewith or an escrow of funds in an amount sufficient to pay taxes resulting from a breach thereof has been established) or is subject to an endorsement under the related title insurance policy.

60.           With respect to each related Underlying Mortgage Loan, an appraisal of the related Mortgaged Property was conducted in connection with the origination of such Underlying Mortgage Loan; and such appraisal satisfied either (A) the requirements of the “Uniform Standards of Professional Appraisal Practice” as adopted by the Appraisal Standards

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Board of the Appraisal Foundation, or (B) the guidelines in Title XI of the Financial Institutions Reform, Recovery and Enforcement Act or 1989, in either case as in effect on the date such Underlying Mortgage Loan was originated.

61.           With respect to each related Underlying Mortgage Loan, the related Underlying Mortgage Loan documents require the Mortgagor to provide the Mortgagee with certain financial information at the times required under such Underlying Mortgage Loan documents.

62.           With respect to each related Underlying Mortgage Loan, the related Mortgaged Property is served by public utilities, water and sewer (or septic facilities) and otherwise appropriate for the use in which the Mortgaged Property is currently being utilized.

63.           With respect to each related Mortgaged Property consisting of a Ground Lease, Seller represents and warrants the following with respect to the related Ground Lease:

(i)            Such Ground Lease or a memorandum thereof has been or will be duly recorded no later than 30 days after the Purchase Date of the related Purchased Loan and such Ground Lease permits the interest of the lessee thereunder to be encumbered by the related Mortgage or, if consent of the lessor thereunder is required, it has been obtained prior to the Purchase Date.

(ii)           Upon the foreclosure of the Underlying Mortgage Loan (or acceptance of a deed in lieu thereof), the Mortgagor’s interest in such Ground Lease is assignable to the Mortgagee under the leasehold estate and its assigns without the consent of the lessor thereunder (or, if any such consent is required, it has been obtained prior to the Purchase Date).

(iii)          Such Ground Lease may not be amended, modified, canceled or terminated without the prior written consent of the Mortgagee and any such action without such consent is not binding on the Mortgagee, its successors or assigns, except termination or cancellation if (i) an event of default occurs under the Ground Lease, (ii) notice thereof is provided to the Mortgagee and (iii) such default is curable by the Mortgagee as provided in the Ground Lease but remains uncured beyond the applicable cure period.

(iv)          Such Ground Lease is in full force and effect, there is no material default under such Ground Lease, and there is no event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a material default under such Ground Lease.

(v)           The Ground Lease or ancillary agreement between the lessor and the lessee requires the lessor to give notice of any default by the lessee to the Mortgagee. The Ground Lease or ancillary agreement further provides that no notice given is effective against the Mortgagee unless a copy has been given to the Mortgagee in a manner described in the Ground Lease or ancillary agreement.

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(vi)          The Ground Lease (i) is not subject to any liens or encumbrances superior to, or of equal priority with, the Mortgage, subject, however, to only the Title Exceptions or (ii) is subject to a subordination, non-disturbance and attornment agreement to which the Mortgagee on the lessor’s fee interest in the Mortgaged Property is subject.

(vii)         A Mortgagee is permitted a reasonable opportunity (including, where necessary, sufficient time to gain possession of the interest of the lessee under the Ground Lease) to cure any curable default under such Ground Lease before the lessor thereunder may terminate such Ground Lease.

(viii)        Such Ground Lease has an original term (together with any extension options, whether or not currently exercised, set forth therein all of which can be exercised by the Mortgagee if the Mortgagee acquires the lessee’s rights under the Ground Lease) that extends not less than 20 years beyond the stated maturity date.

(ix)           Under the terms of such Ground Lease, any estoppel or consent letter received by the Mortgagee from the lessor, and the related Mortgage, taken together, any related insurance proceeds or condemnation award (other than in respect of a total or substantially total loss or taking) will be applied either to the repair or restoration of all or part of the related Mortgaged Property, with the Mortgagee or a trustee appointed by it having the right to hold and disburse such proceeds as repair or restoration progresses, or to the payment or defeasance of the outstanding principal balance of the Underlying Mortgage Loan, together with any accrued interest (except in cases where a different allocation would not be viewed as commercially unreasonable by any commercial mortgage lender, taking into account the relative duration of the Ground Lease and the related Mortgage and the ratio of the market value of the related Mortgaged Property to the outstanding principal balance of such Underlying Mortgage Loan).

(x)            The Ground Lease does not impose any restrictions on subletting that would be viewed as commercially unreasonable by a prudent commercial lender.

(xi)           The ground lessor under such Ground Lease is required to enter into a new lease upon termination of the Ground Lease for any reason, including the rejection of the Ground Lease in bankruptcy.

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REPRESENTATIONS AND WARRANTIES
RE:  PURCHASED LOANS CONSISTING OF MEZZANINE LOANS

1.             The Mezzanine Loan is a performing mezzanine loan secured by a pledge of all (or such lesser percentage as Buyer may agree to) of the Capital Stock of a Mortgagor that owns income producing commercial real estate.

2.             As of the Purchase Date, such Mezzanine Loan complies in all material respects with, or is exempt from, all requirements of federal, state or local law relating to such Mezzanine Loan.

3.             Immediately prior to the sale, transfer and assignment to Buyer thereof, Seller had good and marketable title to, and was the sole owner and holder of, such Mezzanine Loan, and Seller is transferring such Mezzanine Loan free and clear of any and all liens, pledges, encumbrances, charges, security interests or any other ownership interests of any nature encumbering such Mezzanine Loan. Upon consummation of the purchase contemplated to occur in respect of such Mezzanine Loan on the Purchase Date therefor, Seller will have validly and effectively conveyed to Buyer all legal and beneficial interest in and to such Mezzanine Loan free and clear of any pledge, lien, encumbrance or security interest.

4.             No fraudulent acts were committed by Seller in connection with its acquisition or origination of such Mezzanine Loan nor were any fraudulent acts committed by any Person in connection with the origination of such Mezzanine Loan.

5.             All information contained in the related Preliminary Due Diligence Package (or as otherwise provided to Buyer) in respect of such Mezzanine Loan is accurate and complete in all material respects.

6.             Except as included in the Preliminary Due Diligence Package, Seller is not a party to any document, instrument or agreement, and there is no document, that by its terms modifies or affects the rights and obligations of any holder of such Mezzanine Loan and Seller has not consented to any material change or waiver to any term or provision of any such document, instrument or agreement and no such change or waiver exists.

7.             Except as included in the Preliminary Due Diligence Package or otherwise disclosed to Buyer, such Mezzanine Loan is presently outstanding, the proceeds thereof have been fully and properly disbursed and, except for amounts held in escrow by Seller, there is no requirement for any future advances thereunder.

8.             Seller has full right, power and authority to sell and assign such Mezzanine Loan and such Mezzanine Loan or any related Mezzanine Note has not been cancelled, satisfied or rescinded in whole or part nor has any instrument been executed that would effect a cancellation, satisfaction or rescission thereof.

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9.             Other than consents and approvals obtained as of the related Purchase Date or those already granted in the documentation governing such Mezzanine Loan (the “Mezzanine Loan Documents”), no consent or approval by any Person is required in connection with Seller’s sale and/or Buyer’s acquisition of such Mezzanine Loan, for Buyer’s exercise of any rights or remedies in respect of such Mezzanine Loan or for Buyer’s sale, pledge or other disposition of such Mezzanine Loan. No third party holds any “right of first refusal”, “right of first negotiation”, “right of first offer”, purchase option, or other similar rights of any kind, and no other impediment exists to any such transfer or exercise of rights or remedies.

10.           The Mezzanine Collateral is secured by a pledge of equity ownership interests in the related borrower under the Underlying Mortgage Loan or a direct or indirect owner of the related borrower and the security interest created thereby has been fully perfected in favor of Seller as Mezzanine Lender.

11.           The Underlying Property Owner has been duly organized and is validly existing and in good standing under the laws of its jurisdiction of organization, with requisite power and authority to own its assets and to transact the business in which it is now engaged, the sole purpose of the Underlying Property Owner under its organizational documents is to own, finance, sell or otherwise manage the Properties and to engage in any and all activities related or incidental thereto, and the Underlying Mortgaged Properties constitute the sole assets of the Underlying Property Owner.

12.           The Underlying Property Owner has good and marketable title to the Underlying Mortgaged Property, no claims under the title policies insuring the Underlying Property Owner’s title to the Properties have been made, and the Underlying Property Owner has not received any written notice regarding any material violation of any easement, restrictive covenant or similar instrument affecting the Underlying Mortgaged Property.

13.           The representations and warranties made by the borrower (the “Mezzanine Borrower”) in the Mezzanine Loan Documents were true and correct in all material respects as of the date such representations and warranties were stated to be true therein, and there has been no adverse change with respect to the Mezzanine Loan, the Mezzanine Borrower, the Underlying Mortgaged Property or the Underlying Property Owner that would render any such representation or warranty not true or correct in any material respect as of the Purchase Date.

14.           The Mezzanine Loan Documents provide for the acceleration of the payment of the unpaid principal balance of the Mezzanine Loan if (i) the related borrower voluntarily transfers or encumbers all or any portion of any related Mezzanine Collateral, or (ii) any direct or indirect interest in the related borrower is voluntarily transferred or assigned, other than, in each case, as permitted under the terms and conditions of the related loan documents.

15.           Pursuant to the terms of the Mezzanine Loan Documents:  (a) no material terms of any related Mortgage may be waived, canceled, subordinated or modified in any material respect and no material portion of such Mortgage or the Mortgaged Property may be released without the consent of the holder of the Mezzanine Loan; (b) no material action may be taken by the Underlying Property Owner with respect to the Underlying Mortgaged Property

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without the consent of the holder of the Mezzanine Loan; (c) the holder of the Mezzanine Loan is entitled to approve the budget of the Underlying Property Owner as it relates to the Underlying Mortgaged Property; and (d) the holder of the Mezzanine Loan’s consent is required prior to the Underlying Property Owner incurring any additional indebtedness.

16.           There is no (i) monetary default, breach or violation with respect to such Mezzanine Loan, the Underlying Mortgage Loan or any other obligation of the owner of the Underlying Mortgaged Property (the “Underlying Property Owner”), (ii) material non-monetary default, breach or violation with respect to such Mezzanine Loan, the Underlying Mortgage Loan or any other obligation of the Underlying Property Owner or (iii) event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration.

17.           No default or event of default has occurred under any agreement pertaining to any lien or other interest that ranks pari passu with or senior to the interests of the holder of such Mezzanine Loan or with respect to any Underlying Mortgage Loan or other indebtedness in respect of the related Underlying Mortgaged Property and there is no provision in any agreement related to any such lien, interest or loan which would provide for any increase in the principal amount of any such lien, other interest or loan.

18.           Seller’s security interest in the Mezzanine Loan is covered by a UCC-9 insurance policy (the “UCC-9 Policy”) in the maximum principal amount of the Mezzanine Loan insuring that the related pledge is a valid first priority lien on the collateral pledged in respect of such Mezzanine Loan (the “Mezzanine Collateral”), subject only to the exceptions stated therein (or a pro forma title policy or marked up title insurance commitment on which the required premium has been paid exists which evidences that such UCC-9 Policy will be issued), such UCC-9 Policy (or, if it has yet to be issued, the coverage to be provided thereby) is in full force and effect, no material claims have been made thereunder and no claims have been paid thereunder, Seller has not done, by act or omission, anything that would materially impair the coverage under the UCC-9 Policy and as of the Purchase Date, the UCC-9 Policy (or, if it has yet to be issued, the coverage to be provided thereby) will inure to the benefit of Buyer without the consent of or notice to the insurer.

19.           The Mezzanine Loan, and each party involved in the origination of the Mezzanine Loan, complied as of the date of origination with, or was exempt from, applicable state or federal laws, regulations and other requirements pertaining to usury.

20.           Seller has delivered to Buyer or its designee the original promissory note made in respect of such Mezzanine Loan, together with an original assignment thereof executed by Seller in blank.

21.           The Seller has not received any written notice that the Mezzanine Loan may be subject to reduction or disallowance for any reason, including without limitation, any setoff, right of recoupment, defense, counterclaim or impairment of any kind.

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22.           The Seller has no obligation to make loans to, make guarantees on behalf of, or otherwise extend credit to, or make any of the foregoing for the benefit of, the Mezzanine Borrower or any other person under or in connection with the Mezzanine Loan.

23.           The servicing and collection practices used by the servicer of the Mezzanine Loan, and the origination practices of the related originator, have been in all respects legal, proper and prudent and have met customary industry standards by prudent institutional commercial mezzanine lenders and mezzanine loan servicers except to the extent that, in connection with its origination, such standards were modified as reflected in the documentation delivered to Buyer.

24.           If applicable, the ground lessor consented to and acknowledged that (i) the Mezzanine Loan is permitted / approved, (ii) any foreclosure of the Mezzanine Loan and related change in ownership of the ground lessee will not require the consent of the ground lessor or constitute a default under the ground lease, (iii) copies of default notices would be sent to Mezzanine Lender and (iv) it would accept cure from Mezzanine Lender on behalf of the ground lessee.

25.           To the extent the Buyer was granted a security interest with respect to the Mezzanine Loan, such interest (i) was given for due consideration, (ii) has attached, (iii) is perfected, (iv) is a first priority lien, and (v) has been appropriately assigned to the Buyer by the Underlying Property Owner.

26.           No consent, approval, authorization or order of, or registration or filing with, or notice to, any court or governmental agency or body having jurisdiction or regulatory authority is required for any transfer or assignment by the holder of such Mezzanine Loan.

27.           Seller has not received written notice of any outstanding liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind for which the holder of such Mezzanine Loan is or may become obligated.

28.           Seller has not advanced funds, or knowingly received any advance of funds from a party other than the borrower relating to such Mezzanine Loan, directly or indirectly, for the payment of any amount required by such Mezzanine Loan.

29.           All real estate taxes and governmental assessments, or installments thereof, which would be a lien on any related Underlying Mortgaged Property and that prior to the Purchase Date for the related Purchased Loan have become delinquent in respect of such Underlying Mortgaged Property have been paid, or an escrow of funds in an amount sufficient to cover such payments has been established. For purposes of this representation and warranty, real estate taxes and governmental assessments and installments thereof shall not be considered delinquent until the earlier of (a) the date on which interest and/or penalties would first be payable thereon and (b) the date on which enforcement action is entitled to be taken by the related taxing authority.

30.           As of the Purchase Date for the related Purchased Loan, each related Underlying Mortgaged Property was free and clear of any material damage (other than deferred

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maintenance for which escrows were established at origination) that would affect materially and adversely the value of such Underlying Mortgaged Property as security for the related Underlying Mortgage Loan and there was no proceeding pending or, based solely upon the delivery of written notice thereof from the appropriate condemning authority, threatened for the total or partial condemnation of such Underlying Mortgaged Property.

31.           As of the date of origination of the Mezzanine Loan, all insurance coverage required under the Mezzanine Loan Documents and/or any Mortgage Loan related to the Underlying Mortgaged Property, which insurance covered such risks as were customarily acceptable to prudent commercial and multifamily mortgage lending institutions lending on the security of property comparable to the related Underlying Mortgaged Property in the jurisdiction in which such Underlying Mortgaged Property is located, and with respect to a fire and extended perils insurance policy, is in an amount (subject to a customary deductible) at least equal to the lesser of (i) the replacement cost of improvements located on such Underlying Mortgaged Property, or (ii) the outstanding principal balance of the Underlying Mortgage Loan, and in any event, the amount necessary to prevent operation of any co-insurance provisions; and, except if such Underlying Mortgaged Property is operated as a mobile home park, is also covered by business interruption or rental loss insurance, in an amount at least equal to 12 months of operations of the related Underlying Mortgaged Property, all of which was in full force and effect with respect to each related Underlying Mortgaged Property; and, as of the Purchase Date for the related Purchased Loan, all insurance coverage required under the Mezzanine Loan Documents and/or any Underlying Mortgage Loan related to the Underlying Mortgaged Property, which insurance covers such risks and is in such amounts as are customarily acceptable to prudent commercial and multifamily mortgage lending institutions lending on the security of property comparable to the related Underlying Mortgaged Property in the jurisdiction in which such Underlying Mortgaged Property is located, is in full force and effect with respect to each related Underlying Mortgaged Property; all premiums due and payable through the Purchase Date for the related Purchased Loan have been paid; and no notice of termination or cancellation with respect to any such insurance policy has been received by Seller; and except for certain amounts not greater than amounts which would be considered prudent by an institutional commercial and/or multifamily mortgage lender with respect to a similar mortgage loan and which are set forth in the Mezzanine Loan Documents and/or any Underlying Mortgage Loan related to the Underlying Mortgaged Property, any insurance proceeds in respect of a casualty loss, will be applied either (i) to the repair or restoration of all or part of the related Underlying Mortgaged Property or (ii) the reduction of the outstanding principal balance of the Underlying Mortgage Loan, subject in either case to requirements with respect to leases at the related Underlying Mortgaged Property and to other exceptions customarily provided for by prudent institutional lenders for similar loans. The Underlying Mortgaged Property is also covered by comprehensive general liability insurance against claims for personal and bodily injury, death or property damage occurring on, in or about the related Underlying Mortgaged Property, in an amount customarily required by prudent institutional lenders. An architectural or engineering consultant has performed an analysis of the Underlying Mortgaged Properties located in seismic zone 3 or 4 in order to evaluate the structural and seismic condition of such property, for the sole purpose of assessing the probable maximum loss (“PML”) for the Underlying Mortgaged Property in the event of an earthquake. In such instance, the PML was based on a 475 year lookback with a 10% probability of exceedance in a 50 year period. If the resulting report concluded that the PML would exceed 20% of the amount of the replacement costs of the

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 improvements, earthquake insurance on such Underlying Mortgaged Property was obtained by an insurer rated at least A-:V by A.M. Best Company or “BBB-” (or the equivalent) from S&P and Fitch or “Baa3” (or the equivalent) from Moody’s. If the Underlying Mortgaged Property is located in Florida or within 25 miles of the coast of Texas, Louisiana, Mississippi, Alabama, Georgia, North Carolina or South Carolina such Underlying Mortgaged Property is insured by windstorm insurance in an amount at least equal to the lesser of (i) the outstanding principal balance of such Underlying Mortgage Loan and (ii) 100% of the full insurable value, or 100% of the replacement cost, of the improvements located on the related Underlying Mortgaged Property.

32.           The insurance policies contain a standard Mortgagee clause naming the Mortgagee, its successors and assigns as loss payee, in the case of a property insurance policy, and additional insured in the case of a liability insurance policy and provide that they are not terminable without 30 days prior written notice to the Mortgagee (or, with respect to non-payment, 10 days prior written notice to the Mortgagee) or such lesser period as prescribed by applicable law. Each Mortgage requires that the Mortgagor maintain insurance as described above or permits the Mortgagee to require insurance as described above, and permits the Mortgagee to purchase such insurance at the Mortgagor’s expense if Mortgagor fails to do so.

33.           There is no material and adverse environmental condition or circumstance affecting the Underlying Mortgaged Property; there is no material violation of any applicable Environmental Law with respect to the Underlying Mortgaged Property; neither Seller nor the Underlying Property Owner has taken any actions which would cause the Underlying Mortgaged Property not to be in compliance with all applicable Environmental Laws; the Underlying Mortgage Loan documents require the borrower to comply with all Environmental Laws; and each Mortgagor has agreed to indemnify the Mortgagee for any losses resulting from any material, adverse environmental condition or failure of the Mortgagor to abide by such Environmental Laws or has provided environmental insurance.

34.           No borrower under the Mezzanine Loan nor any Mortgagor under any Underlying Mortgage Loan is a debtor in any state or federal bankruptcy or insolvency proceeding.

35.           Each related Underlying Mortgaged Property was inspected by or on behalf of the related originator or an affiliate during the 12 month period prior to the related origination date.

36.           There are no material violations of any applicable zoning ordinances, building codes and land laws applicable to the Underlying Mortgaged Property or the use and occupancy thereof which (i) are not insured by an ALTA lender’s title insurance policy (or a binding commitment therefor), or its equivalent as adopted in the applicable jurisdiction, or a law and ordinance insurance policy or (ii) would have a material adverse effect on the value, operation or net operating income of the Underlying Mortgaged Property. The Mezzanine Loan Documents and the Underlying Mortgage Loan documents require the Underlying Mortgaged Property to comply with all applicable laws and ordinances.

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37.           None of the material improvements which were included for the purposes of determining the appraised value of any related Underlying Mortgaged Property at the time of the origination of the Mezzanine Loan or any related Underlying Mortgage Loan lies outside of the boundaries and building restriction lines of such property (except Underlying Mortgaged Properties which are legal non-conforming uses), to an extent which would have a material adverse affect on the value of the Underlying Mortgaged Property or the related Mortgagor’s use and operation of such Underlying Mortgaged Property (unless affirmatively covered by title insurance) and no improvements on adjoining properties encroached upon such Underlying Mortgaged Property to any material and adverse extent (unless affirmatively covered by title insurance).

38.           As of the Purchase Date for the related Purchased Loan, there was no pending action, suit or proceeding, or governmental investigation of which the Seller, the Mezzanine Borrower or the Underlying Property Owner has received notice, against the Mortgagor or the related Underlying Mortgaged Property the adverse outcome of which could reasonably be expected to materially and adversely affect the Mezzanine Loan or the Underlying Mortgage Loan.

39.           The improvements located on the Underlying Mortgaged Property are either not located in a federally designated special flood hazard area or, if so located, the Mortgagor is required to maintain or the Mortgagee maintains, flood insurance with respect to such improvements and such policy is in full force and effect in an amount no less than the lesser of (i) the original principal balance of the Underlying Mortgage Loan, (ii) the value of such improvements on the related Underlying Mortgaged Property located in such flood hazard area or (iii) the maximum allowed under the related federal flood insurance program.

40.           Except for Mortgagors under Underlying Mortgage Loans the Underlying Mortgaged Property with respect to which includes a Ground Lease, the related Mortgagor (or its affiliate) has title in the fee simple interest in each related Underlying Mortgaged Property.

41.           The related Underlying Mortgaged Property is not encumbered, and none of the Mezzanine Loan Documents or any Underlying Mortgage Loan documents permits the related Underlying Mortgaged Property to be encumbered subsequent to the Purchase Date of the related Purchased Loan without the prior written consent of the holder thereof, by any lien securing the payment of money junior to or of equal priority with, or superior to, the lien of the related Mortgage (other than Title Exceptions, taxes, assessments and contested mechanics and materialmens liens that become payable after such Purchase Date).

42.           Each related Underlying Mortgaged Property constitutes one or more complete separate tax lots (or the related Mortgagor has covenanted to obtain separate tax lots and a Person has indemnified the Mortgagee for any loss suffered in connection therewith or an escrow of funds in an amount sufficient to pay taxes resulting from a breach thereof has been established) or is subject to an endorsement under the related title insurance policy.

43.           An appraisal of the related Underlying Mortgaged Property was conducted in connection with the origination of the Underlying Mortgage Loan; and such appraisal satisfied either (A) the requirements of the “Uniform Standards of Professional Appraisal Practice” as

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adopted by the Appraisal Standards Board of the Appraisal Foundation, or (B) the guidelines in Title XI of the Financial Institutions Reform, Recovery and Enforcement Act or 1989, in either case as in effect on the date such Underlying Mortgage Loan was originated.

44.           The related Underlying Mortgaged Property is served by public utilities, water and sewer (or septic facilities) and otherwise appropriate for the use in which the Underlying Mortgaged Property is currently being utilized.

45.           With respect to each related Underlying Mortgaged Property consisting of a Ground Lease, Seller represents and warrants the following with respect to the related Ground Lease:

(i)            Such Ground Lease or a memorandum thereof has been or will be duly recorded no later than 30 days after the Purchase Date of the related Purchased Loan and such Ground Lease permits the interest of the lessee thereunder to be encumbered by the related Mortgage or, if consent of the lessor thereunder is required, it has been obtained prior to the Purchase Date.

(ii)           Upon the foreclosure of the Underlying Mortgage Loan (or acceptance of a deed in lieu thereof), the Mortgagor’s interest in such Ground Lease is assignable to the Mortgagee under the leasehold estate and its assigns without the consent of the lessor thereunder (or, if any such consent is required, it has been obtained prior to the Purchase Date).

(iii)          Such Ground Lease may not be amended, modified, canceled or terminated without the prior written consent of the Mortgagee and any such action without such consent is not binding on the Mortgagee, its successors or assigns, except termination or cancellation if (i) an event of default occurs under the Ground Lease, (ii) notice thereof is provided to the Mortgagee and (iii) such default is curable by the Mortgagee as provided in the Ground Lease but remains uncured beyond the applicable cure period.

(iv)          Such Ground Lease is in full force and effect, there is no material default under such Ground Lease, and there is no event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a material default under such Ground Lease.

(v)           The Ground Lease or ancillary agreement between the lessor and the lessee requires the lessor to give notice of any default by the lessee to the Mortgagee. The Ground Lease or ancillary agreement further provides that no notice given is effective against the Mortgagee unless a copy has been given to the Mortgagee in a manner described in the Ground Lease or ancillary agreement.

(vi)          The Ground Lease (i) is not subject to any liens or encumbrances superior to, or of equal priority with, the Mortgage, subject, however, to only the Title Exceptions or (ii) is subject to a subordination, non-disturbance and attornment agreement to which the Mortgagee on the lessor’s fee interest in the Mortgaged Property is subject.

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(vii)         A Mortgagee is permitted a reasonable opportunity (including, where necessary, sufficient time to gain possession of the interest of the lessee under the Ground Lease) to cure any curable default under such Ground Lease before the lessor thereunder may terminate such Ground Lease.

(viii)        Such Ground Lease has an original term (together with any extension options, whether or not currently exercised, set forth therein all of which can be exercised by the Mortgagee if the Mortgagee acquires the lessee’s rights under the Ground Lease) that extends not less than 20 years beyond the stated maturity date.

(ix)           Under the terms of such Ground Lease, any estoppel or consent letter received by the Mortgagee from the lessor, and the related Mortgage, taken together, any related insurance proceeds or condemnation award (other than in respect of a total or substantially total loss or taking) will be applied either to the repair or restoration of all or part of the related Underlying Mortgaged Property, with the Mortgagee or a trustee appointed by it having the right to hold and disburse such proceeds as repair or restoration progresses, or to the payment or defeasance of the outstanding principal balance of the Underlying Mortgage Loan, together with any accrued interest (except in cases where a different allocation would not be viewed as commercially unreasonable by any commercial mortgage lender, taking into account the relative duration of the Ground Lease and the related Mortgage and the ratio of the market value of the related Mortgaged Property to the outstanding principal balance of such Underlying Mortgage Loan).

(x)            The Ground Lease does not impose any restrictions on subletting that would be viewed as commercially unreasonable by a prudent commercial lender.

(xi)           The ground lessor under such Ground Lease is required to enter into a new lease upon termination of the Ground Lease for any reason, including the rejection of the Ground Lease in bankruptcy.

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REPRESENTATIONS AND WARRANTIES
RE: PURCHASED LOANS CONSISTING OF PREFERRED EQUITY

                                (a)           The Preferred Equity consists of a performing current pay preferred equity position (with a put or synthetic maturity date structure replicating a debt instrument) representing the entire equity ownership interest in an entity that owns income producing commercial real estate.

                                (b)           There are no equity or other interests (whether debt or equity) that are senior in priority or pari passu in right of payment with respect to the Preferred Equity. The Underlying Mortgage Loan documents prohibit the creation of class or series of equity whose rights and preferences are senior or pari passu with the Preferred Equity as to dividends, distributions, repurchase, redemption, payment upon redemption, liquidation, winding up or dissolution or any other payments or distributions or any kind or nature.

                                (c)           Immediately prior to the sale, transfer and assignment to Buyer, Seller had good and marketable title to, and was the sole owner of, such Preferred Equity, and Seller is transferring such Preferred Equity free and clear of any interest or claim of a third party and free and clear of all liens, pledges, encumbrances, charges, security interests or any other ownership interests of any nature encumbering such Preferred Equity.  Upon consummation of the purchase contemplated to occur in respect of such Preferred Equity on the Purchase Date therefor, Seller will have validly and effectively conveyed to Buyer all legal and beneficial interest in and to such Preferred Equity free and clear of any pledge, lien, encumbrance or security interest.

                                (d)           No fraudulent acts were committed by Seller in connection with the acquisition or origination of the Preferred Equity nor were any fraudulent acts committed by any Person in connection with the origination of such Preferred Equity.

                                (e)           The Preferred Equity represents the ownership levels set forth in the related Preliminary Due Diligence Package (or as otherwise identified in writing to Buyer); all other information contained in the related Preliminary Due Diligence Package (or as otherwise identified in writing to Buyer) is accurate and complete in all material respects.

                                (f)            Other than the document(s) evidencing the Preferred Equity and other documentation delivered to Buyer in respect of the Preferred Equity (collectively, the “Preferred Equity Documents”), Seller is not a party to any document, instrument or agreement, and there is no document of which Seller is aware, that by its terms modifies or affects the rights and obligations of any holder of such Preferred Equity and Seller has not consented to any material change or waiver to any term or provision of any such document, instrument or agreement and no such change or waiver exists.

                                (g)           Seller has full right, power and authority to sell and assign such Preferred Equity and such Preferred Equity has not been cancelled, satisfied, rescinded or subordinated in whole or in part nor has any instrument been executed that would effect a cancellation, satisfaction, rescission or subordination thereof; the Preferred Equity represents an ownership interest in the Preferred Equity Property Owner; the issuer of the Preferred Equity is the Preferred Equity Property Owner.

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                                (h)           No consents or approval by any Person is required for Buyer to exercise any rights or remedies under the Preferred Equity or for Buyer’s sale or other disposition of such Preferred Equity if Buyer acquires title thereto, other than consents and approvals which have been obtained; no third party (including the Preferred Equity Property Owner) holds any statutory or contractual “right of first refusal”, “right of first negotiation”, “right of first offer”, purchase option, anti-dilution, co-sale or other similar rights of any kind, and no other impediment exists to any such transfer or exercise of rights or remedies with respect to the Preferred Equity or the Underlying Mortgaged Property.

                                (i)            Seller will, by the Purchase Date, have obtained all approvals, authorizations, consents, orders or other actions required under the Preferred Equity Documents and required by any Person or Governmental Authority for the consummation of the transactions contemplated in this Agreement.

                                (j)            To the extent the Buyer was granted a security interest with respect to the Preferred Equity, such interest (i) was given for due consideration, (ii) has attached, (iii) is perfected, (iv) is a first priority Lien, and (v) has been appropriately assigned to the Buyer by the Preferred Equity Property Owner.

                                (k)           All of the Preferred Equity consists of limited liability company or partnership interests that do not constitute a Security pursuant to Section 8-103(c) of the UCC. None of the Preferred Equity (i) is dealt in or traded on a securities exchange or in a securities market, (ii) by its terms expressly provides that it is a Security governed by Article 8 of the UCC, (iii) is Investment Property, (iv) is held in a Securities Account or (v) constitutes a Security or a Financial Asset. None of the Underlying Mortgage Loan documents for the Preferred Equity consists of Instruments. For purposes of this paragraph (11), capitalized terms undefined in this Agreement have the meaning given to such term in the UCC.

                                (l)            The representations and warranties made by the Preferred Equity Property Owner in the Preferred Equity Documents were true and correct in all material respects as of the date such representations and warranties were stated to be true therein, and there has been no adverse change with respect to the Preferred Equity or the Underlying Mortgaged Property or the Preferred Equity Property Owner that would render any such representation or warranty not true or correct in any material respect as of the Purchase Date.

                                (m)          Seller has transferred to Buyer the Preferred Equity and delivered true and correct copies of the documents evidencing the Preferred Equity, and containing the rights, duties, obligations, liabilities and remedies relative to the Preferred Equity, to the Custodian.

                                (n)           Seller has no obligation to make capital contributions to, loans to, make guarantees on behalf of, or otherwise extend credit to, or make any of the foregoing for the benefit of, the owner of the Underlying Mortgaged Property related to the Preferred Equity (the “Preferred Equity Property Owner”) or any other person under or in connection with the Preferred Equity. Other than the rights of Buyer as set forth in this Agreement, there exist no options or rights to purchase any interest in the Preferred Equity.

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                                (o)           There are no outstanding warrants, permitted stock option plans, registration rights agreements or subscription agreements with respect to the Preferred Equity.

                                (p)           The Preferred Equity is not convertible into any other interest.

                                (q)           Pursuant to the terms of the Preferred Equity Documents: (a) no material terms of any related Mortgage may be waived, canceled, subordinated or modified in any material respect and no material portion of such Mortgage or the Underlying Mortgaged Property may be released without the consent of the holder of the Preferred Equity; (b) no material action may be taken by the Preferred Equity Property Owner with respect to the Underlying Mortgaged Property without the consent of the holder of the Preferred Equity; (c) the holder of the Preferred Equity is entitled to approve the budget of the Preferred Equity Property Owner as it relates to the Underlying Mortgaged Property; and (d) the holder of the Preferred Equity’s consent is required prior to the Preferred Equity Property Owner incurring any additional indebtedness.

                                (r)            The Preferred Equity and the payments of yield (exclusive of any default interest, late charges or prepayment premiums) provided for thereunder complied as of the date of origination with, or is exempt from, applicable laws pertaining to usury.

                                (s)           The Preferred Equity is a certificated security in registered form, or is in uncertificated form and (i) held through the facilities of The Depository Trust Corporation in New York, New York, or (b) such other clearing organization or book-entry system as is designated in writing by the Buyer, or (ii) registered on the books of the issuer thereof.

                                (t)            Certain balance sheets, financial statements, rent rolls, operating statements and other financial documentation relating to the Preferred Equity Property Owner and the Properties (collectively, the “Preferred Equity Financial Documents”) have been made available to Buyer and such Preferred Equity Financial Documents represent true and correct copies of documents delivered to Seller by the Preferred Equity Property Owner; there has been no material adverse change to the financial condition of the Underlying Mortgaged Property or the Preferred Equity Property Owner since the date of the relevant Preferred Equity Financial Document which would have a material adverse effect on the value of the Preferred Equity; the Preferred Equity Property Owner currently does not have, nor has it ever had, employment contracts, collective bargaining agreements or any “employment benefit plan” as defined in the Employee Retirement Income Security Act of 1974); and the Preferred Equity Property Owner does not have any material liabilities (including guaranties and other contingent liabilities) other than those reflected in the Preferred Equity Financial Documents.

                                (u)           As of the Purchase Date, (a) the Preferred Equity Property Owner complies (and at the time of the origination of the Preferred Equity, complied) in all material respects with all applicable federal, state and local statutes, laws, rules and regulations, (b) the Preferred Equity Property Owner is not in default under any order, writ, injunction, decree or demand of any governmental authority, the violation of which would materially and adversely affect the condition (financial or otherwise) or business of the Preferred Equity Property Owner and (c) the Preferred Equity Property Owner is not a debtor in any state or federal bankruptcy or insolvency proceedings.

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                                (v)           The Preferred Equity Documents contain the following terms and provisions:

                (i)            the Preferred Equity holder is entitled to receive, among other amounts, monthly payments of yield, repayment of its equity contribution and exit fees;

                (ii)           after payment of debt service in connection with any first mortgage loan on the Underlying Mortgaged Property and payment of approved operating expenses and capital expenditures, preference is given to the Preferred Equity holder over all other equity investors and all other Persons with respect to all dividends, receipts, gains, payments, proceeds (including liquidation proceeds), profits, payments in kind and other distributions, while losses and liabilities are allocated to the Preferred Equity holder only after such losses and liabilities have been allocated to other equity investors;

                (iii)          upon a sale or refinance of the Underlying Mortgaged Property, the Preferred Equity holder is entitled to receive distributions prior to all of the equity holders to be applied to the full repayment of Preferred Equity holder’s equity contribution, accrued yield and exit fees payable to the Preferred Equity holder;

                (iv)          the Preferred Equity holder has the right to inspect the books and records and otherwise participate in the day-to-day affairs of the issuer of the Preferred Equity (the “Preferred Equity Issuer”), and the Preferred Equity Issuer has a continuing obligation to keep the books and records in proper order;

                (v)           financial statements and budgets of the Preferred Equity Issuer are required to be delivered to and approved by the Preferred Equity holder;

                (vi)          the Preferred Equity Issuer is obligated to maintain insurance on the Underlying Mortgaged Property, which insurance is subject to review and approval of the Preferred Equity holder;

                (vii)         the Preferred Equity Issuer has and is obligated to maintain officers and directors liability insurance in commercially reasonable amounts during the time the Preferred Equity is outstanding and the holder of the Preferred Equity is an additional insured under such policies;

                (vi)          the Preferred Equity holder has a right to receive all notices related to the Preferred Equity Issuer, all material action or changes and the occurrence of any event of default or potential event of default under the Underlying Mortgage Loan documents, any Contractual Obligation, any first mortgage loan on the Underlying Mortgaged Property and any other Indebtedness of the Preferred Equity Issuer;

                (vii)         the Preferred Equity holder has a right to receive copies of all filings with and notices to or from Governmental Authorities and such other documents related to the Preferred Equity Issuer and its business and affairs as the Preferred Equity holder may reasonably request;

                (viii)        subject to the rights of any lender under a first mortgage loan on the Underlying Mortgaged Property, the Preferred Equity holder has the right to approve of, the right to remove

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and the right to replace property managers, and the fees paid to property managers are subordinate in right of payment to amounts payable to the Preferred Equity holder;

                (ix)           the Preferred Equity Issuer is obligated to pay all taxes and other impositions in a timely manner, and, in the absence of timely payment of such amounts by the Preferred Equity Issuer, the Preferred Equity holder, may, but is not required to, pay such amounts;

                (x)            the Preferred Equity holder has the right to participate in audits of the Preferred Equity Issuer;

                (xi)           other equity investors may not transfer their equity interest in the Preferred Equity Issuer without the prior written consent of the Preferred Equity holder,

                (xii)          the obligation to repay the amounts owed to the Preferred Equity holder has a stated maturity date and the Preferred Equity holder has the right to extend such maturity date, but if the maturity date is not extended, the Preferred Equity Issuer or other equity investors are required to redeem the Preferred Equity; in full plus the payment of accrued yield and exit fees;

                (xiii)         the Underlying Mortgage Loan documents contain usual and customary events of default (including, without limitation, (1) the failure to timely pay the monthly preferred yield amounts, any exit fees and all other amounts owed to the Preferred Equity holder, (2) the amendment of the Preferred Equity Issuer’s Governing Documents without the Preferred Equity holder’s written consent, (3) the failure to dismiss a petition for bankruptcy and (4) monetary and non-monetary defaults under any first mortgage loan on the Underlying Mortgaged Property) upon occurrence of which the holder of the Preferred Equity may accelerate any indebtedness owed to it and exercise certain rights and remedies, including, without limitation, (i) the Preferred Equity holder shall automatically own a greater interest in the Preferred Equity Issuer, (ii) all tenants shall be required to deposit monthly rent payments into a lockbox account established for the benefit of the Preferred Equity holder, (iii) the right to terminate and replace the Property Manager, (iv) application of all excess cash flow (after payment of debt service on the first mortgage loan on the Underlying Mortgaged Property, payment of approved operating expenses and expenditures and payment of the monthly yield amount to the Preferred Equity holder) to the amortization of the Preferred Equity, (v) the sale of the Preferred Equity Issuer’s assets or refinancing of Indebtedness, (vi) sale of property at public auction where the Preferred Equity holder may bid, (vii) dissolution of the Preferred Equity Issuer, (viii) termination of agreements between the Preferred Equity Issuer and third parties, (ix) obtaining specific performance, (x) withholding amounts otherwise distributable to the other equity holders, (xi) recovery of costs and expenses (including legal fees and costs) incurred in enforcing rights and remedies, (xii) exercise rights of a manager or controlling Person and/or (xiii) exercise any other right or remedy provided for in the Underlying Mortgage Loan documents;

                (xvi)        the Preferred Equity holder shall have the right to remove and replace any Person managing or controlling the Preferred Equity Issuer;

                (xvii)       the Underlying Mortgage Loan documents prohibit any merger, consolidation, organic changes or other changes of control with respect to the Preferred Equity Issuer without the prior written consent of the Preferred Equity holder;

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                (xviii)      the Underlying Mortgage Loan documents prohibit the filing of any bankruptcy, liquidation, dissolution, receivership or winding up of the Preferred Equity Issuer without the prior written consent of the Preferred Equity holder;

                (xix)         the Underlying Mortgage Loan documents prohibit any material changes to the Preferred Equity Issuer or its properties, assets, liabilities, obligations, Indebtedness, rights, duties or Contractual Obligations without the prior written consent of the Preferred Equity holder;

                (xx)          the Preferred Equity Issuer may not sell, transfer, acquire, finance, lease or encumber any asset or property, incur any Indebtedness or contingent obligation, enter into any Contractual Obligation or make any loans or advances to any existing or future equity investor in the Preferred Equity Issuer without the prior written consent of the Preferred Equity holder,

                (xxi)         the Underlying Mortgage Loan documents prohibit any amendment to the Governing Documents of the Preferred Equity Issuer and all other Underlying Mortgage Loan documents without the prior written consent of the Preferred Equity holder;

                (xxii)        the Underlying Mortgage Loan documents prohibit additional equity investors without consent of the Preferred Equity holder;

                (xxiii)       the Preferred Equity Issuer may not engage in material improvements to or renovations of the Underlying Mortgaged Property without the prior written consent of the Preferred Equity holder;

                (xxiv)       with respect to any first mortgage loan on the Underlying Mortgaged Property, the Preferred Equity Issuer may not, without the prior written consent of the Preferred Equity holder, permit (i) a prepayment on such loan, (ii) any refinancing of such loan and/or (iii) any amendments to the loan documents for such loan;

                (xxv)        the Preferred Equity Issuer may not distribute non-cash property to any equity investor in the Preferred Equity Issuer without the prior written consent of the Preferred Equity holder;

                (xxvi)       the Preferred Equity Issuer has covenanted in its Governing Documents and/or the Underlying Mortgage Loan documents to own no significant asset other than the Underlying Mortgaged Property, as applicable, and related assets incidental to its ownership and operation of such Underlying Mortgaged Property, to hold itself out as being a legal entity, separate and apart from any other Person and to otherwise be a special purpose entity, and such provisions may not be changed without the prior written consent of the Preferred Equity holder;

                (xxvii)      the Governing Documents of the Preferred Equity Issuer do not include any provision that by its terms expressly provides that it is a Security governed by Article 8 of the UCC, and such a provision may not be changed or added without the prior written consent of the Preferred Equity holder;

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                (xxviii)     the Preferred Equity holder is not obligated to make any additional capital or other contributions beyond the contribution represented by the Preferred Equity or, if such obligations exist, the Seller has retained such obligations as a part of the Retained Interest; and

                (xxix)       the Underlying Mortgage Loan documents prohibit payment of any loan made to the Preferred Equity Issuer by any other equity holder, guarantor or Affiliate of the foregoing prior to the payment in full of the Preferred Equity.

                                32.           No consent, approval, authorization or order of, or registration or filing with, or notice to, any court or governmental agency or body having jurisdiction or regulatory authority is required for any transfer or assignment by the holder of such Preferred Equity.

                                33.           Seller has not received written notice of any outstanding liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind for which the holder of such Preferred Equity is or may become obligated.

                                34.           Seller has not advanced funds, or knowingly received any advance of funds from a party other than the issuer related to such Preferred Equity, directly or indirectly, for the payment of any amount required by such Preferred Equity.

                                35.           All real estate taxes and governmental assessments, or installments thereof, which would be a lien on any related Underlying Mortgaged Property and that prior to the Purchase Date for the related Purchased Asset have become delinquent in respect of such Underlying Mortgaged Property have been paid, or an escrow of funds in an amount sufficient to cover such payments has been established. For purposes of this representation and warranty, real estate taxes and governmental assessments and installments thereof shall not be considered delinquent until the earlier of (a) the date on which interest and/or penalties would first be payable thereon and (b) the date on which enforcement action is entitled to be taken by the related taxing authority.

                                36.           As of the Purchase Date for the related Purchased Asset, each related Underlying Mortgaged Property was free and clear of any material damage (other than deferred maintenance for which escrows were established at origination) that would affect materially and adversely the value of such Underlying Mortgaged Property as security for the related Underlying Mortgage Loan and there was no proceeding pending or, based solely upon the delivery of written notice thereof from the appropriate condemning authority, threatened for the total or partial condemnation of such Underlying Mortgaged Property.

                                37.           As of the date of its origination, all insurance coverage required under each related Mortgage, which insurance covered such risks as were customarily acceptable to prudent commercial and multifamily mortgage lending institutions lending on the security of property comparable to the related Underlying Mortgaged Property in the jurisdiction in which such Underlying Mortgaged Property is located, and with respect to a fire and extended perils insurance policy, is in an amount (subject to a customary deductible) at least equal to the lesser of (i) the replacement cost of improvements located on such Underlying Mortgaged Property, or (ii) the outstanding principal balance of the Underlying Mortgage Loan, and in any event, the

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amount necessary to prevent operation of any co-insurance provisions; and, except if such Underlying Mortgaged Property is operated as a mobile home park, is also covered by business interruption or rental loss insurance, in an amount at least equal to 12 months of operations of the related Underlying Mortgaged Property, all of which was in full force and effect with respect to each related Underlying Mortgaged Property; and, as of the Purchase Date for the related Purchased Asset, all insurance coverage required under each Mortgage, which insurance covers such risks and is in such amounts as are customarily acceptable to prudent commercial and multifamily mortgage lending institutions lending on the security of property comparable to the related Underlying Mortgaged Property in the jurisdiction in which such Underlying Mortgaged Property is located, is in full force and effect with respect to each related Underlying Mortgaged Property; all premiums due and payable through the Purchase Date for the related Purchased Asset have been paid; and no notice of termination or cancellation with respect to any such insurance policy has been received by Seller, and except for certain amounts not greater than amounts which would be considered prudent by an institutional commercial and/or multifamily mortgage lender with respect to a similar mortgage loan and which are set forth in the related Mortgage, any insurance proceeds in respect of a casualty loss, will be applied either (i) to the repair or restoration of all or part of the related Underlying Mortgaged Property or (ii) the reduction of the outstanding principal balance of the Underlying Mortgage Loan, subject in either case to requirements with respect to leases at the related Underlying Mortgaged Property and to other exceptions customarily provided for by prudent institutional lenders for similar loans. The Underlying Mortgaged Property is also covered by comprehensive general liability insurance against claims for personal and bodily injury, death or property damage occurring on, in or about the related Underlying Mortgaged Property, in an amount customarily required by prudent institutional lenders. An architectural or engineering consultant has performed an analysis of the Underlying Mortgaged Properties located in seismic zone 3 or 4 in order to evaluate the structural and seismic condition of such property, for the sole purpose of assessing the probable maximum loss (“PML”) for the Underlying Mortgaged Property in the event of an earthquake. In such instance, the PML was based on a 475 year lookback with a 10% probability of exceedance in a 50 year period. If the resulting report concluded that the PML would exceed 20% of the amount of the replacement costs of the improvements, earthquake insurance on such Underlying Mortgaged Property was obtained by an insurer rated at least A-:V by A.M. Best Company or “BBB-” (or the equivalent) from S&P and Fitch or “Baa3” (or the equivalent) from Moody’s. If the Underlying Mortgaged Property is located in Florida or within 25 miles of the coast of Texas, Louisiana, Mississippi, Alabama, Georgia, North Carolina or South Carolina such Underlying Mortgaged Property is insured by windstorm insurance in an amount at least equal to the lesser of (i) the outstanding principal balance of such Underlying Mortgage Loan and (ii) 100% of the full insurable value, or 100% of the replacement cost, of the improvements located on the related Underlying Mortgaged Property.

                                38.           The insurance policies contain a standard Mortgagee clause naming the Mortgagee, its successors and assigns as loss payee, in the case of a property insurance policy, and additional insured in the case of a liability insurance policy and provide that they are not terminable without 30 days prior written notice to the Mortgagee (or, with respect to non-payment, 10 days prior written notice to the Mortgagee) or such lesser period as prescribed by applicable law. Each Mortgage requires that the Mortgagor maintain insurance as described above or permits the Mortgagee to require insurance as described above, and permits the Mortgagee to purchase such insurance at the Mortgagor’s expense if Mortgagor fails to do so.

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                                39.           There is no material and adverse environmental condition or circumstance affecting the Underlying Mortgaged Property; there is no material violation of any applicable Environmental Law with respect to the Underlying Mortgaged Property; neither Seller nor the Underlying Property Owner has taken any actions which would cause the Underlying Mortgaged Property not to be in compliance with all applicable Environmental Laws; the Underlying Mortgage Loan documents require the borrower to comply with all Environmental Laws; and each Mortgagor has agreed to indemnify the Mortgagee for any losses resulting from any material, adverse environmental condition or failure of the Mortgagor to abide by such Environmental Laws or has provided environmental insurance.

                                40.           Each related Underlying Mortgaged Property was inspected by or on behalf of the related originator or an affiliate during the 12 month period prior to the related origination date.

                                41.           There are no material violations of any applicable zoning ordinances, building codes or land laws applicable to the Underlying Mortgaged Property or the use and occupancy thereof which (i) are not insured by an ALTA lender’s title insurance policy (or a binding commitment therefor), or its equivalent as adopted in the applicable jurisdiction, or a law and ordinance insurance policy or (ii) would have a material adverse effect on the value, operation or net operating income of the Underlying Mortgaged Property. The Underlying Mortgage Loan documents require the Underlying Mortgaged Property to comply with all applicable laws and ordinances.

                                42.           None of the material improvements which were included for the purposes of determining the appraised value of any related Underlying Mortgaged Property at the time of the origination of the respective Underlying Mortgage Loan lies outside of the boundaries and building restriction lines of such property (except Underlying Mortgaged Properties which are legal non-conforming uses), to an extent which would have a material adverse affect on the value of the Underlying Mortgaged Property or related Mortgagor’s use and operation of such Underlying Mortgaged Property (unless affirmatively covered by title insurance) and no improvements on adjoining properties encroached upon such Underlying Mortgaged Property to any material and adverse extent (unless affirmatively covered by title insurance).

                                43.           As of the Purchase Date for the related Purchased Asset, there was no pending action, suit or proceeding, or governmental investigation of which the Seller or the Underlying Property Owner has received notice, against the Mortgagor or the related Underlying Mortgaged Property the adverse outcome of which could reasonably be expected to materially and adversely affect the Preferred Equity or the Underlying Mortgage Loan.

                                44.           The improvements located on the Underlying Mortgaged Property are either not located in a federally designated special flood hazard area or, if so located, the Mortgagor is required to maintain or the Mortgagee maintains, flood insurance with respect to such improvements and such policy is in full force and effect in an amount no less than the lesser of (i) the original principal balance of the Underlying Mortgage Loan, (ii) the value of such improvements on the related Underlying Mortgaged Property located in such flood hazard area or (iii) the maximum allowed under the related federal flood insurance program.

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                                45.           Except for Mortgagors under Underlying Mortgage Loans the Underlying Mortgaged Property with respect to which includes a Ground Lease, the related Mortgagor (or its affiliate) has title in the fee simple interest in each related Underlying Mortgaged Property.

                                46.           The related Underlying Mortgaged Property is not encumbered, and none of the Underlying Mortgage Loan documents permits the related Underlying Mortgaged Property to be encumbered subsequent to the Purchase Date of the related Purchased Asset without the prior written consent of the holder thereof, by any lien securing the payment of money junior to or of equal priority with, or superior to, the lien of the related Mortgage (other than Title Exceptions, taxes, assessments and contested mechanics and materialmens liens that become payable after such Purchase Date).

                                47.           Each related Underlying Mortgaged Property constitutes one or more complete separate tax lots (or the related Mortgagor has covenanted to obtain separate tax lots and a Person has indemnified the Mortgagee for any loss suffered in connection therewith or an escrow of funds in an amount sufficient to pay taxes resulting from a breach thereof has been established) or is subject to an endorsement under the related title insurance policy.

                                48.           An appraisal of the related Underlying Mortgaged Property was conducted in connection with the origination of such Underlying Mortgage Loan; and such appraisal satisfied either (A) the requirements of the “Uniform Standards of Professional Appraisal Practice” as adopted by the Appraisal Standards Board of the Appraisal Foundation, or (B) the guidelines in Title XI of the Financial Institutions Reform, Recovery and Enforcement Act or 1989, in either case as in effect on the date such Underlying Mortgage Loan was originated.

                                49.           The related Underlying Mortgaged Property is served by public utilities, water and sewer (or septic facilities) and otherwise appropriate for the use in which the Underlying Mortgaged Property is currently being utilized.

                                (w)  With respect to each related Underlying Mortgaged Property consisting of a Ground Lease, Seller represents and warrants the following with respect to the related Ground Lease:

                (i)            Such Ground Lease or a memorandum thereof has been or will be duly recorded no later than 30 days after the Purchase Date of the related Purchased Asset and such Ground Lease permits the interest of the lessee thereunder to be encumbered by the related Mortgage or, if consent of the lessor thereunder is required, it has been obtained prior to the Purchase Date.

                (ii)           Upon the foreclosure of the Underlying Mortgage Loan (or acceptance of a deed in lieu thereof), the Mortgagor’s interest in such Ground Lease is assignable to the Mortgagee under the leasehold estate and its assigns without the consent of the lessor thereunder (or, if any such consent is required, it has been obtained prior to the Purchase Date).

                (iii)          Such Ground Lease may not be amended, modified, canceled or terminated without the prior written consent of the Mortgagee and any such action without such consent is not binding on the Mortgagee, its successors or assigns, except termination or cancellation if (i) an event of default occurs under the Ground Lease, (ii) notice thereof is provided to the

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Mortgagee and (iii) such default is curable by the Mortgagee as provided in the Ground Lease but remains uncured beyond the applicable cure period.

                (iv)          Such Ground Lease is in full force and effect, there is no material default under such Ground Lease, and there is no event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a material default under such Ground Lease.

                (v)           The Ground Lease or ancillary agreement between the lessor and the lessee requires the lessor to give notice of any default by the lessee to the Mortgagee. The Ground Lease or ancillary agreement further provides that no notice given is effective against the Mortgagee unless a copy has been given to the Mortgagee in a manner described in the Ground Lease or ancillary agreement.

                (vi)          The Ground Lease (i) is not subject to any liens or encumbrances superior to, or of equal priority with, the Mortgage, subject, however, to only the Title Exceptions or (ii) is subject to a subordination, non-disturbance and attornment agreement to which the Mortgagee on the lessor’s fee interest in the Underlying Mortgaged Property is subject.

                (vii)         A Mortgagee is permitted a reasonable opportunity (including, where necessary, sufficient time to gain possession of the interest of the lessee under the Ground Lease) to cure any curable default under such Ground Lease before the lessor thereunder may terminate such Ground Lease.

                (viii)        Such Ground Lease has an original term (together with any extension options, whether or not currently exercised, set forth therein all of which can be exercised by the Mortgagee if the Mortgagee acquires the lessee’s rights under the Ground Lease) that extends not less than 20 years beyond the stated maturity date.

                (ix)           Under the terms of such Ground Lease, any estoppel or consent letter received by the Mortgagee from the lessor, and the related Mortgage, taken together, any related insurance proceeds or condemnation award (other than in respect of a total or substantially total loss or taking) will be applied either to the repair or restoration of all or part of the related Underlying Mortgaged Property, with the Mortgagee or a trustee appointed by it having the right to hold and disburse such proceeds as repair or restoration progresses, or to the payment or defeasance of the outstanding principal balance of the Underlying Mortgage Loan, together with any accrued interest (except in cases where a different allocation would not be viewed as commercially unreasonable by any commercial mortgage lender, taking into account the relative duration of the Ground Lease and the related Mortgage and the ratio of the market value of the related Underlying Mortgaged Property to the outstanding principal balance of such Underlying Mortgage Loan).

                (x)            The Ground Lease does not impose any restrictions on subletting that would be viewed as commercially unreasonable by a prudent commercial lender.

                (xi)           The ground lessor under such Ground Lease is required to enter into a new lease upon termination of the Ground Lease for any reason, including the rejection of the Ground Lease in bankruptcy.

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REPRESENTATIONS AND WARRANTIES
RE:  PURCHASED SECURITIES

1.             The Purchased Security consists of pass-through certificates representing beneficial ownership interests in one or more REMICs consisting of one or more first lien mortgage loans secured by commercial and/or multifamily properties.

2.             Immediately prior to the sale, transfer and assignment to Buyer thereof, Seller had good and marketable title to, and was the sole owner and holder of, such Purchased Security, and Seller is transferring such Purchased Security free and clear of any and all liens, pledges, encumbrances, charges, security interests or any other ownership interests of any nature encumbering such Purchased Security.

3.             Seller has full right, power and authority to sell and assign such Purchased Security and such Purchased Security has not been cancelled, satisfied or rescinded in whole or part nor has any instrument been executed that would effect a cancellation, satisfaction or rescission thereof.

4.             Other than consents and approvals obtained as of the related Purchase Date or those already granted in the related documents governing such Purchased Security, no consent or approval by any Person is required in connection with Buyer’s acquisition of such Purchased Security, for Buyer’s exercise of any rights or remedies in respect of such Purchased Security or for Buyer’s sale or other disposition of such Purchased Security. No third party holds any “right of first refusal”, “right of first negotiation”, “right of first offer”, purchase option, or other similar rights of any kind, and no other impediment exists to any such transfer or exercise of rights or remedies.

5.             Upon consummation of the purchase contemplated to occur in respect of such Purchased Security on the Purchase Date therefor, Seller will have validly and effectively conveyed to Buyer all legal and beneficial interest in and to such Purchased Security free and clear of any and all liens, pledges, encumbrances, charges, security interests or any other ownership interests of any nature.

6.             The Purchased Security is a certificated security in registered form, or is in uncertificated form and held through the facilities of (a) The Depository Trust Corporation in New York, New York, or (b) such other clearing organization or book-entry system as is designated in writing by the Buyer.

7.             With respect to any Purchased Security that is a certificated security, Seller has delivered to Buyer or its designee such certificated security, along with any and all certificates, assignments, bond powers executed in blank, necessary to transfer such certificated security under the issuing documents of such Purchased Security.

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8.             All information contained in the related Preliminary Due Diligence Package (or as otherwise provided to Buyer) in respect of such Purchased Security is accurate and complete in all material respects.

9.             As of the date of its issuance, such Purchased Security complied in all material respects with, or was exempt from, all requirements of federal, state or local law relating to the issuance thereof including, without limitation, any registration requirements of the Securities Act of 1933, as amended.

10.           Except as included in the Preliminary Due Diligence Package, there is no document that by its terms modifies or affects the rights and obligations of the holder of such Purchased Security, the terms of the related pooling and servicing agreement or any other agreement relating to the Purchased Security, and, since issuance, there has been no material change or waiver to any term or provision of any such document, instrument or agreement.

11.           There is no (i) monetary default, breach or violation exists with respect to any pooling and servicing agreement or other document governing or pertaining to such Purchased Security, (ii) material non-monetary default, breach or violation exists with respect to any such agreement or other document or other document governing or pertaining to such Purchased Security, or (iii) event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration under such documents and agreements.

12.           No consent, approval, authorization or order of, or registration or filing with, or notice to, any court or governmental agency or body having jurisdiction or regulatory authority over Seller is required for any transfer or assignment of such Purchased Security.

13.           Except as including in the Preliminary Due Diligence Package, (i) no interest shortfalls have occurred and no realized losses have been applied to any Purchased Security or otherwise incurred with respect to any mortgage loan related to such Purchased Security nor any class of Purchased Security issued under the same governing documents as any Purchased Security, and (ii) the Seller is not aware of any circumstances that could have a Material Adverse Effect on the Purchased Security.

14.           There are no circumstances or conditions with respect to the Purchased Security, the Mortgaged Property or the related Mortgagor’s credit standing that can reasonably be expected to cause private institutional investors to regard the Purchased Security as an unacceptable investment or adversely affect the value or marketability of the Purchased Security.

15.           Seller has not received written notice of any outstanding liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind for which the holder of such Purchased Security is or may become obligated.

16.           There is no material inaccuracy in any servicer report or trustee report delivered to it (and, in turn, delivered pursuant to the terms of this Agreement) in connection with such Purchased Security.

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17.           No servicer of the Purchased Security has made any advances, directly or indirectly, with respect to the Purchased Security or to any mortgage loan relating to such Purchased Security.

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EXHIBIT VII

ASSET INFORMATION

Loan ID #:

Borrower Name:

Borrower Address:

Borrower City:

Borrower State:

Borrower Zip Code:

Recourse?

Guaranteed?

Related Borrower Name(s):

Original Principal Balance:

Note Date:

Loan Date:

Loan Type (e.g. fixed/arm):

Current Principal Balance:

Current Interest Rate (per annum):

Paid to date:

Annual P&I:

Next Payment due date:

Index (complete whether fixed or arm):

Gross Spread/Margin (complete whether fixed or arm):

Life Cap:

Life Floor:

Periodic Cap:

Periodic Floor:

Rounding Factor:

Lookback (in days):

Interest Calculation Method (e.g., Actual/360):

Interest rate adjustment frequency:

P&I payment frequency:

First P&I payment due:

First interest rate adjustment date:

First payment adjustment date:

Next interest rate adjustment date:

Next payment adjustment date:

Conversion Date:

Converted Interest Rate Index:

Converted Interest Rate Spread:

Maturity date:

Loan term:

Amortization term:

Hyper-Amortization Flag:

Hyper-Amortization Term:

Hyper-Amortization Rate Increase:

ASSET INFORMATION

Balloon Amount:

Balloon LTV:

Prepayment Penalty Flag:

Prepayment Penalty Text:

Lockout Period:

Lien Position:

Fee/Leasehold:

Ground Lease Expiration Date:

CTL (Yes/No):

CTL Rating (Moody’s):

CTL Rating (Duff):

CTL Rating (S&P):

CTL Rating (Fitch):

Lease Guarantor:

CTL Lease Type (NNN, NN, Bondable):

Property Name:

Property Address:

Property City:

Property Zip Code:

Property Type (General):

Property Type (Specific):

Cross-collateralized (Yes/No)(1) *:

Property Size:

Year built:

Year renovated:

Actual Average Occupancy:

Occupancy Rent Roll Date:

Underwritten Average Occupancy:

Largest Tenant:

Largest Tenant SF:

Largest Tenant Lease Expiration:

2nd Largest Tenant:

2nd Largest Tenant SF:

2nd Largest Tenant Lease Expiration:

3rd Largest Tenant:

3rd Largest Tenant SF:

3rd Largest Tenant Lease Expiration:

Underwritten Average Rental Rate/ADR:

Underwritten Vacancy/Credit Loss:

Underwritten Other Income:

Underwritten Total Revenues:

Underwritten Replacement Reserves:

(1)           If yes, give property information on each property covered and in aggregate as appropriate.  Loan ID’s should be denoted with a suffix letter to signify loans/collateral.

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ASSET INFORMATION

Underwritten Management Fees:

Underwritten Franchise Fees:

Underwritten Total Expenses:

Underwritten Leasing Commissions:

Underwritten Tenant Improvement Costs:

Underwritten NOI:

Underwritten NCF:

Underwritten Debt Service Constant:

Underwritten DSCR at NOI:

Underwritten DSCR at NCF:

Underwritten NOI Period End Date:

Hotel Franchise:

Hotel Franchise Expiration Date:

Appraiser Name:

Appraised Value:

Appraisal Date:

Appraisal Cap Rate:

Appraisal Discount Rate:

Underwritten LTV:

Environmental Report Preparer:

Environmental Report Date:

Environmental Report Issues:

Architectural and Engineering Report Preparer:

Architectural and Engineering Report Date:

Deferred Maintenance Amount:

Ongoing Replacement Reserve Requirement per A&E Report:

Immediate Repairs Escrow % (e.g. 125%):

Replacement Reserve Annual Deposit:

Replacement Reserve Balance:

Tenant Improvement/Leasing Commission Annual Deposits:

Tenant Improvement/Leasing Commission Balance:

Taxes paid through date:

Monthly Tax Escrow:

Tax Escrow Balance:

Insurance paid through date:

Monthly Insurance Escrow:

Insurance Escrow Balance:

Reserve/Escrow Balance as of Date:

Probable Maximum Loss %:

Covered by Earthquake Insurance (Yes/No):

Number of times 30 days late in last 12 months:

Number of times 60 days late in last 12 months:

Number of times 90 days late in last 12 months:

Servicing Fee:

Notes:

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EXHIBIT VIII

PURCHASE PROCEDURE

Preliminary Approval of New Asset Which is an Eligible Loan.

(a)           Seller may, from time to time, submit to the applicable Buyer a Preliminary Due Diligence Package for such Buyer’s review and approval in order to enter into a Transaction with respect to any New Asset that Seller proposes to be included as an Asset under the Agreement.

(b)           Upon the applicable Buyer’s receipt of a complete Preliminary Due Diligence Package, such Buyer, within five (5) Business Days, shall have the right to request, in such Buyer’s good faith business judgment, additional diligence materials and deliveries that such Buyer shall specify on a Supplemental Due Diligence List.  Upon such Buyer’s receipt of all of the Diligence Materials or such Buyer’s waiver thereof, Buyer within ten (10) Business Days and following receipt of internal credit approval, shall either (i) notify Seller of the Purchase Price and the Market Value for the New Asset or (ii) deny, in such Buyer’s sole and absolute discretion, Seller’s request for a Transaction.  A Buyer’s failure to respond to Seller within ten (10) Business Days, as applicable, shall be deemed to be a denial of Seller’s request for a purchase, unless such Buyer and Seller have agreed otherwise in writing.

Final Approval of New Asset which is an Eligible Loan.  Upon a Buyer’s notification to Seller of the Purchase Price and the Market Value for any New Asset which is an Eligible Loan, Seller shall, if Seller desires to enter into a Transaction with respect to such New Asset, satisfy the conditions set forth below (in addition to satisfying the conditions precedent to obtaining each purchase, as set forth in Section 3(b) of this Agreement) as a condition precedent to such Buyer’s approval of such New Asset as an Asset, all in a manner reasonably satisfactory to such Buyer and pursuant to documentation reasonably satisfactory to such Buyer:

(c)           Delivery of Purchased Loan Documents.  Seller shall deliver to the applicable Buyer: (i) with respect to a New Asset that is Pre-Existing Asset, each of the Purchased Loan Documents, except Purchased Loan Documents that Seller expressly and specifically disclosed in Seller’s Preliminary Due Diligence Package were not in Seller’s possession; and (ii) with respect to New Asset that is Originated Asset, each of the Purchased Loan Documents.

(d)           Environmental and Engineering.  The applicable Buyer shall have received a “Phase 1” (and, if necessary, “Phase 2”) environmental report, an asbestos survey, if applicable, and an engineering report, each in form reasonably satisfactory to such Buyer, by an engineer or environmental consultant reasonably approved by such Buyer.

(e)           Appraisal.  The applicable Buyer shall have received either an appraisal approved by such Buyer (or a Draft Appraisal), each by an MAI appraiser.  If the applicable Buyer receives only a Draft Appraisal prior to entering into a Transaction,

Seller shall deliver an appraisal approved by such Buyer by an MAI appraiser on or before thirty (30) days after the Purchase Date.

(f)            Insurance.  The applicable Buyer shall have received certificates or other evidence of insurance demonstrating insurance coverage in respect of the Mortgaged Property of types, in amounts, with insurers and otherwise in compliance with the terms, provisions and conditions set forth in the Purchased Loan Documents.  Such certificates or other evidence shall indicate that Seller will be named as an additional insured as its interest may appear and shall contain a loss payee endorsement in favor of such additional insured with respect to the policies required to be maintained under the Purchased Loan Documents.

(g)           Survey.  The applicable Buyer shall have received all surveys of the Mortgaged Property that are in Seller’s possession.

(h)           Lien Search Reports.  The applicable Buyer or such Buyer’s counsel shall have received, as reasonably requested by Buyers, satisfactory reports of UCC, tax lien, judgment and litigation searches and title updates conducted by search firms and/or title companies acceptable to such Buyer with respect to the Eligible Loan, Mortgaged Property, Seller and Mortgagor, such searches to be conducted in each location such Buyer shall reasonably designate.

(i)            Opinions of Counsel.  The applicable Buyer shall have received copies of all legal opinions in the Seller’s possession with respect to the Eligible Loan which shall be in form and substance reasonably satisfactory to such Buyer.

(j)            Additional Real Estate Matters.  Seller shall have delivered to the applicable Buyer to the extent in Seller’s possession such other real estate related certificates and documentation as may have been requested by such Buyer, such as:  (i) certificates of occupancy issued by the appropriate Governmental Authority and either letters certifying that the Mortgaged Property is in compliance with all applicable zoning laws issued by the appropriate Governmental Authority or evidence that the related Title Policy includes a zoning endorsement and (ii) abstracts of all leases in effect at the Mortgaged Property and estoppel certificates, in form and substance acceptable to Buyer, from any ground lessor and from any tenant that occupies 7.5% or more of the rentable space at the Mortgaged Property, and in any event from tenants whose occupancies aggregate not less than 70% of the occupied rentable square footage at the Mortgaged Property.

(k)           Other Documents.  The applicable Buyer shall have received such other documents as such Buyer or its counsel shall reasonably deem necessary.

Within five (5) Business Days of Seller’s satisfaction of all of the conditions enumerated in clauses (a) through (i) above, the applicable Buyer shall either (i) if the Purchased Loan Documents with respect to a New Asset are not reasonably satisfactory in form and substance to the applicable Buyer, notify Seller that such Buyer has not approved a New Asset as an Asset or (ii) notify Seller that such Buyer has approved the New Asset as an Asset.  The applicable

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Buyer’s failure to respond to Seller within two (2) Business Days shall be deemed to be a denial of Seller’s request that such Buyer approve the a New Asset, unless such Buyer and Seller have agreed otherwise in writing.

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EX-10.3

Exhibit 10.3

CAPITAL TRUST, INC.

2007 LONG-TERM

INCENTIVE PLAN

Award Agreement granting

Restricted Shares and Performance Units

Award No.           

You (the “Participant”) are hereby awarded Restricted Shares and Performance Units subject to the terms and conditions set forth in this agreement (the “Award”) and in the Capital Trust, Inc. 2007 Long-Term Incentive Plan (“Plan”), which is attached hereto as Exhibit A. A summary of the Plan appears in its Prospectus, which is attached as Exhibit B. You should carefully review these documents, and consult with your personal financial advisor, in order to assure that you fully understand the terms, conditions, and financial implications of this Award.

By executing this Award, you agree to be bound by all of the Plan’s terms and conditions as if they had been set out verbatim in this Award. In addition, you recognize and agree that all determinations, interpretations, or other actions respecting the Plan and this Award will be made by the Board of Directors of the Company or the Committee that administers the Plan pursuant to Section 4 of the Plan, and that such determinations, interpretations or other actions are (unless arbitrary and capricious) final, conclusive and binding upon all parties, including you and your successors in interest. Capitalized terms are defined in the Plan or in this Award.

1.General Terms of Your Award.

Name of Participant

Date of Award

2.Restricted Shares. The Restricted Shares portion of your Award are being granted pursuant to Section 8 of the Plan, and shall have the terms set forth in the table below:

Number of Shares Subject to Restricted Shares Award
Purchase Price per Share	Not applicable.
Vesting

3.Performance Units. The Performance Units portion of your Award is being granted pursuant to Section 10 of the Plan as a “Performance Compensation Award”, and shall have the terms set forth in the table below; subject, absolutely, to the terms of the Plan and to the

Committee’s discretion to interpret the Plan and this Award in any manner that the Committee may deem reasonably necessary or appropriate in order for this Award to satisfy the requirements for “performance-based compensation” within the meaning of Section 162(m)(4) of the Code, and associated tax regulations and rulings. The Performance Units portion of your Award provides that you may vest in a right to receive a number of Shares provided that the Performance Goals have been satisfied:

Number of Shares Subject to Performance Units Award

Performance Period

Performance Goal

Vesting

4.Issuance of Shares. All Shares subject to this Award will be issued as of the Date of Award, but the stock certificates evidencing the Shares will bear the following legend that shall remain in place and effective until all vesting restrictions lapse and new certificates are issued pursuant to Section 6 below:

“The sale or other transfer of the Shares represented by this certificate, whether voluntary, involuntary, or by operation of law, is subject to certain restrictions on transfer set forth in the 2007 Long-Term Incentive Plan of Capital Trust, Inc., in the rules and administrative procedures adopted pursuant to such Plan, and in a related Award Agreement. A copy of the Plan, such rules and procedures and such Award Agreement may be obtained from the Secretary of Capital Trust, Inc.”

5.Unvested Shares. You are reflected as the owner of record of the Shares subject to this Award on the Company’s books and records. The Company will hold the stock certificate for safekeeping until the Shares subject to this Award become vested and nonforfeitable. You must deliver to the Company, as soon as practicable after the Date of Award, a stock power, endorsed in blank, with respect to the Shares subject to this Award. If you forfeit any Shares subject to this Award, the stock power will be used to return the certificates for the forfeited Shares to the Company’s transfer agent for cancellation. As the owner of record of the Shares subject to this Award, you are entitled to all rights of a stockholder of the Company, including the right to vote the Shares and the right to payment of any cash dividends or other distributions (including those paid in stock) declared or paid following the Date of Award and to the extent paid in stock, such stock shall be subject to the same restrictions contained in Section 4, subject in each case to the treatment of the Award upon termination of employment before the particular record date for determining shareholders of record entitled to payment of the dividend or distribution.

6.Satisfaction or Failure of Vesting Restrictions. As vesting restrictions become satisfied over time and/or upon satisfaction of performance goals and you are entitled to receive the Shares so vested, the Company shall cause new stock certificates for such Shares to be delivered to you, with such legends the Company determines to be appropriate. New certificates shall not be

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delivered to you unless you have made arrangements satisfactory to the Committee to satisfy tax-withholding obligations.

7.Not a Contract of Employment. By executing this Award, you acknowledge and agree that (i) any person who is terminated before full vesting of an award, such as the one granted to you by this Award, could claim that he or she was terminated to preclude vesting; (ii) you promise never to make such a claim; (iii) nothing in this Award or the Plan confers on you any right to continue an employment, service or consulting relationship with the Company, nor shall it affect in any way your right or the Company’s right to terminate your employment, service, or consulting relationship at any time, with or without Cause; and (iv) the Company would not have granted this Award to you but for these acknowledgements and agreements.

8.Severability. Subject to one exception, every provision of this Award and the Plan is intended to be severable, and if any provision of the Plan or this Award is held by a court of competent jurisdiction to be invalid and unenforceable, the remaining provisions shall continue to be fully effective. The only exception is that this Award shall be unenforceable if any provision of the preceding section is illegal, invalid, or unenforceable.

9.Notices. Any notice, payment or communication required or permitted to be given by any provision of this Award shall be in writing and shall be delivered personally or sent by certified mail, return receipt requested, addressed as follows:

(a)if to the Company, at the address set forth on the signature page, to the attention of:  Committee administering the Capital Trust, Inc. 2007 Long-Term Incentive Plan; or

(b)if to you, at the address set forth below your signature on the signature page.

Each party may, from time to time, by notice to the other party hereto, specify a new address for delivery of notices relating to this Award. Any such notice shall be deemed to be given as of the date such notice is personally delivered or properly mailed.

10.Designation of Beneficiary. Notwithstanding anything to the contrary contained herein or in the Plan, following the execution of this Award, you may expressly designate a beneficiary (the “Beneficiary”) to your interest in the Restricted Shares and Performance Units awarded hereby. You shall designate the Beneficiary by completing and executing a designation of beneficiary form substantially in the form attached hereto as Exhibit C (the “Designation of Death Beneficiary”) and delivering an executed copy of the Designation of Death Beneficiary to the Company. You may, at any time, change or revoke such designation. A Beneficiary designation, or revocation of a prior Beneficiary designation, shall be effective only if it is made in writing on a form provided by the Company, signed by you and received by the Company. If you do not designate a Beneficiary or the Beneficiary dies prior to having received all Shares due under the Award, such Shares shall be paid to your estate.

11.Transfer. This Award may not be sold, pledged, or otherwise transferred without the prior written consent of the Committee.  Notwithstanding the foregoing, you may transfer this Award (i) by instrument to an inter vivos or testamentary trust (or other entity) in which each beneficiary is a permissible gift recipient, as such is set forth in subsection (ii) of this Section 11, or

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(ii) by gift to charitable institutions or by gift or transfer for consideration to any of your following relatives (or to an inter vivos trust, testamentary trust or other entity primarily for the benefit of, or an entity, the voting interests of which are primarily owned  by,  your following relatives): any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, domestic partner, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include adoptive relationships.  Any transferee of your rights shall succeed and be subject to all of the terms of this Award and the Plan.

12.Section 83(b) Election Notice. If you make an election under Section 83(b) of the Internal Revenue Code of 1986, as amended, with respect to the Shares underlying your Restricted Shares (a “Section 83(b) election”), you agree to provide a copy of such election to the Company within 10 days after filing that election with the Internal Revenue Service.
Exhibit D contains a suggested form of Section 83(b) election.

13.Deferral Election. You may irrevocably elect to defer the receipt of all or a percentage of the Shares that would otherwise be issued to you on the vesting of this Award. A copy of the form which you may use to make a deferral election may be obtained from the Company. Notwithstanding the foregoing, Shares which have been subject to a Section 83(b) election are not eligible for deferral.

14.Binding Effect. Every covenant, term and provision of this Award shall be binding upon and inure to the benefit of the parties hereto and their respective beneficiaries, legatees, legal representatives, successors, transferees, and assigns.

15.Modifications. This Award may be modified or amended at any time by the Committee, provided that your consent must be obtained for any modification that adversely alters or impairs any rights or obligations under this Award, unless there is an express Plan provision permitting the Committee to act unilaterally to make the modification.

16.Headings. Headings shall be ignored in interpreting this Award.

17.Governing Law. The laws of the State of New York shall govern the validity of this Award, the construction of its terms, and the interpretation of the rights and duties of the parties hereto. Any suit with respect to the Award will be brought in the federal or state courts in the districts which include New York City, New York, and you agree and submit to the personal jurisdiction and venue thereof.

18.Income Taxes and Deferral. You are solely responsible and liable for the satisfaction of all taxes and penalties that may arise in connection with this Award (including any taxes arising under Section 409A of the Code), and the Company shall not have any obligation to indemnify or otherwise hold you harmless from any or all of such taxes. To the extent your Award is not deferred and vested before January 1, 2005, the Company shall have the discretion to unilaterally modify your Award in a manner that (i) conforms with the requirements of Section 409A of the Code, (ii) that voids any Participant election to the extent it would violate Section 409A of the Code, and (iii) for any distribution election that would violate Section 409A of the Code, to make distributions pursuant to the Award at the earliest to occur of a distribution event that is allowable under Section 409A of the Code or any distribution event that is both allowable under Section 409A

4

of the Code and is elected by the Participant, subject to any second election to defer, provided that the Administrator permits second elections to defer in accordance with Section 409A(a)(4)(C) of the Code. The Administrator shall have the sole discretion to interpret the requirements of the Code, including Section 409A, for purposes of the Plan and your Award.

19.Counterparts. This Award may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute the same instrument.

20.Plan Governs. By signing this Award Agreement, you acknowledge that you have received a copy of the Plan and that your Award Agreement is subject to all the provisions contained in the Plan, the provisions of which are made a part of this Award Agreement and your Award is subject to all interpretations, amendments, rules and regulations which from time to time may be promulgated and adopted pursuant to the Plan. In the event of a conflict between the provisions of this Award Agreement and those of the Plan, the provisions of the Plan shall control.

21.Investment Purposes. By executing this Award Agreement, you represent and warrant that any Shares issued to you pursuant to your Award will be held for investment purposes only for your own account, and not with a view to, for resale in connection with, or with an intent in participating directly or indirectly in, any distribution of such Shares within the meaning of the Securities Act of 1933, as amended.

22.Employment Agreement Provision  [OPTION IF EMPLOYEE HAS AN EMPLOYMENT AGREEMENT]  By executing this Award, you acknowledge and agree that your rights upon a termination of employment before full vesting of this Award will be determined under Section            of your employment agreement with the Company and                                                 , dated as of                                        , 20    .

23.Securities Law Restrictions. Regardless of whether the offering and sale of Shares under the Plan have been registered under the Securities Act of 1933, as amended (the “Securities Act”), or have been registered or qualified under the securities laws of any state, the Company at its discretion may impose restrictions upon the sale, pledge or other transfer of such Shares (including the placement of appropriate legends on stock certificates or the imposition of stop-transfer instructions) if, in the judgment of the Company, such restrictions are necessary or desirable in order to achieve compliance with the Securities Act or the securities laws of any state or any other law or to enforce the intent of this Award.

24.Long-term Consideration for Award. [OPTIONAL] The terms and conditions set forth in Exhibit E are hereby incorporated by reference and made an integral part of this Award Agreement. An invalidation of all or part of Exhibit E, or your commencement of litigation to invalidate, modify, or alter the terms and conditions set forth in Exhibit E, shall cause this Award to become null, void, and unenforceable.

5

BY YOUR SIGNATURE BELOW, along with the signature of the Company’s representative, you and the Company agree as of the Date of Award that this Award is being made under and governed by the terms and conditions of this Award and the Plan.

CAPITAL TRUST, INC.
By:
	Name: Geoffrey G. Jervis
	Title: Chief Financial Officer
Company Address:
410 Park Avenue, 14th Floor, New York, NY 10022

The undersigned Participant hereby accepts the terms of this Award and the Plan.

By:

Name of Participant:

Participant Address:

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Exhibit A

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Exhibit B

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

PROSPECTUS

Exhibit C

Designation of Death Beneficiary Form

In connection with the Award Agreement granting Restricted Shares and Performance Units (the “Award”) entered into as of                    between Capital Trust, Inc. (the “Company”) and                  , an individual residing at                       (the “Participant”), the Participant hereby designates the person specified below as the beneficiary upon my death of the Participant’s interest in the Restricted Shares and Performance Units awarded pursuant to the Award. This designation shall remain in effect until revoked in writing by the Participant.

Name of Beneficiary:

Address:

Social Security No.:

The Participant understands that this designation operates to entitle the above-named beneficiary, in the event of my death, to the rights conferred by the Award from the date this form is delivered to the Company until such date as this designation is revoked in writing by the Participant, including by delivery to the Company of a written designation of beneficiary executed by the Participant on a later date.

	Participant
Date:
By:
	[Participant Signature]

Sworn to before me this

      day of                               , 200 

Notary Public

County of

State of

Exhibit D

Section 83(b) Election Form

Attached is an Internal Revenue Code Section 83(b) Election Form. IF YOU WISH TO MAKE A SECTION 83(B) ELECTION, YOU MUST DO SO WITHIN 30 DAYS AFTER THE DATE THE RESTRICTED SHARES COVERED BY THE ELECTION WERE TRANSFERRED TO YOU. In order to make the election, you must completely fill out the attached form and file one copy with the Internal Revenue Service office where you file your tax return. In addition, one copy of the statement also must be submitted with your income tax return for the taxable year in which you make this election. Finally, you also must submit a copy of the election form to the Company within 10 days after filing that election with the Internal Revenue Service. A Section 83(b) election normally cannot be revoked.

CAPITAL TRUST, INC.
2007 LONG-TERM

INCENTIVE PLAN

Election to Include Value of Restricted Shares in Gross Income
in Year of Transfer Under Internal Revenue Code Section 83(b)

Pursuant to Section 83(b) of the Internal Revenue Code, I hereby elect within 30 days after receiving the property described herein to be taxed immediately on its value specified in item 5 below.

1.My General Information:

Name:

Address:

S.S.N.

or T.I.N.:

2.Description of the property with respect to which I am making this election:

                                           shares of                    stock of Capital Trust, Inc. (the “Restricted Shares”).

3.The Restricted Shares were transferred to me on                                     , 20   . This election relates to the 20    calendar taxable year.

4.The Restricted Shares are subject to the following restrictions:

The Restricted Shares are forfeitable until they are earned in accordance with Section 8 of the Capital Trust, Inc. 2007 Long-Term Incentive Plan (“Plan”), the Restricted Shares Award Agreement (“Award”), or other award agreement or Plan provisions. The Restricted Shares generally are not transferable until my interest becomes vested and nonforfeitable, pursuant to the Award and the Plan.

5.Fair market value:

The fair market value at the time of transfer (determined without regard to any restrictions other than restrictions which by their terms never will lapse) of the Restricted Shares with respect to which I am making this election is $        per share.

6.Amount paid for Restricted Shares:

The amount I paid for the Restricted Shares is $        per share.

7.Furnishing statement to employer:

A copy of this statement has been furnished to my employer,                                   . If the transferor of the Restricted Shares is not my employer, that entity also has been furnished with a copy of this statement.

8.Award or Plan not affected:

Nothing contained herein shall be held to change any of the terms or conditions of the Award or the Plan.

Dated:                                            , 20   .

	Taxpayer
County of
State of

EXHIBIT E

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Long-Term Consideration and
Company Recovery for Breach

By signing and accepting your Award Agreement, you recognize and agree that the Company’s key consideration in granting this Award is securing your long-term commitment to serve as its                                 [include job title or description] who will advance and promote the Company’s business interests and objectives. Accordingly, you agree that this Award shall be subject to the terms and conditions set forth in Section 25 of the Plan (relating to the termination, rescission, and recapture if you violate certain commitments made therein to the Company), as well as to the following terms and conditions as material and indivisible consideration for this Award:

(a)Fiduciary Duty. During your employment with the Company you shall devote your full energies, abilities, attention and business time to the performance of your job responsibilities and shall not engage in any activity which conflicts or interferes with, or in any way compromises, your performance of such responsibilities.

(b)Confidential Information. You recognize that by virtue of your employment with the Company, you will be granted otherwise prohibited access to confidential information and proprietary data which are not known, and not readily accessible to the Company’s competitors. This information (the “Confidential Information”) includes, but is not limited to, current and prospective customers; the identity of key contacts at such customers; customers’ particularized preferences and needs; marketing strategies and plans; financial data; personnel data; compensation data; proprietary procedures and processes; and other unique and specialized practices, programs and plans of the Company and its customers and prospective customers. You recognize that this Confidential Information constitutes a valuable property of the Company, developed over a significant period of time and at substantial expense. Accordingly, you agree that you shall not, at any time during or after your employment with the Company, divulge such Confidential Information or make use of it for your own purposes or the purposes of any person or entity other than the Company.

(c)Non-Solicitation of Customers. You recognize that by virtue of your employment with the Company you will be introduced to and involved in the solicitation and servicing of existing customers of the Company and new customers obtained by the Company during your employment. You understand and agree that all efforts expended in soliciting and servicing such customers shall be for the permanent benefit of the Company.

You further agree that during your employment with the Company you will not engage in any conduct which could in any way jeopardize or disturb any of the Company’s customer relationships. You also recognize the Company’s legitimate interest in protecting, for a reasonable period of time after your employment with the Company, the Company’s customers. Accordingly, you agree that, for a period beginning on the date hereof and ending one (1) year after termination of your employment with the Company, regardless of the reason for such termination, you shall not, directly or indirectly, without the prior written consent of the Chairman of the Company, market, offer, sell or otherwise furnish any products or services similar to, or otherwise competitive with, those offered by the Company to any customer of the Company.

(d)Non-Solicitation of Employees. You recognize the substantial expenditure of time and effort which the Company devotes to the recruitment, hiring, orientation, training and retention of its employees. Accordingly, you agree that, for a period beginning on the date hereof and ending two (2) years after termination of your employment with the Company, regardless of the reason for such termination, you shall not, directly or indirectly, for yourself or on behalf of any other person or entity, solicit, offer employment to, hire or otherwise retain the services of any employee of the Company.

(e)Non-Competition. <IF DESIRED, PHJW TO CUSTOMIZE TO CONFORM WITH APPLICABLE LAW.>

(f)Survival of Commitments; Potential Recapture of Award and Proceeds. You acknowledge and agree that the terms and conditions of this Section regarding confidentiality and non-solicitation [and non-competition] shall survive both (i) the termination of your employment with the Company for any reason, and (ii) the termination of the Plan, for any reason. You acknowledge and agree that the grant of Restricted Shares in this Award Agreement is just and adequate consideration for the survival of the restrictions set forth herein, and that the Company may pursue any or all of the following remedies if you either violate the terms of this Section or succeed for any reason in invalidating any part of it (it being understood that the invalidity of any term hereof would result in a failure of consideration for the Award):

(i)declaration that the Award is null and void and of no further force or effect;

(ii)recapture of any cash paid or Shares issued to you, or any designee or beneficiary of you, pursuant to the Award;

(iii)recapture of the proceeds, plus reasonable interest, with respect to any Shares that are both issued pursuant to this Award and sold or otherwise disposed of by you, or any designee or beneficiary of you.

The remedies provided above are not intended to be exclusive, and the Company may seek such other remedies as are provided by law, including equitable relief.

(g)Acknowledgement. You acknowledge and agree that your adherence to the foregoing requirements will not prevent you from engaging in your chosen occupation and earning a satisfactory livelihood following the termination of your employment with the Company.

EX-10.4

Exhibit 10.4

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Restricted Share Award Agreement

You (the “Participant”) are hereby awarded Restricted Shares subject to the terms and conditions set forth in this agreement (the “Award Agreement” or “Award”) and in the Capital Trust, Inc. 2007 Long-Term Incentive Plan (“Plan”). A copy of the Plan is attached as Exhibit A. A summary of the Plan appears in its Prospectus, which is attached as Exhibit B. You should carefully review these documents, and consult with your personal financial advisor, before exercising this Award. This Award is conditioned on your execution of this Award Agreement.

By executing this Award Agreement, you agree to be bound by all of the Plan’s terms and conditions as if they had been set out verbatim below. In addition, you recognize and agree that all determinations, interpretations, or other actions respecting the Plan and this Award Agreement will be made by the Board of Directors (the “Board”) of Capital Trust, Inc. (the “Company”) or any Committee appointed by the Board to administer the Plan, and shall (in the absence of manifest bad faith or fraud) be final, conclusive and binding on all parties, including you and your successors in interest. Capitalized terms are defined in the Plan or in this Award Agreement.

1.Specific Terms. This portion of your Award is being granted pursuant to Section 8 of the Plan, and shall have the following terms:

Name of Participant
Number of Shares Subject to Award
Purchase Price per Share (if applicable)	Not applicable.
Award Date
Vesting	Your Award will vest at the rate of    % on each of the next       anniversaries of the Grant Date, provided that your Continuous Service has not ended before the vesting date (subject to any employment agreement between you and the Comapny); and provided further that you will become 100% vested in this Award if your Continuous Service ends due to your Retirement, your death, or your Disability.
Deferral Elections	¨ Allowed in accordance with Section 8(g) of the Plan. ¨ Not allowed.
Lifetime Transfers	¨ Allowed in accordance with Section 12(b) of the Plan. ¨ Not allowed.

2.Accelerated Vesting; Change in Corporate Control. To the extent you have not previously vested in your rights with respect to this Award, your Award will become     

¨        % vested if your Continuous Service ends due to your death or “disability” within the meaning of Section 409A of the Code;

¨        % if your Continuous Service ends due to an Involuntary Termination that occurs within the one year period following a Change in Control.

3.Dividends. When Shares are delivered to you or your duly-authorized transferee pursuant to the vesting of the Shares, you or your duly-authorized transferee shall also be entitled to receive, with respect to each Share delivered, (i) a number of Shares equal to the stock dividends which were declared and paid to the holders of Shares between the Award Date and the date such Share is issued, and (ii) a number of Shares having a Fair Market Value (on the date of each cash dividend payment date) equal to any cash dividends that were paid to the holders of Shares based on a record date between the Award Date and date such share is delivered. To the extent that your Continuous Service ends before vesting of the Shares, you will forfeit all dividends (whether paid in cash or in stock) attributable to all such shares.

4.Investment Purposes. By executing this Award, you acknowledge that you are receiving and will be holding your Restricted Shares for investment purposes only for your own account, and not with a view to, for resale in connection with, or with an intent of participating directly or indirectly in, any distribution of such Shares within the meaning of the Securities Act of 1933, as amended.

5.Issuance of Restricted Shares. Until all vesting restrictions lapse, any certificates that you receive for Restricted Shares will include a legend stating that they are subject to the restrictions set forth in the Plan and this Award Agreement. The certificates evidencing such Restricted Shares that will be issued will bear the following legend that shall remain in place and effective until all other vesting restrictions lapse and new certificates are issued:

“The sale or other transfer of the Stock represented by this certificate, whether voluntary, involuntary, or by operation of law, is subject to certain restrictions on transfer set forth in the Capital Trust, Inc. 2007 Long-Term Incentive Plan, and in any rules and administrative procedures adopted pursuant to such Plan and in a related Award Agreement. A copy of the Plan, such rules and procedures and such Award Agreement may be obtained from the Secretary of Capital Trust, Inc.”

6.Unvested Restricted Shares. The Company will hold all Restricted Shares in escrow until vesting occurs. You will be reflected as the owner of record on the Company’s books and records of any Shares issued pursuant to this Award Agreement. The Company will hold the stock certificates for safekeeping until such Shares have become vested and non-forfeitable. You must deliver to the Company, as soon as practicable after the date any Shares are issued, a stock power, endorsed in blank, with respect to any such Shares. If you forfeit any Shares, the stock power will be used to return the certificates for the forfeited Shares to the transfer agent for cancellation. As the owner of record of any Restricted Shares you qualify to receive pursuant to this Award Agreement, you will be entitled to all rights of a stockholder of the Company, including the right to vote Shares; subject, however, to the provisions of Section 3 hereof with respect to any cash or stock dividends

that are paid between the date of this Award and your receipt of shares pursuant to a vesting event, subject in each case to the treatment of the Award upon termination of employment before the particular record date for determining stockholders of record entitled to the payment of the dividend or distribution. To the extent such a dividend is paid in stock, such stock shall be subject to the same vesting restrictions contained in Section 1.

7.Satisfaction of Vesting Restrictions; Tax Withholding. Unrestricted shares will be issued when you complete the requirements that are necessary for you to vest in the Restricted Shares underlying this Award. As soon as practicable after the later of (i) the date on which your Award vests in whole or in part or (ii) the distribution date or dates set forth in your deferral election, the Company will issue to you or your duly-authorized transferee, free from vesting restrictions (but subject to such legends as the Company determines to be appropriate), one Share for each vested Restricted Share with such number of Shares issued to you being reduced by a number of Shares having a fair market value equal to the minimum statutory tax withholding required in connection with the vesting of your Restricted Shares. Fractional shares will not be issued, and cash will be paid in lieu thereof. Certificates shall not be delivered to you unless you have made arrangements satisfactory to the Committee to satisfy all applicable employment and tax-withholding obligations

8.Section 83(b) Election Notice. If you make an election under Section 83(b) of the Internal Revenue Code of 1986, as amended, with respect to the Shares underlying your Restricted Shares (a “Section 83(b) election”), you agree to provide a copy of such election to the Company within 10 days after filing that election with the Internal Revenue Service. Exhibit C contains a suggested form of Section 83(b) election.

9.Designation of Death Beneficiary. Notwithstanding anything to the contrary contained herein or in the Plan, following the execution of this Award Agreement, you may expressly designate a death beneficiary (the “Death Beneficiary”) to your interest, if any, in this Award and any underlyng Shares. You shall designate the Death Beneficiary by completing and executing a designation of death beneficiary agreement substantially in the form attached hereto as Exhibit D (the “Designation of Death Beneficiary”) and delivering an executed copy of the Designation of Death Beneficiary to the Company.

10.Restrictions on Transfer of Award. If lifetime transfers are allowed under Section 1, your rights under this Award Agreement may not be sold, pledged, or otherwise transferred without the prior written consent of the Committee. Notwithstanding the foregoing, the Participant may transfer the Restricted Shares that are subject to this Award

(i)by instrument to an inter vivos or testamentary trust (or other entity) in which each beneficiary is a permissible gift recipient, as such is set forth in subsection (ii) of this Section, or

(ii)by gift to charitable institutions or by gift or transfer for consideration to any of the following relatives of yours (or to an inter vivos trust, testamentary trust or other entity primarily for the benefit of the following relatives of yours): any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, domestic partner, sibling, niece, nephew, mother-in-law,

father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include adoptive relationships.

Any transferee of the Participant’s rights shall succeed and be subject to all of the terms of this Award Agreement and the Plan.

11.Conditions on Issuance of Shares; Transfer Restrictions. Notwithstanding any other provision of the Plan or of this Award Agreement: (i) the Committee may condition your receipt of Shares on your execution of a shareholder agreement imposing terms  generally applicable to other similarly-situated employee-shareholders; and (ii) any Shares issued pursuant to this Award Agreement shall be non-transferable except in accordance with Section 10 above, until the first day of the seventh month following the termination of your Continuous Service.

12.Taxes. Except to the extent otherwise specifically provided in another document establishing contractual rights for you, by signing this Award Agreement, you acknowledge that you shall be solely responsible for the satisfaction of any taxes that may arise pursuant to this Award (including taxes arising under Sections 409A or 4999 of the Code), and that neither the Company nor the Administrator shall have any obligation whatsoever to pay such taxes or otherwise indemnify or hold you harmless from any or all of such taxes. The Committee shall have the sole discretion to interpret the requirements of the Code, including Section 409A, for purposes of the Plan and this Award Agreement.

13.Notices. Any notice or communication required or permitted by any provision of this Award Agreement to be given to you shall be in writing and shall be delivered electronically, personally, or sent by certified mail, return receipt requested, addressed to you at the last address that the Company had for you on its records. Each party may, from time to time, by notice to the other party hereto, specify a new address for delivery of notices relating to this Award Agreement. Any such notice shall be deemed to be given as of the date such notice is personally delivered or properly mailed.

14.Binding Effect. Except as otherwise provided in this Award Agreement or in the Plan, every covenant, term, and provision of this Award Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legatees, legal representatives, successors, transferees, and assigns.

15.Modifications. This Award Agreement may be modified or amended at any time, in accordance with Section 15 of the Plan and provided that you must consent in writing to any modification that adversely and materially affects any rights or obligations under this Award Agreement (with such an affect being presumed to arise from a modification that would trigger a violation of Section 409A of the Code).

16.Headings. Section and other headings contained in this Award Agreement are for reference purposes only and are not intended to describe, interpret, define or limit the scope or intent of this Award Agreement or any provision hereof.

17.Severability. Every provision of this Award Agreement and of the Plan is intended to be severable. If any term hereof is illegal or invalid for any reason, such illegality or invalidity shall not affect the validity or legality of the remaining terms of this Award Agreement.

18.Counterparts. This Award Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument.

19.Plan Governs. By signing this Award Agreement, you acknowledge that you have received a copy of the Plan and that your Award Agreement is subject to all the provisions contained in the Plan, the provisions of which are made a part of this Award Agreement and your Award is subject to all interpretations, amendments, rules and regulations which from time to time may be promulgated and adopted pursuant to the Plan. In the event of a conflict between the provisions of this Award Agreement and those of the Plan, the provisions of the Plan shall control.

20.Investment Purposes. By executing this Award Agreement, you represent and warrant that any Shares issued to you pursuant to your Award will be held for investment purposes only for your own account, and not with a view to, for resale in connection with, or with an intent in participating directly or indirectly in, any distribution of such Shares within the meaning of the Securities Act of 1933, as amended.

21.Not a Contract of Employment. By executing this Award Agreement you acknowledge and agree that (i) any person who is terminated before full vesting of an award, such as the one granted to you by this Award, could claim that he or she was terminated to preclude vesting; (ii) you promise never to make such a claim; (iii) nothing in this Award Agreement or the Plan confers on you any right to continue an employment, service or consulting relationship with the Company, nor shall it affect in any way your right or the Company’s right to terminate your employment, service, or consulting relationship at any time, with or without Cause; and (iv) the Company would not have granted this Award to you but for these acknowledgements and agreements.

22.Employment Agreement Provision  [OPTION IF EMPLOYEE HAS AN EMPLOYMENT AGREEMENT]  By executing this Award, you acknowledge and agree that your rights upon a termination of employment before full vesting of this Award will be determined under Section           of your employment agreement with the Company and                                                , dated as of                                             , 20    .

23.Securities Law Restrictions. Regardless of whether the offering and sale of Shares under the Plan have been registered under the Securities Act of 1933, as amended (the “Securities Act”), or have been registered or qualified under the securities laws of any state, the Company at its discretion may impose restrictions upon the sale, pledge or other transfer of such Shares (including the placement of appropriate legends on stock certificates or the imposition of stop-transfer instructions) if, in the judgment of the Company, such restrictions are necessary or desirable in order to achieve compliance with the Securities Act or the securities laws of any state or any other law or to enforce the intent of this Award.

24.Long-term Consideration for Award. [OPTIONAL] The terms and conditions set forth in Exhibit E are hereby incorporated by reference and made an integral part of this Award Agreement. An invalidation of all or part of Exhibit E, or your commencement of litigation to invalidate, modify, or alter the terms and conditions set forth in Exhibit E, shall cause this Award to become null, void, and unenforceable.

25.Governing Law. The laws of the State of New York shall govern the validity of this Award Agreement, the construction of its terms, and the interpretation of the rights and duties of the parties hereto.

[Signature page follows]

BY YOUR SIGNATURE BELOW, along with the signature of the Company’s representative, you and the Company agree that the Restricted Shares are awarded under and governed by the terms and conditions of this Award Agreement and the Plan.

CAPITAL TRUST, INC.
By:
	Name:
	Title:
PARTICIPANT
The undersigned Participant hereby accepts the terms of this Award Agreement and the Plan.
By:
Name of Participant:

EXHIBIT A

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Plan Document

EXHIBIT B

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Plan Prospectus

EXHIBIT C

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Section 83(b) Election Form

Attached is an Internal Revenue Code Section 83(b) Election Form. IF YOU WISH TO MAKE A SECTION 83(B) ELECTION, YOU MUST DO SO WITHIN 30 DAYS AFTER THE DATE THE RESTRICTED SHARES COVERED BY THE ELECTION WERE TRANSFERRED TO YOU. In order to make the election, you must completely fill out the attached form and file one copy with the Internal Revenue Service office where you file your tax return. In addition, one copy of the statement also must be submitted with your income tax return for the taxable year in which you make this election. Finally, you also must submit a copy of the election form to the Company within 10 days after filing that election with the Internal Revenue Service. A Section 83(b) election normally cannot be revoked.

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Election to Include Value of Restricted Shares in Gross Income

in Year of Transfer Under Internal Revenue Code Section 83(b)

Pursuant to Section 83(b) of the Internal Revenue Code, I hereby elect within 30 days after receiving the property described herein to be taxed immediately on its value specified in item 5 below.

1.My General Information:

Name:                                                      

Address:                                                   

S.S.N.

or T.I.N.:                                                   

2.Description of the property with respect to which I am making this election:

                                             shares of                         stock of (the “Restricted Shares”).

3.The Restricted Shares were transferred to me on                                , 20    . This election relates to the 20       calendar taxable year.

4.The Restricted Shares are subject to the following restrictions:

The Restricted Shares are forfeitable until they are earned in accordance with Section 1 of the Capital Trust, Inc. 2007 Long-Term Incentive Plan (“Plan”) Restricted Share Award Agreement (“Award Agreement”) or other Award Agreement or Plan provisions. The Restricted Shares generally are not transferable until my interest becomes vested and nonforfeitable, pursuant to the Award Agreement and the Plan.

5.Fair market value:

The fair market value at the time of transfer (determined without regard to any restrictions other than restrictions which by their terms never will lapse) of the Restricted Shares with respect to which I am making this election is $       per share.

6.Amount paid for Restricted Shares:

The amount I paid for the Restricted Shares is $       per share.

7.Furnishing statement to employer:

A copy of this statement has been furnished to my employer,                          . If the transferor of the Restricted Shares is not my employer, that entity also has been furnished with a copy of this statement.

8.Award Agreement or Plan not affected:

Nothing contained herein shall be held to change any of the terms or conditions of the Award Agreement or the Plan.

Dated:                          , 200  .

Taxpayer

EXHIBIT D

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Designation of Death Beneficiary

In connection with the Awards designated below that I have received pursuant to the Plan, I hereby designate the person specified below as the death beneficiary upon my death of my interest in Awards as defined in the Company’s 2007 Long-Term Incentive Plan (the “Plan”). This designation shall remain in effect until revoked in writing by me.

Name of Death Beneficiary:                                                                                                          

Address:                                                                                                                                         

Social Security No.:                                                                                                                       

This death beneficiary designation relates to any and all of my rights under the following Award or Awards:

¨any Award that I have received or ever receive under the Plan.

¨the                             Award that I received pursuant to an award agreement dated                     ,        between myself and the Company.

I understand that this designation operates to entitle the above named death beneficiary, in the event of my death, to any and all of my rights under the Award(s) designated above from the date this form is delivered to the Company until such date as this designation is revoked in writing by me, including by delivery to the Company of a written designation of beneficiary executed by me on a later date. In the absence of a valid death beneficiary designation, my estate will be treated as the beneficiary of this Award in the event of my death while it is outstanding.

Date:
By:
	Name of Participant

Sworn to before me this

         day of                 , 200  

Notary Public

County of                                     

State of                                          

EXHIBIT E

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Long-Term Consideration and

Company Recovery for Breach

By signing and accepting your Award Agreement, you recognize and agree that the Company’s key consideration in granting this Award is securing your long-term commitment to serve as its                             [include job title or description] who will advance and promote the Company’s business interests and objectives. Accordingly, you agree that this Award shall be subject to the terms and conditions set forth in Section 25 of the Plan (relating to the termination, rescission, and recapture if you violate certain commitments made therein to the Company), as well as to the following terms and conditions as material and indivisible consideration for this Award:

(a)Fiduciary Duty. During your employment with the Company you shall devote your full energies, abilities, attention and business time to the performance of your job responsibilities and shall not engage in any activity which conflicts or interferes with, or in any way compromises, your performance of such responsibilities.

(b)Confidential Information. You recognize that by virtue of your employment with the Company, you will be granted otherwise prohibited access to confidential information and proprietary data which are not known, and not readily accessible to the Company’s competitors. This information (the “Confidential Information”) includes, but is not limited to, current and prospective customers; the identity of key contacts at such customers; customers’ particularized preferences and needs; marketing strategies and plans; financial data; personnel data; compensation data; proprietary procedures and processes; and other unique and specialized practices, programs and plans of the Company and its customers and prospective customers. You recognize that this Confidential Information constitutes a valuable property of the Company, developed over a significant period of time and at substantial expense. Accordingly, you agree that you shall not, at any time during or after your employment with the Company, divulge such Confidential Information or make use of it for your own purposes or the purposes of any person or entity other than the Company.

(c)Non-Solicitation of Customers. You recognize that by virtue of your employment with the Company you will be introduced to and involved in the solicitation and servicing of existing customers of the Company and new customers obtained by the Company during your employment. You understand and agree that all efforts expended in soliciting and servicing such customers shall be for the permanent benefit of the Company. You further agree that during your employment with the Company you will not engage in any conduct which could in any way jeopardize or disturb any of the Company’s customer relationships. You also recognize the Company’s legitimate interest in protecting, for a reasonable period of time after your employment with the Company, the Company’s customers. Accordingly, you agree that, for a period beginning

on the date hereof and ending one (1) year after termination of your employment with the Company, regardless of the reason for such termination, you shall not, directly or indirectly, without the prior written consent of the Chairman of the Company, market, offer, sell or otherwise furnish any products or services similar to, or otherwise competitive with, those offered by the Company to any customer of the Company.

(d)Non-Solicitation of Employees. You recognize the substantial expenditure of time and effort which the Company devotes to the recruitment, hiring, orientation, training and retention of its employees. Accordingly, you agree that, for a period beginning on the date hereof and ending two (2) years after termination of your employment with the Company, regardless of the reason for such termination, you shall not, directly or indirectly, for yourself or on behalf of any other person or entity, solicit, offer employment to, hire or otherwise retain the services of any employee of the Company.

(e)Non-Competition. <IF DESIRED, PHJW TO CUSTOMIZE TO CONFORM WITH APPLICABLE LAW.>

(f)Survival of Commitments; Potential Recapture of Award and Proceeds. You acknowledge and agree that the terms and conditions of this Section regarding confidentiality and non-solicitation [and non-competition] shall survive both (i) the termination of your employment with the Company for any reason, and (ii) the termination of the Plan, for any reason. You acknowledge and agree that the grant of Restricted Shares in this Award Agreement is just and adequate consideration for the survival of the restrictions set forth herein, and that the Company may pursue any or all of the following remedies if you either violate the terms of this Section or succeed for any reason in invalidating any part of it (it being understood that the invalidity of any term hereof would result in a failure of consideration for the Award):

(i)declaration that the Award is null and void and of no further force or effect;

(ii)recapture of any cash paid or Shares issued to you, or any designee or beneficiary of you, pursuant to the Award;

(iii)recapture of the proceeds, plus reasonable interest, with respect to any Shares that are both issued pursuant to this Award and sold or otherwise disposed of by you, or any designee or beneficiary of you.

The remedies provided above are not intended to be exclusive, and the Company may seek such other remedies as are provided by law, including equitable relief.

(g)Acknowledgement. You acknowledge and agree that your adherence to the foregoing requirements will not prevent you from engaging in your chosen occupation and earning a satisfactory livelihood following the termination of your employment with the Company.

EX-10.5

Exhibit 10.5

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Performance Unit and Performance Share Award Agreement

Award No.          

You are hereby awarded Performance Units and Performance Shares subject to the terms and conditions set forth in this agreement (“Award Agreement” or “Award”), and in the Capital Trust, Inc. 2007 Long-Term Incentive Plan  (the “Plan”), which is attached as Exhibit A.  A summary of the Plan appears in its Prospectus, which is attached as Exhibit B. You should carefully review these documents, and consult with your personal financial advisor, in order to fully understand the implications of this Award, including your tax alternatives and their consequences.

By executing this Award Agreement, you agree to be bound by all of the Plan’s terms and conditions as if they had been set out verbatim below.  In addition, you recognize and agree that all determinations, interpretations, or other actions respecting the Plan and this Award Agreement will be made by the Board of Directors (the “Board”) of Capital Trust, Inc. (the “Company”) or any Committee appointed by the Board to administer the Plan, and shall (in the absence of manifest bad faith or fraud) be final, conclusive and binding upon all parties, including you and your successors in interest.  Capitalized terms are defined in the Plan or in this Award Agreement.

1.             General Terms of Your Award

Name of Participant

Date of Award

2.             Performance Unit.  The Performance Unit portion of your Award is being granted pursuant to Section 10 of the Plan, and shall have the terms set forth in the table below, subject, absolutely, to the terms of the Plan and to the Committee’s discretion to interpret the Plan and this Award in any manner that the Committee may deem reasonably necessary or appropriate in order for this Award to satisfy the requirements for “performance-based compensation” within the meaning of Section 162(m)(4) of the Code, and associated tax regulations and rulings.  The Performance Unit portion of your award provides that you may qualify to receive an amount of cash that falls within the range specified in the table below, such amount to be determined based on the extent to which, if at all, the Performance Measures for Determining Qualification have been satisfied and in accordance with the weights assigned thereto.

Range in Amount of Cash	Threshold:	$
	Target:	$
	Maximum:	$
Performance Period

Performance Measures	See Schedule           , attached hereto as Exhibit B.
Qualification

3.             Performance Shares.  The Performance Shares portion of your award provides that you may qualify to receive, subject to further vesting, a number of Shares (“Performance Shares”) with a value that falls within the range of values specified in the table below, such value to be determined based on the extent to which, if at all, the Performance Measures for Determining Qualification have been satisfied and the weights assigned thereto.  The Performance Shares portion of your Award is being granted pursuant to Section 10 of the Plan, and shall have the terms set forth in the table below, subject, absolutely, to the terms of the Plan and to the Committee’s discretion to interpret the Plan and this Award in any manner that the Committee may deem reasonably necessary or appropriate in order for this Award to satisfy the requirements for “performance-based compensation” within the meaning of Section 162(m)(4) of this Code, and associated tax regulations and rulings.

Range in Value of Shares of Performance Shares		Threshold:		$
		Target:		$
		Maximum:		$
	Performance Period for Qualification
	Performance Measures		See Schedule            , attached hereto as Exhibit C and Exhibit D..
	Pricing Date to Determine Number of Shares
	Qualification

Performance Period for Further Vesting

Performance Measure for

Determining Further Vesting

Further Vesting

4.             Issuance of Shares of Performance Shares.  If you qualify to receive any Shares of Performance Shares that remain subject to further vesting, the stock certificates evidencing such Shares that will be issued as of the Pricing Date will bear the following legend that shall remain in place and effective until all other vesting restrictions lapse and new certificates are issued pursuant to Section 6(b) below:

2

“The sale or other transfer of the Stock represented by this certificate, whether voluntary, involuntary, or by operation of law, is subject to certain restrictions on transfer set forth in the Capital Trust, Inc. 2007 Long-Term Incentive Plan , and in any rules and administrative procedures adopted pursuant to such Plan and in a related Award Agreement.  A copy of the Plan, such rules and procedures and such Award Agreement may be obtained from the Secretary of Capital Trust, Inc.”

5.             Unvested Performance Shares.  You will be reflected as the owner of record on the Company’s books and records of any Shares of Performance Shares issued pursuant to this Award Agreement. The Company will hold the stock certificates for safekeeping until such Shares have become vested and non-forfeitable.  You must deliver to the Company, as soon as practicable after the date any Shares of Performance Shares are issued, a stock power, endorsed in blank, with respect to any such Shares. If you forfeit any Shares of Performance Shares, the stock power will be used to return the certificates for the forfeited Shares to the transfer agent for cancellation.  As the owner of record of any Shares of Performance Shares you qualify to receive pursuant to this Award Agreement, you will be entitled to all rights of a stockholder of the Company, including the right to vote Shares and the right to the payment of any cash dividends and other distributions (including those paid in stock) following the date of issuance of such Shares and to the  extent paid in stock, such stock shall be subject to the same restrictions contained in Section 3, subject in each case to the treatment of the Award upon termination of employment before the particular record date for determining stockholders of record entitled to the payment of the dividend or distribution.

6.             Dividends.  Whenever unrestricted Shares are delivered to you or your duly-authorized transferee pursuant to the vesting of this Award, you or your duly-authorized transferee shall also be entitled to receive, with respect to each unrestricted Share issued, (i) a number of Shares equal to the stock dividends which were declared and paid to the holders of Shares between the Grant Date and the date such Share is issued, and (ii) a number of Shares having a Fair Market Value (on the date of each cash dividend payment date) equal to any cash dividends that were paid to the holders of Shares based on a record date between the Award Date and the date such unrestricted Share is issued.

7.             Qualification and Vesting.

(a)           After the Performance Period for the Performance Unit, if you qualify to receive an amount of cash pursuant to the Performance Unit as determined and calculated by the Committee, you shall be paid such cash amount in conformity with the Company’s bonus payment practices generally applicable to senior executives of the Company.

(b)           If you qualify to receive any Shares of Performance Shares, subject to further vesting, as the further vesting restrictions become satisfied over time or upon satisfaction of the relevant performance measures, the Company shall cause new stock certificates for the Shares of Performance Shares so vested to be delivered to you, with such legends as the Company determines to be appropriate.  New certificates shall not be delivered to you unless you have made arrangements satisfactory to the Committee to satisfy tax-withholding obligations.

3

8.             Restrictions on Transfer of Award. This Award Agreement may not be sold, pledged, or otherwise transferred without the prior written consent of the Committee.  Notwithstanding the foregoing, you may transfer this Award Agreement -

(i)by instrument to an inter vivos or testamentary trust (or other entity) in which each beneficiary is a permissible gift recipient, as such is set forth in subsection (ii) of this Section, or

(ii)by gift to charitable institutions or by gift or transfer for consideration to any of the following relatives of yours (or to an inter vivos trust, testamentary trust or other entity primarily for the benefit of the following relatives of yours): any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, domestic partner, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include adoptive relationships.

Any transferee of your rights shall succeed to and be subject to all of the terms of this Award Agreement and the Plan.

9.             Conditions on Issuance of Shares; Transfer Restrictions.  Notwithstanding any other provision of the Plan or of this Award Agreement: (i) the Committee may condition your receipt of Shares on your execution of a shareholder agreement imposing terms generally applicable to other similarly-situated employee- shareholders; and (ii) any Shares issued pursuant to this Award Agreement shall be non-transferable until the first day of the seventh month following the termination of your Continuous Service.

10.           Designation of Death Beneficiary.  Notwithstanding anything to the contrary contained herein or in the Plan, following the execution of this Award Agreement, you may expressly designate a death beneficiary (the “Death Beneficiary”) to his or her interest in the Performance Unit and Performance Shares awarded hereby.  You shall designate the Death Beneficiary by completing and executing a designation of death beneficiary agreement substantially in the form attached hereto as Exhibit E (the “Designation of Death Beneficiary”) and delivering an executed copy of the Designation of Death Beneficiary to the Company.

11.           Income Taxes and Deferred Compensation.  Except to the extent otherwise specifically provided in another document establishing contractual rights for you, by signing this Award Agreement, you acknowledge that you shall be solely responsible for the satisfaction of any taxes that may arise pursuant to this Award (including taxes arising under Sections 409A or 4999 of the Code), and that neither the Company nor the Administrator shall have any obligation whatsoever to pay such taxes or otherwise indemnify or hold you harmless from any or all of such taxes.  The Committee shall have the sole discretion to interpret the requirements of the Code, including Section 409A, for purposes of the Plan and this Award Agreement.

12.           Notices.  Any notice or communication required or permitted by any provision of this Award Agreement to be given to you shall be in writing and shall be delivered electronically, personally, or sent by certified mail, return receipt requested, addressed to you at the last address

4

that the Company had for you on its records.  Each party may, from time to time, by notice to the other party hereto, specify a new address for delivery of notices relating to this Award Agreement.  Any such notice shall be deemed to be given as of the date such notice is personally delivered or properly mailed.

13.           Binding Effect.  Except as otherwise provided in this Award Agreement or in the Plan, every covenant, term, and provision of this Award Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legatees, legal representatives, successors, transferees, and assigns.

14.           Modifications.  This Award Agreement may be modified or amended at any time, in accordance with Section 15 of the Plan and provided that you must consent in writing to any modification that adversely and materially affects your rights or obligations under this Award Agreement (with such an affect being presumed to arise from a modification that would trigger a Section 409A violation of the Code).

15.           Headings.  Section and other headings contained in this Award Agreement are for reference purposes only and are not intended to describe, interpret, define or limit the scope or intent of this Award Agreement or any provision hereof.

16.           Severability.  Every provision of this Award Agreement and of the Plan is intended to be severable.  If any term hereof is illegal or invalid for any reason, such illegality or invalidity shall not affect the validity or legality of the remaining terms of this Award Agreement.

17.           Counterparts.  This Award Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument.

18.           Plan Governs.  By signing this Award Agreement, you acknowledge that you have received a copy of the Plan and that your Award Agreement is subject to all the provisions contained in the Plan, the provisions of which are made a part of this Award Agreement and your Award is subject to all interpretations, amendments, rules and regulations which from time to time may be promulgated and adopted pursuant to the Plan.  In the event of a conflict between the provisions of this Award Agreement and those of the Plan, the provisions of the Plan shall control.

19.           Investment Purposes. By executing this Award Agreement, you represent and warrant that any Shares issued to you pursuant to your Award will be held for investment purposes only for your own account, and not with a view to, for resale in connection with, or with an intent in participating directly or indirectly in, any distribution of such Shares within the meaning of the Securities Act of 1933, as amended.

20.           Not a Contract of Employment.  By executing this Award Agreement you acknowledge and agree that (i) any person who is terminated before full vesting of an award, such as the one granted to you by this Award, could claim that he or she was terminated to preclude vesting; (ii) you promise never to make such a claim; (iii) nothing in this Award Agreement or the Plan confers on you any right to continue an employment, service or consulting relationship with the

5

Company, nor shall it affect in any way your right or the Company’s right to terminate your employment, service, or consulting relationship at any time, with or without Cause; and (iv) the Company would not have granted this Award to you but for these acknowledgements and agreements.

21.           Employment Agreement Provision  [OPTION IF EMPLOYEE HAS AN EMPLOYMENT AGREEMENT]  By executing this Award, you acknowledge and agree that your rights upon a termination of employment before full vesting of this Award will be determined under Section             of your employment agreement with the Company and                                                 , dated as of                                         , 20    .

22.           Long-term Consideration for Award.  [OPTIONAL] The terms and conditions set forth in Exhibit F are hereby incorporated by reference and made an integral part of this Award Agreement.  An invalidation of all or part of Exhibit F, or your commencement of litigation to invalidate, modify, or alter the terms and conditions set forth in Exhibit F, shall cause this Award to become null, void, and unenforceable.

23.           Securities Law Restrictions.  Regardless of whether the offering and sale of Shares under the Plan have been registered under the Securities Act of 1933, as amended (the “Securities Act”), or have been registered or qualified under the securities laws of any state, the Company at its discretion may impose restrictions upon the sale, pledge or other transfer of such Shares (including the placement of appropriate legends on stock certificates or the imposition of stop-transfer instructions) if, in the judgment of the Company, such restrictions are necessary or desirable in order to achieve compliance with the Securities Act or the securities laws of any state or any other law or to enforce the intent of this Award.

24.           Governing Law.  The laws of the State of New York shall govern the validity of this Award Agreement, the construction of its terms, and the interpretation of the rights and duties of the parties hereto.

BY YOUR SIGNATURE BELOW, along with the signature of the Company’s representative, you and the Company agree that this Award is being made under and governed by the terms and conditions of this Award and the Plan.

CAPITAL TRUST, INC.

By:

Name:

Title:

PARTICIPANT

6

The undersigned Participant hereby accepts the terms of this Award and the Plan.

By:

Name:

Title:

7

EXHIBIT A

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Plan Document

EXHIBIT B

CAPITAL TRUST, INC.
2007 LONG-TERM INCENTIVE PLAN

Plan Prospectus

EXHIBIT C

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Performance Measures to Determine Qualification for Performance Unit

SCHEDULE        

Measure Threshold Target Maximum Weight

Range of Award Amounts for Use in Calculation

Threshold Award Amount Target Award Amount Maximum Award Amount

Formula for Calculation

Calculate and add the following for each Measure to determine the cash amount Participant qualifies to receive:

EXHIBIT D

CAPITAL TRUST, INC.
2007 LONG-TERM INCENTIVE PLAN

Performance Measures to Determine Qualification for Performance Shares

SCHEDULE        

Measure Threshold Target Maximum Weight

Range of Award Values for Use in Calculation

Threshold Award Amount Target Award Amount Maximum Award Amount

Formula for Calculation

Calculate and add the following for each Measure to determine value of Shares of Performance Shares Participant qualifies to receive:

EXHIBIT E

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Designation of Death Beneficiary

In the event of my death or “Disability” within the meaning of the Capital Trust, Inc. 2007 Long-Term Incentive Plan (the “Plan”), I hereby designate the following person to be my death beneficiary for the Award(s) (within the meaning of the Plan) identified below:

Name of Death Beneficiary:

Address:

Social Security No.:

This death beneficiary designation of mine relates to any and all of my rights under the following Award or Awards:

oany Award that I have received or ever receive in the future under the Plan.

othe                   Award that I received pursuant to an award agreement dated             ,      between me and Capital Trust, Inc. (the “Company”).

I understand that this death beneficiary designation operates to entitle the above-named death beneficiary to succeed, in the event of my death, to any and all of my rights under the Award(s) designated above, and shall be effective from the date this form is delivered to the Company until such date as I revoke this designation.  A revocation shall occur only if I deliver to an executive officer of the Company either (i) a written revocation of this designation that is signed by me and notarized, or (ii) a designation of death beneficiary, in the form set forth herein, that is executed and notarized on a later date   In the absence of a valid death beneficiary designation, my estate will be treated as the beneficiary of this Award in the event of my death while it is outstanding.

Date:

Your Signature:

Your Name (printed):

Sworn to before me this

      day of                , 200

Notary Public

County of

State of

EXHIBIT F

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Long-Term Consideration and

Company Recovery for Breach

By signing and accepting your Award Agreement, you recognize and agree that the Company’s key consideration in granting this Award is securing your long-term commitment to serve as its                 [include job title or description] who will advance and promote the Company’s business interests and objectives.  Accordingly, you agree that this Award shall be subject to the terms and conditions set forth in Section 25 of the Plan (relating to the termination, rescission, and recapture if you violate certain commitments made therein to the Company), as well as to the following terms and conditions as material and indivisible consideration for this Award:

(a)           Fiduciary Duty.  During your employment with the Company you shall devote your full energies, abilities, attention and business time to the performance of your job responsibilities and shall not engage in any activity which conflicts or interferes with, or in any way compromises, your performance of such responsibilities.

(b)           Confidential Information.  You recognize that by virtue of your employment with the Company, you will be granted otherwise prohibited access to confidential information and proprietary data which are not known, and not readily accessible to the Company’s competitors.  This information (the “Confidential Information”) includes, but is not limited to, current and prospective customers; the identity of key contacts at such customers; customers’ particularized preferences and needs; marketing strategies and plans; financial data; personnel data; compensation data; proprietary procedures and processes; and other unique and specialized practices, programs and plans of the Company and its customers and prospective customers.  You recognize that this Confidential Information constitutes a valuable property of the Company, developed over a significant period of time and at substantial expense.  Accordingly, you agree that you shall not, at any time during or after your employment with the Company, divulge such Confidential Information or make use of it for your own purposes or the purposes of any person or entity other than the Company.

(c)           Non-Solicitation of Customers.  You recognize that by virtue of your employment with the Company you will be introduced to and involved in the solicitation and servicing of existing customers of the Company and new customers obtained by the Company during your employment.  You understand and agree that all efforts expended in soliciting and servicing such customers shall be for the permanent benefit of the Company.  You further agree that during your employment with the Company you will not engage in any conduct which could in any way jeopardize or disturb any of the Company’s customer relationships.  You also recognize the

Company’s legitimate interest in protecting, for a reasonable period of time after your employment with the Company, the Company’s customers.  Accordingly, you agree that, for a period beginning on the date hereof and ending one (1) year after termination of your employment with the Company, regardless of the reason for such termination, you shall not, directly or indirectly, without the prior written consent of the Chairman of the Company, market, offer, sell or otherwise furnish any products or services similar to, or otherwise competitive with, those offered by the Company to any customer of the Company.

(d)           Non-Solicitation of Employees.  You recognize the substantial expenditure of time and effort which the Company devotes to the recruitment, hiring, orientation, training and retention of its employees.  Accordingly, you agree that, for a period beginning on the date hereof and ending two (2) years after termination of your employment with the Company, regardless of the reason for such termination, you shall not, directly or indirectly, for yourself or on behalf of any other person or entity, solicit, offer employment to, hire or otherwise retain the services of any employee of the Company.

(e)           Non-Competition. <IF DESIRED, PHJW TO CUSTOMIZE TO CONFORM WITH APPLICABLE LAW.>

(f)            Survival of Commitments; Potential Recapture of Award and Proceeds.  You acknowledge and agree that the terms and conditions of this Section regarding confidentiality and non-solicitation [and non-competition] shall survive both (i) the termination of your employment with the Company for any reason, and (ii) the termination of the Plan, for any reason.  You acknowledge and agree that the grant of Performance Units and Performance Shares in this Award Agreement is just and adequate consideration for the survival of the restrictions set forth herein, and that the Company may pursue any or all of the following remedies if you either violate the terms of this Section or succeed for any reason in invalidating any part of it (it being understood that the invalidity of any term hereof would result in a failure of consideration for the Award):

(i)	declaration that the Award is null and void and of no further force or effect;
(ii)	recapture of any cash paid or Shares issued to you, or any designee or beneficiary of you, pursuant to the Award;
(iii)	recapture of the proceeds, plus reasonable interest, with respect to any Shares that are both issued pursuant to this Award and sold or otherwise disposed of by you, or any designee or beneficiary of you.

The remedies provided above are not intended to be exclusive, and the Company may seek such other remedies as are provided by law, including equitable relief.

(g)           Acknowledgement.  You acknowledge and agree that your adherence to the foregoing requirements will not prevent you from engaging in your chosen occupation and earning a satisfactory livelihood following the termination of your employment with the Company.

EX-10.6

Exhibit 10.6

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Stock Option Award Agreement

Award No.       

You are hereby awarded the following stock option (the “Option”) to purchase Shares of Capital Trust, Inc. (the “Company”), subject to the terms and conditions set forth in this Stock Option Award Agreement (the “Award Agreement”) and in the Capital Trust, Inc. 2007 Long-Term Incentive Plan (the “Plan”), which is attached hereto as Exhibit A.  A summary of the Plan appears in its Prospectus, which is attached as Exhibit B.  You should carefully review these documents, and consult with your personal financial advisor, before exercising this Option.  This Option is conditioned on your execution of this Award Agreement.

By executing this Award Agreement, you agree to be bound by all of the Plan’s terms and conditions as if they had been set out verbatim below.  In addition, you recognize and agree that all determinations, interpretations, or other actions respecting the Plan and this Award Agreement will be made by the Company’s Board of Directors or any Committee appointed by the Board to administer the Plan, and shall (in the absence of material and manifest bad faith or fraud) be final, conclusive and binding on all parties, including you and your successors in interest.  Terms that begin with initial capital letters have the special meanings set forth in the Plan or in this Award Agreement (unless the context indicates otherwise).

1.             Specific Terms.  This Option shall have, and be interpreted according to, the following terms, subject to the provisions of the Plan in all instances:

Your Name:
Type of Stock Option:	o   Incentive Stock Option (ISO)(1)
		o   Non-Incentive Stock Option(2)
Number of Shares subject to Option:
Option Exercise Price per Share:
Grant Date:

(1)           If you directly or indirectly own more than 10% of the voting power of all classes of stock of the Company or of any Subsidiary, then the term of your ISO cannot exceed 5 years and the exercise price must be at least 110% of the Fair Market Value per Share on the Grant Date (100% for any other employee who is receiving ISO awards). Only employees may receive ISOs.

(2)           The exercise price of a non-ISO must be at least 100% of the Fair Market Value of the underlying Shares.

Capital Trust, Inc. 2007 Long-Term Incentive Plan

Stock Option Award Agreement

Vesting Schedule:	(Establishes your rights to exercise this Option with respect to the Number of Shares stated above, subject to acceleration per Section 2 below and to any shareholder approval requirement set forth in the Plan.)
	o	% on Grant Date.
	o	% on each of the first      (#) annual (_quarterly/__monthly) anniversary dates of your Continuous Service after the Grant Date.
Lifetime Transfer:	o	Allowed pursuant to Section 8 below only for Non-Incentive Stock Option.
Expiration Date:	o	years after Grant Date; or
	o	10 years after Grant Date

2.             Accelerated Vesting; Change in Corporate Control.  To the extent you have not previously vested in your rights with respect to this Award Agreement, your Option will become -

o100% vested if your Continuous Service ends due to your death or “disability” within the meaning of Section 409A of the Code;

o100% vested if your Continuous Service ends due to an Involuntary Termination that occurs within the one-year period following a Change in Control.

3.             Term of Option.  The term of the Option will expire at 5:00 p.m. (E.D.T. or E.S.T., as applicable) on the Expiration Date. 

4.             Manner of Exercise.  The Option shall be exercised in the manner set forth in the Plan, using the exercise form attached hereto as Exhibit C.  The amount of Shares for which the Option may be exercised is cumulative; that is, if you fail to exercise the Option for all of the Shares vested under the Option during any period set forth above, then any Shares subject to the Option that are not exercised during such period may be exercised during any subsequent period, until the expiration or termination of the Option pursuant to Sections 3 and 6 of this Award Agreement and the terms of the Plan.  Fractional Shares may not be purchased.

5.             Special ISO Provisions.  If designated as an ISO, this Option shall be treated as an ISO to the extent allowable under Section 422 of the Code, and shall otherwise be treated as a Non-ISO.  If you sell or otherwise dispose of Shares acquired upon the exercise of an ISO within 1 year from the date such Shares were acquired or 2 years from the Grant Date, you agree to deliver a written report to the Company within 10 days following the sale or other disposition of such Shares detailing the net proceeds of such sale or disposition.

6.             Termination of Continuous Service.  If your Continuous Service with the Company is terminated for any reason, this Option shall terminate on the date on which you cease to have any right to exercise the Option pursuant to the terms and conditions set forth in Section 6 of the Plan.

7.             Designation of Death Beneficiary.  Notwithstanding anything to the contrary contained herein or in the Plan, following the execution of this Award Agreement, you may expressly designate a death beneficiary (the “Death Beneficiary”) to your interest in the Option awarded hereby.  You shall designate the Death Beneficiary by completing and executing a designation of death beneficiary agreement substantially in the form attached hereto as Exhibit D (the “Designation of Death Beneficiary”) and delivering an executed copy of the Designation of Death Beneficiary to the Company.  In the absence of a valid death beneficiary designation, your estate will be treated as your death beneficiary of this Option in the event of your death while it is outstanding.

8.             Restrictions on Transfer of Awards. This Award Agreement may not be sold, pledged, or otherwise transferred without the prior written consent of the Committee.  Notwithstanding the foregoing, you may transfer this Option (if allowed under Section 1 for a Non-Incentive Stock Option) —

(i)by instrument to an inter vivos or testamentary trust (or other entity) in which each beneficiary is a permissible gift recipient, as such is set forth in subsection (ii) of this Section, or

(ii)by gift to charitable institutions or by gift or transfer for consideration to any of the following relatives of yours (or to an inter vivos trust, testamentary trust or other entity primarily for the benefit of or an entity, the voting interests of which are primarily owned by the following relatives of yours): any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, domestic partner, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include adoptive relationships.

Any transferee of your rights shall succeed and be subject to all of the terms of this Award Agreement and the Plan.

9.             Conditions on Issuance of Shares; Transfer Restrictions.  Notwithstanding any other provision of the Plan or of this Award Agreement: (i) the Committee may condition your receipt of Shares on your execution of a shareholder agreement imposing terms generally applicable to other similarly-situated employee-shareholders; and (ii) any Shares issued pursuant to this Award Agreement shall be non-transferable.

10.           Taxes.  By signing this Award Agreement, you acknowledge that you shall be solely responsible for the satisfaction of any taxes that may arise (including taxes arising under Sections 409A or 4999 of the Code), and that the Company shall have no obligation whatsoever to pay such taxes.

11.           Notices.  Any notice or communication required or permitted by any provision of this Award Agreement to be given to you shall be in writing and shall be delivered electronically,

personally, or by certified mail, return receipt requested, addressed to you at the last address that the Company had for you on its records.  Each party may, from time to time, by notice to the other party hereto, specify a new e-mail or home address for delivery of notices relating to this Award Agreement.  Any such notice shall be deemed to be given as of the date such notice is personally delivered or properly mailed.

12.           Binding Effect.  Except as otherwise provided in this Award Agreement or in the Plan, every covenant, term, and provision of this Award Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legatees, legal representatives, successors, transferees, and assigns.

13.           Modifications.  This Award Agreement may be modified or amended at any time, in accordance with Section 15 of the Plan and provided that you must consent in writing to any modification that adversely and materially affects your rights or obligations under this Award Agreement (with such an affect being presumed to arise from a modification that would trigger a violation of Section 409A of the Code).

14.           Headings.  Section and other headings contained in this Award Agreement are for reference purposes only and are not intended to describe, interpret, define or limit the scope or intent of this Award Agreement or any provision hereof.

15.           Severability.  Every provision of this Award Agreement and of the Plan is intended to be severable.  If any term hereof is illegal or invalid for any reason, such illegality or invalidity shall not affect the validity or legality of the remaining terms of this Award Agreement.

16.           Counterparts.  This Award Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument.

17.           Plan Governs.  By signing this Award Agreement, you acknowledge that you have received a copy of the Plan and that your Award Agreement is subject to all the provisions contained in the Plan, the provisions of which are made a part of this Award Agreement and your Option is subject to all interpretations, amendments, rules and regulations which from time to time may be promulgated and adopted pursuant to the Plan.  In the event of a conflict between the provisions of this Award Agreement and those of the Plan, the provisions of the Plan shall control.

18.           Investment Purposes. By executing this Award Agreement, you represent and warrant that any Shares issued to you pursuant to your Options will be held for investment purposes only for your own account, and not with a view to, for resale in connection with, or with an intent in participating directly or indirectly in, any distribution of such Shares within the meaning of the Securities Act of 1933, as amended.

19.           Not a Contract of Employment.  By executing this Award Agreement you acknowledge and agree that (i) any person who is terminated before full vesting of an award, such as the one granted to you by this Award Agreement, could claim that he or she was terminated to preclude vesting; (ii) you promise never to make such a claim; (iii) nothing in this Award Agreement or the Plan confers on you any right to continue an employment, service or consulting relationship with

the Company, nor shall it affect in any way your right or the Company’s right to terminate your employment, service, or consulting relationship at any time, with or without Cause; and (iv) the Company would not have granted this Option to you but for these acknowledgements and agreements.

20.           Employment Agreement Provision  [OPTION IF EMPLOYEE HAS AN EMPLOYMENT AGREEMENT]  By executing this Option, you acknowledge and agree that your rights upon a termination of employment before full vesting of this Option will be determined under Section           of your employment agreement with the Company and                 , dated as of                        , 20      .

21.           Securities Law Restrictions.  Regardless of whether the offering and sale of Options or Shares under the Plan have been registered under the Securities Act of 1933, as amended (the “Securities Act”), or have been registered or qualified under the securities laws of any state, the Company at its discretion may impose restrictions upon the sale, pledge or other transfer of such Shares (including the placement of appropriate legends on stock certificates or the imposition of stop-transfer instructions) if, in the judgment of the Company, such restrictions are necessary or desirable in order to achieve compliance with the Securities Act or the securities laws of any state or any other law or to enforce the intent of this Option.

22.           Long-term Consideration for Award.  [OPTIONAL] The terms and conditions set forth in Exhibit E are hereby incorporated by reference and made an integral part of this Award Agreement.  An invalidation of all or part of Exhibit E, or your commencement of litigation to invalidate, modify, or alter the terms and conditions set forth in Exhibit E, shall cause this Option to become null, void, and unenforceable.

23.           Governing Law.  The laws of the State of New York shall govern the validity of this Award Agreement, the construction of its terms, and the interpretation of the rights and duties of the parties hereto.

[Signature page follows]

BY YOUR SIGNATURE BELOW, along with the signature of the Company’s representative, you and the Company agree that the Option is hereby awarded under and governed by the terms and conditions of this Award Agreement and the Plan.

CAPITAL TRUST, INC.
By:
	Name:
	Title:
PARTICIPANT
The undersigned Participant hereby accepts the terms of this Award Agreement and the Plan.
By:
Name of Participant:

EXHIBIT A

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Plan Document

EXHIBIT B

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Plan Prospectus

EXHIBIT C

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Form of Exercise of Stock Option Award Agreement

Capital Trust, Inc.

Attention:

Dear Sir or Madam:

The undersigned elects to exercise his/her Incentive Stock Option to purchase            shares of Common Stock of Capital Trust, Inc. (the “Company”) under and pursuant to a Stock Option Agreement dated as of                               .

1.             o  Delivered herewith is a certified or bank cashier’s or teller’s check and/or shares of Common Stock held by the undersigned for at least six months*, valued at the closing sale price of the stock on the business day prior to the date of exercise, as follows:

$		in cash or check
$		in the form of            shares of Common Stock,
	valued at $                   per share
$		Total

2.             o  Delivered herewith are irrevocable instructions to a broker approved by the Company to deliver promptly to the Company the amount of sale or loan proceeds to pay the exercise price.**

If method 1 is chosen, the name or names to be on the stock certificate or certificates and the address and Social Security Number of such person(s) is as follows:

Name:

Address:

Social Security Number

	Very truly yours,
Date	Optionee

*The Committee may waive the six months’ requirement in its discretion.

**The Committee must approve this method in writing before your election

EXHIBIT D

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Designation of Death Beneficiary

In connection with the Option designated below that I have received pursuant to the Plan, I hereby designate the person specified below as the beneficiary upon my death of my interest in Awards as defined in the Company’s 2007 Long-Term Incentive Plan (the “Plan”). This designation shall remain in effect until revoked in writing by me.

Name of Death Beneficiary:

Address:

Social Security No.:

This death beneficiary designation relates to any and all of my rights under the following Award or Awards:

oany Award that I have received or ever receive under the Plan.

othe                                Award that I received pursuant to an award agreement dated                     ,            between myself and the Company.

I understand that this designation operates to entitle the above-named death beneficiary, in the event of my death, to any and all of my rights under the Award(s) designated above from the date this form is delivered to the Company until such date as this designation is revoked in writing by me, including by delivery to the Company of a written designation of death beneficiary executed by me on a later date. In the absence of a valid beneficiary designation, my estate will be treated as the death beneficiary of this Award in the event of my death while it is outstanding.

Date:
By:
	Name of Participant

Sworn to before me this

           day of                               , 200    

Notary Public

County of

State of

EXHIBIT E

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Long-Term Consideration and

Company Recovery for Breach

By signing and accepting your Award Agreement, you recognize and agree that the Company’s key consideration in granting this Award is securing your long-term commitment to serve as its            [include job title or description] who will advance and promote the Company’s business interests and objectives. Accordingly, you agree that this Award shall be subject to the terms and conditions set forth in Section 25 of the Plan (relating to the termination, rescission, and recapture if you violate certain commitments made therein to the Company), as well as to the following terms and conditions as material and indivisible consideration for this Award:

(a)           Fiduciary Duty. During your employment with the Company you shall devote your full energies, abilities, attention and business time to the performance of your job responsibilities and shall not engage in any activity which conflicts or interferes with, or in any way compromises, your performance of such responsibilities.

(b)           Confidential Information. You recognize that by virtue of your employment with the Company, you will be granted otherwise prohibited access to confidential information and proprietary data which are not known, and not readily accessible to the Company’s competitors. This information (the “Confidential Information”) includes, but is not limited to, current and prospective customers; the identity of key contacts at such customers; customers’ particularized preferences and needs; marketing strategies and plans; financial data; personnel data; compensation data; proprietary procedures and processes; and other unique and specialized practices, programs and plans of the Company and its customers and prospective customers. You recognize that this Confidential Information constitutes a valuable property of the Company, developed over a significant period of time and at substantial expense. Accordingly, you agree that you shall not, at any time during or after your employment with the Company, divulge such Confidential Information or make use of it for your own purposes or the purposes of any person or entity other than the Company.

(c)           Non-Solicitation of Customers. You recognize that by virtue of your employment with the Company you will be introduced to and involved in the solicitation and servicing of existing customers of the Company and new customers obtained by the Company during your employment. You understand and agree that all efforts expended in soliciting and servicing such customers shall be for the permanent benefit of the Company. You further agree that during your employment with the Company you will not engage in any conduct which could in any way jeopardize or disturb any of the Company’s customer relationships. You also recognize the Company’s legitimate interest in protecting, for a reasonable period of time after your employment with the Company, the Company’s customers. Accordingly, you agree that, for a period beginning on the date hereof and ending one (1) year after termination of your employment with the Company, regardless of the reason for such termination, you shall not, directly or indirectly, without the prior written consent of the Chairman of the Company, market, offer, sell or otherwise furnish any products or services similar to, or otherwise competitive with, those offered by the Company to any customer of the Company.

(d)           Non-Solicitation of Employees. You recognize the substantial expenditure of time and effort which the Company devotes to the recruitment, hiring, orientation, training and retention of its employees. Accordingly, you agree that, for a period beginning on the date hereof and ending two (2) years after termination of your employment with the Company, regardless of the reason for such termination, you shall not, directly or indirectly, for yourself or on behalf of any other person or entity, solicit, offer employment to, hire or otherwise retain the services of any employee of the Company.

(e)           Non-Competition. <IF DESIRED, PHJW TO CUSTOMIZE TO CONFORM WITH APPLICABLE LAW.>

(f)            Survival of Commitments; Potential Recapture of Award and Proceeds. You acknowledge and agree that the terms and conditions of this Section regarding confidentiality and non-solicitation [and non-competition] shall survive both (i) the termination of your employment with the Company for any reason, and (ii) the termination of the Plan, for any reason. You acknowledge and agree that the grant of an Option in this Award Agreement is just and adequate consideration for the survival of the restrictions set forth herein, and that the Company may pursue any or all of the following remedies if you either violate the terms of this Section or succeed for any reason in invalidating any part of it (it being understood that the invalidity of any term hereof would result in a failure of consideration for the Award):

(i)declaration that the Award is null and void and of no further force or effect;

(ii)recapture of any cash paid or Shares issued to you, or any designee or beneficiary of you, pursuant to the Award;

(iii)recapture of the proceeds, plus reasonable interest, with respect to any Shares that are both issued pursuant to this Award and sold or otherwise disposed of by you, or any designee or beneficiary of you.

The remedies provided above are not intended to be exclusive, and the Company may seek such other remedies as are provided by law, including equitable relief.

(g)           Acknowledgement. You acknowledge and agree that your adherence to the foregoing requirements will not prevent you from engaging in your chosen occupation and earning a satisfactory livelihood following the termination of your employment with the Company.

EX-10.7

Exhibit 10.7

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

SAR Award Agreement

Award No.           

You (the “Participant”) are hereby awarded Share Appreciation Rights subject to the terms and conditions set forth in this agreement (the “Award Agreement” or “Award”) and in the Capital Trust, Inc. 2007 Long-Term Incentive Plan (“Plan”). A copy of the Plan is attached as Exhibit A. A summary of the Plan appears in its Prospectus, which is attached as Exhibit B. You should carefully review these documents, and consult with your personal financial advisor, before exercising this Award. This Award is conditioned on your execution of this Award Agreement.

By executing this Award Agreement, you agree to be bound by all of the Plan’s terms and conditions as if they had been set out verbatim below. In addition, you recognize and agree that all determinations, interpretations, or other actions respecting the Plan and this Award Agreement will be made by the Board of Directors (the “Board”) of Capital Trust, Inc. (the “Company”) or any Committee appointed by the Board to administer the Plan, and shall (in the absence of manifest bad faith or fraud) be final, conclusive and binding on all parties, including you and your successors in interest. Capitalized terms are defined in the Plan or in this Award Agreement.

1.Specific Terms. This portion of your Award is being granted pursuant to Section 7 of the Plan, and shall have the following terms:

Name of Participant
Date of Award
Number of Shares measuring the value of this SAR	Shares (“SAR Shares”).
Base Price for SARs	$          .           per Share.
Vesting	At the rate of     % on each of the next        [monthly] [quarterly] [annual] anniversaries of the Award Date; subject to acceleration as provided in the Plan and in Section 2 below, and to your Continuous Service not ending before the vesting date.
Lifetime Transfers	o Allowed in accordance with Section 12(b) of the Plan. o Not allowed.

2.Accelerated Vesting; Change in Corporate Control. To the extent you have not previously vested in your rights with respect to this Award, your Award will become –

(a)100% vested if your Continuous Service ends due to your death or “disability” within the meaning of Section 409A of the Code;

(b)100% if your Continuous Service ends due to an Involuntary Termination that occurs within the twelve months following a Change in Control.

3.Vesting and Exercise of Your Award. No Shares will be issued and no cash will be paid to you before your Award vests in accordance with Section 1 or 2 above and is exercised. To the extent you have vested in this Award, you may exercise it at any time and from time to time in accordance with the Plan, using the exercise form attached hereto as Exhibit C. The amount you receive upon exercise will equal the product of –

(a)the number of SAR Shares that you designate for exercise, and

(b)the excess of 100% of the Fair Market Value of a Share on the date of exercise over the Base Price stated in Section 1 above

4.Form of Payments to You. The Company will make any payment to you under this Award in the form of Shares, with cash paid in lieu of fractional Shares. Any Shares that you receive will be free from vesting restrictions (but subject to such legends as the Company determines to be appropriate). Notwithstanding the foregoing, the Company will not issue Share certificates to you unless you have made arrangements satisfactory to the Compensation Committee to satisfy any applicable tax withholding obligations. You may satisfy minimum withholding requirements through the surrender of Shares that are both subject to this Award and that have a Fair Market  Value equal to the minimum statutory tax withholding associated with the Shares giving rise to the taxable income.

5.Failure of Vesting Restrictions. By executing this Award, you acknowledge and agree that if your Continuous Service terminates under circumstances that do not result in accelerated vesting pursuant to Section 2 above, you will irrevocably forfeit any and all unvested rights under this Award, and this Award will immediately become null, void, and unenforceable.

6.Investment Purposes. By executing this Award, you represent and warrant to the Company that any Shares issued to you pursuant to this Award will be held for investment purposes only for your own account and not with a view to, for resale in connection with, or with an intent of participating directly or indirectly in, any distribution of such Shares within the meaning of the Securities Act of 1933, as amended.

7.Designation of Death Beneficiary. Notwithstanding anything to the contrary contained herein or in the Plan, following the execution of this Award Agreement, you may expressly designate a death beneficiary (the “Beneficiary”) to your interest in the SAR awarded hereby. You shall designate the Death Beneficiary by completing and executing a designation of death beneficiary agreement substantially in the form attached hereto as Exhibit D (the “Designation of Death Beneficiary”) and delivering an executed copy of the Designation of Death Beneficiary to the Company. In the absence of a valid death beneficiary designation, your estate will be treated as your death beneficiary of this Award in the event of your death while it is outstanding.

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8.Restriction of Transfer. If lifetime transfers are allowed under Section 1, your rights under this Award Agreement may not be sold, pledged, or otherwise transferred without the prior written consent of the Compensation Committee. Notwithstanding the foregoing, you may transfer this Award Agreement.

(i)by instrument to an inter vivos or testamentary trust (or other entity) in which each beneficiary is a permissible gift recipient, as such is set forth in subsection (ii) of this Section, or

(ii)by gift to charitable institutions or by gift or transfer for consideration to any of the following relatives of yours (or to an inter vivos trust, testamentary trust or other entity primarily for the benefit of the following relatives of yours): any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, domestic partner, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include adoptive relationships.

Any transferee of your rights shall succeed to and be subject to all the terms of this Award Agreement and the Plan.

9.Conditions on Issuance of Shares; Transfer Restrictions. Notwithstanding any other provision of the Plan or of this Award Agreement: (i) the Committee may condition your receipt of Shares on your execution of a shareholder agreement imposing terms generally applicable to other similarly-situated employee-shareholders; and (ii) any Shares issued pursuant to this Award Agreement shall be non-transferable.

10.Taxes. Except to the extent otherwise specifically provided in another document establishing contractual rights for you, by signing this Award Agreement, you acknowledge that you shall be solely responsible for the satisfaction of any taxes that may arise pursuant to this Award (including taxes arising under Sections 409A or 4999 of the Code), and that neither the Company nor the Administrator shall have any obligation whatsoever to pay such taxes or otherwise indemnify or hold you harmless from any or all of such taxes.

11.Notices. Any notice or communication required or permitted by any provision of this Award Agreement to be given to you shall be in writing and shall be delivered electronically, personally, or sent by certified mail, return receipt requested, addressed to you at the last address that the Company had for you on its records. Each party may, from time to time, by notice to the other party hereto, specify a new address for delivery of notices relating to this Award Agreement. Any such notice shall be deemed to be given as of the date such notice is personally delivered or properly mailed.

12.Binding Effect. Except as otherwise provided in this Award Agreement or in the Plan, every covenant, term, and provision of this Award Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legatees, legal representatives, successors, transferees, and assigns.

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13.Modifications. This Award Agreement may be modified or amended at any time, in accordance with Section 15 of the Plan and provided that you must consent in writing to any modification that adversely and materially affects any rights or obligations under this Award Agreement (with such an affect being presumed to arise from a modification that would trigger a Section 409A violation of the Code).

14.Headings. Section and other headings contained in this Award Agreement are for reference purposes only and are not intended to describe, interpret, define or limit the scope or intent of this Award Agreement or any provision hereof.

15.Severability. Every provision of this Award Agreement and of the Plan is intended to be severable. If any term hereof is illegal or invalid for any reason, such illegality or invalidity shall not affect the validity or legality of the remaining terms of this Award Agreement.

16.Counterparts. This Award Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument.

17.Plan Governs. By signing this Award Agreement, you acknowledge that you have received a copy of the Plan and that your Award Agreement is subject to all the provisions contained in the Plan, the provisions of which are made a part of this Award Agreement and your Award is subject to all interpretations, amendments, rules and regulations which from time to time may be promulgated and adopted pursuant to the Plan. In the event of a conflict between the provisions of this Award Agreement and those of the Plan, the provisions of the Plan shall control.

18.Not a Contract of Employment. By executing this Award Agreement you acknowledge and agree that (i) any person who is terminated before full vesting of an award, such as the one granted to you by this Award, could claim that you were terminated to preclude vesting; (ii) you promise never to make such a claim; (iii) nothing in this Award Agreement or the Plan confers on you any right to continue an employment, service or consulting relationship with the Company, nor shall it affect in any way your right or the Company’s right to terminate your employment, service, or consulting relationship at any time, with or without Cause; and (iv) the Company would not have granted this Award to you but for these acknowledgements and agreements.

19.Employment Agreement Provision  [OPTION IF EMPLOYEE HAS AN EMPLOYMENT AGREEMENT]  By executing this Award, you acknowledge and agree that your rights upon a termination of employment before full vesting of this Award will be determined under Section            of your employment agreement with the Company and                                                 , dated as of                                        , 20    .

20.Securities Law Restrictions. Regardless of whether the offering and sale of SARs or Shares under the Plan have been registered under the Securities Act of 1933, as amended (the “Securities Act”), or have been registered or qualified under the securities laws of any state, the Company at its discretion may impose restrictions upon the sale, pledge or other transfer of such Shares (including the placement of appropriate legends on stock certificates

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or the imposition of stop-transfer instructions) if, in the judgment of the Company, such restrictions are necessary or desirable in order to achieve compliance with the Securities Act or the securities laws of any state or any other law or to enforce the intent of this Award.

21.Long-term Consideration for Award. [OPTIONAL] The terms and conditions set forth in Exhibit E are hereby incorporated by reference and made an integral part of this Award Agreement. An invalidation of all or part of Exhibit E, or your commencement of litigation to invalidate, modify, or alter the terms and conditions set forth in Exhibit E, shall cause this Award to become null, void, and unenforceable.

22.Governing Law. The laws of the State of New York shall govern the validity of this Award Agreement, the construction of its terms, and the interpretation of the rights and duties of the parties hereto.

BY YOUR SIGNATURE BELOW, along with the signature of the Company’s representative, you and the Company agree that this Award is being made under and governed by the terms and conditions of this Award and the Plan.

CAPITAL TRUST, INC.
By:
	Name:
	Title:
PARTICIPANT
The undersigned Participant hereby accepts the terms of this Award and the Plan.
By:
	Name of Participant:

5

EXHIBIT A

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Plan Document

EXHIBIT B

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Plan Prospectus

EXHIBIT C

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Form of Share Appreciation Rights Exercise

Attention:Capital Trust, Inc.

410 Park Avenue

New York, NY 10022

Dear Sir or Madam:

The undersigned elects to exercise his/her Share Appreciation Rights with respect to            shares of Common Stock of Capital Trust, Inc. (the “Company”) under and pursuant to an SAR Agreement dated as of                             .

The undersigned recognizes and agrees that the Company will satisfy its obligations arising from this exercise notice through issuing shares of its Common Stock (net of  shares of Common Stock having a Fair Market Value equal to the minimum statutory taxes and withholding due; except to the extent the undersigned pays cash herewith to settle such obligations). The name or names to be on the stock certificate or certificates and the address and Social Security Number of such person(s) shall be as follows:

Name:                                                                                                                                                         & nbsp;                                           

Address:                                                                                                                                                                           &nb sp;      

Social Security Number                                                                                                                                                           

	Very truly yours,
Date		SAR Holder

EXHIBIT D

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Designation of Death Beneficiary

In connection with the Awards designated below that I have received pursuant to the Plan, I hereby designate the person specified below as the death beneficiary upon my death of my interest in Awards as defined in the Company’s 2007 Long-Term Incentive Plan (the “Plan”). This designation shall remain in effect until revoked in writing by me.

Name of Death Beneficiary:

Address:

Social Security No.:

This death beneficiary designation relates to any and all of my rights under the following Award or Awards:

o           any Award that I have received or ever receive under the Plan.

othe                                    Award that I received pursuant to an award agreement dated                        ,          between myself and the Company.

I understand that this designation operates to entitle the above named death beneficiary, in the event of my death, to any and all of my rights under the Award(s) designated above from the date this form is delivered to the Company until such date as this designation is revoked in writing by me, including by delivery to the Company of a written designation of death beneficiary executed by me on a later date. In the absence of a valid death beneficiary designation, my estate will be treated as the beneficiary of this Award in the event of my death while it is outstanding.

	Date:
	By:
		Name of Participant
Sworn to before me this
day of                         , 200
Notary Public
County of
State of

EXHIBIT E

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Long-Term Consideration and

Company Recovery for Breach

By signing and accepting your Award Agreement, you recognize and agree that the Company’s key consideration in granting this Award is securing your long-term commitment to serve as its                   [include job title or description] who will advance and promote the Company’s business interests and objectives. Accordingly, you agree that this Award shall be subject to the terms and conditions set forth in Section 25 of the Plan (relating to the termination, rescission, and recapture if you violate certain commitments made therein to the Company), as well as to the following terms and conditions as material and indivisible consideration for this Award:

(a)           Fiduciary Duty. During your employment with the Company you shall devote your full energies, abilities, attention and business time to the performance of your job responsibilities and shall not engage in any activity which conflicts or interferes with, or in any way compromises, your performance of such responsibilities.

(b)           Confidential Information. You recognize that by virtue of your employment with the Company, you will be granted otherwise prohibited access to confidential information and proprietary data which are not known, and not readily accessible to the Company’s competitors. This information (the “Confidential Information”) includes, but is not limited to, current and prospective customers; the identity of key contacts at such customers; customers’ particularized preferences and needs; marketing strategies and plans; financial data; personnel data; compensation data; proprietary procedures and processes; and other unique and specialized practices, programs and plans of the Company and its customers and prospective customers. You recognize that this Confidential Information constitutes a valuable property of the Company, developed over a significant period of time and at substantial expense. Accordingly, you agree that you shall not, at any time during or after your employment with the Company, divulge such Confidential Information or make use of it for your own purposes or the purposes of any person or entity other than the Company.

(c)           Non-Solicitation of Customers. You recognize that by virtue of your employment with the Company you will be introduced to and involved in the solicitation and servicing of existing customers of the Company and new customers obtained by the Company during your employment. You understand and agree that all efforts expended in soliciting and servicing such customers shall be for the permanent benefit of the Company. You further agree that during your employment with the Company you will not engage in any conduct which could in any way jeopardize or disturb any of the Company’s customer relationships. You also recognize the Company’s legitimate interest in protecting, for a reasonable period of time after your employment with the Company, the Company’s customers. Accordingly, you agree that, for a period beginning on the date hereof and ending one (1) year after termination of your employment with the Company, regardless of the reason for such termination, you shall not, directly or indirectly, without the prior written consent of the Chairman of the Company, market, offer, sell or otherwise furnish

any products or services similar to, or otherwise competitive with, those offered by the Company to any customer of the Company.

(d)           Non-Solicitation of Employees. You recognize the substantial expenditure of time and effort which the Company devotes to the recruitment, hiring, orientation, training and retention of its employees. Accordingly, you agree that, for a period beginning on the date hereof and ending two (2) years after termination of your employment with the Company, regardless of the reason for such termination, you shall not, directly or indirectly, for yourself or on behalf of any other person or entity, solicit, offer employment to, hire or otherwise retain the services of any employee of the Company.

(e)           Non-Competition. <IF DESIRED, PHJW TO CUSTOMIZE TO CONFORM WITH APPLICABLE LAW.>

(f)            Survival of Commitments; Potential Recapture of Award and Proceeds. You acknowledge and agree that the terms and conditions of this Section regarding confidentiality and non-solicitation [and non-competition] shall survive both (i) the termination of your employment with the Company for any reason, and (ii) the termination of the Plan, for any reason. You acknowledge and agree that the grant of Share Appreciation Rights in this Award Agreement is just and adequate consideration for the survival of the restrictions set forth herein, and that the Company may pursue any or all of the following remedies if you either violate the terms of this Section or succeed for any reason in invalidating any part of it (it being understood that the invalidity of any term hereof would result in a failure of consideration for the Award):

(i)declaration that the Award is null and void and of no further force or effect;

(ii)recapture of any cash paid or Shares issued to you, or any designee or beneficiary of you, pursuant to the Award;

(iii)recapture of the proceeds, plus reasonable interest, with respect to any Shares that are both issued pursuant to this Award and sold or otherwise disposed of by you, or any designee or beneficiary of you.

The remedies provided above are not intended to be exclusive, and the Company may seek such other remedies as are provided by law, including equitable relief.

(g)           Acknowledgement. You acknowledge and agree that your adherence to the foregoing requirements will not prevent you from engaging in your chosen occupation and earning a satisfactory livelihood following the termination of your employment with the Company.

EX-10.8

Exhibit 10.8

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Restricted Share Unit Award Agreement

Award No.               

You are hereby awarded Restricted Share Units (the “RSUs”) subject to the terms and conditions set forth in this Restricted Share Unit Award Agreement (“Award Agreement”), and in the Capital Trust, Inc. 2007 Long-Term Incentive Plan (the “Plan”), which is attached as Exhibit A. A summary of the Plan appears in its Prospectus, which is attached as Exhibit B. You should carefully review these documents, and consult with your personal financial advisor, before exercising this Award. This Award is conditioned on your execution of this Award Agreement.

By executing this Award Agreement, you agree to be bound by all of the Plan’s terms and conditions as if they had been set out verbatim below. In addition, you recognize and agree that all determinations, interpretations, or other actions respecting the Plan and this Award Agreement will be made by the Board of Directors (the “Board”) of Capital Trust, Inc. (the “Company”), or any committee appointed by the Board to administer the Plan, and shall (in the absence of manifest bad faith or fraud) be final, conclusive and binding upon all parties, including you, your heirs and representatives. Capitalized terms are defined in the Plan or in this Award Agreement.

1.             Specific Terms. Your RSUs have the following terms:

Name of Participant
Number  of RSUs Subject to Award
Purchase Price per Share (if applicable)	Not applicable.
Award Date
Vesting	At the rate of         % on each of the next [        annual] anniversaries of the Award Date; subject to acceleration as provided in the Plan and in Section 2 below, and to your Continuous Service not ending before vesting.
Deferral Election	o Allowed in accordance with Section 8(g) and 9 of the Plan, according to the terms and conditions set forth in any deferral election and distribution election forms that the Committee may provide at your request. o Not allowed.

2.             Accelerated Vesting; Change in Corporate Control. To the extent you have not previously vested in your rights with respect to this Award, your Award will become –

o100% vested if your Continuous Service ends due to your death or “disability” within the meaning of Section 409A of the Code;

o100% vested if your Continuous Service with the Company ends due to an involuntary termination that occurs within the twelve months following a Change in Control.

3.             Termination of Continuous Service. This Award shall be canceled and become automatically null and void immediately after termination of your Continuous Service for any reason, but only to the extent you have not become vested, pursuant to the foregoing terms, on or at the time your Continuous Service ends.

4.             Satisfaction of Vesting Restrictions; Tax Withholding. No Shares will be issued before you complete the requirements that are necessary for you to vest in the Shares underlying your RSUs. As soon as practicable after the later of (i) the date on which your RSUs vest in whole or in part or (ii) the date or dates set forth in your deferral and distribution election forms (if allowed under Section 1 and made by you), the Company will issue to you or your duly-authorized transferee, free from vesting restrictions (but subject to such legends as the Company determines to be appropriate), one Share for each vested RSU with such number of Shares issued to you being reduced by a number of Shares having a fair market value equal to the minimum statutory tax withholding required in connection with the vesting of your RSUs, with cash being withheld from your pay for any additional withholding and employment taxes that applicable tax laws may require. Certificates shall not be delivered to you unless all applicable employment and tax-withholding obligations have been satisfied. Fractional shares will not be issued, and cash will be paid in lieu thereof.

5.             Dividends. Whenever Shares are delivered to you or your duly-authorized transferee pursuant to the vesting of the Shares underlying your RSUs, you or your duly-authorized transferee shall also be entitled to receive, with respect to each Share issued, (i) a number of Shares equal to the stock dividends which were declared and paid to the holders of Shares between the Grant Date and the date such Share is issued, and (ii) a number of Shares having a Fair Market Value (on the date of each cash dividend payment date) equal to any cash dividends that were paid to the holders of Shares based on a record date between the Grant Date and the date such Share is issued. To the extent that your Continuous Service ends before vesting of the shares, you will forfeit all dividends (whether paid in cash or in stock) attributable to all such shares.

6.             Designation of Death Beneficiary. Notwithstanding anything to the contrary contained herein or in the Plan, following the execution of this Award Agreement, you may expressly designate a death beneficiary (the “Beneficiary”) to your interest, if any, in this Award and any underlying Shares. You shall designate the Beneficiary by completing and executing a designation of death beneficiary agreement substantially in the form attached hereto as Exhibit C (the “Designation of Death Beneficiary”) and delivering an executed copy of the Designation of Death Beneficiary to the Company. In the absence of a valid death beneficiary designation, your estate will be treated as  your beneficiary of this Award in the event of your death while it is outstanding.

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7.             Restrictions on Transfer of Award. Your rights under this Award Agreement may not be sold, pledged, or otherwise transferred without the prior written consent of the Committee.

8.             Income Taxes and Deferred Compensation. You are solely responsible and liable for the satisfaction of all taxes and penalties that may arise in connection with this Award (including any taxes arising under Section 409A of the Code), and the Company shall not have any obligation to indemnify or otherwise hold you harmless from any or all of such taxes. The Committee has the discretion to unilaterally interpret this Award and the Plan in a manner that (i) conforms with the requirements of Section 409A of the Code, (ii) that voids any election of yours to the extent it would violate Section 409A of the Code with respect to compensation that is deferred and that vests after December 31, 2004, and (iii) for any distribution election that would violate Section 409A of the Code, to make distributions pursuant to the Award at the earliest to occur of a distribution event that is allowable under Section 409A of the Code or any distribution event that is both allowable under Section 409A of the Code and is elected by you, subject to any valid second election to defer, provided that the Committee permits second elections to defer in accordance with Section 409A(a)(4)(C). The Committee shall have the sole discretion to interpret the requirements of the Code, including Section 409A, for purposes of the Plan and this Award Agreement.

9.             Notices. Any notice or communication required or permitted by any provision of this Award Agreement to be given to you shall be in writing and shall be delivered electronically,  personally, or sent by certified mail, return receipt requested, addressed to you at the last address that the Company had for you on its records. Each party may, from time to time, by notice to the other party hereto, specify a new address for delivery of notices relating to this Award Agreement. Any such notice shall be deemed to be given as of the date such notice is personally delivered or properly mailed.

10.           Binding Effect. Except as otherwise provided in this Award Agreement or in the Plan, every covenant, term, and provision of this Award Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legatees, legal representatives, successors, transferees, and assigns.

11.           Modifications. This Award Agreement may be modified or amended at any time, in accordance with Section 15 of the Plan and provided that you must consent in writing to any modification that adversely and materially affects your rights or obligations under this Award Agreement (with such an affect being presumed to arise from a modification that would trigger a violation of Section 409A of the Code).

12.           Headings. Section and other headings contained in this Award Agreement are for reference purposes only and are not intended to describe, interpret, define or limit the scope or intent of this Award Agreement or any provision hereof.

13.           Severability. Every provision of this Award Agreement and of the Plan is intended to be severable. If any term hereof is illegal or invalid for any reason, such illegality or invalidity shall not affect the validity or legality of the remaining terms of this Award Agreement.

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14.           Counterparts. This Award Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument.

15.           Plan Governs. By signing this Award Agreement, you acknowledge that you have received a copy of the Plan and that your Award Agreement is subject to all the provisions contained in the Plan, the provisions of which are made a part of this Award Agreement and your Award is subject to all interpretations, amendments, rules and regulations which from time to time may be promulgated and adopted pursuant to the Plan. In the event of a conflict between the provisions of this Award Agreement and those of the Plan, the provisions of the Plan shall control.

16.           Investment Purposes. By executing this Award, you represent and warrant to the Company that any Shares issued to you pursuant to your RSUs will be held for investment purposes only for your own account and not with a view to, for resale in connection with, or with an intent of participating directly or indirectly in, any distribution of such Shares within the meaning of the Securities Act of 1933, as amended.

17.           Not a Contract of Employment. By executing this Award Agreement you acknowledge and agree that (i) any person who is terminated before full vesting of an award, such as the one granted to you by this Award, could claim that he or she was terminated to preclude vesting; (ii) you promise never to make such a claim; (iii) nothing in this Award Agreement or the Plan confers on you any right to continue an employment, service or consulting relationship with the Company, nor shall it affect in any way your right or the rights of the Company, to terminate your employment, service, or consulting relationship at any time, with or without Cause; and (iv) the Company would not have granted this Award to you but for these acknowledgements and agreements.

18.           Employment Agreement Provision  [OPTION IF EMPLOYEE HAS AN EMPLOYMENT AGREEMENT]  By executing this Award, you acknowledge and agree that your rights upon a termination of employment before full vesting of this Award will be determined under Section            of your employment agreement with the Company and                                                 , dated as of                                        , 20    .

19.           Securities Law Restrictions. Regardless of whether the offering and sale of RSUs or Shares under the Plan have been registered under the Securities Act of 1933, as amended (the “Securities Act”), or have been registered or qualified under the securities laws of any state, the Company at its discretion may impose restrictions upon the sale, pledge or other transfer of such Shares (including the placement of appropriate legends on stock certificates or the imposition of stop-transfer instructions) if, in the judgment of the Company, such restrictions are necessary or desirable in order to achieve compliance with the Securities Act or the securities laws of any state or any other law or to enforce the intent of this Award.

20.           Long-term Consideration for Award. [OPTIONAL] The terms and conditions set forth in Exhibit D are hereby incorporated by reference and made an integral part of this Award Agreement. An invalidation of all or part of Exhibit D, or your commencement of litigation to invalidate, modify, or alter the terms and conditions set forth in Exhibit D, shall cause this Award to become null, void, and unenforceable.

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21.           Governing Law. The laws of the State of New York shall govern the validity of this Award Agreement, the construction of its terms, and the interpretation of the rights and duties of the parties hereto.

BY YOUR SIGNATURE BELOW, along with the signature of the Company’s representative, you and the Company agree that the RSUs are hereby awarded under and governed by the terms and conditions of this Award Agreement and the Plan.

CAPITAL TRUST, INC.
By:
	Name:
	Title:
PARTICIPANT
The undersigned Participant hereby accepts the terms of this Award Agreement and the Plan.
By:
Name of Participant:

5

EXHIBIT A

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Plan Document

EXHIBIT B

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Plan Prospectus

EXHIBIT C

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Designation of Death Beneficiary

In connection with Awards granted pursuant to the Plan, I hereby designate the person specified below as the beneficiary of my interest in Awards as defined in the Company’s 2007 Long-Term Incentive Plan (the “Plan”). This designation shall remain in effect until revoked in writing by me.

Name of Death Beneficiary:                                               

Address:                                                 

Social Security No.:                                                                   

This death beneficiary designation relates to any and all of my rights under the following Award or Awards:

o            any Award that I have received or will ever receive under the Plan.

othe                                    Award that I received pursuant to an award agreement dated                        ,          between myself and the Company.

I understand that this designation operates to entitle the above named death beneficiary, in the event of my death, to any and all of my rights under the Award(s) designated above from the date this form is delivered to the Company until such date as this designation is revoked in writing by me, including by delivery to the Company of a written designation of death beneficiary executed by me on a later date. In the absence of a valid death beneficiary designation, my estate will be treated as the beneficiary of this Award in the event of my death while it is outstanding.

	Date:
	By:
		Name of Participant
Sworn to before me this
day of                         , 200
Notary Public
County of
State of

EXHIBIT D

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Long-Term Consideration and

Company Recovery for Breach

By signing and accepting your Award Agreement, you recognize and agree that the Company’s key consideration in granting this Award is securing your long-term commitment to serve as its                   [include job title or description] who will advance and promote the Company’s business interests and objectives. Accordingly, you agree that this Award shall be subject to the terms and conditions set forth in Section 25 of the Plan (relating to the termination, rescission, and recapture if you violate certain commitments made therein to the Company), as well as to the following terms and conditions as material and indivisible consideration for this Award:

(a)           Fiduciary Duty. During your employment with the Company you shall devote your full energies, abilities, attention and business time to the performance of your job responsibilities and shall not engage in any activity which conflicts or interferes with, or in any way compromises, your performance of such responsibilities.

(b)           Confidential Information. You recognize that by virtue of your employment with the Company, you will be granted otherwise prohibited access to confidential information and proprietary data which are not known, and not readily accessible to the Company’s competitors. This information (the “Confidential Information”) includes, but is not limited to, current and prospective customers; the identity of key contacts at such customers; customers’ particularized preferences and needs; marketing strategies and plans; financial data; personnel data; compensation data; proprietary procedures and processes; and other unique and specialized practices, programs and plans of the Company and its customers and prospective customers. You recognize that this Confidential Information constitutes a valuable property of the Company, developed over a significant period of time and at substantial expense. Accordingly, you agree that you shall not, at any time during or after your employment with the Company, divulge such Confidential Information or make use of it for your own purposes or the purposes of any person or entity other than the Company.

(c)           Non-Solicitation of Customers. You recognize that by virtue of your employment with the Company you will be introduced to and involved in the solicitation and servicing of existing customers of the Company and new customers obtained by the Company during your employment. You understand and agree that all efforts expended in soliciting and servicing such customers shall be for the permanent benefit of the Company. You further agree that during your employment with the Company you will not engage in any conduct which could in any way jeopardize or disturb any of the Company’s customer relationships. You also recognize the Company’s legitimate interest in protecting, for a reasonable period of time after your employment with the Company, the Company’s customers. Accordingly, you agree that, for a period beginning on the date hereof and ending one (1) year after termination of your employment with the Company, regardless of the reason for such termination, you shall not, directly or indirectly, without

the prior written consent of the Chairman of the Company, market, offer, sell or otherwise furnish any products or services similar to, or otherwise competitive with, those offered by the Company to any customer of the Company.

(d)           Non-Solicitation of Employees. You recognize the substantial expenditure of time and effort which the Company devotes to the recruitment, hiring, orientation, training and retention of its employees. Accordingly, you agree that, for a period beginning on the date hereof and ending two (2) years after termination of your employment with the Company, regardless of the reason for such termination, you shall not, directly or indirectly, for yourself or on behalf of any other person or entity, solicit, offer employment to, hire or otherwise retain the services of any employee of the Company.

(e)           Non-Competition. <IF DESIRED, PHJW TO CUSTOMIZE TO CONFORM WITH APPLICABLE LAW.>

(f)            Survival of Commitments; Potential Recapture of Award and Proceeds. You acknowledge and agree that the terms and conditions of this Section regarding confidentiality and non-solicitation [and non-competition] shall survive both (i) the termination of your employment with the Company for any reason, and (ii) the termination of the Plan, for any reason. You acknowledge and agree that the grant of Restricted Share Units in this Award Agreement is just and adequate consideration for the survival of the restrictions set forth herein, and that the Company may pursue any or all of the following remedies if you either violate the terms of this Section or succeed for any reason in invalidating any part of it (it being understood that the invalidity of any term hereof would result in a failure of consideration for the Award):

(i)declaration that the Award is null and void and of no further force or effect;

(ii)recapture of any cash paid or Shares issued to you, or any designee or beneficiary of you, pursuant to the Award;

(iii)recapture of the proceeds, plus reasonable interest, with respect to any Shares that are both issued pursuant to this Award and sold or otherwise disposed of by you, or any designee or beneficiary of you.

The remedies provided above are not intended to be exclusive, and the Company may seek such other remedies as are provided by law, including equitable relief.

(g)           Acknowledgement. You acknowledge and agree that your adherence to the foregoing requirements will not prevent you from engaging in your chosen occupation and earning a satisfactory livelihood following the termination of your employment with the Company.

6

EX-10.9

Exhibit 10.9

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Deferral Election Agreement for Deferred Share Units

DEFERRAL AGREEMENT (the “Deferral Agreement”), made this          day of            ,           , by and between                                (the “Participant”), and Capital Trust, Inc. (the “Company”).

WHEREAS, the Company has established the Capital Trust, Inc. 2007 Long-Term Incentive Plan (the “Plan”), which is attached as Exhibit B, and the Participant is eligible to participate in said Plan;

WHEREAS, Section 9(a) of the Plan permits the Committee to authorize deferral compensation elections with any deferred compensation being credited to Deferred Share Units (“DSUs”) in accordance with Section 9 of the Plan;

NOW, THEREFORE, it is mutually agreed as follows:

1.Term of Election. This Deferral Agreement and the provisions of the Plan constitute the entire agreement between the parties, and will continue in full force and effect until, either you execute a superseding Deferral Agreement, you revoke the Deferral Agreement in a writing sent to and approved by the Committee, you cease service with the Company, or the Plan is terminated by appropriate corporate action, whichever shall first occur. This Deferral Agreement will become effective:

a.on the January 1st following the execution of this Deferral Agreement; or

b.on the first day of the next calendar month following the execution of this Deferral Agreement, but only if this Deferral Agreement is executed within the 30-day period after you first become eligible for Plan participation.

2.Compensation being Deferred. You make the following election (which shall supersede any prior election only to the extent of an election made affirmatively herein) to defer the following amount of fees/compensation for as long as this Deferral Agreement is in effect:

a.             percent (        %) of the amount otherwise payable in cash.

b.             percent (        %) of the amount otherwise payable in shares of the Company’s common stock.

c.             percent (        %) of any Restricted Share Units (“RSUs”) in which the Participant earns a vested interest (but only if the underlying Award Agreement specifically authorizes deferral elections).

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3.Crediting, Vesting, and Distribution of Deferred Compensation. The Company agrees to make DSU credits in accordance with Section 9 of the Plan and the elections that you make in the Distribution Election Agreement that is attached hereto as Exhibit A.

4.Taxes. Except to the extent otherwise specifically provided in another document establishing contractual rights for you, by signing this Deferral Agreement, you acknowledge that you shall be solely responsible for the satisfaction of any taxes that may arise pursuant to this Award (including taxes arising under Sections 409A or 4999 of the Code), and that neither the Company nor the administrator of the Plan shall have any obligation whatsoever to pay such taxes or otherwise indemnify or hold you harmless from any or all of such taxes. The Committee shall nevertheless have the discretion –

a.to condition any issuance of Shares on your satisfaction of applicable employment and withholding taxes; and

b.to unilaterally interpret this Deferral Agreement and the Plan in any manner that (i) conforms with the requirements of Section 409A of the Code with respect to compensation that is deferred and that vests after December 31, 2004, (ii) that voids any election of yours to the extent it would violate Section 409A of the Code, and (iii) for any distribution election that would violate Section 409A of the Code, that defers distributions pursuant to the Award until the earliest to occur of a distribution event that is allowable under Section 409A of the Code or any distribution event that is both allowable under Section 409A of the Code and is elected by you, subject to any valid second election to defer, that the Committee permits second elections to defer in accordance with Section 409A(a)(4)(C).

The Committee shall have the sole discretion to interpret the requirements of the Code, including Section 409A, for purposes of the Plan and this Deferral Agreement.

5.Designation of Death Beneficiary. Notwithstanding anything to the contrary contained herein or in the Plan, following the execution of this Deferral Agreement, you may expressly designate a death beneficiary (the “Death Beneficiary”) to your rights and interest under this Deferral Agreement. You shall designate the Death Beneficiary by completing and executing a designation of death beneficiary agreement substantially in the form attached hereto as Attachment 1 to Exhibit A (“Designation of Death Beneficiary”) and delivering an executed copy of the Designation of Death Beneficiary to the Company.

6.Restrictions on Transfer of Award. This Deferral Agreement may not be sold, pledged, or otherwise transferred without the prior written consent of the Committee. Notwithstanding the foregoing, you may transfer this Deferral Agreement

(i)by instrument to an inter vivos or testamentary trust (or other entity) in which each beneficiary is a permissible gift recipient, as such is set forth in subsection (ii) of this Section, or

(ii)by gift to charitable institutions or by gift or transfer for consideration to any of the following relatives of yours (or to an inter vivos trust, testamentary trust or other entity primarily for the benefit of the following relatives of

2

yours): any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, domestic partner, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include adoptive relationships.

Any transferee of your rights shall succeed to and be subject to all of the terms of this Deferral Agreement and the Plan.

7.Conditions on Issuance of Shares; Transfer Restrictions. Notwithstanding any other provision of the Plan or of this Deferral Agreement: (i) the Committee may condition your receipt of Shares on your execution of a shareholder agreement imposing terms generally applicable to other similarly-situated employee-shareholders; and (ii) any Shares issued pursuant to this Deferral Agreement shall be non-transferable until the first day of the seventh month following the termination of your Continuous Service.

8.Notices. Any notice or communication required or permitted by any provision of this Deferral Agreement to be given to you shall be in writing and shall be delivered electronically, personally, or sent by certified mail, return receipt requested, addressed to you at the last address that the Company had for you on its records. Each party may, from time to time, by notice to the other party hereto, specify a new address for delivery of notices relating to this Deferral Agreement. Any such notice shall be deemed to be given as of the date such notice is personally delivered or properly mailed.

9.Binding Effect. Except as otherwise provided in this Deferral Agreement or in the Plan, every covenant, term, and provision of this Deferral Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legatees, legal representatives, successors, transferees, and assigns.

10.Modifications. This Deferral Agreement may be modified or amended at any time, in accordance with Section 15 of the Plan and provided that you must consent in writing to any modification that adversely and materially affects your rights or obligations under this Deferral Agreement (with such an affect being presumed to arise from a modification that would trigger a violation of Section 409A of the Code).

11.Headings. Section and other headings contained in this Deferral Agreement are for reference purposes only and are not intended to describe, interpret, define or limit the scope or intent of this Deferral Agreement or any provision hereof.

12.Severability. Every provision of this Deferral Agreement and of the Plan is intended to be severable. If any term hereof is illegal or invalid for any reason, such illegality or invalidity shall not affect the validity or legality of the remaining terms of this Deferral Agreement.

13.Counterparts. This Deferral Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument.

14.Plan Governs. By signing this Deferral Agreement, you acknowledge that you have received a copy of the Plan and that your Deferral Agreement is subject to all the provisions

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contained in the Plan, the provisions of which are made a part of this Deferral Agreement, and your Award is subject to all interpretations, amendments, rules and regulations which from time to time may be promulgated and adopted pursuant to the Plan. In the event of a conflict between the provisions of this Deferral Agreement and those of the Plan, the provisions of the Plan shall control.

15.Investment Purposes. By executing this Deferral Agreement, you represent and warrant that any Shares issued to you pursuant to your Award will be held for investment purposes only for your own account, and not with a view to, for resale in connection with, or with an intent in participating directly or indirectly in, any distribution of such Shares within the meaning of the Securities Act of 1933, as amended (the “Securities Act”).

16.Not a Contract of Employment. By executing this Deferral Agreement you acknowledge and agree that nothing in this Deferral Agreement or the Plan confers on you any right to continue an employment, service or consulting relationship with the Company, nor shall it affect in any way your right or the Company’s right to terminate your employment, service, or consulting relationship at any time, with or without Cause; and the Company would not have executed this Deferral Agreement but for these acknowledgements and agreements.

17.Securities Law Restrictions. Regardless of whether the offering and sale of Shares under the Plan have been registered under the Securities Act of 1933, as amended (the “Securities Act”), or have been registered or qualified under the securities laws of any state, the Company at its discretion may impose restrictions upon the sale, pledge or other transfer of such Shares (including the placement of appropriate legends on stock certificates or the imposition of stop-transfer instructions) if, in the judgment of the Company, such restrictions are necessary or desirable in order to achieve compliance with the Securities Act or the securities laws of any state or any other law or to enforce the intent of this Award.

18.Long-term Consideration for Award. [OPTIONAL] The terms and conditions set forth in Exhibit D are hereby incorporated by reference and made an integral part of this Award Agreement. An invalidation of all or part of Exhibit D, or your commencement of litigation to invalidate, modify, or alter the terms and conditions set forth in Exhibit D, shall cause this Award to become null, void, and unenforceable.

19.Governing Law. The laws of the State of New York shall govern the validity of this Deferral Agreement, the construction of its terms, and the interpretation of the rights and duties of the parties hereto.

BY YOUR SIGNATURE BELOW, along with the signature of the Company’s representative, you and the Company agree that this Award is being made under and governed by the terms and conditions of this Award and the Plan.

CAPITAL TRUST, INC.

By:

Name:

Title:

4

PARTICIPANT

The undersigned Participant hereby accepts the terms of this
Award and the Plan.

By:

Name:

Title:

5

EXHIBIT A

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Distribution Election Agreement regarding Deferred Share Units

DISTRIBUTION AGREEMENT, made this          day of            ,           , by and between                                          (the “Participant”), and Capital Trust, Inc. (the “Company”), with respect to compensation that you defer pursuant to the terms and conditions of the Deferral Agreement (the “Deferral Agreement”) dated                              ,          between the Participant and the Company.

WHEREAS, the Company has established the Capital Trust, Inc. 2007 Long-Term Incentive Plan (the “Plan”), and you have elected to defer compensation and thereby to participate in said Plan and to accrue Deferred Share Units (“DSUs”) in accordance with Section 9 of the Plan;

NOW THEREFORE, it is mutually agreed as follows:

1.Form and Time of Payment. By the execution hereof, I agree to participate in the Plan, upon the terms and conditions set forth therein, and, in accordance therewith, elect to have my Account distributed to me in whole Shares (with cash being paid in lieu of fractional Shares), upon the earliest of the events checked below:

Event	Form of Distribution	Time of Distribution
o Death	oOne lump sum distribution. oSubstantially equal annual payments over a period of        years (up to 10).	oAs soon as practicable. oThe next January 1st. oOther:                        .
o Disability	oOne lump sum distribution. oSubstantially equal annual payments over a period of        years (up to 10).	oAs soon as practicable. oThe next January 1st. oOther:                        .
o Other Separation from Service	oOne lump sum distribution. oSubstantially equal annual payments over a period of        years (up to 10).	oAs soon as practicable. oThe next January 1st. oOther:                        .

o Change in Control	oOne lump sum distribution. oSubstantially equal annual payments over a period of        years (up to 10).	oAs soon as practicable. oThe next January 1st. oOther:                        .
o Specified Date	oOne lump sum distribution. oSubstantially equal annual payments over a period of        years (up to 10).	Date:                        ,       .

2.Designation of Beneficiary. In the event of my death before I have collected all of the benefits payable under the Plan, I hereby direct that any remaining benefits payable under the Plan be distributed to the beneficiary or beneficiaries I have designated pursuant to Attachment 1.

3.Effect of Election. I recognize and agree that the elections made in Section 1 hereof apply to the entire value of my account, and these elections may only be changed at least one year in advance of the earliest date on which payments would otherwise commence pursuant to Section 1 hereof, and may only be changed pursuant to an election that conforms with the requirements set forth in Section 9 of the Plan.

With respect to the elections made in Section 1 hereof, I may, by submitting an effective superseding Distribution Agreement at any time and from time to time, prospectively change the beneficiary designation and the manner of payment to a beneficiary. Such elections shall, however, become irrevocable upon my death.

4.Taxes. I recognize and agree that I am solely responsible and liable for the satisfaction of all income taxes and penalties that may arise in connection with my participation in the Plan (including any taxes arising under Section 409A of the Code). The Company shall not have any obligation to indemnify or otherwise hold me or any of my beneficiaries harmless from any or all of such taxes, but is permitted to take discretionary action pursuant to Section 11(c) of the Plan.

5.Mutual Commitments. The Company agrees to make payment of all amounts due to me in accordance with the terms of the Plan and the elections I make herein. I agree to be bound by the terms of the Plan, as in effect on the date hereof or properly amended hereafter.

6.The terms of Sections 6 through 18 of the Deferral Agreement are incorporated herein by reference, and shall apply to this Distribution Agreement based on the understanding that references in such Sections to Deferral Agreement shall refer to this Distribution Agreement for purposes hereof.

[Signature Page to Follow]

IN WITNESS WHEREOF, the parties hereto have hereunto set their hands the day and year first above-written.

CAPITAL TRUST, INC.

By:

Printed Name:

A duly authorized executive officer

PARTICIPANT

Printed Name:

Attachment 1

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Designation of Death Beneficiary

In the event of my death or “Disability” within the meaning of the Capital Trust, Inc. 2007 Long-Term Incentive Plan (the “Plan”), I hereby designate the following person to be my beneficiary for the Award(s) (within the meaning of the Plan) identified below:

Name of Beneficiary:

Address:

Social Security No.:

This beneficiary designation of mine relates to any and all of my rights under the following Award or Awards:

oany Award that I have received or ever receive in the future under the Plan.

othe                                    Award that I received pursuant to an award agreement dated                        ,          between me and Capital Trust, Inc. (the “Company”).

I understand that this beneficiary designation operates to entitle the above-named beneficiary to succeed, in the event of my death, to any and all of my rights under the Award(s) designated above, and shall be effective from the date this form is delivered to the Company until such date as I revoke this designation. A revocation shall occur only if I deliver to an executive officer of the Company either (i) a written revocation of this designation that is signed by me and notarized, or (ii) a designation of death beneficiary, in the form set forth herein, that is executed and notarized on a later date.

Date:

Your Signature:

Your Name (printed):

Sworn to before me this

         day of                         , 200  

Notary Public

County of                                    

State of                                        

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EXHIBIT B

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Plan Document

1

EXHIBIT C

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Plan Prospectus

1

EXHIBIT D

CAPITAL TRUST, INC.

2007 LONG-TERM INCENTIVE PLAN

Long-Term Consideration and

Company Recovery for Breach

By signing and accepting your Award Agreement, you recognize and agree that the Company’s key consideration in granting this Award is securing your long-term commitment to serve as its                   [include job title or description] who will advance and promote the Company’s business interests and objectives. Accordingly, you agree that this Award shall be subject to the terms and conditions set forth in Section 25 of the Plan (relating to the termination, rescission, and recapture if you violate certain commitments made therein to the Company), as well as to the following terms and conditions as material and indivisible consideration for this Award:

(a)Fiduciary Duty. During your employment with the Company you shall devote your full energies, abilities, attention and business time to the performance of your job responsibilities and shall not engage in any activity which conflicts or interferes with, or in any way compromises, your performance of such responsibilities.

(b)Confidential Information. You recognize that by virtue of your employment with the Company, you will be granted otherwise prohibited access to confidential information and proprietary data which are not known, and not readily accessible to the Company’s competitors. This information (the “Confidential Information”) includes, but is not limited to, current and prospective customers; the identity of key contacts at such customers; customers’ particularized preferences and needs; marketing strategies and plans; financial data; personnel data; compensation data; proprietary procedures and processes; and other unique and specialized practices, programs and plans of the Company and its customers and prospective customers. You recognize that this Confidential Information constitutes a valuable property of the Company, developed over a significant period of time and at substantial expense. Accordingly, you agree that you shall not, at any time during or after your employment with the Company, divulge such Confidential Information or make use of it for your own purposes or the purposes of any person or entity other than the Company.

(c)Non-Solicitation of Customers. You recognize that by virtue of your employment with the Company you will be introduced to and involved in the solicitation and servicing of existing customers of the Company and new customers obtained by the Company during your employment. You understand and agree that all efforts expended in soliciting and servicing such customers shall be for the permanent benefit of the Company. You further agree that during your employment with the Company you will not engage in any conduct which could in any way jeopardize or disturb any of the Company’s customer relationships. You also recognize the Company’s legitimate interest in protecting, for a reasonable period of time after your employment with the Company, the Company’s customers. Accordingly, you agree that, for a period beginning on the date hereof and ending one (1) year after termination of your employment with the Company, regardless of the reason for such termination, you shall not, directly or indirectly, without the prior written consent of the Chairman of the Company, market, offer, sell or otherwise furnish

1

any products or services similar to, or otherwise competitive with, those offered by the Company to any customer of the Company.

(d)Non-Solicitation of Employees. You recognize the substantial expenditure of time and effort which the Company devotes to the recruitment, hiring, orientation, training and retention of its employees. Accordingly, you agree that, for a period beginning on the date hereof and ending two (2) years after termination of your employment with the Company, regardless of the reason for such termination, you shall not, directly or indirectly, for yourself or on behalf of any other person or entity, solicit, offer employment to, hire or otherwise retain the services of any employee of the Company.

(e)Non-Competition. <IF DESIRED, PHJW TO CUSTOMIZE TO CONFORM WITH APPLICABLE LAW.>

(f)Survival of Commitments; Potential Recapture of Award and Proceeds. You acknowledge and agree that the terms and conditions of this Section regarding confidentiality and non-solicitation [and non-competition] shall survive both (i) the termination of your employment with the Company for any reason, and (ii) the termination of the Plan, for any reason. You acknowledge and agree that the grant of Deferred Share Units in this Award Agreement is just and adequate consideration for the survival of the restrictions set forth herein, and that the Company may pursue any or all of the following remedies if you either violate the terms of this Section or succeed for any reason in invalidating any part of it (it being understood that the invalidity of any term hereof would result in a failure of consideration for the Award):

(i)declaration that the Award is null and void and of no further force or effect;

(ii)recapture of any cash paid or Shares issued to you, or any designee or beneficiary of you, pursuant to the Award;

(iii)recapture of the proceeds, plus reasonable interest, with respect to any Shares that are both issued pursuant to this Award and sold or otherwise disposed of by you, or any designee or beneficiary of you.

The remedies provided above are not intended to be exclusive, and the Company may seek such other remedies as are provided by law, including equitable relief.

(g)Acknowledgement. You acknowledge and agree that your adherence to the foregoing requirements will not prevent you from engaging in your chosen occupation and earning a satisfactory livelihood following the termination of your employment with the Company.

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EX-31.1

Exhibit 31.1

CERTIFICATION
PURSUANT TO 17 CFR 240.13a-14
PROMULGATED UNDER
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, John R. Klopp, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Capital Trust, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 6, 2007

  /s/ John R. Klopp

John R. Klopp

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION
PURSUANT TO 17 CFR 240.13a-14
PROMULGATED UNDER
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Geoffrey G. Jervis, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Capital Trust, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 6, 2007

  /s/ Geoffrey G. Jervis

Geoffrey G. Jervis

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Capital Trust, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John R. Klopp, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

  /s/ John R. Klopp

John R. Klopp

Chief Executive Officer

November 6, 2007

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Capital Trust, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Geoffrey G. Jervis, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

  /s/ Geoffrey G. Jervis

Geoffrey G. Jervis

Chief Financial Officer

November 6, 2007

EX-99.1

Exhibit 99.1

RISK FACTORS

Risks Related to Our Investment Program

Our existing loans and investments expose us to a high degree of risk associated with investing in real estate assets.

Real estate historically has experienced significant fluctuations and cycles in performance that may result in reductions in the value of our real estate related investments.  The performance and value of our loans and investments once originated or acquired by us depends upon many factors beyond our control.  The ultimate performance and value of our investments is subject to the varying degrees of risk generally incident to the ownership and operation of the properties which collateralize or support our investments.  The ultimate performance and value of our loans and investments depends upon, in large part, the commercial property owner’s ability to operate the property so that it produces sufficient cash flows necessary either to pay the interest and principal due to us on our loans and investments or pay us as an equity advisor.  Revenues and cash flows may be adversely affected by:

•changes in national economic conditions;

•changes in local real estate market conditions due to changes in national or local economic conditions or changes in local property market characteristics;

•competition from other properties offering the same or similar services;

•changes in interest rates and in the state of the debt and equity capital markets;

•the ongoing need for capital improvements, particularly in older building structures;

•changes in real estate tax rates and other operating expenses;

•adverse changes in governmental rules and fiscal policies, civil unrest, acts of God, including earthquakes, hurricanes and other natural disasters, acts of war or terrorism, which may decrease the availability of or increase the cost of insurance or result in uninsured losses;

•adverse changes in zoning laws;

•the impact of present or future environmental legislation and compliance with environmental laws;

•the impact of lawsuits which could cause us to incur significant legal expenses and divert management’s time and attention from our day-to-day operations; and

•other factors that are beyond our control and the control of the property owners.

In the event that any of the properties underlying our loans or investments experiences any of the foregoing events or occurrences, the value of, and return on, such investments, our profitability and the market price of our class A common stock would be negatively impacted.

We may change our investment strategy without shareholder consent, which may result in riskier investments than our current investments.

As part of our strategy, we may seek to expand our investment activities beyond real estate related investments.  We may change our investment activities at any time without the consent of our shareholders, which could result in our making investments that are different from, and possibly riskier than, our current real estate investments.  New investments we may make outside of our area of historical expertise may not perform as well as our current portfolio of real estate related investments.

We are exposed to the risks involved with making subordinated investments.

Our subordinated investments involve the risks attendant to investments consisting of subordinated loan and similar positions.  In many cases, management of our investments and our remedies with respect thereto, including the ability to foreclose on or direct decisions with respect to the collateral securing such investments, is subject to the rights of senior lenders and the rights set forth in inter-creditor or servicing agreements.  Our interests, and those of the senior lenders and other interested parties may not be aligned.

We may not be able to obtain the level of leverage necessary to optimize our return on investment.

Our return on investment depends, in part, upon our ability to grow our balance sheet portfolio of invested assets and those of our investment management vehicles through the use of leverage at a cost of debt that is lower than the yield earned on our investments.  We generally obtain leverage through the issuance of collateralized debt obligations, or CDOs, repurchase agreements and other borrowings.  Our ability to obtain the necessary leverage on beneficial terms ultimately depends upon the quality of the portfolio assets that collateralize our indebtedness.  Our failure to obtain and/or maintain leverage at desired levels, or to obtain leverage on attractive terms, would have a material adverse effect on our performance or that of our investment management vehicles.  Moreover, we are dependent upon a few lenders to provide financing under repurchase agreements for our origination or acquisition of loans and investments and there can be no assurance that these agreements will be renewed or extended at expiration.  Our ability to obtain financing through CDOs is subject to conditions in the debt capital markets which are impacted by factors beyond our control that may at times be adverse and reduce the level of investor demand for such securities.

We are subject to the risks of holding leveraged investments.

Leverage creates an opportunity for increased return on equity, but at the same time creates risk for us and our investment management vehicles.  For example, leveraging magnifies changes in our net worth.  We and our investment management vehicles will leverage assets only when there is an expectation that leverage will provide a benefit, such as enhancing returns, although we cannot assure you that the use of leverage will prove to be beneficial.  Increases in

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credit spreads in the market generally may adversely affect the market value of our investments.  Because borrowings under our repurchase agreements and some other agreements are secured by our investments, which are subject to being marked to market by our credit providers, the borrowings available to us may decline if the market value of our investments decline.  Moreover, we cannot assure you that we will be able to meet mark-to-market capital calls or debt service obligations in general and, to the extent such obligations are not met, there is a risk of loss of some or all of our investments through foreclosure or a financial loss if we or they are required to liquidate assets, the impact of which could be magnified if such a liquidation is at a commercially inopportune time.

We may guarantee some of our leverage and contingent obligations.

We guarantee the performance of some of our obligations, including but not limited to some of our repurchase agreements, derivative agreements, obligations to co-invest in our investment management vehicles and unsecured indebtedness.  Non-performance on such obligations may cause losses to us in excess of the capital we initially may have invested/committed under such obligations and there is no assurance that we will have sufficient capital to cover any such losses.

Our secured and unsecured credit agreements may impose restrictions on our operation of the business.

Under our secured and unsecured credit agreements, such as our repurchase agreements and derivative agreements, we may make certain representations, warranties and affirmative and negative covenants that may restrict our ability to operate while still utilizing those sources of credit.  Such representations, warranties and covenants may include but are not limited to restrictions on corporate guarantees, the maintenance of certain financial ratios, including our ratio of debt to equity capital and our debt service coverage ratio, as well as the maintenance of a minimum net worth, restrictions against a change of control of our company and limitations on alternative sources of capital.

Our success depends on the availability of attractive investments and our ability to identify, structure, consummate, leverage, manage and realize returns on attractive investments.

Our operating results are dependent upon the availability of, as well as our ability to identify, structure, consummate, leverage, manage and realize returns on, credit sensitive investment opportunities.  In general, the availability of desirable credit sensitive investment opportunities and, consequently, our balance sheet returns and our investment management vehicles’ returns, will be affected by the level and volatility of interest rates, conditions in the financial markets, general economic conditions, the market and demand for credit sensitive investment opportunities, and the supply of capital for such investment opportunities.  We cannot make any assurances that we will be successful in identifying and consummating investments which satisfy our rate of return objectives or that such investments, once consummated, will perform as anticipated.  In addition, if we are not successful in investing for our investment management vehicles, the potential revenues we earn from management fees and co-investment returns will be reduced.  We may expend significant time and resources in identifying and pursuing targeted investments, some of which may not be consummated.

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The real estate investment business is highly competitive.  Our success depends on our ability to compete with other providers of capital for real estate investments.

Our business is highly competitive.  Competition may cause us to accept economic or structural features in our investments that we would not have otherwise accepted and it may cause us to search for investments in markets outside of our traditional product expertise.  We compete for attractive investments with traditional lending sources, such as insurance companies and banks, as well as other REITs, specialty finance companies and private equity vehicles with similar investment objectives, which may make it more difficult for us to consummate our target investments.  Many of our competitors have greater financial resources and lower costs of capital than we do, which provides them with greater operating flexibility and a competitive advantage relative to us.

Our loans and investments may be subject to fluctuations in interest rates which may not be adequately protected, or protected at all, by our hedging strategies.

Our current balance sheet investment program emphasizes loans with both “floating” interest rates and fixed interest rates.  Floating rate investments earn interest at rates that adjust from time to time (typically monthly) based upon an index (typically LIBOR), allowing this portion of our portfolio to be insulated from changes in value due specifically to changes in rates.  Fixed interest rate investments, however, do not have adjusting interest rates and, as prevailing interest rates change, the relative value of the fixed cash flows from these investments will cause potentially significant changes in value.  Depending on market conditions, fixed rate assets may become a greater portion of our new loan originations.  We may employ various hedging strategies to limit the effects of changes in interest rates (and in some cases credit spreads), including engaging in interest rate swaps, caps, floors and other interest rate derivative products.  No strategy can completely insulate us or our investment management vehicles from the risks associated with interest rate changes and there is a risk that they may provide no protection at all and potentially compound the impact of changes in interest rates.  Hedging transactions involve certain additional risks such as counterparty risk, the legal enforceability of hedging contracts, the early repayment of hedged transactions and the risk that unanticipated and significant changes in interest rates may cause a significant loss of basis in the contract and a change in current period expense.  We cannot make assurances that we will be able to enter into hedging transactions or that such hedging transactions will adequately protect us or our investment management vehicles against the foregoing risks.  In addition, cash flow hedges which are not perfectly correlated (and appropriately designated/documented as such) with a variable rate financing will impact our reported income as gains, and losses on the ineffective portion of such hedges will be recorded.

Our use of leverage may create a mismatch with the duration and index of the investments that we are financing.

We attempt to structure our leverage such that we minimize the difference between the term of our investments and the leverage we use to finance such an investment.  In the event that our leverage is shorter term than the financed investment, we may not be able to extend or find appropriate replacement leverage and that would have an adverse impact on our liquidity and our returns.  In the event that our leverage is longer term than the financed investment, we may not

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be able to repay such leverage or replace the financed investment with an optimal substitute or at all, which will negatively impact our desired leveraged returns.

We attempt to structure our leverage such that we minimize the difference between the index of our investments and the index of our leverage—financing floating rate investments with floating rate leverage and fixed rate investments with fixed rate leverage.  If such a product is not available to us from our lenders on reasonable terms, we may use hedging instruments to effectively create such a match.  For example, in the case of fixed rate investments, we may finance such an investment with floating rate leverage, but effectively convert all or a portion of the attendant leverage to fixed rate using hedging strategies.

Our attempts to mitigate such risk are subject to factors outside of our control, such as the availability to us of favorable financing and hedging options, which is subject to a variety of factors, of which duration and term matching are only two such factors.

Our loans and investments may be illiquid which will constrain our ability to vary our portfolio of investments.

Our real estate investments and structured financial product investments are relatively illiquid and some are highly illiquid.  Such illiquidity may limit our ability to vary our portfolio or our investment management vehicles’ portfolios of investments in response to changes in economic and other conditions.  Illiquidity may result from the absence of an established market for investments as well as the legal or contractual restrictions on their resale.  In addition, illiquidity may result from the decline in value of a property securing these investments.  We cannot make assurances that the fair market value of any of the real property serving as security will not decrease in the future, leaving our or our investment management vehicles’ investments under-collateralized or not collateralized at all, which could impair the liquidity and value, as well as our return on such investments.

We may not have control over certain of our loans and investments.

Our ability to manage our portfolio of loans and investments may be limited by the form in which they are made.  In certain situations, we or our investment management vehicles may:

•acquire investments subject to rights of senior classes and servicers under inter-creditor or servicing agreements;

•acquire only a participation in an underlying investment;

•co-invest with third parties through partnerships, joint ventures or other entities, thereby acquiring non-controlling interests; or

•rely on independent third party management or strategic partners with respect to the management of an asset.

Therefore, we may not be able to exercise control over the loan or investment.  Such financial assets may involve risks not present in investments where senior creditors, servicers or third party controlling investors are not involved.  Our rights to control the process following a

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borrower default may be subject to the rights of senior creditors or servicers whose interests may not be aligned with ours.  A third party partner or co-venturer may have financial difficulties resulting in a negative impact on such asset, may have economic or business interests or goals which are inconsistent with ours and those of our investment management vehicles, or may be in a position to take action contrary to our or our investment management vehicles’ investment objectives.  In addition, we and our investment management vehicles may, in certain circumstances, be liable for the actions of our third party partners or co-venturers.

We may not achieve our targeted rate of return on our investments.

We originate or acquire investments based on our estimates or projections of overall rates of return on such investments, which in turn are based upon, among other considerations, assumptions regarding the performance of assets, the amount and terms of available financing to obtain desired leverage and the manner and timing of dispositions, including possible asset recovery and remediation strategies, all of which are subject to significant uncertainty.  In addition, events or conditions that we have not anticipated may occur and may have a significant effect on the actual rate of return received on an investment.

As we acquire or originate investments for our balance sheet portfolio, whether as new additions or as replacements for maturing investments, there can be no assurance that we will be able to originate or acquire investments that produce rates of return comparable to rates on our existing investments.

Investor demand for commercial real estate CDOs has been substantially curtailed.

The recent turmoil in the structured finance markets, in particular the sub-prime residential loan market, has negatively impacted the credit markets generally, and, as a result, investor demand for commercial real estate collateralized debt obligations has been substantially curtailed.  In recent years, we have relied to a substantial extent on CDO financings to obtain match funded financing for our investments.  Until the market for commercial real estate CDOs recovers, we may be unable to utilize CDOs to finance our investments and we may need to utilize less favorable sources of financing to finance our investments on a long-term basis.  There can be no assurance as to when demand for commercial real estate CDOs will return or the terms of such securities investors will demand or whether we will be able to issue CDOs to finance our investments on terms beneficial to us.

We may not be able to acquire suitable investments for a CDO issuance, or we may not be able to issue CDOs on attractive terms, which may require us to utilize more costly financing for our investments.

We intend to capitalize on opportunities to finance certain of our investments through the issuance of CDOs.  During the period that we are acquiring these investments, we intend to finance our purchases through repurchase agreements.  We use these repurchase agreements to finance our acquisition of investments until we have accumulated a sufficient quantity of investments, at which time we may refinance them through a securitization, such as a CDO issuance.  As a result, we are subject to the risk that we will not be able to acquire a sufficient amount of eligible investments to maximize the efficiency of a CDO issuance.  In addition,

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conditions in the debt capital markets may make the issuance of CDOs less attractive to us even when we do have a sufficient pool of collateral.  If we are unable to issue a CDO to finance these investments, we may be required to utilize other forms of potentially less attractive financing.

We may not be able to find suitable replacement investments for CDOs with reinvestment periods.

Some of our CDOs have periods where principal proceeds received from assets securing the CDO can be reinvested for a defined period of time, commonly referred to as a reinvestment period.  Our ability to find suitable investments during the reinvestment period that meet the criteria set forth in the CDO documentation and by rating agencies may determine the success of our CDO investments.  Our potential inability to find suitable investments may cause, among other things, lower returns, interest deficiencies, hyper-amortization of the senior CDO liabilities and may cause us to reduce the life of our CDOs and accelerate the amortization of certain fees and expenses.

The use of CDO financings with over-collateralization and interest coverage requirements may have a negative impact on our cash flow.

The terms of CDOs will generally provide that the principal amount of investments must exceed the principal balance of the related bonds by a certain amount and that interest income exceeds interest expense by a certain amount.  Generally, CDO terms provide that, if certain delinquencies and/or losses or other factors cause a decline in collateral or cash flow levels, the cash flow otherwise payable on our retained subordinated classes may be redirected to repay classes of CDOs senior to ours until the issuer or the collateral is in compliance with the terms of the governing documents.  Other tests (based on delinquency levels or other criteria) may restrict our ability to receive net income from assets pledged to secure CDOs.  We cannot assure you that the performance tests will be satisfied.  With respect to future CDOs we may issue, we cannot assure you, in advance of completing negotiations with the rating agencies or other key transaction parties as to the actual terms of the delinquency tests, over-collateralization and interest coverage terms, cash flow release mechanisms or other significant factors upon which net income to us will be calculated.  Failure to obtain favorable terms with regard to these matters may adversely affect the availability of net income to us.  If our investments fail to perform as anticipated, our overcollateralization, interest coverage or other credit enhancement expense associated with our CDO financings will increase.

We may be required to repurchase loans that we have sold or to indemnify holders of our CDOs.

If any of the loans we originate or acquire and sell or securitize through CDOs do not comply with representations and warranties that we make about certain characteristics of the loans, the borrowers and the underlying properties, we may be required to repurchase those loans or replace them with substitute loans.  In addition, in the case of loans that we have sold instead of retained, we may be required to indemnify persons for losses or expenses incurred as a result of a breach of a representation or warranty.  Repurchased loans typically require a significant allocation of working capital to carry on our books, and our ability to borrow against such assets

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is limited.  Any significant repurchases or indemnification payments could adversely affect our financial condition and operating results.

The commercial mortgage and mezzanine loans we originate or acquire and the commercial mortgage loans underlying the CMBS in which we invest are subject to delinquency, foreclosure and loss, which could result in losses to us.

Our commercial mortgage and mezzanine loans are secured by commercial property and are subject to risks of delinquency and foreclosure, and risks of loss that are greater than similar risks associated with loans made on the security of single-family residential property.  The ability of a borrower to repay a loan secured by an income-producing property typically is dependent primarily upon the successful operation of the property rather than upon the existence of independent income or assets of the borrower.  If the net operating income of the property is reduced, the borrower’s ability to repay the loan may be impaired.  Net operating income of an income-producing property can be affected by, among other things: tenant mix, success of tenant businesses, property management decisions, property location and condition, competition from comparable types of properties, changes in laws that increase operating expenses or limit rents that may be charged, any need to address environmental contamination at the property, changes in national, regional or local economic conditions and/or specific industry segments; declines in regional or local real estate values and declines in regional or local rental or occupancy rates, increases in interest rates, real estate tax rates and other operating expenses, and changes in governmental rules, regulations and fiscal policies, including environmental legislation, acts of God, terrorism, social unrest and civil disturbances.

Our investments in subordinated CMBS and similar investments are subject to losses.

In general, losses on an asset securing a mortgage loan included in a securitization will be borne first by the equity holder of the property and then by the most junior security holder.  In the event of default and the exhaustion of any equity support and any classes of securities junior to those in which we invest (and in some cases we may be invested in the junior most classes of securitizations), we may not be able to recover all of our investment in the securities we purchase.  In addition, if the underlying mortgage portfolio has been overvalued by the originator, or if the values subsequently decline and, as a result, less collateral is available to satisfy interest and principal payments due on the related mortgage backed securities, the securities in which we invest may incur significant losses.

The prices of lower credit quality CMBS are generally less sensitive to interest rate changes than more highly rated investments, but more sensitive to adverse economic downturns and underlying borrower developments.  A projection of an economic downturn, for example, could cause a decline in the price of lower credit quality CMBS because the ability of borrowers to make principal and interest payments on the mortgages underlying the mortgage backed securities may be impaired.  In such event, existing credit support in the securitization structure may be insufficient to protect us against loss of our principal on these securities.

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We may invest in non-performing assets that are subject to a higher degree of financial risk.

We will make investments in non-performing or other troubled assets that involve a high degree of financial risk and there can be no assurance that our investment objectives will be realized or that there will be any return on our investment.  Furthermore, investments in properties operating in workout modes or under bankruptcy protection laws may, in certain circumstances, be subject to additional potential liabilities that could exceed the value of our original investment.

The impact of the events of September 11, 2001 and the effect thereon on terrorism insurance expose us to certain risks.

The terrorist attacks on September 11, 2001 disrupted the U.S. financial markets, including the real estate capital markets, and negatively impacted the U.S. economy in general.  Any future terrorist attacks, the anticipation of any such attacks, and the consequences of any military or other response by the U.S. and its allies may have a further adverse impact on the U.S. financial markets and the economy generally.  We cannot predict the severity of the effect that such future events would have on the U.S. financial markets, the economy or our business.

In addition, the events of September 11, 2001 created significant uncertainty regarding the ability of real estate owners of high profile assets to obtain insurance coverage protecting against terrorist attacks at commercially reasonable rates, if at all.  A bill to extend the Terrorism Risk Insurance Act of 2002, or TRIA, beyond 2007 has been introduced in Congress, but no assurance can be provided as to its enactment.  The absence of affordable insurance coverage may adversely affect the general real estate lending market, lending volume and the market’s overall liquidity and may reduce the number of suitable investment opportunities available to us and the pace at which we are able to make investments.  If the properties that we invest in are unable to obtain affordable insurance coverage, the value of those investments could decline and in the event of an uninsured loss, we could lose all or a portion of our investment.

The economic impact of any future terrorist attacks could also adversely affect the credit quality of some of our loans and investments.  Some of our loans and investments will be more susceptible to such adverse effects than others.  We may suffer losses as a result of the adverse impact of any future attacks and these losses may adversely impact our results of operations.

Our non-U.S. investments will expose us to certain risks.

We make investments in foreign countries.  Investing in foreign countries involves certain additional risks that may not exist when investing in the United States.  The risks involved in foreign investments include:

•exposure to local economic conditions, local interest rates, foreign exchange restrictions and restrictions on the withdrawal of foreign investment and earnings, investment restrictions or requirements, expropriations of property and changes in foreign taxation structures;

•potential adverse changes in the diplomatic relations of foreign countries with the United States and government policies against investments by foreigners;

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•changes in foreign regulations;

•hostility from local populations, potential instability of foreign governments and risks of insurrections, terrorist attacks, war or other military action;

•fluctuations in foreign currency exchange rates;

•changes in social, political, legal, taxation and other conditions affecting our international investment;

•logistical barriers to our timely receipt of financial information relating to our international investments that may need to be included in our periodic reporting obligations as a public company; and

•lack of uniform accounting standards (including availability of information in accordance with U.S. generally accepted accounting principles).

Unfavorable legal, regulatory, economic or political changes such as those described above could adversely affect our financial condition and results of operations.

We may from time to time invest a portion of our assets in non-U.S. investments or in instruments denominated in non-U.S. currencies, the prices of which will be determined with reference to currencies other than the U.S. dollar.  We may hedge our foreign currency exposure.  To the extent unhedged, the value of our non-U.S. assets will fluctuate with U.S. dollar exchange rates as well as the price changes of our investments in the various local markets and currencies.  Among the factors that may affect currency values are trade balances, the level of short-term interest rates, differences in relative values of similar assets in different currencies, long-term opportunities for investment and capital appreciation and political developments.  An increase in the value of the U.S. dollar compared to the other currencies in which we make our investments will reduce the effect of increases and magnify the effect of decreases in the prices of our securities in their local markets.  We could realize a net loss on an investment, even if there were a gain on the underlying investment before currency losses were taken into account.  The Fund may seek to hedge currency risks by investing in currencies, currency futures contracts and options on currency futures contracts, forward currency exchange contracts, swaps, options or any combination thereof (whether or not exchange traded), but there can be no assurance that these strategies will be effective, and such techniques entail costs and additional risks.

There are increased risks involved with construction lending activities.

We originate loans for the construction of commercial and residential use properties.  Construction lending generally is considered to involve a higher degree of risk than other types of lending due to a variety of factors, including generally larger loan balances, the dependency on successful completion of a project, the dependency upon the successful operation of the project (such as achieving satisfactory occupancy and rental rates) for repayment, the difficulties in estimating construction costs and loan terms which often do not require full amortization of the loan over its term and, instead, provide for a balloon payment at stated maturity.

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Some of our investments and investment opportunities may be in synthetic form.

Synthetic investments are contracts between parties whereby payments are exchanged based upon the performance of an underlying reference obligation.  In addition to the risks associated with the performance of the reference obligation, these synthetic interests carry the risk of the counterparty not performing its contractual obligations.  Market standards, GAAP accounting methodology and tax regulations related to these investments are evolving, and we cannot be certain that their evolution will not adversely impact the value or sustainability of these investments.  Furthermore, our ability to invest in synthetic investments, other than through a taxable REIT subsidiaries, may be severely limited by the REIT qualification requirements because synthetic investment contracts generally are not qualifying assets and do not produce qualifying income for purposes of the REIT asset and income tests.

Risks Related to Our Investment Management Business

We are subject to risks and uncertainties associated with operating our investment management business, and we may not achieve from this business the investment returns that we expect.

We will encounter risks and difficulties as we operate our investment management business.  In order to achieve our goals as an investment manager, we must:

•manage our investment management vehicles successfully by investing their capital in suitable investments that meet their respective investment criteria;

•actively manage the assets in our portfolios in order to realize targeted performance;

•create incentives for our management and professional staff to the task of developing and operating the investment management business; and

•structure, sponsor and capitalize future investment management vehicles that provide investors with attractive investment opportunities.

If we do not successfully operate our investment management business to achieve the investment returns that we or the market anticipates, our results of operations may be adversely impacted.

We may expand our investment management business to involve other investment classes where we do not have prior investment experience.  We may find it difficult to attract third party investors without a performance track record involving such investments.  Even if we attract third party capital, there can be no assurance that we will be successful in deploying the capital to achieve targeted returns on the investments.

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We face substantial competition from established participants in the private equity market as we offer mezzanine and other investment management vehicles to third party investors.

We face significant competition from large financial and other institutions that have proven track records in marketing and managing investment management vehicles and otherwise have a competitive advantage over us because they have access to pre-existing third party investor networks into which they can channel competing investment opportunities.  If our competitors offer investment products that are competitive with products offered by us, we will find it more difficult to attract investors and to capitalize our investment management vehicles.

Our investment management vehicles are subject to the risk of defaults by third party investors on their capital commitments.

The capital commitments made by third party investors to our investment management vehicles represent unsecured promises by those investors to contribute cash to the investment management vehicles from time to time as investments are made by the investment management vehicles.  Accordingly, we are subject to general credit risks that the investors may default on their capital commitments.  If defaults occur, we may not be able to close loans and investments we have identified and negotiated which could materially and adversely affect the investment management vehicles’ investment program or make us liable for breach of contract, in either case to the detriment of our franchise in the private equity market.

Risks Related to Our Company

We are dependent upon our senior management team to develop and operate our business.

Our ability to develop and operate our business depends to a substantial extent upon the experience, relationships and expertise of our senior management and key employees.  We cannot assure you that these individuals will remain in our employ.  The employment agreement with our chief executive officer, John R. Klopp, expires on December 31, 2008, unless further extended.  The employment agreement with our chief operating officer, Stephen D. Plavin, expires on December 28, 2008, unless further extended by us to 2009.  The employment agreement with our chief financial officer, Geoffrey G. Jervis, expires on December 31, 2009, unless further extended by us to 2010.  The employment agreement with our chief credit officer, Thomas C. Ruffing, expires on December 31, 2008.  The loss of the services of our senior management and key employees could have a material adverse effect on our operations.

There may be conflicts between the interests of our investment management vehicles and us.

We are subject to a number of potential conflicts between our interests and the interests of our investment management vehicles.  We are subject to potential conflicts of interest in the allocation of investment opportunities between our balance sheet and our investment management vehicles.  In addition, we may make investments that are senior or junior to, participations in, or have rights and interests different from or adverse to, the investments made by our investment management vehicles.  Our interests in such investments may conflict with the interests of our investment management vehicles in related investments at the time of origination or in the event of a default or restructuring of the investment.  Finally, our officers and

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employees may have conflicts in allocating their time and services among us and our investment management vehicles.

We must manage our portfolio in a manner that allows us to rely on an exclusion from registration under the Investment Company Act of 1940 in order to avoid the consequences of regulation under that Act.

We rely on an exclusion from registration as an investment company afforded by Section 3(c)(5)(C) of the Investment Company Act of 1940.  Under this exclusion, we are required to maintain, on the basis of positions taken by the SEC staff in interpretive and no-action letters, a minimum of 55% of the value of the total assets of our portfolio in “mortgages and other liens on and interests in real estate,” which we refer to as “Qualifying Interests,” and a minimum of 80% in Qualifying Interests and real estate related assets.  Because registration as an investment company would significantly affect our ability to engage in certain transactions or to organize ourselves in the manner we are currently organized, we intend to maintain our qualification for this exclusion from registration.  In the past, when required due to the mix of assets in our balance sheet portfolio, we have purchased all of the outstanding interests in pools of whole residential mortgage loans, which we treat as Qualifying Interests based on SEC staff positions.  Investments in such pools of whole residential mortgage loans may not represent an optimum use of our investable capital when compared to the available investments we target pursuant to our investment strategy and these investments present additional risks to us, and these risks are compounded by our inexperience with such investments.  We continue to analyze our investments and may acquire other pools of whole loan residential mortgage backed securities when and if required for compliance purposes.

We treat our investments in CMBS, B Notes and mezzanine loans as Qualifying Interests for purposes of determining our eligibility for the exclusion provided by Section 3(c)(5)(C) to the extent such treatment is consistent with guidance provided by the SEC or its staff.  In the absence of such guidance that otherwise supports the treatment of these investments as Qualifying Interests, we will treat them, for purposes of determining our eligibility for the exclusion provided by Section 3(c)(5)(C), as real estate related assets or miscellaneous assets, as appropriate.

If our portfolio does not comply with the requirements of the exclusion we rely upon, we could be forced to alter our portfolio by selling or otherwise disposing of a substantial portion of the assets that are not Qualifying Interests or by acquiring a significant position in assets that are Qualifying Interests.  Altering our portfolio in this manner may have an adverse effect on our investments if we are forced to dispose of or acquire assets in an unfavorable market and may adversely affect our stock price.

If it were established that we were an unregistered investment company, there would be a risk that we would be subject to monetary penalties and injunctive relief in an action brought by the SEC, that we would be unable to enforce contracts with third parties and that third parties could seek to obtain rescission of transactions undertaken during the period it was established that we were an unregistered investment company and limitations on corporate leverage that would have a material adverse impact on our investment returns.

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We may expand our franchise through business acquisitions and the recruitment of financial professionals, which may present additional costs and other challenges and may not prove successful.

Our business plan contemplates expansion of our franchise into complementary investment strategies involving other credit-sensitive structured financial products.  We may undertake such expansion through business acquisitions or the recruitment of financial professionals with experience in other products.  We may also expend a substantial amount of time and capital pursuing opportunities to expand into complementary investment strategies that we do not consummate.  The expansion of our operations could place a significant strain on our management, financial and other resources.  Our ability to manage future expansion will depend upon our ability to monitor operations, maintain effective quality controls and significantly expand our internal management and technical and accounting systems, all of which could result in higher operating expenses and could adversely affect our current business, financial condition and results of operations.

We cannot assure you that we will be able to identify and integrate businesses or professional teams we acquire to pursue complementary investment strategies and expand our business.  Moreover, any decision to pursue expansion into businesses with complementary investment strategies will be in the discretion of our management and may be consummated without prior notice or shareholder approval.  In such instances, shareholders will be relying on our management to assess the relative benefits and risks associated with any such expansion.

Risks Relating to Our Class A Common Stock

Because a limited number of shareholders, including members of our management team, own a substantial number of our shares, they may make decisions or take actions that may be detrimental to your interests.

By virtue of their direct and indirect share ownership, John R. Klopp, a director and our chief executive officer, Craig M. Hatkoff, a director and former officer, and other shareholders indirectly owned by trusts for the benefit of our chairman of the board, Samuel Zell, have the power to significantly influence our affairs and are able to influence the outcome of matters required to be submitted to shareholders for approval, including the election of our directors, amendments to our charter, mergers, sales of assets and other acquisitions or sales.  The influence exerted by these shareholders over our affairs might not be consistent with the interests of some or all of our other shareholders.  As of November 6, 2007, these shareholders collectively own and control 2,312,284 shares of our class A common stock representing approximately 13.0% of our outstanding class A common stock.

W. R. Berkley Corporation, or WRBC, owns 3,133,300 shares of our class A common stock which represents 17.9% of our outstanding class A common stock as of November 6, 2007.  An officer of WRBC serves on our board of directors and, therefore, has the power to significantly influence our affairs.  Through its significant ownership of our class A common stock, WRBC may have the ability to influence matters submitted for shareholder approval.  The influence exerted by WRBC over our affairs might not be consistent with the interests of some or all of our other shareholders.

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The concentration of ownership in our officers or directors or shareholders associated with them may have the effect of delaying or preventing a change in control of our company, including transactions in which you might otherwise receive a premium for your class A common stock, and might negatively affect the market price of our class A common stock.

Some provisions of our charter and bylaws and Maryland law may deter takeover attempts, which may limit the opportunity of our shareholders to sell their shares at a favorable price.

Some of the provisions of our charter and bylaws and Maryland law discussed below could make it more difficult for a third party to acquire us, even if doing so might be beneficial to our shareholders by providing them with the opportunity to sell their shares at a premium to the then current market price.

Issuance of Preferred Stock Without Shareholder Approval.  Our charter authorizes our board of directors to authorize the issuance of up to 100,000,000 shares of preferred stock and up to 100,000,000 shares of class A common stock.  Our charter also authorizes our board of directors, without shareholder approval, to classify or reclassify any unissued shares of our class A common stock and preferred stock into other classes or series of stock and to amend our charter to increase or decrease the aggregate number of shares of stock of any class or series that may be issued.  Our board of directors, therefore, can exercise its power to reclassify our stock to increase the number of shares of preferred stock we may issue without shareholder approval.  Preferred stock may be issued in one or more series, the terms of which may be determined without further action by shareholders.  These terms may include preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions of redemption.  The issuance of any preferred stock, however, could materially adversely affect the rights of holders of our class A common stock and, therefore, could reduce the value of the class A common stock.  In addition, specific rights granted to future holders of our preferred stock could be used to restrict our ability to merge with, or sell assets to, a third party.  The power of our board of directors to issue preferred stock could make it more difficult, delay, discourage, prevent or make it more costly to acquire or effect a change in control, thereby preserving the current shareholders’ control.

Advance Notice Bylaw.  Our bylaws contain advance notice procedures for the introduction of business and the nomination of directors.  These provisions could discourage proxy contests and make it more difficult for you and other shareholders to elect shareholder-nominated directors and to propose and approve shareholder proposals opposed by management.

Maryland Takeover Statutes.  We are subject to the Maryland Business Combination Act which could delay or prevent an unsolicited takeover of us.  The statute substantially restricts the ability of third parties who acquire, or seek to acquire, control of us to complete mergers and other business combinations without the approval of our board of directors even if such transaction would be beneficial to shareholders.  “Business combinations” between such a third party acquiror or its affiliate and us are prohibited for five years after the most recent date on which the acquiror or its affiliate becomes an “interested shareholder.”  An “interested shareholder” is defined as any person who beneficially owns 10 percent or more of our shareholder voting power or an affiliate or associate of ours who, at any time within the two-year period prior to the date interested shareholder status is determined, was the beneficial owner of

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10 percent or more of our shareholder voting power.  If our board of directors approved in advance the transaction that would otherwise give rise to the acquiror or its affiliate attaining such status, such as the issuance of shares of our class A common stock to WRBC, the acquiror or its affiliate would not become an interested shareholder and, as a result, it could enter into a business combination with us.  Our board of directors could choose not to negotiate with an acquirer if the board determined in its business judgment that considering such an acquisition was not in our strategic interests.  Even after the lapse of the five-year prohibition period, any business combination with an interested shareholder must be recommended by our board of directors and approved by the affirmative vote of at least:

•80% of the votes entitled to be cast by shareholders; and

•two-thirds of the votes entitled to be cast by shareholders other than the interested shareholder and affiliates and associates thereof.

The super-majority vote requirements do not apply if the transaction complies with a minimum price requirement prescribed by the statute.

The statute permits various exemptions from its provisions, including business combinations that are exempted by the board of directors prior to the time that an interested shareholder becomes an interested shareholder.  Our board of directors has exempted any business combination involving family partnerships controlled separately by John R. Klopp and Craig M. Hatkoff, and a limited liability company indirectly controlled by a trust for the benefit of Samuel Zell and his family.  As a result, these persons and WRBC may enter into business combinations with us without compliance with the super-majority vote requirements and the other provisions of the statute.

We are subject to the Maryland Control Share Acquisition Act.  With certain exceptions, the Maryland General Corporation Law provides that “control shares” of a Maryland corporation acquired in a control share acquisition have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter, excluding shares owned by the acquiring person or by our officers or by our directors who are our employees, and may be redeemed by us.  “Control shares” are voting shares which, if aggregated with all other shares owned or voted by the acquiror, would entitle the acquiror to exercise voting power in electing directors within one of the specified ranges of voting power.  A person who has made or proposes to make a control share acquisition, upon satisfaction of certain conditions, including an undertaking to pay expenses, may compel our board to call a special meeting of shareholders to be held within 50 days of demand to consider the voting rights of the “control shares” in question.  If no request for a meeting is made, we may present the question at any shareholders’ meeting.

If voting rights are not approved at the shareholders’ meeting or if the acquiring person does not deliver the statement required by Maryland law, then, subject to certain conditions and limitations, we may redeem for fair value any or all of the control shares, except those for which voting rights have previously been approved.  If voting rights for control shares are approved at a shareholders’ meeting and the acquirer may then vote a majority of the shares entitled to vote, then all other shareholders may exercise appraisal rights.  The fair value of the shares for

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purposes of these appraisal rights may not be less than the highest price per share paid by the acquiror in the control share acquisition.  The control share acquisition statute does not apply to shares acquired in a merger, consolidation or share exchange if we are a party to the transaction, nor does it apply to acquisitions approved or exempted by our charter or bylaws.  Our bylaws contain a provision exempting certain holders identified in our bylaws from this statute, including WRBC, family partnerships controlled separately by John R. Klopp and Craig M.  Hatkoff, and a limited liability company indirectly controlled by a trust for the benefit of Samuel Zell and his family.

We are also subject to the Maryland Unsolicited Takeovers Act which permits our board of directors, among other things and notwithstanding any provision in our charter or bylaws, to elect on our behalf to stagger the terms of directors and to increase the shareholder vote required to remove a director.  Such an election would significantly restrict the ability of third parties to wage a proxy fight for control of our board of directors as a means of advancing a takeover offer.  If an acquiror was discouraged from offering to acquire us, or prevented from successfully completing a hostile acquisition, you could lose the opportunity to sell your shares at a favorable price.

The market value of our class A common stock may be adversely affected by many factors.

As with any public company, a number of factors may adversely influence the price of our class A common stock, many of which are beyond our control.  These factors include, in addition to other risk factors mentioned in this section:

•the level of institutional interest in us;

•the perception of REITs generally and REITs with portfolios similar to ours, in particular, by market professionals;

•the attractiveness of securities of REITs in comparison to other companies; and the market’s perception of our growth potential and potential future cash dividends.

An increase in market interest rates may lead prospective purchasers of our class A common stock to expect a higher dividend yield, which would adversely affect the market price of our class A common stock.

One of the factors that will influence the price of our class A common stock will be the dividend yield on our stock (distributions as a percentage of the price of our stock) relative to market interest rates.  An increase in market interest rates may lead prospective purchasers of our class A common stock to expect a higher dividend yield, which could adversely affect the market price of our class A common stock.

Your ability to sell a substantial number of shares of our class A common stock may be restricted by the low trading volume historically experienced by our class A common stock.

Although our class A common stock is listed on the New York Stock Exchange, the daily trading volume of our shares of class A common stock has historically been lower than the

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trading volume for certain other companies.  As a result, the ability of a holder to sell a substantial number of shares of our class A common stock in a timely manner without causing a substantial decline in the market of the shares, especially by means of a large block trade, may be restricted by the limited trading volume of the shares of our class A common stock.

Risks Related to our REIT Status and Certain Other Tax Items

Our charter does not permit any individual to own more than 9.9% of our class A common stock, and attempts to acquire our class A common stock in excess of the 9.9% limit would be void without the prior approval of our board of directors.

For the purpose of preserving our qualification as a REIT for federal income tax purposes, our charter prohibits direct or constructive ownership by any individual of more than a certain percentage, currently 9.9%, of the lesser of the total number or value of the outstanding shares of our class A common stock as a means of preventing ownership of more than 50% of our class A common stock by five or fewer individuals.  The charter’s constructive ownership rules are complex and may cause the outstanding class A common stock owned by a group of related individuals or entities to be deemed to be constructively owned by one individual.  As a result, the acquisition of less than 9.9% of our outstanding class A common stock by an individual or entity could cause an individual to own constructively in excess of 9.9% of our outstanding class A common stock, and thus be subject to the charter’s ownership limit.  There can be no assurance that our board of directors, as permitted in the charter, will increase, or won’t decrease, this ownership limit in the future.  Any attempt to own or transfer shares of our class A common stock in excess of the ownership limit without the consent of our board of directors will be void, and will result in the shares being transferred by operation of law to a charitable trust, and the person who acquired such excess shares will not be entitled to any distributions thereon or to vote such excess shares.

The 9.9% ownership limit may have the effect of precluding a change in control of us by a third party without the consent of our board of directors, even if such change in control would be in the interest of our shareholders or would result in a premium to the price of our class A common stock (and even if such change in control would not reasonably jeopardize our REIT status).  The ownership limit exemptions and the reset limits granted to date would limit our board of directors’ ability to reset limits in the future and at the same time maintain compliance with the REIT qualification requirement prohibiting ownership of more than 50% of our class A common stock by five or fewer individuals.

There are no assurances that we will be able to pay dividends in the future.

We intend to pay quarterly dividends and to make distributions to our shareholders in amounts such that all or substantially all of our taxable income in each year, subject to certain adjustments, is distributed.  This, along with other factors, should enable us to qualify for the tax benefits accorded to a REIT under the Internal Revenue Code.  All distributions will be made at the discretion of our board of directors and will depend on our earnings, our financial condition, maintenance of our REIT status and such other factors as our board of directors may deem relevant from time to time.  There are no assurances that we will be able to pay dividends in the

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future.  In addition, some of our distributions may include a return of capital, which would reduce the amount of capital available to operate our business.

We will be dependent on external sources of capital to finance our growth.

As with other REITs, but unlike corporations generally, our ability to finance our growth must largely be funded by external sources of capital because we generally will have to distribute to our shareholders 90% of our taxable income in order to qualify as a REIT, including taxable income where we do not receive corresponding cash.  Our access to external capital will depend upon a number of factors, including general market conditions, the market’s perception of our growth potential, our current and potential future earnings, cash distributions and the market price of our class A common stock.

If we do not maintain our qualification as a REIT, we will be subject to tax as a regular corporation and face a substantial tax liability.  Our taxable REIT subsidiaries will be subject to income tax.

We expect to continue to operate so as to qualify as a REIT under the Internal Revenue Code.  However, qualification as a REIT involves the application of highly technical and complex Internal Revenue Code provisions for which only a limited number of judicial or administrative interpretations exist.  Even a technical or inadvertent mistake could jeopardize our REIT status.  Furthermore, new tax legislation, administrative guidance or court decisions, in each instance potentially with retroactive effect, could make it more difficult or impossible for us to qualify as a REIT.  If we fail to qualify as a REIT in any tax year, then:

•we would be taxed as a regular domestic corporation, which under current laws, among other things, means being unable to deduct distributions to shareholders in computing taxable income and being subject to federal income tax on our taxable income at regular corporate rates;

•any resulting tax liability could be substantial, could have a material adverse effect on our book value and would reduce the amount of cash available for distribution to shareholders; and

•unless we were entitled to relief under applicable statutory provisions, we would be required to pay taxes, and thus, our cash available for distribution to shareholders would be reduced for each of the years during which we did not qualify as a REIT.

Fee income from our investment management business is expected to be realized by one of our taxable REIT subsidiaries, and, accordingly, will be subject to income tax.

Complying with REIT requirements may cause us to forego otherwise attractive opportunities and limit our expansion opportunities.

In order to qualify as a REIT for federal income tax purposes, we must continually satisfy tests concerning, among other things, our sources of income, the nature of our investments in commercial real estate and related assets, the amounts we distribute to our shareholders and the

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ownership of our stock.  We may also be required to make distributions to shareholders at disadvantageous times or when we do not have funds readily available for distribution.  Thus, compliance with REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.

Complying with REIT requirements may force us to liquidate or restructure otherwise attractive investments.

In order to qualify as a REIT, we must also ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified REIT real estate assets.  The remainder of our investments in securities cannot include more than 10% of the outstanding voting securities of any one issuer or 10% of the total value of the outstanding securities of any one issuer unless we and such issuer jointly elect to be treated as a “taxable REIT subsidiary” under the Internal Revenue Code.  The total value of all of our investments in taxable REIT subsidiaries cannot exceed 20% of the value of our total assets.  In addition, no more than 5% of the value of our assets can consist of the securities of any one issuer.  If we fail to comply with these requirements, we must dispose of a portion of our assets within 30 days after the end of the calendar quarter in order to avoid losing our REIT status and suffering adverse tax consequences.

Complying with REIT requirements may force us to borrow to make distributions to shareholders.

From time to time, our taxable income may be greater than our cash flow available for distribution to shareholders.  If we do not have other funds available in these situations, we may be unable to distribute substantially all of our taxable income as required by the REIT provisions of the Internal Revenue Code.  Thus, we could be required to borrow funds, sell a portion of our assets at disadvantageous prices or find another alternative.  These options could increase our costs or reduce our equity.

We utilize “taxable mortgage pools” to finance our investments.

Certain securitizations, such as our CDOs, are considered taxable mortgage pools, or TMPs, for federal income tax purposes.  TMPs are generally subject to an unavoidable federal tax on the portion of their income deemed to be excess inclusion income, or EII.  As a REIT, we are exempt from taxation at the corporate level on such EII as long as we own 100% of the equity interests in the securitization (as defined for tax purposes).  Notwithstanding the foregoing, we will be subject to taxation at the corporate level on any EII allocated to certain shareholders treated as disqualified organizations under applicable tax rules (generally tax-exempt entities, including federal, state, and foreign governmental entities).

In certain instances, we have either pledged our equity interests in these TMPs as collateral under our repurchase agreements or have contributed these interests to other TMPs—in both cases subjecting the pools to the potential loss of their tax exempt status in the event that we were forced to sell our interests or our interests were foreclosed upon by a third party that was not afforded the same exemption as us.

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Despite our general corporate level exemption from taxation on EII, our shareholders (other than disqualified organizations, described above) are subject to taxation on the EII that we earn.  The Internal Revenue Service has not given clear guidance as to the appropriate method for the calculation of EII and, absent such clear guidance, we have calculated EII based upon what we believe to be a reasonable method.  Our estimation of EII is disclosed in our year end financial statements.  In addition, pursuant to recently issued guidance from the Internal Revenue Service, we are required to allocate EII to our shareholders in proportion to dividends paid and to inform our shareholders of the amount and character of the EII allocated to them.  Given the lack of guidance concerning calculation of EII, there can be no assurances that we have calculated excess inclusion income in a manner satisfactory to the Internal Revenue Service.

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