As filed with the Securities and Exchange Commission on March 3, 2003

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



                            SCHEDULE 14A INFORMATION


     Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934, as amended

Filed by the Registrant  [X]
Filed by a Party other than the Registrant  [ ]
Check the appropriate box:

     [ ]Preliminary Proxy Statement
     [ ]Confidential, for Use of the Commission Only (as permitted by Rule
        14a-6(e)(2))
     [X]Definitive Proxy Statement
     [ ]Definitive Additional Materials
     [ ]Soliciting Material Pursuant to ss.240.14a-12

                               CAPITAL TRUST, INC.



- --------------------------------------------------------------------------------
                (Name of Registrant as Specified In Its Charter)




- --------------------------------------------------------------------------------
     (Name of Person(s) Filing Proxy Statement if other than the Registrant)




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                               CAPITAL TRUST, INC.
                                 410 Park Avenue
                                   14th Floor
                            New York, New York 10022

                    NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
                           To be held on April 2, 2003

To our Shareholders:

     We hereby notify you that we are holding a special meeting of shareholders
at the offices of Paul, Hastings, Janofsky & Walker LLP, 75 East 55th Street,
New York, New York 10022, on April 2, 2003, at 10:00 a.m., New York City time,
for the following purposes:

          (1) To consider and vote upon a proposal to amend and restate our
     charter to make the amendments we determined are necessary in connection
     with our election to be taxed as a real estate investment trust and to
     simplify our capital structure by eliminating from our charter the
     authorized but unissued class B common stock, as described more fully in
     the attached proxy statement and set forth in appendix A thereto.

          (2) To consider and vote upon a proposal to further amend our charter
     to effect a one (1) for three (3) reverse stock split and a corresponding
     reduction in our stated capital, as described more fully in the attached
     proxy statement and set forth in appendix B thereto.

          (3) To consider and act upon such other business and matters or
     proposals as may properly come before the special meeting and any
     adjournment or postponement thereof.

     You can vote your shares of class A common stock if our records show that
you owned the shares on February 14, 2003, the record date for the shareholder
meeting.

                                           By Order of the Board of Directors

                                           /s/  Samuel Zell

                                           Samuel Zell
                                           Chairman of the Board




DATE: March 3, 2003

     To assure your representation at the shareholders meeting, please vote.
     Whether or not you plan to attend the meeting, please take the time to vote
     by completing and mailing the enclosed proxy card to us. We have enclosed a
     return envelope for that purpose, which requires no postage if mailed in
     the United States. If you sign, date and mail your proxy card without
     indicating how you wish to vote, your proxy will be counted as a vote in
     favor of the proposals to amend our charter. If you fail to return your
     card, your vote will not be counted, unless you attend the meeting and vote
     in person.





                               CAPITAL TRUST, INC.
                         ------------------------------

                                 PROXY STATEMENT

                       FOR SPECIAL MEETING OF SHAREHOLDERS

                           TO BE HELD ON APRIL 2, 2003
                        --------------------------------

                                  INTRODUCTION

     We are asking you to approve amendments to our charter that we have
determined are necessary in light of our election to be taxed as a real estate
investment trust, or REIT, under federal income tax law. The amendments would
also, as a means of simplifying our capital structure, eliminate from our
charter the authorized but unissued class B common stock and effect a one (1)
for three (3) reverse stock split.

     We have scheduled a special meeting of shareholders to vote on the
proposals to approve the charter amendments. The date, time and place of the
meeting is:

          Date: April 2, 2003

          Time: 10:00 a.m. New York City time

          Place: The Law Offices of Paul, Hastings, Janofsky & Walker LLP 75
                 East 55th Street New York, New York 10022

     The record date for shareholders entitled to notice of and to vote at the
special meeting is February 14, 2003. If you were a shareholder at that time,
you may vote at the meeting.

See Risk Factors section beginning on page 4 for certain information that should
be considered by shareholders regarding our election to be taxed as a REIT and
the related amendments to our charter.

     Our officers and directors and shareholders indirectly controlled by trusts
for the benefit of the family of Samuel Zell, chairman of our board of
directors, who collectively own or control the vote over 7,694,181 shares of
common stock in total, or approximately 46.6% of the 16,515,132 voting shares
outstanding as of the record date, have advised us that they intend to vote all
of the shares of common stock owned by them in favor of the proposals.

Our board of directors has unanimously approved the charter amendments, and
believes that our REIT election, the simplification of our capital structure and
the reverse stock split are in our company's best interest. Our board of
directors unanimously recommends a vote in favor of approval of the proposals.

     This proxy statement is dated March 3, 2003 and was first mailed to our
shareholders on or about March 3, 2003.






                               Table of Contents

                                                                            Page




FORWARD-LOOKING STATEMENTS.....................................................i
SUMMARY........................................................................1
RISK FACTORS...................................................................4
HISTORICAL AND PRO FORMA CAPITALIZATION........................................8
BUSINESS.......................................................................9
GENERAL INFORMATION ABOUT THE SPECIAL MEETING AND VOTING......................10
REIT RELATED CHARTER AMENDMENTS...............................................12
CAPITAL STRUCTURE RELATED CHARTER AMENDMENTS..................................17
FEDERAL INCOME TAX CONSIDERATIONS.............................................21
BENEFICIAL OWNERSHIP OF STOCK.................................................37
DESCRIPTION OF OUR STOCK......................................................39
SHAREHOLDER PROPOSALS FOR 2003 ANNUAL MEETING.................................46
WHERE YOU CAN FIND MORE INFORMATION...........................................46
ARTICLES OF AMENDMENT AND RESTATEMENT........................................A-1
ARTICLES OF AMENDMENT........................................................B-1



                           FORWARD-LOOKING STATEMENTS

     This proxy statement contains statements that plan for or anticipate the
future. Forward-looking statements include statements about our future
operations as a REIT, the effects of our reverse stock split, our business plans
and strategies, and most other statements that are not historical in nature.
When used in this proxy statement, the words "anticipate," "plan," "intend,"
"believe," "estimate," and the like are generally considered forward-looking.
Because forward-looking statements involve future risks and uncertainties, there
are factors that could cause actual results to differ materially from those
expressed or implied. For example, a few of the uncertainties that could affect
the ultimate accuracy of the forward-looking statements, besides the specific
factors identified in the Risk Factors section on page 3, include:

     o    changes in the real estate market;

     o    changes in real estate capital markets;

     o    changes in our business strategies;

     o    fluctuations in prevailing interest rates and credit spreads; and

     o    changes in federal tax laws.


                                      -i-




                                     SUMMARY

     This summary highlights selected information contained in this document and
may not contain all of the information that is important to you. To better
understand the proposals to amend our charter, you should read carefully this
entire document. We refer in the proxy statement to our class A common stock as
common stock, the only class of stock currently outstanding, which is listed and
traded on the New York Stock Exchange.

                                   The Company

     We are an investment management and real estate finance company that
pursues lending and investment opportunities in commercial real estate and
related assets.

     In December 2002, our board of directors authorized our election to be
taxed as a REIT for the 2003 tax year. The decision to authorize the REIT
election resulted from a review of other strategic alternatives by our board of
directors. Our board determined that the REIT election was superior to the other
alternatives considered.

     We are not undergoing any fundamental change in our business; we are only
changing how we are taxed for federal income tax purposes. We will continue to
make, for our own account and as investment manager for the account of funds
under management, loans and debt related investments in various types of
commercial real estate and related assets, and, to the extent necessary, will
modify our current investment program to originate or acquire loans and
investments to produce a portfolio of such assets that meets the asset and
income tests necessary to maintain our qualification as a REIT.

     Our principal executive offices are located at:

          Capital Trust, Inc.
          410 Park Avenue, 14th Floor,
          New York, New York 10022

                          Reasons for our REIT election

     We believe our REIT election represents a strategic alternative that best
positions us to increase shareholder value. The key reasons for our board's
approval of our REIT election and related business plan were:

     o    The determination that our existing portfolios could produce an
          attractive dividend yield if our net income could be distributed
          without corporate-level income tax; and

     o    The belief that our investment management business was in an early
          phase of development and would continue to grow and become more
          valuable in the REIT format.

     Our board also considered the following developments in our business and
the regulatory environment in which REITs operate:

     o    With the development of our investment management business, we reduced
          the need to retain earnings as a primary source of capital to support
          our lending business;

     o    Recent IRS private letter rulings treat mezzanine loans as qualifying
          assets that result in qualifying income; and

     o    New REIT laws provide us with the flexibility to invest in and manage
          a portfolio of assets as well as to operate our investment management
          business in a taxable REIT subsidiary.

     Our board also considered the following benefits from a capital markets and
valuation perspective:

     o    The effective elimination of corporate-level income tax will allow us
          to produce consistent dividend distributions;




     o    The potential for stock price appreciation with an attractive dividend
          yield;

     o    The increased likelihood of attracting equity research analysis of our
          business as our performance can be measured against other comparable
          publicly-traded REITs; and

     o    The potential for independent valuation of our investment management
          business which would be operated as a separate transparent segment in
          a taxable REIT subsidiary.

                         REIT Related Charter Amendments

     We propose to amend our charter to include ownership and transfer
restrictions in connection with our election to be taxed as a REIT. The REIT
related restrictions are intended to ensure that five or fewer individuals do
not own more than 50% of the value of our outstanding stock, a requirement we
must satisfy in order to maintain our qualifications as a REIT.

     The restrictions would:

     o    prohibit ownership of our stock by certain individuals in excess of
          2.5%;

     o    allow our board of directors to exempt certain individuals from the
          2.5% ownership limit;

     o    void any transfer in excess of the 2.5% ownership limit; and

     o    require our board of directors to use reasonable best efforts to
          preserve our status as a REIT.

     We determined that these restrictions are advisable in light of our
election to be taxed as a REIT and that they are comparable to similar
provisions contained in the corporate charters of other publicly traded REITs.

                  Capital Structure Related Charter Amendments

     We also propose to amend our charter to eliminate from the charter the
100,000,000 shares of authorized but unissued shares of class B common stock as
a means of simplifying our capital structure. The class B common stock, none of
which is outstanding, had been originally authorized as a means of facilitating
compliance with The Bank Holding Company Act of 1956, as amended, by certain
prior investors who made a significant equity investment. Now that these
investors no longer hold the stock issued in connection with their investment,
we believe it is advisable to simplify our capital structure at the same time we
are amending our charter to include the REIT related ownership and transfer
restrictions.

     We also propose to amend our charter to effect a one (1) for three (3)
reverse stock split whereby three shares of our outstanding common stock would
be automatically converted into one share of such stock and we would pay cash in
lieu of fractional shares that would otherwise be issued. Our board of directors
believes that the reverse stock split will enhance the marketability and
liquidity of our common stock, which trades on the New York Stock Exchange.

     Upon the effective date of the reverse stock split, assuming no repurchases
of stock prior to such date, the number of shares of our outstanding common
stock will be reduced to 5,505,044, subject in each case to further reduction
upon the elimination of fractional shares, but the par value and the voting and
other rights and preferences of our stock will not otherwise be altered by the
reverse stock split. Our aggregate stated capital will be reduced so that it
equals $0.01 per outstanding share of our common stock.


                                       2





Recommendation of our Board of Directors

     Our board of directors has unanimously approved the charter amendments, and
believes that the amendments made thereby relating to our REIT election, the
elimination of our class B common stock and the reverse stock split are in our
company's best interest. Our board of directors unanimously recommends a vote in
favor of approval of the proposals to amend our charter as discussed herein.

No Appraisal Rights

     Maryland corporate law does not provide for any dissenters' rights to elect
to have the fair value of your shares judicially appraised and paid to you in
cash in connection with the charter amendments.


                                       3





                                  RISK FACTORS

     You should read the following risk factors carefully before voting your
stock. The risks and uncertainties relating to our election to be taxed as a
REIT and the related amendments to our charter are not the only ones you or we
will face. If the risks discussed below occur or develop to our or your
detriment, they may negatively affect our business or your investment in us.

Risks of ownership of our common stock due to our REIT election

     The amended and restated charter does not permit ownership of over 2.5% of
our common stock by individuals, and attempts to acquire our common stock in
excess of the 2.5% limit would be void without the prior approval of our board
of directors.

        For the purpose of preserving our REIT qualification, the amended and
restated charter would prohibit direct or constructive ownership by any
individual of more than 2.5% of the lesser of the total number or value of the
outstanding shares of our common stock as a means of preventing ownership of
more than 50% of our common stock by five or fewer individuals. The amended and
restated charter's constructive ownership rules are complex and may cause the
outstanding 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 2.5% of our outstanding common stock by an individual
or entity could cause an individual to own constructively in excess of 2.5% of
our outstanding common stock, and thus be subject to the amended and restated
charter's ownership limit. The ownership limit was established following a
review of the aggregate ownership of the top five direct or constructive
individual shareholders. There can be no assurance that our board of directors,
as permitted in the amended and restated charter, will increase this ownership
limit in the future. Any attempt to own or transfer shares of our common stock
in excess of the ownership limit without the consent of our board of directors
shall 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.

     After reviewing the top five shareholders treated as individuals for REIT
qualification purposes, our board of directors fixed the ownership limit at
2.5%. The amended and restated charter contains a provision that would exempt
certain of our officers and directors and related persons from the ownership
limit. Based on the number of shares outstanding on the date hereof, this
exemption would permit these top five shareholders collectively to hold up to
47.8% of our outstanding shares of common stock.

        The 2.5% ownership limit may have the effect of precluding a change in
control of Capital Trust 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
stockholders (and even if such change in control would not reasonably jeopardize
our REIT status).

        We have not established a dividend payment level and there are no
assurances of our ability 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. We have not established a dividend payment
level. 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


                                       4





deem relevant from time to time. There are no assurances as to our ability to
pay dividends in the future. In addition, some of our distributions may include
a return of capital.

     Our current common stock trading price is not necessarily indicative of the
price of our common stock following the REIT election.

     Our current stock price is not necessarily indicative of how the market
will value our common stock following our election to be taxed as a REIT. In the
future, we will be required to distribute 90% of our taxable income and can be
expected to be compared to other REITs and impacted by factors affecting REITs
generally. Our current stock price reflects the current market valuation of our
current business and assets and does not necessarily take into account the
changes in our business and operations that will occur in connection with our
REIT election. Our current stock price also is affected by general market
conditions.

     An increase in market interest rates may lead prospective purchasers of our
common stock to expect a higher dividend yield, which would adversely affect the
market price of our common stock.

     One of the factors that will influence the price of our 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 common stock to expect a higher
dividend yield, which would adversely affect the market price of our common
stock.

     Tax legislation proposed by President Bush may have negative consequences
for REITs.

     Recent tax legislation proposed by President Bush would, if enacted, allow
corporations to pay dividends that are tax-free to shareholders or, to the
extent dividends are not paid, allow shareholders to increase the tax basis of
their shares. As currently described, this proposal would not apply to REITs.
Although the proposal does not adversely affect the tax treatment of REITs, it
may cause investments in non-REIT corporations to become relatively more
desirable. As a result, the capital markets may be less favorable to REITs when
they seek to raise equity capital, and the prices at which REIT equity
securities trade may decline or underperform non-REIT corporations.

     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 stock.

     Shareholders are not entitled to appraisal rights in connection with the
amended and restated charter and our election to be taxed as a REIT.

     Shareholders do not have any statutory dissenters or appraisal rights under
Maryland corporate law to elect to have the fair value of their stock judicially
appraised and paid in cash in connection with the amended and restated charter
or our election to be taxed as a REIT.


                                       5





Risks related to REIT qualification

     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.

     We expect 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:

     o    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;

     o    any resulting tax liability could be substantial, could have a
          material adverse effect on our book value and could reduce the amount
          of cash available for distribution to shareholders; and

     o    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.

Complying with REIT requirements may cause us to forego otherwise attractive
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 and diversification of our investments in commercial real estate and
related assets, the amounts we distribute to our shareholders and the 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. The REIT provisions of the tax code may substantially limit our
ability to hedge our financial assets and related borrowings. 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 investment 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. 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.


                                       6


 


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.


                                       7






                     HISTORICAL AND PRO FORMA CAPITALIZATION

     The following table sets forth (i) certain of our short-term obligations
and our capitalization as of September 30, 2002 and (ii) such short-term
obligations and capitalization giving pro forma effect to the elimination of our
class B common stock and the reverse stock split.




                                                                           September 30, 2002
                                                                        Historical    Pro Forma
                                                                        ----------    ---------
                                                                              (thousands)
                                                                                  

Short-Term Debt                                                            --            --

     Total short-term debt

Long-Term Debt
     Credit facilities                                                     35,000        35,000
     Repurchase obligations                                               172,757       172,757
                                                                        -----------   -----------
     Total long-term debt                                                 207,757       207,757

Company-obligated, mandatorily redeemable, convertible preferred
     securities of CT Convertible Trust I, holding solely 8.25% junior
     subordinated debentures                                               88,869        88,869


Shareholders' Equity; Pro Forma Shareholders' Equity(1)

     Preferred stock, $0.01 par value, 100,000 shares authorized,
          no shares issued and outstanding                                 --            --
     Class A common stock, $0.01 par value, 100,000 authorized,
         17,912 issued and outstanding                                        179        --
     Class B common stock, $0.01 par value, 100,000 shares authorized,
         no shares issued and outstanding                                  --            --
     Restricted class A common stock, $0.01 par value,
         300 shares issued and outstanding                                      3        --
     Pro forma preferred stock, $0.01 par value; 100,000 shares
         authorized, no shares issued and outstanding                      --            --
     Pro forma class A common stock, $0.01 par value; 100,000 shares
         authorized, 5,971 shares issued and outstanding                   --                60
     Pro forma restricted class A common stock, $0.01 par value;
         100 shares issued and outstanding                                 --                 1

     Additional paid-in capital                                           134,411       134,532
     Unearned compensation                                                   (479)         (479)
     Accumulated other comprehensive income                               (33,154)      (33,154)
     Accumulated deficit                                                      371           371
                                                                        -----------   -----------

          Total shareholders' equity and Pro forma total
              stockholders' equity                                        101,331       101,331
                                                                        -----------   -----------
Total Capitalization and Pro Forma Total Capitalization (2)               397,957       397,957
                                                                        ===========   ===========




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

(1)  The class B common stock is identical to the class A common stock, except
     the class B common stock does not entitle the holders to voting rights.

(2)  Total Capitalization and Pro Forma Total Capitalization include long-term
     debt and shareholders' equity.


                                       8






                                    BUSINESS

     We are an investment management and real estate finance company that
pursues lending and investment opportunities in commercial real estate and
related assets. In December 2002, our board of directors authorized our election
to be taxed as a REIT for the 2003 tax year. We will continue to make, for our
own account and as investment manager for the account of funds under management,
loans and debt related investments in various types of commercial real estate
and related assets.

     We are the co-sponsor and exclusive investment manager of CT Mezzanine
Partners II LP, or Fund II, the largest dedicated commercial real estate
mezzanine investment fund in the United States with total equity commitments of
$845 million. Our business strategy is to continue to expand our investment
management business by sponsoring other funds, and, following the investment
period for Fund II, other commercial real estate mezzanine investment funds. We
believe that these funds will generate additional investment management fees and
incentive compensation tied to the performance of their portfolios of
investments. We continue to manage our existing portfolio of balance sheet
assets originated prior to the commencement of our investment management
business and are positioned to selectively add to our balance sheet investments
by investing in a diverse array of real estate and investment
management/finance-related assets and enterprises, including operating
companies.

     Our company was created to take advantage of opportunities resulting from
the rapid evolution of the real estate capital markets. Since our inception in
1997, we have designed and developed a platform to provide flexible, value-added
financing for large single and multiple portfolios and real estate operating
companies. Our current investment program emphases senior and junior mortgage
loans, mezzanine loans secured by pledges in equity interests in the property
owners, subordinated tranches of commercial mortgage backed securities, commonly
referred to as CMBS, and preferred and other direct equity investments. In
general, our investments are subordinate to other third-party senior financing,
but senior to the owner/operator equity in the property.

     In view of our election to be taxed as a REIT, we will tailor our balance
sheet investment program to originate or acquire loans and investments to
produce a portfolio that meets the asset and income tests necessary to maintain
our qualification as a REIT. In order to accommodate our REIT status, the legal
structure of future investment funds we sponsor may be different from the legal
structure of our existing investment funds. For a discussion of the federal
income tax law qualifications for a REIT, see the information below under the
caption "Federal Income Tax Considerations -- Taxation of REIT."

     In connection with our election to be taxed as a REIT, we and affiliates of
Citigroup Inc. decided to modify our existing relationship under which we
co-sponsor and invest in a series of commercial real estate mezzanine funds
managed by us. In January 2003, we purchased Citigroup's interest in CT
Mezzanine Partners I for a purchase price of approximately $38.4 million
(including the assumption of liabilities). We also purchased from Citigroup
stock purchase warrants exercisable for 8,528,467 shares of our common stock for
a purchase price of approximately $2.1 million. Finally, we have agreed to amend
the terms of our venture agreement with Citigroup. Under the amended agreement,
we will earn 100% of the base management fees derived from all funds under
management and will own 62 1/2% of the incentive management interests in future
mezzanine funds co-sponsored with Citigroup pursuant to the venture agreement.


                                       9






            GENERAL INFORMATION ABOUT THE SPECIAL MEETING AND VOTING



Where and when will the special meeting be held?

The date, time and place of the meeting is:

     April 2, 2003
     10:00 a.m. (New York City time)
     The Law Offices of Paul, Hastings, Janofsky & Walker LLP
     75 East 55th Street
     New York, New York 10022

Why did you send me this proxy statement?

We sent you this proxy statement and the enclosed proxy card because our board
of directors is asking for your proxy to vote at the special meeting. This proxy
statement summarizes the information you need to know to vote at the meeting.
But you don't have to attend in order to vote your shares. Instead, you may
simply complete, sign, and return the enclosed proxy card.

Who can vote?

You can vote your shares of common stock if our records show that you were the
official owner of record of the shares on February 14, 2003, the record date for
the special meeting. A total of 16,515,132 shares of our common stock can vote
at the special meeting. You get one vote for each share of common stock that you
own. The enclosed proxy card shows the number of shares you can vote.

How are votes counted?

We will hold the special meeting if shareholders representing the required
quorum of shares of stock entitled to vote either sign and return their proxy
cards or attend the meeting. A majority of the shares of common stock entitled
to vote at the meeting present in person or by proxy will constitute a quorum.
If you sign and return your proxy card, your shares will be counted to determine
whether we have a quorum even if you abstain or fail to vote as indicated on the
proxy card.

The proposals to amend our charter are non-routine matters. As a result, if your
shares are held in the name of a nominee, and you do not tell the nominee by
April 2, 2003 how to vote your shares, the nominee cannot vote them (giving rise
to what is known as a broker non-vote) but if the nominee signs and returns the
proxy card, your shares will be counted as present to determine if a quorum
exists.

If you abstain or your shares are treated as broker non-votes, your abstention
or the broker non-votes will have the effect of a vote against the proposals to
amend our charter.

What is the required vote for approval?

The affirmative vote of a majority of the shares of common stock entitled to
vote is required to approve the proposals to amend our charter.

How do I vote by proxy?

Follow the instructions on the enclosed proxy card to vote on the matter to be
considered at the special meeting. Sign and date the proxy card and mail it back
to us in the enclosed envelope. The proxyholders named in the proxy card will
vote your shares as you instruct. If you sign and return the proxy card but do
not vote on the proposal, the proxyholders will vote for you on the proposal.
Unless you instruct otherwise, the proxyholders will vote in favor of approval
of the proposals to amend our charter.

What if other matters come up at the special meeting?

The proposals to amend our charter described in this proxy statement are the
only matters we now know of that will be voted on at the special meeting. If
other matters are properly presented at the meeting, the proxyholders will vote
your shares as they see fit.


10





Can I change my vote after I return my proxy card?

Yes. At any time before the vote on a proposal is taken, you can change your
vote either by giving us a written notice revoking your proxy card or by
signing, dating, and returning to us a new proxy card or by attending the
special meeting and voting your shares in person. We will honor the proxy card
with the latest date.

Proxy revocation notices or new proxy cards should be sent to Capital Trust,
Inc. c/o American Stock Transfer & Trust Company, 6201 Fifteenth Avenue,
Brooklyn, New York 11219, Attention: Paul Caroppoli.

Can I vote in person at the special meeting rather than by completing the proxy
card?

Although we encourage you to complete and return the proxy card to ensure that
your vote is counted, you can attend the special meeting and vote your shares in
person.

What do I do if my shares are held in "street name"?

If your shares are held in the name of your broker, a bank, or other nominee,
that party should give you instructions for voting your shares.

Who pays for this proxy solicitation?

We do. In addition to sending you these materials, some of our employees may
contact you by telephone, by mail, or in person. None of these employees will
receive any extra compensation for doing this.


                                       11





                         REIT RELATED CHARTER AMENDMENTS

Introduction

     We are providing this proxy statement to you in connection with our request
for shareholder approval to make the amendments to our charter we determined are
necessary in connection with our election to be taxed as a REIT. Specifically,
we are asking you to approve articles of amendment and restatement of our
charter which, among other things discussed below under the caption "Capital
Structure Related Charter Amendments", would amend our charter to include
ownership and transfer restrictions related to our REIT election.

Background

     In 1997, our management team took control of our company, re-capitalized it
and significantly changed its business plan. At that time, our goal was to
create a large, diversified finance company that specialized in the rapidly
emerging market for commercial real estate mezzanine financing. Pursuant to that
business plan, we also provided advisory and investment banking services to
owners and operators of commercial real estate. Although our company had
originally been operated as a REIT since it was founded in 1966, in light of our
new business plan, we chose to be taxed as a regular domestic corporation in
order to maximize flexibility, retain earnings and accommodate our initial mix
of businesses.

     From July, 1997 through December 31, 1999, we made 41 investments
aggregating approximately $1.3 billion, all for our own account and balance
sheet. By that time, we had become a recognized leader in the real estate
mezzanine market and we saw an opportunity to continue our successful investment
strategy and significantly expand our franchise by raising capital in the
private equity market. In March of 2000, we entered into a strategic venture
with affiliates of Citigroup Inc. to co-sponsor and invest in a series of
commercial real estate mezzanine funds that would be managed by us. This venture
marked the commencement of our investment management business and provided the
potential for significant operating leverage by allowing us to grow earnings and
enhance returns on equity without increasing financial leverage.

     Pursuant to our strategic venture with Citigroup, we are currently managing
CT Mezzanine Partners II, which we refer to as Fund II. Fund II closed its
private offering in August 2001 with total capital commitments of $845 million,
including commitments of $199 million and $50 million by Citigroup and us,
respectively, and the balance from third party institutional investors. Fund II
has originated $1.1 billion of investments and had a $723.5 million investment
portfolio at December 31, 2002. Our wholly owned subsidiary, CT Investment
Management Co., LLC, referred to as CTIMCO, serves as the exclusive investment
manager of Fund II.

     When we entered the third party investment management business, we decided
to de-emphasize (and ultimately exit) the advisory/investment banking business.
Pursuant to our agreement with Citigroup, we also agreed to re-elect REIT status
as soon as practicable (the earliest possible point being for the 2002 tax
year). During 2001, we became concerned that, due to the mix of assets in our
portfolio and our growing third-party investment management business, we would
find it difficult, as an operating matter, to meet the qualifications to be
taxed as a REIT. As a result, we sought and received from Citigroup a waiver of
the requirement to re-elect REIT status, which was ultimately received in early
2002. Notwithstanding the waiver, we remained committed to pursuing alternative
strategies for tax efficiency, including a REIT election, depending on the
impact on our business.

Decision to Elect to be Taxed as a Real Estate Investment Trust

        During 2002, we continued to explore various strategic alternatives to
increase shareholder value as we believed that our company was undervalued in
the equity market. We were also aware of important new developments in the rules
governing REITs that could materially benefit us. Specifically, the IRS had
issued private letter rulings concluding that mezzanine loans constitute
qualifying assets that result in


                                       12





qualifying income for REIT qualification purposes. As a result of these
developments, at a meeting of our board of directors on November 6, 2002,
management presented a preliminary analysis of potential strategic alternatives
including a sale or liquidation of the company, a sale or spin-off of CTIMCO,
and a re-election of REIT status. The board directed management to propose a
comprehensive business plan for our company if we were to elect REIT status for
the 2003 tax year. Our board also authorized us to engage Morgan Stanley & Co.
Incorporated as our financial advisor to evaluate and analyze the proposed REIT
election and the other potential strategic alternatives.

     On December 10, 2002, our board of directors held a meeting and reviewed
management's detailed plan for electing to operate and be taxed as a REIT and to
consider Morgan Stanley's evaluation and analysis of strategic alternatives.
Management reviewed its plan for meeting the REIT qualification tests, including
actions it recommended to address ownership concentration issues and accumulated
"earnings and profits" generated during the period when we were taxed as a
regular corporation. Morgan Stanley made a presentation that included
quantitative and qualitative assessments of various alternatives. Based upon the
plan presented by management and the analysis presented by Morgan Stanley, our
board unanimously determined that it was in our company's best interest to elect
to be taxed as a REIT and authorized management to take all actions necessary
and appropriate to elect to be operated and taxed as a REIT. Our board of
directors subsequently declared the election advisable and approved and
authorized for submission for shareholder approval the amended and restated
charter.

Reasons for Election to be Taxed as a REIT

     Our board of directors considered numerous factors, including the advice of
Morgan Stanley, in reaching its decision to approve our election to be taxed as
a REIT as the superior alternative. Paramount among our board's reasons for
approving the election were:

     o    The determination that our existing portfolio of loans and investments
          could produce an attractive dividend yield if our net income could be
          distributed to shareholders free of corporate-level income tax, and

     o    The belief that our third-party investment management business was
          still in an early phase of development and that the business should
          continue to grow in the ordinary course and become more valuable.

     Our board of directors also considered developments in our business and
with respect to the laws and regulations applicable to enterprises that operate
as REITs that rendered a decision to elect REIT status opportune for us and that
would not otherwise require us to materially alter our business plan in order to
qualify as a REIT. Specifically, our board considered the following
developments:

     o    With the development of our investment management business, we had
          materially reduced the capital intensive nature of our balance sheet
          lending business and therefore the need to retain earnings as a source
          of capital;

     o    Recent IRS private letter rulings that permitted mezzanine loans to be
          classified as qualifying assets that result in qualifying income; and

     o    Recent changes in REIT legislation, including the REIT Modernization
          Act of 2000, that provided us with the flexibility to invest in and
          manage our portfolio of assets as well as to operate our investment
          management business in a taxable REIT subsidiary.

     From a capital markets and valuation perspective, the board also considered
the following benefits afforded by the REIT structure:


                                      -13-




     o    The effective elimination of corporate-level income tax could produce
          consistent dividend distributions to shareholders;

     o    The potential for stock price appreciation with an attractive dividend
          yield;

     o    The increased likelihood of attracting equity research analysis of our
          business since our performance can now be measured against a pool of
          comparable publicly-traded REITs; and

     o    The potential for independent valuation of our investment management
          business, which would be operated as a separate transparent segment in
          a taxable REIT subsidiary.

     Our board of directors also considered the following negative factors:

     o    The fact that the specific plan to restructure our hedging strategy
          and offset our accumulated earnings and profits and the write-off of
          certain deferred tax assets would result in a loss of approximately
          $14 million in the fourth quarter of fiscal year 2002;

     o    The possibility that management's assumptions with respect to future
          operations as a REIT may not be achieved; and

     o    The potential that the federal tax laws governing or affecting REITs
          could be changed.

     The foregoing discussion of the information and factors considered by our
board of directors is not intended to be exhaustive but we believe includes all
material factors considered by the board. In view of the complexity and wide
variety of information and factors, both positive and negative, considered by
the board, it did not find it practical to quantify, rank or otherwise assign
relative or specific weights to the factors considered. In addition, the board
did not reach any specific conclusion with respect to each of the factors
considered, or any aspect of any particular factor, but, rather, conducted an
overall analysis of the factors described above, including discussions with
management and legal, financial and accounting advisors. In considering the
factors described above, individual members of the board may have given
different weight to different factors. Our board of directors considered all
these factors as a whole and believed the factors supported its determination.
After taking into consideration all of the factors set forth above, our board
concluded that electing to be taxed and operated as a REIT in accordance with
the plan developed by management was superior to the other strategic
alternatives considered by it and in the best interest of our company.

Becoming a Real Estate Investment Trust

     Shareholder approval of the proposed amended and restated charter at the
special meeting, together with timely completion of the other transactions
described below, will allow us to qualify to elect to be taxed as a REIT
beginning with the taxable year beginning January 1, 2003. If we were to qualify
for taxation as a REIT and elect REIT status, we would not be subject to federal
corporate income tax on the net income we distribute to our shareholders.

     One of the requirements to qualify as a REIT is the elimination of all of
our accumulated "earnings and profits" from all non-REIT qualifying years in
which we have operated as a regular corporation. We believe we have eliminated
all such earnings and profits by actions taken in December 2002. We did so by
triggering losses through the settlement of certain derivative hedging
instruments, the disposition of a non-performing asset and the write-off of
certain deferred tax assets.

     In order to qualify as a REIT, no more than 50% of our common stock may be
owned by five or fewer individuals. As a means of facilitating compliance with
such qualification, shareholders controlled by John R. Klopp and Craig M.
Hatkoff and trusts for the benefit of the family of Samuel Zell each sold


                                      -14-



500,000 shares of common stock to Stichting Pensioenfonds ABP in a transaction
that closed on February 7, 2003. Following this transaction, our largest five
individual shareholders own in the aggregate less than 50% of our common stock.
In connection with this transaction, we entered into a registration rights
agreement with Stichting Pensioenfonds ABP pursuant to which we agreed to
register for resale the shares of common stock purchased by it.

Ongoing Management

     In connection with our election to become a REIT, we have consolidated all
of our management activities, including the investment management of Fund II and
future third-party funds and the ongoing management of our company itself, into
our wholly owned subsidiary, CTIMCO, which will be operated as a taxable REIT
subsidiary. CTIMCO will serve as our exclusive manager and all of our employees
will be directly employed by CTIMCO. Subject to the supervision of our board of
directors, CTIMCO will be responsible our the day-to-day operations pursuant to
a management agreement. We expect to base the compensation, fees, expense
reimbursements and other terms of the management agreement with CTIMCO upon the
terms contained in the management agreements between externally managed publicly
traded commercial mortgage REITs and their outside managers. We believe that
this will produce a management agreement with terms comparable to those that
could be obtained from unrelated parties on an arm's length basis. We believe
that this corporate organizational structure provides financial transparency
for, and facilitates the separate valuation of, our different business segments,
which should provide us with more flexibility if we decide to sell or spin off
CTIMCO's management business in the future.

Description of REIT Related Charter Amendments

        We summarize below the principal REIT related amendments contained in
the amended and restated charter. This summary does not purport to be complete
and is qualified in its entirely by reference to the complete text of the
articles of amendment and restatement attached to this proxy statement as
appendix A. You are urged to read the appendix to this proxy statement in its
entirety.

     The proposed amended and restated charter would include a new provision
that would restrict ownership of our stock. The new provision prohibits
ownership, directly or by virtue of the attribution provisions of the Internal
Revenue Code, by any individual of more than 2.5% of the lesser of the number or
value of the issued and outstanding shares of our stock. The 2.5% ownership
limit was established as a means of preventing ownership of more than 50% of our
stock by five or fewer individuals following a review of the aggregate ownership
of the top five direct or constructive individual shareholders. Our board of
directors, in its sole and absolute discretion, may waive or modify the
ownership limit with respect to one or more persons who would not be treated as
"individuals" for purposes of the Internal Revenue Code if it is satisfied,
based upon information required to be provided by the party seeking the waiver
and, if otherwise determined to be necessary, upon a ruling from the Internal
Revenue Service or an opinion of counsel satisfactory to the board of directors,
that ownership in excess of this limit will not cause a person who is an
individual to be treated as owning shares in excess of the ownership limit,
applying the applicable constructive ownership rules, and will not otherwise
jeopardize our status as a REIT for federal income tax purposes. There can be no
assurance that our board of directors will increase this ownership limit in the
future.

     Any shares held at any time in violation of the ownership limit will be
transferred automatically to a trust for the benefit of a designated charitable
beneficiary, and the person who acquired such excess shares of our stock will
not be entitled to any distributions thereon or to vote such excess shares of
stock. The holder of any such excess shares of our stock will receive the lesser
of the value of such excess shares as of the effective time or the cash proceeds
from the sale of such excess shares of stock by the trustee of the trust. After
the effective time of the amended and restated charter, any person who acquires
our stock


                                      -15-




in excess of the ownership limit will not receive any proceeds from the
subsequent sale thereof in excess of the lesser of the price paid therefor or
the amount realized from such sale. A transfer of our stock to a person who, as
a result of the transfer, violates the ownership limit may be void under certain
circumstances, and, in any event, would deny the transferee any of the economic
benefits of owning our stock in excess of the ownership limit. The ownership
limit may have the effect of delaying, deferring or preventing a change in
control and, therefore, could adversely affect the shareholders' ability to
realize a premium over the then-prevailing market price for our common stock in
connection with such transaction.

     The amended and restated charter contains a provision that would exempt all
shareholders who hold shares in excess of the 2.5% ownership limit as of the
effective date of the charter. Pursuant to this exemption, the following
shareholders would be so exempt:

     o    Samuel Zell, our chairman of the board, and Samstock LLC and Veqtor
          Finance Company L.L.C., which is owned indirectly by trusts for the
          benefit of the family of Mr. Zell;

     o    John R. Klopp, a director and our chief executive officer, and JRK
          Investment Partnership LP, a family investment partnership owned by
          Mr. Klopp and his family;

     o    Craig M. Hatkoff, a director, and CMH Investment Partnership, a family
          investment partnership owned by Mr. Hatkoff and his family;

     o    Gary R. Garrabrant, a director, and GRG Investment Partnership LP, a
          family investment partnership owned by Garrabrant and his family;

     o    Sheli Z. Rosenberg, a director, and Rosenberg-CT General Partnership,
          a family investment partnership owned by Ms. Rosenberg and her
          husband; and

     o    Stephen D. Plavin, our chief operating officer.

     In addition, the proposed amended and restated charter would include a new
provision that states that if we elect to qualify for REIT status, our board of
directors will use its reasonable best efforts to take such actions as are
necessary or appropriate to preserve our status our as a REIT, but if the board
determines that it is no longer in our best interests to continue to be
qualified as a REIT, the board may revoke or otherwise terminate our REIT
election. The board may also determine that compliance with any restriction or
limitation on stock ownership and transfers (described above) is no longer
required for REIT qualification.

Articles of Amendment and Restatement

     The effective date of the amendments discussed above will occur upon the
filing with, and acceptance for record by, the State Department of Assessments
and Taxation of Maryland of the articles of amendment and restatement set forth
in appendix A hereto. Although our board of directors believes as of the date of
this proxy statement that the charter amendments discussed above are advisable
and in our company's best interest, our board of directors may abandon the
proposal at any time before, during or after the special meeting and prior to
filing the articles of amendment and restatement in Maryland, should it
determine otherwise. For a summary description of our stock following the
charter amendments, refer to the information below under the caption
"Description of Our Stock."


                                      -16-





                  CAPITAL STRUCTURE RELATED CHARTER AMENDMENTS

Introduction

     We are also providing this proxy statement to you in connection with our
request for shareholder approval of other amendments to our charter to eliminate
from our charter the authorized but unissued class B common stock and to effect
a one (1) for three (3) reverse stock split. Specifically, we are asking you to
approve articles of amendment and restatement of our charter, which, among other
things discussed above under the caption "REIT Related Charter Amendments",
would eliminate our class B common stock and articles of amendment which would
further amend our charter to effect the reverse stock split.

Elimination of Class B Common Stock

     We summarize below the amendments relating to the elimination of the class
B common stock from the amended and restated charter. This summary does not
purport to be complete and is qualified in its entirety by reference to the
complete text of the articles of amendment and restatement attached to this
proxy statement as appendix A. You are urged to read the appendix to this proxy
statement in its entirety.

     The amended and restated charter would eliminate the 100,000,000 shares of
our authorized but unissued class B common stock and make other conforming
amendments that would reflect the elimination of the class B common stock. The
non-voting class B common stock had been originally authorized as a means of
limiting the voting power of certain prior investors who at the time they made a
significant equity investment in us might have been prohibited by the Bank
Holding Company Act of 1956, as amended, from holding more than 4.9% of any
class or series of our voting stock. Now that these investors no longer hold the
stock issued in connection with their investment, we believe it is advisable to
simplify our capital structure by eliminating the class B common stock and have
decided to so amend our charter at the same time that we are amending our
charter to include the REIT related ownership and transfer restrictions.

     The class B common stock, none of which is outstanding, is identical to the
class A common stock except it does not have voting rights. Under our current
charter, each share of class B common stock is convertible at the option of the
holder at any time into one share of class A common stock, and each share of
class A common stock is convertible at the option of the holder at any time into
one share of class B common stock. If shares of class B common stock are to be
converted into shares of class A common stock, the holder of shares of the class
B common stock must certify to us that he or she will not, upon the issuance of
such shares of class A common stock, own more than 4.9% of any class of our
voting stock or that he or she is not prohibited by the Bank Holding Company Act
from holding more than 4.9% of any class or series of our voting stock.

     The amendment deletes all references to class B common stock and eliminates
all 100,000,000 shares of class B common stock from our authorized stock. The
amended and restated charter would also eliminate the conversion rights of the
class A common stock pursuant to which the holders have a right to convert one
share of class A common stock into one share of class B common stock.

Reverse Stock Split

     In January 2003, our board of directors authorized a further amendment to
our charter that would effect a one (1) for three (3) reverse stock split
whereby three (3) shares of our outstanding common stock would be automatically
converted into one (1) share of common stock and a corresponding reduction of
our stated capital would be made. To avoid the existence of fractional shares,
any shareholder who would otherwise be entitled to receive a fractional share
will receive cash from us in lieu of such fractional share


                                      -17-





based on the closing trading price of our common stock on the effective date of
the charter amendment. The voting and other rights and preferences of our stock
will not otherwise be altered by the reverse stock split. A copy of the charter
amendment is attached as appendix B.

     Our board of directors authorized the reverse stock split with the purpose
of increasing the marketability and liquidity of our common stock which trades
on the New York Stock Exchange. Our board of directors believes that the current
low trading price for our common stock may effectively limit the marketability
of the stock for the following reasons:

     o    there is a reluctance on the part of many brokerage firms and
          institutional investors to recommend lower-priced stocks to their
          clients or to hold them in their portfolios because they are viewed as
          unduly speculative in nature;

     o    it is the policy of certain brokerage firms not to provide coverage
          and research with respect to lower-priced stocks;

     o    brokerage firms often apply time-consuming procedures that function to
          make the handling of orders for lower-priced stocks difficult for
          investors and unattractive to brokers from an economic standpoint;

     o    brokerage firms often will not allow their customers to obtain margin
          loans on lower-priced stocks; and

     o    the brokerage commission on a lower-priced stock may also represent a
          higher percentage of the sale price as compared to the brokerage
          commission on a higher-priced stock.

     Our aim with the reverse stock split is to have the current trading price
per share of our common stock, which has averaged $4.85 per share over the last
30 trading days, increase proportionately by three times. With such an increase
in price, we believe that:

     o    the shares become more attractive to a broader range of investors by
          increasing the price per share so that institutional and other
          investors with minimum price per share restrictions can purchase the
          stock;

     o    brokerage firms will be able to recommend the stock to their clients
          and avoid applying time-consuming procedures in the handling of orders
          for the stock;

     o    the stock becomes more attractive to analysts, and, as a result,
          produces greater analyst coverage and research;

     o    brokerage firms will be able to extend margin loans on the stock
          thereby removing such impediment to ownership by investors who desire
          to own only marginable stock; and

     o    trading commissions on a sale of the stock will represent a lower
          percentage of the sales price.

     However, we cannot assure you that the trading price of our common stock
will increase in proportion to the reduction in the number of outstanding shares
resulting from the reverse stock split or that the marketability or liquidity of
such stock will be improved.


                                      -18-





Effects of the Reverse Split

     If approved by our shareholders, upon the effective date of the charter
amendment the following will result:

     o    each three (3) shares of our outstanding common stock will be
          converted automatically into one (1) share of our common stock,
          resulting in a reduction of the number of outstanding shares of such
          stock from 16,515,132 to 5,505,044 (subject to further reduction upon
          the elimination of fractional shares);

     o    the total number of shares of common stock and preferred stock
          authorized for issuance in our charter will remain the same;

     o    the par value of our shares of stock will remain $0.01 per share and,
          as a consequence, the aggregate stated capital of our outstanding
          stock will be reduced, while the aggregate capital surplus in excess
          of our stated capital attributable to our outstanding stock for
          statutory and accounting purposes will be correspondingly increased;

     o    the number of shares of stock subject to our outstanding stock options
          and convertible securities and authorized for issuance pursuant to our
          stock plans will be proportionately reduced and the exercise and
          conversion prices will be proportionately increased;

     o    no fractional shares of stock will be issued for any fractional
          interest resulting from the reverse stock split and we will pay cash
          in lieu of such fractional shares based on the closing price on the
          New York Stock Exchange on the day immediately preceding the effective
          date of the reverse stock split;

     o    the rights, preferences, privileges or priorities of all our
          outstanding common stock will remain unchanged;

o          each shareholder's percentage ownership and voting power will remain
           unchanged, except for minor differences resulting from the
           elimination of fractional interests; and

     o    certain shareholders may be left with one or more "odd lots," or a
          number of shares that is less than 100, and therefore may find it
          difficult to sell such shares and in connection with any sale may have
          to pay higher commissions and other transaction costs as compared to a
          sale involving a "round lot," or a number that is in even multiplies
          of 100.

     We do not expect that the reverse stock split will affect the listing of
our shares of common stock on the New York Stock Exchange, nor the registration
of such stock under the Securities Exchange Act of 1934. We will, however, need
to file a supplemental listing application with the New York Stock Exchange in
connection with the reverse stock split. All fees incurred in connection with
the implementation of the proposed reverse stock split will be borne by us.

Exchange of Stock Certificates and Elimination of Fractional Share Interests

     The reverse stock split will become effective upon the filing and
acceptance for record of the articles of amendment in Maryland without any
action on the part our shareholders and without regard to the date or dates old
stock certificates formerly representing shares of our stock before the reverse
stock split are physically surrendered for new stock certificates representing
the number of shares of stock a shareholder is entitled to receive as a result
of the reverse stock split.


                                      -19-





     As soon as practicable after the date the charter amendment becomes
effective, we will send a letter of transmittal to each shareholder of record at
the effective time for use in transmitting old stock certificates to our
transfer agent, American Stock Transfer & Trust Company, who will be serving as
our exchange agent. The letter of transmittal will contain instructions for the
surrender of old certificates to the exchange agent in exchange for new
certificates representing the number of whole new shares of stock into which
such holders' shares represented by the old certificates have been converted as
a result of the reverse stock split and cash in lieu of fractional shares.

        Shareholders should not send their old certificates to the exchange
agent until they have received the letter of transmittal. Old certificates not
presented for surrender as soon as is practicable after the letter of
transmittal is sent shall be exchanged for new certificates at the first time
they are otherwise presented for transfer or conversion. Until so surrendered,
each current certificate representing shares of our stock will be deemed for all
corporate purposes after the effective time of the charter amendment to
represent ownership of shares in the appropriately reduced whole number of
shares.

     No fractional shares of stock will be issued for any fractional share
interest resulting from the reverse stock split. Rather, we will pay each
shareholder who would otherwise receive a fractional share of stock as a result
of the reverse stock split, in lieu of such fractional share interest, an amount
of cash equal to the closing sale price of a share of common stock on the New
York Stock Exchange on the date the charter amendment becomes effective (or the
preceding trading day if the stock was not traded that day) multiplied by the
number of shares of stock held by such holder that would otherwise have been
exchanged for such fractional share interest. We will use our existing cash to
fund such payments.

Articles of Amendment and Restatement and Articles of Amendment

     The effective date of the amended and restated charter that will effect the
elimination of the class B common stock and charter amendment that will effect
the reverse stock split will occur upon the filing with, and acceptance for
record by, the State Department of Assessments and Taxation of Maryland of the
articles of amendment and restatement set forth in appendix A hereto and
articles of amendment set forth in appendix B hereto, respectively. Although our
board of directors believes as of the date of this proxy statement that the
charter amendments are advisable and in our company's best interest, our board
of directors may abandon the proposal at any time before, during or after the
special meeting and prior to filing the articles of amendment and restatement
and articles of amendment in Maryland, if it should determine otherwise. For a
summary of our stock following the charter amendments, refer to the information
below under the caption "Description of Our Stock".


                                       20



                        FEDERAL INCOME TAX CONSIDERATIONS

General

     The following is a discussion of the material United States federal income
tax considerations associated with our REIT election and with the ownership of
our common stock. The following discussion is not exhaustive of all possible tax
considerations that may be relevant to the REIT election. Moreover, the
discussion contained herein does not address all aspects of taxation that may be
relevant to you in light of your personal tax circumstances, including, for
example, certain types of shareholders subject to special treatment under
federal income tax laws, including insurance companies, tax-exempt organizations
(except to the extent discussed under the caption "Taxation of Tax-Exempt
Shareholders"), financial institutions, broker-dealers, and foreign corporations
and persons who are not citizens or residents of the United States (except to
the extent discussed under the caption "Taxation of Non-U.S. Shareholders").

     The statements in this discussion are based upon, and qualified in their
entirety by, current provisions of the Internal Revenue Code, existing,
temporary, and currently-proposed Treasury Regulations promulgated under the
Internal Revenue Code, existing administrative rulings and practices of the
Internal Revenue Service, and judicial decisions. We cannot give you any
assurances that future legislative, administrative, or judicial actions or
decisions, which may be retroactive in effect, will not affect the accuracy of
any of the statements in this proxy statement.

     You are urged to consult your own tax advisor regarding the specific tax
consequences to you of the election and of the ownership and sale of stock in an
entity electing to be taxed as a real estate investment trust, including the
federal, state, local, foreign and other tax consequences of such ownership and
sale, as well as potential changes in the applicable tax laws.

Opinion of Counsel

     Our tax counsel, Paul, Hastings, Janofsky & Walker LLP, will deliver to us
an opinion to the effect that, subject to the qualifications set forth in the
opinion and discussed below,

     o    the summary of the federal income tax consequences to shareholders set
          forth in this section addresses all material federal income tax
          consequences of the election, and

     o    to the extent that such summary involves matters of law, it is
          accurate in all material respects under the Internal Revenue Code and
          Treasury Regulations and their existing interpretations and represents
          counsel's opinion as to how such matters would be resolved by a court
          if presented with the issues discussed in this section.

     Tax counsel has also delivered to us an opinion to the effect that, subject
to the qualifications set forth in the opinion, we will qualify to be treated as
a REIT beginning January 1, 2003. No legal opinion has been obtained regarding
any other tax issues, except as specifically noted herein. In addition, an
opinion of counsel is not binding on the Internal Revenue Service or the courts.
Accordingly, some of the conclusions set forth in this section could be
challenged by the IRS and any such challenge could be sustained by the courts.

     This summary and the opinion of counsel are based on the facts and law
relating to the election as of the date of this proxy statement and do not
address or cover the tax consequences of any transaction undertaken by us or our
shareholders following the election.

     Prior to January 1, 2003, all of our income was subject to income taxes
that we paid, and our shareholders recognized income only to the extent that we
paid a dividend from current or accumulated


                                      -21-



earnings and profits. Following the election, we generally will be taxable only
on our undistributed income, and our shareholders generally will be taxable on
the income distributed to them. However, because the operations of CTIMCO are of
a nature and scope that would cause us to fail to qualify as a real estate
investment trust, it will be treated and operate as a taxable REIT subsidiary.
As a result, CTIMCO will be directly taxed on its income, so that only its
after-tax income will be available for reinvestment or for distribution to our
shareholders. In general, any of the after-tax income of CTIMCO distributed to
our shareholders will be includable in our shareholders' taxable income and will
be subject to a second level of tax. The REIT may own an interest in one or more
taxable REIT subsidiaries, in addition to CTIMCO.

Tax Consequences of REIT Election

     We plan to make an election to be taxed as a real estate investment trust
under Section 856 of the Internal Revenue Code, commencing with our taxable year
beginning January 1, 2003. The sections of the Internal Revenue Code and
Treasury Regulations applicable to qualification and operation as a real estate
investment trust are technical and complex. Although we believe that we will be
organized and will operate in a manner necessary to satisfy the requirements for
taxation as a real estate investment trust under the Internal Revenue Code, many
of which are discussed below, we cannot assure you that the REIT will be able to
so operate for all periods following the Election.

Taxation of a REIT

     If we qualify as a real estate investment trust, we generally will not be
subject to federal corporate income taxes on our net income to the extent that
the income is currently distributed to stockholders. The benefit of this tax
treatment is that it substantially eliminates the "double taxation" resulting
from the taxation at both the corporate and stockholder levels that generally
results from owning stock in a corporation. Accordingly, income generated by us
generally will be subject to taxation solely at the stockholder level upon
distribution. We will, however, be required to pay certain federal income taxes,
including in the following circumstances:

     o    We will be subject to federal income tax at regular corporate rates on
          taxable income, including net capital gain, that we do not distribute
          to stockholders during, or within a specified time period after, the
          calendar year in which such income is earned.

     o    We will be subject to the "alternative minimum tax" on our
          undistributed items of tax preference.

     o    We will be subject to a 100% tax on net income from certain sales or
          other dispositions of property that we hold primarily for sale to
          customers in the ordinary course of business (known as "prohibited
          transactions").

     o    If we fail to satisfy the 75% gross income test or the 95% gross
          income test, both described below, but nevertheless qualify as a real
          estate investment trust, we will be subject to a 100% tax on an amount
          equal to (i) the gross income attributable to the greater of the
          amount by which we fail the 75% or 95% gross income test multiplied by
          (ii) a fraction intended to reflect our profitability.

     o    If we have (a) net income from the sale or other disposition of
          "foreclosure property" which is held primarily for sale to customers
          in the ordinary course of business or (b) other nonqualifying income
          from foreclosure property, we will be required to pay tax at the
          highest corporate rate on this income. In general, foreclosure
          property is property acquired through foreclosure after a default on a
          loan secured by the property or on a lease of the property.


                                      -22-





     o    If we acquire an asset from a corporation which is not a REIT in a
          transaction in which the basis of the asset in our hands is determined
          by reference to the basis of the asset in the hands of the transferor
          corporation, and we subsequently sell the asset within ten years, then
          under Treasury Regulations, we would be required to pay tax at the
          highest regular corporate tax rate on this gain to the extent the fair
          market value of the asset exceeds our adjusted tax basis in the asset,
          in each case, determined as of the date on which we acquired the
          asset. The results described in this paragraph assume that we will
          elect this treatment in lieu of an immediate tax when the asset is
          acquired. We will also be subject to such tax liability for all of our
          assets that were held as of January 1, 2003.

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

     o    If we fail to distribute during the calendar year at least the sum of
          (i) 85% of our real estate investment trust ordinary income for such
          year, (ii) 95% of our real estate investment trust capital gain net
          income for such year, and (iii) any undistributed taxable income from
          prior periods, we will pay a 4% excise tax on the excess of such
          required distribution over the amount actually distributed to
          stockholders.

     o    We may elect to retain and pay income tax on some or all of our
          long-term capital gain, as described below.

     o    We may be subject to a 100% excise tax on transactions with our
          taxable REIT subsidiary not conducted on an arm's-length basis.

Requirements for Qualification as a REIT.

     Introduction

     In order to qualify as a real estate investment trust for federal income
tax purposes, we must elect to be treated as a REIT and must satisfy certain
statutory tests relating to, among other things, (i) sources of our income, (ii)
the nature of our assets, (iii) the amount of our distributions, and (iv) the
ownership of our stock.

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

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

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

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

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

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

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


                                      -23-





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

     The Internal Revenue Code provides that conditions (1) to (4) must be met
during the entire year and that condition (5) must be met during at least 335
days of a year of twelve months, or during a proportionate part of a shorter
taxable year. Conditions (5) and (6) do not apply to the first taxable year for
which an election is made to be taxed as a REIT. With Stichting Pensioenfonds
ABP's purchase of 1,500,000 shares of our common stock from shareholders
associated with John R. Klopp, Craig M. Hatkoff and Samuel Zell, as of the date
of this proxy statement, we would satisfy the requirements of condition (6).

     Our proposed amended and restated charter provides for restrictions
regarding ownership and transfer of our stock. These restrictions are intended
to assist us in satisfying the share ownership requirements described in
conditions (5) and (6) above. These stock ownership and transfer restrictions
are described below under the caption "Description of Our Stock -- Certain
Provisions of Maryland Law and Our Charter and Bylaws -- REIT Qualification --
Restrictions on Ownership and Transfer." These restrictions, however, may not
ensure that we will, in all cases, be able to satisfy the share ownership
requirements described in conditions (5) and (6) above. If we fail to satisfy
these share ownership requirements, our status as a REIT would terminate. If,
however, we comply with the rules contained in applicable Treasury Regulations
that require us to determine the actual ownership of our shares and we do not
know, or would not have known through the exercise of reasonable diligence, that
we failed to meet the requirement described in condition (6) above, we would not
be disqualified as a REIT. In addition, a corporation may not qualify as a REIT
unless its taxable year is the calendar year. We have and will continue to have
a calendar taxable year.

     A corporation that is a "qualified REIT subsidiary" is not treated as a
corporation separate from its parent real estate investment trust for federal
income tax purposes. All assets, liabilities, and items of income, deduction,
and credit of a qualified REIT subsidiary are treated as the assets,
liabilities, and items of income, deduction and credit of the real estate
investment trust. A qualified REIT subsidiary is a corporation, all of the
capital stock of which is owned by a real estate investment trust and for which
no election has been made to treat it as a "taxable REIT subsidiary" (as
discussed below). Thus, in applying the requirements described in this section,
any qualified REIT subsidiary that we may own in the future will be ignored and
all assets, liabilities and items of income, deduction and credit of such
subsidiary will be treated as our assets, liabilities, and items of income,
deduction and credit.

     A REIT will be deemed to own its proportionate share (based upon its share
of the capital of the partnership) of the assets of a partnership in which it is
a partner and will be deemed to be entitled to the income of the partnership
attributable to such share. In addition, the assets and income of the
partnership attributed to a REIT shall retain their same character as in the
hands of the partnership for purposes of determining whether the REIT satisfied
the income and asset tests described below.

     A real estate investment trust may own up to 100% of the stock of one or
more taxable REIT subsidiaries. A taxable REIT subsidiary may earn income that
would not be REIT qualifying income, as described below, if earned directly by
the parent real estate investment trust. Both the subsidiary and the real estate
investment trust must jointly elect to treat the subsidiary as a taxable REIT
subsidiary. Overall, not more than 20% of the value of the real estate
investment trust's assets may consist of securities of one or more taxable REIT
subsidiaries. A taxable REIT subsidiary will pay tax at regular corporate rates
on any income that it earns. There is a 100% excise tax imposed on transactions
involving a taxable REIT subsidiary and its parent real estate investment trust
that are not conducted on an arm's-length basis. CTIMCO is and will remain our
wholly owned subsidiary and we and CTIMCO will make a taxable REIT subsidiary
election with respect to CTIMCO. CTIMCO will pay corporate income tax on its


                                      -24-




taxable income and its after-tax net income will be available for reinvestment
and for distribution to us as its parent. We may own interests in one or more
taxable REIT subsidiaries other than CTIMCO.

     Income Tests

     General. A REIT must satisfy annually two tests regarding the sources of
its gross income in order to maintain its real estate investment trust status.
First, at least 75% of a REIT's gross income, excluding gross income from
certain "dealer" sales, for each taxable year generally must consist of defined
types of income that the REIT derives, directly or indirectly, from investments
relating to real property or mortgages on real property or temporary investment
income. We refer to this test as the 75% gross income test. Qualifying income
for purposes of the 75% gross income test generally includes:

     o    interest from debt secured by mortgages on real property or on
          interests in real property;

     o    "rents from real property" (as defined below);

     o    dividends or other distributions on, and gain from the sale of, shares
          in other real estate investment trusts;

     o    gain from the sale or other disposition of real property; and

     o    amounts (other than amounts the determination of which depends in
          whole or in part on the income or profits of any person) received as
          consideration for entering into agreements to make loans secured by
          mortgages on real property or on interests in real property or
          agreements to purchase or lease real property.

     Second, at least 95% of the REIT's gross income, excluding gross income
from certain "dealer" sales, for each taxable year generally must consist of
income that is qualifying income for purposes of the 75% gross income test, as
well as dividends, other types of interest, and gain from the sale or
disposition of stock or securities. We refer to this test as the 95% gross
income test.

     Interest from Debt Secured by Mortgages on Real Property or on Interests in
Real Property. For these purposes, the term "interest" generally does not
include any interest of which the amount received depends on the income or
profits of any person. An amount will generally not be excluded from the term
"interest," however, if such amount is based on a fixed percentage of receipts
or sales.

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

     In general, and subject to the exceptions in the preceding paragraph, the
interest, original issue discount, and market discount income that we derive
from investments in mortgage backed securities and mortgage loans will be
qualifying interest income for purposes of both the 75% and the 95% gross income
tests. It is possible, however, that interest income from a mortgage loan may be
based in part on


                                      -25-



the borrower's profits or net income, which would generally disqualify such
interest income for purposes of both the 75% and the 95% gross income tests.

     We may acquire construction loans or mezzanine loans that have shared
appreciation provisions. To the extent interest on a loan is based on the cash
proceeds from the sale or value of property, income attributable to such
provision would be treated as gain from the sale of the secured property, which
generally should qualify for purposes of the 75% and 95% gross income tests.
There is some uncertainty as to whether mezzanine loans constitute qualifying
assets for purposes of the 75% asset test and result in qualifying income for
purposes of the 75% gross income test. Recent private letter rulings issued by
the Internal Revenue Service to other taxpayers indicate that, in certain
circumstances, mezzanine loans secured by interests in a partnership or limited
liability company, substantially all of the assets of which represent interests
in real estate, constitute qualifying assets and result in qualifying income. We
have received an opinion of counsel to the effect that our mezzanine loans
constitute qualifying assets and result in qualifying income. However, an
opinion of counsel is not binding on the Internal Revenue Service, and we may
not rely on private letter rulings issued to other taxpayers. If this issue is
not clarified by legislation, regulations, or a public ruling, we expect to
request a private letter ruling from the Internal Revenue Service to the effect
that our mezzanine loans constitute qualifying assets and result in qualifying
income for purposes of these tests. If, however, our mezzanine loans are
determined not to constitute qualifying assets and do not result in qualifying
income for purposes of these tests, our ability to elect REIT status will be
jeopardized.

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

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

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

     o    we attach a schedule of the sources of our income to our Federal
          income tax return; and

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

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

     Foreclosure Property

     Net income realized by us from foreclosure property would generally be
subject to tax at the maximum Federal corporate tax rate. Foreclosure property
includes real property and related personal


                                      -26-





property (1) that is acquired by us through foreclosure following a default on
indebtedness owed to us that is secured by the property and (2) for which we
make an election to treat the property as foreclosure property.

     Prohibited Transaction Income

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

     Hedging Transactions

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

     Rents from Real Property

     Rent that a REIT receives from real property that it owns and leases to
tenants will qualify as "rents from real property" if the following conditions
are satisfied,

     o    First, the rent must not be based, in whole or in part, on the income
          or profits of any person. An amount will not fail to qualify as rent
          from real property solely by reason of being based on a fixed
          percentage (or percentages) of sales and receipts.

     o    Second, neither a REIT nor any direct or indirect owner of 10% or more
          of its stock may own, actually or constructively, 10% or more of the
          tenant from which the REIT collects the rent.

     o    Third, all of the rent received under a lease will not qualify as
          rents from real property unless the rent attributable to the personal
          property leased in connection with the real property constitutes no
          more than 15% of the total rent received under the lease.

     o    Finally, a REIT generally must not operate or manage its real property
          or furnish or render services to its tenants, other than through an
          "independent contractor" who is adequately compensated and from whom
          the REIT does not derive revenue. The REIT may provide services
          directly, however, if the services are "usually or customarily
          rendered" in connection with the rental of space for occupancy only
          and are not otherwise considered rendered "primarily for the
          occupant's convenience." In addition, the REIT may render, other than
          through an independent contractor, a de minimis amount of
          "non-customary" services to the tenants of a property as long as the
          REIT's income from such services does not exceed 1% of its gross
          income from the property.

     Although no assurances can be given that either of the income tests will be
satisfied in any given year, we anticipate that our operations will allow us to
meet each of the 75% gross income test and the


                                      -27-





95% gross income test. Such belief is premised in large part on our expectation
that substantially all of the amounts received by us will qualify as interest
from debt secured by mortgages on real property or on interests in real
property.

     Asset Tests

     A REIT also must satisfy the following four tests relating to the nature of
its assets at the close of each quarter of its taxable year.

     o    First, at least 75% of the value of a REIT's total assets must consist
          of cash or cash items, including receivables, government securities,
          "real estate assets," or qualifying temporary investments. We refer to
          this test as the "75% asset test".

     o    Second, no more than 25% of the value of a REIT's total assets may be
          represented by securities other than those that are qualifying assets
          for purposes of the 75% asset test. We refer to this test as the "25%
          asset test".

     o    Third, of the investments included in the 25% asset test, the value of
          the securities of any one issuer (other than a "taxable REIT
          subsidiary") that a REIT owns may not exceed 5% of the value of the
          REIT's total assets, and a REIT may not own 10% or more of the total
          combined voting power or 10% or more of the total value of the
          securities of any issuer (other than a "taxable REIT subsidiary").

     o    Fourth, while a REIT may own up to 100% of the stock of a corporation
          that elects to be treated as a "taxable REIT subsidiary" for federal
          income tax purposes, at no time may the total value of a REIT's stock
          in one or more taxable REIT subsidiaries exceed 20% of the value of
          the REIT's gross assets.

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

     We anticipate that we may securitize all or a portion of the mortgage loans
which we acquire, in which event we will likely retain certain of the
subordinated and interest only classes of mortgage backed securities which may
be created as a result of such securitization. The securitization of mortgage
loans may be accomplished through one or more real estate investment conduits
established by us or, if a non-real estate mortgage investment conduit
securitization is desired, through one or more qualified REIT subsidiaries or
taxable subsidiaries established by us. The securitization of the mortgage loans
through either one or more real estate mortgage investment conduits or one or
more qualified REIT subsidiaries or taxable subsidiaries should not affect our
qualification as a REIT or result in the imposition of corporate income tax
under the taxable mortgage pool rules. Income realized by us from a real estate
mortgage investment conduit securitization could, however, be subject to a 100%
tax as a "prohibited transaction." Such prohibited transactions are discussed
above under the caption "--Income Tests--Prohibited Transaction Income."

     We intend to operate so that we will not acquire any assets that would
cause us to violate any of the asset tests. If, however, we should fail to
satisfy any of the asset tests at the end of a calendar quarter, we would not
lose our real estate investment trust status if (i) we satisfied the asset tests
at the end of the close of the preceding calendar quarter and (ii) the
discrepancy between the value of our assets and the


                                      -28-




asset test requirements arose from changes in the market values of our assets
and was not wholly or partly caused by the acquisition of one or more
nonqualifying assets. If we did not satisfy the condition described in clause
(ii) of the preceding sentence, we could still avoid disqualification as a real
estate investment trust by eliminating any discrepancy within 30 days after the
close of the calendar quarter in which the discrepancy arose.

        Distribution Requirements

        Each taxable year, a REIT must distribute dividends to its shareholders
in an amount at least equal to:

     o    90% of the REIT's "real estate investment trust taxable income,"
          computed without regard to the dividends paid deduction and the REIT's
          net capital gain or loss; and

     o    certain items of noncash income.

     A REIT must make such distributions in the taxable year to which they
relate, or in the following taxable year if the REIT declares the distribution
before it timely files its federal income tax return for such year and pays the
distribution on or before the first regular distribution date after such
declaration. Further, if a REIT fails to meet the 90% distribution requirement
as a result of an adjustment to its tax returns by the Internal Revenue Service,
the REIT may, if the deficiency is not due to fraud with intent to evade tax or
a willful failure to file a timely tax return, and if certain other conditions
are met, retroactively cure the failure by paying a deficiency dividend (plus
interest) to its shareholders.

     A REIT will be subject to federal income tax on its taxable income,
including net capital gain, that it did not distribute to its shareholders.
Furthermore, if a REIT fails to distribute during a calendar year, or, in the
case of distributions with declaration and record dates falling within the last
three months of the calendar year, by the end of the January following such
calendar year, at least the sum of:

     o    85% of the REIT's real estate investment trust ordinary income for
          such year;

     o    95% of the REIT's real estate investment trust capital gain income for
          such year; and

     o    any of the REIT's undistributed taxable income from prior periods, the
          REIT will be subject to a 4% nondeductible excise tax on the excess of
          such required distribution over the amount actually distributed. If
          the REIT elects to retain and pay income tax on the net capital gain
          that it receives in a taxable year, the REIT will be deemed to have
          distributed any such amount for the purposes of the 4% excise tax
          described in the preceding sentence.

     We intend to make distributions to our holders of common stock in a manner
that will allow us to satisfy the distribution requirements described above. It
is possible that, from time to time, our pre-distribution taxable income may
exceed our cash flow and we may have difficulty satisfying the distribution
requirements. We intend to monitor closely the relationship between our
pre-distribution taxable income and our cash flow and intend to borrow funds or
liquidate assets in order to overcome any cash flow shortfalls if necessary to
satisfy the distribution requirements imposed by the Internal Revenue Code. It
is possible, although unlikely, that we may decide to terminate our REIT status
as a result of any such cash shortfall. Such a termination would have adverse
consequences to our stockholders. The consequences are described above under the
caption "--Taxation of a REIT--General."

     Recordkeeping Requirements

     A REIT must maintain records of information specified in applicable
Treasury Regulations in order to maintain its qualification as a real estate
investment trust. In addition, in order to avoid a


                                       -29-




monetary penalty, a REIT must request on an annual basis certain information
from its shareholders designed to disclose the actual ownership of the REIT's
outstanding stock. We intend to comply with these recordkeeping requirements.

     Ownership Requirements

     For a REIT to qualify as a real estate investment trust, shares of the REIT
must be held by a minimum of 100 persons for at least 335 days in each taxable
year after the REIT's first taxable year. Further, at no time during the second
half of any taxable year after the REIT's first taxable year may more than 50%
of the REIT's shares be owned, actually or constructively, by five or fewer
"individuals." As of the date of the proxy statement, we would satisfy the
requirement that we not be closely held as described in the foregoing sentence.
Our common stock will be held by 100 or more persons. Our proposed amended and
restated charter will contain ownership and transfer restrictions designed to
prevent violation of these requirements. The provisions of the amended and
restated charter restricting the ownership and transfer of our common stock are
described below under the caption "Description of Our Stock--Certain Provisions
of Maryland Law and Our Charter and Bylaws -- REIT Qualification Restrictions on
Ownership and Transfer."

     Earnings and Profits

     In order for us to qualify as a REIT, on or before the end of the 2003 tax
year (the first year to which our election to be taxed as a REIT relates), we
must have distributed to our shareholders an amount equal to any earnings and
profits accumulated from years in which we were taxed as a regular corporation.
We have been treated as a regular corporation for 1997-2002. Any distribution
made by us to satisfy this requirement will be treated as taxable income by the
shareholders, and we generally will not be permitted to include such amounts
when computing our dividends paid deduction. If we were found to have
miscalculated our earnings and profits accumulated from years in which we were a
regular corporation, our ability to qualify as a REIT could be jeopardized. We
believe, as of January 1, 2003, we have no accumulated earnings or profits from
any non-REIT qualifying tax year for which we were taxed as a regular
corporation as a result of losses we triggered in December 2002.

     Failure to Qualify

     If a REIT fails to qualify as a real estate investment trust in any taxable
year, and no relief provisions applied, the REIT would be subject to federal
income tax, including any applicable alternative minimum tax, on its taxable
income at regular corporate rates. In calculating a REIT's taxable income in a
year in which it did not qualify as a real estate investment trust, the REIT
would not be able to deduct amounts paid out to its shareholders. In fact, the
REIT would not be required to distribute any amounts to its shareholders in such
taxable year. In such event, to the extent of the REIT's current and accumulated
earnings and profits, all distributions to shareholders would be taxable as
ordinary income. Moreover, subject to certain limitations under the Internal
Revenue Code, corporate shareholders might be eligible for the dividends
received deduction. Unless the REIT qualified for relief under specific
statutory provisions, the REIT would be disqualified from taxation as a real
estate investment trust for the four taxable years following the year in which
it ceased to qualify as a real estate investment trust. We cannot predict
whether, in all circumstances, we would qualify for such statutory relief.



                                       -30-





Taxation of Taxable U.S. Shareholders

     Taxable U.S. Shareholder

     As used herein, the term "Taxable U.S. Shareholder" means a holder of our
common stock that, for United States federal income tax purposes, is:

     o    a citizen or resident of the United States;

     o    a corporation, partnership, or other entity created or organized in or
          under the laws of the United States or any state or political
          subdivision thereof;

     o    an estate the income of which from sources without the United States
          is includible in gross income for United States federal income tax
          purposes regardless of its connection with the conduct of a trade or
          business within the United States; or

     o    any trust with respect to which (i) a United States court is able to
          exercise primary supervision over the administration of such trust and
          (ii) one or more United States persons have the authority to control
          all substantial decisions of the trust.

     For any taxable year in which we qualify as a REIT, amounts distributed to
Taxable U.S. Shareholders will be taxed as follows.

     Distributions Generally

     Distributions made to our Taxable U.S. Shareholders out of current or
accumulated earnings and profits (and not designated as a capital gain dividend)
will be taken into account by such shareholder as ordinary income and will not,
in the case of a corporate shareholder, be eligible for the dividends received
deduction. To the extent that we make a distribution with respect to holders of
our common stock that is in excess of our current or accumulated earnings and
profits, the distribution will be treated by a Taxable U.S. Shareholder first as
a tax-free return of capital, reducing the shareholder's tax basis in the common
stock, and any portion of the distribution in excess of the shareholder's tax
basis in the common stock will then be treated as gain from the sale of such
common stock. Dividends declared by us in October, November, or December of any
year payable to a shareholder of record on a specified date in any such month
shall be treated as both paid by us and received by shareholders on December 31
of such year, provided that the dividend is actually paid by us during January
of the following calendar year. Taxable U.S. Shareholders may not include on
their federal income tax returns any of our tax losses.

     Capital Gain Dividends

     Dividends to Taxable U.S. Shareholders that properly are designated by us
as capital gain dividends will be treated by such shareholders as long-term
capital gain, to the extent that such dividends do not exceed our actual net
capital gain, without regard to the period for which the shareholders have held
our common stock. Taxable U.S. Shareholders that are corporations may be
required, however, to treat up to 20% of particular capital gain dividends as
ordinary income. Capital gain dividends, like regular dividends from a real
estate investment trust, are not eligible for the dividends received deduction
for corporations.

     Retained Capital Gains

     A REIT may elect to retain, rather than distribute, its net long-term
capital gain received during the tax year. To the extent designated in a notice
from the REIT to its shareholders, the REIT will pay the income tax on such
gains and Taxable U.S. Shareholders must include their proportionate share of
the


                                       -31-





undistributed net long-term capital gain so designated in their income for the
tax year. Each Taxable U.S. Shareholder will be deemed to have paid its share of
the tax paid by the REIT, which tax will be credited or refunded to such
shareholder.

     Passive Activity Loss and Investment Interest Limitations

     Distributions, including deemed distributions of undistributed net
long-term capital gain, from us and gain from the disposition of our common
stock will not be treated as passive activity income, and, therefore, Taxable
U.S. Shareholders who are subject to the passive loss limitation rules of the
Internal Revenue Code will not be able to apply any passive activity losses
against such income. Distributions from us, to the extent they do not constitute
a return of capital, generally will be treated as investment income for purposes
of the investment income limitation on deductibility of investment interest.
However, net capital gain from the disposition of our common stock or capital
gain dividends, including deemed distributions of undistributed net long-term
capital gains, generally will be excluded from investment income.

     Sale of Common Stock

     Upon the sale of our common stock, a Taxable U.S. Shareholder generally
will recognize gain or loss equal to the difference between the amount realized
on such sale and the holder's tax basis in the common stock sold. To the extent
that the common stock is held as a capital asset by the Taxable U.S.
Shareholder, the gain or loss will be a long-term capital gain or loss if the
common stock has been held for more than a year, and will be a short-term
capital gain or loss if the common stock has been held for a shorter period. In
general, however, any loss upon a sale of the common stock by a Taxable U.S.
Shareholder who has held such common stock for six months or less (after
applying certain holding period rules) will be treated as a long-term capital
loss to the extent that distributions from us were required to be treated as
long-term capital gain by that holder.

Taxation of Tax-Exempt Shareholders

     Tax-exempt entities, including qualified employee pension and profit
sharing trusts and individual retirement accounts, which we refer to as Exempt
Organizations, generally are exempt from federal income taxation. Exempt
Organizations are subject to tax, however, on their unrelated business taxable
income, or UBTI. UBTI is defined as the gross income derived by an Exempt
Organization from an unrelated trade or business, less the deductions directly
connected with that trade or business, subject to certain exceptions. While many
investments in real estate generate UBTI, the Internal Revenue Service has
issued a ruling that dividend distributions from a REIT to an exempt employee
pension trust do not constitute UBTI, provided that the shares of the REIT are
not otherwise used in an unrelated trade or business of the exempt employee
pension trust. Based on that ruling, amounts distributed to Exempt Organizations
generally should not constitute UBTI. However, if an Exempt Organization
finances its acquisition of common stock with debt, a portion of its income from
a REIT will constitute UBTI pursuant to the "debt-financed property" rules.

     In addition, in certain circumstances, a pension trust that owns more than
10% of the stock of a REIT will be required to treat a percentage of the
dividends paid by the REIT as UBTI based upon the percentage of the REIT's
income that would constitute UBTI to the shareholder if received directly by it.
This rule applies to a pension trust holding more than 10% (by value) of our
common stock only if (i) the percentage of the income from us that is UBTI
(determined as if we were a pension trust) is at least 5% and (ii) we are
treated as a "pension-held REIT." We do not expect to qualify as a "pension-held
REIT" and have covenanted not to become one in connection with our prior
convertible trust preferred financing.


                                       -32-



Taxation of Non-U.S. Shareholders

     General

     The rules governing United States federal income taxation of nonresident
alien individuals, foreign corporations, foreign partnerships, foreign trusts
and certain other foreign stockholders, which we refer to as Non-U.S.
Shareholders, are complex and no attempt is made herein to provide more than a
general summary of such rules. This discussion does not consider the tax rules
applicable to all Non-U.S. Shareholders and, in particular, does not consider
the special rules applicable to U.S. branches of foreign banks or insurance
companies or certain intermediaries. Non-U.S. shareholders should consult with
their own tax advisors to determine the impact of federal, state, local and
foreign tax laws with regard to the election, including any reporting and
withholding requirements.

     Ordinary Dividends

     General

     Distributions to Non-U.S. Shareholders that are not attributable to gain
from sales or exchanges by a REIT of United States real property interests and
are not designated by a REIT as capital gain dividends (or deemed distributions
of retained capital gains) will be treated as ordinary dividends to the extent
that they are made out of current or accumulated earnings and profits of the
REIT. Any portion of a distribution in excess of current and accumulated
earnings and profits of the REIT will not be taxable to a Non-U.S. Shareholder
to the extent that such distribution does not exceed the adjusted basis of the
shareholder in the REIT's stock, but rather will reduce the adjusted basis of
such shares. To the extent that the portion of the distribution in excess of
current and accumulated earnings and profits exceeds the adjusted basis of a
Non-U.S. Shareholder in our common stock, such excess generally will be treated
as gain from the sale or disposition of the common stock and will be taxed as
described below.

     Withholding

     Dividends paid to Non-U.S. Shareholders may be subject to U.S. withholding
tax. If an income tax treaty does not apply and the Non-U.S. Shareholder's
investment in the REIT's stock is not effectively connected with a trade or
business conducted by the Non-U.S. Shareholder in the United States (or if a tax
treaty does apply and the investment in the stock is not attributable to a
United States permanent establishment maintained by the Non-U.S. Shareholder),
ordinary dividends (i.e., distributions out of current and accumulated earnings
and profits) will be subject to a U.S. withholding tax at a 30% rate, or, if an
income tax treaty applies, at a lower treaty rate. Because we generally cannot
determine at the time that a distribution is made whether or not it will be in
excess of earnings and profits, we intend to withhold on the gross amount of
each distribution at the 30% rate (or lower treaty rate) (other than
distributions subject to the 35% FIRPTA withholding rules described below). To
receive a reduced treaty rate, a Non-U.S. Shareholder must furnish us or our
paying agent with a duly completed Form 1001 or Form W-8BEN (or authorized
substitute form) certifying such holder's qualification for the reduced rate.
Generally, a Non-U.S. Shareholder will be entitled to a refund from the IRS to
the extent the amount withheld by us from a distribution exceeds the amount of
United States tax owed by such shareholder.

     In the case of a Non-U.S. Shareholder that is a partnership or a trust, the
withholding rules for a distribution to such a partnership or trust will be
dependent on numerous factors, including (1) the classification of the type of
partnership or trust, (2) the status of the partner or beneficiary, and (3) the
activities of the partnership or trust. Non-U.S. Shareholders that are
partnerships or trusts are urged to consult their tax advisors regarding the
withholding rules applicable to them based on their particular circumstances.


                                       -33-


     If an income tax treaty does not apply, ordinary dividends that are
effectively connected with the conduct of a trade or business within the United
States by a Non-U.S. Shareholder (and, if a tax treaty applies, ordinary
dividends that are attributable to a United States permanent establishment
maintained by the Non-U.S. Shareholder) are exempt from U.S. withholding tax. In
order to claim such exemption, a Non-U.S. Shareholder must provide us or our
paying agent with a duly completed Form W-8ECI (or authorized substitute form)
certifying such holder's exemption. However, ordinary dividends exempt from U.S.
withholding tax because they are effectively connected or are attributable to a
United States permanent establishment maintained by the Non-U.S. Shareholder
generally are subject to U.S. federal income tax on a net income basis at
regular graduated rates. In the case of Non-U.S. Shareholders that are
corporations, any effectively connected ordinary dividends or ordinary dividends
attributable to a United States permanent establishment maintained by the
Non-U.S. Shareholder may, in certain circumstances, be subject to an additional
branch profits tax at a 30% rate, or lower rate specified by an applicable
income tax treaty.

     Capital Gain Dividends

     General

     For any year in which we qualify as a REIT, distributions that are
attributable to gain from sales or exchanges by us of United States real
property interests will be taxed to a Non-U.S. Shareholder under the provisions
of the Foreign Investment in Real Property Tax Act of 1980, which is commonly
referred to as FIRPTA. Under FIRPTA, distributions attributable to gain from
sales of United States real property are taxed to a Non-U.S. Shareholder as if
such gain were effectively connected with a United States trade or business.
Non-U.S. Shareholders thus would be taxed at the regular capital gain rates
applicable to Taxable U.S. Shareholders (subject to the applicable alternative
minimum tax and a special alternative minimum tax in the case of nonresident
alien individuals). Distributions subject to FIRPTA also may be subject to a 30%
branch profits tax in the hands of a corporate Non-U.S. Shareholder not
otherwise entitled to treaty relief or exemption.

     Withholding

     Under FIRPTA, a REIT is required to withhold 35% of any distribution that
is designated as a capital gain dividend or which could be designated as a
capital gain dividend and is attributable to gain from the disposition of a
United States real property interest. Moreover, if a REIT designates previously
made distributions as capital gain dividends, subsequent distributions (up to
the amount of the prior distributions so designated) will be treated as capital
gain dividends for purposes of FIRPTA withholding.

     Sale of Common Stock

     A Non-U.S Shareholder generally will not be subject to United States
federal income tax under FIRPTA with respect to gain recognized upon a sale of
our common stock, if less than 50% of our assets during a prescribed testing
period consist of interests in real property located within the United States
(excluding interests in real property solely in the capacity as a creditor) or
we are a "domestically-controlled REIT." A domestically-controlled REIT
generally is defined as a real estate investment trust in which at all times
during a specified testing period less than 50% in value of the stock was held
directly or indirectly by non-U.S. persons. Although currently it is anticipated
that we will be a domestically-controlled REIT, and, therefore, that the sale of
common stock will not be subject to taxation under FIRPTA, there can be no
assurance that we will, at all relevant times, be a domestically-controlled
REIT. If we are not a domestically-controlled REIT, a Non-U.S. Shareholder's
sale of our stock will generally not be subject to tax under FIRPTA if (a) the
stock is treated as "regularly traded" on an established securities market and
(b) the seller held 5% or less of our stock at all times during a specified
testing period. If the gain on the sale of our common stock were subject to
taxation under FIRPTA, a Non-U.S. Shareholder would be subject to the same
treatment as Taxable U.S. Shareholders with respect to such


                                       -34-



gain (subject to the applicable alternative minimum tax and a special
alternative minimum tax in the case of nonresident alien individuals). In
addition, a purchaser of our common stock from a Non-U.S. Shareholder subject to
taxation under FIRPTA generally would be required to deduct and withhold a tax
equal to 10% of the amount realized by a Non-U.S. Shareholder on the
disposition. Any amount withheld would be creditable against the Non-U.S.
Shareholder's FIRPTA tax liability.

     Even if gain recognized by a Non-U.S. Shareholder upon the sale of our
common stock is not subject to FIRPTA, such gain generally will be taxable to
such shareholder if:

     o    an income tax treaty does not apply and the gain is effectively
          connected with a trade or business conducted by the Non-U.S.
          Shareholder in the United States (or, an income tax treaty applies and
          the gain is attributable to a United States permanent establishment
          maintained by the Non-U.S. Shareholder), in which case, unless an
          applicable treaty provides otherwise, a Non-U.S. Shareholder will be
          taxed on his or her net gain from the sale at regular graduated U.S.
          federal income tax rates. In the case of a Non-U.S. Shareholder that
          is a corporation, such shareholder may be subject to an additional
          branch profits tax at a 30% rate, unless an applicable income tax
          treaty provides for a lower rate and the shareholder demonstrates its
          qualification for such rate; or

     o    the Non-U.S. Shareholder is a nonresident alien individual who holds
          our common stock as a capital asset and was present in the United
          States for 183 days or more during the taxable year and certain other
          conditions apply, in which case the Non-U.S. Shareholder will be
          subject to a 30% tax on capital gains.

     Estate Tax Considerations

     The value of our common stock owned, or treated as owned, by a Non-U.S.
Shareholder who is a nonresident alien individual at the time of his or her
death will be included in the individual's gross estate for United States
federal estate tax purposes, unless otherwise provided in an applicable estate
tax treaty.

Information Reporting and Backup Withholding

     A REIT is required to report to its shareholders and to the IRS the amount
of distributions paid during each tax year, and the amount of tax withheld, if
any. These requirements apply even if withholding was not required with respect
to payments made to a shareholder. In the case of Non-U.S. Shareholders, the
information reported may also be made available to the tax authorities of the
Non-U.S. Shareholder's country of residence, if an applicable income tax treaty
so provides.

     Backup withholding generally may be imposed at the rate of up to 30% on
certain payments to shareholders unless the shareholder (i) furnishes certain
information, or (ii) is otherwise exempt from backup withholding.

     A shareholder who does not provide a REIT with his or her correct taxpayer
identification number also may be subject to penalties imposed by the IRS. In
addition, the REIT may be required to withhold a portion of capital gain
distributions to any shareholders who fail to certify their non-foreign status
to the REIT.

     You should consult your own tax advisor regarding your qualification for an
exemption from backup withholding and the procedure for obtaining an exemption.
Backup withholding is not an additional tax. Rather, the amount of any backup
withholding with respect to a distribution to a shareholder will be allowed as a
credit against such holder's United States federal income tax liability and may
entitle the Taxable U.S. Shareholder to a refund, provided that the required
information is furnished to the IRS.


                                       -35-



     In general, backup withholding and information reporting will not apply to
a payment of the proceeds of the sale of our common stock by a Non-U.S.
Shareholder by or through a foreign office of a foreign broker effected outside
of the United States; provided, however, that foreign brokers having certain
connections with the United States may be obligated to comply with the backup
withholding and information reporting rules. Information reporting (but not
backup withholding) will apply, however, to a payment of the proceeds of a sale
of our common stock by foreign offices of certain brokers, including foreign
offices of a broker that:

     o    is a United States person;

     o    derives 50% or more of its gross income for certain periods from the
          conduct of a trade or business in the United States; or

     o    is a "controlled foreign corporation" for United States tax purposes.

     Information reporting will not apply in the above cases if the broker has
documentary evidence in its records that the holder is a Non-U.S. Shareholder
and certain conditions are met, or the Non-U.S. Shareholder otherwise
establishes an exemption.

     Payment to or through a United States office of a broker of the proceeds of
a sale of our common stock is subject to both backup withholding and information
reporting unless the shareholder certifies in the manner required that he or she
is a Non-U.S. Shareholder and satisfies certain other qualifications under
penalties of perjury or otherwise establishes an exemption.

State and Local Tax

     The discussion herein concerns only the United States federal income tax
treatment likely to be accorded to a REIT and its shareholders. No consideration
has been given to the state and local tax treatment of such parties. The state
and local tax treatment may not conform to the federal treatment described
above. As a result, you should consult your own tax advisor regarding the
specific state and local tax consequences of the REIT Election and ownership and
sale of our common stock.

Federal Income Tax Consequences of the Reverse Stock Split

     We have not sought and will not seek a ruling from the Internal Revenue
Service regarding the federal income tax consequences of the reverse stock
split. However, in the opinion of counsel, based upon the Internal Revenue Code,
Treasury Regulations promulgated thereunder, judicial authority and
administrative rulings and practices as in effect on the date of this proxy
statement, the reverse stock split will have the tax consequences explained
below. This discussion is for general information only, is applicable only to
shareholders who hold shares as capital assets, and does not discuss
consequences which may apply to special classes of taxpayers.

     We will not recognize any gain or loss as a result of the reverse stock
split.

     The exchange of three (3) shares of common stock for one (1) share of new
common stock will not result in the recognition of gain or loss to our common
shareholders. Shareholders who receive cash in lieu of fractional shares will
recognize capital gain (except in any case in which the cash payment is
essentially equivalent to a dividend) to the extent the cash paid for the
fractional shares exceeds the shareholders' adjusted basis in the fractional
shares surrendered. The holding period of the shares of the new common stock
will include the shareholders' holding period for the shares of the common stock
exchanged therefor. The adjusted basis of the shares of the new common stock
will be the same as the adjusted basis of the shares of the common stock
exchanged therefor, reduced by the portion of the adjusted basis of the old
common stock properly allocated to the fractional shares.



                                       -36-



                          BENEFICIAL OWNERSHIP OF STOCK

     The following table sets forth the beneficial ownership of our common stock
based on beneficial ownership as of February 14, 2003, for persons known to us
to be holding more than 5% of our common stock, each director and executive
officer, and our directors and executive officers as a group. Such information
(other than with respect to directors and officers) is based on a review of
statements filed with the Securities and Exchange Commission pursuant to
Sections 13(d), 13(f) and 13(g) of the Securities Exchange Act with respect to
our common stock.




                                                                          Amount and Nature
                                                                       of Beneficial Ownership
                                                                       -----------------------
                                                                                         Percent
                Five Percent Shareholders,                                                 of
             Directors and Executive Officers                     Number(1)             Class(1)
             --------------------------------                     ---------             --------
                                                                                  

     Veqtor Finance Company, L.L.C. (2)                           2,692,288                16.3%
     EOP Operating Limited Partnership (3)                        4,273,428  (4)           20.6
     State  Street Bank and Trust  Company,  as Trustee           4,273,428  (4)           20.6
     for General Motors  Employees Global Group Pension
     Trust (5)
     Vornado Realty, L.P. (6)                                     4,273,428  (4)           20.6
     Stichting Pensioenfonds ABP (7)                              1,770,200                10.7
     Advisors Research, Inc. (8)                                    786,860                 4.8
     Bedford Oak Advisors, LLC (9)                                  906,300                 5.5
     Jeffrey A. Altman                                                   --                 --
     Thomas E. Dobrowski                                                 --  (10)           --
     Martin L. Edelman                                              105,710  (11)            *
     Gary R. Garrabrant                                             485,133  (11)(12)       2.9
     Craig M. Hatkoff                                             2,001,723  (13)(14)(15)  12.0
     John R. Klopp                                                2,324,020  (13)(14)      13.7
     Susan W. Lewis                                                      --                 --
     Brian H. Oswald                                                137,560  (16)            *
     Stephen D. Plavin                                              416,666  (16)           2.5
     Sheli Z. Rosenberg                                             450,133  (11)(17)       2.7
     Steven Roth                                                         --  (18)           --
     Lynne B. Sagalyn                                                55,710  (11)            *
     Michael D. Watson                                                   --                 --
     Samuel Zell                                                    225,710  (11)(19)       1.4
     All  executive  officers and  directors as a group           6,202,365                35.0%
     (14 persons)



     --------------------------------------------------
     * Represents less than 1%.

     (1)  The number of shares are those beneficially owned, as determined under
          the rules of the Securities and Exchange Commission, and such
          information is not necessarily indicative of beneficial ownership for
          any other purpose. Under such rules, beneficial ownership includes any
          shares as to which a person has sole or shared voting power or
          investment power and any shares which the person has the right to
          acquire within 60 days through the exercise of any option, warrant or
          right, through conversion of any security or pursuant to the automatic
          termination of a power of attorney or revocation of a trust,
          discretionary account or similar arrangement.

     (2)  Zell General Partnership, Inc., or Zell GP, is the sole managing
          member of Veqtor Finance Company, L.L.C. The sole shareholder of Zell
          GP is The Sam Investment Trust, a trust established for the benefit of
          the family of Sam Zell. Chai Trust Company L.L.C. serves as trustee of
          The Sam Investment Trust. Veqtor Finance Company is located at c/o
          Equity Group Investments, L.L.C., Two North Riverside Plaza, Chicago,
          Illinois 60606.


                                       -37-




     (3)  Beneficial ownership information is based on a statement filed
          pursuant to Section 13(d) of the Securities Exchange Act by EOP
          Operating Limited Partnership, or EOP. The address of EOP is Two North
          Riverside Plaza, Chicago, Illinois 60606.

     (4)  Represents shares which may be obtained upon conversion of $29,914,000
          in convertible amount of Variable Step Up Convertible Trust Preferred
          Securities issued by our company's consolidated Delaware statutory
          business trust subsidiary, CT Convertible Trust I, or the CT Trust, to
          each of EOP, State Street Bank and Trust Company, as trustee for
          General Motors Employes Global Group Pension Trust, or the GM Trust,
          and Vornado Realty L.P., or VNO.

     (5)  Beneficial ownership information is based on statements filed pursuant
          to Section 13(d) of the Securities Exchange Act by General Motors
          Asset Management Corporation, or GMAM, and the GM Trust as another
          reporting person named therein. State Street Bank and Trust Company
          acts as the trustee for the GM Trust, a trust under and for the
          benefit of certain employee benefit plans of General Motors
          Corporation, or GM, and its subsidiaries. These shares may be deemed
          to be owned beneficially by GMIMCo, a wholly owned subsidiary of GM.
          GMIMCo's principal business is providing investment advice and
          investment management services with respect to the assets of certain
          employee benefit plans of GM and its subsidiaries and with respect to
          the assets of certain direct and indirect subsidiaries of GM and
          associated entities. GMIMCo is serving as the GM Trust's investment
          manager with respect to these shares and in that capacity it has sole
          power to direct the trustee as to the voting and disposition of these
          shares. Because of the trustee's limited role, beneficial ownership of
          the shares by the trustee is disclaimed. The address of GMIMCo is 767
          Fifth Avenue, New York, New York 10153.

     (6)  Beneficial ownership information is based on a statement filed
          pursuant to Section 13(d) of the Securities Exchange Act by VNO. The
          address of VNO is c/o Vornado Realty Trust, Park 80 West, Plaza II,
          Saddle Brook, New Jersey 07663.

     (7)  Beneficial ownership information is based on a statement filed
          pursuant to Section 13(d) of the Securities Exchange Act by Stichting
          Pensioenfonds ABP. The address of Stichting Pensioenfonds ABP is c/o
          ABP Investments US, Inc., 666 Third Avenue 2nd floor, New York, NY
          10017-3904.

     (8)  Beneficial ownership information is based on a statement filed
          pursuant to Section 13(d) of the Securities Exchange Act by Advisory
          Research Incorporated. The address of Advisory Research Incorporated
          is 180 North Stetson Avenue, Suite 5780, Chicago, Illinois 60601.

     (9)  Beneficial ownership information is based on a statement filed
          pursuant to Section 13(d) of the Securities Exchange Act by Bedford
          Oak Advisors, LLC. The address of Bedford Oak Advisors, LLC is 100
          South Bedford Road, Mt. Kisco, NY 10549.

     (10) Does not include the shares that may be deemed beneficially owned by
          GMIMCo, as to which Mr. Dobrowski disclaims beneficial ownership.

     (11) In each case (that of Mr. Zell, Mr. Edelman, Mr. Garrabrant, Ms.
          Rosenberg and Dr. Sagalyn), includes 30,710 shares obtainable upon
          conversion of vested stock units. In the case of Mr. Zell, Mr.
          Edelman, Mr. Garrabrant and Dr. Sagalyn, includes 120,000, 75,000,
          35,000 and 25,000 shares issuable upon the exercise of vested stock
          options.

     (12) Includes the 419,423 shares owned by GRG Investment Partnership LP,
          for which Mr. Garrabrant serves as the general partner.

     (13) Includes, in the case of Mr. Hatkoff, the 1,830,132 shares owned by
          CMH Investment Partnership LP, a family partnership for which Mr.
          Hatkoff serves as a general partner. Includes, in the case of Mr.
          Klopp, 1,800,132 shares owned by JRK Investment Partnership LP, a
          family partnership for which Mr. Klopp serves as general partner.

     (14) Includes 424,999 and 141,667 shares issuable upon the exercise of
          vested stock options held by each of Messrs. Klopp and Hatkoff.
          Includes 29,630 shares for Mr. Klopp that are the subject of
          restricted stock awards for which he retains voting rights.

     (15) Includes 11,924 shares that may be obtained upon conversion of vested
          stock units.

     (16) Includes 96,666 and 116,666 shares issuable upon the exercise of
          vested stock options held by Mr. Oswald and Mr. Plavin. Includes 3,704
          shares for Mr. Oswald that are the subject of restricted stock awards
          for which he retains voting rights.

     (17) Includes 419,423 shares owned by Rosenberg-CT General Partnership, for
          which Ms. Rosenberg serves as a general partner.

     (18) Does not include the shares that may be deemed beneficially owned by
          VNO, as to which Mr. Roth disclaims beneficial ownership.

     (19) Does not include the shares that may be deemed beneficially owned by
          EOP, as to which Mr. Zell disclaims beneficial ownership.


                                      -38-





                            DESCRIPTION OF OUR STOCK

     The proposed charter amendments would include in our charter ownership and
transfer restrictions relating to our election to be taxed as a REIT, eliminate
from our charter our class B stock and effect a one (1) for three (3) reverse
stock split. The following is a summary description of our common and preferred
stock, provisions of our charter and our bylaws and specific provisions of the
Maryland General Corporation Law following effectiveness of the charter
amendments. As summaries, they are qualified in their entirety by reference to
the Maryland General Corporation Law and to our charter and bylaws.

Common Stock

     Holders of our class A common stock are entitled to receive dividends when
authorized by our board of directors out of assets legally available for the
payment of dividends. They are also entitled to share ratably in our assets
legally available for distribution to our shareholders in the event of our
liquidation, dissolution or winding up, after payment of, or adequate provision
for, all of our known debts and liabilities. These rights are subject to the
preferential rights of any other class or series of our stock. All shares of
class A common stock have equal dividend and liquidation rights.

     Subject to our charter restrictions on ownership and transfer of our stock,
each outstanding share of class A common stock is entitled to one vote on all
matters to be submitted to a vote of the shareholders. There is no cumulative
voting in the election of our directors and our directors are elected by a
plurality of the votes cast, so the holders of a simple majority of the
outstanding class A common stock, voting at a shareholders meeting at which a
quorum is present, can elect all of the directors nominated for election at the
meeting. Holders of our common stock have no exchange, sinking fund, redemption
or appraisal rights and have no preemptive rights to subscribe for any of our
securities. Because holders of common stock do not have preemptive rights, we
may issue additional shares of stock that may reduce each shareholder's
proportionate voting and financial interest in our company. Rights to receive
dividends on our common stock may be restricted by the terms of any future
classified and issued shares of our preferred stock.

     Under our charter, we may issue up to 200,000,000 shares of stock comprised
of the following:

     o    100,000,000 shares of class A common stock, par value $.01 per share;
          and

     o    100,000,000 shares of preferred stock, par value $.01 per share.

     As of February 14, 2003, 5,505,044 shares of class A common stock were
issued and outstanding after giving effect to the one (1) for three (3) reverse
stock split, subject to further reduction upon the elimination of fractional
shares. No shares of preferred stock have been designated as a particular class
or series or are outstanding. The class A common stock is listed on the New York
Stock Exchange under the symbol "CT".

     Under Maryland law, a Maryland corporation generally cannot dissolve, amend
its charter, merge, sell all or substantially all of its assets, engage in a
share exchange or engage in similar transactions outside the ordinary course of
business unless approved by the affirmative vote of shareholders holding at
least two-thirds of the shares entitled to vote on the matter. However, a
Maryland corporation may provide in its charter for approval of these matters by
a lesser percentage, but not less than a majority, of all of the votes entitled
to be cast on the matter. Our charter provides for approval of these matters by
a majority of all votes entitled to be cast on the matter.


                                      -39-




Power to Reclassify Shares of Our Stock and to Increase the Number of Shares of
Our Stock

     Our charter authorizes our board of directors, without shareholder
approval, to:

     o    classify and reclassify any unissued shares of our common stock and
          preferred stock into other classes or series of stock; and

     o    increase or decrease the aggregate number of shares of stock of any
          class or series that may be issued.

     Prior to the issuance of shares of each class or series, the board is
required by Maryland law and by our charter to set, subject to our charter
restrictions on transfers of stock, the terms, preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends or other
distributions, qualifications and terms or conditions of redemption for each
class or series. Thus, the board could authorize the issuance of shares of
preferred stock with terms and conditions which could have the effect of
delaying, deferring or preventing a transaction or a change in control of our
company that might involve a premium price for holders of our common stock or
otherwise be in their best interest.

Power to Issue Additional Shares of Common Stock and Preferred Stock

     We believe that the power to issue additional shares of our common stock or
preferred stock, increase the aggregate number of shares of stock of any class
or series that we have the authority to issue and to classify or reclassify
unissued shares of our common or preferred stock and thereafter to issue the
classified or reclassified shares provides us with increased flexibility in
structuring possible future financings and acquisitions and in meeting other
needs which might arise. These actions can be taken without shareholder
approval, unless shareholder approval is required by applicable law or the rules
of any stock exchange or automated quotation system on which our securities may
be listed or traded. Although we have no present intention of doing so, we could
issue a class or series of stock that could delay, defer or prevent a
transaction or a change in control of our company that might involve a premium
price for holders of common stock or otherwise be in their best interest.

Transfer Agent and Registrar

     The transfer agent and registrar for the all of the securities covered by
this prospectus is American Stock Transfer & Trust Company located in Brooklyn,
New York.

Certain Provisions of Maryland Law and Our Charter and Bylaws

     REIT Qualification Restrictions on Ownership and Transfer

     Our charter contains restrictions on the number of shares of our stock that
a person may own. No individual may acquire or hold, directly or indirectly, in
excess of 2.5% in value or number of our stock unless they receive an exemption
from our board of directors.

     Our charter further prohibits (a) any person from owning shares of our
stock that would result in our being "closely held" under Section 856(h) of the
Internal Revenue Code or otherwise cause us to fail to qualify as a REIT and (b)
any person from transferring shares of our stock if the transfer would result in
our stock being owned by fewer than 100 persons. Any person who acquires or
intends to acquire shares of our stock that may violate any of these
restrictions, or who is the intended transferee of shares of our stock which are
transferred to the Trust, as defined below, is required to give us immediate
written notice and provide us with such information as we may request in order
to determine the effect of the transfer on our status as a REIT. The above
restrictions will not apply if our board of directors determines that it is no
longer in our best interests to continue to qualify as a REIT.


                                      -40-




     Our board of directors, in its sole discretion, may exempt a person from,
or modify, these limits, subject to such terms, conditions, representations and
undertakings as it may determine. Our board of directors has granted limited
exemptions to certain persons who directly or indirectly own our stock,
including officers and directors and shareholders controlled by them or trusts
for the benefit of their families.

     Any attempted transfer of our stock which, if effective, would result in
violation of the above limitations, will cause the number of shares causing the
violation (rounded to the nearest whole share) to be automatically transferred
to a trust, which we refer to as the Trust, for the exclusive benefit of one or
more charitable beneficiaries, which we refer to as the Charitable Beneficiary,
and the proposed transferee will not acquire any rights in the shares. The
automatic transfer will be deemed to be effective as of the close of business on
the business day (as defined in our charter) prior to the date of the transfer.
The shares transferred to the Trust will generally be selected so as to minimize
the aggregate value of shares transferred to the Trust. Shares of our stock held
in the Trust will be issued and outstanding shares. The proposed transferee will
not benefit economically from ownership of any shares of stock held in the
Trust, will have no rights to dividends and no rights to vote or other rights
attributable to the shares of stock held in the Trust. The trustee of the Trust
will have all voting rights and rights to dividends or other distributions with
respect to shares held in the Trust. These rights will be exercised for the
exclusive benefit of the Charitable Beneficiary. Any dividend or other
distribution paid prior to our discovery that shares of stock have been
transferred to the Trust will be paid by the recipient to the Trustee upon
demand. Any dividend or other distribution authorized but unpaid will be paid
when due to the Trustee. Any dividend or distribution paid to the Trustee will
be held in trust for the Charitable Beneficiary. Subject to Maryland law, the
Trustee will have the authority (i) to rescind as void any vote cast by the
proposed transferee prior to our discovery that the shares have been transferred
to the Trust and (ii) to recast the vote in accordance with the desires of the
Trustee acting for the benefit of the Charitable Beneficiary. However, if we
have already taken irreversible corporate action, then the Trustee will not have
the authority to rescind and recast the vote. If necessary to protect our status
as a REIT, we may establish additional Trusts with distinct Trustees and
Charitable Beneficiaries to which shares may be transferred.

     Within 20 days of receiving notice from us that shares of our stock have
been transferred to the Trust, the Trustee will sell the shares to a person
designated by the Trustee, whose ownership of the shares will not violate the
above ownership limitations. Upon the sale, the interest of the Charitable
Beneficiary in the shares sold will terminate and the Trustee will distribute
the net proceeds of the sale to the proposed transferee and to the Charitable
Beneficiary as follows. The proposed transferee will receive the lesser of (i)
the price paid by the proposed transferee for the shares or, if the proposed
transferee did not give value for the shares in connection with the event
causing the shares to be held in the Trust (e.g., a gift, devise or other
similar transaction), the Market Price (as defined in our charter) of the shares
on the day of the event causing the shares to be held in the Trust and (ii) the
price received by the Trustee from the sale or other disposition of the shares.
Any net sale proceeds in excess of the amount payable to the proposed transferee
will be paid immediately to the Charitable Beneficiary. If, prior to our
discovery that shares of our stock have been transferred to the Trust, the
shares are sold by the proposed transferee, then (i) the shares shall be deemed
to have been sold on behalf of the Trust and (ii) to the extent that the
proposed transferee received an amount for the shares that exceeds the amount he
was entitled to receive, the excess shall be paid to the Trustee upon demand.

     In addition, shares of our stock held in the Trust will be deemed to have
been offered for sale to us, or our designee, at a price per share equal to the
lesser of (i) the price per share in the transaction that resulted in the
transfer to the Trust (or, in the case of a devise or gift, the Market Price at
the time of the devise or gift) and (ii) the Market Price on the date we, or our
designee, accept the offer. We will have the right to accept the offer until the
Trustee has sold the shares. Upon a sale to us, the interest of the Charitable
Beneficiary in the shares sold will terminate and the Trustee will distribute
the net proceeds of the sale to the proposed transferee.


                                      -41-





     All certificates representing shares of our stock issued in the future will
bear a legend referring to the restrictions described above.

     Every owner of more than such percentage as may from time to time be
established by our board of directors (or such lower percentage as required by
the Internal Revenue Code or the regulations promulgated thereunder) of our
stock, within 30 days after the end of each taxable year, is required to give us
written notice, stating his name and address, the number of shares of each class
and series of our stock which he beneficially owns and a description of the
manner in which the shares are held. Each such owner shall provide us with such
additional information as we may request in order to determine the effect, if
any, of his beneficial ownership on our status as a REIT and to ensure
compliance with the ownership limits. In addition, each shareholder shall upon
demand be required to provide us with such information as we may request in good
faith in order to determine our status as a REIT and to comply with the
requirements of any taxing authority or governmental authority or to determine
such compliance.

     These ownership limits could delay, defer or prevent a transaction or a
change in control that might involve a premium price for the common stock or
otherwise be in the best interest of the stockholders.

     Business Combinations

     Under Maryland law, "business combinations" between a Maryland corporation
and an interested shareholder or an affiliate of an interested shareholder are
prohibited for five years after the most recent date on which the interested
shareholder becomes an interested shareholder. These business combinations
include a merger, consolidation, share exchange, or, in circumstances specified
in the statute, an asset transfer or issuance or reclassification of equity
securities. An interested shareholder is defined as:

     o    any person who beneficially owns 10% or more of the voting power of
          the corporation's shares; or

     o    an affiliate or associate of the corporation who, at any time within
          the two-year period prior to the date in question, was the beneficial
          owner of 10% or more of the voting power of the then outstanding
          voting stock of the corporation.

     A person is not an interested shareholder under the statute if the board of
directors approved in advance the transaction by which he or she otherwise would
have become an interested shareholder. However, in approving a transaction, our
board of directors may provide that its approval is subject to compliance, at or
after the time of approval, with any terms and conditions determined by the
board.

     After the five-year prohibition, any business combination between the
Maryland corporation and an interested shareholder generally must be recommended
by the board of directors of the corporation and approved by the affirmative
vote of at least:

     o    80% of the votes entitled to be cast by holders of outstanding shares
          of voting stock of the corporation; and

     o    two-thirds of the votes entitled to be cast by holders of voting stock
          of the corporation other than shares held by the interested
          shareholder with whom or with whose affiliate the business combination
          is to be effected or the shares held by any affiliate or associate of
          the interested shareholder.

     These super-majority vote requirements do not apply if the corporation's
common shareholders receive a minimum price, as defined under Maryland law, for
their shares in the form of cash or other consideration in the same form as
previously paid by the interested shareholder for its shares.


                                      -42-





     The statute permits various exemptions from its provisions, including
business combinations that are exempted by the board of directors prior to the
time that the interested shareholder became an interested shareholder.

     Our board of directors has adopted resolutions which exempt Veqtor Finance
Company, L.L.C., JRK Investment Partnership LP and CMH Investment Partnership LP
from the five-year prohibition and the super-majority vote requirement. The
business combination statute may discourage others from trying to acquire
control of us and may increase the difficulty of consummating any offer relating
to the same.

     Control Share Acquisitions

     Maryland 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. A control share acquisition means the acquisition of control shares,
subject to certain exceptions. Shares owned by the acquiror, by officers of the
target corporation or by directors of the target corporation who are also
employees are excluded from shares entitled to vote on the matter. Control
shares are voting shares of stock which, if aggregated with all other shares of
stock owned by the acquiror or in respect of which the acquiror is able to
exercise or direct the exercise of voting power (except solely by virtue of a
revocable proxy), would entitle the acquiror to exercise voting power in
electing directors within one of the following ranges of voting power:

     o    one-tenth or more but less than one-third;

     o    one-third or more but less than a majority; or

     o    a majority or more of all voting power.

     Control shares do not include shares the acquiror is entitled to vote as a
result of having previously obtained shareholder approval.

     A person who has made or proposes to make a control share acquisition may
compel the board of directors of the corporation to call a special meeting of
shareholders to be held within 50 days of demand to consider the voting rights
of the shares. The right to compel the calling of a special meeting is subject
to the satisfaction of certain conditions, including an undertaking to pay the
expenses of the meeting. If no request for a meeting is made, the corporation
may itself present the question at any shareholders meeting.

     If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as required by the statute, then
the corporation may redeem for fair value any or all of the control shares,
except those for which voting rights have previously been approved. The right of
the corporation to redeem control shares is subject to certain conditions and
limitations. Fair value is determined, without regard to the absence of voting
rights for the control shares, as of the date of the last control share
acquisition by the acquiror or of any meeting of shareholders at which the
voting rights of the shares are considered and not approved. If voting rights
for control shares are approved at a shareholders meeting and the acquiror
becomes entitled to vote a majority of the shares entitled to vote, all other
shareholders may exercise appraisal rights. The fair value of the shares as
determined for purposes of 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 (a) to shares acquired
in a merger, consolidation or share exchange if the corporation is a party to
the transaction, or (b) to acquisitions approved or exempted by the charter or
bylaws of the corporation.


                                      -43-





     Maryland Unsolicited Takeovers Act

     The Maryland Unsolicited Takeovers Act applies to any Maryland corporation
that has a class of securities registered under the Securities Exchange Act of
1934 and at least three independent directors. Pursuant to such act, the board
of directors of any Maryland corporation fitting such description, without
obtaining shareholder approval and notwithstanding a contrary provision in its
charter or bylaws, may elect to:

     o    classify the board;

     o    increase the required shareholder vote to remove a director to
          two-thirds of all the votes entitled to be cast by the shareholders
          generally in the election of directors; and

     o    require that a shareholder requested special meeting need be called
          only upon the written request of the shareholders entitled to cast a
          majority of all the votes entitled to be cast at the meeting.

     Additionally, the board could provide that:

     o    the number of directors may be fixed only by a vote of the board of
          directors;

     o    each vacancy on the board of directors (including a vacancy resulting
          from the removal of a director by the shareholders) may be filled only
          by the affirmative vote of a majority of the remaining directors in
          office, even if the remaining directors do not constitute a quorum;
          and

     o    any director elected to fill a vacancy will hold office for the full
          remainder of the term, rather than until the next election of
          directors.

     The Maryland Unsolicited Takeovers Act does not limit the power of a
corporation to confer on the holders of any class or series of preferred stock
the right to elect one or more directors. We currently have more than three
independent directors and therefore our board of directors could elect to
provide for any of the foregoing provisions. As of the date of this prospectus,
our board of directors has not made any such election.

     Advance Notice of Director Nominations and New Business

     Our bylaws provide that with respect to an annual meeting of shareholders,
nominations of individuals for election to the board of directors and the
proposal of business to be considered by shareholders may be made only:

     o    pursuant to our notice of the meeting;

     o    by or at the direction of the board of directors; or

     o    by a shareholder who was a shareholder of record both at the time of
          giving of notice and at the time of the annual meeting, who is
          entitled to vote at the meeting and who has complied with the advance
          notice procedures of the bylaws.

     With respect to special meetings of shareholders, only the business
specified in our notice of the meeting may be brought before the meeting.
Nominations of individuals for election to the board of directors at a special
meeting may only be made:

     o    pursuant to our notice of the meeting;


                                      -44-





     o    by or at the direction of the board of directors; or

     o    provided that the board of directors has determined that directors
          will be elected at the meeting, by a shareholder who is a shareholder
          of record both at the time of giving of notice and at the time of the
          special meeting and who is entitled to vote at the meeting and has
          complied with the advance notice provisions of the bylaws.


                                      -45-





                  SHAREHOLDER PROPOSALS FOR 2003 ANNUAL MEETING

     Pursuant to SEC Rule 14a-8, if you want to include a shareholder proposal
in the proxy statement for our 2003 annual meeting of shareholders, it must have
been delivered to our corporate secretary at the company's executive offices
before January 1, 2003.

     In addition, if you desire to bring business (including director
nominations) before our 2003 annual meeting, our bylaws currently require that
written notice of such business must be received by our secretary between 90
days before and 60 days before. For additional requirements, shareholders should
refer to our bylaws, article II, section 12, "Nominations and Proposals by
Stockholders," a current copy of which may be obtained from our secretary. If we
do not receive timely notice pursuant to our bylaws, any proposal will be
excluded from consideration at the meeting, regardless of any earlier notice
provided in accordance with SEC Rule 14a-8.

                       WHERE YOU CAN FIND MORE INFORMATION

     We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission, or SEC. You may read
and copy any materials we have filed with the SEC at the SEC's public reference
room at 450 Fifth Street, Washington, D.C. 20549. The SEC also maintains a web
site (http://www.sec.gov) that contains reports, proxy statements and other
information concerning us. Please call the SEC at 1-800-SEC-0330 for information
concerning the operations of the public reference rooms.

     We have authorized no one to give you any information or to make any
representation about the proposals that differs from or adds to the information
contained in this proxy statement or in the documents we have publicly filed
with the SEC. You should not rely on any different or additional information.

     The information contained in this proxy statement speaks only as of the
date indicated on the cover page.


                                      -46-





                                                                      APPENDIX A


                      ARTICLES OF AMENDMENT AND RESTATEMENT

                               CAPITAL TRUST, INC.

                      ARTICLES OF AMENDMENT AND RESTATEMENT


     FIRST: Capital Trust, Inc., a Maryland corporation (the "Corporation"),
desires to amend and restate its charter as currently in effect and as
hereinafter amended.

     SECOND:The following provisions are all the provisions of the charter
currently in effect and as hereinafter amended:

                                   ARTICLE I

                                  INCORPORATOR

     The undersigned, Tonya Mitchem Grindon whose address is c/o Ballard Spahr
Andrews & Ingersoll, 300 East Lombard Street, Baltimore, Maryland 21202, being
at least 18 years of age, does hereby form a corporation under the general laws
of the State of Maryland.

                                   ARTICLE II

                                      NAME

     The name of the corporation (the "Corporation") is:

          Capital Trust, Inc.

                                   ARTICLE III

                                    PURPOSE

     The purposes for which the Corporation is formed are to engage in any
lawful act or activity (including, without limitation or obligation, engaging in
business as a real estate investment trust under the Internal Revenue Code of
1986, as amended, or any successor statute (the "Code")) for which corporations
may be organized under the general laws of the State of Maryland as now or
hereafter in force. For purposes of the charter, "REIT" means a real estate
investment trust under Sections 856 through 860 of the Code.

                                   ARTICLE IV

                  PRINCIPAL OFFICE IN STATE AND RESIDENT AGENT

     The address of the principal office of the Corporation in the State of
Maryland is c/o The Corporation Trust Incorporated, 300 East Lombard Street,
Baltimore, Maryland 21202. The name of the resident agent of the Corporation in
the State of Maryland is The Corporation Trust Incorporated, 300 East Lombard
Street, Baltimore, Maryland 21202. The resident agent is a Maryland corporation.




                                   ARTICLE V

                        PROVISIONS FOR DEFINING, LIMITING
                      AND REGULATING CERTAIN POWERS OF THE
                CORPORATION AND OF THE STOCKHOLDERS AND DIRECTORS

     Section 5.1 Number of Directors. The business and affairs of the
Corporation shall be managed under the direction of the Board of Directors. The
number of directors of the Corporation shall be twelve (12), which number may be
increased or decreased pursuant to the Bylaws, but shall never be less than the
minimum number required by the Maryland General Corporation Law. The names of
the directors who shall serve until the next annual meeting of stockholders and
until their successors are duly elected and qualified are:

                                   Samuel Zell

                                Jeffrey A. Altman

                               Sheli Z. Rosenberg

                               Gary R. Garrabrant

                                Martin L. Edelman

                                  John R. Klopp

                                Lynne B. Sagalyn

                                Craig M. Hatkoff

                               Thomas E. Dobrowski

                                   Steven Roth

                                 Susan W. Lewis

                                Michael D. Watson

The directors may increase the number of directors and may fill any vacancy,
whether resulting from an increase in the number of directors or otherwise, on
the Board of Directors.

     Section 5.2 Extraordinary Actions. Notwithstanding any provision of law
permitting or requiring any action to be taken or approved by the affirmative
vote of the holders of shares entitled to cast a greater number of votes, any
such action shall be effective and valid if taken or approved by the affirmative
vote of holders of shares entitled to cast a majority of all the votes entitled
to be cast on the matter.

     Section 5.3 Authorization by Board of Stock Issuance. The Board of
Directors may authorize the issuance from time to time of shares of stock of the
Corporation of any class or series, whether now or hereafter authorized, or
securities or rights convertible into shares of its stock of any class or
series, whether now or hereafter authorized, for such consideration as the Board
of Directors may deem advisable (or without consideration in the case of a stock
split or stock dividend), subject to such restrictions or limitations, if any,
as may be set forth in the charter or the Bylaws.


                                      A-2





     Section 5.4 Preemptive Rights. Except as may be provided by the Board of
Directors in setting the terms of classified or reclassified shares of stock
pursuant to Section 6.4 or as may otherwise be provided by contract, no holder
of shares of stock of the Corporation shall, as such holder, have any preemptive
right to purchase or subscribe for any additional shares of stock of the
Corporation or any other security of the Corporation which it may issue or sell.

     Section 5.5 Indemnification. The Corporation shall have the power, to the
maximum extent permitted by Maryland law in effect from time to time, to
obligate itself to indemnify, and to pay or reimburse reasonable expenses in
advance of final disposition of a proceeding to, (a) any individual who is a
present or former director or officer of the Corporation or (b) any individual
who, while a director of the Corporation and at the request of the Corporation,
serves or has served as a director, officer, partner or trustee of another
corporation, real estate investment trust, partnership, limited liability
company, joint venture, trust, employee benefit plan or any other enterprise
from and against any claim or liability to which such person may become subject
or which such person may incur by reason of his status as a present or former
director or officer of the Corporation. The Corporation shall have the power,
with the approval of the Board of Directors, to provide such indemnification and
advancement of expenses to a person who served a predecessor of the Corporation
in any of the capacities described in (a) or (b) above and to any employee or
agent of the Corporation or a predecessor of the Corporation.

     Section 5.6 Determinations by Board. The determination as to any of the
following matters, made in good faith by or pursuant to the direction of the
Board of Directors consistent with the charter and in the absence of actual
receipt of an improper benefit in money, property or services or active and
deliberate dishonesty established by a court, shall be final and conclusive and
shall be binding upon the Corporation and every holder of shares of its stock:
the amount of the net income of the Corporation for any period and the amount of
assets at any time legally available for the payment of dividends, redemption of
its stock or the payment of other distributions on its stock; the amount of
paid-in surplus, net assets, other surplus, annual or other net profit, net
assets in excess of capital, undivided profits or excess of profits over losses
on sales of assets; the amount, purpose, time of creation, increase or decrease,
alteration or cancellation of any reserves or charges and the propriety thereof
(whether or not any obligation or liability for which such reserves or charges
shall have been created shall have been paid or discharged); the fair value, or
any sale, bid or asked price to be applied in determining the fair value, of any
asset owned or held by the Corporation; any matter relating to the acquisition,
holding and disposition of any assets by the Corporation; or any other matter
relating to the business and affairs of the Corporation.

     Section 5.7 REIT Qualification. If the Corporation elects to qualify for
federal income tax treatment as a REIT, the Board of Directors shall use its
reasonable best efforts to take such actions as are necessary or appropriate to
preserve the status of the Corporation as a REIT; however, if the Board of
Directors determines that it is no longer in the best interests of the
Corporation to continue to be qualified as a REIT, the Board of Directors may
revoke or otherwise terminate the Corporation's REIT election pursuant to
Section 856(g) of the Code. The Board of Directors also may determine that
compliance with any restriction or limitation on stock ownership and transfers
set forth in Article VII is no longer required for REIT qualification.


                                       A-3





                                   ARTICLE VI

                                      STOCK

     Section 6.1 Authorized Shares. The total number of shares of stock which
the Corporation shall have the authority to issue is 200,000,000 shares,
consisting of two classes of stock as follows:

     (a) 100,000,000 shares of common stock, par value $.01 per share (the
"Common Stock"), of which 100,000,000 shares shall initially be designated class
A common stock, par value $.01 per share (the "Class A Stock"); and

     (b) 100,000,000 shares of preferred stock, par value $.01 per share (the
"Preferred Stock").

     (c) The aggregate par value of all authorized shares of stock having par
value is $2,000,000. If shares of one class of stock are classified or
reclassified into shares of another class of stock pursuant to this Article VI,
the number of authorized shares of the former class shall be automatically
decreased and the number of shares of the latter class shall be automatically
increased, in each case by the number of shares so classified or reclassified,
so that the aggregate number of shares of stock of all classes that the
Corporation has authority to issue shall not be more than the total number of
shares of stock set forth in the first sentence of this Section 6.1. To the
extent permitted by Maryland law, the Board of Directors, without any action by
the stockholders of the Corporation, may amend the charter from time to time to
increase or decrease the aggregate number of shares of stock of any class or
series that the Corporation has the authority to issue.

     Section 6.2 Common Stock. Except as may otherwise be provided in the
charter, all shares of Common Stock shall be identical and shall entitle the
holders thereof to the same rights and privileges with respect thereto. The
Board of Directors may classify or reclassify any unissued shares of Common
Stock from time to time in one or more classes or series of stock. Subject to
the provisions of Section 6.3, the Common Stock shall have the following
preferences, rights, powers, restrictions, limitations and qualifications, and
such others as may be afforded by law:

     (a) Voting Rights. Except as may otherwise be provided by law, each holder
of Class A Stock shall have one vote in respect to each share of Class A Stock
held of record on all matters to be voted upon by stockholders.

     (b) Dividend Rights. The holders of Common Stock shall be entitled to
receive, ratably in proportion to the number of shares of Common Stock held by
them, such dividends as may be authorized from time to time by the Board of
Directors out of assets legally available therefor.

     (c) Liquidation Rights. In the event of the voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation, after payment in full
or reasonable provision for payment in full of all claims and obligations of the
Corporation shall have been made, all of the assets of the Corporation, if any,
remaining, of whatever kind available for distribution to stockholders, shall be
distributed to the holders of Common Stock, ratably, in proportion to the number
of shares of Common Stock held by them.

     Section 6.3 Preferred Stock. The Board of Directors may classify any
unissued shares of Preferred Stock and reclassify any previously classified but
unissued shares of Preferred Stock of any series from time to time, in one or
more classes or series of stock.


                                       A-4





     Section 6.4 Classified or Reclassified Shares. Prior to issuance of
classified or reclassified shares of any class or series, the Board of Directors
by resolution shall: (a) designate that class or series to distinguish it from
all other classes and series of stock of the Corporation; (b) specify the number
of shares to be included in the class or series; (c) set or change, subject to
the provisions of Section 6.3 and subject to the express terms of any class or
series of stock of the Corporation outstanding at the time, the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends or other distributions, qualifications and terms and conditions of
redemption for each class or series; and (d) cause the Corporation to file
articles supplementary with the State Department of Assessments and Taxation of
Maryland ("SDAT"). Any of the terms of any class or series of stock set or
changed pursuant to clause (c) of this Section 6.4 may be made dependent upon
facts or events ascertainable outside the charter (including determinations by
the Board of Directors or other facts or events within the control of the
Corporation) and may vary among holders thereof, provided that the manner in
which such facts, events or variations shall operate upon the terms of such
class or series of stock is clearly and expressly set forth in the articles
supplementary filed with the SDAT.

     Section 6.5 Charter and Bylaws. All persons who shall acquire stock in the
Corporation shall acquire the same subject to the provisions of the charter and
the Bylaws.

                                  ARTICLE VII

                 RESTRICTION ON TRANSFER AND OWNERSHIP OF SHARES

     Section 7.1 Definitions. For the purpose of this Article VII, the following
terms shall have the following meanings:

     Aggregate Stock Ownership Limit. The term "Aggregate Stock Ownership Limit"
shall initially mean not more than 2.5 percent, or such higher percentage as the
Board of Directors shall from time to time determine pursuant to Section 7.2.9,
in value or number of the aggregate of the outstanding shares of Capital Stock.
The number and value of the outstanding shares of Capital Stock shall be
determined by the Board of Directors, which determination shall be conclusive
for all purposes hereof.

     Beneficial Ownership. The term "Beneficial Ownership" shall mean ownership
of Capital Stock by a Person, whether the interest in the shares of Capital
Stock is held directly or indirectly (including by a nominee), and shall include
interests that would be treated as owned through the application of Section 544
of the Code, as modified by Section 856(h)(1)(B) of the Code. The terms
"Beneficial Owner," "Beneficially Owns" and "Beneficially Owned" shall have the
correlative meanings. The term "Beneficial Owner" is intended to be interpreted
in the context of Section 856(h) of the Code so that the Beneficial Ownership of
Capital Stock held by an entity shall be Individuals who are treated as owners
of Capital Stock for purposes of Section 856(h) of the Code rather than the
entity itself.

     Business Day. The term "Business Day" shall mean any day, other than a
Saturday or Sunday, that is neither a legal holiday nor a day on which banking
institutions in New York City are authorized or required by law, regulation or
executive order to close.

     Capital Stock. The term "Capital Stock" shall mean all classes or series of
stock of the Corporation, including, without limitation, Common Stock and
Preferred Stock.

     Charitable Beneficiary. The term "Charitable Beneficiary" shall mean one or
more beneficiaries of the Trust as determined pursuant to Section 7.3.6,
provided that each such organization must be described in Section 501(c)(3) of
the Code and contributions to each such organization must be eligible for
deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of the Code.


                                      A-5





     Charter. The term "Charter" shall mean the charter of the Corporation, as
that term is defined in the MGCL.

     Code. The term "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.

     Common Stock Ownership Limit. The term "Common Stock Ownership Limit" shall
initially mean not more than 2.5 percent (in value or in number of shares,
whichever is more restrictive), or such higher percentage as the Board of
Directors shall from time to time determine pursuant to Section 7.2.9, of the
aggregate of the outstanding shares of Common Stock. The number and value of
outstanding shares of Common Stock shall be determined by the Board of
Directors, which determination shall be conclusive for all purposes hereof.

     Constructive Ownership. The term "Constructive Ownership" shall mean
ownership of Capital Stock by a Person, whether the interest in the shares of
Capital Stock is held directly or indirectly (including by a nominee), and shall
include interests that would be treated as owned through the application of
Section 318(a) of the Code, as modified by Section 856(d)(5) of the Code. The
terms "Constructive Owner," "Constructively Owns" and "Constructively Owned"
shall have the correlative meanings.

     Excepted Holder. The term "Excepted Holder" shall mean a stockholder of the
Corporation for whom an Excepted Holder Limit is created by this Article VII or
by the Board of Directors pursuant to Section 7.2.7 and shall, without
limitation, include each Existing Holder.

     Excepted Holder Limit. The term "Excepted Holder Limit" shall mean,
provided that the affected Excepted Holder agrees to comply with the
requirements established by the Board of Directors pursuant to Section 7.2.7,
and subject to adjustment as provided in Sections 7.2.7(d) and (e), the
percentage limit established by the Board of Directors pursuant to Section
7.2.7, and which for each Existing Holder shall be the Existing Holder Limit,
subject to adjustment as provided in Section 7.2.7(e).

     Existing Holder. The term "Existing Holder" shall mean any Person who was,
or would have been upon the exchange of debt or any security of the Corporation,
the Beneficial Owner of shares of Capital Stock in excess of the Aggregate Stock
Ownership Limit or the Common Stock Ownership Limit both on and immediately
after the Initial Date, so long as, but only so long as, such Person
Beneficially Owns or would, upon exchange of debt or any security of the
Corporation, Beneficially Own shares of Capital Stock in excess of the Aggregate
Stock Ownership Limit or the Common Stock Ownership Limit.

     Existing Holder Limit. The term "Existing Holder Limit" for any Existing
Holder shall mean the percentage of the outstanding shares of Capital Stock
Beneficially Owned, or which would have been Beneficially Owned upon the
exchange of debt or any security of the Corporation, by such Existing Holder on
and immediately after the Initial Date, and, after any adjustment pursuant to
Section 7.2.7(e), shall mean such percentage of the outstanding shares of
Capital Stock as so adjusted. Any Existing Holder Limit shall not be modified
except as provided in Sections 7.2.7(d) and (e). From the Initial Date until the
Restriction Termination Date, the Corporation shall maintain and, upon request,
make available to each Existing Holder, a schedule which sets forth the then
current Existing Holder Limit for each Existing Holder.

     Individual. "Individual" shall mean (i) an "individual" within the meaning
of Section 542(a)(2) of the Code, as modified by Section 544 of the Code and/or
(ii) any beneficiary of a "qualified trust" (as defined in Section 856(h)(3)(E))
of the Code which qualified trust is eligible for look-through treatment under
Section 856(h)(3)(A) of the Code for purposes of determining whether a REIT is
closely held under Section 856(a)(6) of the Code.


                                   A-6





     Initial Date. The term "Initial Date" shall mean the date upon which the
Articles of Amendment and Restatement containing this Article VII are filed with
the SDAT.

     Market Price. The term "Market Price" on any date shall mean, with respect
to any class or series of outstanding shares of Capital Stock, the Closing Price
for such Capital Stock on such date. The "Closing Price" on any date shall mean
the last sale price for such Capital Stock, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, for such Capital Stock, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the NYSE or, if such Capital Stock is not listed or
admitted to trading on the NYSE, as reported on the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which such Capital Stock is listed or admitted
to trading or, if such Capital Stock is not listed or admitted to trading on any
national securities exchange, the last quoted price, or, if not so quoted, the
average of the high bid and low asked prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or, if such system is no longer in use, the principal other
automated quotation system that may then be in use or, if such Capital Stock is
not quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in such
Capital Stock selected by the Board of Directors or, in the event that no
trading price is available for such Capital Stock, the fair market value of the
Capital Stock, as determined by the Board of Directors.

     MGCL. The term "MGCL" shall mean the Maryland General Corporation Law, as
amended from time to time.

     NYSE. The term "NYSE" shall mean the New York Stock Exchange.

     Person. The term "Person" shall mean an Individual, corporation,
partnership, estate, trust (including a trust qualified under Sections 401(a) or
501(c)(17) of the Code), a portion of a trust permanently set aside for or to be
used exclusively for the purposes described in Section 642(c) of the Code,
association, private foundation within the meaning of Section 509(a) of the
Code, joint stock company or other entity and also includes a group as that term
is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended, and a group to which an Excepted Holder Limit applies.

     Prohibited Owner. The term "Prohibited Owner" shall mean, with respect to
any purported Transfer, any Person who, but for the provisions of Section 7.2.1,
would Beneficially Own or Constructively Own shares of Capital Stock, and if
appropriate in the context, shall also mean any Person who would have been the
record owner of the shares that the Prohibited Owner would have so owned.

     REIT. The term "REIT" shall mean a real estate investment trust within the
meaning of Section 856 of the Code.

     Restriction Termination Date. The term "Restriction Termination Date" shall
mean the first day after the Initial Date on which the Corporation determines
pursuant to Section 5.7 that it is no longer in the best interests of the
Corporation to attempt to, or continue to, qualify as a REIT or that compliance
with the restrictions and limitations on Beneficial Ownership, Constructive
Ownership and Transfers of shares of Capital Stock set forth herein is no longer
required in order for the Corporation to qualify as a REIT.

     Transfer. The term "Transfer" shall mean any issuance, sale, transfer,
gift, assignment, devise or other disposition, as well as any other event that
causes any Person to acquire Beneficial Ownership or Constructive Ownership, or
any agreement to take any such actions or cause any such events, of Capital
Stock or the right to vote or receive dividends on Capital Stock, including (a)
the


                                      A-7





granting or exercise of any option (or any disposition of any option), (b) any
disposition of any securities or rights convertible into or exchangeable for
Capital Stock or any interest in Capital Stock or any exercise of any such
conversion or exchange right and (c) Transfers of interests in other entities
that result in changes in Beneficial or Constructive Ownership of Capital Stock;
in each case, whether voluntary or involuntary, whether owned of record,
Constructively Owned or Beneficially Owned and whether by operation of law or
otherwise. The terms "Transferring" and "Transferred" shall have the correlative
meanings.

     Trust. The term "Trust" shall mean any trust provided for in Section 7.3.1.

     Trustee. The term "Trustee" shall mean the Person, unaffiliated with the
Corporation and a Prohibited Owner, that is appointed by the Corporation to
serve as trustee of the Trust.

     Section 7.2 Capital Stock.

          Section 7.2.1 Ownership Limitations. During the period commencing on
the Initial Date and prior to the Restriction Termination Date:

          (a) Basic Restrictions.

               (i) (1) No Individual, other than an Excepted Holder, shall
Beneficially Own or Constructively Own shares of Capital Stock in excess of the
Aggregate Stock Ownership Limit, (2) no Individual, other than an Excepted
Holder, shall Beneficially Own or Constructively Own shares of Common Stock in
excess of the Common Stock Ownership Limit and (3) no Excepted Holder shall
Beneficially Own or Constructively Own shares of Capital Stock in excess of the
Excepted Holder Limit for such Excepted Holder.

               (ii) No Person shall Beneficially or Constructively Own shares of
Capital Stock to the extent that such Beneficial or Constructive Ownership of
Capital Stock would result in the Corporation being "closely held" within the
meaning of Section 856(h) of the Code (without regard to whether the ownership
interest is held during the last half of a taxable year), or otherwise failing
to qualify as a REIT (including, but not limited to, Beneficial or Constructive
Ownership that would result in the Corporation owning (actually or
Constructively) an interest in a tenant that is described in Section
856(d)(2)(B) of the Code if the income derived by the Corporation from such
tenant would cause the Corporation to fail to satisfy any of the gross income
requirements of Section 856(c) of the Code).

               (iii) Notwithstanding any other provisions contained herein, any
Transfer of shares of Capital Stock (whether or not such Transfer is the result
of a transaction entered into through the facilities of the NYSE or any other
national securities exchange or automated inter-dealer quotation system) that,
if effective, would result in the Capital Stock being beneficially owned by less
than 100 Persons (determined under the principles of Section 856(a)(5) of the
Code) shall be void ab initio, and the intended transferee shall acquire no
rights in such shares of Capital Stock.

          (b) Transfer in Trust. If any Transfer of shares of Capital Stock
(whether or not such Transfer is the result of a transaction entered into
through the facilities of the NYSE or any other national securities
exchange or automated inter-dealer quotation system) occurs which, if
effective, would result in any Person Beneficially Owning or Constructively
Owning shares of Capital Stock in violation of Sections 7.2.1(a)(i) or (ii),

               (i) then that number of shares of the Capital Stock the
Beneficial or Constructive Ownership of which otherwise would cause such Person
to violate Section 7.2.1(a)(i) or (ii) (rounded to the nearest whole share)
shall be automatically transferred to a Trust for the


                                       A-8





benefit of a Charitable Beneficiary, as described in Section 7.3, effective as
of the close of business on the Business Day prior to the date of such Transfer,
and such Person shall acquire no rights in such shares; or

               (ii) if the transfer to the Trust described in Section
7.2.1(b)(i) would not be effective for any reason to prevent the violation of
Section 7.2.1(a)(i) or (ii), then the Transfer of that number of shares of
Capital Stock that otherwise would cause any Person to violate Section
7.2.1(a)(i) or (ii) shall be void ab initio, and the intended transferee shall
acquire no rights in such shares of Capital Stock.

          Section 7.2.2 Remedies for Breach. If the Board of Directors or any
duly authorized committee thereof shall at any time determine that a Transfer or
other event has taken place that results in a violation of Section 7.2.1 or that
a Person intends to acquire or has attempted to acquire Beneficial or
Constructive Ownership of any shares of Capital Stock in violation of Section
7.2.1 (whether or not such violation is intended), the Board of Directors or a
committee thereof shall take such action as it deems advisable to refuse to give
effect to or to prevent such Transfer or other event, including, without
limitation, causing the Corporation to redeem shares, refusing to give effect to
such Transfer on the books of the Corporation or instituting proceedings to
enjoin such Transfer or other event; provided, however, that any Transfer or
attempted Transfer or other event in violation of Section 7.2.1 shall
automatically result in the transfer to the Trust described in Section
7.2.1(b)(i), and, where applicable, such Transfer (or other event) shall be void
ab initio as provided above irrespective of any action (or non-action) by the
Board of Directors or a committee thereof.

          Section 7.2.3 Notice of Restricted Transfer. Any Person who acquires
or attempts or intends to acquire Beneficial Ownership or Constructive Ownership
of shares of Capital Stock that will or may violate Section 7.2.1(a) or any
Person who would have owned shares of Capital Stock that resulted in a transfer
to the Trust pursuant to the provisions of Section 7.2.1(b) shall immediately
give written notice to the Corporation of such event, or in the case of such a
proposed or attempted transaction, give at least 15 days prior written notice,
and shall provide to the Corporation at its principal executive office
(attention: President) such other information as the Corporation may request in
order to determine the effect, if any, of such Transfer on the Corporation's
status as a REIT.

          Section 7.2.4 Owners Required To Provide Information. From the Initial
Date and prior to the Restriction Termination Date:

          (a) every owner of more than such percentage as may from time to time
be established by the Board (or such lower percentage as required by the Code or
the Treasury Regulations promulgated thereunder) of the outstanding shares of
Capital Stock, within 30 days after the end of each taxable year, shall give
written notice to the Corporation stating the name and address of such owner,
the number of shares of Capital Stock and other shares of the Capital Stock
Beneficially Owned and a description of the manner in which such shares are
held. Each such owner shall provide to the Corporation such additional
information as the Corporation may request in order to determine the effect, if
any, of such Beneficial Ownership on the Corporation's status as a REIT and to
ensure compliance with the Aggregate Stock Ownership Limit; and

          (b) each Person who is a Beneficial or Constructive Owner of Capital
Stock and each Person (including the stockholder of record) who is holding
Capital Stock for a Beneficial or Constructive Owner shall provide to the
Corporation such information as the Corporation may request, in good faith, in
order to determine the Corporation's status as a REIT and to comply with
requirements of any taxing authority or governmental authority or to determine
such compliance.

          Section 7.2.5 Remedies Not Limited. Subject to Section 5.7, nothing
contained in this Section 7.2 shall limit the authority of the Board of
Directors to take such other action as

                                      A-9





it deems necessary or advisable to protect the Corporation and the interests of
its stockholders in preserving the Corporation's status as a REIT.

          Section 7.2.6 Ambiguity. In the case of an ambiguity in the
application of any of the provisions of this Section 7.2, Section 7.3, or any
definition contained in Section 7.1, the Board of Directors shall have the power
to determine the application of the provisions of this Section 7.2 or Section
7.3 or any such definition with respect to any situation based on the facts
known to it. In the event Section 7.2 or 7.3 requires an action by the Board of
Directors and the Charter fails to provide specific guidance with respect to
such action, the Board of Directors shall have the power to determine the action
to be taken so long as such action is not contrary to the provisions of Sections
7.1, 7.2 or 7.3.

          Section 7.2.7 Exceptions.

               (a) Subject to Section 7.2.1(a)(ii), the Board of Directors, in
its sole discretion, may exempt a Person from the Aggregate Stock Ownership
Limit and the Common Stock Ownership Limit, as the case may be, and may
establish or increase an Excepted Holder Limit for such Person if:

                    (i) the Board of Directors obtains such representations and
undertakings from such Person as are reasonably necessary to ascertain that no
Individual's Beneficial or Constructive Ownership of such shares of Capital
Stock will violate Section 7.2.1(a)(ii);

                    (ii) such Person does not and represents that it will not
own, actually or Constructively, an interest in a tenant of the Corporation (or
a tenant of any entity owned or controlled by the Corporation) that would cause
the Corporation to own, actually or Constructively, more than a 9.9% interest
(as set forth in Section 856(d)(2)(B) of the Code) in such tenant and the Board
of Directors obtains such representations and undertakings from such Person as
are reasonably necessary to ascertain this fact (for this purpose, a tenant from
whom the Corporation (or an entity owned or controlled by the Corporation)
derives (and is expected to continue to derive) a sufficiently small amount of
revenue such that, in the opinion of the Board of Directors, rent from such
tenant would not adversely affect the Corporation's ability to qualify as a
REIT, shall not be treated as a tenant of the Corporation); and

                    (iii) such Person agrees that any violation or attempted
violation of such representations or undertakings (or other action which is
contrary to the restrictions contained in Sections 7.2.1 through 7.2.6) will
result in such shares of Capital Stock being automatically transferred to a
Trust in accordance with Sections 7.2.1(b) and 7.3.

          (b) Prior to granting any exception pursuant to Section 7.2.7(a), the
Board of Directors may require a ruling from the Internal Revenue Service, or an
opinion of counsel, in either case in form and substance satisfactory to the
Board of Directors in its sole discretion, as it may deem necessary or advisable
in order to determine or ensure the Corporation's status as a REIT.
Notwithstanding the receipt of any ruling or opinion, the Board of Directors may
impose such conditions or restrictions as it deems appropriate in connection
with granting such exception.

          (c) Subject to Section 7.2.1(a)(ii), an underwriter which participates
in a public offering or a private placement of Capital Stock (or securities
convertible into or exchangeable for Capital Stock) may Beneficially Own or
Constructively Own shares of Capital Stock (or securities convertible into or
exchangeable for Capital Stock) in excess of the Aggregate Stock Ownership
Limit, the Common Stock Ownership Limit, or both such limits, but only to the
extent necessary to facilitate such public offering or private placement.


                                      A-10





          (d) The Board of Directors may only reduce the Excepted Holder Limit
for an Excepted Holder: (1) with the written consent of such Excepted Holder at
any time, (2) pursuant to the terms and conditions of the agreements and
undertakings entered into with such Excepted Holder in connection with the
establishment of the Excepted Holder Limit for that Excepted Holder, or (3)
pursuant to Section 7.2.7(e). No Excepted Holder Limit shall be reduced to a
percentage that is less than the Common Stock Ownership Limit.

          (e) Modification of Excepted Holder Limits. The Excepted Holder Limits
may be modified as follows:

               (i) Subject to the limitations provided in Section 7.2.9, the
Board may grant options, stock units or shares of Capital Stock which result in
Beneficial Ownership of shares of Capital Stock by an Excepted Holder pursuant
to an incentive stock or option plan approved by the Board of Directors and/or
the stockholders. Any such grant shall increase the Excepted Holder Limit for
the affected Excepted Holder to the maximum extent possible under Section 7.2.9
to permit the Beneficial Ownership of shares of Capital Stock issuable upon the
exercise of such option.

               (ii) Subject to the limitations provided in Section 7.2.9, an
Excepted Holder may elect to participate in a dividend reinvestment plan
approved by the Board of Directors which results in Beneficial Ownership of
shares of Capital Stock by such participating Excepted Holder. Any such
participation shall increase the Excepted Holder Limit for the affected Excepted
Holder to the maximum extent possible under Section 7.2.9 to permit Beneficial
Ownership of the shares of Capital Stock acquired as a result of such
participation.

               (iii) The Excepted Holder Limit for any Excepted Holder shall be
reduced after any Transfer permitted in this Article VII by such Excepted Holder
by the percentage of the outstanding shares of Capital Stock so Transferred or
after the lapse (without exercise) of an option, stock unit or share of Capital
Stock granted pursuant to an incentive stock or option plan described in Section
7.2.7(e)(i) by the percentage of the shares of Capital Stock which the option,
stock unit or share of Capital Stock, if exercised or vested, would have
represented, but in either case no Excepted Holder Limit shall be reduced to a
percentage which is less than the Common Stock Ownership Limit.

               (iv) Upon the issuance by the Corporation of any Capital Stock,
the Excepted Holder Limit for any Excepted Holder shall be reduced to the
percentage of the outstanding shares of Capital Stock held by any such Excepted
Holder immediately after any such issuance, but no Excepted Holder Limit shall
be reduced to a percentage which is less than the Common Stock Ownership Limit.

               (v) Prior to the modification of any Excepted Holder Limit
pursuant to Section 7.2.7(e), the Board of Directors may require such opinions
of counsel, affidavits, undertakings or agreements as it may deem necessary or
advisable in order to determine or ensure the Corporation's status as a REIT.

          Section 7.2.8 Increase in Aggregate Stock Ownership and Common Stock
Ownership Limits. Subject to Section 7.2.9, the Board of Directors may from time
to time increase the Common Stock Ownership Limit and the Aggregate Stock
Ownership Limit.

          Section 7.2.9 Limitations on Changes in Excepted Holder, Aggregate
Ownership Limits and Common Stock Ownership Limits. Neither the Aggregate Stock
Ownership Limit, Common Stock Ownership Limit nor any Excepted Holder Limit may
be increased (nor may any additional Excepted Holder Limit be created) by the
Board of Directors if, after giving effect to such


                                      A-11





increase (or creation), five Individual Beneficial Owners of shares of Capital
Stock (including all of the then Excepted Holders) could Beneficially Own, in
the aggregate, more than 49.9% in number or value of the outstanding shares of
Capital Stock.

          Section 7.2.10 Legend. Each certificate for shares of Capital Stock
shall bear substantially the following legend:

          The shares represented by this certificate are subject to restrictions
          on Beneficial and Constructive Ownership and Transfer for the purpose
          of the Corporation's maintenance of its status as a Real Estate
          Investment Trust under the Internal Revenue Code of 1986, as amended
          (the "Code"). Subject to certain further restrictions and except as
          expressly provided in the Corporation's Charter, (i) no Individual may
          Beneficially or Constructively Own shares of the Corporation's Common
          Stock in excess of 2.5 percent (in value or number of shares,
          whichever is more restrictive) of the outstanding shares of Common
          Stock of the Corporation unless such Individual is an Excepted Holder
          (in which case the Excepted Holder Limit shall be applicable); (ii) no
          Individual may Beneficially or Constructively Own shares of Capital
          Stock of the Corporation in excess of 2.5 percent of the value of the
          total outstanding shares of Capital Stock of the Corporation, unless
          such Individual is an Excepted Holder (in which case the Excepted
          Holder Limit shall be applicable); (iii) no Person may Beneficially or
          Constructively Own Capital Stock that would result in the Corporation
          being "closely held" under Section 856(h) of the Code or otherwise
          cause the Corporation to fail to qualify as a REIT; and (iv) no Person
          may Transfer shares of Capital Stock if such Transfer would result in
          the Capital Stock of the Corporation being owned by fewer than 100
          Persons. Any Person who Beneficially or Constructively Owns or
          attempts to Beneficially or Constructively Own shares of Capital Stock
          which causes or will cause a Person to Beneficially or Constructively
          Own shares of Capital Stock in excess or in violation of the above
          limitations must immediately notify the Corporation. If any of the
          restrictions on transfer or ownership are violated, the shares of
          Capital Stock represented hereby will be automatically transferred to
          a Trustee of a Trust for the benefit of one or more Charitable
          Beneficiaries. In addition, upon the occurrence of certain events,
          attempted Transfers in violation of the restrictions described above
          may be void ab initio. All capitalized terms in this legend have the
          meanings defined in the charter of the Corporation, as the same may be
          amended from time to time, a copy of which, including the restrictions
          on transfer and ownership, will be furnished to each holder of Capital
          Stock of the Corporation on request and without charge.

          Instead of the foregoing legend, the certificate may state that the
Corporation will furnish a full statement about certain restrictions on
transferability to a stockholder on request and without charge.

     Section 7.3 Transfer of Capital Stock in Trust.

          Section 7.3.1 Ownership in Trust. Upon any purported Transfer or other
event described in Section 7.2.1(b) that would result in a transfer of shares of
Capital Stock to a Trust, such shares of Capital Stock shall be deemed to have
been transferred to the Trustee as trustee of a Trust for


                                      A-12





the exclusive benefit of one or more Charitable Beneficiaries. Such transfer to
the Trustee shall be deemed to be effective as of the close of business on the
Business Day prior to the purported Transfer or other event that results in the
transfer to the Trust pursuant to Section 7.2.1(b). The Trustee shall be
appointed by the Corporation and shall be a Person unaffiliated with the
Corporation and any Prohibited Owner. Each Charitable Beneficiary shall be
designated by the Corporation as provided in Section 7.3.6.

          Section 7.3.2 Status of Shares Held by the Trustee. Shares of Capital
Stock held by the Trustee shall be issued and outstanding shares of Capital
Stock of the Corporation. The Prohibited Owner shall have no rights in the
shares held by the Trustee. The Prohibited Owner shall not benefit economically
from ownership of any shares held in trust by the Trustee, shall have no rights
to dividends or other distributions and shall not possess any rights to vote or
other rights attributable to the shares held in the Trust.

          Section 7.3.3 Dividend and Voting Rights. The Trustee shall have all
voting rights and rights to dividends or other distributions with respect to
shares of Capital Stock held in the Trust, which rights shall be exercised for
the exclusive benefit of the Charitable Beneficiary. Any dividend or other
distribution paid prior to the discovery by the Corporation that the shares of
Capital Stock have been transferred to the Trustee shall be paid by the
recipient of such dividend or distribution to the Trustee upon demand and any
dividend or other distribution authorized but unpaid shall be paid when due to
the Trustee. Any dividend or distribution so paid to the Trustee shall be held
in trust for the Charitable Beneficiary. The Prohibited Owner shall have no
voting rights with respect to shares held in the Trust and, subject to Maryland
law, effective as of the date that the shares of Capital Stock have been
transferred to the Trustee, the Trustee shall have the authority (at the
Trustee's sole discretion) (i) to rescind as void any vote cast by a Prohibited
Owner prior to the discovery by the Corporation that the shares of Capital Stock
have been transferred to the Trustee and (ii) to recast such vote in accordance
with the desires of the Trustee acting for the benefit of the Charitable
Beneficiary; provided, however, that if the Corporation has already taken
irreversible corporate action, then the Trustee shall not have the authority to
rescind and recast such vote. Notwithstanding the provisions of this Article
VII, until the Corporation has received notification that shares of Capital
Stock have been transferred into a Trust, the Corporation shall be entitled to
rely on its share transfer and other stockholder records for purposes of
preparing lists of stockholders entitled to vote at meetings, determining the
validity and authority of proxies and otherwise conducting votes of
stockholders.

          Section 7.3.4 Sale of Shares by Trustee. Within 20 days of receiving
notice from the Corporation that shares of Capital Stock have been transferred
to the Trust, the Trustee of the Trust shall sell the shares held in the Trust
to a person, designated by the Trustee, whose ownership of the shares will not
violate the ownership limitations set forth in Section 7.2.1(a). Upon such sale,
the interest of the Charitable Beneficiary in the shares sold shall terminate
and the Trustee shall distribute the net proceeds of the sale to the Prohibited
Owner and to the Charitable Beneficiary as provided in this Section 7.3.4. The
Prohibited Owner shall receive the lesser of (1) the price paid by the
Prohibited Owner for the shares or, if the Prohibited Owner did not give value
for the shares in connection with the event causing the shares to be held in the
Trust (e.g., in the case of a gift, devise or other similar transaction), the
Market Price of the shares on the day of the event causing the shares to be held
in the Trust and (2) the price per share received by the Trustee from the sale
or other disposition of the shares held in the Trust. Any net sales proceeds in
excess of the amount payable to the Prohibited Owner shall be immediately paid
to the Charitable Beneficiary. If, prior to the discovery by the Corporation
that shares of Capital Stock have been transferred to the Trustee, such shares
are sold by a Prohibited Owner, then (i) such shares shall be deemed to have
been sold on behalf of the Trust and (ii) to the extent that the Prohibited
Owner received an amount for such shares that exceeds the amount that such
Prohibited Owner was entitled to receive pursuant to this Section 7.3.4, such
excess shall be paid to the Trustee upon demand.

          Section 7.3.5 Purchase Right in Stock Transferred to the Trustee.
Shares of Capital Stock transferred to the Trustee shall be deemed to have been
offered for sale to the Corporation,


                                      A-13




or its designee, at a price per share equal to the lesser of (i) the price per
share in the transaction that resulted in such transfer to the Trust (or, in the
case of a devise or gift or similar transaction, the Market Price at the time of
such devise or gift or similar transaction) and (ii) the Market Price on the
date the Corporation, or its designee, accepts such offer. The Corporation shall
have the right to accept such offer until the Trustee has sold the shares held
in the Trust pursuant to Section 7.3.4. Upon such a sale to the Corporation, the
interest of the Charitable Beneficiary in the shares sold shall terminate and
the Trustee shall distribute the net proceeds of the sale to the Prohibited
Owner.

          Section 7.3.6 Designation of Charitable Beneficiaries. By written
notice to the Trustee, the Corporation shall designate one or more nonprofit
organizations to be the Charitable Beneficiary of the interest in the Trust such
that (i) the shares of Capital Stock held in the Trust would not violate the
restrictions set forth in Section 7.2.1(a) in the hands of such Charitable
Beneficiary and (ii) each such organization must be described in Section
501(c)(3) of the Code and contributions to each such organization must be
eligible for deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of the
Code.

     Section 7.4 NYSE Transactions. Nothing in this Article VII shall preclude
the settlement of any transaction entered into through the facilities of the
NYSE or any other national securities exchange or automated inter-dealer
quotation system. The fact that the settlement of any transaction occurs shall
not negate the effect of any other provision of this Article VII and any
transferee in such a transaction shall be subject to all of the provisions and
limitations set forth in this Article VII.

     Section 7.5 Enforcement. The Corporation is authorized specifically to seek
equitable relief, including injunctive relief, to enforce the provisions of this
Article VII.

     Section 7.6 Section 7.6 Non-Waiver. No delay or failure on the part of the
Corporation or the Board of Directors in exercising any right hereunder shall
operate as a waiver of any right of the Corporation or the Board of Directors,
as the case may be, except to the extent specifically waived in writing.

                                  ARTICLE VIII

                                   AMENDMENTS

     The Corporation reserves the right from time to time to make any amendment
to its charter, now or hereafter authorized by law, including any amendment
altering the terms or contract rights, as expressly set forth in the charter, of
any shares of outstanding stock. All rights and powers conferred by the charter
on stockholders, directors and officers are granted subject to this reservation.

                                   ARTICLE IX

                             LIMITATION OF LIABILITY

     To the maximum extent that Maryland law in effect from time to time permits
limitation of the liability of directors and officers of a corporation, no
director or officer of the Corporation shall be liable to the Corporation or its
stockholders for money damages. Neither the amendment nor repeal of this Article
IX, nor the adoption or amendment of any other provision of the charter or
Bylaws inconsistent with this Article IX, shall apply to or affect in any
respect the applicability of the preceding sentence with respect to any act or
failure to act which occurred prior to such amendment, repeal or adoption.


                                      A-14





     THIRD: The amendment to and restatement of the charter as hereinabove set
forth has been duly advised by the Board of Directors and approved by the
stockholders of the Corporation as required by law.

     FOURTH:The current address of the principal office of the Corporation is as
set forth in Article IV.

     FIFTH: The name and address of the Corporation's current resident agent is
as set forth in Article IV.

     SIXTH: The number of directors of the Corporation and the names of those
currently in office are as set forth in Article V.

     SEVENTH: There has been no change in the total number of shares of stock
- ------- which the Corporation had authority to issue or in the aggregate par
value of such shares.

     EIGHTH:The undersigned Chief Executive Officer of the Corporation
acknowledges these Articles of Amendment and Restatement to be the corporate act
of the Corporation and, as to all matters or facts required to be verified under
oath, the undersigned Chief Executive Officer acknowledges that to the best of
his knowledge, information and belief, these matters and facts are true in all
material respects and that this statement is made under the penalties of
perjury.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


                                      A-15





     IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment
and Restatement to be executed under seal in its name and on its behalf by its
Chief Executive Officer and attested to by its Secretary, on this ____ day of
________________, 2003.


ATTEST:                                    CAPITAL TRUST, INC.


___________________________                By:_________________________(SEAL)
Brian H. Oswald                               John R. Klopp
Secretary                                     Chief Executive Officer





                                      A-16





                                                                      APPENDIX B

                              ARTICLES OF AMENDMENT

                               CAPITAL TRUST, INC.

                              ARTICLES OF AMENDMENT

THIS IS TO CERTIFY THAT:

     FIRST: Capital Trust, Inc., a Maryland corporation (the "Corporation"),
hereby amends its charter as currently in effect as follows: Immediately upon
the acceptance of these Articles of Amendment for record (the "Effective Time")
by the State Department of Assessments and Taxation of Maryland ("SDAT"), every
three shares of Class A Common Stock ("Class A Stock"), par value $.01 par
share, of the Corporation, which were issued and outstanding immediately prior
to the Effective Time shall automatically and without any action on the part of
the holder thereof be changed into one issued and outstanding share of Class A
Stock, subject to the treatment of fractional interests in shares of Class A
Stock resulting from the change described below. No certificates or scrip
representing fractional share interests in Class A Stock shall be issued, and no
fractional share interest shall entitle the holder thereof to vote or to any
rights as a stockholder of the Corporation. A stockholder shall receive, in lieu
of any fractional share interest in Class A Stock to which the stockholder would
otherwise be entitled, a cash payment therefor equal to the product obtained by
multiplying (1) the closing price per share of Class A Stock on the New York
Stock Exchange on the day immediately preceding the Effective Date, as reported
on the composite tape of the New York Stock Exchange, Inc. (or in the event the
Class A Stock is not so traded on the day immediately preceding the Effective
Time, such closing price on the next preceding day on which such stock was
traded on the New York Stock Exchange), or in the event the Class A Stock is not
traded on the New York Stock Exchange, the fair value per share as determined
solely in the discretion of the Board of Directors, by (2) the number of shares
of Class A Stock outstanding immediately prior to the Effective Time that would
otherwise have been changed into a fractional interest in Class A Stock. Each
holder of a certificate which immediately prior to the Effective Time
represented outstanding shares of Class A Stock (an "Old Certificate") shall be
entitled to receive, upon surrender of such Old Certificate to the transfer
agent of the Corporation for cancellation, a certificate (a "New Certificate")
representing the number of whole shares of Class A Stock, as the case may be,
into which and for which the shares formerly represented by the Old Certificates
so surrendered are changed into under the terms hereof. If more than one Old
Certificate shall be surrendered at one time for the account of the same
stockholder, the number of whole shares of Class A Stock, as the case may be,
for which New Certificates shall be computed on the basis of the aggregate
number of shares represented by the Old Certificates so surrendered.

     SECOND:These Articles of Amendment of the Corporation have been duly
advised by the Board of Directors of the Corporation and approved by the
stockholders of the Corporation as required by law.

     THIRD: The undersigned President acknowledges these Articles of Amendment
to be the corporate act of the Corporation and as to all matters of facts
required to be verified under oath, the undersigned President acknowledges that
to the best of his knowledge, information and belief, these matters and facts
are true in all material respects and that this statement is made under the
penalties for perjury.


                  [Remainder of Page Left Intentionally Blank]




     IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment
to be signed in its name and on its behalf by its President and attested by its
Assistant Secretary on this ___ day of __________, 2003.



ATTEST:                                   CAPITAL TRUST, INC.


____________________________              By:  _________________________ (SEAL)
Brian H. Oswald                                John R. Klopp
Secretary                                      President


                                      B-2





                               CAPITAL TRUST, INC.

     THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF CAPITAL TRUST, INC.
FOR THE SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 2, 2003.

     The undersigned, as a holder of class A common stock, par value $.01 per
share ("Class A Common Stock"), of Capital Trust, Inc., a Maryland corporation
(the "Company"), hereby appoints John R. Klopp and Brian H. Oswald, and each of
them, with full power of substitution, as proxies to vote all shares of Class A
Common Stock which the undersigned is entitled to vote through the execution of
a proxy with respect to the Special Meeting of Stockholders of the Company (the
"Special Meeting") to be held at the offices of Paul, Hastings, Janofsky &
Walker LLP, 75 East 55th Street, New York, New York 10022, on Wednesday, April
2, 2003 at 10:00 a.m., local time, or any adjournment or postponement thereof,
and authorizes and instructs said proxies to vote in the manner directed below
and otherwise to represent the undersigned at the Special Meeting with all
powers possessed by the undersigned if personally present at the Special
Meeting. The undersigned hereby acknowledges receipt of the Notice of the
Special Meeting of Shareholders and of the accompanying Proxy Statement and
revokes any proxy heretofore given with respect to such meeting.

     The votes entitled to be cast by the undersigned will be cast as instructed
below. If this Proxy is executed but no instruction is given, the votes entitled
to be cast by the undersigned will be cast "for" each of the proposals as
described in the Proxy Statement and in the discretion of the Proxy holder on
any other matter that may properly come before the meeting or any adjournment or
postponement thereof. Please mark your choice like this: x .

     THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS VOTES "FOR" EACH OF THE
FOLLOWING

1.   On the proposal to amend and restate our charter to make amendments the
     Company determined are necessary in connection with its election to be
     taxed as a real estate investment trust and to simplify the Company's
     capital structure by eliminating from its charter the authorized but
     unissued class B common stock, as more fully described in the Proxy
     Statement and set forth in appendix A thereto.

     (check one box) [ ] For [ ] Against [ ] Abstain

2.   On the proposal to amend our charter to effect a three (3) for one (1)
     reverse stock split and a corresponding reduction in our stated capital all
     as described more fully in the Proxy Statement and set forth in appendix B
     thereto.

     (check one box) [ ] For [ ] Against [ ] Abstain

3.   In their discretion, the proxies are authorized to vote upon such other
     matters as may properly come before the Special Meeting, or any adjournment
     or postponement thereof, or upon matters incident to the conduct of the
     Special Meeting.

[ ]  CHECK HERE IF YOU PLAN TO ATTEND THE MEETING IN PERSON

     You may revoke or change your proxy at any time prior to its use at the
Special Meeting by giving the Company written direction to revoke it, by giving
the Company a new proxy or by attending the Special Meeting and voting in
person. Your attendance at the Special Meeting will not by itself revoke a proxy
given by you. Written notice of revocation or subsequent proxy should be sent to
Capital Trust, Inc. c/o American Stock Transfer & Trust Company, 6201 Fifteenth
Avenue, Brooklyn, New York 11219, Attention: Paula Caroppoli, or hand-delivered
to Capital Trust, Inc. c/o American Stock Transfer & Trust Company, so as to be
delivered at or before the taking of the vote at the Special Meeting.

     (Continued and to be signed on the reverse side)






     Print and sign your name below exactly as it appears hereon and date this
card. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such. Joint owners should each sign. If a corporation,
please sign in full corporate name by president or authorized officer. If a
partnership, please sign in partnership name by authorized person.

                                        Date: ____________________________, 2003


                                           -------------------------------------
                                           Signature (title, if any)


                                           -------------------------------------
                                           Signature, if held jointly








     PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE TODAY. YOU MAY REVOKE THIS PROXY IN THE MANNER DESCRIBED ABOVE AT ANY
TIME PRIOR TO THE TAKING OF A VOTE ON THE MATTERS DESCRIBED HEREIN.