Consolidated Securitization Vehicles

3 Months Ended

Jun. 30, 2011

Consolidated Securitization Vehicles

Note 11. Consolidated Securitization Vehicles

As of June 30, 2011, our consolidated balance sheet includes an aggregate $2.0 billion of assets and $2.2 billion of liabilities related to 10 consolidated securitization vehicles. Due to the non-recourse nature of these vehicles, and other factors discussed below, our net exposure to loss from investments in these entities is limited to $15.2 million.

Our consolidated securitization vehicles include two categories of entities: (i) collateralized debt obligations sponsored and issued by us, which we refer to as CT CDOs and (ii) other consolidated securitization vehicles which were not issued or sponsored by us. We have historically consolidated the CT CDOs; however we began consolidating the additional securitization vehicles as of January 1, 2010, as discussed in Note 2.

CT CDOs

We currently consolidate four collateralized debt obligation, or CDO, entities, which are VIEs that were sponsored by us. These CT CDOs invest in commercial real estate debt instruments, some of which we originated/acquired and transferred to the CDO entities, and are financed by the debt and equity they issue. We are named as collateral manager of all four CT CDOs and are named special servicer on a number of CDO collateral assets. As a result of consolidation, our subordinate debt and equity ownership interests in these CT CDOs have been eliminated, and our balance sheet reflects both the assets held and debt issued by these CDOs to third-parties. Similarly, our operating results and cash flows include the gross amounts related to the assets and liabilities of the CT CDO entities, as opposed to our net economic interests in these entities. Fees earned by us for the management of these CDOs are eliminated in consolidation.

Our interest in the assets held by these CT CDOs, which are consolidated on our balance sheet, is restricted by the structural provisions of these entities, and our recovery of these assets will be limited by the CDOs’ distribution provisions, which are subject to change due to covenant breaches or asset impairments, as further described below in this Note 11. The liabilities of the CT CDOs, which are also consolidated on our balance sheet, are non-recourse to us, and can generally only be satisfied from each CDOs’ respective asset pool.

We are not obligated to provide, nor have we provided, any financial support to these CT CDOs. Accordingly, other than in the event of a breach of certain representations or warranties, which are discussed in detail below, our maximum exposure to loss as a result of our investment in these entities is limited to $233.6 million, the notional amount of the subordinate debt and equity interest we retained in these CDOs. After giving effect to certain transfers of these interests, provisions for loan losses and other-than-temporary impairments recorded as of June 30, 2011, our remaining net exposure to loss from these entities is $15.2 million.

Other Consolidated Securitization Vehicles

As discussed above, we currently consolidate six additional securitization vehicles, all of which are substantially similar to the CT CDOs. These securitization vehicles invest in commercial real estate debt instruments, which investments were not originated or transferred to the entities by us. In addition to our investment in the subordinate classes of the securities issued by these vehicles, we are named special servicer on a number of their assets. As a result of consolidation, our ownership interests in these consolidation vehicles have been eliminated, and our balance sheet reflects both the assets held and debt issued by these vehicles to third-parties. Similarly, our operating results and cash flows include the gross amounts related to the assets and liabilities of the securitization vehicles, as opposed to our net economic interests in these entities. Special servicing fees paid to us on assets owned by these vehicles are eliminated in consolidation.

Our interest in the assets held by these securitization vehicles, which are consolidated on our balance sheet, is restricted by the structural provisions of these entities, and a recovery of our investment in the vehicles will be limited by each entity’s distribution provisions. The liabilities of the securitization vehicles, which are also consolidated on our balance sheet, are non-recourse to us, and can generally only be satisfied from each vehicle’s respective asset pool.

We are not obligated to provide, nor have we provided, any financial support to these entities. In addition, five of these six investments have been made through our CT CDOs, which limits our exposure to loss as discussed above. Accordingly, as of June 30, 2011, our maximum exposure to loss as a result of our investment in these entities is limited to $69.0 million, the notional amount of our investment in the only securitization vehicle not held by our CT CDOs. Prior to consolidation, we have previously impaired 100% of our investment in this entity, resulting in a zero net exposure to loss as of June 30, 2011.

As described in Note 2, our consolidated balance sheets separately present: (i) our direct assets and liabilities, (ii) the direct assets and liabilities of CT Legacy REIT, and (iii) the assets and liabilities of consolidated securitization vehicles, some of which are subsidiaries of CT Legacy REIT. The following disclosures relate specifically to the assets and liabilities of consolidated securitization vehicles, as separately stated on our consolidated balance sheets.

A. Securities Held-to-Maturity – Consolidated Securitization Vehicles

Our consolidated securitization vehicles’ securities portfolio consists of CMBS, CDOs, and other securities. Activity relating to these securities for the six months ended June 30, 2011 was as follows (in thousands):

	CMBS			CDOs & Other			Total Book Value (1)
December 31, 2010		$456,312			$48,011			$504,323
Principal paydowns		(9,924	)		(21,419	)		(31,343	)
Discount/premium amortization & other (2)		(149	)		(491	)		(640	)
Other-than-temporary impairments:
Recognized in earnings		(6,551	)		—			(6,551	)
Recognized in accumulated other comprehensive income		1,631			—			1,631
June 30, 2011		$441,319			$26,101			$467,420

(1)	Includes securities with a total face value of $561.3 million and $594.4 million as of June 30, 2011 and December 31, 2010, respectively.
(2)	Includes mark-to-market adjustments on securities previously classified as available-for-sale, amortization of other-than-temporary impairments, and losses, if any.

As of both June 30, 2011 and December 31, 2010, all of our consolidated securitization vehicles’ securities were classified as held-to-maturity.

The following table allocates the book value of our consolidated securitization vehicles’ securities as of June 30, 2011 between their amortized cost basis, amounts related to mark-to-market adjustments on securities previously classified as available-for-sale, and the portion of other-than-temporary impairments not related to expected credit losses (in thousands):

	CMBS			CDOs & Other		Total Securities
Amortized cost basis		$448,969			$26,101		$475,070
Mark-to-market adjustments on securities     previously classified as available-for-sale		4,116			—		4,116
Other-than-temporary impairments recognized in    accumulated other comprehensive income		(11,766	)		—		(11,766	)
Total book value as of June 30, 2011		$441,319			$26,101		$467,420

The following table details overall statistics for our consolidated securitization vehicles’ securities portfolio as of June 30, 2011 and December 31, 2010:

	June 30, 2011	December 31, 2010
Number of securities	55	56
Number of issues	39	40
Rating (1) (2)	BB+	BB+
Fixed / Floating (in millions) (3)	$466 / $1	$503 / $1
Coupon (1) (4)	6.66%	6.66%
Yield (1) (4)	7.06%	6.97%
Life (years) (1) (5)	2.9	3.4

(1)	Represents a weighted average as of June 30, 2011 and December 31, 2010, respectively.
(2)	Weighted average ratings are based on the lowest rating published by Fitch Ratings, Standard & Poor’s or Moody’s Investors Service for each security.
(3)	Represents the aggregate net book value of the portfolio allocated between fixed rate and floating rate securities.
(4)	Coupon is based on the securities’ contractual interest rates, while yield is based on expected cash flows for each security, and considers discounts/premiums and asset non-performance. Calculations for floating rate securities are based on LIBOR of 0.19% and 0.26% as of June 30, 2011 and December 31, 2010, respectively.
(5)	Weighted average life is based on the timing and amount of future expected principal payments through the expected repayment date of each respective investment.

The table below details the ratings and vintage distribution of our consolidated securitization vehicles’ securities as of June 30, 2011 (in thousands):

	Rating as of June 30, 2011
Vintage	AAA		AA		A	BBB		BB		B	CCC and Below		Total
2006		$—		$—	$—		$—		$—	$—		$15,180		$15,180
2005		—		—	—		—		—	—		20,530		20,530
2004		—		24,798	4,331		—		—	—		—		29,129
2003		9,907		—	—		3,016		1,962	—		—		14,885
2002		—		—	—		6,687		—	2,680		—		9,367
2001		—		—	—		1,302		—	4,129		1,632		7,063
2000		2,912		—	—		—		—	—		25,507		28,419
1999		—		—	11,286		1,418		17,373	—		—		30,077
1998		76,724		45,944	37,599		43,499		33,309	—		14,539		251,614
1997		5,943		—	18,609		—		5,202	3,035		3,527		36,316
1996		24,840		—	—		—		—	—		—		24,840
Total		$120,326		$70,742	$71,825		$55,922		$57,846	$9,844		$80,915		$467,420

The table below details the ratings and vintage distribution of our consolidated securitization vehicles’ securities as of December 31, 2010 (in thousands):

	Rating as of December 31, 2010
Vintage	AAA		AA		A	BBB		BB		B	CCC and Below		Total
2006		$—		$—	$—		$—		$—	$—		$15,248		$15,248
2005		—		—	—		—		—	—		22,033		22,033
2004		—		24,815	8,414		—		—	—		2,400		35,629
2003		9,906		—	—		3,020		1,959	—		—		14,885
2002		—		—	—		6,663		—	2,652		—		9,315
2001		—		—	—		4,814		4,129	—		3,537		12,480
2000		2,923		—	—		—		—	—		26,017		28,940
1999		—		—	11,337		1,423		17,366	—		—		30,126
1998		98,017		45,593	38,045		43,524		43,534	—		4,125		272,838
1997		—		—	26,124		—		5,182	3,360		3,546		38,212
1996		24,617		—	—		—		—	—		—		24,617
Total		$135,463		$70,408	$83,920		$59,444		$72,170	$6,012		$76,906		$504,323

Other-than-temporary impairments

Quarterly, we reevaluate our consolidated securitization vehicles’ securities portfolio to determine if there has been an other-than-temporary impairment based upon expected future cash flows from each securities investment. As a result of this evaluation, under the accounting guidance discussed in Note 2, during the six months ended June 30, 2011, we recorded a gross other-than-temporary impairment of $4.9 million. In addition, we determined that $1.6 million of impairments previously recorded in other comprehensive income should be recognized as credit losses due to a decrease in cash flow expectations for four of our securities.

To determine the component of the gross other-than-temporary impairment related to expected credit losses, we compare the amortized cost basis of each other-than-temporarily impaired security to the present value of its revised expected cash flows, discounted using its pre-impairment yield. Significant judgment of management is required in this analysis that includes, but is not limited to, (i) assumptions regarding the collectability of principal and interest on the underlying loans, net of related expenses, and (ii) current subordination levels at both the individual loans which serve as collateral under our securities and at the securities themselves.

The following table summarizes activity related to the other-than-temporary impairments of our consolidated securitization vehicles’ securities during the six months ended June 30, 2011 (in thousands):

	Gross Other-Than- Temporary Impairments			Credit Related Other-Than-Temporary Impairments			Non-Credit Related Other-Than-Temporary Impairments
December 31, 2010		$88,586			$74,576			$14,010
Additions due to change in expected      cash flows		4,920			6,551			(1,631	)
Amortization of other-than-temporary      impairments		(1,611	)		(998	)		(613	)
June 30, 2011		$91,895			$80,129			$11,766

Unrealized losses and fair value of securities

Certain of our consolidated securitization vehicles’ securities are carried at values in excess of their fair values. This difference can be caused by, among other things, changes in credit spreads and interest rates. The following table shows the gross unrealized losses and fair value of securities for which the fair value is lower than their book value as of June 30, 2011 and that are not deemed to be other-than-temporarily impaired (in millions):

	Less Than 12 Months					Greater Than 12 Months					Total
	Estimated  Fair Value		Gross Unrealized  Loss			Estimated  Fair Value		Gross Unrealized  Loss			Estimated Fair Value		Gross Unrealized Loss			Book Value (1)
Floating Rate		$—		$—			$—		$—			$—		$—			$—
Fixed Rate		104.0		(3.5	)		159.9		(26.1	)		263.9		(29.6	)		293.5
Total		$104.0		($3.5	)		$159.9		($26.1	)		$263.9		($29.6	)		$293.5

(1) Excludes, as of June 30, 2011, $173.9 million of securities which were carried at or below fair value and securities against which an other-than-temporary impairment equal to the entire book value was recognized in earnings.

As of June 30, 2011, 35 of our consolidated securitization vehicles' securities with an aggregate book value of $293.5 million were carried at values in excess of their fair values. Fair value for these securities was $263.9 million as of June 30, 2011. In total, as of June 30, 2011, our consolidated securitization vehicles had 55 investments in securities with an aggregate book value of $467.4 million that have an estimated fair value of $448.9 million, including 53 investments in CMBS with an estimated fair value of $422.4 million and 2 investments in CDOs and other securities with an estimated fair value of $26.5 million.

The following table shows the gross unrealized losses and fair value of our consolidated securitization vehicles’ securities for which the fair value is lower than our book value as of December 31, 2010 and that are not deemed to be other-than-temporarily impaired (in millions):

	Less Than 12 Months					Greater Than 12 Months					Total
	Estimated  Fair Value		Gross Unrealized  Loss			Estimated Fair Value		Gross Unrealized Loss			Estimated Fair Value		Gross Unrealized  Loss			Book Value (1)
Floating Rate		$—		$—			$—		$—			$—		$—			$—
Fixed Rate		29.3		(1.2	)		221.2		(37.4	)		250.5		(38.6	)		289.1
Total		$29.3		($1.2	)		$221.2		($37.4	)		$250.5		($38.6	)		$289.1

(1) Excludes, as of December 31, 2010, $215.2 million of securities which were carried at or below fair value and securities against which an other-than-temporary impairment equal to the entire book value was recognized in earnings.

As of December 31, 2010, 33 of our consolidated securitization vehicles’ securities with an aggregate book value of $289.1 million were carried at values in excess of their fair values. Fair value for these securities was $250.5 million as of December 31, 2010. In total, as of December 31, 2010, our consolidated securitization vehicles had 56 investments in securities with an aggregate book value of $504.3 million that have an estimated fair value of $475.3 million, including 54 investments in CMBS with an estimated fair value of $426.6 million and two investments in CDOs and other securities with an estimated fair value of $48.7 million. These valuations do not include the value of interest rate swaps entered into in conjunction with the purchase/financing of these investments, if any.

We determine fair values using third party dealer assessments of value, and our own internal financial model-based estimations of fair value. See Note 17 for further discussion of fair value. We regularly examine our securities portfolio and have determined that, despite these differences between book value and fair value, our expectations of future cash flows have only changed adversely for 11 of our securities, against which we have recognized other-than-temporary-impairments.

Investments in variable interest entities

Our consolidated securitization vehicles’ securities portfolio includes investments in both CMBS and CDOs, which securitization structures are generally considered VIEs. We have not consolidated these VIEs due to our determination that, based on the structural provisions of each entity and the nature of our investments, we do not have the power to direct the activities that most significantly impact these entities' economic performance.

These securities were acquired through investment, and do not represent a securitization or other transfer of our assets. We are not named as special servicer on these investments.

We are not obligated to provide, nor have we provided, any financial support to these entities. As these securities are financed by our non-recourse CT CDOs, our exposure to loss is therefore limited to our interests in these consolidated entities described above in this Note 11.

B. Loans Receivable, Net – Consolidated Securitization Vehicles

Activity relating to our consolidated securitization vehicles’ loans receivable for the six months ended June 30, 2011 was as follows (in thousands):

	Gross Book Value			Provision for Loan Losses			Net Book Value (1)
December 31, 2010		$3,145,968			($254,589	)		$2,891,379
Satisfactions (2)		(1,234,890	)		—			(1,234,890	)
Principal paydowns		(170,527	)		—			(170,527	)
Discount/premium amortization & other		260			—			260
Recovery of provision for loan losses		—			18,769			18,769
Realized loan losses		(1,616	)		1,616			—
June 30, 2011		$1,739,195			($234,204	)		$1,504,991

(1)	Includes loans with a total principal balance of $1.7 billion and $3.2 billion as of June 30, 2011 and December 31, 2010, respectively.
(2)	Includes final maturities and full repayments.

The following table details overall statistics for our consolidated securitization vehicles’ loans receivable portfolio as of June 30, 2011 and December 31, 2010:

	June 30, 2011	December 31, 2010
Number of investments	80	94
Fixed / Floating (in millions) (1)	$204 / $1,301	$213 / $2,678
Coupon (2) (3)	2.53%	2.27%
Yield (2) (3)	2.53%	2.27%
Maturity (years) (2) (4)	1.7	1.3

(1)	Represents the aggregate net book value of the portfolio allocated between fixed rate and floating rate loans.
(2)	Represents a weighted average as of June 30, 2011 and December 31, 2010, respectively.
(3)	Calculations for floating rate loans are based on LIBOR of 0.19% and 0.26% as of June 30, 2011 and December 31, 2010, respectively.
(4)	For loans in CT CDOs, assumes all extension options are executed. For loans in other consolidated securitization vehicles, maturity is based on information provided by the trustees of each respective entity.

The tables below detail the types of loans in our consolidated securitization vehicles’ loan portfolio, as well as the property type and geographic distribution of the properties securing these loans, as of June 30, 2011 and December 31, 2010 (in thousands):

	June 30, 2011				December 31, 2010
Asset Type	Book Value		Percentage		Book Value		Percentage
Senior mortgages		$964,089		63%		$2,225,983		76%
Mezzanine loans		267,581		18		316,283		11
Subordinate interests in     mortgages		255,801		17		333,622		11
Other		22,618		2		22,850		2
Total		$1,510,089		100%		$2,898,738		100%

Property Type	Book Value		Percentage		Book Value		Percentage
Office		$682,089		45%		$825,292		28%
Hotel		545,097		36		611,435		21
Retail		156,372		10		178,146		7
Healthcare		21,715		2		1,156,880		40
Other		104,816		7		126,985		4
Total		$1,510,089		100%		$2,898,738		100%

Geographic Location	Book Value			Percentage		Book Value			Percentage
Northeast		$413,657			27%		$417,351			14%
Southeast		290,831			19		318,655			11
West		173,616			11		163,932			6
Southwest		154,597			10		172,088			6
Midwest		13,116			2		18,302			1
Diversified		464,272			31		1,808,410			62
Total		$1,510,089			100%		$2,898,738			100%
Unallocated loan loss provision (1)		(5,098	)				(7,359	)
Net book value		$1,504,991					$2,891,379

(1) W e have recorded a general provision for loan losses against certain pools of smaller loans in our consolidated securitization vehicles. This general provision is not specifically allocable to any loan asset type, collateral property type, or geographic location, but rather to an overall pool of loans. See Note 2 for additional details.

Loan risk ratings

Quarterly, management evaluates our consolidated securitization vehicles’ loan portfolio for impairment as described in Note 2. In conjunction with our quarterly loan portfolio review, management assesses the performance of each loan, and assigns a risk rating based on several factors including risk of loss, LTV, collateral performance, structure, exit plan, and sponsorship. Loans are rated one (less risk) through eight (greater risk), which ratings are defined in Note 2.

The following table allocates the net book value and principal balance of our consolidated securitization vehicles’ loans receivable based on our internal risk ratings as of June 30, 2011 and December 31, 2010 (in thousands):

		Loans Receivable as of June 30, 2011							Loans Receivable as of December 31, 2010
Risk Rating (1)		Number of Loans		Principal Balance		Net Book Value			Number of Loans		Principal Balance		Net Book Value
	1 - 3		20		$566,269		$565,582			26		$2,031,176		$2,030,344
	4 - 5		14		696,988		696,753			11		408,400		408,052
	6 - 8		14		377,109		147,395			19		589,090		341,252
	n/a		32		100,359		100,359			38		119,090		119,090
Total			80		$1,740,725		$1,510,089			94		$3,147,756		$2,898,738
Unallocated loan loss provision:							(5,098	)						(7,359	)
Net book value							$1,504,991							$2,891,379

(1) We have recorded a general provision for loan losses against certain pools of smaller loans in our consolidated securitization vehicles. These loans have not been individually risk-rated, but have been assessed for loss based on macroeconomic factors. See Note 2 for additional details.

In making this risk assessment, one of the primary factors we consider is how senior or junior each loan is relative to other debt obligations of the borrower. The following tables further allocate our consolidated securitization vehicles’ loans receivable by both loan type and our internal risk ratings as of June 30, 2011 and December 31, 2010 (in thousands):

		Senior Mortgage Loans
		as of June 30, 2011						as of December 31, 2010
Risk Rating (1)		Number of Loans		Principal Balance		Net Book Value		Number of Loans		Principal Balance		Net Book Value
	1 - 3		7		$299,169		$299,169		12		$1,639,820		$1,639,815
	4 - 5		8		514,131		514,131		6		335,043		335,043
	6 - 8		2		133,214		61,906		3		193,983		143,676
	n/a		30		88,883		88,883		36		107,449		107,449
Total			47		$1,035,397		$964,089		57		$2,276,295		$2,225,983

(1) We have recorded a general provision for loan losses against certain pools of smaller loans in our consolidated securitization vehicles. These loans have not been individually risk-rated, but have been assessed for loss based on macroeconomic factors. See Note 2 for additional details.

		Subordinate Interests in Mortgages
		as of June 30, 2011						as of December 31, 2010
Risk Rating (1)		Number of Loans		Principal Balance		Net Book Value		Number of Loans		Principal Balance		Net Book Value
	1 - 3		7		$140,332		$139,792		7		$189,323		$188,666
	4 - 5		4		69,857		69,622		4		71,415		71,067
	6 - 8		9		147,701		44,411		11		185,913		71,748
	n/a		1		1,976		1,976		1		2,141		2,141
Total			21		$359,866		$255,801		23		$448,792		$333,622

(1) W e have recorded a general provision for loan losses against certain pools of smaller loans in our consolidated securitization vehicles. These loans have not been individually risk-rated, but have been assessed for loss based on macroeconomic factors. See Note 2 for additional details.

		Mezzanine & Other Loans
		as of June 30, 2011						as of December 31, 2010
Risk Rating (1)		Number of Loans		Principal Balance		Net Book Value		Number of Loans		Principal Balance		Net Book Value
	1 - 3		6		$126,768		$126,621		7		$202,033		$201,863
	4 - 5		2		113,000		113,000		1		1,942		1,942
	6 - 8		3		96,194		41,078		5		209,194		125,828
	n/a		1		9,500		9,500		1		9,500		9,500
Total			12		$345,462		$290,199		14		$422,669		$339,133

(1) W e have recorded a general provision for loan losses against certain pools of smaller loans in our consolidated securitization vehicles. These loans have not been individually risk-rated, but have been assessed for loss based on macroeconomic factors. See Note 2 for additional details.

Loan impairments

The following table describes our consolidated securitization vehicles’ impaired loans as of June 30, 2011, including impaired loans that are current in their interest payments and those that are delinquent on contractual payments (in thousands):

	June 30, 2011
Impaired Loans	No. of Loans		Gross Book Value		Provision for Loan Loss			Net Book Value
Performing loans		7		$316,225		($141,325	)		$174,900
Non-performing loans		6		134,278		(87,781	)		46,497
Total impaired loans		13		$450,503		($229,106	)		$221,397

In addition, as described in Note 2, we have recorded a $5.1 million general provision for loan losses against 32 loans in our consolidated securitization vehicles with an aggregate principal balance of $100.4 million.

The following table details the allocation of our consolidated securitization vehicles’ provision for loan losses as of June 30, 2011 (in thousands):

	June 30, 2011
Impaired Loans	Principal Balance		Provision for Loan Loss		Loss Severity
Subordinate interests in mortgages		$357,890		$102,683		29%
Mezzanine & other loans		335,962		55,116		16
Senior mortgages		946,513		71,307		8
Unallocated (1)		100,359		5,098		5
Total/Weighted Average		$1,740,724		$234,204		13%

(1) We have recorded a general provision for loan losses against certain pools of smaller loans in our consolidated securitization vehicles. This general provision is not specifically allocable to any loan asset type, but rather to an overall pool of loans. See Note 2 for additional details.

Generally, we have recorded provisions for loan loss against all loans which are in maturity default, or otherwise have past-due principal payments. As of June 30, 2011, our consolidated securitization vehicles had one loan with a net book value of $1.6 million which was in maturity default but had no provision recorded. We expect to collect all principal and interest due under this loan upon its resolution.

The following table details our consolidated securitization vehicles’ average balance of impaired loans by loan type, and the income recorded on such loans subsequent to their impairment during the six months ended June 30, 2011 (in thousands):

Income on Impaired Loans for the Six Months Ended June 30, 2011
Asset Type	Average Net Book Value		Income Recorded (1)
Senior Mortgage Loans		$75,906		$2,217
Subordinate Interests in Mortgages		20,486		1,234
Mezzanine & Other Loans		135,244		2,827
Total		$231,636		$6,278

(1) Substantially all of the income recorded on impaired loans during the period was received in cash.

Nonaccrual loans

In accordance with our revenue recognition policies discussed in Note 2, we do not accrue interest on loans which are 90 days past due or, in the opinion of management, are otherwise uncollectable. Accordingly, we do not have any material interest receivable accrued on nonperforming loans as of June 30, 2011.

The following table details our consolidated securitization vehicles’ loans receivable which are on nonaccrual status as of June 30, 2011 (in thousands):

Non-Accrual Loans Receivable as of June 30, 2011
Asset Type	Principal Balance		Net Book Value
Senior Mortgage Loans		$—		$—
Subordinate Interests in Mortgages		86,188		38,419
Mezzanine & Other Loans		96,194		41,078
Total		$182,382		$79,497

C. Real Estate Held-for-Sale – Consolidated Securitization Vehicles

In April 2010, we completed foreclosure on the land which served as collateral for a $15.1 million loan held by one of our consolidated securitization vehicles. This loan had a net book value of $12.1 million at the time of foreclosure, which amount was transferred to real estate held-for-sale. Subsequently, during 2010, we recorded a $4.0 million impairment to reflect this investment at its approximate fair value of $8.1 million.

D. Debt Obligations – Consolidated Securitization Vehicles

As of June 30, 2011 and December 31, 2010, our consolidated securitization vehicles had $2.1 billion and $3.6 billion of total non-recourse securitized debt obligations outstanding, respectively. The balances of each entity’s outstanding securitized debt obligations, their respective coupons and all-in effective costs, including the amortization of fees and expenses, were as follows (in thousands):

	June 30, 2011				December 31, 2010		June 30, 2011
Non-Recourse Securitized Debt Obligations	Principal Balance		Book Value		Book Value		Coupon(1)			All-In Cost(1)				Maturity Date(2)
CT CDOs
CT CDO I		$146,164		$146,164		$199,573		1.00	%		1.01	%		July 2039
CT CDO II		212,380		212,380		262,281		0.78	%		1.07	%		March 2050
CT CDO III		234,341		234,926		239,911		5.24	%		5.16	%		June 2035
CT CDO IV (3)		251,808		251,808		280,820		0.89	%		1.02	%		October 2043
Total CT CDOs		844,693		845,278		982,585		2.09	%		2.18	%		April 2042
Other securitization vehicles
GMACC 1997-C1		88,607		88,607		98,154		7.11	%		7.11	%		July 2029
GSMS 2006-FL8A		50,552		50,552		125,598		1.03	%		1.03	%		June 2020
JPMCC 2005-FL1A		91,057		91,057		95,695		0.75	%		0.75	%		February 2019
MSC 2007-XLFA		664,495		664,495		751,131		0.44	%		0.44	%		October 2020
MSC 2007-XLCA		389,582		389,582		522,137		1.75	%		1.75	%		July 2017
CSFB 2006-HC1		—		—		1,045,929		—			—			May 2023
Total other securitization vehicles		1,284,293		1,284,293		2,638,644		1.34	%		1.34	%		March 2020
Total/Weighted Average		$2,128,986		$2,129,571		$3,621,229		1.64	%		1.68	%	(4)	December 2028

(1)	Represents a weighted average for each respective facility, assuming LIBOR of 0.19% at June 30, 2011 for floating rate debt obligations.
(2)	Maturity dates represent the contractual maturity of each securitization trust. Repayment of securitized debt is a function of collateral cash flows which are disbursed in accordance with the contractual provisions of each trust, and is therefore expected to occur prior to contractual maturity.
(3)	Comprised, at June 30, 2011, of $238.9 million of floating rate notes sold and $12.9 million of fixed rate notes sold.
(4)	Including the impact of interest rate hedges with an aggregate notional balance of $319.2 million as of June 30, 2011, the effective all-in cost of our consolidated securitization vehicles’ debt obligations would be 2.39% per annum.

As discussed above in the introduction to this Note 11, our consolidated securitization vehicles generally include two categories of entities: (i) collateralized debt obligations sponsored and issued by us, which we refer to as CT CDOs and (ii) other consolidated securitization vehicles which were not issued or sponsored by us. We have historically consolidated the CT CDOs; however we began consolidating the additional securitization vehicles as of January 1, 2010.

CT CDOs

As of June 30, 2011, our outstanding CT CDOs included four separate issuances with a total face value of $844.7 million. As of June 30, 2011, $254.1 million of loans receivable and $467.4 million of securities were financed by our CT CDOs. As of December 31, 2010, $299.9 million of loans receivable and $504.3 million of securities were financed by our CT CDOs.

CT CDO I and CT CDO II each have interest coverage and overcollateralization tests, which, when breached, provide for hyper-amortization of the senior notes sold by a redirection of cash flow that would otherwise have been paid to the subordinate classes, some of which are owned by us. Furthermore, all four of our CT CDOs provide for the re-classification of interest proceeds from impaired collateral as principal proceeds, which also serve to hyper-amortize the senior notes sold.

During 2009, we were informed by our CDO trustee of impairments due to rating agency downgrades of certain of the securities which serve as collateral in all of our CT CDOs. These impairments, combined with the non-performance of certain loan collateral, resulted in breaches of interest coverage and overcollateralization tests at CT CDO I and CT CDO II, as well as the reclassification of interest proceeds from the impaired collateral as principal proceeds in all four of our CT CDOs. Other than collateral management fees, we currently do not receive any cash payments from CT CDO I, CT CDO II, and CT CDO IV, and receive irregular cash payments from CT CDO III.

Further, due to the hyper-amortization of senior notes, certain subordinate classes are accruing unpaid interest, resulting in an increased liability to these classes. As senior notes which carry a lower rate of interest continue to hyper-amortize, and certain subordinate notes continue to accrue deferred interest, the weighted-average cost of debt for our CT CDOs has and will continue to increase.

When we formed (and reinvested) our four CT CDOs, we made certain representations and warranties with respect to Capital Trust, Inc. and the loans and securities that we contributed as collateral to these CT CDOs. In the event that these representations or warranties are proved to have been untrue at the time that the respective collateral was contributed, we may be required to repurchase certain of those loans and securities. These representations and warranties generally relate to specific corporate and asset related subjects, including, among other things, proper corporate authorization; compliance with laws and regulations; ownership of the assets; title to, lack of liens encumbering, and adequate insurance covering the underlying collateral properties; and the lack of existing loan defaults.

The maximum potential amount of future payment we may be required to make to repurchase assets is $919.5 million, the current face amount of all loans and securities in our four CT CDOs. In certain cases, we may be able to reduce the impact of any such purchase obligation through recoveries from the exercise of remedies against the institution from which we acquired the asset and received substantially the same representations and warranties. This potential recoverable amount is not currently estimable and would depend on the nature of the representation and warranty breached and the circumstances under which each asset was transferred to the CT CDO. Since inception, we have not been required to repurchase any assets nor have we received any notice of assertion of a potential breach of any representation or warranty. Any payment required to repurchase a loan or security could materially impact our liquidity.

Other Consolidated Securitization Vehicles

In addition to the CT CDOs sponsored by us, which are discussed above, we also have consolidated other securitization vehicles beginning on January 1, 2010, as discussed in Note 2. The debt obligations of these entities are separately presented on our consolidated balance sheet along with the CT CDOs issued by us, as they are also securitized, non-recourse obligations. These obligations will generally be satisfied with the repayment of assets in each such entity’s collateral pool, or will be discharged when losses are realized. As of June 30, 2011, $1.4 billion of loans receivable serve as collateral for the securities issued by these other consolidated securitization vehicles.

E. Derivative Financial Instruments – Consolidated Securitization Vehicles

The following table summarizes the notional amounts and fair values of our consolidated securitization vehicles’ interest rate swaps as of June 30, 2011 and December 31, 2010 (in thousands). The notional amount provides an indication of the extent of our involvement in the instruments at that time, but does not represent exposure to credit or interest rate risk.

Counterparty	June 30, 2011 Notional Amount		Interest Rate (1)			Maturity		June 30, 2011 Fair Value			December 31, 2010 Fair Value
Swiss RE Financial		$241,080		5.10	%		2015		($22,092	)		($24,037	)
Bank of America		44,695		4.58	%		2014		(2,913	)		(3,331	)
Morgan Stanley		17,609		3.95	%		2011		(91	)		(398	)
Bank of America		10,535		5.05	%		2016		(1,296	)		(1,267	)
Bank of America		5,104		4.12	%		2016		(455	)		(422	)
Morgan Stanley		147		5.31	%		2011		(2	)		(7	)
Total/Weighted Average		$319,170		4.94	%		2015		($26,849	)		($29,462	)

(1) Represents the gross fixed interest rate we pay to our counterparties under these derivative instruments. We receive an amount of interest indexed to one-month LIBOR on all of our interest rate swaps.

As of both June 30, 2011 and December 31, 2010, all of the derivative financial instruments of our consolidated securitization vehicles were classified as cash flow hedges, and recorded at fair value as interest rate hedge liabilities on our consolidated balance sheet.

The table below shows amounts recorded to other comprehensive income and amounts recorded to interest expense from other comprehensive income for the six months ended June 30, 2011 and 2010 (in thousands):

	Amount of gain (loss) recognized					Amount of loss reclassified from OCI
	in OCI for the six months ended (1)					to income for the six months ended (2)
Hedge	June 30, 2011		June 30, 2010			June 30, 2011			June 30, 2010
Interest rate swaps		$2,613		($5,835	)		($7,837	)		($8,248	)

(1)	Represents the amount of unrealized gains and losses recorded to other comprehensive income during the period, net of the amount reclassified to interest expense.
(2)	Represents net amounts paid to swap counterparties during the period, which are included in interest expense, offset by an immaterial amount of non-cash swap amortization.

All of our consolidated securitization vehicles’ interest rate swaps were classified as highly effective for all of the periods presented. Over the next twelve months, as we make payments under our hedge agreements, we expect approximately $13.8 million to be reclassified from other comprehensive income to interest expense. This amount is generally equal to the present value of expected payments under the respective derivative contracts.

As of June 30, 2011, our consolidated securitization vehicles have not posted any assets as collateral under derivative agreements.