10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

(Mark One)

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to _____________

Commission File Number 1-14788

Capital Trust, Inc.

(Exact name of registrant as specified in its charter)

Maryland	94-6181186
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
410 Park Avenue, 14th Floor, New York, NY	10022
(Address of principal executive offices)	(Zip Code)
(212) 655-0220 (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ý   No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ý   No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer o
Non-accelerated filer   o (Do not check if a smaller reporting company)	Smaller Reporting Company ý

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

The number of outstanding shares of the registrant's class A common stock, par value $0.01 per share, as of November 9, 2012 was 24,205,573.

CAPITAL TRUST, INC.

INDEX

Part I.	Financial Information
	Item 1:	Financial Statements	1
		Consolidated Balance Sheets – September 30, 2012 (unaudited) and December 31, 2011
		Consolidated Statements of Operations – Nine Months Ended September 30, 2012 (unaudited) and 2011 (unaudited)	3
		Consolidated Statements of Comprehensive Income – Nine Months Ended September 30, 2012 (unaudited) and 2011 (unaudited)	4
		Consolidated Statements of Changes in Equity (Deficit) – Nine Months Ended September 30, 2012 (unaudited) and 2011 (unaudited)	5
		Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2012 (unaudited) and 2011 (unaudited)	6
		Notes to Consolidated Financial Statements (unaudited)	7
	Item 2:	Management's Discussion and Analysis of Financial Condition and Results of Operations	50
	Item 3:	Quantitative and Qualitative Disclosures About Market Risk	73
	Item 4:	Controls and Procedures	74
Part II.	Other Information
	Item 1:	Legal Proceedings	75
	Item 1A:	Risk Factors	75
	Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	77
	Item 3:	Defaults Upon Senior Securities	77
	Item 4:	Mine Safety Disclosures	77
	Item 5:	Other Information	77
	Item 6:	Exhibits	78
	Signatures		80

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

Capital Trust, Inc. and Subsidiaries

Consolidated Balance Sheets

September 30, 2012 and December 31, 2011

 (in thousands, except per share data)

	September 30,		December 31,
	2012		2011
	(unaudited)
Assets
Cash and cash equivalents		$38,867		$34,818
Loans receivable, net		—		19,282
Equity investments in unconsolidated subsidiaries		18,710		10,399
Deferred income taxes		3,094		1,268
Prepaid expenses and other assets		2,096		4,533
Subtotal		62,767		70,300
Assets of Consolidated Entities
CT Legacy REIT
Restricted cash		16,145		12,985
Securities held-to-maturity		—		2,602
Loans receivable, net		—		206,514
Loans held-for-sale, net		—		30,875
Investment in CT Legacy Asset, at fair value		100,100		—
Accrued interest receivable and other assets		—		2,119
Subtotal		116,245		255,095
Securitization Vehicles
Securities held-to-maturity		154,848		358,972
Loans receivable, net		214,457		612,598
Real estate held-for-sale		—		10,342
Accrued interest receivable and other assets		32,880		59,009
Subtotal		402,185		1,040,921
Total assets		$581,197		$1,366,316

See accompanying notes to consolidated financial statements.

- 1 -

Capital Trust, Inc. and Subsidiaries

Consolidated Balance Sheets

September 30, 2012 and December 31, 2011

 (in thousands, except per share data)

	September 30,			December 31,
	2012			2011
	(unaudited)
Liabilities & Equity (Deficit)
Liabilities:
Accounts payable, accrued expenses and other liabilities		$17,834			$8,075
Secured notes		8,326			7,847
Participations sold		—			19,282
Subtotal		26,160			35,204
Non-Recourse Liabilities of Consolidated Entities
CT Legacy REIT
Accounts payable, accrued expenses and other liabilities		—			743
Repurchase obligations		—			58,464
Mezzanine loan, net of unamortized discount		—			55,111
Participations sold		—			97,465
Interest rate hedge liabilities		—			8,817
Subtotal		—			220,600
Securitization Vehicles
Accounts payable, accrued expenses and other liabilities		559			3,102
Securitized debt obligations		497,423			1,211,407
Interest rate hedge liabilities		19,089			24,942
Subtotal		517,071			1,239,451
Total liabilities		543,231			1,495,255
Commitments and contingencies		—			—
Equity (Deficit):
Class A common stock, $0.01 par value, 100,000 shares authorized, 21,979      and 21,967 shares issued and outstanding as of September 30, 2012 and      December 31, 2011, respectively ("class A common stock")		220			220
Restricted class A common stock, $0.01 par value, 537 and 244 shares      issued and outstanding as of September 30, 2012 and December 31, 2011,      respectively ("restricted class A common stock" and together with      class A common  stock, "common stock")		5			2
Additional paid-in capital		597,866			597,049
Accumulated other comprehensive loss		(31,374	)		(40,584	)
Accumulated deficit		(591,276	)		(667,111	)
Total Capital Trust, Inc. shareholders' deficit		(24,559	)		(110,424	)
Noncontrolling interests		62,525			(18,515	)
Total equity (deficit)		37,966			(128,939	)
Total liabilities and equity (deficit)		$581,197			$1,366,316

See accompanying notes to consolidated financial statements.

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Capital Trust, Inc. and Subsidiaries

Consolidated Statements of Operations

Three and Nine Months Ended September 30, 2012 and 2011

(in thousands, except share and per share data)

(unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
Income from loans and other investments:
Interest and related income		$6,944			$25,642			$28,423			$95,187
Less: Interest and related expenses		5,147			21,838			33,902			80,381
Income from loans and other investments, net		1,797			3,804			(5,479	)		14,806
Other revenues:
Management fees from affiliates		1,546			1,753			4,741			4,927
Servicing fees		2,206			1,460			5,591			2,208
Total other revenues		3,752			3,213			10,332			7,135
Other expenses:
General and administrative		7,141			4,941			16,193			19,868
Total other expenses		7,141			4,941			16,193			19,868
Total other-than-temporary impairments of securities		—			(30,687	)		—			(35,620	)
Portion of other-than-temporary impairments of securities      recognized in other comprehensive income		—			173			(160	)		(3,098	)
Impairment of real estate held-for-sale		—			(1,055	)		—			(1,055	)
Net impairments recognized in earnings		—			(31,569	)		(160	)		(39,773	)
Recovery of provision for loan losses		2,811			17,152			2,819			34,401
Valuation allowance on loans held-for-sale		—			—			—			(224	)
Gain on extinguishment of debt		—			20,054			—			271,031
Fair value adjustment on investment in CT Legacy Asset		11,987			—			19,645			—
Gain on deconsolidation of subsidiary		—			—			146,380			—
Income from equity investments in unconsolidated subsidiaries		411			307			1,312			2,105
Income before income taxes		13,617			8,020			158,656			269,613
Income tax provision (benefit)		717			(236	)		1,783			1,214
Net income		$12,900			$8,256			$156,873			$268,399
Net (income) loss attributable to noncontrolling interests		(5,901	)		5,466			(81,038	)		(1,935	)
Net income attributable to Capital Trust, Inc.		$6,999			$13,722			$75,835			$266,464
Per share information:
Net income per share of common stock:
Basic		$0.30			$0.60			$3.30			$11.77
Diluted		$0.28			$0.57			$3.10			$11.08
Weighted average shares of common stock outstanding:
Basic		23,173,426			22,730,080			22,969,103			22,630,672
Diluted		24,616,026			24,121,973			24,442,061			24,057,374

See accompanying notes to consolidated financial statements.

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Capital Trust, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

Three and Nine Months Ended September 30, 2012 and 2011

(in thousands)

(unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
Net income		$12,900			$8,256			$156,873			$268,399
Other comprehensive income (loss):
Unrealized gain (loss) on derivative financial instruments		2,103			(633	)		5,853			2,912
Gain on interest rate swaps no longer designated as cash    flow hedges		—			1,246			2,481			4,447
Amortization of unrealized gains and losses on securities		(4	)		413			(770	)		(93	)
Amortization of deferred gains and losses on settlement    of swaps		—			(28	)		(56	)		(75	)
Other-than-temporary impairments of securities related to    fair value adjustments in excess of expected credit    losses, net of amortization		206			270			419			4,236
Other comprehensive income		2,305			1,268			7,927			11,427
Comprehensive income		$15,205			$9,524			$164,800			$279,826
Comprehensive (income) loss attributable to    noncontrolling interests		(5,901	)		5,466			(81,048	)		(1,935	)
Comprehensive income attributable to    Capital Trust, Inc.		$9,304			$14,990			$83,752			$277,891

See accompanying notes to consolidated financial statements.

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 Capital Trust, Inc. and Subsidiaries

 Consolidated Statements of Changes in Equity (Deficit)

 For the Nine Months Ended September 30, 2012 and 2011

 (in thousands)

 (unaudited)

	Class A Common Stock		Restricted Class A Common Stock		Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Capital Trust, Inc. Shareholders' Deficit			Noncontrolling Interests			Total
Balance at January 1, 2011		$219		$—		$559,411			($50,462	)		($920,355	)		($411,187	)		$—			($411,187	)
Net income		—		—		—			—			266,464			266,464			1,935			268,399
Other comprehensive income		—		—		—			11,427			—			11,427			—			11,427
Allocation to noncontrolling interests		—		—		37,156			—			—			37,156			(12,623	)		24,533
Purchase of noncontrolling interests		—		—		(142	)		—			—			(142	)					(142	)
Consolidation of additional securitization vehicles		—		—		—			538			(4,898	)		(4,360	)		—			(4,360	)
Restricted class A common stock earned, net of     shares deferred		1		2		324			—			—			327			—			327
Deferred directors' compensation		—		—		150			—			—			150			—			150
Balance at September 30, 2011		$220		$2		$596,899			($38,497	)		($658,789	)		($100,165	)		($10,688	)		($110,853	)
Balance at January 1, 2012		$220		$2		$597,049			($40,584	)		($667,111	)		($110,424	)		($18,515	)		($128,939	)
Net income		—		—		—			—			75,835			75,835			81,038			156,873
Other comprehensive income		—		—		—			7,917			—			7,917			10			7,927
Deconsolidation of CT Legacy Asset		—		—		—			1,293			—			1,293			—			1,293
Distributions to noncontrolling interests		—		—		—			—			—			—			(8	)		(8	)
Restricted class A common stock earned, net of     shares deferred		—		3		648			—			—			651			—			651
Deferred directors' compensation		—		—		169			—			—			169			—			169
Balance at September 30, 2012		$220		$5		$597,866			($31,374	)		($591,276	)		($24,559	)		$62,525			$37,966

See accompanying notes to consolidated financial statements.

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Capital Trust, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2012 and 2011

(in thousands)

(unaudited)

	2012			2011
Cash flows from operating activities:
Net income		$156,873			$268,399
Adjustments to reconcile net income to net cash provided by
operating activities:
Net impairments recognized in earnings		160			39,773
Recovery of provision for loan losses		(2,819	)		(34,401	)
Valuation allowance on loans held-for-sale		—			224
Gain on extinguishment of debt		—			(271,031	)
Gain on deconsolidation of CT Legacy Asset		(146,380	)		—
Fair value adjustment on CT Legacy Asset		(19,645	)		—
Income from equity investments in unconsolidated subsidiaries		(1,312	)		(2,105	)
Distributions of income from unconsolidated subsidiaries		1,933			—
Employee stock-based compensation		675			411
Incentive awards plan expense		944			3,395
Deferred directors' compensation		169			150
Distributions from CT Legacy Asset		9,221			—
Amortization of premiums/discounts on loans and securities and deferred              interest on loans		(669	)		(969	)
Amortization of deferred gains and losses on settlement of swaps		(56	)		(75	)
Amortization of deferred financing costs and premiums/discounts on
debt obligations		10,747			9,304
Loss on interest rate swaps not designated as cash flow hedges		2,772			6,255
Changes in assets and liabilities, net:
Accrued interest receivable		(4,765	)		3,406
Deferred income taxes		(1,826	)		(1,093	)
Prepaid expenses and other assets		2,764			624
Accounts payable and accrued expenses		2,812			(2,931	)
Net cash provided by operating activities		11,598			19,336
Cash flows from investing activities:
Principal collections and proceeds from securities		40,344			70,929
Distributions from equity investments		—			4,345
Principal collections of loans receivable		91,889			1,879,041
Proceeds from disposition of loans		—			5,750
Contributions to unconsolidated subsidiaries		(4,030	)		(3,413	)
Distributions from unconsolidated subsidiaries		1,006			3,839
Increase in restricted cash		(3,160	)		(13,715	)
Net cash provided by investing activities		126,049			1,946,776
Cash flows from financing activities:
Borrowings under repurchase obligations		123,977			—
Repayments under repurchase obligations		(58,464	)		(306,042	)
Repayments under senior credit facility		—			(22,932	)
Repayment of junior subordinated notes		—			(4,640	)
Borrowing under mezzanine loan		—			83,000
Repayments under mezzanine loan		(63,000	)		(20,000	)
Repayment of securitized debt obligations		(136,078	)		(1,679,970	)
Payment of financing expenses		—			(11,126	)
Purchase of and distributions to noncontrolling interests		(8	)		(142	)
Purchase of secured notes		—			(405	)
Vesting of restricted Class A common stock		(25	)		(85	)
Net cash used in financing activities		(133,598	)		(1,962,342	)
Net increase in cash and cash equivalents		4,049			3,770
Cash and cash equivalents at beginning of period		34,818			24,449
Cash and cash equivalents at end of period		$38,867			$28,219

See accompanying notes to consolidated financial statements.

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Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited)

Note 1. Organization

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

We are a real estate finance company that specializes in credit sensitive financial products. To date, our investment programs have focused on loans and securities backed by commercial real estate assets. We invest for our own account directly on our balance sheet and for third-parties through a series of investment management vehicles. From the inception of our finance business in 1997 through September 30, 2012, we have completed approximately $12.1 billion of commercial real estate investments. We conduct our operations as a real estate investment trust, or REIT, for federal income tax purposes. We are traded on the New York Stock Exchange, or NYSE, under the symbol “CT”, and are headquartered in New York City.

Sale of Investment Management Platform

On September 27, 2012, we announced our entry into a definitive purchase and sale agreement, or Purchase Agreement, with an affiliate, which we refer to as the Purchaser, of The Blackstone Group L.P., which we refer to as Blackstone. Pursuant to the Purchase Agreement, the Purchaser will acquire our investment management and special servicing businesses, operated through our subsidiary, CT Investment Management Co., LLC, or CTIMCO, and our related private investment fund co-investments for $20.6 million. The Purchaser will also purchase for $10.0 million, or $2.00 per share, 5,000,000 shares of our class A common stock that will represent approximately 17.1% of our common stock outstanding following consummation of the transactions contemplated by the Purchase Agreement, which we refer to as the Transactions. The Purchase Agreement also contemplates that we will enter into a new management agreement pursuant to which a Blackstone affiliate, which we refer to as the New CT Manager, will manage Capital Trust, Inc. following the consummation of the Transactions. Pursuant to the new management agreement, the New CT Manager will manage Capital Trust, Inc. in accordance with investment guidelines and policies approved by our board of directors. Stephen D. Plavin, Geoffrey G. Jervis and Thomas C. Ruffing will continue to serve in their current executive management roles post-transaction. Consummation of the Transactions is subject to customary closing conditions, including the approval of the Transactions by the affirmative vote of the holders of a majority of the outstanding shares of common stock at a special meeting of shareholders that will be called to approve the Transactions. W. R. Berkley and its affiliated entities, holders of approximately 15.9% of our class A common stock, have entered into a voting agreement to support the transaction.

If the Transactions are consummated, we will pay a $2.00 per share special cash dividend to holders of our class A common stock, which will be payable as soon as practicable following closing of the Transactions to shareholders of record as of the close of business on November 12, 2012.

In accordance with NYSE procedures, from November 7, 2012 through the special dividend payment date, our class A common stock will trade with “due-bills” representing an assignment of the right to receive the special dividend. Our class A common stock will not trade ex-dividend until the first business day after the special dividend payment date. Shareholders who sell their shares on or before the special dividend payment date will not be entitled to receive the special dividend.

The sources of funds for the special dividend will be cash on hand prior to the Transactions and the proceeds from the sale of CTIMCO and our private investment fund co-investments. The Purchaser will not receive the special dividend given that its investment in our class A common stock will close after the special dividend record date.

Following the Transactions, we will continue to own our existing cash balances (as reduced to fund expenses of the Transactions and the special dividend), our interest in CT Legacy REIT (as defined below), our carried interest in CT Opportunity Partners I, LP, as well as our retained subordinate interests in our three CT CDOs.

March 2011 Restructuring

On March 31, 2011, we restructured, amended, or extinguished all of our outstanding recourse debt obligations, which we refer to as our March 2011 restructuring. Our March 2011 restructuring involved: (i) the contribution of certain of our legacy assets to a newly formed subsidiary, CT Legacy REIT Mezz Borrower, Inc., or CT Legacy REIT, (ii) the assumption of our legacy repurchase obligations by CT Legacy REIT, and (iii) the extinguishment of the remainder of our recourse obligations, our senior credit facility and junior subordinated notes. The restructuring was financed with a new $83.0 million mezzanine loan obtained by CT Legacy REIT from an affiliate of Five Mile Capital, and the issuance of equity interests in the common stock of CT Legacy REIT to the former lenders under our senior credit facility and our former junior subordinated noteholders, as well as to an affiliate of Five Mile Capital.

Following the completion of our March 2011 restructuring, we no longer have any recourse debt obligations, and retain unencumbered ownership of 100% of (i) our investment management platform, CT Investment Management Co., LLC, (ii) our co-investment in CT Opportunity Partners I, LP, (iii) our residual ownership interests in three of the CDOs that we issued, CT CDOs I, II, and IV, and (iv) our tax-basis net operating losses. Furthermore, we have a 52% equity interest in the common stock of CT Legacy REIT. Our economic interest in CT Legacy REIT is, however, subject to (i) the secured notes, which are non-recourse obligations that are collateralized by certain of our retained equity interests in the common stock of CT Legacy REIT, (ii) incentive awards that provide for the participation in amounts earned from our retained equity interests in the common stock of CT Legacy REIT, and (iii) the subordinate class B common stock of CT Legacy REIT owned by our former junior subordinate noteholders.

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Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

See Note 5 for further discussion of the secured notes, Note 9 for further discussion of the management incentive awards plan, and Note 6 for further discussion of the class B common stock.

In addition to our interest in the common stock of CT Legacy REIT, we also own 100% of its outstanding class A preferred stock. The class A preferred stock initially entitles us to cumulative preferred dividends of $7.5 million per annum, which dividends will be reduced in January 2013 to the greater of (i) 2.5% of certain of CT Legacy REIT’s assets, and (ii) $1.0 million per annum.

CT Legacy Asset Deconsolidation

On February 10, 2012, we refinanced CT Legacy REIT’s mezzanine loan and repurchase facility with a single, new $124.0 million repurchase facility with JPMorgan. The borrower under the new JPMorgan facility, CT Legacy Asset, LLC, or CT Legacy Asset, is a wholly owned subsidiary of CT Legacy REIT and owns all of its assets, other than cash. As a result of the refinancing, CT Legacy REIT ceased to be the primary beneficiary of CT Legacy Asset and, therefore, discontinued the consolidation of CT Legacy Asset. As a result, its assets and liabilities were deconsolidated from our financial statements as of February 10, 2012.

See Note 6 for a further discussion of CT Legacy REIT and CT Legacy Asset.

Note 2. Summary of Significant Accounting Policies

The accompanying unaudited consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP, for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The accompanying unaudited consolidated interim financial statements should be read in conjunction with the consolidated financial statements and the related management’s discussion and analysis of financial condition and results of operations filed with our Annual Report on Form 10-K for the fiscal year ended December 31, 2011. In our opinion, all material adjustments (consisting of normal, recurring accruals) considered necessary for a fair presentation, in accordance with GAAP, have been included. The results of operations for the nine months ended September 30, 2012 are not necessarily indicative of results that may be expected for the entire year ending December 31, 2012.

Principles of Consolidation

The accompanying financial statements include, on a consolidated basis, our accounts, the accounts of our wholly-owned subsidiaries, and variable interest entities, or VIEs, in which we are the primary beneficiary. All significant intercompany balances and transactions have been eliminated in consolidation.

VIEs are defined as entities in which equity investors (i) do not have the characteristics of a controlling financial interest, and/or (ii) do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The entity that consolidates a VIE is known as its primary beneficiary, and is generally the entity with (i) the power to direct the activities that most significantly impact the VIE’s economic performance, and (ii) the right to receive benefits from the VIE or the obligation to absorb losses of the VIE that could be significant to the VIE.

Our consolidated subsidiaries include: (i) CT Legacy REIT, and (ii) five securitization vehicles, including our three CT CDOs which were sponsored and issued by us and one other similar vehicle. See Note 6 and Note 7 for additional information on our investments in VIEs.

Balance Sheet Presentation

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 were subsidiaries of CT Legacy REIT. Assets of all consolidated VIEs can generally only be used to satisfy the obligations of those VIEs, and the liabilities of consolidated VIEs are non-recourse to us.

We have aggregated all the assets and liabilities of the consolidated securitization vehicles due to our determination that these entities are substantively similar and therefore a further disaggregated presentation would not be more meaningful. Similarly, the notes to our consolidated financial statements separately describe (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 were subsidiaries of CT Legacy REIT.

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Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

Equity Investments in Unconsolidated Subsidiaries and Fair Value Option

Our co-investment interests in the private equity funds we manage are accounted for using the equity method. These entities’ assets and liabilities are not consolidated into our financial statements due to our determination that (i) these entities are not VIEs, and (ii) the investors have sufficient rights to preclude consolidation by us. As such, we report our allocable percentage of the earnings or losses of these entities on a single line item in our consolidated statements of operations as income from equity investments.

One such fund, CT Opportunity Partners I, LP, or CTOPI, maintains its financial records at fair value in accordance with GAAP. We have applied such accounting relative to our investment in CTOPI, and include any adjustments to fair value recorded at the fund level in determining the income we record on our equity investment in CTOPI.

We have elected the fair value option of accounting for CT Legacy REIT’s investment in CT Legacy Asset, pursuant to which we record this investment at fair value rather than at our historical cost investment amount. Additionally, changes in the fair value of this investment are recognized in our consolidated statement of operations. We made this election due to our determination that the fair value of the investment in CT Legacy Asset, as a net liquidating portfolio of assets subject to a non-recourse repurchase obligation, is more meaningful and indicative of our interests in CT Legacy Asset than equity method accounting. See Note 6 for additional discussion of CT Legacy REIT and CT Legacy Asset.

Revenue Recognition

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

Interest income from our securities is recognized using a level yield with any purchase premium or discount accreted through income over the life of the security. This yield is calculated using cash flows expected to be collected which are based on a number of assumptions on the underlying loans. Examples include, among other things, the rate and timing of principal payments, including prepayments, repurchases, defaults and liquidations, the pass-through or coupon rate, and interest rates. Additional factors that may affect reported interest income on our securities include interest payment shortfalls due to delinquencies on the underlying mortgage loans and the timing and magnitude of expected credit losses on the mortgage loans underlying the securities. These are impacted by, among other things, the general condition of the real estate market, including competition for tenants and their related credit quality, and changes in market rental rates. These uncertainties and contingencies are difficult to predict and are subject to future events that may alter the assumptions.

Fees from special servicing and asset management services are recorded on an accrual basis as services are rendered under the applicable agreements, and when receipt of fees is reasonably certain. We do not recognize incentive income from our investment management business until contingencies have been eliminated. Recognition of incentive income allocated or paid to us prior to that date is deferred and recorded as deferred incentive income liability under accounts payable, accrued expenses and other liabilities on our consolidated balance sheet. Depending on the structure of our investment management vehicles, certain incentive fees may be in the form of carried interest or promote distributions.

Cash and Cash Equivalents

We classify highly liquid investments with original maturities of three months or less from the date of purchase as cash equivalents. We place our cash and cash equivalents with high credit quality institutions to minimize credit risk exposure. As of, and for the periods ended, September 30, 2012 and December 31, 2011, we had bank balances in excess of federally insured amounts. We have not experienced any losses on our demand deposits, commercial paper or money market investments.

Restricted Cash

We classify the cash balances held by CT Legacy REIT as restricted because, while these cash balances are available for use by CT Legacy REIT for operations, debt service, or other purposes, they cannot be used by us until our allocable share is distributed from CT Legacy REIT, and cannot be co-mingled with any of our other, unrestricted cash balances. See Note 6 for additional discussion of CT Legacy REIT.

- 9 -

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

Securities

We classify our securities as held-to-maturity, available-for-sale, or trading on the date of acquisition of the investment. Held-to-maturity investments are stated at cost, adjusted for the amortization of any premiums or discounts, which are amortized through our consolidated statements of operations using the level yield method described above. Other than in the instance of an other-than-temporary impairment, as discussed below, these held-to-maturity investments are carried on our consolidated financial statements at their amortized cost basis.

We may also invest in securities which may be classified as available-for-sale. Available-for-sale securities are carried at estimated fair value with the net unrealized gains or losses reported as a component of accumulated other comprehensive income (loss) in shareholders’ equity. Changes in the valuations do not affect our reported income or cash flows, but do impact shareholders’ equity and, accordingly, book value per share. On August 4, 2005, we changed the accounting classification of certain of our securities from available-for-sale to held-to-maturity. We have not designated any securities as available-for-sale since that time.

Further, as required under GAAP, when, based on current information and events, there has been an adverse change in the cash flows expected to be collected from those previously estimated for one of our securities, an other-than-temporary impairment is deemed to have occurred. A change in expected cash flows is considered adverse if the present value of the revised cash flows (taking into consideration both the timing and amount of cash flows expected to be collected) discounted using the security’s current yield is less than the present value of the previously estimated remaining cash flows, adjusted for cash receipts during the intervening period.

Should an other-than-temporary impairment be deemed to have occurred, the security is written down to fair value. The total other-than-temporary impairment is bifurcated into (i) the amount related to expected credit losses, and (ii) the amount related to fair value adjustments in excess of expected credit losses, or the Valuation Adjustment. The portion of the other-than-temporary impairment related to expected credit losses is calculated by comparing the amortized cost basis of the security to the present value of cash flows expected to be collected, discounted at the security’s current yield, and is recognized through earnings in the consolidated statement of operations. The remaining other-than-temporary impairment related to the Valuation Adjustment is recognized as a component of accumulated other comprehensive income (loss) in shareholders’ equity. A portion of other-than-temporary impairments recognized through earnings is accreted back to the amortized cost basis of the security through interest income, while amounts recognized through other comprehensive income (loss) are amortized over the life of the security with no impact on earnings.

Loans Receivable, Provision for Loan Losses, Loans Held-for-Sale and Related Allowance

We purchase and originate commercial real estate debt and related instruments, or Loans, generally to be held as long-term investments at amortized cost. Management is required to periodically evaluate each of these Loans for possible impairment. Impairment is indicated when it is deemed probable that we will not be able to collect all amounts due according to the contractual terms of the Loan. If a Loan is determined to be impaired, we write down the Loan through a charge to the provision for loan losses. Impairment on these loans is measured by comparing the estimated fair value of the underlying collateral to the book value of the respective loan. These valuations require significant judgments, which include assumptions regarding capitalization rates, leasing, creditworthiness of major tenants, occupancy rates, availability of financing, exit plan, loan sponsorship, actions of other lenders and other factors deemed necessary by management. Actual losses, if any, could ultimately differ from these estimates.

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, loan-to-value ratio, or LTV, collateral performance, structure, exit plan, and sponsorship. Loans are rated one through eight, which are defined as follows:

1 - Low Risk: A loan that is expected to perform through maturity, with relatively lower LTV, higher in-place debt yield, and stable projected cash flow.

2 - Average Risk: A loan that is expected to perform through maturity, with medium LTV, average in-place debt yield, and stable projected cash flow.

3 - Acceptable Risk: A loan that is expected to perform through maturity, with relatively higher LTV, acceptable in-place debt yield, and some uncertainty (due to lease rollover or other factors) in projected cash flow.

4 - Higher Risk: A loan that is expected to perform through maturity, but has exhibited a material deterioration in cash flow and/or other credit factors. If negative trends continue, default could occur.

5 - Low Probability of Default/Loss: A loan with one or more identified weakness that we expect to have a 15% probability of default or principal loss.

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Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

6 - Medium Probability of Default/Loss: A loan with one or more identified weakness that we expect to have a 33% probability of default or principal loss.

7 - High Probability of Default/Loss: A loan with one or more identified weakness that we expect to have a 67% or higher probability of default or principal loss.

8 - In Default: A loan which is in contractual default and/or which has a very high likelihood of principal loss.

In addition, for certain pools of smaller loans which have similar credit characteristics, primarily loans with an outstanding principal balance of $10.0 million or less in our consolidated securitization vehicles, we have recorded a general provision for loan losses in lieu of the asset-specific provisions we record on all other loans. This general provision is based on macroeconomic data with respect to historic loan losses, vintage, property type, and other factors deemed relevant for such loan pools. These loans do not undergo the same level of asset management as our larger investments.

In certain cases, we may classify loans as held-for-sale based upon the specific facts and circumstances of particular Loans, including known or expected transactions. Loans held-for-sale are carried at the lower of their amortized cost basis and fair value. A reduction in the fair value of loans held-for-sale is recorded as a charge to our consolidated statement of operations as a valuation allowance on loans held-for-sale.

Real Estate Held-for-Sale

Loan investments where we have foreclosed upon the underlying collateral and own an equity interest in real estate are categorized as real estate owned. We generally do not intend to hold such foreclosed assets for long-term operations and therefore classify such assets as real estate held-for-sale on our consolidated balance sheets. Real estate held-for-sale are carried at the lower of our basis in the real estate and fair value, less cost to sell, with reductions in fair value recorded as an impairment of real estate-held-for-sale on our consolidated statements of operations.

Deferred Financing Costs

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

Repurchase Obligations

In certain circumstances, we have financed the purchase of investments from a counterparty through a repurchase obligation with that same counterparty. We record these investments in the same manner as other investments financed with repurchase obligation, with the investment recorded as an asset and the related borrowing under any repurchase agreement recorded as a liability on our consolidated balance sheets. Interest income earned on the investments and interest expense incurred on the repurchase obligations are reported separately on our consolidated statements of operations.

Interest Rate Derivative Financial Instruments

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

To determine the fair value of interest rate derivative financial instruments, we use a third-party derivative specialist to assist us in periodically valuing our interests.

Income Taxes

Our financial results generally do not reflect provisions for current or deferred income taxes on our REIT taxable income. Management believes that we operate in a manner that will continue to allow us to be taxed as a REIT and, as a result, we generally do not expect to pay substantial corporate level taxes other than those payable by our taxable REIT subsidiaries. Many of these requirements, however, are highly technical and complex. If we were to fail to meet these requirements, we may be subject to federal, state and local income tax on current and past income, and penalties. See Note 10 for additional information.

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Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

Accounting for Stock-Based Compensation

Stock-based compensation expense is recognized in net income using a fair value measurement method, which we determine with the assistance of a third-party appraisal firm. Compensation expense for the time vesting of stock-based compensation grants is recognized on the accelerated attribution method and compensation expense for performance vesting of stock-based compensation grants is recognized on a straight line basis.

The fair value of the performance vesting restricted common stock is measured on the grant date using a Monte Carlo simulation to estimate the probability of the market vesting conditions being satisfied. The Monte Carlo simulation is run approximately 100,000 times. For each simulation, the payoff is calculated at the settlement date, and is then discounted to the grant date at a risk-free interest rate. The average of the values over all simulations is the expected value of the restricted common stock on the grant date. The valuation is performed in a risk-neutral framework, so no assumption is made with respect to an equity risk premium. Significant assumptions used in the valuation include an expected term and stock price volatility, an estimated risk-free interest rate and an estimated dividend growth rate.

Estimates of fair value are not intended to predict actual future events or the value ultimately realized by employees who receive equity awards, and subsequent events are not indicative of the reasonableness of the original estimates of fair value made by us.

Comprehensive Income (Loss)

Total comprehensive income was $164.8 million and $279.8 million for the nine months ended September 30, 2012 and 2011, respectively. The primary components of comprehensive income other than net income are the unrealized gains and losses on derivative financial instruments and the component of other-than-temporary impairments of securities related to the Valuation Adjustment.

Earnings per Share of Common Stock

Basic earnings per share, or EPS, is computed based on the net earnings allocable to common stock and stock units, divided by the weighted average number of shares of common stock and stock units outstanding during the period. Diluted EPS is determined using the treasury stock method, and is based on the net earnings allocable to common stock and stock units, divided by the weighted average number of shares of common stock, stock units and potentially dilutive common stock options and warrants. See Note 8 for additional discussion of earnings per share.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may ultimately differ from those estimates.

Reclassifications

Certain reclassifications have been made in the presentation of the prior period consolidated financial statements to conform to the September 30, 2012 presentation.

Segment Reporting

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

The Balance Sheet Investment segment includes our consolidated portfolio of interest earning assets and the financing thereof. The Investment Management segment includes the investment management activities of our wholly-owned investment management subsidiary, CT Investment Management Co., LLC, or CTIMCO, and its subsidiaries, as well as our co-investments in investment management vehicles. CTIMCO is a taxable REIT subsidiary and serves as the investment manager of Capital Trust, Inc., all of our investment management vehicles and CT CDOs, and serves as senior servicer and special servicer for certain of our investments and for third-parties.

Fair Value of Financial Instruments

The “Fair Value Measurements and Disclosures” Topic of the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or the Codification, defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements under GAAP. Specifically, this guidance defines fair value based on exit price, or the price that would be received upon the sale of an asset or the transfer of a liability in an orderly transaction between market participants at the measurement date. Our assets and liabilities which are measured at fair value are discussed in Note 12.

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Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

Recent Accounting Pronouncements

In April 2011, the FASB issued Accounting Standards Update 2011-02, “Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring,” or ASU 2011-02. ASU 2011-02 primarily clarifies when creditors should classify loan modifications as troubled debt restructurings and provides examples and factors to be considered. Loan modifications which are considered troubled debt restructurings could result in additional disclosure requirements and could impact the related provision for loan losses. ASU 2011-02 is effective for the first interim or annual period beginning after June 15, 2011, with retrospective application to the beginning of the year. The adoption of ASU 2011-02 did not have a material impact on our financial statements, however will impact how we account for loan modifications, and may result in an increase in the loan modifications we classify as troubled debt restructurings, and therefore our provision for loan losses.

In April 2011, the FASB issued Accounting Standards Update 2011-03, “Transfers and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements,” or ASU 2011-03. ASU 2011-03 primarily removes certain criteria from the consideration of effective control over assets subject to repurchase agreements. The removal of these criteria will generally result in asset transfers pursuant to repurchase agreements being accounted for as secured borrowings, with both the transferred assets and repurchase liability recorded on the transferor’s balance sheet. ASU 2011-03 is effective for the first interim or annual period beginning after December 15, 2011, and is to be applied prospectively to transactions which occur subsequent to the effective date. The adoption of ASU 2011-03 did not have a material impact on our financial statements.

In May 2011, the FASB issued Accounting Standards Update 2011-04, “Fair Value Measurement (Topic 860): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs,” or ASU 2011-04. ASU 2011-04 amends existing guidance on fair value measurements related to (i) instruments held in a portfolio, (ii) instruments classified within shareholders’ equity, (iii) application of the “highest and best use” concept to nonfinancial assets, (iv) application of blockage factors and other premiums and discounts in the valuation process, and (v) other matters. In addition, ASU 2011-04 expanded the required disclosures around fair value measurements including (i) reporting the level in the fair value hierarchy used to value assets and liabilities which are not measured at fair value, but where fair value is disclosed, and (ii) qualitative disclosures about the sensitivity of Level 3 fair value measurements to changes in unobservable inputs used. ASU 2011-04 is effective for the first interim or annual period beginning after December 15, 2011. The adoption of ASU 2011-04 did not have a material impact on our financial statements, however it did expand our disclosures related to fair value measurements.

In June 2011, the FASB issued Accounting Standards Update 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income,” or ASU 2011-05. ASU 2011-05 does not change the items that must be reported in other comprehensive income, however it eliminates the option to present other comprehensive income on the statement of shareholders’ equity and instead requires either (i) a continuous statement of comprehensive income which would replace the current statement of operations, or (ii) an additional statement of other comprehensive income, which would immediately follow the statement of operations, and would report the components of other comprehensive income. In December 2011, the FASB issued Accounting Standards Update 2011-12, “Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassification Items Out of Accumulated Comprehensive Income in Accounting Standards Update 2011-05,” or ASU 2011-12. ASU 2011-12 maintained the presentation requirements for comprehensive income under ASU 2011-05, however deferred the requirement to present certain reclassification adjustments into and out of accumulated other comprehensive income on a gross basis. ASU 2011-05 and ASU 20011-12 are both effective for the first interim or annual period beginning after December 15, 2011, and should be applied retrospectively to all periods reported after the effective date. Our early adoption, as permitted, of ASU 2011-05 and ASU 2011-12 as of December 31, 2011 did not have a material impact on our financial statements, other than the change in presentation of comprehensive income as a separate financial statement.

Note 3. Loans Receivable, Net and Loan Participations Sold

As described in Note 1, in conjunction with our March 2011 restructuring of our recourse debt obligations, a significant portion of our assets, including all of our loans, were transferred to a majority-owned subsidiary, CT Legacy REIT. Our only remaining loan was one which had previously been sold to a third-party and recorded as a participation sold asset and liability. In addition, as described in Note 2, our consolidated balance sheets separately state our direct assets and liabilities and certain assets and liabilities of consolidated subsidiaries. See Note 6 for disclosures regarding loans receivable that have been transferred to CT Legacy REIT, and see Note 7 for comparable disclosures regarding loans receivable that are held in consolidated securitization vehicles, as separately stated on our consolidated balance sheets.

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Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

Participations sold represent interests in certain loans that we originated and subsequently sold to one of our investment management vehicles or to third-parties. We have historically presented these participations sold as both assets and non-recourse liabilities because these arrangements do not qualify as sales under GAAP. Generally, participations sold are recorded as assets and liabilities in equal amounts on our consolidated balance sheets, and an equivalent amount of interest income and interest expense is recorded on our consolidated statements of operations. We have no economic exposure to these liabilities.

During September 2012, our one remaining loan participation sold was repaid.

Note 4. Equity Investments in Unconsolidated Subsidiaries

Our equity investments in unconsolidated subsidiaries consist of our co-investments in investment management vehicles that we sponsor and manage. As of September 30, 2012, we had a co-investment in two such vehicles, CT Opportunity Partners I, LP, or CTOPI, and CT High Grade Partners II, LLC, or CT High Grade II.

In December 2007, we made a commitment to invest up to $25.0 million in CTOPI, or 4.6% of CTOPI’s total capital commitments. We have funded $17.1 million of our commitment as of September 30, 2012 and received $6.9 million as a return of capital, resulting in a $10.2 million funded and a $14.8 million unfunded commitment balance. Subsequent to the expiration of CTOPI’s investment period in September 2012, our obligation to fund additional capital to CTOPI is limited.

In accordance with the CTOPI management agreement, CTIMCO may earn incentive compensation in an amount equal to 17.7% of the fund’s profits, after a 9% preferred return and 100% return of capital to the CTOPI partners. While we have not yet received any incentive distributions from CTOPI, we have been allocated $5.9 million of incentive compensation based on a hypothetical liquidation of the fund at its net asset value as of September 30, 2012. Accordingly, we have recognized this allocation as part of our equity investment in CTOPI, however we have deferred the recognition of income until cash is collected or appropriate contingencies have been eliminated.

In April 2012, we purchased a 0.44% interest in CT High Grade II from an existing investor for $2.8 million, representing our initial co-investment in CT High Grade II. Our co-investment represents a $2.9 million total capital commitment to CT High Grade II, of which our unfunded commitment is $480,000 as of September 30, 2012. As CT High Grade II’s investment period expired in May 2011, our obligation to fund additional capital to CT High Grade II is limited.

Activity relating to our equity investments in unconsolidated subsidiaries for the nine months ended September 30, 2012 was as follows (in thousands):

	CTOPI			CT High Grade II		Total
December 31, 2011		$10,399			$—		$10,399
Contributions		1,241			2,789		4,030
Income from equity investments in     unconsolidated subsidiaries (1)		7,068			153		7,221
Distributions		(2,940	)		—		(2,940	)
September 30, 2012		$15,768			$2,942		$18,710

(1) Includes $5.9 million of incentive income allocated to us from CTOPI under the equity method of accounting. This incentive income has not been recognized into earnings, but recorded as a deferred incentive income liability under accounts payable, accrued expenses and other liabilities on our consolidated balance sheet.

As of September 30, 2012, our maximum exposure to loss from CTOPI and CT High Grade II was $7.7 million and $2.8 million, respectively.

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Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

Note 5. Debt Obligations

As described in Note 1, on March 31, 2011, we restructured, amended, or extinguished all of our outstanding recourse debt obligations. In addition, as described in Note 1, our consolidated balance sheets separately state our direct assets and liabilities and certain assets and liabilities of consolidated subsidiaries. See Note 6 for disclosures regarding debt obligations of CT Legacy REIT, and see Note 7 for comparable disclosures regarding debt obligations of consolidated securitization vehicles, all of which are non-recourse to us, as separately stated on our consolidated balance sheets.

In conjunction with our March 2011 restructuring and the corresponding satisfaction of our senior credit facility and junior subordinated notes, wholly-owned subsidiaries issued secured notes to these former creditors, which secured notes are non-recourse to us. The secured notes had an aggregate initial face balance of $7.8 million and are secured by 93.5% of our equity interests in the class A-1 and class A-2 common stock of CT Legacy REIT, which represents 48.3% of the total outstanding class A-1 and class A-2 common stock of CT Legacy REIT. The secured notes mature on March 31, 2016 and bear interest at a rate of 8.2% per annum, which interest may be deferred until maturity. All dividends we receive from our equity interests in the common stock of CT Legacy REIT which serve as collateral under the secured notes must be used to pay, or prepay, interest and principal due thereunder, and only after the notes’ full satisfaction will we receive any cash flow from the common equity interests in CT Legacy REIT that serve as collateral for the notes. Any prepayment, or partial prepayment, of the secured notes will incur a prepayment premium resulting in a total payment of principal and interest under the secured notes of $11.1 million.

We had secured notes outstanding with an accreted book value of $8.3 million and $7.8 million as of September 30, 2012 and December 31, 2011, respectively.

Note 6. CT Legacy REIT

As discussed in Note 1, in connection with the March 2011 restructuring, we transferred substantially all of our directly held interest earning assets to a subsidiary of CT Legacy REIT. CT Legacy REIT is beneficially owned 52% by us, 24% by an affiliate of Five Mile Capital (the former mezzanine lender to CT Legacy REIT), and 24% by the former lenders under our senior credit facility. In addition, the former holders of our junior subordinated notes received class B common stock, a subordinate class of common stock which entitles its holders to receive approximately 25% of the dividends that would otherwise be payable to us on our equity interest in the common stock of CT Legacy REIT, after aggregate cash distributions of $50.0 million have been paid to all other classes of common stock. We manage CT Legacy REIT and CT Legacy Asset as a liquidating portfolio.

On February 10, 2012, we refinanced CT Legacy REIT’s mezzanine loan and repurchase facility with a single, new $124.0 million repurchase facility with JPMorgan. The borrower under the new JPMorgan facility, CT Legacy Asset, is a wholly owned subsidiary of CT Legacy REIT and owns all of its assets, other than cash. As a result of the refinancing, we discontinued consolidation of CT Legacy Asset. As a result, its assets and liabilities were deconsolidated from our financial statements as of February 10, 2012. We recognized a gain of $146.4 million on the deconsolidation of CT Legacy Asset, which was primarily the reversal of charges to GAAP equity resulting from losses previously recorded in excess of our economic interests in securitization vehicles which were consolidated by CT Legacy Asset.

As of September 30, 2012, our consolidated balance sheet includes (i) restricted cash of $16.1 million at CT Legacy REIT, and (ii) a $100.1 million investment in CT Legacy Asset, a 100% owned subsidiary of CT Legacy REIT. Prior to February 10, 2012, CT Legacy Asset was consolidated and therefore our consolidated balance sheet included its loans receivables, securities held-to-maturity, other assets, debt obligations and other liabilities.

The liabilities of CT Legacy Asset are all non-recourse to CT Legacy REIT and us. Neither we, nor CT Legacy REIT is obligated to provide, nor have we or CT Legacy REIT provided, any financial support to CT Legacy Asset.

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. The following disclosures relate specifically to the direct assets and liabilities of CT Legacy REIT, as separately stated on our consolidated balance sheets.

- 15 -

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

A. Securities Held-to-Maturity – CT Legacy REIT

CT Legacy REIT’s securities portfolio consists of CMBS, CDOs, and other securities. Activity relating to these securities for the nine months ended September 30, 2012 was as follows (in thousands):

	CMBS			CDOs & Other			Total Book Value
December 31, 2011		$1,346			$1,256			$2,602
Principal paydowns		(17	)		—			(17	)
Discount/premium amortization & other		18			7			25
Deconsolidation of CT Legacy Asset (1)		(1,347	)		(1,263	)		(2,610	)
September 30, 2012		$—			$—			$—

(1) As further described above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the securities owned by CT Legacy REIT are no longer included in our consolidated financial statements.

The following table details overall statistics for CT Legacy REIT’s securities portfolio as of September 30, 2012 and December 31, 2011:

	September 30, 2012	December 31, 2011
Number of securities	─	6
Number of issues	─	5
Rating (1) (2)	N/A	CCC+
Fixed / Floating (in millions) (3)	$─ / $─	$2 / $1
Coupon (1) (4)	N/A	5.43%
Yield (1) (4)	N/A	3.31%
Life (years) (1) (5)	N/A	4.9

(1)	Represents a weighted average as of December 31, 2011.
(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 0.30% as of December 31, 2011.
(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 CT Legacy REIT’s securities as of December 31, 2011 (in thousands):

	Rating as of December 31, 2011
			CCC and
Vintage		B	Below		Total
2003		$—		$1,256		$1,256
1997		179		—		179
1996		—		1,167		1,167
Total		$179		$2,423		$2,602

- 16 -

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

Other-than-temporary impairments

The following table summarizes activity related to the other-than-temporary impairments of CT Legacy REIT’s securities during the nine months ended September 30, 2012 (in thousands):

	Gross Other-Than-Temporary Impairments			Credit Related Other-Than-Temporary Impairments			Non-Credit Related Other-Than-Temporary Impairments
December 31, 2011		$26,557			$26,105			$452
Amortization of other-than-temporary impairments		(24	)		(11	)		(13	)
Deconsolidation of CT Legacy Asset (1)		(26,533	)		(26,094	)		(439	)
September 30, 2012		$—			$—			$—

(1) As further described in Note 1 above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the securities owned by CT Legacy REIT, some of which were other-than-temporarily impaired, are no longer included in our consolidated financial statements.

Unrealized losses and fair value of securities

Certain of CT Legacy REIT’s securities were 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 December 31, 2011, and that are not deemed to be other-than-temporarily impaired (in millions):

	Less Than 12 Months				Greater Than 12 Months					Total
			Gross				Gross					Gross
	Estimated		Unrealized		Estimated		Unrealized			Estimated		Unrealized
	Fair Value		Loss		Fair Value		Loss			Fair Value		Loss			Book Value (1)
Floating Rate		$—		$—		$0.2		($1.1	)		$0.2		($1.1	)		$1.3
Fixed Rate		1.2		—		—		—			1.2		—			1.2
Total		$1.2		$—		$0.2		($1.1	)		$1.4		($1.1	)		$2.5

(1) Excludes, as of December 31, 2011, $179,000 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, 2011, two of CT Legacy REIT's securities with an aggregate book value of $2.5 million were carried at a value in excess of their fair value. Fair value for these securities was $1.4 million as of December 31, 2011. In total, as of December 31, 2011, CT Legacy REIT had six investments in securities with an aggregate book value of $2.6 million that have an estimated fair value of $1.6 million, including two investments in CMBS with an estimated fair value of $1.4 million and four investments in CDOs and other securities with an estimated fair value of $158,000.

We determine fair values using a combination of third-party dealer assessments of value and our own internal financial model-based estimations of fair value. See Note 12 for further discussion of fair value.

Our estimation of cash flows expected to be generated by our securities portfolio is based upon an internal review of the underlying loans securing our investments both on an absolute basis and compared to our initial underwriting for each investment. Our efforts are supplemented by third-party research reports, third-party market assessments and our dialogue with market participants. We attribute the difference between book value and estimated fair value to the current market dislocation and a general negative bias against structured financial products such as CMBS and CDOs.

- 17 -

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

B. Loans Receivable, Net – CT Legacy REIT

Activity relating to CT Legacy REIT’s loans receivable for the nine months ended September 30, 2012 was as follows (in thousands):

	Gross Book  Value			Provision for  Loan Losses			Net Book Value (1)
December 31, 2011		$436,314			($229,800	)		$206,514
Principal paydowns		(254	)		—			(254	)
Discount/premium amortization & other		28			—			28
Deconsolidation of CT Legacy Asset (2)		(436,088	)		229,800			(206,288	)
September 30, 2012		$—			$—			$—

(1)	Includes loans with a total principal balance of $436.0 million as of December 31, 2011.
(2)	As further described above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the loans owned by CT Legacy REIT are no longer included in our consolidated financial statements.

The following table details overall statistics for CT Legacy REIT’s loans receivable portfolio as of September 30, 2012 and December 31, 2011:

	September 30, 2012	December 31, 2011
Number of investments	─	17
Fixed / Floating (in millions) (1)	$─ / $─	$56 / $151
Coupon (2) (3)	N/A	4.59%
Yield (2) (3)	N/A	5.21%
Maturity (years) (2) (4)	N/A	1.4

(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 December 31, 2011.
(3)	Calculations for floating rate loans are based on LIBOR of 0.30% as of December 31, 2011.
(4)	Represents the final maturity of each investment assuming all extension options are executed.

- 18 -

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

The tables below detail the types of loans in CT Legacy REIT’s portfolio, as well as the property type and geographic distribution of the properties securing these loans, as of September 30, 2012 and December 31, 2011 (in thousands):

	September 30, 2012					December 31, 2011
Asset Type	Book Value		Percentage			Book Value		Percentage
Senior mortgages		$—		―	%		$77,986		37	%
Subordinate interests in     mortgages		—		—			58,078		28
Mezzanine loans		—		—			47,271		23
Other		—		—			23,179		12
Total		$—		―	%		$206,514		100	%
Property Type	Book Value		Percentage			Book Value		Percentage
Office		$—		―	%		$84,519		41	%
Hotel		—		—			75,240		36
Multifamily		—		—			14,212		7
Other		—		—			32,543		16
Total		$—		―	%		$206,514		100	%
Geographic Location	Book Value		Percentage			Book Value		Percentage
Northeast		$—		―	%		$64,040		31	%
Southwest		—		—			40,353		19
West		—		—			38,179		18
Southeast		—		—			20,076		10
Northwest		—		—			9,364		5
International		—		—			34,502		17
Total		$—		―	%		$206,514		100	%

Loan risk ratings

Quarterly, management evaluates CT Legacy REIT’s 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 CT Legacy REIT’s loans receivable based on our internal risk ratings as of September 30, 2012 and December 31, 2011 (dollars in thousands):

		Loans Receivable as of September 30, 2012						Loans Receivable as of December 31, 2011
Risk Rating		Number of Loans		Principal Balance		Net Book Value		Number of Loans		Principal Balance		Net Book Value
	1 - 3		—		$—		$—		5		$91,940		$92,333
	4 - 5		—		—		—		5		64,151		64,127
	6 - 8		—		—		—		7		279,882		50,054
Total			—		$—		$—		17		$435,973		$206,514

- 19 -

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

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 CT Legacy REIT’s loans receivable by both loan type and our internal risk ratings as of September 30, 2012 and December 31, 2011 (dollars in thousands):

		Senior Mortgage Loans
		as of September 30, 2012						as of December 31, 2011
Risk Rating		Number of Loans		Principal Balance		Net Book Value		Number of Loans		Principal Balance		Net Book Value
	1 - 3		—		$—		$—		1		$27,503		$27,503
	4 - 5		—		—		—		2		21,000		20,976
	6 - 8		—		—		—		2		42,569		29,507
Total			—		$—		$—		5		$91,072		$77,986
		Subordinate Interests in Mortgages
		as of September 30, 2012						as of December 31, 2011
Risk Rating		Number of Loans		Principal Balance		Net Book Value		Number of Loans		Principal Balance		Net Book Value
	1 - 3		—		$—		$—		1		$13,000		$13,000
	4 - 5		—		—		—		1		24,531		24,531
	6 - 8		—		—		—		4		85,024		20,547
Total			—		$—		$—		6		$122,555		$58,078
		Mezzanine & Other Loans
		as of September 30, 2012						as of December 31, 2011
Risk Rating		Number of Loans		Principal Balance		Net Book Value		Number of Loans		Principal Balance		Net Book Value
	1 - 3		—		$—		$—		3		$51,437		$51,830
	4 - 5		—		—		—		2		18,620		18,620
	6 - 8		—		—		—		1		152,289		—
Total			—		$—		$—		6		$222,346		$70,450

 

C. Loans Held-for-Sale, Net – CT Legacy REIT

Activity relating to CT Legacy REIT’s loans held-for-sale for the nine months ended September 30, 2012 was as follows (in thousands):

	Gross Book Value			Valuation Allowance			Net Book Value
December 31, 2011		$32,331			($1,456	)		$30,875
Deconsolidation of CT Legacy Asset (1)		(32,331	)		1,456			(30,875	)
September 30, 2012		$—			$—			$—

(1) As further described above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the loans held-for-sale owned by CT Legacy REIT are no longer included in our consolidated financial statements.

- 20 -

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

D. Debt Obligations – CT Legacy REIT

As of September 30, 2012, CT Legacy REIT did not have any debt obligations outstanding. As of December 31, 2011, CT Legacy REIT had $113.6 million of total debt obligations outstanding. The balances of each category of debt were as follows (in thousands):

	September 30,				December 31,
	2012				2011
Debt Obligations	Principal Balance (1)		Book Value (1)		Principal Balance		Book Value
Repurchase obligation (JPMorgan)		$—		$—		$58,464		$58,464
Mezzanine loan		—		—		65,275		55,111
Total/Weighted Average		$—		$—		$123,739		$113,575

(1) As further described above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the debt obligations of CT Legacy REIT are no longer included in our consolidated financial statements.

Repurchase Obligations

In conjunction with our restructuring on March 31, 2011, our three legacy repurchase obligations were assumed by wholly-owned subsidiaries of CT Legacy REIT, and the recourse to Capital Trust, Inc. was eliminated. On February 10, 2012, we refinanced CT Legacy REIT’s one remaining repurchase facility and its mezzanine loan with a single, new $124.0 million repurchase facility with JPMorgan. The new facility is an obligation of CT Legacy Asset, matures in December 2014, carries a rate of LIBOR+6.00% as of September 30, 2012, and has paydown hurdles and associated potential rate increases over the term of the facility. As a result of the refinancing, we discontinued consolidation of CT Legacy Asset. See Note 1 and the introduction to Note 6 for further discussion on the deconsolidation of CT Legacy Asset.

Mezzanine Loan

On March 31, 2011, CT Legacy REIT entered into an $83.0 million mezzanine loan with Five Mile Capital that carried an interest rate of 15.0% per annum, of which 7.0% may be deferred, and that had a maturity date of March 31, 2016. The mezzanine loan was not recourse to Capital Trust, Inc. except for certain limited non-recourse, “bad boy” carve outs.

As of December 31, 2011, the mezzanine loan had an outstanding principal balance of $65.3 million (including deferred interest) and a book balance of $55.1 million. As discussed above, on February 10, 2012, we refinanced CT Legacy REIT’s JPMorgan repurchase facility and its mezzanine loan with a single, new $124.0 million repurchase facility with JPMorgan. As a result of the refinancing, we discontinued consolidation of CT Legacy Asset. See Note 1 and the introduction to Note 6 for further discussion on the deconsolidation of CT Legacy Asset.

E. Participations Sold – CT Legacy REIT

Participations sold represent interests in certain loans that we originated and subsequently sold to one of our investment management vehicles or to third-parties. We have historically presented these participations sold as both assets and non-recourse liabilities because these arrangements do not qualify as sales under GAAP. Generally, participations sold are recorded as assets and liabilities in equal amounts on our consolidated balance sheets, and an equivalent amount of interest income and interest expense is recorded on our consolidated statements of operations. However, impaired loan assets must be reduced through the provision for loans losses while the associated non-recourse liability cannot be reduced until the participation has been contractually extinguished. This can result in an imbalance between the loan participations sold asset and liability. We have no economic exposure to these liabilities.

- 21 -

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

The following table describes CT Legacy REIT’s participations sold assets and liabilities as of December 31, 2011 (in thousands):

	September 30,		December 31,
	2012		2011
Participations sold assets
Gross carrying value		$—		$97,465
Less: Provision for loan losses		—		(97,465	)
Net book value of assets		—		—
Participations sold liabilities
Net book value of liabilities		—		97,465
Net impact to shareholders' equity		$—		($97,465	)

F. Derivative Financial Instruments – CT Legacy REIT

As discussed in Note 1, on February 10, 2012, we refinanced CT Legacy REIT’s mezzanine loan and repurchase facility with a single, new $124.0 million repurchase facility with JPMorgan. As a result of the refinancing, we discontinued consolidation of CT Legacy Asset as of February 10, 2012.

CT Legacy REIT is not party to any interest rate swap agreements. As of December 31, 2011, CT Legacy REIT’s formerly consolidated subsidiary, CT Legacy Asset, was party to five interest rate swaps with a notional amount of $60.8 million and fair value of $8.8 million.

During the period from January 1, 2012 to February 10, 2012, while we consolidated CT Legacy Asset, it made net payments of $262,000 under its interest rate swaps which were recorded as a component of interest expense. During the same period, we recognized $291,000 as a component of interest expense for the change in fair value of these swaps. In addition, as a result of the deconsolidation of CT Legacy Asset, we reclassified $1.8 million from other comprehensive income to interest expense. This amount represents the unamortized balance of prior fair value adjustments to these interest rate swaps from the second quarter of 2011, when we discontinued the designation of these swaps as cash flow hedges.

G. Investment in CT Legacy Asset – CT Legacy REIT

As discussed in Note 1, on February 10, 2012, we refinanced CT Legacy REIT’s mezzanine loan and repurchase facility with a single, new $124.0 million repurchase facility with JPMorgan. The borrower under the new JPMorgan facility, CT Legacy Asset, is a wholly owned subsidiary of CT Legacy REIT and owns all of its assets, other than cash. As a result of the refinancing, we discontinued consolidation of CT Legacy Asset. As a result, its assets and liabilities were deconsolidated from our financial statements as of February 10, 2012.

We have elected the fair value option of accounting for CT Legacy REIT’s investment in CT Legacy Asset, pursuant to which we record this investment at fair value rather than at our historical cost investment amount. Additionally, changes in the fair value of this investment are recognized in our consolidated statement of operations. The fair value of CT Legacy REIT’s investment in CT Legacy Asset was $89.7 million and $100.1 million at February 10, 2012 and September 30, 2012, respectively.

The liabilities of CT Legacy Asset are all non-recourse to us, and we are not obligated to provide, nor have we provided, any financial support to CT Legacy Asset or CT Legacy REIT. We are only exposed to investment losses in CT Legacy Asset via our investment in CT Legacy REIT, which itself holds only two assets, cash of $16.1 million and an investment in CT Legacy Asset of $100.1 million. Net of noncontrolling interests, our investment in CT Legacy REIT is $53.1 million. After giving effect to the $11.1 million which will ultimately be payable under our secured notes and $7.8 million payable under the CT Legacy REIT management incentive awards plan, our maximum exposure to loss from CT Legacy REIT, and therefore CT Legacy Asset, is $34.2 million.

- 22 -

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

The following table represents summarized financial information for CT Legacy Asset (in thousands):

	For the Period from February 11, 2012
	through September 30, 2012 (1)
Income Statement
Total revenues (2)		$140,741
Total expenses (3)		(12,001	)
Net gain		$128,740
	As of September 30, 2012
Balance Sheet
Total assets		$615,720

(1)	Includes activity and balances of VIEs consolidated by CT Legacy Asset.
(2)	Includes interest income and gain on extinguishment of debt.
(3)	Includes interest expense, general and administrative expenses, provisions and impairments.

Note 7. Consolidated Securitization Vehicles

As of September 30, 2012, our consolidated balance sheet includes an aggregate $402.2 million of assets and $517.1 million of liabilities related to four consolidated securitization vehicles. 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.

Due to the deconsolidation of CT Legacy Asset on February 10, 2012, as discussed in Note 1, we deconsolidated one CT CDO, CT CDO III, and three other securitization vehicles that are owned by CT Legacy Asset.

CT CDOs

We currently consolidate three 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 three 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 7. 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.

Other Consolidated Securitization Vehicles

As discussed above, we currently consolidate one other securitization vehicle, which is substantially similar to the CT CDOs. This securitization vehicle invests in commercial real estate debt instruments, which investments were not originated or transferred to the entity by us. In addition to our investment in the subordinate classes of the securities issued by this vehicle, we are named special servicer on its collateral assets. As a result of consolidation, our ownership interest in this consolidation vehicle has been eliminated, and our balance sheet reflects both the assets held and debt issued by this vehicle to third-parties. Similarly, our operating results and cash flows include the gross amounts related to the assets and liabilities of the securitization vehicle, as opposed to our net economic interest in this entity. Special servicing fees paid to us on assets owned by this vehicle are eliminated in consolidation.

Our interest in the assets held by this securitization vehicle, which are consolidated on our balance sheet, is restricted by the structural provisions of this entity, and a recovery of our investment in the vehicle will be limited by its distribution provisions. The liabilities of the securitization vehicle, which are also consolidated on our balance sheet, are non-recourse to us, and can generally only be satisfied from its collateral assets.

- 23 -

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

We are not obligated to provide, nor have we provided, any financial support to this consolidated securitization vehicle. In addition, this investment has been made through one of our CT CDOs, which limits our exposure to loss as discussed above. We have recognized losses on the collateral assets of this CT CDO in excess of our investment therein, resulting in a zero net exposure to loss as of September 30, 2012.

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. 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 nine months ended September 30, 2012 was as follows (in thousands):

	CMBS			CDOs & Other			Total Book Value (1)
December 31, 2011		$357,037			$1,935			$358,972
Principal paydowns		(38,393	)		(1,935	)		(40,328	)
Discount/premium amortization & other (2)		(259	)		202			(57	)
Other-than-temporary impairments:
Recognized in earnings		(160	)		—			(160	)
Recognized in accumulated other comprehensive income		160			—			160
Deconsolidation of CT Legacy Asset (3)		(193,737	)		29,998			(163,739	)
September 30, 2012		$124,648			$30,200			$154,848

(1)	Includes securities with a total face value of $236.4 million and $490.9 million as of September 30, 2012 and December 31, 2011, 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.
(3)	As further described above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the securities owned by its consolidated securitization vehicle are no longer included in our consolidated financial statements. Also, certain securities which are owned by our consolidated securitization vehicles, that had previously been eliminated in consolidation, are now included in our consolidated financial statements. See Note 6 for additional discussion on CT Legacy Asset.

As of both September 30, 2012 and December 31, 2011, all of our consolidated securitization vehicles’ securities were classified as held-to-maturity.

- 24 -

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

The following table allocates the book value of our consolidated securitization vehicles’ securities as of September 30, 2012 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		$136,933			$30,200		$167,133
Mark-to-market adjustments on securities     previously classified as available-for-sale		6			—		6
Other-than-temporary impairments recognized in    accumulated other comprehensive income		(12,291	)		—		(12,291	)
Total book value as of September 30, 2012		$124,648			$30,200		$154,848

The following table details overall statistics for our consolidated securitization vehicles’ securities portfolio as of September 30, 2012 and December 31, 2011:

	September 30, 2012	December 31, 2011
Number of securities	33	52
Number of issues	23	36
Rating (1) (2)	B+	BB+
Fixed / Floating (in millions) (3)	$154 / $1	$358 / $1
Coupon (1) (4)	6.15%	6.49%
Yield (1) (4)	6.32%	7.41%
Life (years) (1) (5)	3.1	2.5

(1)	Represents a weighted average as of September 30, 2012 and December 31, 2011, 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 0.21% and 0.30% as of September 30, 2012 and December 31, 2011, 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 September 30, 2012 (in thousands):

	Rating as of September 30, 2012
Vintage	AAA		AA		A	BBB		BB		B	CCC and Below		Total
2006		$—		$—	$—		$—		$—	$—		$15,130		$15,130
2005		—		—	—		—		—	—		36,672		36,672
2004		—		—	—		24,753		—	—		—		24,753
2003		—		—	—		3,005		1,977	—		—		4,982
2002		—		—	—		—		6,729	—		2,384		9,113
2001		—		—	—		—		—	5,426		2,557		7,983
2000		2,894		—	—		—		19,056	—		3,997		25,947
1999		—		—	4,000		—		15,023	—		—		19,023
1998		—		2,160	7,397		—		151	—		1,537		11,245
Total		$2,894		$2,160	$11,397		$27,758		$42,936	$5,426		$62,277		$154,848

- 25 -

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

The table below details the ratings and vintage distribution of our consolidated securitization vehicles’securities as of December 31, 2011 (in thousands):

	Rating as of December 31, 2011
											CCC and
Vintage	AAA		AA		A	BBB		BB		B	Below		Total
2006		$—		$—	$—		$—		$—	$—		$14,884		$14,884
2005		—		—	—		—		—	—		7,060		7,060
2004		—		24,780	1,935		—		—	—		—		26,715
2003		9,908		—	—		3,011		1,966	—		—		14,885
2002		—		—	—		—		6,712	—		2,283		8,995
2001		—		—	—		—		—	5,426		1,730		7,156
2000		2,891		—	—		—		19,935	—		3,985		26,811
1999		—		—	11,233		1,414		17,380	—		—		30,027
1998		45,956		46,315	37,580		43,607		11,901	—		5,000		190,359
1997		4,434		—	16,159		—		5,223	2,762		3,502		32,080
Total		$63,189		$71,095	$66,907		$48,032		$63,117	$8,188		$38,444		$358,972

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 nine months ended September 30, 2012, we determined that $160,000 of impairments previously recorded in other comprehensive income should be recognized as credit losses due to a decrease in cash flow expectation for one 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 these 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 nine months ended September 30, 2012 (in thousands):

	Gross Other-Than-Temporary Impairments			Credit Related Other-Than-Temporary Impairments			Non-Credit Related Other-Than-Temporary Impairments
December 31, 2011		$130,360			$114,223			$16,137
Additions due to change in expected      cash flows		—			160			(160	)
Amortization of other-than-temporary      impairments		(373	)		(128	)		(245	)
Reductions due to realized losses		(26,263	)		(26,263	)		—
Deconsolidation of CT Legacy Asset (1)		(25,567	)		(22,126	)		(3,441	)
September 30, 2012		$78,157			$65,866			$12,291

(1) As further described in Note 1, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the securities owned by its consolidated securitization vehicles, some of which were other-than-temporarily impaired, are no longer included in our consolidated financial statements.

- 26 -

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

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 September 30, 2012 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		18.6		(11.6	)		57.6		(5.8	)		76.2		(17.4	)		93.6
Total		$18.6		($11.6	)		$57.6		($5.8	)		$76.2		($17.4	)		$93.6

(1) Excludes, as of September 30, 2012, $61.2 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 September 30, 2012, 16 of our consolidated securitization vehicles' securities with an aggregate book value of $93.6 million were carried at values in excess of their fair values. Fair value for these securities was $76.2 million as of September 30, 2012. In total, as of September 30, 2012, our consolidated securitization vehicles had 33 investments in securities with an aggregate book value of $154.8 million that have an estimated fair value of $144.7 million, including 29 investments in CMBS with an estimated fair value of $126.1 million and four investments in CDOs and other securities with an estimated fair value of $18.6 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, 2011 and that are not deemed to be other-than-temporarily impaired (in millions):

	Less Than 12 Months					Greater Than 12 Months					Total
			Gross					Gross					Gross
	Estimated		Unrealized			Estimated		Unrealized			Estimated		Unrealized
	Fair Value		Loss			Fair Value		Loss			Fair Value		Loss			Book Value (1)
Floating Rate		$—		$—			$—		$—			$—		$—			$—
Fixed Rate		154.1		(4.7	)		130.1		(11.1	)		284.2		(15.8	)		300.0
Total		$154.1		($4.7	)		$130.1		($11.1	)		$284.2		($15.8	)		$300.0

(1) Excludes, as of December 31, 2011, $59.0 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, 2011, 35 of our consolidated securitization vehicles' securities with an aggregate book value of $300.0 million were carried at values in excess of their fair values. Fair value for these securities was $284.2 million as of December 31, 2011. In total, as of December 31, 2011, our consolidated securitization vehicles had 52 investments in securities with an aggregate book value of $359.0 million that have an estimated fair value of $350.2 million, including 51 investments in CMBS with an estimated fair value of $348.3 million and one investment in CDOs and other securities with an estimated fair value of $1.9 million.

We determine fair values using a combination of third-party dealer assessments of value and our own internal financial model-based estimations of fair value. See Note 12 for further discussion of fair value. We regularly examine our consolidated securitization vehicles’ 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 consolidated securitization vehicles’ securities, against which we have recognized other-than-temporary-impairments. See Note 6A for additional discussion of fair value estimations.

- 27 -

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

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 for 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. The notional amount of the subordinate debt and equity interests we retained in our CT CDOs is $162.0 million. After giving effect to certain transfers of these interests, provisions for loan losses and other-than-temporary impairments recorded as of September 30, 2012, we have no remaining net exposure to loss from these entities.

B. Loans Receivable, Net – Consolidated Securitization Vehicles

Activity relating to our consolidated securitization vehicles’ loans receivable for the nine months ended September 30, 2012 was as follows (in thousands):

	Gross Book Value			Provision for  Loan Losses			Net Book Value (1)
December 31, 2011		$814,572			($201,974	)		$612,598
Satisfactions (2)		(62,950	)		—			(62,950	)
Principal paydowns		(1,816	)		—			(1,816	)
Discount/premium amortization & other		156			—			156
Recovery of provision for loan losses		—			2,819			2,819
Realized loan losses		(22,001	)		22,001			—
Deconsolidation of CT Legacy Asset (3)		(435,744	)		99,394			(336,350	)
September 30, 2012		$292,217			($77,760	)		$214,457

(1)	Includes loans with a total principal balance of $292.8 million and $815.7 million as of September 30, 2012 and December 31, 2011, respectively.
(2)	Includes final maturities and full repayments.
(3)	As further described in Note 1, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the loans owned by its consolidated securitization vehicles are no longer included in our consolidated financial statements.

- 28 -

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

The following table details overall statistics for our consolidated securitization vehicles’ loans receivable portfolio as of September 30, 2012 and December 31, 2011:

	September 30, 2012	December 31, 2011
Number of investments	14	71
Fixed / Floating (in millions) (1)	$44 / $170	$280 / $333
Coupon (2) (3)	4.34%	5.11%
Yield (2) (3)	4.63%	5.72%
Maturity (years) (2) (4)	3.0	3.6

(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 September 30, 2012 and December 31, 2011, respectively.
(3)	Calculations for floating rate loans are based on LIBOR of 0.21% and 0.30% as of September 30, 2012 and December 31, 2011, 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 September 30, 2012 and December 31, 2011 (in thousands):

	September 30, 2012					December 31, 2011
Asset Type	Book Value		Percentage			Book Value			Percentage
Subordinate interests in     mortgages		$129,509		60	%		$225,773			36	%
Senior mortgages		65,000		30			241,323			39
Mezzanine loans		19,948		10			152,934			25
Total		$214,457		100	%		$620,030			100	%
Property Type	Book Value		Percentage			Book Value			Percentage
Office		$185,006		86	%		$317,940			51	%
Hotel		27,322		13			174,419			28
Retail		—		—			72,701			12
Healthcare		—		—			18,837			3
Other		2,129		1			36,133			6
Total		$214,457		100	%		$620,030			100	%
Geographic Location	Book Value		Percentage			Book Value			Percentage
Northeast		$98,757		46	%		$199,361			32	%
West		78,700		37			152,774			25
Southeast		21,707		10			124,456			20
Southwest		15,293		7			57,046			9
Midwest		—		—			24,957			4
Diversified		—		—			61,436			10
Total		$214,457		100	%		$620,030			100	%
Unallocated loan loss provision (1)		—					(7,432	)
Net book value		$214,457					$612,598

(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, collateral property type, or geographic location, but rather to an overall pool of loans. See Note 2 for additional details.

- 29 -

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

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 September 30, 2012 and December 31, 2011 (dollars in thousands):

		Loans Receivable as of September 30, 2012						Loans Receivable as of December 31, 2011
Risk Rating (1)		Number of Loans		Principal Balance		Net Book Value		Number of Loans		Principal Balance		Net Book Value
	1 - 3		5		$118,333		$118,006		22		$416,032		$415,661
	4 - 5		2		78,700		78,622		3		44,057		43,945
	6 - 8		7		95,795		17,829		17		271,988		76,784
	N/A		—		—		—		29		83,639		83,640
Total			14		$292,828		$214,457		71		$815,716		$620,030
Unallocated loan loss provision:							—						(7,432	)
Net book value							$214,457						$612,598

(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 information.

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 September 30, 2012 and December 31, 2011 (dollars in thousands):

		Senior Mortgage Loans
		as of September 30, 2012						as of December 31, 2011
Risk Rating (1)		Number of Loans		Principal Balance		Net Book Value		Number of Loans		Principal Balance		Net Book Value
	1 - 3		—		$—		$—		10		$117,452		$117,452
	4 - 5		1		65,000		65,000		1		12,551		12,551
	6 - 8		—		—		—		4		43,988		27,680
	N/A		—		—		—		29		83,639		83,640
Total			1		$65,000		$65,000		44		$257,630		$241,323

(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.

- 30 -

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

		Subordinate Interests in Mortgages
		as of September 30, 2012						as of December 31, 2011
Risk Rating (1)		Number of Loans		Principal Balance		Net Book Value		Number of Loans		Principal Balance		Net Book Value
	1 - 3		4		$98,295		$98,058		8		$175,560		$175,314
	4 - 5		1		13,700		13,622		2		31,506		31,394
	6 - 8		7		95,795		17,829		9		122,306		19,065
	N/A		—		—		—		—		—		—
Total			12		$207,790		$129,509		19		$329,372		$225,773

(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.

		Mezzanine & Other Loans
		as of September 30, 2012						as of December 31, 2011
Risk Rating (1)		Number of Loans		Principal Balance		Net Book Value		Number of Loans		Principal Balance		Net Book Value
	1 - 3		1		$20,038		$19,948		4		$123,020		$122,895
	4 - 5		—		—		—		—		—		—
	6 - 8		—		—		—		4		105,694		30,039
	N/A		—		—		—		—		—		—
Total			1		$20,038		$19,948		8		$228,714		$152,934

(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.

Loan impairments

The following table describes our consolidated securitization vehicles’ impaired loans as of September 30, 2012, including impaired loans that are current in their interest payments and those that are delinquent on contractual payments (dollars in thousands):

	September 30, 2012
Impaired Loans	No. of Loans		Gross Book Value		Provision for Loan Loss			Net Book Value
Performing loans		1		$15,062		($15,062	)		$—
Non-performing loans		5		66,828		(62,698	)		4,130
Total impaired loans		6		$81,890		($77,760	)		$4,130

- 31 -

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

The following table details the allocation of our consolidated securitization vehicles’ provision for loan losses as of September 30, 2012 (in thousands):

	September 30, 2012
Impaired Loans	Principal Balance		Provision for Loan Loss		Loss Severity
Subordinate interests in mortgages		$82,094		$77,760		95	%
Total/Weighted Average		$82,094		$77,760		95	%

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 September 30, 2012, our consolidated securitization vehicles had two loans with a net book value of $52.7 million which were in maturity default but had no provision recorded. We expect to collect all principal and interest due under this loan upon their 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 nine months ended September 30, 2012 (in thousands):

Income on Impaired Loans for the Nine Months ended September 30, 2012
Asset Type	Average Net Book Value		Income Recorded (1)
Senior Mortgage Loans		$4,232		$168
Subordinate Interests in Mortgages		5,097		404
Mezzanine & Other Loans		5,135		210
Total		$14,464		$782

(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 September 30, 2012.

The following table details our consolidated securitization vehicles’ loans receivable which are on nonaccrual status as of September 30, 2012 (in thousands):

Nonaccrual Loans Receivable as of September 30, 2012
Asset Type	Principal Balance		Net Book Value
Subordinate Interests in Mortgages		$82,094		$4,130
Total		$82,094		$4,130

Loan modifications

During the nine months ended September 30, 2012, there was one modification of a loan in a consolidated securitization vehicle that was considered a troubled debt restructuring, as defined under GAAP. A troubled debt restructuring is generally any modification of a loan to a borrower that is experiencing financial difficulties, where a lender agrees to terms that are more favorable to the borrower than is otherwise available in the current market. This loan modification included a six-month extension of a $6.6 million subordinate mortgage loan with no interest rate increase. This loan has been individually assessed for impairment, and no impairment beyond the existing $4.6 million impairment was determined to be necessary.

- 32 -

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

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

Activity relating to our consolidated securitization vehicles’ real estate held-for-sale for the nine months ended September 30, 2012 was as follows (in thousands):

	Gross Book Value			Other-Than-Temporary Impairment			Net Book Value
December 31, 2011		$24,960			($14,618	)		$10,342
Deconsolidation of CT Legacy Asset (1)		(24,960	)		14,618			(10,342	)
September 30, 2012		$—			$—			$—

(1) As further described in Note 1 above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the real estate held-for-sale owned by its consolidated securitization vehicles is no longer included in our consolidated financial statements.

D. Debt Obligations – Consolidated Securitization Vehicles

As of September 30, 2012 and December 31, 2011, our consolidated securitization vehicles had $497.4 million and $1.2 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):

	September 30, 2012				December 31, 2011		September 30, 2012
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		$91,044		$91,044		$121,409		1.26	%		1.28	%		July 2039
CT CDO II		156,900		156,900		199,751		0.92	%		1.21	%		March 2050
CT CDO III		—		—		199,553		N/A			N/A				N/A
CT CDO IV (3)		198,927		198,927		221,540		1.07	%		1.23	%		October 2043
Total CT CDOs		446,871		446,871		742,253		1.06	%		1.23	%		February 2045
Other securitization vehicles
GMACC 1997-C1		—		—		83,672		N/A			N/A				N/A
GECMC 00-1 H		—		—		24,847		N/A			N/A				N/A
GSMS 2006-FL8A		50,552		50,552		50,552		1.06	%		1.06	%		June 2020
MSC 2007-XLCA		—		—		310,083		N/A			N/A				N/A
JPMCC 2004-FL1A		—		—		—		N/A			N/A				N/A
Total other securitization vehicles		50,552		50,552		469,154		1.06	%		1.06	%		June 2020
Total/Weighted Average		$497,423		$497,423		$1,211,407		1.06	%		1.21	%	(4)	August 2042

(1)	Represents a weighted average for each respective facility, assuming LIBOR of 0.21% at September 30, 2012 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 generally expected to occur prior to the maturity date above.
(3)	Comprised, at September 30, 2012, of $184.9 million of floating rate notes sold and $14.0 million of fixed rate notes sold.
(4)	Including the impact of interest rate hedges with an aggregate notional balance of $273.7 million as of September 30, 2012, the effective all-in cost of our consolidated securitization vehicles’ debt obligations would be 4.09% per annum.

As discussed above in the introduction to this Note 7, 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.

- 33 -

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

CT CDOs

As of September 30, 2012, our consolidated CT CDOs, CT CDO I, CT CDO II, and CT CDO IV, included three separate issuances with a total face value of $446.9 million. As of September 30, 2012, loans receivable and securities with a book balance of $149.5 million and $154.8 million, respectively, were financed by our three consolidated CT CDOs. As of December 31, 2011, loans receivable and securities with a book balance of $208.3 million and $359.0 million, respectively, were financed by our four consolidated CT CDOs, one of which was deconsolidated as of February 10, 2012.

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 three of our consolidated 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 three of our consolidated CT CDOs. Other than collateral management fees, we currently do not receive any cash payments from these consolidated CDOs.

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 consolidated CT CDOs has and will continue to increase.

In March 2012, the trustee for CT CDO II informed us of an event of default resulting from a failure of CT CDO II to pay the full amount of interest due to its Class B Notes, which failure resulted from a shortage of funds available to the CDO for such payments. We are not obligated to, nor have we, provided any financial support to CT CDO II to rectify this event of default.

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 $722.5 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 consolidate one other securitization vehicle which was not sponsored or issued by us. The debt obligations of this entity 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 the entity’s collateral pool, or will be discharged when losses are realized.

- 34 -

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

As of September 30, 2012, loans receivable with an aggregate book value of $65.0 million serve as collateral for the securities issued by this other consolidated securitization vehicle. As of December 31, 2011, loans receivable with an aggregate book value of $404.3 million serve as collateral for the securities issued by these five other consolidated securitization vehicles, three of which was deconsolidated as of February 10, 2012.

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 September 30, 2012 and December 31, 2011 (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	September 30, 2012 Notional Amount		Interest Rate (1)			Maturity		September 30, 2012 Fair Value			December 31, 2011 Fair Value
Swiss RE Financial		$223,802		5.10	%		2015		($15,631	)		($20,540	)
Bank of America		34,270		4.58	%		2014		(1,499	)		(2,368	)
Bank of America		10,535		5.05	%		2016		(1,387	)		(1,461	)
Bank of America		5,104		4.12	%		2016		(572	)		(573	)
Total/Weighted Average		$273,711		5.01	%		2015		($19,089	)		($24,942	)

(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 September 30, 2012 and December 31, 2011, 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 nine months ended September 30, 2012 and 2011 (in thousands):

	Amount of net loss recognized					Amount of loss reclassified from OCI
	in OCI for the nine months ended (1)					to income for the nine months ended (2)
Hedge	September 30, 2012			September 30, 2011		September 30, 2012			September 30, 2011
Interest rate swaps		($5,853	)		$1,980		($10,182	)		($11,512	)

(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 $9.8 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 September 30, 2012, our consolidated securitization vehicles have not posted any assets as collateral under derivative agreements.

Note 8. Shareholders’ Equity

Authorized Capital

We have the authority to issue up to 200,000,000 shares of stock, consisting of 100,000,000 shares of class A common stock and 100,000,000 shares of preferred stock. Subject to applicable NYSE listing requirements, our board of directors is authorized to issue additional shares of authorized stock without shareholder approval. In addition, to the extent not issued, currently authorized stock may be reclassified between class A common stock and preferred stock.

Common Stock

Shares of class A common stock are entitled to vote on all matters presented to a vote of shareholders, except as provided by law or subject to the voting rights of any outstanding preferred stock. Holders of record of shares of class A common stock on the record date fixed by our board of directors are entitled to receive such dividends as may be declared by the board of directors subject to the rights of the holders of any outstanding preferred stock. A total of 23,191,622 shares of class A common stock and stock units were issued and outstanding as of September 30, 2012.

- 35 -

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

We did not repurchase any of our class A common stock during the nine months ended September 30, 2012, other than the 6,959 shares we acquired pursuant to elections by incentive plan participants to satisfy tax withholding obligations through the surrender of shares equal in value to the amount of the withholding obligation incurred upon the vesting of restricted class A common stock.

Preferred Stock

We have not issued any shares of preferred stock since we repurchased all of the previously issued and outstanding preferred stock in 2001.

Warrants

In conjunction with the March 2009 restructuring of our legacy repurchase obligations, we issued to our former repurchase lenders warrants to purchase an aggregate 3,479,691 shares of our class A common stock at an exercise price of $1.79 per share. The warrants became exercisable on March 16, 2012, will expire on March 16, 2019, and may be exercised in a cashless manner at the option of the warrant holders. The fair value assigned to these warrants, totaling $940,000, has been recorded as an increase to additional paid-in capital, and was amortized into interest expense over the term of the related debt obligations. The warrants were valued using the Black-Scholes valuation method.

On November 8, 2012, all of our outstanding warrants were exercised in a cashless manner. See Note 16 for further discussion.

Dividends

We generally intend to distribute each year substantially all of our taxable income (which does not necessarily equal net income as calculated in accordance with GAAP) to our shareholders to comply with the REIT provisions of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code.

In addition, ourdividend policy remains subject to revision at the discretion of our board of directors. All distributions will be made at the discretion of our board of directors and will depend upon our taxable income, our financial condition, our maintenance of REIT status and other factors as our board of directors deems relevant.

No dividends were declared during the nine months ended September 30, 2012 or 2011.

- 36 -

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

Accumulated Other Comprehensive Loss

The following table details the primary components of accumulated other comprehensive loss as of September 30, 2012, and significant activity for the nine months ended September 30, 2012 (in thousands):

Accumulated Other Comprehensive Loss	Market on Interest Rate Hedges			Deferred Gains on Settled Hedges			Other-than- Temporary Impairments			Unrealized Gains on Securities			Total
Total as of December 31, 2011		($27,423	)		$56			($16,578	)		$3,361			($40,584	)
Unrealized gain on derivative     financial instruments		5,853			—			—			—			5,853
Ineffective portion of cash flow     hedges (1)		2,481			—			—			—			2,481
Amortization of net unrealized gains     on securities		—			—			—			(770	)		(770	)
Amortization of net deferred gains     on settlement of swaps		—			(56	)		—			—			(56	)
Other-than-temporary impairments     of securities (2)		—			—			409			—			409
Deconsolidation of CT Legacy     Asset (3)		—			—			3,879			(2,586	)		1,293
Total as of September 30, 2012		($19,089	)		$—			($12,290	)		$5			($31,374	)
Allocation to non-controlling interest (3)														—
Accumulated other comprehensive loss as of September 30, 2012														($31,374	)

(1)	As a result of the deconsolidation of CT Legacy Asset in the first quarter of 2012, the balance of accumlated other comprehensive income related to cash flow hedges of CT Legacy Asset was reclassified to interest expense.
(2)	Represents other-than-temporary impairments of securities in excess of credit losses, including amortization of prior other-than-temporary impairments of $248,000.
(3)	As further described in Note 1 above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the balances of accumulated other comprehensive income related to CT Legacy Asset, including those allocable to noncontrolling interests are no longer included in our consolidated financial statements.

Noncontrolling Interests

The noncontrolling interests included on our consolidated balance sheet represent the equity interests in CT Legacy REIT which are not owned by us, as described in Note 6. CT Legacy REIT’s outstanding common stock includes class A-1 common stock, class A-2 common stock, and subordinate class B common stock. A portion of CT Legacy REIT’s consolidated equity and results of operations are allocated to these noncontrolling interests based on their pro-rata ownership of CT Legacy REIT.

The following table describes activity relating to noncontrolling interests for the nine months ended September 30, 2012 (in thousands):

	Noncontrolling Interests
December 31, 2011		($18,515	)
Net income attributable to noncontrolling interests		81,038
Other comprehensive income attributable to     noncontrolling interests		10
Distributions to noncontrolling interests		(8	)
September 30, 2012		$62,525

- 37 -

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

As of December 31, 2011, the noncontrolling interests recorded on our consolidated balance sheet was a deficit, which reflected the consolidated book value of CT Legacy REIT, including certain securitization vehicles in which losses had been recorded in excess of CT Legacy REIT’s net investment. As a result of our deconsolidation of CT Legacy Asset during the first quarter of 2012, the impact of these excess losses has been reversed, resulting in a positive allocation to noncontrolling interests as of September 30, 2012.

Earnings Per Share

The following table sets forth the calculation of Basic and Diluted earnings per share, or EPS, based on the weighted average of both restricted and unrestricted class A common stock outstanding, for the three and nine months ended September 30, 2012 (in thousands, except share and per share amounts):

	Three Months Ended September 30, 2012						Nine Months Ended September 30, 2012
	Net		Wtd. Avg.		Per Share		Net		Wtd. Avg.		Per Share
	Income		Shares		Amount		Income		Shares		Amount
Basic EPS:
Net income allocable to      common stock		$6,999		23,173,426		$0.30		$75,835		22,969,103		$3.30
Effect of Dilutive Securities:
Warrants outstanding for the      purchase of common stock		—		1,442,600				—		1,472,958
Diluted EPS:
Net income per share of      common stock and assumed      conversions		$6,999		24,616,026		$0.28		$75,835		24,442,061		$3.10

The following table sets forth the calculation of Basic and Diluted EPS based on the weighted average of both restricted and unrestricted class A common stock outstanding, for the three and nine months ended September 30, 2011 (in thousands, except share and per share amounts):

	Three Months Ended September 30, 2011						Nine Months Ended September 30, 2011
	Net		Wtd. Avg.		Per Share		Net		Wtd. Avg.		Per Share
	Income		Shares		Amount		Income		Shares		Amount
Basic EPS:
Net income allocable to      common stock		$13,722		22,730,080		$0.60		$266,464		22,630,672		$11.77
Effect of Dilutive Securities:
Warrants outstanding for the      purchase of common stock		—		1,391,893				—		1,426,702
Diluted EPS:
Net income per share of      common stock and assumed      conversions		$13,722		24,121,973		$0.57		$266,464		24,057,374		$11.08

- 38 -

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

Note 9. General and Administrative Expenses

General and administrative expenses for the nine months ended September 30, 2012 and 2011 consisted of the following (in thousands):

	Nine Months Ended September 30,
General and Administrative Expenses	2012		2011
Personnel costs		$7,642		$7,162
Restructuring awards		—		2,750
Professional services		2,468		3,914
Pending sale of investment management platform		2,135		—
Operating and other costs		2,267		1,617
Subtotal		14,512		15,443
Non-cash personnel costs
Management incentive awards plan - CT Legacy REIT		944		3,395
Employee stock-based compensation		675		411
Subtotal		1,619		3,806
Expenses of consolidated securitization vehicles		62		619
Total		$16,193		$19,868

Management Incentive Awards Plan

Upon completion of our March 2011 restructuring, we granted senior level employees incentive awards issued under our long term incentive plan that participate in amounts earned from our retained equity interest in CT Legacy REIT. The awards provide payments to an employee pool of an amount equal to as much as 6.75% of the dividends paid (subject to certain caps) to the common equity holders of CT Legacy REIT’s obligations, when and if distributed to us as dividends. See Note 11 for further discussion.

Note 10. Income Taxes

Capital Trust, Inc. has made an election to be taxed as a REIT under Section 856(c) of the Internal Revenue Code, commencing with the tax year ending December 31, 2003. As a REIT, we generally are not subject to federal, state, and local income taxes except for the operations of our taxable REIT subsidiary, CTIMCO. The primary benefit from this election is that we are able to deduct dividends paid to our shareholders from the calculation of taxable income, effectively eliminating corporate taxes on the operations of the REIT. In order to qualify as a REIT, our activities must focus on real estate investments and we must meet certain asset, income, ownership and distribution requirements. These qualifications have become more difficult to meet in light of the transfer of our legacy portfolio to CT Legacy REIT in conjunction with our March 2011 restructuring, and the lack of new, replacement investment activity. If we fail to maintain our qualification as a REIT, we may be subject to material penalties as well as federal, state and local income tax on our taxable income at regular corporate rates. As of September 30, 2012 and December 31, 2011, Capital Trust, Inc. was in compliance with all REIT requirements.

In addition, Capital Trust, Inc. includes in its taxable income the income generated by investments in our CT CDOs. Due to the redirection provisions of our consolidated CT CDOs, which reallocate principal proceeds and interest otherwise distributable to us to repay senior noteholders, assets financed through our CT CDOs may generate current taxable income without a corresponding cash distribution to us. See Note 7 for further discussion of these redirection provisions.

As of December 31, 2011, Capital Trust, Inc. had net operating losses, or NOLs, of approximately $161.5 million and net capital losses, or NCLs, of approximately $120.8 million available to be carried forward and utilized in current or future periods. The utilization of NOLs to offset our taxable income or distribution requirements will require us to pay alternative minimum taxes.

Deferred income taxes recorded on our consolidated balance sheets reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities used for financial reporting purposes and the amounts used in the computation of our current income tax obligations.

- 39 -

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

Note 11. Employee Benefit and Incentive Plans

Stock-Based Incentive Plans

We had stock-based incentive awards outstanding under three benefit plans as of September 30, 2012: (i) our amended and restated 1997 non-employee director stock plan, or 1997 Director Plan, (ii) our 2007 long term incentive plan, or 2007 Plan, and (iii) our 2011 long term incentive plan, or 2011 Plan. The 1997 Director Plan and the 2007 Plan expired in 2007 and 2011, respectively and no new awards may be issued under them. In March 2011, in addition to the 300,000 shares awarded to our three named executive officers, our board’s compensation committee authorized our chief executive officer to grant 100,000 shares under the 2007 Plan to other officers and employees designated by him. These 100,000 shares were awarded to employees in January 2012.

Under the 2011 Plan, a maximum of 1.0 million shares of class A common stock may be issued. Shares canceled under previous plans are available to be reissued under the 2011 Plan. As of September 30, 2012, there were 615,000 shares available under the 2011 Plan.

Under these plans, our employees are issued shares of our restricted class A common stock. We record grant date fair value of these shares as an expense over their vesting period. These shares vest either (i) pro-rata over a three-year service period, or (ii) upon the attainment of certain pre-specified performance measures within a prescribed timeframe subject to continued employment.

 As of September 30, 2012, unvested share-based compensation consisted of 536,536 shares of restricted class A common stock with an unamortized value of $686,000. Subject to vesting conditions and the continued employment of certain employees, $465,000 of these costs will be recognized as compensation expense during the fourth quarter of 2012 and the remainder will be recognized over the next two years.

Activity under these three plans for the nine months ended September 30, 2012 is summarized in the table below in share and share equivalents:

Benefit Type (1)	1997 Director Plan		2007 Plan			2011 Plan		Total
Restricted Class A Common Stock
Beginning balance		—		244,424			—		244,424
Granted		—		100,000			275,000		375,000
Vested, deferred or forfeited		—		(82,888	)		—		(82,888	)
Ending balance (2)		—		261,536			275,000		536,536
Stock Units (3)
Beginning balance		68,544		438,260			55,531		562,335
Granted and deferred		—		60,000			54,180		114,180
Ending balance		68,544		498,260			109,711		676,515
Total outstanding		68,544		759,796			384,711		1,213,051

(1)	No stock options are outstanding under any of our plans.
(2)	Includes (i) 275,000 performance based awards that contingently vest upon the attainment of certain pre-specified performance measures, and (ii) 250,000 time based awards that vest based upon an employee’s continued employment on pre-established vesting dates.
(3)	Stock units are granted to certain members of our board of directors in lieu of cash compensation for services and in lieu of dividends earned on previously granted stock units. In addition, certain of our employees have elected to defer the vesting of their restricted shares.

- 40 -

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

A summary of the unvested restricted class A common stock as of and for the nine months ended September 30, 2012 was as follows:

	Restricted Class A Common Stock
	Shares			Grant Date Fair Value
Unvested at January 1, 2012		244,424			$2.65
Granted		375,000			2.77
Vested, deferred or forfeited		(82,888	)		3.56
Unvested at September 30, 2012		536,536			$2.64

A summary of the unvested restricted class A common stock as of and for the nine months ended September 30, 2011 was as follows:

	Restricted Class A Common Stock
	Shares			Grant Date Fair Value
Unvested at January 1, 2011		32,785			$5.67
Granted		300,000			2.29
Vested		(88,361	)		2.62
Unvested at September 30, 2011		244,424			$2.65

The total grant date fair value of restricted shares that vested during the nine months ended September 30, 2012 and 2011 was$184,000 and $231,000, respectively.

CTOPI Incentive Management Fee Grants

In addition to the equity interests detailed above, we may grant percentage interests in the incentive compensation received by us from certain of our investment management vehicles. In January 2011, we created a pool for employees equal to 45% of the CTOPI incentive management fee received by us. As of September 30, 2012, we had granted 92.5% of the pool to our employees and the remainder remains unallocated. These grants have the following employment-based vesting schedule: (i) one-third on the date of grant, (ii) one-third on September 13, 2012, and (iii) the remainder vests upon our receipt of incentive management fees from CTOPI.

CT Legacy REIT Management Incentive Awards Plan

In conjunction with our March 2011 restructuring, we created an employee pool for up to 6.75% of the dividends paid to the common equity holders of CT Legacy REIT (subject to certain caps and priority distributions). As of September 30, 2012, incentive awards for 83.5% of the pool were granted to our employees and the remainder remains unallocated. Approximately 90% of these grants have the following employment-based vesting schedule: (i) 25% vests on the date of grant, (ii) 25% vests in March 2013, (iii) 25% vests in March 2014, and (iv) the remainder vests upon our receipt of dividends from CT Legacy REIT. The remaining 10% of these grants vest upon our receipt of dividends from CT Legacy REIT.

Strategic Transaction Related Awards

On June 27, 2012, our compensation committee authorized contingent awards in the form of restricted class A common stock and cash bonuses to our chief executive officer, Stephen D. Plavin, chief financial officer, Geoffrey G. Jervis, and our chief credit officer, Thomas C. Ruffing. Subject to their continued employment, these awards vest if a strategic transaction has been consummated, or definitive documentation governing a strategic transaction has been entered into, prior to December 31, 2012.

These awards provided for grants of 125,000, 100,000 and 50,000 shares of restricted common stock to Messrs. Plavin, Jervis, and Ruffing, respectively.

Note 12. Fair Values

Assets and Liabilities Recorded at Fair Value

Certain of our assets and liabilities are measured at fair value either (i) on a recurring basis, as of each quarter-end, or (ii) on a nonrecurring basis, as a result of impairment or other events. Generally, loans held-for-sale, real estate held-for-sale, the investment in CT Legacy Asset, and interest rate swaps are measured at fair value on a recurring basis, while impaired loans and securities are measured at fair value on a nonrecurring basis. These fair values are determined using a variety of inputs and methodologies, which are detailed below.

- 41 -

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

As discussed in Note 2, the “Fair Value Measurement and Disclosures” Topic of the Codification establishes a fair value hierarchy that prioritizes the inputs used in determining fair value under GAAP, which includes the following classifications, in order of priority:

· Level 1 generally includes only unadjusted quoted prices in active markets for identical assets or liabilities as of the reporting date.

· Level 2 inputs are those which, other than Level 1 inputs, are observable for identical or similar assets or liabilities.

· Level 3 inputs generally include anything which does not meet the criteria of Levels 1 and 2, particularly any unobservable inputs.

The following table summarizes our assets and liabilities, including those of CT Legacy REIT and our consolidated securitization vehicles, which are recorded at fair value as of September 30, 2012 (in thousands):

				Fair Value Measurements Using
				Quoted Prices		Other			Significant
	Total			in Active		Observable			Unobservable
	Fair Value at			Markets		Inputs			Inputs
	September 30, 2012			(Level 1)		(Level 2)			(Level 3)
Measured on a recurring basis:
Investment in CT Legacy Asset		$100,100			$—		$—			$100,100
Securitization vehicles' interest rate hedge liabilities		($19,089	)		$—		($19,089	)		$—
Measured on a nonrecurring basis:
Securitization vehicles' impaired loans receivable (1) :
Subordinate interests in mortgages		$4,130			$—		$—			$4,130

(1) Loans receivable against which we have recorded a provision for loan losses as of September 30, 2012.

The following table reconciles the beginning and ending balances of assets measured at fair value on a recurring basis using Level 3 inputs (in thousands):

	Loans			Real Estate			Investment in
	Held-for-Sale			Held-for-Sale			CT Legacy Assets
December 31, 2011		$30,875			$10,342			$—
Deconsolidation of CT Legacy Asset		(30,875	)		(10,342	)		89,676
Contributions to CT Legacy Asset		—			—			73,064
Distributions from CT Legacy Asset		—			—			(82,285	)
Adjustments to fair value included in earnings:
Fair value adjustment on investment in CT Legacy Asset		—			—			19,645
September 30, 2012		$—			$—			$100,100

The fair values of each type of asset recorded at fair value using Level 3 inputs are determined by an internal committee comprised of senior management including our chief executive officer, chief financial officer and our chief credit officer and head of asset management. The following methods and assumptions were used to estimate the fair value of each type of asset and liability which was recorded at fair value as of September 30, 2012:

Investment in CT Legacy Asset: We have elected the fair value option of accounting for CT Legacy REIT’s investment in CT Legacy Asset, pursuant to which we record this investment at fair value rather than at our historical cost investment amount. We made this election due to our determination that the fair value of the investment in CT Legacy Asset, as a net liquidating portfolio of assets subject to a non-recourse repurchase facility, is more meaningful and indicative of our interests in CT Legacy Asset than equity method accounting. Consequently, we arrive at the fair value of our Investment in CT Legacy Asset by discounting expected cash flows after the repayment of the repurchase facility. To determine the expected cash flows of CT Legacy Asset, management estimates the timing and recovery amount for each of its assets, and then applies the proceeds to first satisfy the repurchase facility. The remaining cash flows are discounted to their present value to arrive at the fair value of CT Legacy Asset. The key assumptions for significant unobservable inputs are: (i) a discount rate of 20%, and (ii) loss severities ranging from 0% to 100% against the underlying assets. A change in the discount rate used by 100 basis points would change the fair value of CT Legacy REIT’s investment in CT Legacy Asset by approximately $2.3 million.

- 42 -

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

Interest rate hedge liabilities: Interest rate hedges are valued using advice from a third-party derivative specialist, based on a combination of observable market-based inputs, such as interest rate curves, and unobservable inputs such as credit valuation adjustments due to the risk of non-performance by both us and our counterparties. See Note 7 for additional details on our interest rate hedges. We have made an accounting policy decision to utilize the so-called “portfolio exception” under ASC paragraph 820-10-35-18D, and have valued our interest rate hedge liabilities, as applicable, on a net basis.

Impaired securities held-to-maturity: Securities which are other-than-temporarily impaired are generally valued by a combination of (i) obtaining assessments from third-party dealers and, (ii) in cases where such assessments are unavailable or, in the opinion of management, deemed not to be indicative of fair value, discounting expected cash flows using internal cash flow models and estimated market discount rates. In the case of internal models, expected cash flows of each security are based on management’s assumptions regarding the collection of principal and interest on the underlying loans and securities. There were no securities which were impaired during the three months ended September 30, 2012. Previously impaired securities have been subsequently adjusted for amortization, and are therefore no longer reported at fair value as of September 30, 2012.

Impaired loans: The loans identified for impairment are collateral dependent loans. Impairment on these loans is measured by comparing management’s estimation of fair value of the underlying collateral to the book value of the respective loan. These valuations require significant judgments, which include assumptions regarding capitalization rates, leasing, creditworthiness of major tenants, occupancy rates, availability of financing, exit plan, loan sponsorship, actions of other lenders and other factors deemed necessary by management. The table above includes all impaired loans, regardless of the period in which impairment was recognized.

Additional details of our consolidated securitization vehicles’ loans which were recorded at fair value as of September 30, 2012 are described below:

Subordinate interests in mortgages: Six of our consolidated securitization vehicles’ subordinate interests in mortgage loans with an aggregate principal balance of $82.1 million are reported at fair value as of September 30, 2012, including three hotel loans ($60.9 million), one office loan ($6.6 million), one retail loan ($4.4 million) and one mixed-use/other loan ($10.2 million). The loans have a weighted average maturity of February 2012 and a weighted average coupon of 3.7% per annum as of September 30, 2012.

The following table lists the range of key assumptions used for arriving at the fair value of each of these types of loans.

	Assumption Ranges for Significant Unobservable Inputs (Level 3)
Collateral Type	Capitalization Rate	Occupancy	Loss Severity (1)
Office	N/A	N/A	70%
Hotel	9% - 15%	75% - 83%	N/A
Retail	10%	90%	N/A
Mixed Use / Other	N/A	N/A	79%

(1) In certain cases a loss severity based on inputs from third-parties including appraisals on, and bids for, underlying collateral were utilized to compute the fair value of the impaired loans.

Fair Value of Financial Instruments

In addition to the above disclosures for assets and liabilities which are recorded at fair value, GAAP also requires disclosure of fair value information about financial instruments, whether or not recognized in the statement of financial position, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are estimated using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the estimated market discount rate and the estimated future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in an immediate settlement of the instrument. Rather, these fair values reflect the amounts that management believes are realizable in an orderly transaction among willing parties. These disclosure requirements exclude certain financial instruments and all non-financial instruments.

- 43 -

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

The following table details the carrying amount, face amount, and approximate fair value of the financial instruments described above (in thousands). All fair value estimates are measured using significant unobservable inputs, or Level 3 inputs as further described above.

Fair Value of Financial Instruments
	September 30, 2012						December 31, 2011
	Carrying Amount		Face Amount		Fair Value		Carrying Amount		Face Amount		Fair Value
Financial assets:
Cash and cash equivalents		$38,867		$38,867		$38,867		$34,818		$34,818		$34,818
Loans receivable, net		—		—		—		19,282		19,282		17,354
CT Legacy REIT
Restricted cash		16,145		16,145		16,145		12,985		12,985		12,985
Securities held-to-maturity		N/A		N/A		N/A		2,602		29,251		1,638
Loans receivable, net		N/A		N/A		N/A		206,514		435,973		180,439
Investment in CT Legacy Asset		100,100		N/A		100,100		N/A		N/A		N/A
Securitization Vehicles
Securities held-to-maturity		154,848		236,390		144,742		358,972		490,940		350,180
Loans receivable, net		214,457		292,828		200,028		612,598		815,716		570,936
Financial liabilities:
Secured notes		8,326		8,326		7,158		7,847		7,847		6,436
Participations sold		—		—		—		19,282		19,282		17,354
CT Legacy REIT
Repurchase obligations		N/A		N/A		N/A		58,464		58,464		54,556
Mezzanine loan		N/A		N/A		N/A		55,111		55,111		71,475
Participations sold		N/A		N/A		N/A		97,465		97,465		—
Securitization Vehicles
Securitized debt obligations		497,423		497,423		302,698		1,211,407		1,210,992		767,619

The following methods and assumptions were used to estimate the fair value of each class of financial instruments, excluding those described above that are carried at fair value, for which it is practicable to estimate that value:

Cash and cash equivalents: The carrying amount of cash on deposit and in money market funds is considered to be a reasonable estimate of fair value.

Loans receivable, net: Other than impaired loans, these assets are recorded at their amortized cost and not at fair value. The fair values presented above were estimated by management taking into consideration factors including capitalization rates, leasing, occupancy rates, availability and cost of financing, exit plan, sponsorship, actions of other lenders and indications of market value from other market participants.

Restricted cash: The carrying amount of restricted cash is considered to be a reasonable estimate of fair value.

Securities held-to-maturity: These investments, other than securities that have been other-than-temporarily impaired, are recorded on an amortized cost basis and not at fair value. The fair values presented above have been estimated by a combination of (i) obtaining assessments from third-party dealers and, (ii) in cases where such assessments are unavailable or, in the opinion of management, deemed not to be indicative of fair value, discounting expected cash flows using internal cash flow models and estimated market discount rates. The expected cash flows of each security are based on management’s assumptions regarding the collection of principal and interest on the underlying loans and securities.

Secured notes: These notes are recorded at their aggregate principal balance and not at fair value. The fair value was estimated based on the rate at which a similar credit facility would be priced today.

Participations sold: These liabilities are recorded at their amortized cost and not at fair value. The fair values presented above are consistent with those presented for the related loan assets.

Repurchase obligations: These facilities were recorded at their aggregate principal balance and not at fair value. The fair value was estimated based on the rate at which a similar credit facility would be priced today.

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Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

Mezzanine loan: This instrument was recorded at its amortized cost and not at fair value. The fair value was estimated based on the rate at which a similar credit facility would be priced today.

Securitized debt obligations: These obligations are recorded at the face value of outstanding obligations to third-parties and not at fair value.The fair values presented above have been estimated by obtaining assessments from third-party dealers.

Note 13. Supplemental Disclosures for Consolidated Statements of Cash Flows

As described in Note 2, following the deconsolidation described in Note 1, our financial statements include five consolidated securitization vehicles. The consolidation of these entities has materially impacted our statement of cash flows, primarily the amounts reported as principal collections of loans and repayments of securitized debt obligations. Notwithstanding the gross presentation on our consolidated statement of cash flows, the consolidation of these entities has no impact on our net cash flow.

Interest paid on our outstanding debt obligations during the nine months ended September 30, 2012 and 2011 was $21.9 million and $85.2 million, respectively. This includes interest paid by consolidated variable interest entities. The difference between interest expense on our consolidated statement of operations and interest paid is primarily due to non-cash interest expense recorded on amortization of discount of the Five Mile Capital mezzanine loan, interest rate swaps, loan participations sold and deferred interest on various debt obligations.

Net taxes paid by us during the nine months ended September 30, 2012 and 2011 were $788,000 and $2.4 million, respectively. The taxes paid in 2012 relate primarily to the investment management activities of our taxable REIT subsidiary, CTIMCO.

Significant non-cash investing and financing activities, which are not presented on our consolidated statements of cash flows, primarily includes the repayments of our loan participations sold assets and liabilities.

Note 14. Transactions with Related Parties

We earn base management and incentive fees in our capacity as investment manager for multiple vehicles which we have sponsored. Due to the nature of our relationship with these vehicles, all management fees are considered revenue from related parties under GAAP. In addition, we have investments which are senior, junior, or pari passu to investments in our investment management vehicles, which could produce conflicts of interest between our direct portfolio and those of our managed accounts.

On November 9, 2006, we commenced our CT High Grade MezzanineSM, or CT High Grade I, investment management initiative and entered into three separate account agreements with affiliates of W. R. Berkley Corporation, or WRBC, with an aggregate commitment of $250.0 million, which was subsequently increased to $350.0 million in July 2007. Subsequent to the expiration of the CT High Grade I investment period, we continued to invest on behalf of WRBC under the CT High Grade I platform on a non-discretionary basis, bringing CT High Grade I’s total investments to $594.0 million as of September 30, 2012. Pursuant to these agreements, we invested capital on behalf of WRBC in commercial real estate mortgages, mezzanine loans and participations therein. The separate accounts are entirely funded with committed capital from WRBC and are managed by a subsidiary of CTIMCO. CTIMCO earns a management fee equal to 0.25% per annum on invested assets.

WRBC beneficially owned common stock representing approximately 15.4% of our outstanding common stock and stock units as of November 9, 2012, and a member of our board of directors is an employee of WRBC. In addition, wholly-owned subsidiaries of WRBC are investors in certain private funds under Five Mile Capital’s management. As discussed in Notes 1 and 7, Five Mile Capital provided an $83.0 million mezzanine loan to CT Legacy REIT in connection with our March 2011 restructuring, and holds a significant interest in the common equity of CT Legacy REIT. In February 2012 we refinanced CT Legacy REIT’s Five Mile Capital mezzanine loan and repurchase facility with a single, new $124.0 million repurchase facility with JPMorgan.

In July 2008, CTOPI, a private equity fund that we manage, held its final closing completing its capital raise with $539.9 million total equity commitments. EGI-Private Equity II, L.L.C., an affiliate under common control of the chairman of our board of directors, owns a 3.7% limited partner interest in CTOPI. During the nine months ended September 30, 2012, we recorded $2.0 million of fees from CTOPI, $80,000 of which were attributable to EGI-Private Equity II, L.L.C.

CTOPI has purchased $75.5 million face value of our CT CDO notes in the open market for $40.4 million. These purchases were from third-parties, and were not sold by us.

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Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

Note 15. Segment Reporting

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

The Balance Sheet Investment segment includes our consolidated portfolio of interest earning assets and the financing thereof. The Investment Management segment includes the investment management activities of our wholly-owned investment management subsidiary, CT Investment Management Co., LLC, or CTIMCO, and its subsidiaries, as well as our co-investments in investment management vehicles. CTIMCO is a taxable REIT subsidiary and serves as the investment manager of Capital Trust, Inc., all of our investment management vehicles and CT CDOs, and serves as senior servicer and special servicer for certain of our investments and for third-parties.

The following table details each segment's contribution to our operating results and the identified assets attributable to each such segment for the nine months ended, and as of, September 30, 2012 (in thousands):

	Balance Sheet			Investment		Inter-Segment
	Investment			Management		Activities			Total
Income from loans and other investments:
Interest and related income		$28,423			$—		$—			$28,423
Less: Interest and related expenses		33,902			—		—			33,902
Income from loans and other investments, net		(5,479	)		—		—			(5,479	)
Other revenues:
Management fees from affiliates		—			6,597		(1,856	)		4,741
Servicing fees		—			6,991		(1,400	)		5,591
Total other revenues		—			13,588		(3,256	)		10,332
Other expenses
General and administrative		6,551			11,498		(1,856	)		16,193
Servicing fees expense		1,400			—		(1,400	)		—
Total other expenses		7,951			11,498		(3,256	)		16,193
Total other-than-temporary impairments of securities		—			—		—			—
Portion of other-than-temporary impairments of securities recognized in other comprehensive income		(160	)		—		—			(160	)
Net impairments recognized in earnings		(160	)		—		—			(160	)
Recovery of provision for loan losses		2,819			—		—			2,819
Fair value adjustment on investment in CT Legacy Asset		19,645			—		—			19,645
Gain on deconsolidation of subsidiary		146,380			—		—			146,380
Income from equity investments in unconsolidated subsidiaries		—			1,312		—			1,312
Income before income taxes		155,254			3,402		—			158,656
Income tax provision		467			1,316		—			1,783
Net income		$154,787			$2,086		$—			$156,873
Net income attributable to noncontrolling interests		(81,038	)		—		—			(81,038	)
Net income attributable to Capital Trust, Inc.		$73,749			$2,086		$—			$75,835
Total assets		$556,003			$25,194		$—			$581,197

All revenues were generated from external sources within the United States. The Investment Management segment received intercompany preferred dividend income of $1.9 million from the Balance Sheet segment for the nine months ended September 30, 2012. In addition, the Investment Management segment earned fees of $1.4 million for serving as collateral manager of the CT CDOs consolidated under our Balance Sheet Investment segment as well as special servicing activity for certain CT CDO assets for the nine months ended September 30, 2012.

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Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

The following table details each segment's contribution to our operating results and the identified assets attributable to each such segment for the nine months ended, and as of, September 30, 2011 (in thousands):

	Balance Sheet			Investment			Inter-Segment
	Investment			Management			Activities			Total
Income from loans and other investments:
Interest and related income		$95,187			$—			$—			$95,187
Less: Interest and related expenses		80,381			—			—			80,381
Income from loans and other investments, net		14,806			—			—			14,806
Other revenues:
Management fees from affiliates		—			6,171			(1,244	)		4,927
Servicing fees		—			2,840			(632	)		2,208
Total other revenues		—			9,011			(1,876	)		7,135
Other expenses:
General and administrative		5,372			15,740			(1,244	)		19,868
Servicing fee expense		632			—			(632	)		—
Total other expenses		6,004			15,740			(1,876	)		19,868
Total other-than-temporary impairments of securities		(35,620	)		—			—			(35,620	)
Portion of other-than-temporary impairments of securities recognized in other comprehensive income		(3,098	)		—			—			(3,098	)
Impairment of real estate held-for-sale		(1,055	)		—			—			(1,055	)
Net impairments recognized in earnings		(39,773	)		—			—			(39,773	)
Recovery of provision for loan losses		34,401			—			—			34,401
Valuation allowance on loans held-for-sale		(224	)		—			—			(224	)
Gain on extinguishment of debt		271,031			—			—			271,031
Income from equity investments in unconsolidated subsidiaries		—			2,105			—			2,105
Income (loss) before income taxes		274,237			(4,624	)		—			269,613
Income tax provision (benefit)		2,615			(1,401	)		—			1,214
Net income (loss)		$271,622			($3,223	)		$—			$268,399
Net income attributable to noncontrolling interests		(1,935	)		—			—			(1,935	)
Net income (loss) attributable to Capital Trust, Inc.		$269,687			($3,223	)		$—			$266,464
Total assets		$1,528,441			$11,448			$—			$1,539,889

All revenues were generated from external sources within the United States. The Investment Management segment received intercompany preferred dividend income of $1.2 million from the Balance Sheet segment for the nine months ended September 30, 2011. In addition, the Investment Management segment earned fees of $632,000 for serving as collateral manager of the CT CDOs consolidated under our Balance Sheet Investment segment as well as special servicing activity for certain CT CDO assets for the nine months ended September 30, 2011.

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Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

The following table details each segment's contribution to our operating results and the identified assets attributable to each such segment for the three months ended, and as of, September 30, 2012 (in thousands):

	Balance Sheet			Investment		Inter-Segment
	Investment			Management		Activities			Total
Income from loans and other investments:
Interest and related income		$6,944			$—		$—			$6,944
Less: Interest and related expenses		5,147			—		—			5,147
Income from loans and other investments, net		1,797			—		—			1,797
Other revenues:
Management fees from affiliates		—			2,165		(619	)		1,546
Servicing fees		—			3,237		(1,031	)		2,206
Total other revenues		—			5,402		(1,650	)		3,752
Other expenses
General and administrative		3,381			4,379		(619	)		7,141
Servicing fees expense		1,031			—		(1,031	)		—
Total other expenses		4,412			4,379		(1,650	)		7,141
Recovery of provision for loan losses		2,811			—		—			2,811
Fair value adjustment on investment in CT Legacy Asset		11,987			—		—			11,987
Income from equity investments in unconsolidated subsidiaries		—			411		—			411
Income before income taxes		12,183			1,434		—			13,617
Income tax provision		167			550		—			717
Net income		$12,016			$884		$—			$12,900
Net income attributable to noncontrolling interests		(5,901	)		—		—			(5,901	)
Net income attributable to Capital Trust, Inc.		$6,115			$884		$—			$6,999
Total assets		$556,003			$25,194		$—			$581,197

All revenues were generated from external sources within the United States. The Investment Management segment received intercompany preferred dividend income of $619,000 million from the Balance Sheet segment for the three months ended September 30, 2012. In addition, the Investment Management segment earned fees of $1.0 million for serving as collateral manager of the CT CDOs consolidated under our Balance Sheet Investment segment as well as special servicing activity for certain CT CDO assets for the three months ended September 30, 2012.

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Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(unaudited)

The following table details each segment's contribution to our operating results and the identified assets attributable to each such segment for the three months ended, and as of, September 30, 2011 (in thousands):

	Balance Sheet			Investment			Inter-Segment
	Investment			Management			Activities			Total
Income from loans and other investments:
Interest and related income		$25,642			$—			$—			$25,642
Less: Interest and related expenses		21,838			—			—			21,838
Income from loans and other investments, net		3,804			—			—			3,804
Other revenues:
Management fees from affiliates		—			2,372			(619	)		1,753
Servicing fees		—			1,671			(211	)		1,460
Total other revenues		—			4,043			(830	)		3,213
Other expenses:
General and administrative		2,427			3,344			(830	)		4,941
Total other expenses		2,427			3,344			(830	)		4,941
Total other-than-temporary impairments of securities		(30,687	)		—			—			(30,687	)
Portion of other-than-temporary impairments of securities recognized in other comprehensive income		173			—			—			173
Impairment of real estate held-for-sale		(1,055	)		—			—			(1,055	)
Net impairments recognized in earnings		(31,569	)		—			—			(31,569	)
Recovery of provision for loan losses		17,152			—			—			17,152
Gain on extinguishment of debt		20,054			—			—			20,054
Income from equity investments in unconsolidated subsidiaries		—			307			—			307
Income before income taxes		7,014			1,006			—			8,020
Income tax provision (benefit)		703			(939	)		—			(236	)
Net income		$6,311			$1,945			$—			$8,256
Net loss attributable to noncontrolling interests		5,466			—			—			5,466
Net income attributable to Capital Trust, Inc.		$11,777			$1,945			$—			$13,722
Total assets		$1,528,441			$11,448			$—			$1,539,889

All revenues were generated from external sources within the United States. The Investment Management segment received intercompany preferred dividend income of $619,000 from the Balance Sheet segment for the three months ended September 30, 2011. In addition, the Investment Management segment earned fees of $211,000 for serving as collateral manager of the CT CDOs consolidated under our Balance Sheet Investment segment as well as special servicing activity for certain CT CDO assets for the three months ended September 30, 2011.

Note 16. Subsequent Events

Subsequent to quarter end, on November 8, 2012, the holders of our outstanding warrants exercised on a cashless basis all of the outstanding warrants. As a result, we issued 1,690,466 shares of our class A common stock pursuant to the terms of the warrants.

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

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

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

Introduction

We are a real estate finance company that specializes in credit sensitive financial products. To date, our investment programs have focused on loans and securities backed by commercial real estate assets. We invest for our own account directly on our balance sheet and for third-parties through a series of investment management vehicles. From the inception of our finance business in 1997 through September 30, 2012, we have completed approximately $12.1 billion of commercial real estate investments. We conduct our operations as a real estate investment trust, or REIT, for federal income tax purposes. We are traded on the New York Stock Exchange, or NYSE, under the symbol “CT”, and are headquartered in New York City.

Sale of Investment Management Platform

On September 27, 2012, we announced our entry into a definitive purchase and sale agreement, or Purchase Agreement, with an affiliate, which we refer to as the Purchaser, of The Blackstone Group L.P., which we refer to as Blackstone. Pursuant to the Purchase Agreement, the Purchaser will acquire our investment management and special servicing businesses, operated through our subsidiary, CT Investment Management Co., LLC, or CTIMCO, and our related private investment fund co-investments for $20.6 million. The Purchaser will also purchase for $10.0 million, or $2.00 per share, 5,000,000 shares of our class A common stock that will represent approximately 17.1% of our common stock outstanding following consummation of the transactions contemplated by the Purchase Agreement, which we refer to as the Transactions. The Purchase Agreement also contemplates that we will enter into a new management agreement pursuant to which a Blackstone affiliate, which we refer to as the New CT Manager, will manage Capital Trust, Inc. following the consummation of the Transactions. Pursuant to the new management agreement, the New CT Manager will manage Capital Trust, Inc. in accordance with investment guidelines and policies approved by our board of directors. Stephen D. Plavin, Geoffrey G. Jervis and Thomas C. Ruffing will continue to serve in their current executive management roles post-transaction. Consummation of the Transactions is subject to customary closing conditions, including the approval of the Transactions by the affirmative vote of the holders of a majority of the outstanding shares of common stock at a special meeting of shareholders that will be called to approve the Transactions. W. R. Berkley and its affiliated entities, holders of approximately 15.9% of our class A common stock, have entered into a voting agreement to support the transaction.

If the Transactions are consummated, we will pay a $2.00 per share special cash dividend to holders of our class A common stock, which will be payable as soon as practicable following closing of the Transactions to shareholders of record as of the close of business on November 12, 2012.

In accordance with NYSE procedures, from November 7, 2012 through the special dividend payment date, our class A common stock will trade with “due-bills” representing an assignment of the right to receive the special dividend. Our class A common stock will not trade ex-dividend until the first business day after the special dividend payment date. Shareholders who sell their shares on or before the special dividend payment date will not be entitled to receive the special dividend.

The sources of funds for the special dividend will be cash on hand prior to the Transactions and the proceeds from the sale of CTIMCO and our private investment fund co-investments. The Purchaser will not receive the special dividend given that its investment in our class A common stock will close after the special dividend record date.

Following the Transactions, we will continue to own our existing cash balances (as reduced to fund expenses of the Transactions and the special dividend), our interest in CT Legacy REIT (as defined below), our carried interest in CT Opportunity Partners I, LP, as well as our retained subordinate interests in our three CT CDOs.

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March 2011 Restructuring

On March 31, 2011, we restructured, amended, or extinguished all of our outstanding recourse debt obligations, which we refer to as our March 2011 restructuring. Our March 2011 restructuring involved: (i) the contribution of certain of our legacy assets to a newly formed subsidiary, CT Legacy REIT Mezz Borrower, Inc., or CT Legacy REIT, (ii) the assumption of our legacy repurchase obligations by CT Legacy REIT, and (iii) the extinguishment of the remainder of our recourse obligations, our senior credit facility and junior subordinated notes. The restructuring was financed with a new $83.0 million mezzanine loan obtained by CT Legacy REIT from an affiliate of Five Mile Capital, and the issuance of equity interests in the common stock of CT Legacy REIT to the former lenders under our senior credit facility and our former junior subordinated noteholders, as well as to an affiliate of Five Mile Capital.

Following the completion of our March 2011 restructuring, we no longer have any recourse debt obligations, and retain unencumbered ownership of 100% of (i) our investment management platform, CT Investment Management Co., LLC, (ii) our co-investment in CT Opportunity Partners I, LP, (iii) our residual ownership interests in three of the CDOs that we issued, CT CDOs I, II, and IV, and (iv) our tax-basis net operating losses. Furthermore, we have a 52% equity interest in the common stock of CT Legacy REIT. Our economic interest in CT Legacy REIT is, however, subject to (i) the secured notes, which are non-recourse obligations that are collateralized by certain of our retained equity interests in the common stock of CT Legacy REIT, (ii) incentive awards that provide for the participation in amounts earned from our retained equity interests in the common stock of CT Legacy REIT, and (iii) the subordinate class B common stock of CT Legacy REIT owned by our former junior subordinate noteholders. In addition to our interest in the common stock of CT Legacy REIT, we also own 100% of its outstanding class A preferred stock.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The preparation of these financial statements requires our management to make estimates and assumptions with regard to the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Actual results could differ from these estimates. There have been no material changes to our Critical Accounting Policies described in our annual report on Form 10-K filed with the Securities and Exchange Commission on February 14, 2012.

Principles of Consolidation and Balance Sheet Presentation

The accompanying financial statements include, on a consolidated basis, our accounts, the accounts of our wholly-owned subsidiaries, and variable interest entities, or VIEs, in which we are the primary beneficiary, prepared in accordance with GAAP. All significant intercompany balances and transactions have been eliminated in consolidation.

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. Assets of all consolidated VIEs can generally only be used to satisfy the obligations of those VIEs, and the liabilities of consolidated VIEs are non-recourse to us. Similarly, the following discussion separately describes (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.

Beginning in the first quarter of 2012, CT Legacy REIT no longer consolidates one of its subsidiaries, CT Legacy Asset, LLC, or CT Legacy Asset, and instead accounts for its net equity investment in CT Legacy Asset on a fair value basis. See Note 1 to our consolidated financial statements for additional discussion.

Discussion of Operations

We include below in our discussion of operations: (i) an overview of the operations of our parent company, Capital Trust, Inc., including its wholly-owned investment management subsidiary, CTIMCO, (ii) a discussion of the consolidated balance sheet and operating results of Capital Trust, Inc. prepared in accordance with GAAP, (iii) a discussion of the adjusted balance sheet of Capital Trust, Inc., and (iv) a discussion of CT Legacy REIT.

We believe that our adjusted balance sheet provides meaningful information to consider, in addition to our consolidated balance sheet prepared in accordance with GAAP. This adjusted measure helps us to evaluate our financial position and performance without the effects of certain transactions and GAAP adjustments that are not necessarily indicative of our current investment portfolio, operations, capitalization, or equity.

See section III below for a presentation and discussion of our adjusted balance sheet.

I. Capital Trust, Inc.

Subsequent to our March 2011 restructuring, our business has focused on managing the operations of our investment management and special servicing platform, and the recovery from the legacy investments within CT Legacy REIT’s portfolio. Our investment management business is operated through our wholly-owned taxable subsidiary, CT Investment Management Co., LLC, or CTIMCO, and includes: (i) management of our public company parent, Capital Trust, Inc.; (ii) collateral management of the four CT CDOs which we have sponsored; (iii) special servicing of investments within both our public company and private equity portfolios, as well as for third-parties; and (iv) sponsorship and management of our private equity management mandates, which are described below.

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Investment Management Overview

We act as an investment manager for ourselves and third-parties and as special servicer for certain of our loan investments, as well as for third-parties. The table below details investment management and special servicing fee revenue generated by CTIMCO for the nine months ended September 30, 2012 and 2011 (in thousands):

Investment Management Revenues
	September 30, 2012			September 30, 2011
Fees generated as:
Public company manager		$1,856			$1,244
Private equity manager		4,741			4,927
CDO collateral manager		433			598
Special servicer		6,558			2,242
Total fees		$13,588			$9,011
Eliminations (1)		(3,256	)		(1,876	)
Total fees, net		$10,332			$7,135

(1) Fees received by CTIMCO from Capital Trust, Inc., or other consolidated subsidiaries, have been eliminated in consolidation.

We have developed our investment management business in order to create operating leverage within our platform, generating fee revenue from investing third-party capital and, in certain instances, earning co-investment income. Our active investment management mandates are described below:

· CT Opportunity Partners I, LP, or CTOPI, is no longer investing capital (its investment period expired in September 2012). The fund held its final closing in July 2008 with $539.9 million in total equity commitments from 28 institutional and individual investors. We have a $25.0 million commitment to invest in the fund, of which $10.2 million is currently funded. Subsequent to the investment period expiration, our obligation to fund additional capital to CTOPI is limited. The fund targeted opportunistic investments in commercial real estate, specifically high yield debt, equity and hybrid instruments, as well as non-performing and sub-performing loans and securities. We earn base management fees of 1.3% per annum of invested capital, as well as net incentive management fees of 17.7% of profits after a 9% preferred return and a 100% return of capital. As of September 30, 2012, CTOPI has invested $491.5 million in 39 transactions, of which $212.8 million remains outstanding.

· CT High Grade Partners II, LLC, or CT High Grade II, is no longer investing capital (its investment period expired in May 2011). The fund closed in June 2008 with $667 million of commitments from two institutional investors. The fund targeted senior debt opportunities in the commercial real estate sector and did not employ leverage. We earn a base management fee of 0.40% per annum on invested capital. In conjunction with the transfer of interests from one of CT High Grade II’s investors to the other in April 2012, we made a $2.8 million (0.44%) co-investment in CT High Grade II. As of September 30, 2012, CT High Grade II has invested $588.1 million in 33 transactions, of which $551.1 million remains outstanding.

· CT High Grade MezzanineSM, or CT High Grade I, is no longer formally investing capital (its investment period officially expired in July 2008), however we have continued investing the “high grade” strategy through CT High Grade I on a non-discretionary basis since the end of the CT High Grade II investment period in May 2011. The separate account closed in November 2006, with a single, related party institutional investor committing $250 million, which was subsequently increased to $350 million in July 2007. As a result of the re-opening of the platform in May 2011 and the reinvesting of certain realized assets, as of September 30, 2012, we have invested $594.0 million for this account. This separate account has a single investor, W. R. Berkley Corporation, or WRBC, which is our largest shareholder and designates an appointee to our board of directors. CT High Grade I targets lower LTV subordinate debt investments without leverage and invested $420.9 million in 12 transactions during its initial investment period, as well as $173.1 million in five transactions since the platform was re-opened in May 2011. We generally earn management fees of 0.25% per annum on invested capital for substantially all of CT High Grade I’s investments. As of September 30, 2012, $273.3 million of these investments remain outstanding.

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· CT Large Loan 2006, Inc., or CT Large Loan, is no longer investing capital (its investment period expired in May 2008). The fund closed in May 2006 with total equity commitments of $325 million from eight institutional investors. In light of the performance of this fund, we do not charge the full management fee of 0.75% per annum of fund assets (capped at 1.5% on invested equity), and instead voluntarily capped our fee at $805,000 per annum.

The table below provides additional information regarding the three private equity funds and one separate account we managed as of September 30, 2012.

Investment Management Mandates, as of September 30, 2012
(in millions)
							Base	Incentive
		Total	Total Capital		Co-		Management	Management
	Type	Investments(1)	Commitments		Investment %		Fee	Fee
Investing:
CT High Grade I	Sep. Acc.	$298	$581	(2)	—%		0.25% (Assets)(3)	N/A
Liquidating:
CTOPI	Fund	$213	$540		4.63%	(4)	1.28% (Assets)	(5)
CT High Grade II	Fund	$551	$667		0.44%	(6)	0.40% (Assets)	N/A
CT Large Loan	Fund	$172	$325		—%	(7)	0.75% (Assets)(8)	N/A

(1)	Represents total investments, on a cash basis, as of period-end.
(2)	CT High Grade I ultimately closed with capital commitments of $350 million. Subsequent to the expiration of the CT High Grade I investment period, we continued to invest on behalf of WRBC under the CT High Grade I platform on a non-discretionary basis, bringing WRBC’s total allocated capital to $581 million as of September 30, 2012.
(3)	We generally earn fees equal to 0.25% per annum of invested capital, however due to the non-discretionary nature of this investment vehicle, in certain cases we earn fees which may be greater or less than 0.25% per annum.
(4)	We have committed to invest $25.0 million in CTOPI.
(5)	CTIMCO earns net incentive management fees of 17.7% of profits after a 9% preferred return on capital and a 100% return of capital, subject to a catch-up. We have allocated 45% of the CTOPI incentive management fees to our employees as long-term performance awards.
(6)	In conjunction with the transfer of interests from one of CT High Grade II’s investors to the other in April 2012, we purchased a 0.44% interest in CT High Grade II for $2.8 million, representing a $2.9 million capital commitment.
(7)	We have co-invested on a pari passu, asset by asset basis with CT Large Loan.
(8)	Capped at 1.5% of equity. In light of the performance of this fund, we do not charge the full management fee, and instead we have voluntarily capped our fee at $805,000 per annum.

As of September 30, 2012, we held co-investments in two of the private equity funds that we manage, CTOPI and CT High Grade II. These investments totaled $18.7 million as of September 30, 2012, and were recorded as equity investments in unconsolidated subsidiaries on our consolidated balance sheet. Our investment in CTOPI includes a $5.9 million incentive allocation to CTIMCO as the general partner of CTOPI, however our ability to ultimately collect these incentive allocations is contingent upon the performance of CTOPI’s current and future investments. Accordingly, we have deferred recognition of income from such incentive allocations and have recognized an equivalent $5.9 million unearned revenue liability as a component of accounts payable, accrued expenses and other liabilities on our consolidated balance sheet. See Note 4 to our consolidated financial statements for additional discussion.

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Originations

We have historically allocated investment opportunities between our balance sheet and investment management vehicles based upon our assessment of risk and return profiles, the availability and cost of capital, and applicable regulatory restrictions associated with each opportunity. Currently, we are originating investments only for our investment management business, which are summarized in the table below for the nine months ended September 30, 2012 and for the year ended December 31, 2011.

Originations(1)
($ in millions)	Nine months ended September 30, 2012	Year ended December 31, 2011
	#   /    $	#    /    $
Investment management	6   /  $123	11   /  $219

(1) Includes total commitments, both funded and unfunded, net of any related purchase discounts.

Asset Management

We actively manage the CT Legacy REIT portfolio and the assets held by our investment management vehicles with our in-house team of asset managers. While these investments are primarily in the form of debt, we are aggressive in exercising the rights afforded to us as a lender. These rights may include collateral level budget approvals, lease approvals, loan covenant enforcement, escrow/reserve management/collection, collateral release approvals and other rights that we may negotiate. In light of the recent deterioration in property level performance, property valuation, and the real estate capital markets, a significant number of our loans are either non-performing and/or on our watch list. This requires intensive efforts on the part of our asset management team to maximize the recovery of those investments.

We actively manage our various securities portfolios using a combination of quantitative tools and loan/property level analysis to monitor the performance of the securities and their collateral against original expectations. Securities are analyzed to monitor underlying loan delinquencies, transfers to special servicing, and changes to the servicer’s watch list. Realized losses on underlying loans are tracked and compared to original loss expectations. On a periodic basis, individual loans of concern are also re-underwritten.

Investment in CT Legacy REIT

Following the completion of our March 2011 restructuring, we retained a 52% equity interest in the class A common stock of CT Legacy REIT, comprised of 4.4 million shares of class A-1 common stock and 775,000 shares of class A-2 common stock. Also, in April 2011, we purchased 118,651 shares of class B common stock of CT Legacy REIT for an average price of $1.20 per share. The outstanding common stock of CT Legacy REIT is comprised of 4.4 million shares of class A-1 common stock, 5.6 million shares of class A-2 common stock, and 1.5 million shares of class B common stock. We also own 100% of the outstanding class A preferred stock of CT Legacy REIT, which initially entitles us to cumulative preferred dividends of $7.5 million per annum. These dividends will be reduced in January 2013 to the greater of (i) 2.5% of certain of CT Legacy REIT’s assets, and (ii) $1.0 million per annum. As a result of our consolidation of CT Legacy REIT, these shares of class A preferred stock are not represented on our financial statements.

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The following table details the allocation of CT Legacy REIT’s adjusted equity by class of common stock, and Capital Trust Inc.’s aggregate investment in the common stock of CT Legacy REIT on an adjusted basis as of September 30, 2012. The adjusted equity balance is used to evaluate our investment in CT Legacy REIT because it excludes from GAAP equity items which are not indicative of our economic interests in the recovery of our legacy portfolio. See section III below for a presentation of CT Legacy REIT’s adjusted balance sheet.

Capital Trust, Inc.'s Investment in CT Legacy REIT as of September 30, 2012
(in thousands)
CT Legacy REIT total adjusted assets (at fair value) (1)	$116,245
CT Legacy REIT total adjusted liabilities (1)	(625	)
Total CT Legacy REIT adjusted equity (1)	$115,620
CT Legacy REIT equity:
Allocable to Class A-1 common stock	$43,551
Allocable to Class A-2 common stock	64,749
Allocable to Class B common stock	7,195
Allocable to Class B preferred stock	125
	$115,620
Capital Trust, Inc. ownership by class:
Class A-1 common stock	100	%
Class A-2 common stock	14	%
Class B common stock (2)	8	%
Capital Trust, Inc. adjusted equity allocation:
Class A-1 common stock	$43,551
Class A-2 common stock	8,951
Class B common stock (2)	583
Total Capital Trust investment in CT Legacy REIT	$53,085

(1)	See section III below for a presentation and discussion of CT Legacy REIT’s adjusted balance sheet. See Note 12 to our consolidated financial statements for discussion of the discounted cash flow valuation of CT Legacy Asset, the largest asset of CT Legacy REIT.
(2)	The class B common stock is a subordinate class that entitles its holders to receive approximately 25% of the dividends that would otherwise be payable to the class A-1 common stock, after aggregate cash distributions of $50.0 million have been paid to all other classes of common stock.

Our $53.1 million interest in the common stock of CT Legacy REIT is subject to (i) the secured notes, which are collateralized by certain of our equity interests in the common stock of CT Legacy REIT, and (ii) incentive awards that provide for the participation in amounts earned from our retained equity interests in the common stock of CT Legacy REIT.

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The following table details our interest in CT Legacy REIT’s adjusted equity, net of the secured notes and management incentive awards as of September 30, 2012 (in thousands):

Capital Trust, Inc.'s Net Investment in CT Legacy REIT as of September 30, 2012
Gross investment in CT Legacy REIT (1)	$53,085
Secured notes, including prepayment premium (2)	(11,059	)
Management incentive awards plan, fully vested (3)	(7,805	)
Investment in CT Legacy REIT, net	$34,221

(1)	Gross investment in CT Legacy REIT is calculated on an adjusted basis as detailed in the preceding table. See section III below for a presentation and discussion of CT Legacy REIT’s adjusted balance sheet.
(2)	Includes the full potential prepayment premium on secured notes, as described below. We carry this liability at its amortized basis of $8.3 million on our balance sheet as of September 30, 2012. The remaining interest and prepayment premium will be recognized, as applicable, over the term of the secured notes as a component of interest expense.
(3)	Assumes full payment of the management incentive awards plan, as described below, based on the hypothetical GAAP liquidation value of CT Legacy REIT as of September 30, 2012. We periodically accrue a payable for the management incentive awards plan based on the vesting schedule for the awards and continued employment of the award recipients. As of September 30, 2012, our balance sheet includes $4.0 million in accounts payable and accrued expenses for the management incentive awards plan.

Secured Notes

In conjunction with our March 2011 restructuring and the corresponding satisfaction of our senior credit facility and junior subordinated notes, wholly-owned subsidiaries issued secured notes to these former creditors, which secured notes are non-recourse to us. The secured notes had an aggregate initial face balance of $7.8 million and are secured by 93.5% of our equity interests in the class A-1 and class A-2 common stock of CT Legacy REIT, which represents 48.3% of the total outstanding class A-1 and class A-2 common stock of CT Legacy REIT. The secured notes mature on March 31, 2016 and bear interest at a rate of 8.2% per annum, which interest may be deferred until maturity. All dividends we receive from our equity interests in the common stock of CT Legacy REIT which serve as collateral under the secured notes must be used to pay, or prepay, interest and principal due thereunder, and only after the notes’ full satisfaction will we receive any cash flow from the common equity interests in CT Legacy REIT that serve as collateral for the notes. Any prepayment, or partial prepayment, of the secured notes will incur a prepayment premium resulting in a total payment of principal and interest under the secured notes of $11.1 million.

In April 2011, we purchased $405,000 of the secured notes at par.

Management Incentive Awards Plan

Upon completion of our March 2011 restructuring, we granted senior level employees incentive awards issued under our long term incentive plan that participate in amounts earned from our retained equity interest in CT Legacy REIT. The awards provide payments to certain senior level employees equal to as much as 6.75% of the total recovery (subject to certain caps) of our legacy assets, net of CT Legacy REIT’s obligations, when and if distributed to us as dividends.

Class A Preferred Stock

In addition to our interest in the common stock of CT Legacy REIT, we also own 100% of its outstanding class A preferred stock, which initially entitles us to cumulative preferred dividends of $7.5 million per annum. These dividends will be reduced in January 2013 to the greater of (i) 2.5% of certain of CT Legacy REIT’s assets, and (ii) $1.0 million per annum. As a result of our consolidation of CT Legacy REIT, these shares of class A preferred stock are not represented on our balance sheet.

Taxes

Capital Trust, Inc. has made a tax election to be treated as a REIT, and therefore generally is not subject to federal, state, and local income taxes except for the operations of its taxable REIT subsidiary, CTIMCO. The primary benefit from this election is that we are able to deduct dividends paid to our shareholders from the calculation of taxable income, effectively eliminating corporate taxes on the operations of the REIT. In order to qualify as a REIT, our activities must focus on real estate investments and we must meet certain asset, income, ownership and distribution requirements. These qualifications have become more difficult to meet in light of the transfer of our legacy portfolio to CT Legacy REIT in conjunction with our March 2011 restructuring, and the lack of new, replacement investment activity. If we fail to maintain our qualification as a REIT, we may be subject to material penalties and potentially subject to past and future taxes. As of September 30, 2012 and December 31, 2011, we were in compliance with all REIT requirements.

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We have net operating losses, or NOLs, and net capital losses, or NCLs, available to be carried forward and utilized in current or future periods. As of December 31, 2011, these included NOLs of approximately $161.5 million and NCLs of approximately $120.8 million at Capital Trust, Inc. The utilization of NOLs to offset our taxable income or distribution requirements will require us to pay alternative minimum taxes.

II. Discussion of Consolidated Operations of Capital Trust, Inc.

Balance Sheet Investments

Our consolidated balance sheet investments include various types of commercial mortgage backed securities and collateralized debt obligations, or Securities, and commercial real estate loans and related instruments, or Loans, all of which are assets of either CT Legacy REIT or consolidated securitization vehicles. We collectively refer to these as Interest Earning Assets. The table below shows our Interest Earning Assets as of September 30, 2012 and December 31, 2011 (in millions):

Consolidated Interest Earning Assets
	September 30, 2012					December 31, 2011
	Book Value		Yield(1)			Book Value		Yield(1)
CT Legacy REIT
Securities held-to-maturity		$—		―	%		$3		3.31	%
Loans receivable, net (2)		—		—			207		5.21
Loans held-for-sale, net		—		—			31		6.26
Subtotal / Weighted Average		$—		—	%		$241		5.32	%
Securitization Vehicles
Securities held-to-maturity		$155		6.32	%		$359		7.41	%
Loans receivable, net		214		4.63			613		5.72
Subtotal / Weighted Average		$369		5.34	%		$972		6.34	%
Total / Weighted Average		$369		5.34	%		$1,213		6.14	%

(1)	Yield on floating rate assets assumes LIBOR of 0.21% and 0.30% at September 30, 2012 and December 31, 2011, respectively.
(2)	Excludes, as of December 31, 2011, loan participations sold with a net book value of zero that are net of $97.5 million of provisions for loan losses as of December 31, 2011.

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Asset Management

The table below details the overall credit profile of Interest Earning Assets held in consolidated securitization vehicles, which includes: (i) Loans where we have foreclosed upon the underlying collateral and own an equity interest in real estate, (ii) Loans against which we have recorded a provision for loan losses, or reserves, (iii) Securities which have been other-than-temporarily impaired, and (iv) Loans and Securities that are categorized as Watch List Assets, which are currently performing but pose a higher risk of non-performance and/or loss. We actively monitor and manage Watch List Assets to mitigate these risks in our portfolio.

Portfolio Performance - Consolidated Securitization Vehicles
(in millions, except for number of investments)	September 30, 2012			December 31, 2011
Interest earning assets of consolidated     securitization vehicles ($ / #)		$369 / 47			$972 / 123
Real estate owned ($ / #)	$─ / ─				$10 / 2
Percentage of interest earning assets		―	%		1.1	%
Impaired Loans (1)
Performing loans ($ / #)	$─ / 1				$17 / 4
Non-performing loans ($ / #)		$4 / 5			$26 / 7
Total ($ / #)		$4 / 6			$43 / 11
Percentage of interest earning assets		1.1	%		4.4	%
Impaired Securities (1) ($ / #)		$12 / 11			$16 / 14
Percentage of interest earning assets		3.4	%		1.6	%
Watch List Assets (2)
Watch list loans ($ / #)		$92 / 3			$78 / 6
Watch list securities ($ / #)		$40 / 6			$16 / 5
Total ($ / #)		$132 / 9			$94 / 11
Percentage of interest earning assets		35.8	%		9.7	%

(1)	Amounts represent net book value after provisions for loan losses, valuation allowances on loans-held-for-sale and other-than-temporary impairments of securities.
(2)	Watch List Assets exclude Loans against which we have recorded a provision for loan losses or valuation allowances, and Securities which have been other-than-temporarily impaired.

As of September 30, 2012, there were significant differences between the estimated fair value and the book value of some of the Securities in our consolidated securitization vehicles portfolio. We believe these differences to be related to the high degree of structural complexity combined with poor reporting available on these securities and a general negative bias against structured financial products and not reflective of a change in cash flow expectations from these securities. Accordingly, we have not recorded any additional other-than-temporary impairments against such Securities. See note 7 to our consolidated financial statements for additional discussion of securities with unrealized losses.

The ratings activity of our consolidated Securities portfolio over the nine months ended September 30, 2012 and the year ended December 31, 2011 is detailed below:

Rating Activity(1)
	Nine months ended September 30, 2012	Year ended December 31, 2011
Securities Upgraded	4	5
Securities Downgraded	10	22

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

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Capitalization

We capitalize our business with a combination of debt and equity which has included common equity, preferred equity, unsecured debt, and secured debt. As of September 30, 2012, our consolidated debt obligations, which are all non-recourse to us, include (i) our secured notes, which are secured only by certain of our equity interests in the common stock of CT Legacy REIT, and (ii) securitized debt obligations of consolidated securitization vehicles. Our equity capital is currently comprised entirely of common stock. From March 31, 2011 through February 10, 2012, we consolidated the debt obligations of CT Legacy REIT, including its repurchase facility and mezzanine loan, which were also non-recourse to us.

The table below describes our consolidated debt liabilities including those of CT Legacy REIT and our consolidated securitization vehicles, as of September 30, 2012 and December 31, 2011:

Consolidated Interest Bearing Liabilities (1)
(Principal balance, in millions)	September 30, 2012			December 31, 2011
Non-Recourse debt obligations
Capital Trust, Inc.
Secured notes		$8			$8
Weighted average effective cost of Capital Trust, Inc. debt		8.19	%		8.19	%
CT Legacy REIT
Repurchase obligations (2)		$—			$58
Mezzanine loan (2)		—			65
Total CT Legacy REIT debt obligations		$—			$123
Weighted average effective cost of CT Legacy REIT debt (3) (4)		N/A			11.14	%
Consolidated Securitization Vehicles
CT collateralized debt obligations		$447			$742
Other consolidated securitization vehicles		51			469
Total securitization vehicles debt obligations		$498			$1,211
Weighted average effective cost of securitization vehicles debt (3) (5)		1.21	%		2.68	%
Total interest bearing liabilities		$498			$1,334

(1)	Excludes loan participations sold.
(2)	As further described in Note 6 to our consolidated financial statements, we deconsolidated CT Legacy Asset, a wholly-owned subsidiary of CT Legacy REIT, in the first quarter of 2012. As a result, its debt obligations are no longer included in our consolidated financial statements.
(3)	Floating rate debt obligations assume LIBOR of 0.21% and 0.30% at September 30, 2012 and December 31, 2011, respectively.
(4)	Including the impact of interest rate hedges with an aggregate notional balance of $60.8 million as of December 31, 2011, the effective all-in cost of CT Legacy REIT’s debt obligations would be 13.46% per annum.
(5)	Including the impact of interest rate hedges with an aggregate notional balance of $273.7 and $296.6 million as of September 30, 2012 and December 31, 2011, respectively, the effective all-in cost of our consolidated securitization vehicles’ debt obligations would be 4.09% and 3.98% per annum, respectively.

Secured Notes

In conjunction with our March 2011 restructuring and the corresponding satisfaction of our senior credit facility and junior subordinated notes, wholly-owned subsidiaries issued secured notes to these former creditors, which secured notes are non-recourse to us. The secured notes had an aggregate initial face balance of $7.8 million and are secured by 93.5% of our equity interests in the class A-1 and A-2 common stock of CT Legacy REIT, which represents 48.3% of the total outstanding class A-1 and A-2 common stock of CT Legacy REIT. The secured notes mature on March 31, 2016 and bear interest at a rate of 8.2% per annum, which interest may be deferred until maturity. All dividends we receive from our equity interests in the common stock of CT Legacy REIT which serve as collateral under the secured notes must be used to pay, or prepay, interest and principal due thereunder, and only after the notes’ full satisfaction will we receive any cash flow from the common equity interests in CT Legacy REIT that serve as collateral for the notes. Any prepayment, or partial prepayment, of the secured notes will incur a prepayment premium resulting in a total payment of principal and interest under the secured notes of $11.1 million.

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During the second quarter of 2011, we purchased $405,000 of the secured notes at par.

Repurchase Obligations

As of December 31, 2011, CT Legacy REIT was party to one repurchase obligation with JPMorgan, which was non-recourse to Capital Trust, Inc., had an outstanding balance of $58.5 million, and an all-in cost of LIBOR plus 2.50% per annum.

In February 2012, CT Legacy REIT refinanced its repurchase facility and its mezzanine loan with a single, new $124.0 million repurchase facility from JPMorgan, obtained by its subsidiary CT Legacy Asset. This refinancing resulted in the deconsolidation of CT Legacy Asset and with it, the repurchase facility. See Note 6 to our consolidated financial statements for further discussion.

Mezzanine Loan

As of December 31, 2011, CT Legacy REIT was party to a mezzanine loan with Five Mile Capital, which was non-recourse to Capital Trust, Inc., had an outstanding balance of $65.3 million, and an all-in cost of 18.61% per annum.

In February 2012, CT Legacy REIT refinanced the mezzanine loan and its JPMorgan repurchase facility with a single, new $124.0 million repurchase facility from JPMorgan, obtained by its subsidiary CT Legacy Asset.

Securitized Debt Obligations

Non-recourse debt obligations of consolidated securitization vehicles include our CT CDOs, as well as securities issued by other consolidated securitization vehicles which are not sponsored by us.

These consolidated non-recourse securitized debt obligations are described below (in millions):

Non-Recourse Securitized Debt Obligations
	September 30, 2012					December 31, 2011
	Book Value		All-in Cost(1)			Book Value		All-in Cost(1)
CT CDOs
CT CDO I		$91		1.3	%		$121		1.2	%
CT CDO II		157		1.2			200		1.2
CT CDO III		—		—			200		5.2
CT CDO IV		199		1.2			222		1.2
Total CT CDOs		$447		1.2	%		$743		2.3	%
Other securitization vehicles
GSMS 2006-FL8A		$51		1.1	%		$51		1.4	%
GMACC 1997-C1		—		—			84		7.1
GECMC 00-1 H		—		—			25		5.5
MSC 2007-XLCA		—		—			310		2.4
Total other securitization vehicles		$51		1.1	%		$470		3.3	%
Total non-recourse debt obligations		$498		1.2	%		$1,213		2.7	%

(1) Includes amortization of premiums and issuance costs of CT CDOs. Floating rate debt obligations assume LIBOR of 0.21% and 0.30% at September 30, 2012 and December 31, 2011, respectively.

Shareholders’ Equity

We did not issue any new shares of class A common stock during the nine months ended September 30, 2012. Changes in the number of outstanding shares during the nine months ended September 30, 2012 resulted from employee restricted common stock grants, forfeitures and vesting, as well as stock unit grants to our board of directors.

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The following table calculates our book value per share as of September 30, 2012 and December 31, 2011:

Shareholders' Equity
	September 30, 2012			December 31, 2011
Shareholders equity		($24,559,202	)		($110,423,805	)
Shares:
Class A common stock		21,978,571			21,966,684
Restricted common stock		536,536			244,424
Stock units		676,515			562,335
Dilutive Warrants		—			—
Total		23,191,622			22,773,443
Book value per share		($1.06	)		($4.85	)

As of September 30, 2012, there were 22,515,107 shares of our class A common stock and restricted common stock outstanding. There were also outstanding warrants to purchase 3,479,691 shares of our class A common stock at an exercise price of $1.79 per share. The warrants became exercisable on March 16, 2012, will expire on March 16, 2019, and may be exercised in a cashless manner.

On November 8, 2012, all of our outstanding warrants were exercised in a cashless manner. See Note 16 to our consolidated financial statements for further discussion.

Other Balance Sheet Items

Participations sold represent interests in certain loans that we originated and subsequently sold to one of our investment management vehicles or to third-parties. We have historically presented these participations sold as both assets and non-recourse liabilities because these arrangements do not qualify as sales under GAAP. Generally, participations sold are recorded as assets and liabilities in equal amounts on our consolidated balance sheets, and an equivalent amount of interest income and interest expense is recorded on our consolidated statements of operations. We have no economic exposure to these liabilities.

During September 2012, our one remaining loan participation sold was repaid.

Interest Rate Exposure

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

Our counterparties in these transactions are large financial institutions and we are dependent upon the financial health of these counterparties and a functioning interest rate derivative market in order to effectively execute our hedging strategy.

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The table below details our interest rate exposure as of September 30, 2012 and December 31, 2011:

Interest Rate Exposure
(in millions)	September 30, 2012			December 31, 2011
Value exposure to interest rates(1)
Fixed rate assets		$277			$844
Fixed rate debt		(22	)		(394	)
Interest rate swaps		(274	)		(357	)
Net fixed rate exposure		($19	)		$93
Weighted average coupon (fixed rate assets)		6.30	%		7.29	%
Cash flow exposure to interest rates(1)
Floating rate assets		$253			$863
Floating rate debt		(483	)		(901	)
Interest rate swaps		274			357
Net floating rate exposure		$44			$319
Weighted average coupon (floating rate assets) (2)		3.63	%		3.59	%
Net income impact from 100 bps change in LIBOR		$0.4			$3.2

(1)	All values are in terms of face or notional amounts, and include loans classified as held-for-sale.
(2)	Weighted average coupon assumes LIBOR of 0.21% and 0.30% at September 30, 2012 and December 31, 2011, respectively.

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Results of Operations

Comparison of Results of Operations: Three Months Ended September 30, 2012 vs. September 30, 2011
(in thousands, except per share data)
	2012			2011			Change			% Change
Income from loans and other investments:
Interest and related income		$6,944			$25,642			($18,698	)		(72.9	%)
Less: Interest and related expenses		5,147			21,838			(16,691	)		(76.4	%)
Income from loans and other investments, net		1,797			3,804			(2,007	)		(52.8	%)
Other revenues:
Management fees from affiliates		1,546			1,753			(207	)		(11.8	%)
Servicing fees		2,206			1,460			746			51.1	%
Total other revenues		3,752			3,213			539			16.8	%
Other expenses:
General and administrative		7,141			4,941			2,200			44.5	%
Total other expenses		7,141			4,941			2,200			44.5	%
Total other-than-temporary impairments of securities		—			(30,687	)		30,687			(100.0	%)
Portion of other-than-temporary impairments of securities      recognized in other comprehensive income		—			173			(173	)		(100.0	%)
Impairment of real estate held-for-sale		—			(1,055	)		1,055			(100.0	%)
Net impairments recognized in earnings		—			(31,569	)		31,569			(100.0	%)
Recovery of provision for loan losses		2,811			17,152			(14,341	)		(83.6	%)
Gain on extinguishment of debt		—			20,054			(20,054	)		(100.0	%)
Fair value adjustment on investment in CT Legacy Asset		11,987			—			11,987			100.0	%
Income from equity investments in unconsolidated subsidiaries		411			307			104			33.9	%
Income before income taxes		13,617			8,020			5,597			69.8	%
Income tax provision (benefit)		717			(236	)		953			N/A
Net income		$12,900			$8,256			$4,644			56.3	%
Net (income) loss attributable to noncontrolling interests		(5,901	)		5,466			(11,367	)		N/A
Net income (loss) attributable to Capital Trust, Inc.		$6,999			$13,722			($6,723	)		(49.0	%)
Net income (loss) per share - diluted		$0.28			$0.57			($0.28	)		(50.0	%)
Dividend per share		$0.00			$0.00			$0.00			N/A
Average LIBOR		0.24%			0.22%			0.01%			5.5%

Income from loans and other investments, net

As discussed in Note 1 to our consolidated financial statements, we deconsolidated the assets and liabilities of CT Legacy Asset in the first quarter of 2012. As a result of this and repayments in our portfolio, interest income decreased $18.7 million, or 73%, and interest expense decreased by $16.7 million, or 76%, during the three months ended September 30, 2012 compared to the three months ended September 30, 2011. On a net basis, net interest income decreased by $2.0 million as the decrease in interest income was more than the reduction in interest expense.

Management fees from affiliates

Base management fees from our investment management business decreased $207,000, or 12%, during the third quarter of 2012 compared to the third quarter of 2011. The decrease was attributable to repayment activity in our investment management vehicles.

Servicing fees

Servicing fees increased $746,000 during the third quarter of 2012 compared to 2011. The increase in fees was primarily due to modification activity on loans for which we are named special servicer.

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General and administrative expenses

General and administrative expenses include personnel costs, operating expenses, professional fees, and expenses associated with consolidated securitization vehicles. General and administrative expenses increased $2.2 million during the third quarter of 2012 compared to 2011. This increase was primarily due to expenses associated with the pending sale of our investment management platform.

Net impairments recognized in earnings

There were no impairments recognized in earnings during the third quarter of 2012. During the third quarter of 2011, we recorded $30.7 million of other-than-temporary impairments of securities on one of our securities that had an adverse change in cash flow expectations. Of this amount, $30.5 million was included in earnings and the remainder, $173,000, was recorded in other comprehensive income. In addition, we recorded a $1.1 million impairment on real estate held-for-sale to reflect the property at fair value.

Recovery of provision for loan losses

During the third quarter of 2012, we recorded a $2.8 million net recovery of loan losses. This net recovery included a $4.1 million recovery of one loan that had previously been impaired, offset by a $1.3 million provision against another loan.

During the third quarter of 2011, we recorded a $17.2 million recovery of provisions for loan losses. The recovery was primarily related to two loans that had previously been impaired.

Gain on extinguishment of debt

There were no gains on extinguishment of debt during the third quarter of 2012. During the third quarter of 2011, we recorded a $20.1 million gain on the extinguishment of debt due to realized losses from collateral assets held by consolidated securitization vehicles.

Fair value adjustment on investment in CT Legacy Asset

We have elected the fair value option of accounting for CT Legacy REIT’s investment in CT Legacy Asset, pursuant to which we record this investment at fair value rather than at our historical cost investment amount. During the third quarter of 2012, we recognized $12.0 million of fair value adjustments on our investment in CT Legacy Asset. See Note 6 to our consolidated financial statements for further discussion. We recorded no such fair value adjustments in 2011.

Income from equity investments in unconsolidated subsidiaries

The income from equity investments during the third quarter of 2012 of $411,000 was comprised of income from our co-investments in CTOPI and CT High Grade II. CTOPI’s income was largely driven by income from operations, while CT High Grade II’s income was the result of positive fair value adjustments on its investment portfolio.

Similarly, the income from equity investments during the third quarter of 2011 of $307,000 was from our co-investment in CTOPI. CTOPI’s income for the quarter was primarily comprised of investment income and fair value adjustments. We did not have a co-investment in CT High Grade II in the third quarter of 2011.

Income tax provision

During the third quarter of 2012, we recorded an income tax provision of $717,000 comprised of an estimated income tax liability of $918,000 at our taxable REIT subsidiary, CTIMCO, and a $166,000 provision at Capital Trust associated with our use of NOLs. This was offset by a $367,000 non-cash income tax benefit due to an increase in the deferred tax asset of CTIMCO.

During the third quarter of 2011, we recorded a net income tax benefit of $236,000 which is primarily comprised of an increase of our deferred tax asset at CTIMCO.

Net income attributable to noncontrolling interests

The net income attributable to noncontrolling interests recorded during the third quarter of 2012 and 2011 represents the pro-rata share of CT Legacy REIT’s net income for the quarter allocable to equity interests not owned by us.

Dividends

We did not pay any dividends on our class A common stock in the third quarter of 2012 or 2011.

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Comparison of Results of Operations: Nine Months Ended September 30, 2012 vs. September 30, 2011
(in thousands, except per share data)
	2012			2011			Change			% Change
Income from loans and other investments:
Interest and related income		$28,423			$95,187			($66,764	)		(70.1	%)
Less: Interest and related expenses		33,902			80,381			(46,479	)		(57.8	%)
Income from loans and other investments, net		(5,479	)		14,806			(20,285	)		N/A
Other revenues:
Management fees from affiliates		4,741			4,927			(186	)		(3.8	%)
Servicing fees		5,591			2,208			3,383			153.2	%
Total other revenues		10,332			7,135			3,197			44.8	%
Other expenses:
General and administrative		16,193			19,868			(3,675	)		(18.5	%)
Total other expenses		16,193			19,868			(3,675	)		(18.5	%)
Total other-than-temporary impairments of securities		—			(35,620	)		35,620			(100.0	%)
Portion of other-than-temporary impairments of securities      recognized in other comprehensive income		(160	)		(3,098	)		2,938			(94.8	%)
Impairment of real estate held-for-sale		—			(1,055	)		1,055			(100.0	%)
Net impairments recognized in earnings		(160	)		(39,773	)		39,613			(99.6	%)
Recovery of provision for loan losses		2,819			34,401			(31,582	)		(91.8	%)
Valuation allowance on loans held-for-sale		—			(224	)		224			(100.0	%)
Gain on extinguishment of debt		—			271,031			(271,031	)		(100.0	%)
Fair value adjustment on investment in CT Legacy Asset		19,645			—			19,645			100.0	%
Gain on deconsolidation of subsidiary		146,380			—			146,380			100.0	%
Income from equity investments in unconsolidated subsidiaries		1,312			2,105			(793	)		(37.7	%)
Income before income taxes		158,656			269,613			(110,957	)		(41.2	%)
Income tax provision		1,783			1,214			569			46.9	%
Net income		$156,873			$268,399			($111,526	)		(41.6	%)
Net income attributable to noncontrolling interests		(81,038	)		(1,935	)		(79,103	)		N/A
Net income attributable to Capital Trust, Inc.		$75,835			$266,464			($190,629	)		(71.5	%)
Net income per share - diluted		$3.10			$11.08			($7.98	)		(72.0	%)
Dividend per share		$0.00			$0.00			$0.00			N/A
Average LIBOR		0.24%			0.21%			0.03%			16.6%

Income from loans and other investments, net

As discussed in Note 1 to our consolidated financial statements, we deconsolidated the assets and liabilities of CT Legacy Asset in the first quarter of 2012. As a result of this and repayments in our portfolio, interest income decreased $66.8 million, or 71%, and interest expense decreased by $46.5 million, or 58%, during the first nine months of 2012 compared to the first nine months of 2011. On a net basis, net interest income decreased by $20.3 million as the decrease in interest income was more than the reduction in interest expense.

Management fees from affiliates

Base management fees from our investment management business decreased $186,000, or 4%, during the first nine months of 2012 compared to the first nine months of 2011. The increase was attributable to net repayment activity in our investment management vehicles.

Servicing fees

Servicing fees increased $3.4 million during the first nine months of 2012 compared to the first nine months of 2011. The increase in fees was primarily due to modification activity on loans for which we are named special servicer.

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General and administrative expenses

General and administrative expenses include personnel costs, operating expenses, professional fees and expenses associated with consolidated securitization vehicles. General and administrative expenses decreased by $3.7 million between the first nine months of 2012 and the first nine months of 2011. The decrease was primarily due to (i) $2.9 million of one-time restructuring bonuses paid in 2011 and (ii) a $2.8 million decrease in expenses recognized under the CT Legacy REIT management incentive awards plan. This was offset by $2.1 million of additional 2012 expenses associated with the pending sale of our investment management platform.

Net impairments recognized in earnings

During the first nine months of 2012, we recognized a $160,000 impairment, representing additional credit loss on one of the securities in our consolidated securitization vehicles.

During the nine months ended September 30, 2011, we recorded a gross other-than-temporary impairment of $35.6 million on seven securities that had an adverse change in cash flow expectations. In addition, we recognized $3.1 million of previous other-than-temporary impairments from other comprehensive income into earnings, to reflect additional credit impairments on these securities. We also recorded a $1.1 million impairment on real estate held-for-sale to reflect the property at fair value.

Recovery of provision for loan losses

During the first nine months of 2012, we recorded a $2.8 million net recovery of provisions for loan losses. This net recovery included a $4.1 million recovery of one loan that had previously been impaired, offset by a $1.3 million provision against another loan.

During the nine months ended September 30, 2011, we recorded a net $34.4 million recovery of provisions for loan losses. The net recovery included $43.8 million of recoveries on previously impaired loans, offset by $9.4 million of additional loan loss provisions against three loans.

Valuation allowance on loans held-for-sale

There were no valuation allowances on loans held-for-sale during the first nine months of 2012. During the nine months ended September 30, 2011, we recorded a valuation allowance of $224,000 against one loan we classified as held-for-sale.

Gain on extinguishment of debt

There were no gains on extinguishment of debt during the first nine months of 2012. During the nine months ended September 30, 2011, we recorded $271.0 million of gain on the extinguishment of debt. This was primarily comprised of (i) a $174.8 million gain on extinguishment of our senior credit facility and junior subordinated notes, (ii) a $75.0 million gain associated with the elimination of a loan participation sold liability, and (iii) $20.1 million of gains on the extinguishment of debt due to realized losses from collateral assets held by consolidated securitization vehicles.

Fair value adjustment on investment in CT Legacy Asset

We have elected the fair value option of accounting for CT Legacy REIT’s investment in CT Legacy Asset, pursuant to which we record this investment at fair value rather than at our historical cost investment amount. During the first nine months of 2012, we recognized $19.6 million of fair value adjustments on our investment in CT Legacy Asset. See Note 6 to our consolidated financial statements for further discussion. We recorded no such fair value adjustments in 2011.

Gain on deconsolidation of subsidiary

During the first quarter of 2012, we recognized a gain of $146.4 million on the deconsolidation of CT Legacy Asset, which was primarily the result of a reversal of charges to GAAP equity resulting from losses previously recorded in excess of our economic interests in securitization vehicles which were consolidated by CT Legacy Asset. See Note 6 to our consolidated financial statements for additional discussion. We recorded no such gains in 2011.

Income from equity investments in unconsolidated subsidiaries

The income from equity investments during the first nine months of 2012 of $1.3 million was comprised of income from our co-investments in CTOPI and CT High Grade II. CTOPI’s income was largely the result of fair value adjustments on its investment portfolio, the recognition of income on investments purchased at a discount, and income from operations. CT High Grade II’s income was the result of positive fair value adjustments on its investment portfolio

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Similarly, income from equity investments during the nine months ended September 30, 2011 of $2.1 million was largely the result of investment income and fair value adjustments on the CTOPI portfolio. We did not have a co-investment in CT High Grade II in 2011.

Income tax provision

During the first nine months of 2012, we recorded an income tax provision of $1.8 million comprised of (i) an estimated income tax liability of $3.1 million at our taxable REIT subsidiary, CTIMCO, and (ii) a $467,000 estimated alternative minimum tax liability at Capital Trust, Inc., offset by a $1.8 million non-cash income tax benefit due to an increase in the deferred tax asset of CTIMCO.

During the nine months ended September 30, 2011, we recorded an income tax provision of $1.2 million comprised of a $2.3 million current income tax expense, offset by a $1.1 million income tax benefit due to an increase in the deferred tax asset of CTIMCO.

Net income attributable to noncontrolling interests

The net income attributable to noncontrolling interests recorded during the first nine months of 2012 and 2011 represents the pro-rata share of CT Legacy REIT’s net income for the quarter allocable to equity interests not owned by us.

Dividends

We did not pay any dividends on our class A common stock during the first nine months of 2012 or 2011.

Liquidity and Capital Resources

Liquidity

As of September 30, 2012, our primary sources of liquidity include: (i) $38.9 million of cash on deposit at Capital Trust, Inc. and CTIMCO; (ii) the class A preferred stock dividends we receive from CT Legacy REIT; (iii) management fees we earn from private equity funds and CDOs we manage; and (iv) fees earned from special servicing assignments. Uses of liquidity include operating expenses; various capital commitments to our managed funds; taxes; and any dividends necessary to maintain our REIT status. We have no obligations to provide financial support to CT Legacy REIT or our consolidated securitization vehicles, and all debt obligations of such entities, some of which are consolidated onto our financial statements, are non-recourse to us. In addition, we have the ability to obtain additional liquidity through the issuance of stock, incurrence of debt, or other capital raising activities.

As discussed in Note 1 to our consolidated financial statements, we have entered into an agreement with an affiliate of the Blackstone Group L.P. to sell our investment management platform. While the sale would result in a significant one-time increase to our cash on deposit, we intend to pay a $2.00 per share special dividend that will reduce our cash balance to a level that is expected to be sufficient to meet our near-term liquidity needs. Moreover, as a result of this transaction we will no longer have access to a significant portion of our current sources of liquidity, almost all of which presently comes from CTIMCO, our investment management subsidiary. Conversely, upon the consummation of the sale transaction, we will no longer incur any of the operating expenses related to our investment management platform, which is currently our most significant use of liquidity.

We currently do not have access to liquidity from our portfolio of Interest Earning Assets. CT Legacy REIT owns a substantial portion of our Interest Earning Assets, the proceeds of which will not be distributed to CT Legacy REIT’s common shareholders, including us, until the related repurchase obligation has been repaid. In addition, the first $11.1 million of distributions we receive from CT Legacy REIT must be used to repay our secured notes before any cash flow is available to us. Accordingly, other than the preferred dividends discussed above, we will not receive distributions from CT Legacy REIT in the near term. We will, however, receive our proportionate share of the proceeds generated from the CT Legacy REIT portfolio, subject to repayment of our secured notes, once CT Legacy REIT’s leverage has been repaid.

In addition, as described in Note 7 to our consolidated financial statements, covenant breaches in our CT CDOs have resulted in a redirection of cash flow to amortize senior noteholders, which amounts would otherwise have been available to us. The additional principal amortization to senior CT CDO notes are a function of cash received under each respective collateral pool, and are only required to the extent there is cash flow in excess of the interest expense otherwise due under each respective vehicle. Accordingly, these redirection provisions cannot result in a cash outflow from us to our CT CDOs, only a diminution of liquidity available to us.

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Cash Flows

Our consolidated statements of cash flows include the cash inflows and outflows of the consolidated subsidiaries described in Note 2 to our consolidated financial statements. While this does not impact our net cash flow, it does increase certain gross cash flow disclosures.

We experienced a net increase in cash of $4.0 million for the nine months ended September 30, 2012, compared to a net increase of $3.8 million for the nine months ended September 30, 2011.

Cash provided by operating activities during the nine months ended September 30, 2012 was $11.6 million, compared to $19.3 million cash provided during the nine months ended September 30, 2011. The decrease was primarily due to the deconsolidation of CT Legacy Asset on February 10, 2012.

During the nine months ended September 30, 2012, cash provided by investing activities was $126.0 million, compared to $1.9 billion provided by investing activities during the first nine months ended September 30, 2011. The decrease was primarily due to significant loan repayment activity inside of consolidated securitization vehicles in the first nine months of 2011.

During the nine months ended September 30, 2012, cash used in financing activities was $133.6 million, compared to $2.0 billion during the same period in 2011. This decrease was primarily due to significant repayments of securitized debt obligations of consolidated securitized vehicles during 2011.

Capitalization

Our authorized capital stock consists of 100,000,000 shares of class A common stock, of which 22,515,107 shares were issued and outstanding as of September 30, 2012, and 100,000,000 shares of preferred stock, none of which were outstanding as of September 30, 2012.

Pursuant to the terms of our prior debt restructuring completed on March 16, 2009, we issued to JPMorgan, Morgan Stanley and Citigroup warrants to purchase 3,479,691 shares of our class A common stock at an exercise price of $1.79 per share, the closing bid price on the New York Stock Exchange on March 13, 2009. The warrants became exercisable on March 16, 2012, will expire on March 16, 2019, and may be exercised in a cashless manner.

On November 8, 2012, all of our outstanding warrants were exercised in a cashless manner. See Note 16 to our consolidated financial statements for further discussion.

Secured Notes

As of September 30, 2012, we had non-recourse notes outstanding with a face balance of $8.3 million which are secured by 93.5% of our equity interests in the class A-1 and class A-2 common stock of CT Legacy REIT. The terms of these agreements are described in Note 5 to our consolidated financial statements.

Consolidated Securitization Vehicles

As of September 30, 2012, our consolidated securitization vehicles had non-recourse securitized debt obligations with a total face value of $497.4 million. The terms of these obligations are described in Note 7 to our consolidated financial statements.

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Contractual Obligations

The following table sets forth information about certain of our contractual obligations as of September 30, 2012 (in millions):

Contractual Obligations(1)
	Payments due by period
	Total		Less than 1 year		1-3 years		3-5 years		More than  5 years
Parent Level
Secured notes (2)		$11		$—		$—		$11		$—
Equity investments(3)(4)		15		—		—		—		15
Operating lease obligations(5)		6		1		2		2		1
Subtotal		32		1		2		13		16
Consolidated Securitization Vehicles
CT CDOs		447		—		—		—		447
Other securitization vehicles		51		—		—		—		51
Subtotal		498		—		—		—		498
Total contractual obligations		$530		$1		$2		$13		$514

(1)	We are also subject to interest rate swaps for which we cannot estimate future payments due.
(2)	The secured notes mature on March 31, 2016. As of September 30, 2012, $8.3 million of principal is outstanding; however we will ultimately pay $11.1 million at maturity.
(3)	CTOPI’s investment period expired in September 2012, subsequent to which our obligation to fund capital to CTOPI is limited. Therefore, our entire unfunded commitment is assumed funded in more than five years for purposes of the above table.
(4)	In April 2012 we purchased a 0.44% interest in CT High Grade II from an existing investor, representing our initial co-investment in CT High Grade II. Our co-investment represents a $2.9 million total capital commitment to CT High Grade II, of which our unfunded commitment is $480,000 as of September 30, 2012. As CT High Grade II’s investment period has expired, our entire unfunded commitment is assumed funded in more than five years for purposes of the above table.
(5)	As discussed in Note 1 to our consolidated financial statements, we have entered into an agreement with an affiliate of the Blackstone Group L.P. to sell our investment management platform. As a result of this transaction, our operating lease will be assumed, and we will no longer have any obligation for future lease payments. The above table does not reflect this lease assumption as the sale transaction remains subject to shareholder approval.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

III. Non-GAAP Disclosures: Adjusted Balance Sheet

We believe that our adjusted balance sheet provides meaningful information to consider, in addition to our consolidated balance sheet prepared in accordance with GAAP. This adjusted measure helps us to evaluate our financial position and performance without the effects of certain transactions and GAAP adjustments that are not necessarily indicative of our current investment portfolio, operations, capitalization, or shareholders’ equity.

We believe that the consolidation of VIEs, in particular the consolidation of non-recourse securitization vehicles, while in accordance with GAAP, has resulted in a presentation of gross assets and liabilities, provisions/impairments, and operations being recorded in excess of our economic interests in such entities. Accordingly, our adjusted balance sheet deconsolidates securitization vehicles which are presented gross in accordance with GAAP, and shows instead our cash investment in these non-recourse entities, adjusted for losses expected or incurred. Due to the non-recourse nature of these entities, our investment amount cannot be less than zero on a cash basis. We also separately show our financial position from that of CT Legacy REIT.

In addition, beginning in the first quarter of 2012 we ceased consolidation of CT Legacy Asset, a subsidiary of CT Legacy REIT, in our GAAP financial statements and instead record a net investment in that pool of assets and liabilities on a fair value basis. See Note 7 to our consolidated financial statements for further discussion. Consistent with this fair value presentation in our consolidated financial statements, we have adjusted the liabilities we would incur under our secured notes and management incentive awards plan based on the valuation of CT Legacy REIT as of September 30, 2012.

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Our adjusted balance sheet is not an alternative or substitute for our consolidated balance sheet prepared in accordance with GAAP as a measure of our financial position. Rather, we believe that our adjusted balance sheet is an additional measure that is a valuable tool for analyzing our business. Our adjusted balance sheet should not be viewed as an alternative measure of shareholders’ equity, and we may not prepare our adjusted balance sheet in the same manner as other companies that use a similarly titled measure.

As a result of the changes in our consolidated financial statements following the deconsolidation of CT Legacy Asset described above, we no longer present adjusted operating results. We no longer review these adjusted operating results in monitoring our business, and with their exclusion from our consolidated statement of operations do not believe they would provide additional meaningful information about our business.

The following table details the transition from our consolidated balance sheet prepared in accordance with GAAP to the adjusted balance sheets of Capital Trust, Inc. and CT Legacy REIT, as of September 30, 2012:

Adjusted Balance Sheet as of September 30, 2012
(in thousands, except per share data)							Adjusted Balance Sheet
	Consolidated GAAP						CT Legacy		Capital
	Capital Trust, Inc.			Adjustments (1)(2)(3)			REIT		Trust, Inc.
Assets
Cash and cash equivalents		$38,867			$—			$—		$38,867
Equity investments in unconsolidated subsidiaries		18,710			(4,534	)		—		14,176
Investment in CT Legacy REIT		—			53,085			—		53,085
Deferred income taxes		3,094			—			—		3,094
Prepaid expenses and other assets		2,096			625			—		2,721
Subtotal		62,767			49,176			—		111,943
Assets of Consolidated Entities
CT Legacy REIT
Restricted cash		16,145			—			16,145		—
Investment in CT Legacy Asset, at fair value		100,100			—			100,100		—
Subtotal		116,245			—			116,245		—
Assets of consolidated securitization vehicles		402,185			(402,185	)		—		—
Total/adjusted assets		$581,197			($353,009	)		$116,245		$111,943
Liabilities & Shareholders' Equity
Accounts payable, accrued expenses and other liabilities		$17,834			($727	)		$—		$17,107
Secured notes		8,326			2,733			—		11,059
Subtotal		26,160			2,006			—		28,166
Non-Recourse Liabilities of Consolidated Entities
CT Legacy REIT
Accounts payable, accrued expenses and other liabilities		—			625			625		—
Subtotal		—			625			625		—
Liabilities of consolidated securitization vehicles		517,071			(517,071	)		—		—
Total/adjusted liabilities		543,231			(514,440	)		625		28,166
Total/adjusted equity		(24,559	)		223,956			115,620		83,777
Noncontrolling interests		62,525			(62,525	)		—		—
Total/adjusted liabilities and shareholders' equity		$581,197			($353,009	)		$116,245		$111,943
Capital Trust, Inc. book value/adjusted book value per share:
Basic		($1.06	)							$3.61
Diluted		($1.06	)							$3.36

(1)	All securitization vehicles have been deconsolidated and reported at our cash investment amount, adjusted for current losses relative to our equity investment in each vehicle. Due to the non-recourse nature of these entities, our investment cannot be less than zero on a cash basis. See note 7 to our consolidated financial statements for discussion of consolidated securitization vehicles.
(2)	Incentive allocations to CTIMCO from our investment management vehicles have been excluded from our adjusted balance sheet. These incentive allocations will only be paid to CTIMCO in the future contingent on the ultimate performance of such vehicles.
(3)	Liabilities under our secured notes and the management incentive awards, the payments of which are linked to our gross recovery from CT Legacy REIT, have been adjusted to reflect what would be paid in a liquidation of CT Legacy REIT based on its adjusted balance sheet as of September 30, 2012.

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Quarterly Performance

The following table describes the activity in Capital Trust, Inc.’s balance sheet accounts, on an adjusted basis, during the third quarter of 2012:

Comparison of adjusted balance sheet of Capital Trust, Inc: As of September 30, 2012 vs. June 30, 2012
(in thousands)
	September 30, 2012		June 30, 2012		Change			% Change
Assets:
Cash and cash equivalents		$38,867		$34,604		$4,263			12.3	%
Equity investments in unconsolidated subsidiaries		14,176		14,318		(142	)		(1.0	%)
Investment in CT Legacy REIT		53,085		48,883		4,202			8.6	%
Deferred income taxes		3,094		2,727		367			13.5	%
Prepaid expenses and other assets		2,721		2,832		(111	)		(3.9	%)
Total adjusted assets		$111,943		$103,364		$8,579			8.3	%
Liabilities and Shareholders' Equity
Liabilities:
Accounts payable, accrued expenses and other liabilities		$17,107		$12,545		$4,562			36.4	%
Secured notes		11,059		11,059		—			―	%
Total adjusted liabilities		28,166		23,604		4,562			19.3	%
Total Adjusted Shareholders' Equity		83,777		79,760		4,017			5.0	%
Total adjusted liabilities and shareholders' equity		$111,943		$103,364		$8,579			8.3	%

Cash and cash equivalents

Cash and cash equivalents increased by $4.3 million during the third quarter of 2012. This was primarily due to (i) $3.5 million of special servicing fees, (ii) $1.9 million of preferred dividend distributions received from CT Legacy REIT, (iii) $1.7 million of investment management and CDO collateral management fees received from affiliates, and (iv) a distribution of $553,000 from CTOPI. This was offset by payments of $3.4 million of general and administrative expenses.

Equity investments in unconsolidated subsidiaries

The decrease of $142,000 was due to a distribution of $553,000 from CTOPI, offset by $411,000 of income recognized from our co-investments in CTOPI and CT High Grade II.

Investment in CT Legacy REIT

The increase of $4.2 million represents our allocable share of the increase in the adjusted equity of CT Legacy REIT. CT Legacy REIT’s equity increased during the period as a result of a $9.4 million increase in the fair value of CT Legacy Asset and $712,000 of net cash collections.

Deferred income taxes

The increase in deferred income taxes was primarily due to the timing difference between GAAP and tax in connection with the recognition of expenses related to our CT Legacy REIT management incentive awards plan.

Prepaid expenses and other assets

The decrease in prepaid expenses and other assets was primarily due to the collection of special servicing fees that were earned and accrued during the second quarter. This was offset by the payment of certain annual insurance premiums.

Accounts payable, accrued expenses and other liabilities

The increase in accounts payable, accrued expenses and other liabilities was primarily due to (i) the accrual of $1.9 million of expenses related to the pending sale of our investment management platform, (ii) $1.8 million of various corporate expense accruals, and (iii) $899,000 of accrued income taxes.

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IV. CT Legacy REIT

As further discussed above, in conjunction with our March 2011 restructuring, we have transferred a significant portion of our legacy portfolio to CT Legacy Asset, a wholly owned subsidiary of CT Legacy REIT. Subsequent to our March 2011 restructuring, the CT Legacy Asset portfolio received principal repayments of $338.6 million, which repayments represent approximately 68% of the initial net book value of the portfolio. Proceeds from these repayments have primarily been used to repay debt, including (i) a $20.0 million repayment of the mezzanine loan at CT Legacy REIT, and (ii) repayments of $310.5 million of legacy repurchase obligations. In the aggregate, 85% of the debt obligations of CT Legacy REIT and its subsidiaries have been repaid since our March 2011 restructuring.

In addition, in February 2012, we refinanced CT Legacy Asset’s repurchase facility and CT Legacy REIT’s mezzanine loan with a single, new $124.0 million repurchase facility with JPMorgan, obtained by its subsidiary CT Legacy Asset. The new facility matures in December 2014, and carries a rate of LIBOR+6.00% as of September 30, 2012. Periodic repayment targets must be met under the facility, which require the outstanding balance be reduced to: $100.0 million by December 31, 2012, $80.0 million by June 30, 2013, and $40.0 million by December 31, 2013. In addition, the facility’s interest rate is subject to increase by 0.50% per annum if the outstanding balance of the facility has not been reduced to $60.0 million as of December 31, 2012. As of September 30, 2012, the outstanding balance of the facility was $57.2 million and it was collateralized by the majority of CT Legacy Asset’s investment portfolio, including loans with an aggregate principal balance of $304.3 million and securities with an aggregate face balance of $135.4 million.

Note on Forward-Looking Statements

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

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

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ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

The principal objective of our asset and liability management activities is to maximize net interest income while minimizing levels of interest rate risk. Interest income and interest expense are subject to the risk of interest rate fluctuations. In certain instances, to mitigate the impact of fluctuations in interest rates, we use interest rate swaps to effectively convert floating rate liabilities to fixed rate liabilities for proper matching with fixed rate assets. Each derivative used as a hedge is matched with a liability with which it is expected to have a high correlation. The swap agreements are generally held-to-maturity and we do not use interest rate derivative financial instruments for trading purposes. The differential to be paid or received on these agreements is recognized as an adjustment to interest expense and is recognized on the accrual basis.

As of September 30, 2012, a 100 basis point change in LIBOR would impact our net income (loss) by approximately $429,000.

Credit Risk

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

The following table provides information about our financial instruments that are sensitive to changes in interest rates as of September 30, 2012, including instruments in consolidated securitization vehicles. For financial assets and debt obligations, the table presents face balance and weighted average interest rates. For interest rate swaps, the table presents notional amounts and weighted average fixed pay and floating receive interest rates. These notional amounts are used to calculate the contractual cash flows to be exchanged under each contract.

Financial Assets and Liabilities Sensitive to Changes in Interest Rates as of September 30, 2012
(in thousands)
Capital Trust, Inc. Debt Obligations:
	Secured Notes
Fixed rate debt		$8,326
Interest rate(1)		8.19%
Floating rate debt		$—
Interest rate(1)		—
Assets of Consolidated Securitization Vehicles:
	Securities		Loans Receivable		Total
Fixed rate assets		$227,855		$48,731		$276,586
Interest rate(1)		6.03%		7.53%		6.30%
Floating rate assets		$8,535		$244,096		$252,631
Interest rate(1)		1.61%		3.70%		3.63%
Non-Recourse Debt Obligations of Consolidated Securitization Vehicles:
	CT CDOs		Other Vehicles		Total
Fixed rate debt		$14,011		$—		$14,011
Interest rate(1)		6.83%		―%		6.83%
Floating rate debt		$432,860		$50,552		$483,412
Interest rate(1)		0.87%		1.06%		0.89%
Derivative Financial Instruments of Consolidated Securitization Vehicles:
Notional amounts		$273,711
Fixed pay rate(1)		5.01%
Floating receive rate(1)		0.21%

(1) Represents weighted average rates where applicable. Floating rates are based on LIBOR of 0.21%, which is the rate as of September 30, 2012.

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ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Controls over Financial Reporting

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

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PART II. OTHER INFORMATION

ITEM 1: Legal Proceedings

We prevailed on our motion and were dismissed from the previously disclosed lawsuit commenced by Philips International Investments, LLC.

On October 5, 2012, Landesbank Baden-Wurttemberg, as plaintiff, commenced a lawsuit in Delaware Chancery Court against Walton Seattle Mezz Holdings VI-B, L.L.C. and our wholly-owned subsidiary, CT Investment Management Co., LLC, solely in its capacity as the special servicer of a loan under the Amended and Restated Participation and Servicing Agreement, dated October 23, 2007. On October 12, 2011, Walton Seattle Mezz Holdings VI-B, L.L.C., as controlling holder of the loan, appointed CT Investment Management Co., LLC as the special servicer of the loan which is held by a securitization vehicle. Plaintiff seeks (i) declaratory judgment that the Walton defendant should be disqualified from exercising any control rights with respect to the defaulted mortgage loan pursuant to the terms of the Amended and Restated Participation and Servicing Agreement and (ii) an injunction enjoining CT Investment Management Co., LLC from acting upon any direction of the Walton defendant without the consent of the plaintiff. Our motion to dismiss is currently pending before the court.

ITEM 1A: Risk Factors

The following risk factors amend the risk factors contained in our Form 10-K for the year ended December 31, 2011, or our 2011 Form 10-K. Other than risk factors added below, there have been no material changes to the risk factors previously disclosed in our 2011 Form 10-K.

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

If we invest in certain “swaps”, failure to obtain and maintain an exemption from being regulated as a commodity pool operator could subject us to additional regulation and compliance requirements which could materially adversely affect our business and financial condition.

Recently adopted regulations implementing the Dodd-Frank Act of 2010 establish a comprehensive new regulatory framework for derivative contracts commonly referred to as “swaps.” Under these recently adopted rules, among other things, a private fund or other vehicle that trades in certain swaps, such as interest rate swaps, may be considered a “commodity pool,” which would cause its manager to be regulated as “commodity pool operator” or “CPO”. CT Legacy REIT and certain of our CT CDOs are party to interest rate swaps as a hedge against certain interest rate risk which may render them commodity pools even though the entry into the swaps was not used for trading purposes. Under the new regulations, unless an exemption is available, a CPO must register with the U.S. Commodity Futures Trading Commission, or CFTC, and become a member of the National Futures Association, or NFA, by the end of 2012, which will require compliance with NFA’s rules, and render such CPO subject to regulation by the CFTC, including with respect to disclosure, reporting, recordkeeping and business conduct. The CFTC staff has recently issued an interpretative letter that excludes from the definition of commodity pools certain securitization vehicles, such as our CT CDOs, that satisfy the criteria set forth in the letter. CT Legacy REIT currently qualifies for a de minimis exemption from such registration contained in CFTC regulations. If the securitization related interpretative relief is rescinded or CT Legacy REIT no longer satisfies the de minimis exemption, CTIMCO would be required to register as a CPO and become a member of the NFA and, as a result, would be subject to regulation by the CFTC with respect to disclosure, reporting, recordkeeping and business conduct.

If we resume our balance sheet investment activity, and use interest rate swaps in connection with our balance sheet investments and related borrowings, we may be considered a commodity pool. We would not use such swaps for the purpose of trading in commodity interests, and we would not consider our company or its operations to be a commodity pool as to which CPO regulation or compliance is required. We would submit a no-action letter request to the CFTC seeking exemptive relief for our directors from CPO registration under these new rules. There can be no assurance that any such relief will be granted. If exemptive relief is granted, we may be restricted to operating within certain parameters discussed in the no-action letter we submitted to the CFTC.

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The CFTC has substantial enforcement power with respect to violations of the laws over which it has jurisdiction, including their anti-fraud and anti-manipulation provisions. Among other things, CFTC may suspend or revoke the registration of a person who fails to comply, prohibit such a person from trading or doing business with registered entities, impose civil money penalties, require restitution and seek fines or imprisonment for criminal violations. Additionally, a private right of action exists against those who violate the laws over which CFTC has jurisdiction or who willfully aid, abet, counsel, induce or procure a violation of those laws. In the event we fail to receive exemptive relief from the CFTC on this matter and our directors fail to comply with the regulatory requirements of these new rules, we may be subject to significant fines, penalties and other civil or governmental actions or proceedings, any of which could have a materially adverse effect on our business, financial condition and results of operations.

Capital Trust, Inc. and its shareholders are exposed to several risks relating to the Transactions contemplated by the Purchase Agreement with the Purchaser, an affiliate of The Blackstone Group, L.P., or Blackstone, including the following:

· The market price of our Common Stock may decline as a result of the Transactions.

· We will become externally managed and advised as result of the Transactions and will no longer have employees to manage our day-to-day activities.

· Blackstone will have the ability to influence our affairs and the outcome of matters submitted to a vote of shareholders.

· In the event we experience an “ownership change” for purposes of Section 382 of the Internal Revenue Code of 1986, as amended, our ability to utilize our net operating losses and net capital losses against future taxable income will be limited, increasing our dividend distribution requirement for which we may not have sufficient cash flow.

· We have agreed to exempt the Purchaser, Blackstone and their respective affiliates from certain statutory antitakeover protections.

· Shares eligible for sale in the near future may cause the market price for our Common Stock to decline.

· Our shareholders will not have the right to appraisal of their investment in our Common Stock in connection with the Transactions.

· The amendments to our charter reflected in the Charter Amendment Proposal contain provisions that reduce or eliminate duties of Blackstone and our directors with respect to corporate opportunities and competitive activities.

· The personnel of the New CT Manager, as our external manager, will not be required to dedicate a specific portion of their time to the management of our business.

· The New CT Manager manages our portfolio pursuant to very broad investment guidelines and our board of directors will not approve each investment decision made by the New CT Manager, which may result in our making riskier investments with which you may not agree and which could cause our operating results and the value of our Common Stock to decline.

· The New CT Manager’s fee structure may not create proper incentives or may induce the New CT Manager and its affiliates to make certain investments, including speculative investments, which increase the risk of our investment portfolio.

· We may compete with existing and future private and public investment vehicles established and/or managed by Blackstone or its affiliates, which may present various conflicts of interest that restrict our ability to pursue certain investment opportunities or take other actions that are beneficial to our business and result in decisions that are not in the best interests of our stockholders.

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· Termination of the New Management Agreement would be costly.

· The New CT Manager maintains a contractual as opposed to a fiduciary relationship with us. The New CT Manager’s liability is limited under the New Management Agreement and we have agreed to indemnify the New CT Manager against certain liabilities.

Each of the risks mentioned above is described in detail in the definitive proxy statement filed under Schedule 14A with the SEC on November 9, 2012, under the heading “RISK FACTORS – Risk Factors Related to the Transactions”. The Schedule 14A is filed as exhibit 99.2 and incorporated herein by reference.

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

None.

ITEM 3: Defaults Upon Senior Securities

None.

ITEM 4: Mine Safety Disclosures

None.

ITEM 5: Other Information

None.

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ITEM 6: Exhibits

	2.1	Purchase and Sale Agreement, dated as of September 27, 2012, by and between Capital Trust, Inc. and Huskies Acquisition LLC (filed as Exhibit 2.1 to Capital Trust, Inc.’s Current Report on Form 8-K (File No. 1-14788) filed on October 3, 2012 and incorporated herein by reference).
	3.1a	Charter of Capital Trust, Inc. (filed as Exhibit 3.1.a to Capital Trust, Inc.’s Current Report on Form 8-K (File No. 1-14788) filed on April 2, 2003 and incorporated herein by reference).
	3.1b	Certificate of Notice (filed as Exhibit 3.1 to Capital Trust, Inc.’s Current Report on Form 8-K (File No. 1-14788) filed on February 27, 2007 and incorporated herein by reference).
	3.2a	Second Amended and Restated By-Laws of Capital Trust, Inc. (filed as Exhibit 3.2 to Capital Trust, Inc.’s Current Report on Form 8-K (File No. 1-14788) filed on February 27, 2007 and incorporated herein by reference).
	3.2b	First Amendment to the Second Amended and Restated By-Laws of Capital Trust, Inc. (filed as Exhibit 3.1 to Capital Trust, Inc.’s Current Report on Form 8-K (File No. 1-14788) filed on July 26, 2011 and incorporated herein by reference).
	3.2c	Second Amendment to Second Amended and Restated Bylaws of Capital Trust, Inc. (filed as Exhibit 3.1 to Capital Trust, Inc.’s Current Report on Form 8-K (File No. 1-14788) filed on October 3, 2012 and incorporated herein by reference).
	10.1	Letter Agreement, dated September 27, 2012, between W. R. Berkley Corporation and Capital Trust, Inc. (filed as Exhibit 10.3 to Capital Trust, Inc.’s Current Report on Form 8-K (File No. 1-14788) filed on October 3, 2012 and incorporated herein by reference).
·	31.1	Certification of Stephen D. Plavin, Chief Executive Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
·	31.2	Certification of Geoffrey G. Jervis, Chief Financial Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
+	32.1	Certification of Stephen D. Plavin, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
+	32.2	Certification of Geoffrey G. Jervis, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
·	99.1	Updated Risk Factors from Capital Trust, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2011, filed on February 14, 2012 with the Securities and Exchange Commission.
	99.2	Capital Trust, Inc. Schedule 14A containing Definitive Proxy Statement, dated November 12, 2012 (as filed on November 9, 2012 and incorporated herein by reference).
*	101.INS	XBRL Instance Document
*	101.SCH	XBRL Taxonomy Extension Schema Document
*	101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
*	101.LAB	XBRL Taxonomy Extension Label Linkbase Document
*	101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
*	101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

________________________

· Filed herewith

+ This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liability of that Section. Such exhibit shall not be deemed incorporated into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act.

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* Attached as Exhibit 101 to this Quarterly Report on Form 10-Q are the following materials, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets at September 30, 2012 and December 31, 2011; (ii) the Consolidated Statements of Operations for the three and nine months ended September 30, 2012 and 2011; (iii) the Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2012 and 2011; (iv) the Consolidated Statements of Changes in Equity (Deficit) for the nine months ended September 30, 2012 and 2011; (v) the Consolidated Statements of Cash Flows for the nine months ended September 30, 2012 and 2011; and (vi) Notes to Consolidated Financial Statements.

Pursuant to Rule 406T of Regulation S-T, this interactive data file is deemed not “filed” or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act, is deemed not “filed” for purposes of Section 18 of the Exchange Act, and otherwise is not subject to liability under these sections.

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SIGNATURES

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

	CAPITAL TRUST, INC.
November 14, 2012	By:	/s/ Stephen D. Plavin
Date		Stephen D. Plavin
		Chief Executive Officer (Principal executive officer)

November 14, 2012	By:	/s/ Geoffrey G. Jervis
Date		Geoffrey G. Jervis
		Chief Financial Officer (Principal financial officer and Principal accounting officer)

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EX-31.1

Exhibit 31.1

CERTIFICATION

PURSUANT TO 17 CFR 240.13a-14

PROMULGATED UNDER

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Stephen D. Plavin, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Capital Trust, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2012

 /s/ Stephen D. Plavin

Stephen D. Plavin

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

PURSUANT TO 17 CFR 240.13a-14

PROMULGATED UNDER

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Geoffrey G. Jervis, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Capital Trust, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2012

 /s/ Geoffrey G. Jervis

Geoffrey G. Jervis

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Capital Trust, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stephen D. Plavin, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 /s/ Stephen D. Plavin

Stephen D. Plavin

Chief Executive Officer

November 14, 2012

This certification accompanies each Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906 has been provided by the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Capital Trust, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Geoffrey G. Jervis, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 /s/ Geoffrey G. Jervis

Geoffrey G. Jervis

Chief Financial Officer

November 14, 2012

This certification accompanies each Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906 has been provided by the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-99.1

Exhibit 99.1

RISK FACTORS

Risks Related to Our Investment Activities

Our current business is subject to a high degree of risk. Our assets and liabilities are subject to increasing risk due to the impact of market turmoil in commercial real estate. Our efforts to stabilize our business with the restructuring of our debt obligations may not be successful as our investment portfolio is subject to the risk of further deterioration and ongoing turmoil in the financial markets.

Our portfolio is comprised of debt and related interests, directly or indirectly secured by commercial real estate. A significant portion of these investments are in subordinate positions, increasing the risk profile of our investments as underlying property performance deteriorates. Furthermore, our portfolio is leveraged, effectively further increasing our exposure to loss on our investments. The recent financial market turmoil and economic recession has resulted in a material deterioration in the value of commercial real estate and dramatically reduced the amount of capital to finance the commercial real estate industry (both at the property and corporate level). Given the composition of and leverage in our portfolio and the continuing negative impact of the commercial real estate market turmoil, the risks associated with our business have dramatically increased. Even with our March 2009 and March 2011 debt restructurings, we may not be able to satisfy our obligations to our lenders. The impact of the economic recession on the commercial real estate sector in general, and our portfolio in particular, cannot be predicted and we expect to experience significant defaults by borrowers and other impairments to our investments. These events may trigger defaults under our restructured debt obligations that may result in the exercise of remedies that may cause severe (and potentially complete) losses in the book value of our investments. Therefore, an investment in our class A common stock is subject to a high degree of risk.

We may decide to recapitalize our business in order to commence balance sheet investment activity and this may involve a high cost of capital and significant dilution to our shareholders.

In order to commence balance sheet investment activity, we will need to obtain substantial additional capital for which we can provide no assurances. The capital markets have not completely recovered from the financial crisis and even if we can access the capital markets, any new capital we raise may be at a high cost and/or involve significant dilution to our shareholders.

The U.S. and other financial markets have been in turmoil, and the U.S. and other economies in which we invest are in the midst of a weak recovery from the recent severe recession that can be expected to negatively impact our operations.

The U.S. and other financial markets have been experiencing extreme dislocations and a severe contraction in available liquidity globally as important segments of the credit markets are frozen as lenders are unwilling or unable to originate new credit. Global financial markets have been disrupted by, among other things, volatility in security prices, credit rating downgrades, sovereign debt default concerns, currency devaluation, and the failure and near failure of a number of large financial institutions and declining valuations, and this disruption has been acute in real estate related markets. This disruption has led to a decline in business and consumer confidence and increased unemployment and has precipitated a severe economic recession around the globe where recoveries have been weak and may not be sustained. As a consequence, owners and operators of commercial real estate that secure or back our investments have experienced distress and commercial real estate values have declined substantially. We are unable to predict the likely duration or severity of the current disruption in financial markets and adverse economic conditions which could materially and adversely affect our business, financial condition and results of operations, including leading to significant impairment to our assets and our ability to generate income.

Our existing loans and investments expose us to a high degree of risk associated with investing in real estate assets.

Real estate historically has experienced significant fluctuations and cycles in performance that may result in reductions in the value of our real estate related investments. The performance and value of our loans and investments once originated or acquired by us depends upon many factors beyond our control. The ultimate performance and value of our investments is subject to the varying degrees of risk generally incident to the ownership and operation of the properties which collateralize or support our investments. The ultimate performance and value of our loans and investments depends upon, in large part, the commercial property owner’s ability to operate the property so that it produces sufficient cash flows necessary either to pay the interest and principal due to us on our loans and investments or pay us as an equity advisor.

Revenues and cash flows may be adversely affected by:

· changes in national economic conditions;

· changes in local real estate market conditions due to changes in national or local economic conditions or changes in local property market characteristics;

· the extent of the impact of the recent turmoil in the financial markets, including the lack of available debt financing for commercial real estate;

· tenant bankruptcies;

· competition from other properties offering the same or similar services;

· changes in interest rates and in the state of the debt and equity capital markets;

· the ongoing need for capital improvements, particularly in older building structures;

· changes in real estate tax rates and other operating expenses;

· adverse changes in governmental rules and fiscal policies, civil unrest, acts of God, including earthquakes, hurricanes and other natural disasters, and acts of war or terrorism, which may decrease the availability of or increase the cost of insurance or result in uninsured losses;

· adverse changes in zoning laws;

· the impact of present or future environmental legislation and compliance with environmental laws;

· the impact of lawsuits which could cause us to incur significant legal expenses and divert management’s time and attention from our day-to-day operations; and

· other factors that are beyond our control and the control of the commercial property owners.

In the event that any of the properties underlying or collateralizing our loans or investments experiences any of the foregoing events or occurrences, the value of, and return on, such investments, our profitability and the market price of our class A common stock would be negatively impacted.

A prolonged economic slowdown, a lengthy or severe recession characterized by a weak recovery, a continuing credit crisis, or declining real estate values could harm our operations or may adversely affect our liquidity.

We believe the risks associated with our business are more severe during periods of economic slowdown or recession like those we are currently experiencing, particularly if these periods are accompanied by declining real estate values.The recent dislocation of the global credit markets and anticipated collateral consequences to commercial activity of businesses unable to finance their operations as required has led to a weakening of general economic conditions and precipitated declines in real estate values, and has otherwise exacerbated troubled borrowers’ ability to repay loans in our portfolio or backing our CMBS investments. We have made loans to hotels, an industry whose performance has been severely impacted by the recent recession.

Declining real estate values would likely reduce the level of new mortgage loan originations, since borrowers often use increases in the value of their existing properties to support the purchase of or investment in additional properties, which in turn could lead to fewer opportunities for our investment. Borrowers may also be less able to pay principal and interest on our loans as the real estate economy continues to weaken. Continued weakened economic conditions could negatively affect occupancy levels and rental rates in the markets in which the collateral supporting our investments are located, which, in turn, may have a material adverse impact on our cash flows and operating results of our borrowers. Further, declining real estate values like those occurring in the commercial real estate sector significantly increase the likelihood that we will incur losses on our loans in the event of default because the value of our collateral may be insufficient to cover our basis in the loan. Any sustained period of increased payment delinquencies, foreclosures or losses could adversely affect both our net interest income from loans in our portfolio as well as our ability to operate our investment management business, which would significantly harm our revenues, results of operations, financial condition, liquidity, business prospects and our share price.

We are exposed to the risks involved with making subordinated investments.

Our subordinated investments involve the risks attendant to investments consisting of subordinated loans and similar positions. Subordinate positions incur losses before the senior positions in a capital structure and, as a result, foreclosures on the underlying collateral can reduce or eliminate the proceeds available to satisfy our subordinate investment. Also, in certain cases where we experience appraisal reductions, we may lose our controlling class status or special servicer designation rights. In many cases, management of our investments and our remedies with respect thereto, including the ability to foreclose on or direct decisions with respect to the collateral securing such investments, is subject to the rights of senior lenders and the rights set forth in inter-creditor or servicing agreements. Our interests and those of the senior lenders and other interested parties may not be aligned, which can lead to disputes and litigation.

We are subject to counterparty risk associated with our debt obligations and interest rate swaps.

Our counterparties for these critical financial relationships include both domestic and international financial institutions. Many of them have been severely impacted by the credit market turmoil and have been experiencing financial pressures. In some cases, our counterparties have filed for bankruptcy, leading to financial losses for us.

We may guarantee many of our debt and contingent obligations.

We may guarantee the performance of many of our obligations, including, but not limited to, our repurchase agreements, derivative agreements, obligations to co-invest in our investment management vehicles and unsecured indebtedness. The non-performance of such obligations may cause losses to us in excess of the capital we initially may have invested or committed under such obligations and there is no assurance that we will have sufficient capital to cover any such losses.

Our success depends on the availability of attractive investments and our ability to identify, structure, consummate, leverage, manage and realize returns on attractive investments.

Our operating results are dependent upon the availability of, as well as our ability to identify, structure, consummate, leverage, manage and realize returns on, credit sensitive investment opportunities for our managed vehicles and our balance sheet assuming we are able to resume balance sheet investment activity. In general, the availability of desirable investment opportunities and, consequently, our balance sheet returns and our investment management vehicles’ returns, will be affected by the level and volatility of interest rates, conditions in the financial markets, general economic conditions, the demand for credit sensitive investment opportunities and the supply of capital for such investment opportunities. We cannot make any assurances that we will be successful in identifying and consummating investments which satisfy our rate of return objectives or that such investments, once consummated, will perform as anticipated. In addition, if we are not successful in investing for our investment management vehicles, the potential revenues we earn from management fees and co-investment returns will be reduced. We may expend significant time and resources in identifying and pursuing targeted investments, some of which may not be consummated.

The real estate investment business is highly competitive. Our success depends on our ability to compete with other providers of capital for real estate investments.

Our business is highly competitive. Competition may cause us to accept economic or structural features in our investments that we would not have otherwise accepted and it may cause us to search for investments in markets outside of our traditional product expertise. We compete for attractive investments with traditional lending sources, such as insurance companies and banks, as well as other REITs, specialty finance companies and private equity vehicles with similar investment objectives, which may make it more difficult for us to consummate our target investments. Many of our competitors have greater financial resources and lower costs of capital than we do, which provides them with greater operating flexibility and a competitive advantage relative to us.

Our loans and investments may be subject to fluctuations in interest rates which may not be adequately protected, or protected at all, by our hedging strategies.

Our investments include loans with both floating interest rates and fixed interest rates. Floating rate investments earn interest at rates that adjust from time to time (typically monthly) based upon an index (typically one month LIBOR). These floating rate loans are insulated from changes in value specifically due to changes in interest rates; however, the coupons they earn fluctuate based upon interest rates (again, typically one month LIBOR) and, in a declining and/or low interest rate environment, these loans will earn lower rates of interest and this will impact our operating performance. Fixed interest rate investments, however, do not have adjusting interest rates and, as prevailing interest rates change, the relative value of the fixed cash flows from these investments will cause potentially significant changes in value. We may employ various hedging strategies to limit the effects of changes in interest rates (and in some cases credit spreads), including engaging in interest rate swaps, caps, floors and other interest rate derivative products. We believe that no strategy can completely insulate us or our investment management vehicles from the risks associated with interest rate changes and there is a risk that they may provide no protection at all and potentially compound the impact of changes in interest rates. Hedging transactions involve certain additional risks such as counterparty risk, the legal enforceability of hedging contracts, the early repayment of hedged transactions and the risk that unanticipated and significant changes in interest rates may cause a significant loss of basis in the contract and a change in current period expense. We cannot make assurances that we will be able to enter into hedging transactions or that such hedging transactions will adequately protect us or our investment management vehicles against the foregoing risks.

Accounting for derivatives under GAAP is extremely complicated. Any failure by us to account for our derivatives properly in accordance with GAAP on our consolidated financial statements could adversely affect our earnings. In particular, cash flow hedges which are not perfectly correlated (and appropriately designated and/or documented as such) with a variable rate financing will impact our reported income as gains and losses on the ineffective portion of such hedges.

Our use of leverage may create a mismatch with the duration and index of the investments that we are financing.

We attempt to structure our leverage to minimize the difference between the term of our investments and the leverage we use to finance each investment. We have restructured and eliminated our recourse debt obligations; however, there can be no assurances that our restructuring will enable the successful collection of our assets. The risks of a duration mismatch are further magnified by the trends we are experiencing in our portfolio which results from extending loans made to our borrowers in order to maximize the likelihood and magnitude of our recovery on our assets. This trend effectively extends the duration of our investments, while our liabilities have set maturity dates.

Our loans and investments are illiquid, which will constrain our ability to vary our portfolio of investments.

Our real estate investments and structured financial product investments are relatively illiquid and some are highly illiquid. Such illiquidity may limit our ability to vary our portfolio or our investment management vehicles’ portfolios of investments in response to changes in economic and other conditions. Illiquidity may result from the absence of an established market for investments as well as the legal or contractual restrictions on their resale. In addition, illiquidity may result from the decline in value of a property securing these investments. We cannot make assurances that the fair market value of any of the real property serving as security will not decrease in the future, leaving our or our investment management vehicles’ investments under-collateralized or not collateralized at all, which could impair the liquidity and value, as well as our return on such investments.

We may not have control over certain of our loans and investments.

Our ability to manage our portfolio of loans and investments may be limited by the form in which they are made. In certain situations, we or our investment management vehicles may:

· acquire investments subject to rights of senior classes and servicers under inter-creditor or servicing agreements;

· acquire only a minority and/or a non-controlling participation in an underlying investment;

· co-invest with third-parties through partnerships, joint ventures or other entities, thereby acquiring non-controlling interests; or

· rely on independent third-party management or strategic partners with respect to the management of an asset.

Therefore, we may not be able to exercise control over the loan or investment. Such financial assets may involve risks not present in investments where senior creditors, servicers or third-party controlling investors are not involved. Our rights to control the process following a borrower default may be subject to the rights of senior creditors or servicers whose interests may not be aligned with ours. A third-party partner or co-venturer may have financial difficulties resulting in a negative impact on such asset, may have economic or business interests or goals which are inconsistent with ours and those of our investment management vehicles, or may be in a position to take action contrary to our or our investment management vehicles’ investment objectives. In addition, we and our investment management vehicles may, in certain circumstances, be liable for the actions of our third-party partners or co-venturers.

Developments with our CDO financings have negatively impacted our cash flow.

The terms of CDOs generally provide that the principal amount of investments must exceed the principal balance of the related bonds by a certain amount and that interest income must exceed interest expense by a certain ratio. Certain of our CT CDOs provide that, if defaults, losses, or rating agency downgrades cause a decline in collateral value or cash flow levels, the cash flow otherwise payable to our retained subordinated classes may be redirected to repay classes of CDOs senior to ours until the tests are returned to compliance. We have breached these tests and cash flow has been redirected for all three of our consolidated CT CDOs. Once breached there is no certainty about when or if the cash flow redirection will remedy the tests’ failure or that cash flow will be restored to our subordinated classes. Other than collateral management fees, we currently do not receive cash payments from any of consolidated CDOs, which has caused a material deterioration in our cash flow available for operations, debt service, debt repayments, and unfunded commitments to our investment management vehicles.

We may be required to repurchase loans that we have sold or to indemnify holders of our CDOs.

If any of the loans we originate or acquire, and sell or securitize, through our CT CDOs do not comply with representations and warranties that we make about certain characteristics of the loans, the borrowers and the underlying properties, we may be required to repurchase those loans or replace them with substitute loans. In addition, in the case of loans that we have sold instead of retained, we may be required to indemnify persons for losses or expenses incurred as a result of a breach of a representation or warranty. Repurchased loans typically require a significant allocation of working capital to carry on our books, and our ability to borrow against such assets is limited. Any significant repurchases or indemnification payments could adversely affect our financial condition and operating results.

The commercial mortgage and mezzanine loans we originate or acquire and the commercial mortgage loans underlying the commercial mortgage backed securities in which we invest are subject to delinquency, foreclosure and loss, which could result in losses to us.

Our commercial mortgage and mezzanine loans are secured by commercial property and are subject to risks of delinquency and foreclosure, and risks of loss that are greater than similar risks associated with loans made on the security of single-family residential property. The ability of a borrower to repay a loan secured by an income-producing property typically is dependent primarily upon the successful operation of the property rather than upon the existence of independent income or assets of the borrower. If the net operating income of the property is reduced, the borrower’s ability to repay the loan may be impaired. Net operating income of an income-producing property can be affected by, among other things, tenant mix, success of tenant businesses, property management decisions, property location and condition, competition from comparable types of properties, changes in laws that increase operating expenses or limit rents that may be charged, any need to address environmental contamination at the property, changes in national, regional or local economic conditions and/or specific industry segments, declines in regional or local real estate values, declines in regional or local rental or occupancy rates, increases in interest rates, real estate tax rates and other operating expenses, and changes in governmental rules, regulations and fiscal policies, including environmental legislation, acts of God, terrorism, social unrest and civil disturbances. In addition, we are exposed to the risk of judicial proceedings with our borrowers, including bankruptcy or other litigation, as a strategy to avoid foreclosure or enforcement of other rights by us as a lender.

Our investments in subordinated commercial mortgage backed securities and similar investments are subject to losses.

In general, losses on an asset securing a mortgage loan included in a securitization will be borne first by the equity holder of the property and then by the most junior security holder, referred to as the “first loss” position. In the event of default and the exhaustion of any equity support and any classes of securities junior to those in which we invest (and in some cases we may be invested in the junior-most classes of securitizations), we may not be able to recover all of our investment in the securities we purchase. In addition, if the underlying mortgage portfolio has been overvalued by the originator, or if the values subsequently decline and, as a result, less collateral is available to satisfy interest and principal payments due on the related mortgage backed securities, the securities in which we invest may incur significant losses. Subordinate interests generally are not actively traded and are relatively illiquid investments and recent volatility in CMBS trading markets has caused the value of these investments to decline.

The prices of lower credit quality CMBS are generally less sensitive to interest rate changes than more highly rated investments, but more sensitive to adverse economic downturns and underlying borrower developments. A projection of an economic downturn, for example, could cause a decline in the price of lower credit quality CMBS because the ability of borrowers to make principal and interest payments on the mortgages underlying the mortgage backed securities may be impaired, as has occurred throughout the recent economic recession and weak recovery. In such event, existing credit support in the securitization structure may be insufficient to protect us against the loss of our principal on these securities.

We may have difficulty or be unable to sell some of our loans and commercial mortgage backed securities.

A prolonged period of frozen capital markets, decline in commercial real estate values and an out of favor real estate sector may prevent us from selling our loans and CMBS. We may be forced to sell assets in order to meet required debt reduction levels. If the market for real estate loans and CMBS is disrupted or dislocated, this may be difficult or impossible, causing further losses or events of default.

The impact of the events of September 11, 2001 and the effect thereon on terrorism insurance expose us to certain risks.

The terrorist attacks on September 11, 2001 disrupted the U.S. financial markets, including the real estate capital markets, and negatively impacted the U.S. economy in general. Any future terrorist attacks, the anticipation of any such attacks, and the consequences of any military or other response by the U.S. and its allies may have a further adverse impact on the U.S. financial markets and the economy generally. We cannot predict the severity of the effect that such future events would have on the U.S. financial markets, the economy or our business.

In addition, the events of September 11, 2001 created significant uncertainty regarding the ability of real estate owners of high profile assets to obtain insurance coverage protecting against terrorist attacks at commercially reasonable rates, if at all. This led to the creation of The Terrorism Risk Insurance Act of 2002, to provide a federal backstop against insurance claims related to acts of terrorism. This law was extended in December 2007 and then again under a new law, the Terrorism Risk Insurance Program Reauthorization Act, or TRIPRA, which expires in 2014. There is no assurance that TRIPRA will be extended beyond 2014. The absence of affordable insurance coverage may adversely affect the general real estate lending market, lending volume and the market’s overall liquidity and may reduce the number of suitable investment opportunities available to us and the pace at which we are able to make investments. If the properties that we invest in are unable to obtain affordable insurance coverage, the value of those investments could decline and in the event of an uninsured loss, we could lose all or a portion of our investment.

The economic impact of any future terrorist attacks could also adversely affect the credit quality of some of our loans and investments. Some of our loans and investments will be more susceptible to such adverse effects than others. We may suffer losses as a result of the adverse impact of any future attacks and these losses may adversely impact our results of operations.

There are increased risks involved with construction lending activities.

We may originate loans for the construction of commercial and residential use properties. Construction lending generally is considered to involve a higher degree of risk than other types of lending due to a variety of factors, including generally larger loan balances, the dependency on successful completion of a project, the dependency upon the successful operation of the project (such as achieving satisfactory occupancy and rental rates) for repayment, the difficulties in estimating construction costs and loan terms which often do not require full amortization of the loan over its term and, instead, provide for a balloon payment at stated maturity.

Some of our investments and investment opportunities may be in synthetic form.

Synthetic investments are contracts between parties whereby payments are exchanged based upon the performance of an underlying obligation. In addition to the risks associated with the performance of the obligation, these synthetic interests carry the risk of the counterparty not performing its contractual obligations. Market standards, GAAP accounting methodology, regulatory oversight and compliance requirements, tax and other regulations related to these investments are evolving, and we cannot be certain that their evolution will not adversely impact the value or sustainability of these investments. Furthermore, our ability to invest in synthetic investments, other than through taxable REIT subsidiaries, may be severely limited by the REIT qualification requirements because synthetic investment contracts generally are not qualifying assets and do not produce qualifying income for purposes of the REIT asset and income tests.

Risks Related to Our Investment Management Business and Management of CDOs

Our current financial condition may adversely impact our investment management business.

In large part, our ability to raise capital and garner other investment management and advisory business is dependent upon our reputation as a balance sheet manager and credit underwriter, as well as the ability to demonstrate that we have the resources to manage and co-invest in our investment management vehicles. Our recent losses and our 2009 and 2011 debt restructurings may have a negative impact on our reputation.

We may not maintain our special servicer approval or rating.

Our status as an approved special servicer by the three major rating agencies, as well as our special servicer rating by these agencies is subject to periodic review and may be impacted by our overall financial condition, the operations of our investment management business, as well as other factors which may be beyond our control. Any reduction in our special servicer rating, or a loss of our status as an approved special servicer, would impair our ability to generate future special servicing revenues.

We are subject to risks and uncertainties associated with operating our investment management business, and we may not achieve the investment returns that we expect.

We will encounter risks and difficulties as we operate our investment management business. In order to achieve our goals as an investment manager, we must:

· manage our investment management vehicles successfully by investing their capital in suitable investments that meet their respective investment criteria;

· actively manage the assets in our portfolios in order to realize targeted performance;

· create incentives for our management and professional staff to develop and operate the investment management business; and

· structure, sponsor and capitalize future investment management vehicles that provide investors with attractive investment opportunities.

If we do not successfully operate our investment management business to achieve the investment returns that we or the market anticipates, our operations may be adversely impacted.

We may expand our investment management business to involve other investment classes where we do not have prior investment experience. We may find it difficult to attract third-party investors without a performance track record involving such investments. Even if we attract third-party capital, there can be no assurance that we will be successful in deploying the capital to achieve targeted returns on the investments.

We face substantial competition from established participants in the private equity market as we offer investment management vehicles to third-party investors.

We face significant competition from large financial and other institutions that have proven track records in marketing and managing vehicles and otherwise have a competitive advantage over us because they have access to pre-existing third-party investor networks into which they can channel competing investment opportunities. If our competitors offer investment products that are competitive with products offered by us, we will find it more difficult to attract investors and to capitalize our investment management vehicles.

Our investment management vehicles are subject to the risk of defaults by third-party investors on their capital commitments.

The capital commitments made by third-party investors to our investment management vehicles represent unsecured promises by those investors to contribute cash to the investment management vehicles from time-to-time as investments are made by the investment management vehicles. Accordingly, we are subject to general credit risks that the investors may default on their capital commitments. If defaults occur, we may not be able to close loans and investments we have identified and negotiated or make protective advances to support existing investments which could materially and adversely affect the investment management vehicles’ investment program or make us liable for breach of contract, in either case to the detriment of our franchise in the private equity market.

CTIMCO’s role as collateral manager for our CT CDOs and investment manager for our funds may expose us to liabilities to investors.

We are subject to potential liabilities to investors as a result of CTIMCO’s role as collateral manager for our CT CDOs and our investment management business generally. In serving in such roles, we could be subject to claims by CDO investors and investors in our funds that we did not act in accordance with our duties under our CT CDO and investment fund documentation or that we were negligent in taking or refraining from taking actions with respect to the underlying collateral in our CT CDOs or in making investments. In particular, the discretion that we exercise in managing the collateral for our CT CDOs and the investments in our investment management business could result in a liability due to the current negative conditions in the commercial real estate market and the inherent uncertainties surrounding the course of action that will result in the best long term results with respect to such collateral and investments. This risk could be increased due to the affiliated nature of our roles. If we were found liable for our actions as collateral manager or investment manager and we were required to pay significant damages to our CT CDO and investment advisory investors, our financial condition could be materially adversely effected.

Our investment management agreements contain “clawback” provisions which may require repayment of incentive management fees previously received by us.

As part of our investment management business we earn incentive fees based on the performance of certain of our investment management vehicles. The investment management agreements which govern our relationships with these vehicles contain “clawback” provisions which may require the repayment of incentive fees previously received by us. If certain predetermined performance thresholds are not met upon the ultimate dissolution of such entities, we could be required to refund either a portion, or all of incentive fees previously received.

We are exposed to litigation risks in our role as an investment manager and special servicer.

CTIMCO’s role as an investment manager for third-parties, including investors in our private equity platforms and our CT CDOs, as well as CTIMCO’s role as a special servicer expose us to litigation risks. In these roles, we make investment, asset management, loan work-out, and other decisions which could result in adverse financial impacts to third-parties. These parties may pursue legal action against us as a result of these decisions, the outcomes of which cannot be certain.

If we invest in certain “swaps”, failure to obtain and maintain an exemption from being regulated as a commodity pool operator could subject us to additional regulation and compliance requirements which could materially adversely affect our business and financial condition.

Recently adopted regulations implementing the Dodd-Frank Act of 2010 establish a comprehensive new regulatory framework for derivative contracts commonly referred to as “swaps.” Under these recently adopted rules, among other things, a private fund or other vehicle that trades in certain swaps, such as interest rate swaps, may be considered a “commodity pool,” which would cause its manager to be regulated as “commodity pool operator” or “CPO”. CT Legacy REIT and certain of our CT CDOs are party to interest rate swaps as a hedge against certain interest rate risk which may render them commodity pools even though the entry into the swaps was not used for trading purposes. Under the new regulations, unless an exemption is available, a CPO must register with the U.S. Commodity Futures Trading Commission, or CFTC, and become a member of the National Futures Association, or NFA, by the end of 2012, which will require compliance with NFA’s rules, and render such CPO subject to regulation by the CFTC, including with respect to disclosure, reporting, recordkeeping and business conduct. The CFTC staff has recently issued an interpretative letter that excludes from the definition of commodity pools certain securitization vehicles, such as our CT CDOs, that satisfy the criteria set forth in the letter. CT Legacy REIT currently qualifies for a de minimis exemption from such registration contained in CFTC regulations. If the securitization related interpretative relief is rescinded or CT Legacy REIT no longer satisfies the de minimis exemption, CTIMCO would be required to register as a CPO and become a member of the NFA and, as a result, would be subject to regulation by the CFTC with respect to disclosure, reporting, recordkeeping and business conduct.

If we resume our balance sheet investment activity, and use interest rate swaps in connection with our balance sheet investments and related borrowings, we may be considered a commodity pool. We would not use such swaps for the purpose of trading in commodity interests, and we would not consider our company or its operations to be a commodity pool as to which CPO regulation or compliance is required. We would submit a no-action letter request to the CFTC seeking exemptive relief for our directors from CPO registration under these new rules. There can be no assurance that any such relief will be granted. If exemptive relief is granted, we may be restricted to operating within certain parameters discussed in the no-action letter we submitted to the CFTC.

The CFTC has substantial enforcement power with respect to violations of the laws over which it has jurisdiction, including their anti-fraud and anti-manipulation provisions. Among other things, CFTC may suspend or revoke the registration of a person who fails to comply, prohibit such a person from trading or doing business with registered entities, impose civil money penalties, require restitution and seek fines or imprisonment for criminal violations. Additionally, a private right of action exists against those who violate the laws over which CFTC has jurisdiction or who willfully aid, abet, counsel, induce or procure a violation of those laws. In the event we fail to receive exemptive relief from the CFTC on this matter and our directors fail to comply with the regulatory requirements of these new rules, we may be subject to significant fines, penalties and other civil or governmental actions or proceedings, any of which could have a materially adverse effect on our business, financial condition and results of operations.

Risks Related to Our Company

We are dependent upon our senior management team to develop and operate our business.

Our ability to develop and operate our business depends to a substantial extent upon the experience, relationships and expertise of our senior management and key employees. We cannot assure you that these individuals will remain in our employ. Our chief executive officer, Stephen D. Plavin, our chief financial officer, Geoffrey G. Jervis, and our chief credit officer, Thomas C. Ruffing, are currently not employed pursuant to employment agreements. There can be no assurance that Messrs. Plavin, Jervis, and Ruffing will enter into new employment agreements pursuant to which they agree to long-term employment with us. In addition, the departure of Mr. Plavin from his employment with us constitutes an event of default under the repurchase facility of our restructuring subsidiary, CT Legacy Asset, unless we hire a suitable replacement acceptable to the lender.

There may be conflicts between the interests of our investment management vehicles and us.

We are subject to a number of potential conflicts between our interests and the interests of our investment management vehicles. We are subject to potential conflicts of interest in the allocation of investment opportunities between our balance sheet, should we resume our balance sheet investment activity, and our investment management vehicles. In addition, we may make investments that are senior or junior to, participations in, or have rights and interests different from or adverse to, the investments made by our investment management vehicles. Our interests in such investments may conflict with the interests of our investment management vehicles in related investments at the time of origination or in the event of a default or restructuring of the investment. Finally, our officers and employees may have conflicts in allocating their time and services among us and our investment management vehicles.

We must manage our portfolio in a manner that allows us to rely on an exclusion from registration under the Investment Company Act of 1940 in order to avoid the consequences of regulation under that Act.

We rely on an exclusion from registration as an investment company afforded by Section 3(a)(1)(C) of the Investment Company Act of 1940, as amended, or the Investment Company Act. To qualify for this exclusion, we are not engaged in the business of investing, reinvesting, owning, holding, or trading securities and we do not own “investment securities” with a value that exceeds 40% of the value of our total assets (exclusive of government securities and cash items) on a consolidated basis. We may not be able to maintain such a mix of assets in the future, and attempts to maintain such an asset mix may impair our ability to pursue otherwise attractive investments. In addition, these rules are subject to change and such changes may have an adverse impact on us. We may need to avail ourselves of alternative exclusions and exemptions which may require a change in the organizational structure of our business.

Furthermore, as it relates to our investment in our restructuring subsidiary, CT Legacy REIT, we rely on an exclusion from registration as an investment company afforded by Section 3(c)(5)(C) of the Investment Company Act of 1940. Given the material size of CT Legacy REIT relative to our 3(a)(1)(C) exclusion, were CT Legacy REIT to be required to register as an investment company, we may not qualify for our 3(a)(1)(C) exclusion. Under this exclusion, CT Legacy REIT is required to maintain, on the basis of positions taken by the SEC staff in interpretive and no-action letters, a minimum of 55% of the value of the total assets of our portfolio in “mortgages and other liens on and interests in real estate,” which we refer to as Qualifying Interests, and a minimum of 80% in Qualifying Interests and real estate related assets. Because registration as an investment company would significantly affect CT Legacy REIT’s ability to engage in certain transactions or to organize itself in the manner it is currently organized, we intend to maintain its qualification for this exclusion from registration. In the past, based on SEC staff positions, when required due to the mix of assets in our balance sheet portfolio, we have purchased agency residential mortgage backed securities that represent the entire beneficial interests in the underlying pools of whole residential mortgage loans, which we treat as Qualifying Interests. Investments in such pools of whole residential mortgage loans may not represent an optimum use of our investable capital when compared to the available investments we target pursuant to our investment strategy. These investments present additional risks to us, and these risks are compounded by our inexperience with such investments. We continue to analyze our investments and may acquire other pools of whole loan residential mortgage backed securities when and if required for compliance purposes.

We treat certain of our investments in CMBS, B Notes and mezzanine loans as Qualifying Interests for purposes of determining our eligibility for the exclusion provided by Section 3(c)(5)(C) to the extent such treatment is consistent with guidance provided by the SEC or its staff. In the absence of such guidance that otherwise supports the treatment of these investments as Qualifying Interests, we will treat them, for purposes of determining our eligibility for the exclusion provided by Section 3(c)(5)(C), as real estate related assets or miscellaneous assets, as appropriate.

The SEC staff has recently commenced an advance notice rulemaking initiative, indicating that it is reconsidering its interpretive policy under Section 3(c)(5)(C) and whether to advance rulemaking to define the basis for the exclusion. We cannot predict the outcome of this reconsideration or potential rulemaking initiative and its impact on our ability to rely on the exclusion.

If CT Legacy REIT’s portfolio does not comply with the requirements of the exclusion we rely upon, it could be forced to alter its portfolio by selling or otherwise disposing of a substantial portion of the assets that are not Qualifying Interests or, with the consent of its shareholders, by acquiring a significant position in assets that are Qualifying Interests. Altering CT Legacy REIT’s portfolio in this manner may have an adverse effect on its investments if it is forced to dispose of or acquire assets in an unfavorable market, and may adversely affect our stock price.

If it were established that we were an unregistered investment company, there would be a risk that we would be subject to monetary penalties and injunctive relief in an action brought by the SEC, that we would be unable to enforce contracts with third-parties, that third-parties could seek to obtain rescission of transactions undertaken during the period it was established that we were an unregistered investment company, and that we would be subject to limitations on corporate leverage that would have an adverse impact on our investment returns.

Our investment management subsidiary, CTIMCO, is registered under the Investment Advisors Act of 1940, and is subject to regulation under that Act.

CTIMCO has registered as an investment adviser under the Investment Advisers Act of 1940, or the Investment Advisors Act, and is subject to the extensive regulation prescribed by that statute and the regulations thereunder. We are subject to oversight and examination by the SEC with respect to CTIMCO's activities as a registered investment adviser under this regulatory regime. A failure to comply with the obligations imposed by the Investment Advisers Act, including record-keeping, advertising and operating requirements, disclosure obligations and prohibitions on fraudulent activities, could result in fines, censure, suspensions of personnel or investing activities or other sanctions, including revocation of our registration as an investment adviser. The regulations under the Investment Advisers Act are designed primarily to protect investors in our funds and other clients. They are not designed to protect holders of our publicly traded common stock. Even if a sanction imposed against CTIMCO or its personnel involves a small monetary amount, the adverse publicity related to such sanction could harm our reputation and our relationship with our fund investors and impede our ability to raise additional capital or new funds. In addition, compliance with the Investment Advisors Act may require us to incur additional costs, and these costs may be material.

Changes in accounting pronouncements have materially changed the presentation and content of our financial statements.

Beginning January 1, 2010, we adopted new accounting guidance which required us to consolidate certain securitization vehicles in which we have subordinate investments. This consolidation resulted in a significant increase to our GAAP-basis assets and liabilities, which may be misleading to readers of our financial statements. In addition, we are required to record losses under GAAP on consolidated assets which may be in excess of our economic interest in the respective consolidated entities.

We may not have sufficient cash flow to satisfy our tax liability arising from the use of CDO financing.

Due to the redirection provisions of our CDOs, which reallocate principal and interest otherwise distributable to us to repay senior note holders, assets financed through our CDOs may generate current taxable income without a corresponding cash distribution to us. In order to raise the cash necessary to meet our tax and/or distribution requirements, we may be required to borrow funds, sell a portion of our assets at disadvantageous prices or find other alternatives. In any case, there can be no assurances that we will be able to generate sufficient cash from these endeavors to meet our tax and/or distribution requirements.

In the event we experience an “ownership change” for purposes of Section 382 of the Internal Revenue Code, of 1986, as amended, our ability to utilize our net operating losses and net capital losses against future taxable income will be limited, increasing our dividend distribution requirement for which we may not have sufficient cash flow.

We have substantial net operating and net capital loss carry forwards which we use to offset our tax and/or distribution requirements. In the event that we experience an “ownership change” for purposes of Section 382 of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, our ability to use these losses will be effectively eliminated. An “ownership change” is determined based upon the changes in ownership that occur in our class A common stock for a trailing three year period. Such ownership change provisions may be triggered by regular trading activity in our class A common stock, and are generally beyond our control. The issuance of our preferred stock purchase rights pursuant to our tax preservation shareholder rights plan deters but does not prevent such an ownership change. In addition, such efforts to preserve these tax benefits may significantly constrain our ability to raise additional capital through offerings of class A common stock.

Risks Relating to Our Class A Common Stock

Because a limited number of shareholders, including members of our management team, own a substantial number of our shares, they may make decisions or take actions that may be detrimental to your interests.

Our executive officers and directors, along with vehicles for the benefit of their families, collectively own and control 1,532,755 shares of our class A common stock representing approximately 6.3% of our outstanding common stock as of November 9, 2012. W. R. Berkley Corporation, or WRBC, which employs one of our directors, owns 3,843,413 shares of our class A common stock, which represents approximately 15.4% of our outstanding common stock as of November 9, 2012. By virtue of their voting power, these shareholders have the power to significantly influence our affairs and are able to influence the outcome of matters required to be submitted to shareholders for approval, including the election of our directors, amendments to our charter, mergers, sales of assets and other acquisitions or sales. The influence exerted by these shareholders over our affairs might not be consistent with the interests of some or all of our other shareholders. In addition, the concentration of ownership in our officers or directors or shareholders associated with them may have the effect of delaying or preventing a change in control of our company, including transactions in which you might otherwise receive a premium for your class A common stock, and might negatively affect the market price of our class A common stock.

Some provisions of our charter and bylaws, tax benefits preservation rights plan and Maryland law may deter takeover attempts, which may limit the opportunity of our shareholders to sell their shares at a favorable price.

Some of the provisions of our charter and bylaws and Maryland law discussed below could make it more difficult for a third-party to acquire us, even if doing so might be beneficial to our shareholders by providing them with the opportunity to sell their shares at a premium to the then current market price.

Issuance of Preferred Stock Without Shareholder Approval. Our charter authorizes our board of directors to authorize the issuance of up to 100,000,000 shares of preferred stock and up to 100,000,000 shares of class A common stock. Our charter also authorizes our board of directors, without shareholder approval, to classify or reclassify any unissued shares of our class A common stock and preferred stock into other classes or series of stock and to amend our charter to increase or decrease the aggregate number of shares of stock of any class or series that may be issued. Our board of directors, therefore, can exercise its power to reclassify our stock to increase the number of shares of preferred stock we may issue without shareholder approval. Preferred stock may be issued in one or more series, the terms of which may be determined without further action by shareholders. These terms may include preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions of redemption. The issuance of any preferred stock, however, could materially adversely affect the rights of holders of our class A common stock and, therefore, could reduce the value of the class A common stock. In addition, specific rights granted to future holders of our preferred stock could be used to restrict our ability to merge with, or sell assets to, a third-party. The power of our board of directors to issue preferred stock could make it more difficult, delay, discourage, prevent or make it more costly to acquire or effect a change in control, thereby preserving the current shareholders’ control.

Advance Notice Bylaw. Our bylaws contain advance notice procedures for the introduction of business and the nomination of directors. These provisions could discourage proxy contests and make it more difficult for you and other shareholders to elect shareholder-nominated directors and to propose and approve shareholder proposals opposed by management.

Maryland Takeover Statutes. We are subject to the Maryland Business Combination Act which could delay or prevent an unsolicited takeover of us. The statute substantially restricts the ability of third-parties who acquire, or seek to acquire, control of us to complete mergers and other business combinations without the approval of our board of directors even if such transaction would be beneficial to shareholders. “Business combinations” between such a third-party acquirer or its affiliate and us are prohibited for five years after the most recent date on which the acquirer or its affiliate becomes an “interested shareholder.” An “interested shareholder” is defined as any person who beneficially owns 10 percent or more of our shareholder voting power or an affiliate or associate of ours who, at any time within the two-year period prior to the date interested shareholder status is determined, was the beneficial owner of 10 percent or more of our shareholder voting power. If our board of directors approved in advance the transaction that would otherwise give rise to the acquirer or its affiliate attaining such status, the acquirer or its affiliate would not become an interested shareholder and, as a result, it could enter into a business combination with us. Our board of directors could choose not to negotiate with an acquirer if the board determined in its business judgment that considering such an acquisition was not in our strategic interests. Even after the lapse of the five-year prohibition period, any business combination with an interested shareholder must be recommended by our board of directors and approved by the affirmative vote of at least:

· 80% of the votes entitled to be cast by shareholders; and

· two-thirds of the votes entitled to be cast by shareholders other than the interested shareholder and affiliates and associates thereof.

The super-majority vote requirements do not apply if the transaction complies with a minimum price requirement prescribed by the statute.

The statute permits various exemptions from its provisions, including business combinations that are exempted by the board of directors prior to the time that an interested shareholder becomes an interested shareholder. Our board of directors has exempted any business combination involving a limited liability company indirectly controlled by a trust for the benefit of Samuel Zell, our chairman of the board, and his family and approved in advance, the issuance of shares to WRBC. As a result, these parties may enter into business combinations with us without compliance with the super-majority vote requirements and the other provisions of the statute.

We are also subject to the Maryland Control Share Acquisition Act. With certain exceptions, the Maryland General Corporation Law provides that “control shares” of a Maryland corporation acquired in a control share acquisition have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter, excluding shares owned by the acquiring person or by our officers or by our directors who are our employees, and may be redeemed by us. “Control shares” are voting shares which, if aggregated with all other shares owned or voted by the acquirer, would entitle the acquirer to exercise voting power in electing directors within one of the specified ranges of voting power. A person who has made or proposes to make a control share acquisition, upon satisfaction of certain conditions, including an undertaking to pay expenses, may compel our board to call a special meeting of shareholders to be held within 50 days of demand to consider the voting rights of the “control shares” in question. If no request for a meeting is made, we may present the question at any shareholders’ meeting.

If voting rights are not approved at the shareholders’ meeting or if the acquiring person does not deliver the statement required by Maryland law, then, subject to certain conditions and limitations, we may redeem for fair value any or all of the control shares, except those for which voting rights have previously been approved. If voting rights for control shares are approved at a shareholders’ meeting and the acquirer may then vote a majority of the shares entitled to vote, then all other shareholders may exercise appraisal rights. The fair value of the shares for purposes of these appraisal rights may not be less than the highest price per share paid by the acquirer in the control share acquisition. The control share acquisition statute does not apply to shares acquired in a merger, consolidation or share exchange if we are not a party to the transaction, nor does it apply to acquisitions approved or exempted by our charter or bylaws. Our bylaws contain a provision exempting certain holders identified in our bylaws from this statute, including WRBC, and a limited liability company indirectly controlled by a trust for the benefit of Samuel Zell and his family.

We are also subject to the Maryland Unsolicited Takeovers Act which permits our board of directors, among other things and notwithstanding any provision in our charter or bylaws, to elect on our behalf to stagger the terms of directors and to increase the shareholder vote required to remove a director. Such an election would significantly restrict the ability of third-parties to wage a proxy fight for control of our board of directors as a means of advancing a takeover offer. If an acquirer was discouraged from offering to acquire us, or prevented from successfully completing a hostile acquisition, you could lose the opportunity to sell your shares at a favorable price.

Shareholder rights plans such as the plan we recently adopted for the purpose of preserving our tax benefits, are commonly understood to have anti-takeover effects. Under our tax benefit preservation rights agreement, if any person or group acquires 4.9% or more of our outstanding class A common stock without the approval of our board of directors under specific circumstances, our existing shareholders have the right to purchase shares of our class A common stock at a substantial discount to the public market price. The agreement is intended to act as a deterrent to any person or entity seeking to acquire 4.9% or more of our outstanding common stock without the prior approval of our board of directors.

The price of our class A common stock may be impacted by many factors.

As with any public company, a number of factors may impact the trading price of our class A common stock, many of which are beyond our control. These factors include, in addition to other risk factors mentioned in this section:

· the level of institutional interest in us;

· the perception of REITs generally and REITs with portfolios similar to ours, in particular, by market professionals;

· the attractiveness of securities of REITs in comparison to other companies;

· the market’s perception of our ability to successfully manage our portfolio; and

· the general economic environment and the commercial real estate property and capital markets.

Your ability to sell a substantial number of shares of our class A common stock may be restricted by the low trading volume historically experienced by our class A common stock.

Although our class A common stock is listed on the New York Stock Exchange, the daily trading volume of our shares of class A common stock has historically been lower than the trading volume for certain other companies. As a result, the ability of a holder to sell a substantial number of shares of our class A common stock in a timely manner without causing a substantial decline in the market value of the shares, especially by means of a large block trade, may be restricted by the limited trading volume of the shares of our class A common stock.

Our shares of class A common stock may be delisted from the NYSE if the price per share trades below $1.00 for an extended period of time, which could negatively affect our business, our financial condition, our results of operations and our ability to service our debt obligations.

Our class A common stock at times has traded below $1.00. In the event the average closing price of our class A common stock for a 30-day period is below $1.00, our stock could be delisted from the NYSE. The threat of delisting and/or a delisting of our class A common stock could have adverse effects by, among other things:

· reducing the trading liquidity and market price of our class A common stock;

· reducing the number of investors willing to hold or acquire our class A common stock, thereby further restricting our ability to obtain equity financing; and

· reducing our ability to retain, attract and motivate directors, officers and employees.

Risks Related to our REIT Status and Certain Other Tax Items

Our charter does not permit any individual to own more than 9.9% of our class A common stock, and attempts to acquire our class A common stock in excess of the 9.9% limit would be void without the prior approval of our board of directors.

For the purpose of preserving our qualification as a REIT for federal income tax purposes, our charter prohibits direct or constructive ownership by any individual of more than a certain percentage, currently 9.9%, of the lesser of the total number or value of the outstanding shares of our class A common stock as a means of preventing ownership of more than 50% of our class A common stock by five or fewer individuals. The charter’s constructive ownership rules are complex and may cause the outstanding class A common stock owned by a group of related individuals or entities to be deemed to be constructively owned by one individual. As a result, the acquisition of less than 9.9% of our outstanding class A common stock by an individual or entity could cause an individual to own constructively in excess of 9.9% of our outstanding class A common stock, and thus be subject to the charter’s ownership limit. There can be no assurance that our board of directors, as permitted in the charter, will increase, or will not decrease, this ownership limit in the future. Any attempt to own or transfer shares of our class A common stock in excess of the ownership limit without the consent of our board of directors will be void, and will result in the shares being transferred by operation of the charter to a charitable trust, and the person who acquired such excess shares will not be entitled to any distributions thereon or to vote such excess shares.

The 9.9% ownership limit may have the effect of precluding a change in control of us by a third-party without the consent of our board of directors, even if such change in control would be in the interest of our shareholders or would result in a premium to the price of our class A common stock (and even if such change in control would not reasonably jeopardize our REIT status). The ownership limit exemptions and the reset limits granted to date would limit our board of directors’ ability to reset limits in the future and at the same time maintain compliance with the REIT qualification requirement prohibiting ownership of more than 50% of our class A common stock by five or fewer individuals.

There are no assurances that we will be able to pay dividends in the future.

We expect in the future when we generate taxable income to pay quarterly dividends and to make distributions to our shareholders in amounts so that all or substantially all of our taxable income in each year, subject to certain adjustments, is distributed. This, along with our compliance with other requirements, should enable us to qualify for the tax benefits accorded to a REIT under the Internal Revenue Code. All distributions will be made at the discretion of our board of directors and will depend on our earnings, our financial condition, maintenance of our REIT status and such other factors as our board of directors may deem relevant from time to time. There are no assurances that we will be able to pay dividends in the future, and we may use our substantial net operating losses carried forward to offset future taxable income, and therefore reduce our dividend requirements. In addition, some of our distributions may include a return of capital, which would reduce the amount of capital available to operate our business.

We will be dependent on external sources of capital to finance our growth.

As with other REITs, but unlike corporations generally, our ability to finance our growth must largely be funded by external sources of capital because we generally will have to distribute to our shareholders 90% of our taxable income in order to qualify as a REIT, including taxable income where we do not receive corresponding cash. Our access to external capital will depend upon a number of factors, including general market conditions, the market’s perception of our growth potential, our current and potential future earnings, cash distributions and the market price of our class A common stock.

If we do not maintain our qualification as a REIT, we will be subject to tax as a regular corporation and face a substantial tax liability. Our taxable REIT subsidiaries are subject to income tax.

We expect to continue to operate so as to qualify as a REIT under the Internal Revenue Code. However, qualification as a REIT involves the application of highly technical and complex Internal Revenue Code provisions for which only a limited number of judicial or administrative interpretations exist. Notwithstanding the availability of cure provisions in the tax code, various compliance requirements could be failed and could jeopardize our REIT status. Furthermore, new tax legislation, administrative guidance or court decisions, in each instance potentially with retroactive effect, could make it more difficult or impossible for us to qualify as a REIT. If we fail to qualify as a REIT in any tax year, then:

· we would be taxed as a regular domestic corporation, which under current laws, among other things, means being unable to deduct distributions to shareholders in computing taxable income and being subject to federal income tax on our taxable income at regular corporate income tax rates;

· any resulting tax liability could be substantial and could have a material adverse effect on our book value;

· 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; and

· we generally would not be eligible to requalify as a REIT for four full taxable years.

Fee income from our investment management business is expected to be realized by one of our taxable REIT subsidiaries, and, accordingly, will be subject to income tax.

Complying with REIT requirements may cause us to forego otherwise attractive opportunities and limit our expansion opportunities.

In order to qualify as a REIT for federal income tax purposes, we must continually satisfy tests concerning, among other things, our sources of income, the nature of our investments in commercial real estate and related assets, the amounts we distribute to our shareholders and the ownership of our stock. We may also be required to make distributions to shareholders at disadvantageous times or when we do not have funds readily available for distribution. Thus, compliance with REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.

Complying with REIT requirements may force us to liquidate or restructure otherwise attractive investments.

In order to qualify as a REIT, we must also ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified REIT real estate assets. The remainder of our investments in securities cannot include more than 10% of the outstanding voting securities of any one issuer or 10% of the total value of the outstanding securities of any one issuer unless we and such issuer jointly elect for such issuer to be treated as a “taxable REIT subsidiary” under the Internal Revenue Code. The total value of all of our investments in taxable REIT subsidiaries cannot exceed 25% of the value of our total assets. In addition, no more than 5% of the value of our assets can consist of the securities of any one issuer other than a taxable REIT subsidiary. 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.

Since we have not originated new balance sheet investments since 2009 and transferred a substantial portion of our investments to CT Legacy REIT, our ability to satisfy the asset and income REIT qualification requirements will be more difficult and unless we are able to raise the capital to originate new balance sheet investments, our status as a REIT will ultimately be jeopardized.

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. Our interests in CT Legacy REIT and our CT CDOs may cause us to recognize taxable income without any corresponding cash income and we may be required to distribute additional dividends in cash and/or class A common stock.

Certain of our legacy assets are subject to separate REIT qualifications and restrictions as a result of our March 2011 debt restructuring.

In conjunction with our 2011 debt restructuring, we transferred certain of our legacy assets to CT Legacy REIT, a special purpose entity which is taxed as a REIT for purposes of federal income taxes. As a REIT, CT Legacy REIT is generally subject to the same risks described above with respect to distribution requirements, limitations on the types and quantities of permissible assets and income, and penalties for non-compliance with REIT regulations.

In addition, CT Legacy REIT is generally precluded from making new investments, and a portion of the legacy assets which are held by CT Legacy REIT may not qualify as REIT real estate assets. Accordingly, there is a risk that as the portfolio liquidates in the ordinary course, the asset mix at CT Legacy REIT, or income thereon, may violate REIT regulations and force CT Legacy REIT to either sell assets, potentially at disadvantageous prices, and/or terminate REIT status, which could result in material taxes and penalties.

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CT Legacy REIT (Details) (CT Legacy REIT, USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012
Schedule of Held-to-maturity Securities [Line Items]
Beginning Balance	$ 2,602
Principal paydowns	(17)
Discount/premium amortization & other	25
Deconsolidation of CT Legacy Asset	(2,610)	[1]
Ending Balance
CMBS
Schedule of Held-to-maturity Securities [Line Items]
Beginning Balance	1,346
Principal paydowns	(17)
Discount/premium amortization & other	18
Deconsolidation of CT Legacy Asset	(1,347)	[1]
Ending Balance
CDOs & Other
Schedule of Held-to-maturity Securities [Line Items]
Beginning Balance	1,256
Principal paydowns
Discount/premium amortization & other	7
Deconsolidation of CT Legacy Asset	(1,263)	[1]
Ending Balance

[1] As further described above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, these securities are no longer included in our consolidated financial statements.

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Consolidated Securitization Vehicles (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended					9 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012 Securitization Vehicles	Dec. 31, 2011 Securitization Vehicles		Sep. 30, 2012 Securitization Vehicles CMBS	Dec. 31, 2011 Securitization Vehicles CMBS	Sep. 30, 2012 Securitization Vehicles CDOs & Other	Dec. 31, 2011 Securitization Vehicles CDOs & Other
Amortized cost basis					$ 167,133			$ 136,933		$ 30,200
Mark-to-market adjustments on securities previously classified as available-for-sale					6			6
Other-than-temporary impairments recognized in accumulated other comprehensive income		(173)	160	3,098	(12,291)			(12,291)
Securities held-to-maturity					$ 154,848	$ 358,972	[1]	$ 124,648	$ 357,037	$ 30,200	$ 1,935

[1] Includes securities with a total face value of $236.4 million and $490.9 million as of September 30, 2012 and December 31, 2011, respectively.

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CT Legacy REIT (Details 9) (CT Legacy REIT, USD $) In Thousands, unless otherwise specified			9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2012 Gross Book Value		Sep. 30, 2012 Provision for Loan Losses		Sep. 30, 2012 Net Book Value
Beginning Balance, gross			$ 32,331
Beginning Balance, allowance					(1,456)
Beginning Balance, book		30,875					30,875
Deconsolidation of CT Legacy Asset			(32,331)	[1]	1,456	[1]	(30,875)	[1]
Ending Balance, gross
Ending Balance, allowance
Ending Balance, book		$ 30,875

[1] As further described above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, these loans held-for-sale are no longer included in our consolidated financial statements.

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Consolidated Securitization Vehicles (Details 17) (Securitization Vehicles, Interest Rate Swaps, USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012		Sep. 30, 2011
Securitization Vehicles | Interest Rate Swaps
Amount of loss recognized in OCI	$ (5,853)	[1]	$ 1,980	[1]
Amount of loss reclassified from OCI to income	$ (10,182)	[2]	$ (11,512)	[2]

[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.

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Consolidated Securitization Vehicles (Details 2) (Securitization Vehicles, HeldToMaturity, USD $) In Millions, unless otherwise specified	9 Months Ended		12 Months Ended
	Sep. 30, 2012 Securities Issues		Dec. 31, 2011 Issues Securities
Securitization Vehicles | HeldToMaturity
Number of securities	33		52
Number of issues	23		36
Rating	B+	[1],[2]	BB+	[1],[2]
Fixed	$ 154	[3]	$ 358	[2]
Floating	$ 1	[3]	$ 1	[3]
Coupon	6.15%	[1],[4]	6.49%	[1],[4]
Yield	6.32%	[1],[4]	7.41%	[1],[4]
Life (years)	3 years 1 month	[1],[5]	2 years 5 months	[1],[5]

[1] Represents a weighted average as of September 30, 2012 and December 31, 2011, 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 0.21% and 0.30% as of September 30, 2012 and December 31, 2011, 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.

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Employee Benefit and Incentive Plans (Details)	9 Months Ended
	Sep. 30, 2012		Sep. 30, 2011
Unvested share-based compensation, shares	1,213,051
1997 Director Plan Restricted Class A Common Stock
Beginning balance
Granted
Vested, deferred or forfeited
Unvested share-based compensation, shares
2007 Plan Restricted Class A Common Stock
Beginning balance	244,424
Granted	100,000
Vested, deferred or forfeited	(82,888)
Unvested share-based compensation, shares	261,536	[1]
2011 Plan Restricted Class A Common Stock
Beginning balance
Granted	275,000
Vested, deferred or forfeited
Unvested share-based compensation, shares	275,000	[1]
Restricted Class A Common Stock Plans
Beginning balance	244,424		32,785
Granted	375,000		300,000
Vested, deferred or forfeited	(82,888)
Unvested share-based compensation, shares	536,536	[1]	244,424
1997 Director Plan Stock Units
Beginning balance	68,544
Granted and deferred
Unvested share-based compensation, shares	68,544
2007 Plan Stock Units
Beginning balance	438,260
Granted and deferred	60,000
Unvested share-based compensation, shares	498,260
2011 Plan Stock Units
Beginning balance	55,531
Granted and deferred	54,180
Unvested share-based compensation, shares	109,711
Stock Units Plans
Beginning balance	562,335
Granted and deferred	114,180
Unvested share-based compensation, shares	676,515
1997 Director Plan
Unvested share-based compensation, shares	68,554
2007 Plan
Unvested share-based compensation, shares	759,796
2011 Plan
Unvested share-based compensation, shares	384,711

[1] Includes (i) 275,000 performance based awards that contingently vest upon the attainment of certain specified performance measures, and (ii) 250,000 time based awards that vest based upon an employee's continued employment on pre-established vesting dates.

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CT Legacy REIT (Details 7) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Book Value, net		$ 19,282
CT Legacy REIT
Book Value, net		206,514
Percentage of Book Value		100.00%
CT Legacy REIT | Northeast
Book Value, net		64,040
Percentage of Book Value		31.00%
CT Legacy REIT | Southwest
Book Value, net		40,353
Percentage of Book Value		19.00%
CT Legacy REIT | West
Book Value, net		38,179
Percentage of Book Value		18.00%
CT Legacy REIT | Southeast
Book Value, net		20,076
Percentage of Book Value		10.00%
CT Legacy REIT | Northwest
Book Value, net		9,364
Percentage of Book Value		5.00%
CT Legacy REIT | International
Book Value, net		34,502
Percentage of Book Value		17.00%
CT Legacy REIT | Office
Book Value, net		84,519
Percentage of Book Value		41.00%
CT Legacy REIT | Hotel
Book Value, net		75,240
Percentage of Book Value		36.00%
CT Legacy REIT | Multifamily
Book Value, net		14,212
Percentage of Book Value		7.00%
CT Legacy REIT | Other Property
Book Value, net		32,543
Percentage of Book Value		16.00%
CT Legacy REIT | Senior Mortgages
Book Value, net		77,986
Percentage of Book Value		37.00%
CT Legacy REIT | Subordinated interests in mortgages
Book Value, net		58,078
Percentage of Book Value		28.00%
CT Legacy REIT | Mezzanine Loans
Book Value, net		47,271
Percentage of Book Value		23.00%
CT Legacy REIT | Other Loans
Book Value, net		$ 23,179
Percentage of Book Value		12.00%

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Organization (Narrative) (Details) (USD $) In Thousands, except Share data, unless otherwise specified		0 Months Ended		189 Months Ended		9 Months Ended
	Feb. 10, 2012	Sep. 30, 2012 CT Investment Management Co, LLC	Sep. 30, 2012 Blackstone Definitive Agreement	Sep. 30, 2012 Capital Trust, Inc.	Sep. 30, 2012 W. R. Berkley Corporation	Sep. 30, 2012 March 2011 Restructuring Capital Trust, Inc.
Completed commercial real estate debt investments				$ 12,100,000
Mezzanine loan						83,000
Retained unencumbered ownership						100.00%
Equity interest in the common stock of CT Legacy REIT						52.00%
Ownership of preferred stock CT Legacy REIT						100.00%
Cumulative preferred dividends per annum						Class A preferred stock initially entitles us to cumulative preferred dividends of $7.5 million per annum, which dividends will be reduced in January 2013 to the greater of (i) 2.5% of certain of CT Legacy REIT's assets, and (ii)$1.0 million per annum.
Refinance with repurchase facility	124,000
Purchase agreement, description		On September 27, 2012, we announced our entry into a definitive purchase and sale agreement, or Purchase Agreement, with an affiliate, which we refer to as the Purchaser, of The Blackstone Group L.P., which we refer to as Blackstone. Pursuant to the Purchase Agreement, the Purchaser will acquire our investment management and special servicing businesses, operated through our subsidiary, CT Investment Management Co., LLC, or CTIMCO, and our related private investment fund co-investments.
Purchase agreement, consideration to be received			20,600
Purchase agreement, equity stake of Capital Trust to be acquired (as a percent)			17.10%
Purchase price of Class A common shares of Capital Trust to be acquired			$ 10,000
Class A common shares of Capital Trust to be acquired, shares			5,000,000
Class A common shares of Capital Trust to be acquired, price per share			$ 2.00
Special cash dividend to be declared			$ 2.00
Beneficially owned common stock (as a percent)					15.90%

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Employee Benefit and Incentive Plans (Details 1) (USD $)	9 Months Ended
	Sep. 30, 2012		Sep. 30, 2011
Unvested share-based compensation, shares	1,213,051
Restricted Class A Common Stock Plans
Unvested, beginning balance	$ 2.65		$ 5.67
Granted	$ 2.77		$ 2.29
Vested, deferred or forfeited	$ 3.56
Vested			$ 2.62
Unvested, ending balance	$ 2.64		$ 2.65
Beginning balance	244,424		32,785
Granted	375,000		300,000
Vested, deferred or forfeited	(82,888)
Vested			(88,361)
Unvested share-based compensation, shares	536,536	[1]	244,424

[1] Includes (i) 275,000 performance based awards that contingently vest upon the attainment of certain specified performance measures, and (ii) 250,000 time based awards that vest based upon an employee's continued employment on pre-established vesting dates.

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Shareholders' Equity (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Shareholders Equity Details 1
Balance, beginning			$ (18,515)
Net (income) loss attributable to noncontrolling interests	5,901	(5,466)	81,038	1,935
Other comprehensive income attributable to noncontrolling interests			10
Distributions to noncontrolling interests			(8)
Balance, end	$ 62,525		$ 62,525

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Segment Reporting (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
Interest and related income	$ 6,944	$ 25,642	$ 28,423	$ 95,187
Less: Interest and related expenses	5,147	21,838	33,902	80,381
Income from loans and other investments, net	1,797	3,804	(5,479)	14,806
Management fees from affiliates	1,546	1,753	4,741	4,927
Servicing fees	2,206	1,460	5,591	2,208
Total other revenues	3,752	3,213	10,332	7,135
General and administrative	7,141	4,941	16,193	19,868
Servicing fee expense
Total other expenses	7,141	4,941	16,193	19,868
Total other-than-temporary impairments of securities		(30,687)		(35,620)
Portion of other-than-temporary impairments of securities recognized in other comprehensive income		173	(160)	(3,098)
Impairment of real estate held-for-sale		(1,055)		(1,055)
Net impairments recognized in earnings		(31,569)	(160)	(39,773)
Valuation allowance on loans held-for-sale				(224)
Recovery of provision for loan losses	2,811	17,152	2,819	34,401
Fair value adjustment on investment in CT Legacy Asset	11,987		19,645
Gain on extinguishment of debt		20,054		271,031
Gain on deconsolidation of subsidiary			146,380
Income from equity investments in unconsolidated subsidiaries	411	307	1,312	2,105
Income before income taxes	13,617	8,020	158,656	269,613
Income tax provision (benefit)	717	(236)	1,783	1,214
Net income	12,900	8,256	156,873	268,399
Net (income) loss attributable to noncontrolling interests	(5,901)	5,466	(81,038)	(1,935)
Net income attributable to Capital Trust, Inc.	6,999	13,722	75,835	266,464
Total assets	581,197	1,539,889	581,197	1,539,889	1,366,316
Balance Sheet Investment
Interest and related income	6,944	25,642	28,423	95,187
Less: Interest and related expenses	5,147	21,838	33,902	80,381
Income from loans and other investments, net	1,797	3,804	(5,479)	14,806
Management fees from affiliates
Servicing fees
Total other revenues
General and administrative	3,381	2,427	6,551	5,372
Servicing fee expense	1,031		1,400	632
Total other expenses	4,412	2,427	7,951	6,004
Total other-than-temporary impairments of securities		(30,687)		(35,620)
Portion of other-than-temporary impairments of securities recognized in other comprehensive income		173	(160)	(3,098)
Impairment of real estate held-for-sale		(1,055)		(1,055)
Net impairments recognized in earnings		(31,569)	(160)	(39,773)
Valuation allowance on loans held-for-sale				(224)
Recovery of provision for loan losses	2,811	17,152	2,819	34,401
Fair value adjustment on investment in CT Legacy Asset	11,987		19,645
Gain on extinguishment of debt		20,054		271,031
Gain on deconsolidation of subsidiary			146,380
Income from equity investments in unconsolidated subsidiaries
Income before income taxes	12,183	7,014	155,254	274,237
Income tax provision (benefit)	167	703	467	2,615
Net income	12,016	6,311	154,787	271,622
Net (income) loss attributable to noncontrolling interests	(5,901)	5,466	(81,038)	(1,935)
Net income attributable to Capital Trust, Inc.	6,115	11,777	73,749	269,687
Total assets	556,003	1,528,441	556,003	1,528,441
Investment Management
Interest and related income
Less: Interest and related expenses
Income from loans and other investments, net
Management fees from affiliates	2,165	2,372	6,597	6,171
Servicing fees	3,237	1,671	6,991	2,840
Total other revenues	5,402	4,043	13,588	9,011
General and administrative	4,379	3,344	11,498	15,740
Servicing fee expense
Total other expenses	4,379	3,344	11,498	15,740
Total other-than-temporary impairments of securities
Portion of other-than-temporary impairments of securities recognized in other comprehensive income
Net impairments recognized in earnings
Fair value adjustment on investment in CT Legacy Asset
Gain on deconsolidation of subsidiary
Income from equity investments in unconsolidated subsidiaries	411	307	1,312	2,105
Income before income taxes	1,434	1,006	3,402	(4,624)
Income tax provision (benefit)	550	(939)	1,316	(1,401)
Net income	884	1,945	2,086	(3,223)
Net (income) loss attributable to noncontrolling interests
Net income attributable to Capital Trust, Inc.	884	1,945	2,086	(3,223)
Total assets	25,194	11,448	25,194	11,448
Inter-Segment Activities
Interest and related income
Less: Interest and related expenses
Income from loans and other investments, net
Management fees from affiliates	(619)	(619)	(1,856)	(1,244)
Servicing fees	(1,031)	(211)	(1,400)	(632)
Total other revenues	(1,650)	(830)	(3,256)	(1,876)
General and administrative	(619)	(830)	(1,856)	(1,244)
Servicing fee expense	(1,031)		(1,400)	(632)
Total other expenses	(1,650)	(830)	(3,256)	(1,876)
Total other-than-temporary impairments of securities
Portion of other-than-temporary impairments of securities recognized in other comprehensive income
Net impairments recognized in earnings
Fair value adjustment on investment in CT Legacy Asset
Gain on deconsolidation of subsidiary
Income from equity investments in unconsolidated subsidiaries
Income before income taxes
Income tax provision (benefit)
Net income
Net (income) loss attributable to noncontrolling interests
Net income attributable to Capital Trust, Inc.
Total assets

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Consolidated Securitization Vehicles (Details 4) (Securitization Vehicles, USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012
Deconsolidation of CT Legacy Asset	$ (163,739)	[1],[2]
Gross Other Than Temporary Impairment
Beginning Balance, total	130,360
Additions due to change in expected cash flows
Amortization of other-than-temporary impairments	(373)
Reductions due to realized losses	(26,263)
Deconsolidation of CT Legacy Asset	(25,567)	[3]
Ending Balance, total	78,157
Credit Related Other Than Temporary Impairment
Beginning Balance, otti	114,223
Additions due to change in expected cash flows	160
Amortization of other-than-temporary impairments	(128)
Reductions due to realized losses	(26,263)
Deconsolidation of CT Legacy Asset	(22,126)	[3]
Ending Balance, otti	65,866
Non Credit Related Other Than Temporary Impairment
Beginning Balance	16,137
Additions due to change in expected cash flows	(160)
Amortization of other-than-temporary impairments	(245)
Reductions due to realized losses
Deconsolidation of CT Legacy Asset	(3,441)	[3]
Ending Balance	$ 12,291

[1] Includes securities with a total face value of $236.4 million and $490.9 million as of September 30, 2012 and December 31, 2011, respectively.

[2] As further described above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the securities owned by its consolidated securitization vehicle are no longer included in our consolidated financial statements. Also, certain securities which are owned by our consolidated securitization vehicles, that had previously been eliminated in consolidation, are now included in our consolidated financial statements. See Note 6 for additional discussion on CT Legacy Asset.

[3] As further described in Note 1 above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the securities owned by CT Legacy REIT, some of which were other-than-temporarily impaired, are no longer included in our consolidated financial statements.

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Income Taxes (Narrative) (Details) (USD $)	Dec. 31, 2011
Net operting loss carried forward	$ 161,500,000
Capital Loss Carryforward
Net capital losses carried forward	$ 120,800,000

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Transactions with Related Parties (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended		9 Months Ended				9 Months Ended
	Sep. 30, 2012 CT Opportunity Partners I, LP	Jul. 31, 2008 CT Opportunity Partners I, LP	Sep. 30, 2012 EGI Private Equity II, L.L.C.	Sep. 30, 2012 W. R. Berkley Corporation	Jul. 31, 2007 W. R. Berkley Corporation	Nov. 09, 2006 W. R. Berkley Corporation	Sep. 30, 2012 CT Investment Management Co, LLC	Mar. 31, 2011 Five Mile
Related Party Transaction [Line Items]
Aggregate commitment agreements					$ 350,000	$ 250,000
Management fee percentage per annum on invested assets (as a percent)							25.00%
Allocated capital				594,000
Beneficially owned common stock and stock units (as a percent)				15.40%
Mezzanine loan to CT Legacy REIT in connection with restructuring								83,000
Total equity commitments		539,900
Limited partner interest (as a percent)			3.70%
Fees	2,000		80
CT CDO notes purchased face amount		75,500
CT CDO notes purchased amount	$ 40,400

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Fair Value (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012		Dec. 31, 2011
Measured on a recurring basis:
Investment in CT Legacy Asset, at fair value
CT Legacy REIT
Measured on a recurring basis:
Investment in CT Legacy Asset, at fair value	100,100
Recurring Basis | CT Legacy REIT
Measured on a recurring basis:
Investment in CT Legacy Asset, at fair value	100,100
Recurring Basis | CT Legacy REIT | Quoted Prices in Active Markets (Level 1)
Measured on a recurring basis:
Investment in CT Legacy Asset, at fair value
Recurring Basis | CT Legacy REIT | Other Observable Inputs (Level 2)
Measured on a recurring basis:
Investment in CT Legacy Asset, at fair value
Recurring Basis | CT Legacy REIT | Significant Unobservable Inputs (Level 3)
Measured on a recurring basis:
Investment in CT Legacy Asset, at fair value	100,100
Recurring Basis | Securitization Vehicles
Measured on a recurring basis:
Interest rate hedge liabilities	(19,089)
Recurring Basis | Securitization Vehicles | Quoted Prices in Active Markets (Level 1)
Measured on a recurring basis:
Interest rate hedge liabilities
Recurring Basis | Securitization Vehicles | Other Observable Inputs (Level 2)
Measured on a recurring basis:
Interest rate hedge liabilities	(19,089)
Recurring Basis | Securitization Vehicles | Significant Unobservable Inputs (Level 3)
Measured on a recurring basis:
Interest rate hedge liabilities
Nonrecurring Basis | Securitization Vehicles
Impaired loans:
Subordinate interests in mortgages	4,130	[1]
Nonrecurring Basis | Securitization Vehicles | Quoted Prices in Active Markets (Level 1)
Impaired loans:
Subordinate interests in mortgages
Nonrecurring Basis | Securitization Vehicles | Other Observable Inputs (Level 2)
Impaired loans:
Subordinate interests in mortgages
Nonrecurring Basis | Securitization Vehicles | Significant Unobservable Inputs (Level 3)
Impaired loans:
Subordinate interests in mortgages	$ 4,130	[1]

[1] Loans receivable against which we have recorded a provision for loan losses as of September 30, 2012.

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Segment Reporting (Narrative) (Details) (Investment Management, USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Investment Management
Intercompany preferred dividend income received	$ 619	$ 619	$ 1,900	$ 1,200
Intercompany fees for serving as collateral manager and servicing activity	$ 1,000	$ 211	$ 1,400	$ 632

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Employee Benefit and Incentive Plans (Narrative) (Details) (USD $)			9 Months Ended									3 Months Ended		9 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2012 2011 Plan	Sep. 30, 2012 Restricted Class A Common Stock Plans		Sep. 30, 2011 Restricted Class A Common Stock Plans	Dec. 31, 2011 Restricted Class A Common Stock Plans	Dec. 31, 2010 Restricted Class A Common Stock Plans	Sep. 30, 2012 2007 Plan	Sep. 30, 2012 Chief Executive Officer	Sep. 30, 2012 Chief Financial Officer	Sep. 30, 2012 Chief Credit Officer	Mar. 31, 2011 Named Executive Officers March 2011 Restructuring 2007 Plan	Mar. 31, 2011 Other Officers and Employees March 2011 Restructuring 2007 Plan	Sep. 30, 2012 CT Opportunity Partners I, LP	Jan. 31, 2011 CT Opportunity Partners I, LP	Sep. 30, 2012 CT Legacy REIT	Sep. 30, 2012 CT Legacy REIT March 2011 Restructuring
Maximum number of shares may be issued		1,000,000
Retsricted stock granted												300,000	100,000
2011 Long-Term Incentive Plan, shares available		615,000
Unamortized value of unvested share-based compensations shares			$ 686,000
Unvested share-based compensation, shares	1,213,051	384,711	536,536	[1]	244,424	244,424	32,785	759,796
Vesting rights			Subject to vesting conditions and the continued employment of certain employees, $465,000 of these costs will be recognized as compensation expense during the fourth quarter of 2012 and the remainder will be recognized over the next two years.
Compensation expense during the fourth quarter of 2012 and over the next two years			465,000
Grant date fair value of restricted shares that vested			$ 184,000		$ 231,000
Percentage of incentive management fee pool for employees															45.00%
Percentage of granted incentive compensation to employees														92.50%		83.50%
Percentage of grants vesting schedule																90.00%
Percentage of grants vesting upon receipt of dividends																10.00%
Description of incentive management fee grants to employees vesting schedule														(i) one-third vests on the date of grant, (ii) one-third on September 13, 2012, and (iii) the remainder vests upon our receipt of incentive management fees from CTOPI		(i) 25% vests on the date of grant, (ii) 25% vests in March 2013, (iii) 25% vests in March 2014, and (iv) the remainder vests upon our receipt of dividends from CT Legacy REIT. The remaining 10% of these grants vest upon our receipt of dividends from CT Legacy REIT
Percentage of the dividends paid to common equity holders created employee pool																	6.75%
Contigent awards, restricted stock									125,000	100,000	50,000

[1] Includes (i) 275,000 performance based awards that contingently vest upon the attainment of certain specified performance measures, and (ii) 250,000 time based awards that vest based upon an employee's continued employment on pre-established vesting dates.

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Shareholders' Equity (Narrative) (Details) (USD $) In Thousands, except Share data, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011	Mar. 31, 2009
Stock, shares authorized	200,000,000
Preferred stock, shares authorized	100,000,000
Common stock and stock units, shares issued and outstanding	23,191,622
Class A Common Stock
Stock, shares authorized	100,000,000	100,000,000
Common stock and stock units, shares issued and outstanding	21,979,000	21,967,000
Repurchase shares to satisfy tax withholdings obligations for incentive plan particiapants	6,959
Warrants issued to purchase common stock, shares			3,479,691
Exercise price			1.79
Warrants exercisable	Mar. 16, 2012
Warrants expiration	Mar. 16, 2019
Fair value of warrants			$ 940

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Equity Investments in Unconsolidated Subsidiaries (Tables)

9 Months Ended

Sep. 30, 2012

Equity Investments In Unconsolidated Subsidiaries Tables

Activity relating to our equity investments in unconsolidated subsidiaries

Activity relating to our equity investments in unconsolidated subsidiaries for the nine months ended September 30, 2012 was as follows (in thousands):

	CTOPI			CT High Grade II		Total
December 31, 2011		$10,399			$—		$10,399
Contributions		1,241			2,789		4,030
Income from equity investments in     unconsolidated subsidiaries (1)		7,068			153		7,221
Distributions		(2,940	)		—		(2,940	)
September 30, 2012		$15,768			$2,942		$18,710

(1) Includes $5.9 million of incentive income allocated to us from CTOPI under the equity method of accounting. This incentive income has not been recognized into earnings, but recorded as a deferred incentive income liability under accounts payable, accrued expenses and other liabilities on our consolidated balance sheet.

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CT Legacy REIT (Details 11) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Net book value of liabilities		$ 19,282
CT Legacy REIT
Net book value of liabilities		97,465
CT Legacy REIT | Participations sold assets
Gross carrying value		97,465
Less: Provision for loan losses		(97,465)
Net book value of assets
Net book value of liabilities		97,465
Net impact to shareholders' equity		$ (97,465)

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CT Legacy REIT (Details 3) (CT Legacy REIT, USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012
Deconsolidation of CT Legacy Asset	$ (2,610)	[1]
Gross Other Than Temporary Impairment
Beginning Balance, total	26,557
Amortization of other-than-temporary impairments	(24)
Deconsolidation of CT Legacy Asset	(26,533)	[2]
Ending Balance, total
Credit Related Other Than Temporary Impairment
Beginning Balance, otti	26,105
Amortization of other-than-temporary impairments	(11)
Deconsolidation of CT Legacy Asset	(26,094)	[2]
Ending Balance, otti
Non Credit Related Other Than Temporary Impairment
Beginning Balance	452
Amortization of other-than-temporary impairments	(13)
Deconsolidation of CT Legacy Asset	(439)	[2]
Ending Balance

[1] As further described above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, these securities are no longer included in our consolidated financial statements.

[2] As further described in Note 1 above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the securities owned by CT Legacy REIT, some of which were other-than-temporarily impaired, are no longer included in our consolidated financial statements.

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General and administrative expenses (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
General and Administrative Expenses
Personnel costs			$ 7,642	$ 7,162
Restructuring awards				2,750
Professional services			2,468	3,914
Pending sale of investment management platform			2,135
Operating and other costs			2,267	1,617
Subtotal			14,512	15,443
Non-cash personnel costs
Employee stock-based compensation			675	411
Non-cash personnel costs			1,619	3,806
Total	7,141	4,941	16,193	19,868
CT Legacy REIT
Non-cash personnel costs
Management incentive awards plan			944	3,395
Securitization Vehicles
Non-cash personnel costs
Total			$ 62	$ 619

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Debt Obligations (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011
Debt obligations	$ 8,326	$ 7,847
Equity interest in common stock	93.50%
Total common stock outstanding	48.30%
Prepayment premium of total payment of principal and interest	11,100
Maturity Date	Mar. 31, 2016
March 2011 Restructuring
Secured notes face amount	$ 7,800
Interest rate	8.20%

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Consolidated Securitization Vehicles (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012 Securities	Dec. 31, 2011
Total assets	$ 62,767	$ 70,300
Total liabilties	26,160	35,204
Securitization Vehicles
Total assets	402,185	1,040,921
Total liabilties	517,071	1,239,451
Number of consolidated securization vehicles	4
Impairment previously recorded in other comprehensive income	160
Number of investments	33	52
Estimated Fair Value	144,700	350,200
Securities held-to-maturity	154,848	358,972	[1]
Number of loans	2
Book value of loans in maturity default	52,700
Non-recourse securitized debt obligations	497,423	1,211,407
Maximum potential amount of future payment	722,500
Expected reclassified from other comprehensive income to interest expense	9,800
Number of securities recognized other-than-temporary-impairment	11
Securitization Vehicles | Subordinated interests in mortgages
Troubled debt restructuring - loan principal balance	6,600
Trouble debt restructing - impairment	4,600
Securitization Vehicles | CT CDOs
Number of consolidated securization vehicles	3
Notional Amounts of subordinated debt and equity interests	162,000
Non-recourse securitized debt obligations	446,871	742,253
Number of issuances	3	4
Face amount of issuances	467,600
Loans receivable, CT CDOs	149,500	208,300
Securities financed by CT CDOs	154,800	359,000
Securitization Vehicles | Other Consolidation Securization Vehicles
Loans receivable, CT CDOs	65,000	404,300
Securitization Vehicles | CMBS
Impairment previously recorded in other comprehensive income	160
Number of investments	29	51
Estimated Fair Value	126,100	348,300
Securities held-to-maturity	124,648	357,037
Securitization Vehicles | CDOs & Other
Impairment previously recorded in other comprehensive income
Number of investments	4	1
Estimated Fair Value	18,600	1,900
Securities held-to-maturity	$ 30,200	$ 1,935

[1] Includes securities with a total face value of $236.4 million and $490.9 million as of September 30, 2012 and December 31, 2011, respectively.

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Consolidated Securitization Vehicles (Details 14) (Securitization Vehicles, USD $) In Thousands, unless otherwise specified			9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2012 Gross Other Than Temporary Impairment		Sep. 30, 2012 Gross Book Value		Sep. 30, 2012 Net Book Value
Real estate held-for-sale
Beginning Balance, gross					$ 24,960
Beginning Balance, otti			(14,618)
Beginning Balance, book		10,342					10,342
Deconsolidation of CT Legacy Asset			14,618	[1]	(24,960)	[1]	(10,342)	[1]
Ending Balance, gross
Ending Balance, otti
Ending Balance, book		$ 10,342

[1] As further described in Note 1 above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the real estate held-for-sale is no longer included in our consolidated financial statements.

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Consolidated Securitization Vehicles (Details 8) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012		Dec. 31, 2011
Types of loans as well as the property type and geographic distribution of the properties securing these loans
Book Value, net			$ 19,282
Securitization Vehicles
Types of loans as well as the property type and geographic distribution of the properties securing these loans
Book Value	214,457		620,030
Unallocated loan loss provision		[1]	(7,432)	[1]
Book Value, net	214,457		612,598
Percentage of Book Value	100.00%		100.00%
Securitization Vehicles | Northeast
Types of loans as well as the property type and geographic distribution of the properties securing these loans
Book Value	98,757		199,361
Percentage of Book Value	46.00%		32.00%
Securitization Vehicles | West
Types of loans as well as the property type and geographic distribution of the properties securing these loans
Book Value	78,700		152,774
Percentage of Book Value	37.00%		25.00%
Securitization Vehicles | Southeast
Types of loans as well as the property type and geographic distribution of the properties securing these loans
Book Value	21,707		124,456
Percentage of Book Value	10.00%		20.00%
Securitization Vehicles | Southwest
Types of loans as well as the property type and geographic distribution of the properties securing these loans
Book Value	15,293		57,046
Percentage of Book Value	7.00%		9.00%
Securitization Vehicles | Midwest
Types of loans as well as the property type and geographic distribution of the properties securing these loans
Book Value			24,957
Percentage of Book Value			4.00%
Securitization Vehicles | Diversified
Types of loans as well as the property type and geographic distribution of the properties securing these loans
Book Value			61,436
Percentage of Book Value	0.00%		10.00%
Securitization Vehicles | Office
Types of loans as well as the property type and geographic distribution of the properties securing these loans
Book Value	185,006		317,940
Percentage of Book Value	86.00%		51.00%
Securitization Vehicles | Hotel
Types of loans as well as the property type and geographic distribution of the properties securing these loans
Book Value	27,322		174,419
Percentage of Book Value	13.00%		28.00%
Securitization Vehicles | Retail
Types of loans as well as the property type and geographic distribution of the properties securing these loans
Book Value			72,701
Percentage of Book Value			12.00%
Securitization Vehicles | Healthcare
Types of loans as well as the property type and geographic distribution of the properties securing these loans
Book Value			18,837
Percentage of Book Value			3.00%
Securitization Vehicles | Other Property
Types of loans as well as the property type and geographic distribution of the properties securing these loans
Book Value	2,129		36,133
Percentage of Book Value	1.00%		6.00%
Securitization Vehicles | Subordinated interests in mortgages
Types of loans as well as the property type and geographic distribution of the properties securing these loans
Book Value	129,509		225,773
Percentage of Book Value	60.00%		36.00%
Securitization Vehicles | Senior Mortgages
Types of loans as well as the property type and geographic distribution of the properties securing these loans
Book Value	65,000		241,323
Percentage of Book Value	30.00%		39.00%
Securitization Vehicles | Mezzanine Loans
Types of loans as well as the property type and geographic distribution of the properties securing these loans
Book Value	$ 19,948		$ 152,934
Percentage of Book Value	10.00%		25.00%

[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, collateral property type, or geographic location, but rather to an overall pool of loans. See Note 2 for additional details.

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CT Legacy REIT (Details 8) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Book Value, net		$ 19,282
CT Legacy REIT
Principal Balance		435,973
Book Value, net		206,514
Number of Loans		17
CT Legacy REIT | Senior Mortgages
Principal Balance		91,072
Book Value, net		77,986
Number of Loans		5
CT Legacy REIT | Senior Mortgages | Risk Rating 1-3
Principal Balance		27,503
Book Value, net		27,503
Number of Loans		1
CT Legacy REIT | Senior Mortgages | Risk Rating 4-5
Principal Balance		21,000
Book Value, net		20,976
Number of Loans		2
CT Legacy REIT | Senior Mortgages | Risk Rating 6-8
Principal Balance		42,569
Book Value, net		29,507
Number of Loans		2
CT Legacy REIT | Subordinated interests in mortgages
Principal Balance		122,555
Book Value, net		58,078
Number of Loans		6
CT Legacy REIT | Subordinated interests in mortgages | Risk Rating 1-3
Principal Balance		13,000
Book Value, net		13,000
Number of Loans		1
CT Legacy REIT | Subordinated interests in mortgages | Risk Rating 4-5
Principal Balance		24,531
Book Value, net		24,531
Number of Loans		1
CT Legacy REIT | Subordinated interests in mortgages | Risk Rating 6-8
Principal Balance		85,024
Book Value, net		20,547
Number of Loans		4
CT Legacy REIT | Mezzanine & Other Loans
Principal Balance		222,346
Book Value, net		70,450
Number of Loans		6
CT Legacy REIT | Mezzanine & Other Loans | Risk Rating 1-3
Principal Balance		51,437
Book Value, net		51,830
Number of Loans		3
CT Legacy REIT | Mezzanine & Other Loans | Risk Rating 4-5
Principal Balance		18,620
Book Value, net		18,620
Number of Loans		2
CT Legacy REIT | Mezzanine & Other Loans | Risk Rating 6-8
Principal Balance		152,289
Book Value, net
Number of Loans		1
CT Legacy REIT | Loans Receivable
Number of Loans		17
CT Legacy REIT | Loans Receivable | Risk Rating 1-3
Principal Balance		91,940
Book Value, net		92,333
Number of Loans		5
CT Legacy REIT | Loans Receivable | Risk Rating 4-5
Principal Balance		64,151
Book Value, net		64,127
Number of Loans		5
CT Legacy REIT | Loans Receivable | Risk Rating 6-8
Principal Balance		279,882
Book Value, net		$ 50,054
Number of Loans		7

XML

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2012

Summary Of Significant Accounting Policies

Summary of Significant Accounting Policies

Note 2. Summary of Significant Accounting Policies

The accompanying unaudited consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP, for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The accompanying unaudited consolidated interim financial statements should be read in conjunction with the consolidated financial statements and the related management’s discussion and analysis of financial condition and results of operations filed with our Annual Report on Form 10-K for the fiscal year ended December 31, 2011. In our opinion, all material adjustments (consisting of normal, recurring accruals) considered necessary for a fair presentation, in accordance with GAAP, have been included. The results of operations for the nine months ended September 30, 2012 are not necessarily indicative of results that may be expected for the entire year ending December 31, 2012.

Principles of Consolidation

The accompanying financial statements include, on a consolidated basis, our accounts, the accounts of our wholly-owned subsidiaries, and variable interest entities, or VIEs, in which we are the primary beneficiary. All significant intercompany balances and transactions have been eliminated in consolidation.

VIEs are defined as entities in which equity investors (i) do not have the characteristics of a controlling financial interest, and/or (ii) do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The entity that consolidates a VIE is known as its primary beneficiary, and is generally the entity with (i) the power to direct the activities that most significantly impact the VIE’s economic performance, and (ii) the right to receive benefits from the VIE or the obligation to absorb losses of the VIE that could be significant to the VIE.

Our consolidated subsidiaries include: (i) CT Legacy REIT, and (ii) five securitization vehicles, including our three CT CDOs which were sponsored and issued by us and one other similar vehicle. See Note 6 and Note 7 for additional information on our investments in VIEs.

Balance Sheet Presentation

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 were subsidiaries of CT Legacy REIT. Assets of all consolidated VIEs can generally only be used to satisfy the obligations of those VIEs, and the liabilities of consolidated VIEs are non-recourse to us.

We have aggregated all the assets and liabilities of the consolidated securitization vehicles due to our determination that these entities are substantively similar and therefore a further disaggregated presentation would not be more meaningful. Similarly, the notes to our consolidated financial statements separately describe (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 were subsidiaries of CT Legacy REIT.

Equity Investments in Unconsolidated Subsidiaries and Fair Value Option

Our co-investment interests in the private equity funds we manage are accounted for using the equity method. These entities’ assets and liabilities are not consolidated into our financial statements due to our determination that (i) these entities are not VIEs, and (ii) the investors have sufficient rights to preclude consolidation by us. As such, we report our allocable percentage of the earnings or losses of these entities on a single line item in our consolidated statements of operations as income from equity investments.

One such fund, CT Opportunity Partners I, LP, or CTOPI, maintains its financial records at fair value in accordance with GAAP. We have applied such accounting relative to our investment in CTOPI, and include any adjustments to fair value recorded at the fund level in determining the income we record on our equity investment in CTOPI.

We have elected the fair value option of accounting for CT Legacy REIT’s investment in CT Legacy Asset, pursuant to which we record this investment at fair value rather than at our historical cost investment amount. Additionally, changes in the fair value of this investment are recognized in our consolidated statement of operations. We made this election due to our determination that the fair value of the investment in CT Legacy Asset, as a net liquidating portfolio of assets subject to a non-recourse repurchase obligation, is more meaningful and indicative of our interests in CT Legacy Asset than equity method accounting. See Note 6 for additional discussion of CT Legacy REIT and CT Legacy Asset.

Revenue Recognition

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

Interest income from our securities is recognized using a level yield with any purchase premium or discount accreted through income over the life of the security. This yield is calculated using cash flows expected to be collected which are based on a number of assumptions on the underlying loans. Examples include, among other things, the rate and timing of principal payments, including prepayments, repurchases, defaults and liquidations, the pass-through or coupon rate, and interest rates. Additional factors that may affect reported interest income on our securities include interest payment shortfalls due to delinquencies on the underlying mortgage loans and the timing and magnitude of expected credit losses on the mortgage loans underlying the securities. These are impacted by, among other things, the general condition of the real estate market, including competition for tenants and their related credit quality, and changes in market rental rates. These uncertainties and contingencies are difficult to predict and are subject to future events that may alter the assumptions.

Fees from special servicing and asset management services are recorded on an accrual basis as services are rendered under the applicable agreements, and when receipt of fees is reasonably certain. We do not recognize incentive income from our investment management business until contingencies have been eliminated. Recognition of incentive income allocated or paid to us prior to that date is deferred and recorded as deferred incentive income liability under accounts payable, accrued expenses and other liabilities on our consolidated balance sheet. Depending on the structure of our investment management vehicles, certain incentive fees may be in the form of carried interest or promote distributions.

Cash and Cash Equivalents

We classify highly liquid investments with original maturities of three months or less from the date of purchase as cash equivalents. We place our cash and cash equivalents with high credit quality institutions to minimize credit risk exposure. As of, and for the periods ended, September 30, 2012 and December 31, 2011, we had bank balances in excess of federally insured amounts. We have not experienced any losses on our demand deposits, commercial paper or money market investments.

Restricted Cash

We classify the cash balances held by CT Legacy REIT as restricted because, while these cash balances are available for use by CT Legacy REIT for operations, debt service, or other purposes, they cannot be used by us until our allocable share is distributed from CT Legacy REIT, and cannot be co-mingled with any of our other, unrestricted cash balances. See Note 6 for additional discussion of CT Legacy REIT.

Securities

We classify our securities as held-to-maturity, available-for-sale, or trading on the date of acquisition of the investment. Held-to-maturity investments are stated at cost, adjusted for the amortization of any premiums or discounts, which are amortized through our consolidated statements of operations using the level yield method described above. Other than in the instance of an other-than-temporary impairment, as discussed below, these held-to-maturity investments are carried on our consolidated financial statements at their amortized cost basis.

We may also invest in securities which may be classified as available-for-sale. Available-for-sale securities are carried at estimated fair value with the net unrealized gains or losses reported as a component of accumulated other comprehensive income (loss) in shareholders’ equity. Changes in the valuations do not affect our reported income or cash flows, but do impact shareholders’ equity and, accordingly, book value per share. On August 4, 2005, we changed the accounting classification of certain of our securities from available-for-sale to held-to-maturity. We have not designated any securities as available-for-sale since that time.

Further, as required under GAAP, when, based on current information and events, there has been an adverse change in the cash flows expected to be collected from those previously estimated for one of our securities, an other-than-temporary impairment is deemed to have occurred. A change in expected cash flows is considered adverse if the present value of the revised cash flows (taking into consideration both the timing and amount of cash flows expected to be collected) discounted using the security’s current yield is less than the present value of the previously estimated remaining cash flows, adjusted for cash receipts during the intervening period.

Should an other-than-temporary impairment be deemed to have occurred, the security is written down to fair value. The total other-than-temporary impairment is bifurcated into (i) the amount related to expected credit losses, and (ii) the amount related to fair value adjustments in excess of expected credit losses, or the Valuation Adjustment. The portion of the other-than-temporary impairment related to expected credit losses is calculated by comparing the amortized cost basis of the security to the present value of cash flows expected to be collected, discounted at the security’s current yield, and is recognized through earnings in the consolidated statement of operations. The remaining other-than-temporary impairment related to the Valuation Adjustment is recognized as a component of accumulated other comprehensive income (loss) in shareholders’ equity. A portion of other-than-temporary impairments recognized through earnings is accreted back to the amortized cost basis of the security through interest income, while amounts recognized through other comprehensive income (loss) are amortized over the life of the security with no impact on earnings.

Loans Receivable, Provision for Loan Losses, Loans Held-for-Sale and Related Allowance

We purchase and originate commercial real estate debt and related instruments, or Loans, generally to be held as long-term investments at amortized cost. Management is required to periodically evaluate each of these Loans for possible impairment. Impairment is indicated when it is deemed probable that we will not be able to collect all amounts due according to the contractual terms of the Loan. If a Loan is determined to be impaired, we write down the Loan through a charge to the provision for loan losses. Impairment on these loans is measured by comparing the estimated fair value of the underlying collateral to the book value of the respective loan. These valuations require significant judgments, which include assumptions regarding capitalization rates, leasing, creditworthiness of major tenants, occupancy rates, availability of financing, exit plan, loan sponsorship, actions of other lenders and other factors deemed necessary by management. Actual losses, if any, could ultimately differ from these estimates.

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, loan-to-value ratio, or LTV, collateral performance, structure, exit plan, and sponsorship. Loans are rated one through eight, which are defined as follows:

1 - Low Risk: A loan that is expected to perform through maturity, with relatively lower LTV, higher in-place debt yield, and stable projected cash flow.

2 - Average Risk: A loan that is expected to perform through maturity, with medium LTV, average in-place debt yield, and stable projected cash flow.

3 - Acceptable Risk: A loan that is expected to perform through maturity, with relatively higher LTV, acceptable in-place debt yield, and some uncertainty (due to lease rollover or other factors) in projected cash flow.

4 - Higher Risk: A loan that is expected to perform through maturity, but has exhibited a material deterioration in cash flow and/or other credit factors. If negative trends continue, default could occur.

5 - Low Probability of Default/Loss: A loan with one or more identified weakness that we expect to have a 15% probability of default or principal loss.

6 - Medium Probability of Default/Loss: A loan with one or more identified weakness that we expect to have a 33% probability of default or principal loss.

7 - High Probability of Default/Loss: A loan with one or more identified weakness that we expect to have a 67% or higher probability of default or principal loss.

8 - In Default: A loan which is in contractual default and/or which has a very high likelihood of principal loss.

In addition, for certain pools of smaller loans which have similar credit characteristics, primarily loans with an outstanding principal balance of $10.0 million or less in our consolidated securitization vehicles, we have recorded a general provision for loan losses in lieu of the asset-specific provisions we record on all other loans. This general provision is based on macroeconomic data with respect to historic loan losses, vintage, property type, and other factors deemed relevant for such loan pools. These loans do not undergo the same level of asset management as our larger investments.

In certain cases, we may classify loans as held-for-sale based upon the specific facts and circumstances of particular Loans, including known or expected transactions. Loans held-for-sale are carried at the lower of their amortized cost basis and fair value. A reduction in the fair value of loans held-for-sale is recorded as a charge to our consolidated statement of operations as a valuation allowance on loans held-for-sale.

Real Estate Held-for-Sale

Loan investments where we have foreclosed upon the underlying collateral and own an equity interest in real estate are categorized as real estate owned. We generally do not intend to hold such foreclosed assets for long-term operations and therefore classify such assets as real estate held-for-sale on our consolidated balance sheets. Real estate held-for-sale are carried at the lower of our basis in the real estate and fair value, less cost to sell, with reductions in fair value recorded as an impairment of real estate-held-for-sale on our consolidated statements of operations.

Deferred Financing Costs

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

Repurchase Obligations

In certain circumstances, we have financed the purchase of investments from a counterparty through a repurchase obligation with that same counterparty. We record these investments in the same manner as other investments financed with repurchase obligation, with the investment recorded as an asset and the related borrowing under any repurchase agreement recorded as a liability on our consolidated balance sheets. Interest income earned on the investments and interest expense incurred on the repurchase obligations are reported separately on our consolidated statements of operations.

Interest Rate Derivative Financial Instruments

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

To determine the fair value of interest rate derivative financial instruments, we use a third-party derivative specialist to assist us in periodically valuing our interests.

Income Taxes

Our financial results generally do not reflect provisions for current or deferred income taxes on our REIT taxable income. Management believes that we operate in a manner that will continue to allow us to be taxed as a REIT and, as a result, we generally do not expect to pay substantial corporate level taxes other than those payable by our taxable REIT subsidiaries. Many of these requirements, however, are highly technical and complex. If we were to fail to meet these requirements, we may be subject to federal, state and local income tax on current and past income, and penalties. See Note 10 for additional information.

Accounting for Stock-Based Compensation

Stock-based compensation expense is recognized in net income using a fair value measurement method, which we determine with the assistance of a third-party appraisal firm. Compensation expense for the time vesting of stock-based compensation grants is recognized on the accelerated attribution method and compensation expense for performance vesting of stock-based compensation grants is recognized on a straight line basis.

The fair value of the performance vesting restricted common stock is measured on the grant date using a Monte Carlo simulation to estimate the probability of the market vesting conditions being satisfied. The Monte Carlo simulation is run approximately 100,000 times. For each simulation, the payoff is calculated at the settlement date, and is then discounted to the grant date at a risk-free interest rate. The average of the values over all simulations is the expected value of the restricted common stock on the grant date. The valuation is performed in a risk-neutral framework, so no assumption is made with respect to an equity risk premium. Significant assumptions used in the valuation include an expected term and stock price volatility, an estimated risk-free interest rate and an estimated dividend growth rate.

Estimates of fair value are not intended to predict actual future events or the value ultimately realized by employees who receive equity awards, and subsequent events are not indicative of the reasonableness of the original estimates of fair value made by us.

Comprehensive Income (Loss)

Total comprehensive income was $164.8 million and $279.8 million for the nine months ended September 30, 2012 and 2011, respectively. The primary components of comprehensive income other than net income are the unrealized gains and losses on derivative financial instruments and the component of other-than-temporary impairments of securities related to the Valuation Adjustment.

Earnings per Share of Common Stock

Basic earnings per share, or EPS, is computed based on the net earnings allocable to common stock and stock units, divided by the weighted average number of shares of common stock and stock units outstanding during the period. Diluted EPS is determined using the treasury stock method, and is based on the net earnings allocable to common stock and stock units, divided by the weighted average number of shares of common stock, stock units and potentially dilutive common stock options and warrants. See Note 8 for additional discussion of earnings per share.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may ultimately differ from those estimates.

Reclassifications

Certain reclassifications have been made in the presentation of the prior period consolidated financial statements to conform to the September 30, 2012 presentation.

Segment Reporting

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

The Balance Sheet Investment segment includes our consolidated portfolio of interest earning assets and the financing thereof. The Investment Management segment includes the investment management activities of our wholly-owned investment management subsidiary, CT Investment Management Co., LLC, or CTIMCO, and its subsidiaries, as well as our co-investments in investment management vehicles. CTIMCO is a taxable REIT subsidiary and serves as the investment manager of Capital Trust, Inc., all of our investment management vehicles and CT CDOs, and serves as senior servicer and special servicer for certain of our investments and for third-parties.

Fair Value of Financial Instruments

The “Fair Value Measurements and Disclosures” Topic of the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or the Codification, defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements under GAAP. Specifically, this guidance defines fair value based on exit price, or the price that would be received upon the sale of an asset or the transfer of a liability in an orderly transaction between market participants at the measurement date. Our assets and liabilities which are measured at fair value are discussed in Note 12.

Recent Accounting Pronouncements

In April 2011, the FASB issued Accounting Standards Update 2011-02, “Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring,” or ASU 2011-02. ASU 2011-02 primarily clarifies when creditors should classify loan modifications as troubled debt restructurings and provides examples and factors to be considered. Loan modifications which are considered troubled debt restructurings could result in additional disclosure requirements and could impact the related provision for loan losses. ASU 2011-02 is effective for the first interim or annual period beginning after June 15, 2011, with retrospective application to the beginning of the year. The adoption of ASU 2011-02 did not have a material impact on our financial statements, however will impact how we account for loan modifications, and may result in an increase in the loan modifications we classify as troubled debt restructurings, and therefore our provision for loan losses.

In April 2011, the FASB issued Accounting Standards Update 2011-03, “Transfers and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements,” or ASU 2011-03. ASU 2011-03 primarily removes certain criteria from the consideration of effective control over assets subject to repurchase agreements. The removal of these criteria will generally result in asset transfers pursuant to repurchase agreements being accounted for as secured borrowings, with both the transferred assets and repurchase liability recorded on the transferor’s balance sheet. ASU 2011-03 is effective for the first interim or annual period beginning after December 15, 2011, and is to be applied prospectively to transactions which occur subsequent to the effective date. The adoption of ASU 2011-03 did not have a material impact on our financial statements.

In May 2011, the FASB issued Accounting Standards Update 2011-04, “Fair Value Measurement (Topic 860): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs,” or ASU 2011-04. ASU 2011-04 amends existing guidance on fair value measurements related to (i) instruments held in a portfolio, (ii) instruments classified within shareholders’ equity, (iii) application of the “highest and best use” concept to nonfinancial assets, (iv) application of blockage factors and other premiums and discounts in the valuation process, and (v) other matters. In addition, ASU 2011-04 expanded the required disclosures around fair value measurements including (i) reporting the level in the fair value hierarchy used to value assets and liabilities which are not measured at fair value, but where fair value is disclosed, and (ii) qualitative disclosures about the sensitivity of Level 3 fair value measurements to changes in unobservable inputs used. ASU 2011-04 is effective for the first interim or annual period beginning after December 15, 2011. The adoption of ASU 2011-04 did not have a material impact on our financial statements, however it did expand our disclosures related to fair value measurements.

In June 2011, the FASB issued Accounting Standards Update 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income,” or ASU 2011-05. ASU 2011-05 does not change the items that must be reported in other comprehensive income, however it eliminates the option to present other comprehensive income on the statement of shareholders’ equity and instead requires either (i) a continuous statement of comprehensive income which would replace the current statement of operations, or (ii) an additional statement of other comprehensive income, which would immediately follow the statement of operations, and would report the components of other comprehensive income. In December 2011, the FASB issued Accounting Standards Update 2011-12, “Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassification Items Out of Accumulated Comprehensive Income in Accounting Standards Update 2011-05,” or ASU 2011-12. ASU 2011-12 maintained the presentation requirements for comprehensive income under ASU 2011-05, however deferred the requirement to present certain reclassification adjustments into and out of accumulated other comprehensive income on a gross basis. ASU 2011-05 and ASU 20011-12 are both effective for the first interim or annual period beginning after December 15, 2011, and should be applied retrospectively to all periods reported after the effective date. Our early adoption, as permitted, of ASU 2011-05 and ASU 2011-12 as of December 31, 2011 did not have a material impact on our financial statements, other than the change in presentation of comprehensive income as a separate financial statement.

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Consolidated Securitization Vehicles (Details 9) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012		Dec. 31, 2011
Book Value, net			$ 19,282
Securitization Vehicles
Principal Balance	292,828		815,716
Book Value	214,457		620,030
Number of Loans	14		71
Book Value, net	214,457		612,598
Unallocated loan loss provision		[1]	(7,432)	[1]
Securitization Vehicles | Risk Rating 1-3
Principal Balance	118,333		416,032
Book Value	118,006		415,661
Number of Loans	5		22
Securitization Vehicles | Risk Rating 4-5
Principal Balance	78,700		44,057
Book Value	78,622		43,945
Number of Loans	2		3
Securitization Vehicles | Risk Rating 6-8
Principal Balance	95,795		271,988
Book Value	17,829		76,784
Number of Loans	7		17
Securitization Vehicles | Risk Rating NA
Principal Balance			83,639
Book Value			83,640
Number of Loans			29
Securitization Vehicles | Senior Mortgages
Principal Balance	65,000		257,630
Book Value	65,000		241,323
Number of Loans	1		44
Securitization Vehicles | Senior Mortgages | Risk Rating 1-3
Principal Balance			117,452
Book Value			117,452
Number of Loans			10
Securitization Vehicles | Senior Mortgages | Risk Rating 4-5
Principal Balance	65,000		12,551
Book Value	65,000		12,551
Number of Loans	1		1
Securitization Vehicles | Senior Mortgages | Risk Rating 6-8
Principal Balance			43,988
Book Value			27,680
Number of Loans			4
Securitization Vehicles | Senior Mortgages | Risk Rating NA
Principal Balance			83,639
Book Value			83,640
Number of Loans			29
Securitization Vehicles | Subordinated interests in mortgages
Principal Balance	207,790		329,372
Book Value	129,509		225,773
Number of Loans	12		19
Securitization Vehicles | Subordinated interests in mortgages | Risk Rating 1-3
Principal Balance	98,295		175,560
Book Value	98,058		175,314
Number of Loans	4		8
Securitization Vehicles | Subordinated interests in mortgages | Risk Rating 4-5
Principal Balance	13,700		31,506
Book Value	13,622		31,394
Number of Loans	1		2
Securitization Vehicles | Subordinated interests in mortgages | Risk Rating 6-8
Principal Balance	95,795		122,306
Book Value	17,829		19,065
Number of Loans	7		9
Securitization Vehicles | Subordinated interests in mortgages | Risk Rating NA
Principal Balance
Book Value
Securitization Vehicles | Mezzanine & Other Loans | Risk Rating 1-3
Principal Balance	20,038		123,020
Book Value	19,948		122,895
Number of Loans	1		4
Securitization Vehicles | Mezzanine & Other Loans | Risk Rating 4-5
Principal Balance
Book Value
Securitization Vehicles | Mezzanine & Other Loans | Risk Rating 6-8
Principal Balance			105,694
Book Value			30,039
Number of Loans			4
Securitization Vehicles | Mezzanine & Other Loans | Risk Rating NA
Principal Balance
Book Value
Securitization Vehicles | Mezzanine Loans
Principal Balance	20,038		228,714
Book Value	$ 19,948		$ 152,934
Number of Loans	1		8

[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, collateral property type, or geographic location, but rather to an overall pool of loans. See Note 2 for additional details.

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CT Legacy REIT (Details 4) (CT Legacy REIT, USD $) In Thousands, unless otherwise specified	Dec. 31, 2011
Schedule of Held-to-maturity Securities [Line Items]
Less than 12 months, Estimated Fair Value	$ 1,200
Less than 12 months, Gross Unrealized Losses
Greater than 12 months , Estimated Fair Value	200
Greater than 12 months , Gross Unrealized Losses	(1,100)
Total, Estimated Fair Value	1,400
Total Gross Unrealized Losses	(1,100)
Total, Book Value	2,500	[1]
Floating Rate
Schedule of Held-to-maturity Securities [Line Items]
Less than 12 months, Estimated Fair Value
Less than 12 months, Gross Unrealized Losses
Greater than 12 months , Estimated Fair Value	200
Greater than 12 months , Gross Unrealized Losses	(1,100)
Total, Estimated Fair Value	200
Total Gross Unrealized Losses	(1,100)
Total, Book Value	1,300	[1]
Fixed Rate
Schedule of Held-to-maturity Securities [Line Items]
Less than 12 months, Estimated Fair Value	1,200
Less than 12 months, Gross Unrealized Losses
Greater than 12 months , Estimated Fair Value
Greater than 12 months , Gross Unrealized Losses
Total, Estimated Fair Value	1,200
Total Gross Unrealized Losses
Total, Book Value	$ 1,200	[1]

[1] Excludes, as of December 31, 2011, $179,000 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.

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General and Administrative Expenses (Tables)

9 Months Ended

Sep. 30, 2012

General And Administrative Expenses Tables

General and administrative expenses

General and administrative expenses for the nine months ended September 30, 2012 and 2011 consisted of the following (in thousands):

	Nine Months Ended September 30,
General and Administrative Expenses	2012		2011
Personnel costs		$7,642		$7,162
Restructuring awards		—		2,750
Professional services		2,468		3,914
Pending sale of investment management platform		2,135		—
Operating and other costs		2,267		1,617
Subtotal		14,512		15,443
Non-cash personnel costs
Management incentive awards plan - CT Legacy REIT		944		3,395
Employee stock-based compensation		675		411
Subtotal		1,619		3,806
Expenses of consolidated securitization vehicles		62		619
Total		$16,193		$19,868

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Shareholders Equity (Tables)

9 Months Ended

Sep. 30, 2012

Shareholders Equity Tables

Accumulated Other Comprehensive Loss

The following table details the primary components of accumulated other comprehensive loss as of September 30, 2012, and significant activity for the nine months ended September 30, 2012 (in thousands):

Accumulated Other Comprehensive Loss	Market on Interest Rate Hedges			Deferred Gains on Settled Hedges			Other-than- Temporary Impairments			Unrealized Gains on Securities			Total
Total as of December 31, 2011		($27,423	)		$56			($16,578	)		$3,361			($40,584	)
Unrealized gain on derivative     financial instruments		5,853			—			—			—			5,853
Ineffective portion of cash flow     hedges (1)		2,481			—			—			—			2,481
Amortization of net unrealized gains     on securities		—			—			—			(770	)		(770	)
Amortization of net deferred gains     on settlement of swaps		—			(56	)		—			—			(56	)
Other-than-temporary impairments     of securities (2)		—			—			409			—			409
Deconsolidation of CT Legacy     Asset (3)		—			—			3,879			(2,586	)		1,293
Total as of September 30, 2012		($19,089	)		$—			($12,290	)		$5			($31,374	)
Allocation to non-controlling interest (3)														—
Accumulated other comprehensive loss as of September 30, 2012														($31,374	)

(1)	As a result of the deconsolidation of CT Legacy Asset in the first quarter of 2012, the balance of accumlated other comprehensive income related to cash flow hedges of CT Legacy Asset was reclassified to interest expense.
(2)	Represents other-than-temporary impairments of securities in excess of credit losses, including amortization of prior other-than-temporary impairments of $248,000.
(3)	As further described in Note 1 above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the balances of accumulated other comprehensive income related to CT Legacy Asset, including those allocable to noncontrolling interests are no longer included in our consolidated financial statements.

Activity relating to noncontrolling interests

The following table describes activity relating to noncontrolling interests for the nine months ended September 30, 2012 (in thousands):

	Noncontrolling Interests
December 31, 2011		($18,515	)
Net income attributable to noncontrolling interests		81,038
Other comprehensive income attributable to     noncontrolling interests		10
Distributions to noncontrolling interests		(8	)
September 30, 2012		$62,525

Basic and Diluted earnings per share, or EPS, based on the weighted average of both restricted and unrestricted class A common stock outstanding

The following table sets forth the calculation of Basic and Diluted earnings per share, or EPS, based on the weighted average of both restricted and unrestricted class A common stock outstanding, for the three and nine months ended September 30, 2012 (in thousands, except share and per share amounts):

	Three Months Ended September 30, 2012						Nine Months Ended September 30, 2012
	Net		Wtd. Avg.		Per Share		Net		Wtd. Avg.		Per Share
	Income		Shares		Amount		Income		Shares		Amount
Basic EPS:
Net income allocable to      common stock		$6,999		23,173,426		$0.30		$75,835		22,969,103		$3.30
Effect of Dilutive Securities:
Warrants outstanding for the      purchase of common stock		—		1,442,600				—		1,472,958
Diluted EPS:
Net income per share of      common stock and assumed      conversions		$6,999		24,616,026		$0.28		$75,835		24,442,061		$3.10

The following table sets forth the calculation of Basic and Diluted EPS based on the weighted average of both restricted and unrestricted class A common stock outstanding, for the three and nine months ended September 30, 2011 (in thousands, except share and per share amounts):

	Three Months Ended September 30, 2011						Nine Months Ended September 30, 2011
	Net		Wtd. Avg.		Per Share		Net		Wtd. Avg.		Per Share
	Income		Shares		Amount		Income		Shares		Amount
Basic EPS:
Net income allocable to      common stock		$13,722		22,730,080		$0.60		$266,464		22,630,672		$11.77
Effect of Dilutive Securities:
Warrants outstanding for the      purchase of common stock		—		1,391,893				—		1,426,702
Diluted EPS:
Net income per share of      common stock and assumed      conversions		$13,722		24,121,973		$0.57		$266,464		24,057,374		$11.08

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Consolidated Securitization Vehicles (Details 3) (Securitization Vehicles, USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Vintage
2006	$ 15,130	$ 14,884
2005	36,672	7,060
2004	24,753	26,715
2003	4,982	14,885
2002	9,113	8,995
2001	7,983	7,156
2000	25,947	26,811
1999	19,023	30,027
1998	11,245	190,359
1997		32,080
Total	154,848	358,972
HeldToMaturity | AAA
Vintage
2006
2005
2004
2003		9,908
2002
2001
2000	2,894	2,891
1999
1998		45,956
1997		4,434
Total	2,894	63,189
HeldToMaturity | AA
Vintage
2006
2005
2004		24,780
2003
2002
2001
2000
1999
1998	2,160	46,315
1997
Total	2,160	71,095
HeldToMaturity | A
Vintage
2006
2005
2004		1,935
2003
2002
2001
2000
1999	4,000	11,233
1998	7,397	37,580
1997		16,159
Total	11,397	66,907
HeldToMaturity | BBB
Vintage
2006
2005
2004	24,753
2003	3,005	3,011
2002
2001
2000
1999		1,414
1998		43,607
1997
Total	27,758	48,032
HeldToMaturity | BB
Vintage
2006
2005
2004
2003	1,977	1,966
2002	6,729	6,712
2001
2000	19,056	19,935
1999	15,023	17,380
1998	151	11,901
1997		5,223
Total	42,936	63,117
HeldToMaturity | BRatingMember
Vintage
2006
2005
2004
2003
2002
2001	5,426	5,426
2000
1999
1998
1997		2,762
Total	5,426	8,188
HeldToMaturity | CccAndBelowRatingMember
Vintage
2006	15,130	14,884
2005	36,672	7,060
2004
2003
2002	2,384	2,283
2001	2,557	1,730
2000	3,997	3,985
1999
1998	1,537	5,000
1997		3,502
Total	$ 62,277	$ 38,444

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CT Legacy REIT (Details 5) (USD $) In Thousands, unless otherwise specified			9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2012 CT Legacy REIT		Sep. 30, 2012 CT Legacy REIT Gross Book Value		Sep. 30, 2012 CT Legacy REIT Provision for Loan Losses		Sep. 30, 2012 CT Legacy REIT Net Book Value
Beginning Balance, gross					$ 436,314
Beginning Balance, allowance							(229,800)
Beginning Balance, book		19,282	206,514						206,514	[1]
Principal paydowns					(254)				(254)
Discount/premium amortization & other					28				28
Deconsolidation of CT Legacy Asset			(2,610)	[2]	(436,088)	[3]	229,800	[3]	(206,288)	[3]
Ending Balance, gross
Ending Balance, allowance
Ending Balance, book		$ 19,282

[1] Includes loans with a total principal balance of $436.0 million as of December 31, 2011.

[2] As further described above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, these securities are no longer included in our consolidated financial statements.

[3] As further described above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the loans owned by CT Legacy REIT are no longer included in our consolidated financial statements.

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Employee Benefit and Incentive Plans (Tables)

9 Months Ended

Sep. 30, 2012

Employee Benefit And Incentive Plans Tables

Activity under stock-based incentive plans

Activity under these three plans for the nine months ended September 30, 2012 is summarized in the table below in share and share equivalents:

Benefit Type (1)	1997 Director Plan		2007 Plan			2011 Plan		Total
Restricted Class A Common Stock
Beginning balance		—		244,424			—		244,424
Granted		—		100,000			275,000		375,000
Vested, deferred or forfeited		—		(82,888	)		—		(82,888	)
Ending balance (2)		—		261,536			275,000		536,536
Stock Units (3)
Beginning balance		68,544		438,260			55,531		562,335
Granted and deferred		—		60,000			54,180		114,180
Ending balance		68,544		498,260			109,711		676,515
Total outstanding		68,544		759,796			384,711		1,213,051

(1)	No stock options are outstanding under any of our plans.
(2)	Includes (i) 275,000 performance based awards that contingently vest upon the attainment of certain pre-specified performance measures, and (ii) 250,000 time based awards that vest based upon an employee’s continued employment on pre-established vesting dates.
(3)	Stock units are granted to certain members of our board of directors in lieu of cash compensation for services and in lieu of dividends earned on previously granted stock units. In addition, certain of our employees have elected to defer the vesting of their restricted shares.

Summary of the unvested restricted class A common stock

A summary of the unvested restricted class A common stock as of and for the nine months ended September 30, 2012 was as follows:

	Restricted Class A Common Stock
	Shares			Grant Date Fair Value
Unvested at January 1, 2012		244,424			$2.65
Granted		375,000			2.77
Vested, deferred or forfeited		(82,888	)		3.56
Unvested at September 30, 2012		536,536			$2.64

A summary of the unvested restricted class A common stock as of and for the nine months ended September 30, 2011 was as follows:

	Restricted Class A Common Stock
	Shares			Grant Date Fair Value
Unvested at January 1, 2011		32,785			$5.67
Granted		300,000			2.29
Vested		(88,361	)		2.62
Unvested at September 30, 2011		244,424			$2.65

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Fair Values (Tables)

9 Months Ended

Sep. 30, 2012

Fair Values Tables

Assets and liabilities, including those of CT Legacy REIT and our consolidated securitization vehicles, which are recorded at fair value

The following table summarizes our assets and liabilities, including those of CT Legacy REIT and our consolidated securitization vehicles, which are recorded at fair value as of September 30, 2012 (in thousands):

				Fair Value Measurements Using
				Quoted Prices		Other			Significant
	Total			in Active		Observable			Unobservable
	Fair Value at			Markets		Inputs			Inputs
	September 30, 2012			(Level 1)		(Level 2)			(Level 3)
Measured on a recurring basis:
Investment in CT Legacy Asset		$100,100			$—		$—			$100,100
Securitization vehicles' interest rate hedge liabilities		($19,089	)		$—		($19,089	)		$—
Measured on a nonrecurring basis:
Securitization vehicles' impaired loans receivable (1) :
Subordinate interests in mortgages		$4,130			$—		$—			$4,130

(1) Loans receivable against which we have recorded a provision for loan losses as of September 30, 2012.

Reconciliation of the beginning and ending balances of assets measured at fair value on a recurring basis using Level 3 inputs

The following table reconciles the beginning and ending balances of assets measured at fair value on a recurring basis using Level 3 inputs (in thousands):

	Loans			Real Estate			Investment in
	Held-for-Sale			Held-for-Sale			CT Legacy Assets
December 31, 2011		$30,875			$10,342			$—
Deconsolidation of CT Legacy Asset		(30,875	)		(10,342	)		89,676
Contributions to CT Legacy Asset		—			—			73,064
Distributions from CT Legacy Asset		—			—			(82,285	)
Adjustments to fair value included in earnings:
Fair value adjustment on investment in CT Legacy Asset		—			—			19,645
September 30, 2012		$—			$—			$100,100

The range of key assumptions used for arriving at the fair value of each of these types of loans

The following table lists the range of key assumptions used for arriving at the fair value of each of these types of loans.

	Assumption Ranges for Significant Unobservable Inputs (Level 3)
Collateral Type	Capitalization Rate	Occupancy	Loss Severity (1)
Office	N/A	N/A	70%
Hotel	9% - 15%	75% - 83%	N/A
Retail	10%	90%	N/A
Mixed Use / Other	N/A	N/A	79%

(1) In certain cases a loss severity based on inputs from third-parties including appraisals on, and bids for, underlying collateral were utilized to compute the fair value of the impaired loans.

The details of the carrying amount, face amount, and approximate fair value of financial instruments

The following table details the carrying amount, face amount, and approximate fair value of the financial instruments described above (in thousands). All fair value estimates are measured using significant unobservable inputs, or Level 3 inputs as further described above.

Fair Value of Financial Instruments
	September 30, 2012						December 31, 2011
	Carrying Amount		Face Amount		Fair Value		Carrying Amount		Face Amount		Fair Value
Financial assets:
Cash and cash equivalents		$38,867		$38,867		$38,867		$34,818		$34,818		$34,818
Loans receivable, net		—		—		—		19,282		19,282		17,354
CT Legacy REIT
Restricted cash		16,145		16,145		16,145		12,985		12,985		12,985
Securities held-to-maturity		N/A		N/A		N/A		2,602		29,251		1,638
Loans receivable, net		N/A		N/A		N/A		206,514		435,973		180,439
Investment in CT Legacy Asset		100,100		N/A		100,100		N/A		N/A		N/A
Securitization Vehicles
Securities held-to-maturity		154,848		236,390		144,742		358,972		490,940		350,180
Loans receivable, net		214,457		292,828		200,028		612,598		815,716		570,936
Financial liabilities:
Secured notes		8,326		8,326		7,158		7,847		7,847		6,436
Participations sold		—		—		—		19,282		19,282		17,354
CT Legacy REIT
Repurchase obligations		N/A		N/A		N/A		58,464		58,464		54,556
Mezzanine loan		N/A		N/A		N/A		55,111		55,111		71,475
Participations sold		N/A		N/A		N/A		97,465		97,465		—
Securitization Vehicles
Securitized debt obligations		497,423		497,423		302,698		1,211,407		1,210,992		767,619

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Organization

9 Months Ended

Sep. 30, 2012

Organization

Organization

Note 1. Organization

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

We are a real estate finance company that specializes in credit sensitive financial products. To date, our investment programs have focused on loans and securities backed by commercial real estate assets. We invest for our own account directly on our balance sheet and for third-parties through a series of investment management vehicles. From the inception of our finance business in 1997 through September 30, 2012, we have completed approximately $12.1 billion of commercial real estate investments. We conduct our operations as a real estate investment trust, or REIT, for federal income tax purposes. We are traded on the New York Stock Exchange, or NYSE, under the symbol “CT”, and are headquartered in New York City.

Sale of Investment Management Platform

On September 27, 2012, we announced our entry into a definitive purchase and sale agreement, or Purchase Agreement, with an affiliate, which we refer to as the Purchaser, of The Blackstone Group L.P., which we refer to as Blackstone. Pursuant to the Purchase Agreement, the Purchaser will acquire our investment management and special servicing businesses, operated through our subsidiary, CT Investment Management Co., LLC, or CTIMCO, and our related private investment fund co-investments for $20.6 million. The Purchaser will also purchase for $10.0 million, or $2.00 per share, 5,000,000 shares of our class A common stock that will represent approximately 17.1% of our common stock outstanding following consummation of the transactions contemplated by the Purchase Agreement, which we refer to as the Transactions. The Purchase Agreement also contemplates that we will enter into a new management agreement pursuant to which a Blackstone affiliate, which we refer to as the New CT Manager, will manage Capital Trust, Inc. following the consummation of the Transactions. Pursuant to the new management agreement, the New CT Manager will manage Capital Trust, Inc. in accordance with investment guidelines and policies approved by our board of directors. Stephen D. Plavin, Geoffrey G. Jervis and Thomas C. Ruffing will continue to serve in their current executive management roles post-transaction. Consummation of the Transactions is subject to customary closing conditions, including the approval of the Transactions by the affirmative vote of the holders of a majority of the outstanding shares of common stock at a special meeting of shareholders that will be called to approve the Transactions. W. R. Berkley and its affiliated entities, holders of approximately 15.9% of our class A common stock, have entered into a voting agreement to support the transaction.

If the Transactions are consummated, we will pay a $2.00 per share special cash dividend to holders of our class A common stock, which will be payable as soon as practicable following closing of the Transactions to shareholders of record as of the close of business on November 12, 2012.

In accordance with NYSE procedures, from November 7, 2012 through the special dividend payment date, our class A common stock will trade with “due-bills” representing an assignment of the right to receive the special dividend. Our class A common stock will not trade ex-dividend until the first business day after the special dividend payment date. Shareholders who sell their shares on or before the special dividend payment date will not be entitled to receive the special dividend.

The sources of funds for the special dividend will be cash on hand prior to the Transactions and the proceeds from the sale of CTIMCO and our private investment fund co-investments. The Purchaser will not receive the special dividend given that its investment in our class A common stock will close after the special dividend record date.

Following the Transactions, we will continue to own our existing cash balances (as reduced to fund expenses of the Transactions and the special dividend), our interest in CT Legacy REIT (as defined below), our carried interest in CT Opportunity Partners I, LP, as well as our retained subordinate interests in our three CT CDOs.

March 2011 Restructuring

On March 31, 2011, we restructured, amended, or extinguished all of our outstanding recourse debt obligations, which we refer to as our March 2011 restructuring. Our March 2011 restructuring involved: (i) the contribution of certain of our legacy assets to a newly formed subsidiary, CT Legacy REIT Mezz Borrower, Inc., or CT Legacy REIT, (ii) the assumption of our legacy repurchase obligations by CT Legacy REIT, and (iii) the extinguishment of the remainder of our recourse obligations, our senior credit facility and junior subordinated notes. The restructuring was financed with a new $83.0 million mezzanine loan obtained by CT Legacy REIT from an affiliate of Five Mile Capital, and the issuance of equity interests in the common stock of CT Legacy REIT to the former lenders under our senior credit facility and our former junior subordinated noteholders, as well as to an affiliate of Five Mile Capital.

Following the completion of our March 2011 restructuring, we no longer have any recourse debt obligations, and retain unencumbered ownership of 100% of (i) our investment management platform, CT Investment Management Co., LLC, (ii) our co-investment in CT Opportunity Partners I, LP, (iii) our residual ownership interests in three of the CDOs that we issued, CT CDOs I, II, and IV, and (iv) our tax-basis net operating losses. Furthermore, we have a 52% equity interest in the common stock of CT Legacy REIT. Our economic interest in CT Legacy REIT is, however, subject to (i) the secured notes, which are non-recourse obligations that are collateralized by certain of our retained equity interests in the common stock of CT Legacy REIT, (ii) incentive awards that provide for the participation in amounts earned from our retained equity interests in the common stock of CT Legacy REIT, and (iii) the subordinate class B common stock of CT Legacy REIT owned by our former junior subordinate noteholders.

See Note 5 for further discussion of the secured notes, Note 9 for further discussion of the management incentive awards plan, and Note 6 for further discussion of the class B common stock.

In addition to our interest in the common stock of CT Legacy REIT, we also own 100% of its outstanding class A preferred stock. The class A preferred stock initially entitles us to cumulative preferred dividends of $7.5 million per annum, which dividends will be reduced in January 2013 to the greater of (i) 2.5% of certain of CT Legacy REIT’s assets, and (ii) $1.0 million per annum.

CT Legacy Asset Deconsolidation

On February 10, 2012, we refinanced CT Legacy REIT’s mezzanine loan and repurchase facility with a single, new $124.0 million repurchase facility with JPMorgan. The borrower under the new JPMorgan facility, CT Legacy Asset, LLC, or CT Legacy Asset, is a wholly owned subsidiary of CT Legacy REIT and owns all of its assets, other than cash. As a result of the refinancing, CT Legacy REIT ceased to be the primary beneficiary of CT Legacy Asset and, therefore, discontinued the consolidation of CT Legacy Asset. As a result, its assets and liabilities were deconsolidated from our financial statements as of February 10, 2012.

See Note 6 for a further discussion of CT Legacy REIT and CT Legacy Asset.

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Segment Reporting (Tables)

9 Months Ended

Sep. 30, 2012

Segment Reporting Tables

The details of each segment's contribution to our operating results and the identified assets attributable to each such segment

The following table details each segment's contribution to our operating results and the identified assets attributable to each such segment for the nine months ended, and as of, September 30, 2012 (in thousands):

	Balance Sheet			Investment		Inter-Segment
	Investment			Management		Activities			Total
Income from loans and other investments:
Interest and related income		$28,423			$—		$—			$28,423
Less: Interest and related expenses		33,902			—		—			33,902
Income from loans and other investments, net		(5,479	)		—		—			(5,479	)
Other revenues:
Management fees from affiliates		—			6,597		(1,856	)		4,741
Servicing fees		—			6,991		(1,400	)		5,591
Total other revenues		—			13,588		(3,256	)		10,332
Other expenses
General and administrative		6,551			11,498		(1,856	)		16,193
Servicing fees expense		1,400			—		(1,400	)		—
Total other expenses		7,951			11,498		(3,256	)		16,193
Total other-than-temporary impairments of securities		—			—		—			—
Portion of other-than-temporary impairments of securities recognized in other comprehensive income		(160	)		—		—			(160	)
Net impairments recognized in earnings		(160	)		—		—			(160	)
Recovery of provision for loan losses		2,819			—		—			2,819
Fair value adjustment on investment in CT Legacy Asset		19,645			—		—			19,645
Gain on deconsolidation of subsidiary		146,380			—		—			146,380
Income from equity investments in unconsolidated subsidiaries		—			1,312		—			1,312
Income before income taxes		155,254			3,402		—			158,656
Income tax provision		467			1,316		—			1,783
Net income		$154,787			$2,086		$—			$156,873
Net income attributable to noncontrolling interests		(81,038	)		—		—			(81,038	)
Net income attributable to Capital Trust, Inc.		$73,749			$2,086		$—			$75,835
Total assets		$556,003			$25,194		$—			$581,197

The following table details each segment's contribution to our operating results and the identified assets attributable to each such segment for the nine months ended, and as of, September 30, 2011 (in thousands):

	Balance Sheet			Investment			Inter-Segment
	Investment			Management			Activities			Total
Income from loans and other investments:
Interest and related income		$95,187			$—			$—			$95,187
Less: Interest and related expenses		80,381			—			—			80,381
Income from loans and other investments, net		14,806			—			—			14,806
Other revenues:
Management fees from affiliates		—			6,171			(1,244	)		4,927
Servicing fees		—			2,840			(632	)		2,208
Total other revenues		—			9,011			(1,876	)		7,135
Other expenses:
General and administrative		5,372			15,740			(1,244	)		19,868
Servicing fee expense		632			—			(632	)		—
Total other expenses		6,004			15,740			(1,876	)		19,868
Total other-than-temporary impairments of securities		(35,620	)		—			—			(35,620	)
Portion of other-than-temporary impairments of securities recognized in other comprehensive income		(3,098	)		—			—			(3,098	)
Impairment of real estate held-for-sale		(1,055	)		—			—			(1,055	)
Net impairments recognized in earnings		(39,773	)		—			—			(39,773	)
Recovery of provision for loan losses		34,401			—			—			34,401
Valuation allowance on loans held-for-sale		(224	)		—			—			(224	)
Gain on extinguishment of debt		271,031			—			—			271,031
Income from equity investments in unconsolidated subsidiaries		—			2,105			—			2,105
Income (loss) before income taxes		274,237			(4,624	)		—			269,613
Income tax provision (benefit)		2,615			(1,401	)		—			1,214
Net income (loss)		$271,622			($3,223	)		$—			$268,399
Net income attributable to noncontrolling interests		(1,935	)		—			—			(1,935	)
Net income (loss) attributable to Capital Trust, Inc.		$269,687			($3,223	)		$—			$266,464
Total assets		$1,528,441			$11,448			$—			$1,539,889

The following table details each segment's contribution to our operating results and the identified assets attributable to each such segment for the three months ended, and as of, September 30, 2012 (in thousands):

	Balance Sheet			Investment		Inter-Segment
	Investment			Management		Activities			Total
Income from loans and other investments:
Interest and related income		$6,944			$—		$—			$6,944
Less: Interest and related expenses		5,147			—		—			5,147
Income from loans and other investments, net		1,797			—		—			1,797
Other revenues:
Management fees from affiliates		—			2,165		(619	)		1,546
Servicing fees		—			3,237		(1,031	)		2,206
Total other revenues		—			5,402		(1,650	)		3,752
Other expenses
General and administrative		3,381			4,379		(619	)		7,141
Servicing fees expense		1,031			—		(1,031	)		—
Total other expenses		4,412			4,379		(1,650	)		7,141
Recovery of provision for loan losses		2,811			—		—			2,811
Fair value adjustment on investment in CT Legacy Asset		11,987			—		—			11,987
Income from equity investments in unconsolidated subsidiaries		—			411		—			411
Income before income taxes		12,183			1,434		—			13,617
Income tax provision		167			550		—			717
Net income		$12,016			$884		$—			$12,900
Net income attributable to noncontrolling interests		(5,901	)		—		—			(5,901	)
Net income attributable to Capital Trust, Inc.		$6,115			$884		$—			$6,999
Total assets		$556,003			$25,194		$—			$581,197

The following table details each segment's contribution to our operating results and the identified assets attributable to each such segment for the three months ended, and as of, September 30, 2011 (in thousands):

	Balance Sheet			Investment			Inter-Segment
	Investment			Management			Activities			Total
Income from loans and other investments:
Interest and related income		$25,642			$—			$—			$25,642
Less: Interest and related expenses		21,838			—			—			21,838
Income from loans and other investments, net		3,804			—			—			3,804
Other revenues:
Management fees from affiliates		—			2,372			(619	)		1,753
Servicing fees		—			1,671			(211	)		1,460
Total other revenues		—			4,043			(830	)		3,213
Other expenses:
General and administrative		2,427			3,344			(830	)		4,941
Total other expenses		2,427			3,344			(830	)		4,941
Total other-than-temporary impairments of securities		(30,687	)		—			—			(30,687	)
Portion of other-than-temporary impairments of securities recognized in other comprehensive income		173			—			—			173
Impairment of real estate held-for-sale		(1,055	)		—			—			(1,055	)
Net impairments recognized in earnings		(31,569	)		—			—			(31,569	)
Recovery of provision for loan losses		17,152			—			—			17,152
Gain on extinguishment of debt		20,054			—			—			20,054
Income from equity investments in unconsolidated subsidiaries		—			307			—			307
Income before income taxes		7,014			1,006			—			8,020
Income tax provision (benefit)		703			(939	)		—			(236	)
Net income		$6,311			$1,945			$—			$8,256
Net loss attributable to noncontrolling interests		5,466			—			—			5,466
Net income attributable to Capital Trust, Inc.		$11,777			$1,945			$—			$13,722
Total assets		$1,528,441			$11,448			$—			$1,539,889

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Fair Value (Details 2)	9 Months Ended
	Sep. 30, 2012
Office
Loss Severity - Low	70.00%	[1]
Hotel Loan
Capitalization Rate - Low	9.00%
Capitalization Rate - High	15.00%
Occupancy - Low	75.00%
Occupancy - High	83.00%
RetailMember
Capitalization Rate - Low	10.00%
Occupancy - Low	90.00%
Other Property
Loss Severity - Low	79.00%	[1]

[1] In certain cases a loss severity based on inputs from parties including appraisals on, and bids for, underlying collateral were utilized to compute the fair value of the impaired loans.

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CT Legacy REIT (Details 1) (CT Legacy REIT, HeldToMaturity, USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011 Securities
CT Legacy REIT | HeldToMaturity
Number of securities	6
Number of issues	5
Rating	CCC+	[1],[2]
Fixed / (in millions)	$ 2	[3]
Floating	$ 1	[3]
Coupon	5.43%	[1],[4]
Yield	3.31%	[1],[4]
Life (years)	4 years 9 months	[1],[5]

[1] Represents a weighted average as of December 31, 2011.

[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 0.30% as of December 31, 2011.

[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.

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Consolidated Securitization Vehicles (Details) (Securitization Vehicles, USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012
Beginning Balance	$ 358,972	[1]
Principal paydowns	(40,328)	[1]
Discount/premium amortization & other	(57)	[1],[2]
Recognized in earnings	(160)	[1]
Recognized in accumulated other comprehensive income	160
Deconsolidation of CT Legacy Asset	(163,739)	[1],[3]
Ending Balance	154,848
CMBS
Beginning Balance	357,037
Principal paydowns	(38,393)
Discount/premium amortization & other	(259)	[2]
Recognized in earnings	(160)
Recognized in accumulated other comprehensive income	160
Deconsolidation of CT Legacy Asset	(193,737)	[3]
Ending Balance	124,648
CDOs & Other
Beginning Balance	1,935
Principal paydowns	(1,935)
Discount/premium amortization & other	202	[2]
Recognized in earnings
Recognized in accumulated other comprehensive income
Deconsolidation of CT Legacy Asset	29,998	[3]
Ending Balance	$ 30,200

[1] Includes securities with a total face value of $236.4 million and $490.9 million as of September 30, 2012 and December 31, 2011, 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

[3] As further described above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the securities owned by its consolidated securitization vehicle are no longer included in our consolidated financial statements. Also, certain securities which are owned by our consolidated securitization vehicles, that had previously been eliminated in consolidation, are now included in our consolidated financial statements. See Note 6 for additional discussion on CT Legacy Asset.

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Shareholders' Equity (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012		Sep. 30, 2011
Balance, beginning			$ (40,584)
Unrealized gain on derivative financial instruments	2,103	(633)	5,853		2,912
Ineffective portion of cash flow hedges		1,246	2,481		4,447
Amortization of net unrealized gains on securities	(4)	413	(770)		(93)
Amortization of net deferred gains on settlement of swaps		(28)	(56)		(75)
Balance, ending	(31,374)		(31,374)
Mark-toMarket on Interest Rate Hedges
Balance, beginning			(27,423)
Unrealized gain on derivative financial instruments			5,853
Ineffective portion of cash flow hedges			2,481	[1]
Amortization of net unrealized gains on securities
Amortization of net deferred gains on settlement of swaps
Other-than-temporary impairments of securities
Deconsolidation of CT Legacy Asset
Balance, ending	(19,089)		(19,089)
Deferred Gains on Settled Hedges
Balance, beginning			56
Unrealized gain on derivative financial instruments
Ineffective portion of cash flow hedges
Amortization of net unrealized gains on securities
Amortization of net deferred gains on settlement of swaps			(56)
Other-than-temporary impairments of securities
Deconsolidation of CT Legacy Asset
Balance, ending
Other than Temporary Impairment
Balance, beginning			(16,578)
Unrealized gain on derivative financial instruments
Ineffective portion of cash flow hedges
Amortization of net unrealized gains on securities
Amortization of net deferred gains on settlement of swaps
Other-than-temporary impairments of securities			409	[2]
Deconsolidation of CT Legacy Asset			3,879	[3]
Balance, ending	(12,290)		(12,290)
Unrealized Gains on Securities
Balance, beginning			3,361
Unrealized gain on derivative financial instruments
Ineffective portion of cash flow hedges
Amortization of net unrealized gains on securities			(770)
Amortization of net deferred gains on settlement of swaps
Other-than-temporary impairments of securities
Deconsolidation of CT Legacy Asset			(2,586)	[3]
Balance, ending	5		5
Accumulated Other Comprehensive Loss
Balance, beginning			(40,584)
Unrealized gain on derivative financial instruments			5,853
Ineffective portion of cash flow hedges			2,481	[1]
Amortization of net unrealized gains on securities			(770)
Amortization of net deferred gains on settlement of swaps			(56)
Other-than-temporary impairments of securities			409	[2]
Deconsolidation of CT Legacy Asset			1,293	[3]
Allocation to non-controlling interest				[3]
Balance, ending	$ (31,374)		$ (31,374)

[1] As a result of the deconsolidation of CT Legacy Asset in the first quarter of 2012, the balance of accumlated other comprehensive income related to cash flow hedges of CT Legacy Asset was reclassified to interest expense.

[2] Represents other-than-temporary impairments of securities in excess of credit losses, including amortization of prior other-than-temporary impairments of $248,000.

[3] As further described in Note 1 above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the balances of accumulated other comprehensive income related to CT Legacy Asset, including those allocable to noncontrolling interests are not longer included in our consolidated financial statements.

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Consolidated Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Assets
Cash and cash equivalents	$ 38,867	$ 34,818
Loans receivable, net		19,282
Investment in CT Legacy Asset, at fair value
Equity investments in unconsolidated subsidiaries	18,710	10,399
Deferred income taxes	3,094	1,268
Prepaid expenses and other assets	2,096	4,533
Subtotal assets	62,767	70,300
Total assets	581,197	1,366,316
Liabilities:
Accounts payable, accrued expenses and other liabilities	17,834	8,075
Secured notes	8,326	7,847
Participations sold		19,282
Subtotal liabilities	26,160	35,204
Total liabilities	543,231	1,495,255
Commitments and contingencies
Equity (Deficit):
Class A common stock; Restricted class A common stock	225	222
Additional paid-in capital	597,866	597,049
Accumulated other comprehensive loss	(31,374)	(40,584)
Accumulated deficit	(591,276)	(667,111)
Total Capital Trust, Inc. shareholders' deficit	(24,559)	(110,424)
Noncontrolling interests	62,525	(18,515)
Total equity (deficit)	37,966	(128,939)
Total liabilities and equity (deficit)	581,197	1,366,316
CT Legacy REIT
Assets
Restricted cash	16,145	12,985
Securities held-to-maturity		2,602
Loans receivable, net		206,514
Loans held-for-sale, net		30,875
Investment in CT Legacy Asset, at fair value	100,100
Equity investments in unconsolidated subsidiaries
Accrued interest receivable and other assets		2,119
Subtotal assets	116,245	255,095
Liabilities:
Accounts payable, accrued expenses and other liabilities		743
Repurchase obligations		58,464
Mezzanine loan, net of unamortized discount		55,111
Participations sold		97,465
Interest rate hedge liabilities		8,817
Subtotal liabilities		220,600
Securitization Vehicles
Assets
Securities held-to-maturity	154,848	358,972	[1]
Loans receivable, net	214,457	612,598
Real estate held for sale		10,342
Accrued interest receivable and other assets	32,880	59,009
Subtotal assets	402,185	1,040,921
Liabilities:
Accounts payable, accrued expenses and other liabilities	559	3,102
Securitized debt obligations	497,423	1,211,407
Interest rate hedge liabilities	19,089	24,942
Subtotal liabilities	517,071	1,239,451
Class A Common Stock
Equity (Deficit):
Class A common stock; Restricted class A common stock	220	220
CommonClassARestrictedMember
Equity (Deficit):
Class A common stock; Restricted class A common stock	$ 5	$ 2

[1] Includes securities with a total face value of $236.4 million and $490.9 million as of September 30, 2012 and December 31, 2011, respectively.

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CT Legacy REIT (Details 6) (CT Legacy REIT, USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011		Sep. 30, 2012
Number of investments	17
Loans Receivable
Number of investments	17
Fixed / (in millions)	$ 56	[1]
Floating	$ 151	[1]
Coupon	4.59%	[2],[3]
Yield
Maturity (years)	1 year 4 months	[2],[4]

[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 December 31, 2011.

[3] Calculations for floating rate loans are based on LIBOR of 0.30% as of December 31, 2011.

[4] Represents the final maturity of each investment assuming all extension options are executed.

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Consolidated Statements of Changes in Equity (Deficit) (Unaudited) (USD $) In Thousands	Class A Common Stock	Restricted Class A Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Loss	Accumulated Deficit	Total Capital Trust, Inc. Shareholders' Deficit	Noncontrolling Interests	Total
Balance, beginning at Dec. 31, 2010	$ 219		$ 559,411	$ (50,462)	$ (920,355)	$ (411,187)		$ (411,187)
Net income					266,464	266,464	1,935	268,399
Other comprehensive income				11,427		11,427		11,427
Allocation to noncontrolling interests			37,156			37,156	(12,623)
Purchase of noncontrolling interests			(142)			(142)		(142)
Consolidation of additional securitization vehicles				538	(4,898)	(4,360)		(4,360)
Restricted class A common stock earned, net of shares deferred	1	2	324			327
Deferred directors' compensation			150			150
Balance, ending at Sep. 30, 2011	220	2	596,899	(38,497)	(658,789)	(100,165)	(10,688)	(110,853)
Balance, beginning at Dec. 31, 2011	220	2	597,049	(40,584)	(667,111)	(110,424)	(18,515)	(128,939)
Net income					75,835	75,835	81,038	156,873
Other comprehensive income				7,917		7,917	10	7,927
Deconsolidation of CT Legacy Asset				1,293		1,293
Distribution to noncontrolling interests							(8)	(8)
Restricted class A common stock earned, net of shares deferred		3	648			651
Deferred directors' compensation			169			169
Balance, ending at Sep. 30, 2012	$ 220	$ 5	$ 597,866	$ (31,374)	$ (591,276)	$ (24,559)	$ 62,525	$ 37,966

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Consolidated Securitization Vehicles (Details 6) (USD $) In Thousands, unless otherwise specified	3 Months Ended			9 Months Ended
	Sep. 30, 2012		Sep. 30, 2011	Sep. 30, 2012		Sep. 30, 2011
Beginning Balance, book				$ 19,282
Recovery of provision for loan losses	(2,811)		(17,152)	(2,819)		(34,401)
Ending Balance, book
Securitization Vehicles
Beginning Balance, allowance				(7,432)	[1]
Beginning Balance, book				612,598
Deconsolidation of CT Legacy Asset				(163,739)	[2],[3]
Ending Balance, allowance		[1]			[1]
Ending Balance, book	214,457			214,457
Securitization Vehicles | Gross Book Value
Beginning Balance, gross				814,572
Satisfactions				(62,950)	[4]
Principal paydowns				(1,816)
Discount/premium amortization & other				156
Recovery of provision for loan losses
Realized loan losses				(22,001)
Deconsolidation of CT Legacy Asset				(435,744)	[5]
Ending Balance, gross	292,217			292,217
Securitization Vehicles | Provision for Loan Losses
Beginning Balance, allowance				(201,974)
Satisfactions
Principal paydowns
Discount/premium amortization & other
Recovery of provision for loan losses				2,819
Realized loan losses				22,001
Deconsolidation of CT Legacy Asset				99,394	[5]
Ending Balance, allowance	(77,760)			(77,760)
Securitization Vehicles | Net Book Value
Beginning Balance, book				612,598	[6]
Satisfactions				(62,950)	[4],[6]
Principal paydowns				(1,816)	[6]
Discount/premium amortization & other				156	[6]
Recovery of provision for loan losses				2,819
Realized loan losses
Deconsolidation of CT Legacy Asset				(336,350)	[5],[6]
Ending Balance, book	$ 214,457	[6]		$ 214,457	[6]

[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, collateral property type, or geographic location, but rather to an overall pool of loans. See Note 2 for additional details.

[2] Includes securities with a total face value of $236.4 million and $490.9 million as of September 30, 2012 and December 31, 2011, respectively.

[3] As further described above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the securities owned by its consolidated securitization vehicle are no longer included in our consolidated financial statements. Also, certain securities which are owned by our consolidated securitization vehicles, that had previously been eliminated in consolidation, are now included in our consolidated financial statements. See Note 6 for additional discussion on CT Legacy Asset.

[4] Includes final maturities and full repayments.

[5] As further described above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the loans owned by CT Legacy REIT are no longer included in our consolidated financial statements.

[6] Includes loans with a total principal balance of $292.8 million and $815.7 million as of September 30, 2012 and December 31, 2011, respectively.

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Equity Investments in Unconsolidated Subsidiaries (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012
CT Opportunity Partners I, LP
Commitment to invest in equity method investments maximum amount	$ 25,000
Percentage of total capital commitment to invest	4.60%
Funded commitment amount, total	17,100
Return of capital on equity method investments	6,900
Funded commitment amount, net	10,200
Unfunded commitment amount	14,800
Maximum exposure to loss from equity investment	7,700
Incentive compensation	5,900
Incentive compensation, percentage of funds profit	17.70%
Preferred return	9.00%
Return of capital to partners	100.00%
CT High Grade II
Funded commitment amount, net	2,900
Unfunded commitment amount	480
Maximum exposure to loss from equity investment	2,800
Ownership, percentage	44.00%
Initial co-investment	$ 2,800

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Consolidated Securitization Vehicle (Details 12) (Securitization Vehicles, USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012
Impaired Loans
Average Book Value	$ 14,464
Income Recorded	782	[1]
Senior Mortgages
Average Book Value	4,232
Income Recorded	168	[1]
Subordinated interests in mortgages
Average Book Value	5,097
Income Recorded	404	[1]
Mezzanine & Other Loans
Average Book Value	5,135
Income Recorded	$ 210	[1]

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

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Segment Reporting

9 Months Ended

Sep. 30, 2012

Segment Reporting [Abstract]

Segment Reporting

Note 15. Segment Reporting

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

The Balance Sheet Investment segment includes our consolidated portfolio of interest earning assets and the financing thereof. The Investment Management segment includes the investment management activities of our wholly-owned investment management subsidiary, CT Investment Management Co., LLC, or CTIMCO, and its subsidiaries, as well as our co-investments in investment management vehicles. CTIMCO is a taxable REIT subsidiary and serves as the investment manager of Capital Trust, Inc., all of our investment management vehicles and CT CDOs, and serves as senior servicer and special servicer for certain of our investments and for third-parties.

The following table details each segment's contribution to our operating results and the identified assets attributable to each such segment for the nine months ended, and as of, September 30, 2012 (in thousands):

	Balance Sheet			Investment		Inter-Segment
	Investment			Management		Activities			Total
Income from loans and other investments:
Interest and related income		$28,423			$—		$—			$28,423
Less: Interest and related expenses		33,902			—		—			33,902
Income from loans and other investments, net		(5,479	)		—		—			(5,479	)
Other revenues:
Management fees from affiliates		—			6,597		(1,856	)		4,741
Servicing fees		—			6,991		(1,400	)		5,591
Total other revenues		—			13,588		(3,256	)		10,332
Other expenses
General and administrative		6,551			11,498		(1,856	)		16,193
Servicing fees expense		1,400			—		(1,400	)		—
Total other expenses		7,951			11,498		(3,256	)		16,193
Total other-than-temporary impairments of securities		—			—		—			—
Portion of other-than-temporary impairments of securities recognized in other comprehensive income		(160	)		—		—			(160	)
Net impairments recognized in earnings		(160	)		—		—			(160	)
Recovery of provision for loan losses		2,819			—		—			2,819
Fair value adjustment on investment in CT Legacy Asset		19,645			—		—			19,645
Gain on deconsolidation of subsidiary		146,380			—		—			146,380
Income from equity investments in unconsolidated subsidiaries		—			1,312		—			1,312
Income before income taxes		155,254			3,402		—			158,656
Income tax provision		467			1,316		—			1,783
Net income		$154,787			$2,086		$—			$156,873
Net income attributable to noncontrolling interests		(81,038	)		—		—			(81,038	)
Net income attributable to Capital Trust, Inc.		$73,749			$2,086		$—			$75,835
Total assets		$556,003			$25,194		$—			$581,197

All revenues were generated from external sources within the United States. The Investment Management segment received intercompany preferred dividend income of $1.9 million from the Balance Sheet segment for the nine months ended September 30, 2012. In addition, the Investment Management segment earned fees of $1.4 million for serving as collateral manager of the CT CDOs consolidated under our Balance Sheet Investment segment as well as special servicing activity for certain CT CDO assets for the nine months ended September 30, 2012.

The following table details each segment's contribution to our operating results and the identified assets attributable to each such segment for the nine months ended, and as of, September 30, 2011 (in thousands):

	Balance Sheet			Investment			Inter-Segment
	Investment			Management			Activities			Total
Income from loans and other investments:
Interest and related income		$95,187			$—			$—			$95,187
Less: Interest and related expenses		80,381			—			—			80,381
Income from loans and other investments, net		14,806			—			—			14,806
Other revenues:
Management fees from affiliates		—			6,171			(1,244	)		4,927
Servicing fees		—			2,840			(632	)		2,208
Total other revenues		—			9,011			(1,876	)		7,135
Other expenses:
General and administrative		5,372			15,740			(1,244	)		19,868
Servicing fee expense		632			—			(632	)		—
Total other expenses		6,004			15,740			(1,876	)		19,868
Total other-than-temporary impairments of securities		(35,620	)		—			—			(35,620	)
Portion of other-than-temporary impairments of securities recognized in other comprehensive income		(3,098	)		—			—			(3,098	)
Impairment of real estate held-for-sale		(1,055	)		—			—			(1,055	)
Net impairments recognized in earnings		(39,773	)		—			—			(39,773	)
Recovery of provision for loan losses		34,401			—			—			34,401
Valuation allowance on loans held-for-sale		(224	)		—			—			(224	)
Gain on extinguishment of debt		271,031			—			—			271,031
Income from equity investments in unconsolidated subsidiaries		—			2,105			—			2,105
Income (loss) before income taxes		274,237			(4,624	)		—			269,613
Income tax provision (benefit)		2,615			(1,401	)		—			1,214
Net income (loss)		$271,622			($3,223	)		$—			$268,399
Net income attributable to noncontrolling interests		(1,935	)		—			—			(1,935	)
Net income (loss) attributable to Capital Trust, Inc.		$269,687			($3,223	)		$—			$266,464
Total assets		$1,528,441			$11,448			$—			$1,539,889

All revenues were generated from external sources within the United States. The Investment Management segment received intercompany preferred dividend income of $1.2 million from the Balance Sheet segment for the nine months ended September 30, 2011. In addition, the Investment Management segment earned fees of $632,000 for serving as collateral manager of the CT CDOs consolidated under our Balance Sheet Investment segment as well as special servicing activity for certain CT CDO assets for the nine months ended September 30, 2011.

The following table details each segment's contribution to our operating results and the identified assets attributable to each such segment for the three months ended, and as of, September 30, 2012 (in thousands):

	Balance Sheet			Investment		Inter-Segment
	Investment			Management		Activities			Total
Income from loans and other investments:
Interest and related income		$6,944			$—		$—			$6,944
Less: Interest and related expenses		5,147			—		—			5,147
Income from loans and other investments, net		1,797			—		—			1,797
Other revenues:
Management fees from affiliates		—			2,165		(619	)		1,546
Servicing fees		—			3,237		(1,031	)		2,206
Total other revenues		—			5,402		(1,650	)		3,752
Other expenses
General and administrative		3,381			4,379		(619	)		7,141
Servicing fees expense		1,031			—		(1,031	)		—
Total other expenses		4,412			4,379		(1,650	)		7,141
Recovery of provision for loan losses		2,811			—		—			2,811
Fair value adjustment on investment in CT Legacy Asset		11,987			—		—			11,987
Income from equity investments in unconsolidated subsidiaries		—			411		—			411
Income before income taxes		12,183			1,434		—			13,617
Income tax provision		167			550		—			717
Net income		$12,016			$884		$—			$12,900
Net income attributable to noncontrolling interests		(5,901	)		—		—			(5,901	)
Net income attributable to Capital Trust, Inc.		$6,115			$884		$—			$6,999
Total assets		$556,003			$25,194		$—			$581,197

All revenues were generated from external sources within the United States. The Investment Management segment received intercompany preferred dividend income of $619,000 million from the Balance Sheet segment for the three months ended September 30, 2012. In addition, the Investment Management segment earned fees of $1.0 million for serving as collateral manager of the CT CDOs consolidated under our Balance Sheet Investment segment as well as special servicing activity for certain CT CDO assets for the three months ended September 30, 2012.

The following table details each segment's contribution to our operating results and the identified assets attributable to each such segment for the three months ended, and as of, September 30, 2011 (in thousands):

	Balance Sheet			Investment			Inter-Segment
	Investment			Management			Activities			Total
Income from loans and other investments:
Interest and related income		$25,642			$—			$—			$25,642
Less: Interest and related expenses		21,838			—			—			21,838
Income from loans and other investments, net		3,804			—			—			3,804
Other revenues:
Management fees from affiliates		—			2,372			(619	)		1,753
Servicing fees		—			1,671			(211	)		1,460
Total other revenues		—			4,043			(830	)		3,213
Other expenses:
General and administrative		2,427			3,344			(830	)		4,941
Total other expenses		2,427			3,344			(830	)		4,941
Total other-than-temporary impairments of securities		(30,687	)		—			—			(30,687	)
Portion of other-than-temporary impairments of securities recognized in other comprehensive income		173			—			—			173
Impairment of real estate held-for-sale		(1,055	)		—			—			(1,055	)
Net impairments recognized in earnings		(31,569	)		—			—			(31,569	)
Recovery of provision for loan losses		17,152			—			—			17,152
Gain on extinguishment of debt		20,054			—			—			20,054
Income from equity investments in unconsolidated subsidiaries		—			307			—			307
Income before income taxes		7,014			1,006			—			8,020
Income tax provision (benefit)		703			(939	)		—			(236	)
Net income		$6,311			$1,945			$—			$8,256
Net loss attributable to noncontrolling interests		5,466			—			—			5,466
Net income attributable to Capital Trust, Inc.		$11,777			$1,945			$—			$13,722
Total assets		$1,528,441			$11,448			$—			$1,539,889

All revenues were generated from external sources within the United States. The Investment Management segment received intercompany preferred dividend income of $619,000 from the Balance Sheet segment for the three months ended September 30, 2011. In addition, the Investment Management segment earned fees of $211,000 for serving as collateral manager of the CT CDOs consolidated under our Balance Sheet Investment segment as well as special servicing activity for certain CT CDO assets for the three months ended September 30, 2011.

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Equity Investments in Unconsolidated Subsidiaries (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012		Sep. 30, 2011
Beginning Balance	$ 10,399
Contributions	4,030		3,413
Income from equity investments in unconsolidated subsidiaries	7,221	[1]
Distributions	(2,940)
Ending Balance	18,710
CT Opportunity Partners I, LP
Beginning Balance	10,399
Contributions	1,241
Income from equity investments in unconsolidated subsidiaries	7,068	[1]
Distributions	(2,940)
Ending Balance	15,768
CT High Grade II
Beginning Balance
Contributions	2,789
Income from equity investments in unconsolidated subsidiaries	153
Distributions
Ending Balance	$ 2,942

[1] Includes $5.9 million of incentive income allocated to us from CTOPI under the equity method of accounting. This incentive income has not been recognized into earnings, but recorded as a deferred incentive income liability under accounts payable, accrued expenses and other liabilities on our consolidated balance sheet.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2012

Summary Of Significant Accounting Policies Policies

Principles of Consolidation

Principles of Consolidation

The accompanying financial statements include, on a consolidated basis, our accounts, the accounts of our wholly-owned subsidiaries, and variable interest entities, or VIEs, in which we are the primary beneficiary. All significant intercompany balances and transactions have been eliminated in consolidation.

VIEs are defined as entities in which equity investors (i) do not have the characteristics of a controlling financial interest, and/or (ii) do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The entity that consolidates a VIE is known as its primary beneficiary, and is generally the entity with (i) the power to direct the activities that most significantly impact the VIE’s economic performance, and (ii) the right to receive benefits from the VIE or the obligation to absorb losses of the VIE that could be significant to the VIE.

Our consolidated subsidiaries include: (i) CT Legacy REIT, and (ii) five securitization vehicles, including our three CT CDOs which were sponsored and issued by us and one other similar vehicle. See Note 6 and Note 7 for additional information on our investments in VIEs.

Balance Sheet Presentation

Balance Sheet Presentation

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 were subsidiaries of CT Legacy REIT. Assets of all consolidated VIEs can generally only be used to satisfy the obligations of those VIEs, and the liabilities of consolidated VIEs are non-recourse to us.

We have aggregated all the assets and liabilities of the consolidated securitization vehicles due to our determination that these entities are substantively similar and therefore a further disaggregated presentation would not be more meaningful. Similarly, the notes to our consolidated financial statements separately describe (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 were subsidiaries of CT Legacy REIT.

Equity Investments in Unconsolidated Subsidiaries and Fair Value Option

Equity Investments in Unconsolidated Subsidiaries and Fair Value Option

Our co-investment interests in the private equity funds we manage are accounted for using the equity method. These entities’ assets and liabilities are not consolidated into our financial statements due to our determination that (i) these entities are not VIEs, and (ii) the investors have sufficient rights to preclude consolidation by us. As such, we report our allocable percentage of the earnings or losses of these entities on a single line item in our consolidated statements of operations as income from equity investments.

One such fund, CT Opportunity Partners I, LP, or CTOPI, maintains its financial records at fair value in accordance with GAAP. We have applied such accounting relative to our investment in CTOPI, and include any adjustments to fair value recorded at the fund level in determining the income we record on our equity investment in CTOPI.

We have elected the fair value option of accounting for CT Legacy REIT’s investment in CT Legacy Asset, pursuant to which we record this investment at fair value rather than at our historical cost investment amount. Additionally, changes in the fair value of this investment are recognized in our consolidated statement of operations. We made this election due to our determination that the fair value of the investment in CT Legacy Asset, as a net liquidating portfolio of assets subject to a non-recourse repurchase obligation, is more meaningful and indicative of our interests in CT Legacy Asset than equity method accounting. See Note 6 for additional discussion of CT Legacy REIT and CT Legacy Asset.

Revenue Recognition

Revenue Recognition

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

Interest income from our securities is recognized using a level yield with any purchase premium or discount accreted through income over the life of the security. This yield is calculated using cash flows expected to be collected which are based on a number of assumptions on the underlying loans. Examples include, among other things, the rate and timing of principal payments, including prepayments, repurchases, defaults and liquidations, the pass-through or coupon rate, and interest rates. Additional factors that may affect reported interest income on our securities include interest payment shortfalls due to delinquencies on the underlying mortgage loans and the timing and magnitude of expected credit losses on the mortgage loans underlying the securities. These are impacted by, among other things, the general condition of the real estate market, including competition for tenants and their related credit quality, and changes in market rental rates. These uncertainties and contingencies are difficult to predict and are subject to future events that may alter the assumptions.

Fees from special servicing and asset management services are recorded on an accrual basis as services are rendered under the applicable agreements, and when receipt of fees is reasonably certain. We do not recognize incentive income from our investment management business until contingencies have been eliminated. Recognition of incentive income allocated or paid to us prior to that date is deferred and recorded as deferred incentive income liability under accounts payable, accrued expenses and other liabilities on our consolidated balance sheet. Depending on the structure of our investment management vehicles, certain incentive fees may be in the form of carried interest or promote distributions.

Cash and Cash Equivalents

Cash and Cash Equivalents

We classify highly liquid investments with original maturities of three months or less from the date of purchase as cash equivalents. We place our cash and cash equivalents with high credit quality institutions to minimize credit risk exposure. As of, and for the periods ended, September 30, 2012 and December 31, 2011, we had bank balances in excess of federally insured amounts. We have not experienced any losses on our demand deposits, commercial paper or money market investments.

Restricted Cash

Restricted Cash

We classify the cash balances held by CT Legacy REIT as restricted because, while these cash balances are available for use by CT Legacy REIT for operations, debt service, or other purposes, they cannot be used by us until our allocable share is distributed from CT Legacy REIT, and cannot be co-mingled with any of our other, unrestricted cash balances. See Note 6 for additional discussion of CT Legacy REIT.

Securities

Securities

We classify our securities as held-to-maturity, available-for-sale, or trading on the date of acquisition of the investment. Held-to-maturity investments are stated at cost, adjusted for the amortization of any premiums or discounts, which are amortized through our consolidated statements of operations using the level yield method described above. Other than in the instance of an other-than-temporary impairment, as discussed below, these held-to-maturity investments are carried on our consolidated financial statements at their amortized cost basis.

We may also invest in securities which may be classified as available-for-sale. Available-for-sale securities are carried at estimated fair value with the net unrealized gains or losses reported as a component of accumulated other comprehensive income (loss) in shareholders’ equity. Changes in the valuations do not affect our reported income or cash flows, but do impact shareholders’ equity and, accordingly, book value per share. On August 4, 2005, we changed the accounting classification of certain of our securities from available-for-sale to held-to-maturity. We have not designated any securities as available-for-sale since that time.

Further, as required under GAAP, when, based on current information and events, there has been an adverse change in the cash flows expected to be collected from those previously estimated for one of our securities, an other-than-temporary impairment is deemed to have occurred. A change in expected cash flows is considered adverse if the present value of the revised cash flows (taking into consideration both the timing and amount of cash flows expected to be collected) discounted using the security’s current yield is less than the present value of the previously estimated remaining cash flows, adjusted for cash receipts during the intervening period.

Should an other-than-temporary impairment be deemed to have occurred, the security is written down to fair value. The total other-than-temporary impairment is bifurcated into (i) the amount related to expected credit losses, and (ii) the amount related to fair value adjustments in excess of expected credit losses, or the Valuation Adjustment. The portion of the other-than-temporary impairment related to expected credit losses is calculated by comparing the amortized cost basis of the security to the present value of cash flows expected to be collected, discounted at the security’s current yield, and is recognized through earnings in the consolidated statement of operations. The remaining other-than-temporary impairment related to the Valuation Adjustment is recognized as a component of accumulated other comprehensive income (loss) in shareholders’ equity. A portion of other-than-temporary impairments recognized through earnings is accreted back to the amortized cost basis of the security through interest income, while amounts recognized through other comprehensive income (loss) are amortized over the life of the security with no impact on earnings.

Loans Receivable, Provision for Loan Losses, Loans Held-for-Sale and Related Allowance

Loans Receivable, Provision for Loan Losses, Loans Held-for-Sale and Related Allowance

We purchase and originate commercial real estate debt and related instruments, or Loans, generally to be held as long-term investments at amortized cost. Management is required to periodically evaluate each of these Loans for possible impairment. Impairment is indicated when it is deemed probable that we will not be able to collect all amounts due according to the contractual terms of the Loan. If a Loan is determined to be impaired, we write down the Loan through a charge to the provision for loan losses. Impairment on these loans is measured by comparing the estimated fair value of the underlying collateral to the book value of the respective loan. These valuations require significant judgments, which include assumptions regarding capitalization rates, leasing, creditworthiness of major tenants, occupancy rates, availability of financing, exit plan, loan sponsorship, actions of other lenders and other factors deemed necessary by management. Actual losses, if any, could ultimately differ from these estimates.

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, loan-to-value ratio, or LTV, collateral performance, structure, exit plan, and sponsorship. Loans are rated one through eight, which are defined as follows:

1 - Low Risk: A loan that is expected to perform through maturity, with relatively lower LTV, higher in-place debt yield, and stable projected cash flow.

2 - Average Risk: A loan that is expected to perform through maturity, with medium LTV, average in-place debt yield, and stable projected cash flow.

3 - Acceptable Risk: A loan that is expected to perform through maturity, with relatively higher LTV, acceptable in-place debt yield, and some uncertainty (due to lease rollover or other factors) in projected cash flow.

4 - Higher Risk: A loan that is expected to perform through maturity, but has exhibited a material deterioration in cash flow and/or other credit factors. If negative trends continue, default could occur.

5 - Low Probability of Default/Loss: A loan with one or more identified weakness that we expect to have a 15% probability of default or principal loss.

6 - Medium Probability of Default/Loss: A loan with one or more identified weakness that we expect to have a 33% probability of default or principal loss.

7 - High Probability of Default/Loss: A loan with one or more identified weakness that we expect to have a 67% or higher probability of default or principal loss.

8 - In Default: A loan which is in contractual default and/or which has a very high likelihood of principal loss.

In addition, for certain pools of smaller loans which have similar credit characteristics, primarily loans with an outstanding principal balance of $10.0 million or less in our consolidated securitization vehicles, we have recorded a general provision for loan losses in lieu of the asset-specific provisions we record on all other loans. This general provision is based on macroeconomic data with respect to historic loan losses, vintage, property type, and other factors deemed relevant for such loan pools. These loans do not undergo the same level of asset management as our larger investments.

In certain cases, we may classify loans as held-for-sale based upon the specific facts and circumstances of particular Loans, including known or expected transactions. Loans held-for-sale are carried at the lower of their amortized cost basis and fair value. A reduction in the fair value of loans held-for-sale is recorded as a charge to our consolidated statement of operations as a valuation allowance on loans held-for-sale.

Real Estate Held-for-Sale

Real Estate Held-for-Sale

Loan investments where we have foreclosed upon the underlying collateral and own an equity interest in real estate are categorized as real estate owned. We generally do not intend to hold such foreclosed assets for long-term operations and therefore classify such assets as real estate held-for-sale on our consolidated balance sheets. Real estate held-for-sale are carried at the lower of our basis in the real estate and fair value, less cost to sell, with reductions in fair value recorded as an impairment of real estate-held-for-sale on our consolidated statements of operations.

Deferred Financing Costs

Deferred Financing Costs

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

Repurchase Obligations

Repurchase Obligations

In certain circumstances, we have financed the purchase of investments from a counterparty through a repurchase obligation with that same counterparty. We record these investments in the same manner as other investments financed with repurchase obligation, with the investment recorded as an asset and the related borrowing under any repurchase agreement recorded as a liability on our consolidated balance sheets. Interest income earned on the investments and interest expense incurred on the repurchase obligations are reported separately on our consolidated statements of operations.

Interest Rate Derivative Financial Instruments

Interest Rate Derivative Financial Instruments

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

To determine the fair value of interest rate derivative financial instruments, we use a third-party derivative specialist to assist us in periodically valuing our interests.

Income Taxes

Income Taxes

Our financial results generally do not reflect provisions for current or deferred income taxes on our REIT taxable income. Management believes that we operate in a manner that will continue to allow us to be taxed as a REIT and, as a result, we generally do not expect to pay substantial corporate level taxes other than those payable by our taxable REIT subsidiaries. Many of these requirements, however, are highly technical and complex. If we were to fail to meet these requirements, we may be subject to federal, state and local income tax on current and past income, and penalties. See Note 10 for additional information.

Accounting for Stock-Based Compensation

Accounting for Stock-Based Compensation

Stock-based compensation expense is recognized in net income using a fair value measurement method, which we determine with the assistance of a third-party appraisal firm. Compensation expense for the time vesting of stock-based compensation grants is recognized on the accelerated attribution method and compensation expense for performance vesting of stock-based compensation grants is recognized on a straight line basis.

The fair value of the performance vesting restricted common stock is measured on the grant date using a Monte Carlo simulation to estimate the probability of the market vesting conditions being satisfied. The Monte Carlo simulation is run approximately 100,000 times. For each simulation, the payoff is calculated at the settlement date, and is then discounted to the grant date at a risk-free interest rate. The average of the values over all simulations is the expected value of the restricted common stock on the grant date. The valuation is performed in a risk-neutral framework, so no assumption is made with respect to an equity risk premium. Significant assumptions used in the valuation include an expected term and stock price volatility, an estimated risk-free interest rate and an estimated dividend growth rate.

Estimates of fair value are not intended to predict actual future events or the value ultimately realized by employees who receive equity awards, and subsequent events are not indicative of the reasonableness of the original estimates of fair value made by us.

Comprehensive Income (Loss)

Comprehensive Income (Loss)

Total comprehensive income was $164.8 million and $279.8 million for the nine months ended September 30, 2012 and 2011, respectively. The primary components of comprehensive income other than net income are the unrealized gains and losses on derivative financial instruments and the component of other-than-temporary impairments of securities related to the Valuation Adjustment.

Earnings per Share of Common Stock

Earnings per Share of Common Stock

Basic earnings per share, or EPS, is computed based on the net earnings allocable to common stock and stock units, divided by the weighted average number of shares of common stock and stock units outstanding during the period. Diluted EPS is determined using the treasury stock method, and is based on the net earnings allocable to common stock and stock units, divided by the weighted average number of shares of common stock, stock units and potentially dilutive common stock options and warrants. See Note 8 for additional discussion of earnings per share.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may ultimately differ from those estimates.

Reclassifications

Reclassifications

Certain reclassifications have been made in the presentation of the prior period consolidated financial statements to conform to the September 30, 2012 presentation.

Segment Reporting

Segment Reporting

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

The Balance Sheet Investment segment includes our consolidated portfolio of interest earning assets and the financing thereof. The Investment Management segment includes the investment management activities of our wholly-owned investment management subsidiary, CT Investment Management Co., LLC, or CTIMCO, and its subsidiaries, as well as our co-investments in investment management vehicles. CTIMCO is a taxable REIT subsidiary and serves as the investment manager of Capital Trust, Inc., all of our investment management vehicles and CT CDOs, and serves as senior servicer and special servicer for certain of our investments and for third-parties.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The “Fair Value Measurements and Disclosures” Topic of the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or the Codification, defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements under GAAP. Specifically, this guidance defines fair value based on exit price, or the price that would be received upon the sale of an asset or the transfer of a liability in an orderly transaction between market participants at the measurement date. Our assets and liabilities which are measured at fair value are discussed in Note 12.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In April 2011, the FASB issued Accounting Standards Update 2011-02, “Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring,” or ASU 2011-02. ASU 2011-02 primarily clarifies when creditors should classify loan modifications as troubled debt restructurings and provides examples and factors to be considered. Loan modifications which are considered troubled debt restructurings could result in additional disclosure requirements and could impact the related provision for loan losses. ASU 2011-02 is effective for the first interim or annual period beginning after June 15, 2011, with retrospective application to the beginning of the year. The adoption of ASU 2011-02 did not have a material impact on our financial statements, however will impact how we account for loan modifications, and may result in an increase in the loan modifications we classify as troubled debt restructurings, and therefore our provision for loan losses.

In April 2011, the FASB issued Accounting Standards Update 2011-03, “Transfers and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements,” or ASU 2011-03. ASU 2011-03 primarily removes certain criteria from the consideration of effective control over assets subject to repurchase agreements. The removal of these criteria will generally result in asset transfers pursuant to repurchase agreements being accounted for as secured borrowings, with both the transferred assets and repurchase liability recorded on the transferor’s balance sheet. ASU 2011-03 is effective for the first interim or annual period beginning after December 15, 2011, and is to be applied prospectively to transactions which occur subsequent to the effective date. The adoption of ASU 2011-03 did not have a material impact on our financial statements.

In May 2011, the FASB issued Accounting Standards Update 2011-04, “Fair Value Measurement (Topic 860): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs,” or ASU 2011-04. ASU 2011-04 amends existing guidance on fair value measurements related to (i) instruments held in a portfolio, (ii) instruments classified within shareholders’ equity, (iii) application of the “highest and best use” concept to nonfinancial assets, (iv) application of blockage factors and other premiums and discounts in the valuation process, and (v) other matters. In addition, ASU 2011-04 expanded the required disclosures around fair value measurements including (i) reporting the level in the fair value hierarchy used to value assets and liabilities which are not measured at fair value, but where fair value is disclosed, and (ii) qualitative disclosures about the sensitivity of Level 3 fair value measurements to changes in unobservable inputs used. ASU 2011-04 is effective for the first interim or annual period beginning after December 15, 2011. The adoption of ASU 2011-04 did not have a material impact on our financial statements, however it did expand our disclosures related to fair value measurements.

In June 2011, the FASB issued Accounting Standards Update 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income,” or ASU 2011-05. ASU 2011-05 does not change the items that must be reported in other comprehensive income, however it eliminates the option to present other comprehensive income on the statement of shareholders’ equity and instead requires either (i) a continuous statement of comprehensive income which would replace the current statement of operations, or (ii) an additional statement of other comprehensive income, which would immediately follow the statement of operations, and would report the components of other comprehensive income. In December 2011, the FASB issued Accounting Standards Update 2011-12, “Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassification Items Out of Accumulated Comprehensive Income in Accounting Standards Update 2011-05,” or ASU 2011-12. ASU 2011-12 maintained the presentation requirements for comprehensive income under ASU 2011-05, however deferred the requirement to present certain reclassification adjustments into and out of accumulated other comprehensive income on a gross basis. ASU 2011-05 and ASU 20011-12 are both effective for the first interim or annual period beginning after December 15, 2011, and should be applied retrospectively to all periods reported after the effective date. Our early adoption, as permitted, of ASU 2011-05 and ASU 2011-12 as of December 31, 2011 did not have a material impact on our financial statements, other than the change in presentation of comprehensive income as a separate financial statement.

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Consolidated Securitization Vehicles (Details 15) (USD $) In Thousands, unless otherwise specified	9 Months Ended			9 Months Ended										9 Months Ended						9 Months Ended
	Sep. 30, 2012	Sep. 30, 2012 GECMC 00-1 H	Dec. 31, 2011 GECMC 00-1 H	Sep. 30, 2012 Other Securization Vehicles		Sep. 30, 2012 Securitization Vehicles		Sep. 30, 2012 Securitization Vehicles CT CDO I		Sep. 30, 2012 Securitization Vehicles CT CDO II		Sep. 30, 2012 Securitization Vehicles CT CDO III	Dec. 31, 2011 Securitization Vehicles CT CDO III	Sep. 30, 2012 Securitization Vehicles CT CDO IV		Sep. 30, 2012 Securitization Vehicles CT CDOs		Sep. 30, 2012 Securitization Vehicles GMACC 1997-C1	Dec. 31, 2011 Securitization Vehicles GMACC 1997-C1	Sep. 30, 2012 Securitization Vehicles GSMS 2006-FL8A		Sep. 30, 2012 Securitization Vehicles JPMCC 2004-FL1A	Dec. 31, 2011 Securitization Vehicles JPMCC 2004-FL1A	Sep. 30, 2012 Securitization Vehicles MSC 2007-XLCA	Dec. 31, 2011 Securitization Vehicles MSC 2007-XLCA
Principal Balance				$ 50,552		$ 497,423		$ 91,044		$ 156,900				$ 198,927	[1]	$ 446,871				$ 50,552
Book Value, beginning year			24,847	469,154		1,211,407		121,409		199,751			199,553	221,540	[1]	742,253			83,672	50,552					310,083
Book Value, ending year			$ 24,847	$ 50,552		$ 497,423		$ 91,044		$ 156,900			$ 199,553	$ 198,927	[1]	$ 446,871			$ 83,672	$ 50,552					$ 310,083
Coupon				1.06%	[2]	1.06%	[2]	1.26%	[2]	0.92%	[2]			1.07%	[2]	1.06%	[2]			1.06%	[2]
All-In Cost				1.06%		1.21%	[2],[3]	1.28%	[2]	1.21%	[2]			1.23%	[2]	1.23%	[2]			1.06%
Maturity Date	Mar. 31, 2016			Jun. 30, 2020	[4]	Aug. 31, 2042	[4]	Jul. 31, 2039	[4]	Mar. 31, 2050	[4]			Oct. 31, 2043	[4]	Feb. 28, 2045	[4]			Jun. 30, 2020	[4]

[1] Comprised, at September 30, 2012, of $184.9 million of floating rate notes sold and $14.0 million of fixed rate notes sold.

[2] Represents a weighted average for each respective facility, assuming LIBOR of 0.21% at September 30, 2012 for floating rate debt obligations.

[3] Including the impact of interest rate hedges with an aggregate notional balance of $273.7 million as of September 30, 2012, the effective all-in cost of our consolidated securitization vehicles' debt obligations would be 4.09% per annum.

[4] 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 generally expected to occur prior to the maturity date above.

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Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Cash flows from operating activities:
Net income	$ 156,873	$ 268,399
Adjustments to reconcile net income to net cash provided by operating activities:
Net impairments recognized in earnings	160	39,773
Recovery of provision for loan losses	(2,819)	(34,401)
Valuation allowance on loans held-for-sale		224
Gain on extinguishment of debt		(271,031)
Gain on deconsolidation of CT Legacy Asset	(146,380)
Fair value adjustment on investment in CT Legacy Asset	(19,645)
Income from equity investments in unconsolidated subsidiaries	(1,312)	(2,105)
Distributions of income from unconsolidated subsidiaries	1,933
Employee stock-based compensation	675	411
Incentive awards plan expense	944	3,395
Deferred directors' compensation	169	150
Distributions from CT Legacy Asset	9,221
Amortization of premiums/discounts on loans and securities and deferred interest on loans	(669)	(969)
Amortization of deferred gains and losses on settlement of swaps	(56)	(75)
Amortization of deferred financing costs and premiums/discounts on debt obligations	10,747	9,304
Loss on interest rate swaps not designated as cash flow hedges	2,772	6,255
Changes in assets and liabilities, net:
Accrued interest receivable	(4,765)	3,406
Deferred income taxes	(1,826)	(1,093)
Prepaid expenses and other assets	2,764	624
Accounts payable and accrued expenses	2,812	(2,931)
Net cash provided by operating activities	11,598	19,336
Cash flows from investing activities:
Principal collections and proceeds from securities	40,344	70,929
Distributions from equity method investments		4,345
Principal collections of loans receivable	91,889	1,879,041
Proceeds from disposition of loans		5,750
Contributions to unconsolidated subsidiaries	(4,030)	(3,413)
Distributions from unconsolidated subsidiaries	1,006	3,839
Increase in restricted cash	(3,160)	(13,715)
Net cash provided by investing activities	126,049	1,946,776
Cash flows from financing activities:
Borrowings under repurchase obligations	123,977
Repayments under repurchase obligations	(58,464)	(306,042)
Repayments under senior credit facility		(22,932)
Repayment of junior subordinated notes		(4,640)
Borrowing under mezzanine loan		83,000
Repayments under mezzanine loan	(63,000)	(20,000)
Repayment of securitized debt obligations	(136,078)	(1,679,970)
Payment of financing expenses		(11,126)
Purchase of and distribution to noncontrolling interests	(8)	(142)
Purchase of secured notes		(405)
Vesting of restricted Class A common stock	(25)	(85)
Net cash used in financing activities	(133,598)	(1,962,342)
Net increase in cash and cash equivalents	4,049	3,770
Cash and cash equivalents at beginning of period	34,818	24,449
Cash and cash equivalents at end of period	$ 38,867	$ 28,219

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Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Common stock, shares authorized	200,000,000
Common stock, shares issued	23,191,622
CommonClassARestrictedMember
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares issued	537,000	244,000
Common stock, shares outstanding	537,000	244,000
Class A Common Stock
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	21,979,000	21,967,000
Common stock, shares outstanding	21,979,000	21,967,000

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Income Taxes

9 Months Ended

Sep. 30, 2012

Income Taxes

Income Taxes

Note 10. Income Taxes

Capital Trust, Inc. has made an election to be taxed as a REIT under Section 856(c) of the Internal Revenue Code, commencing with the tax year ending December 31, 2003. As a REIT, we generally are not subject to federal, state, and local income taxes except for the operations of our taxable REIT subsidiary, CTIMCO. The primary benefit from this election is that we are able to deduct dividends paid to our shareholders from the calculation of taxable income, effectively eliminating corporate taxes on the operations of the REIT. In order to qualify as a REIT, our activities must focus on real estate investments and we must meet certain asset, income, ownership and distribution requirements. These qualifications have become more difficult to meet in light of the transfer of our legacy portfolio to CT Legacy REIT in conjunction with our March 2011 restructuring, and the lack of new, replacement investment activity. If we fail to maintain our qualification as a REIT, we may be subject to material penalties as well as federal, state and local income tax on our taxable income at regular corporate rates. As of September 30, 2012 and December 31, 2011, Capital Trust, Inc. was in compliance with all REIT requirements.

In addition, Capital Trust, Inc. includes in its taxable income the income generated by investments in our CT CDOs. Due to the redirection provisions of our consolidated CT CDOs, which reallocate principal proceeds and interest otherwise distributable to us to repay senior noteholders, assets financed through our CT CDOs may generate current taxable income without a corresponding cash distribution to us. See Note 7 for further discussion of these redirection provisions.

As of December 31, 2011, Capital Trust, Inc. had net operating losses, or NOLs, of approximately $161.5 million and net capital losses, or NCLs, of approximately $120.8 million available to be carried forward and utilized in current or future periods. The utilization of NOLs to offset our taxable income or distribution requirements will require us to pay alternative minimum taxes.

Deferred income taxes recorded on our consolidated balance sheets reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities used for financial reporting purposes and the amounts used in the computation of our current income tax obligations.

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Document and Entity Information	9 Months Ended
	Sep. 30, 2012	Nov. 09, 2012
Document And Entity Information
Entity Registrant Name	Capital Trust Inc
Entity Central Index Key	0001061630
Document Type	10-Q
Document Period End Date	Sep. 30, 2012
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		24,205,573
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2012

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Employee Benefit and Incentive Plans

9 Months Ended

Sep. 30, 2012

Employee Benefit And Incentive Plans

Employee Benefit and Incentive Plans

Note 11. Employee Benefit and Incentive Plans

Stock-Based Incentive Plans

We had stock-based incentive awards outstanding under three benefit plans as of September 30, 2012: (i) our amended and restated 1997 non-employee director stock plan, or 1997 Director Plan, (ii) our 2007 long term incentive plan, or 2007 Plan, and (iii) our 2011 long term incentive plan, or 2011 Plan. The 1997 Director Plan and the 2007 Plan expired in 2007 and 2011, respectively and no new awards may be issued under them. In March 2011, in addition to the 300,000 shares awarded to our three named executive officers, our board’s compensation committee authorized our chief executive officer to grant 100,000 shares under the 2007 Plan to other officers and employees designated by him. These 100,000 shares were awarded to employees in January 2012.

Under the 2011 Plan, a maximum of 1.0 million shares of class A common stock may be issued. Shares canceled under previous plans are available to be reissued under the 2011 Plan. As of September 30, 2012, there were 615,000 shares available under the 2011 Plan.

Under these plans, our employees are issued shares of our restricted class A common stock. We record grant date fair value of these shares as an expense over their vesting period. These shares vest either (i) pro-rata over a three-year service period, or (ii) upon the attainment of certain pre-specified performance measures within a prescribed timeframe subject to continued employment.

 As of September 30, 2012, unvested share-based compensation consisted of 536,536 shares of restricted class A common stock with an unamortized value of $686,000. Subject to vesting conditions and the continued employment of certain employees, $465,000 of these costs will be recognized as compensation expense during the fourth quarter of 2012 and the remainder will be recognized over the next two years.

Activity under these three plans for the nine months ended September 30, 2012 is summarized in the table below in share and share equivalents:

Benefit Type (1)	1997 Director Plan		2007 Plan			2011 Plan		Total
Restricted Class A Common Stock
Beginning balance		—		244,424			—		244,424
Granted		—		100,000			275,000		375,000
Vested, deferred or forfeited		—		(82,888	)		—		(82,888	)
Ending balance (2)		—		261,536			275,000		536,536
Stock Units (3)
Beginning balance		68,544		438,260			55,531		562,335
Granted and deferred		—		60,000			54,180		114,180
Ending balance		68,544		498,260			109,711		676,515
Total outstanding		68,544		759,796			384,711		1,213,051

(1)	No stock options are outstanding under any of our plans.
(2)	Includes (i) 275,000 performance based awards that contingently vest upon the attainment of certain pre-specified performance measures, and (ii) 250,000 time based awards that vest based upon an employee’s continued employment on pre-established vesting dates.
(3)	Stock units are granted to certain members of our board of directors in lieu of cash compensation for services and in lieu of dividends earned on previously granted stock units. In addition, certain of our employees have elected to defer the vesting of their restricted shares.

A summary of the unvested restricted class A common stock as of and for the nine months ended September 30, 2012 was as follows:

	Restricted Class A Common Stock
	Shares			Grant Date Fair Value
Unvested at January 1, 2012		244,424			$2.65
Granted		375,000			2.77
Vested, deferred or forfeited		(82,888	)		3.56
Unvested at September 30, 2012		536,536			$2.64

A summary of the unvested restricted class A common stock as of and for the nine months ended September 30, 2011 was as follows:

	Restricted Class A Common Stock
	Shares			Grant Date Fair Value
Unvested at January 1, 2011		32,785			$5.67
Granted		300,000			2.29
Vested		(88,361	)		2.62
Unvested at September 30, 2011		244,424			$2.65

The total grant date fair value of restricted shares that vested during the nine months ended September 30, 2012 and 2011 was$184,000 and $231,000, respectively.

CTOPI Incentive Management Fee Grants

In addition to the equity interests detailed above, we may grant percentage interests in the incentive compensation received by us from certain of our investment management vehicles. In January 2011, we created a pool for employees equal to 45% of the CTOPI incentive management fee received by us. As of September 30, 2012, we had granted 92.5% of the pool to our employees and the remainder remains unallocated. These grants have the following employment-based vesting schedule: (i) one-third on the date of grant, (ii) one-third on September 13, 2012, and (iii) the remainder vests upon our receipt of incentive management fees from CTOPI.

CT Legacy REIT Management Incentive Awards Plan

In conjunction with our March 2011 restructuring, we created an employee pool for up to 6.75% of the dividends paid to the common equity holders of CT Legacy REIT (subject to certain caps and priority distributions). As of September 30, 2012, incentive awards for 83.5% of the pool were granted to our employees and the remainder remains unallocated. Approximately 90% of these grants have the following employment-based vesting schedule: (i) 25% vests on the date of grant, (ii) 25% vests in March 2013, (iii) 25% vests in March 2014, and (iv) the remainder vests upon our receipt of dividends from CT Legacy REIT. The remaining 10% of these grants vest upon our receipt of dividends from CT Legacy REIT.

Strategic Transaction Related Awards

On June 27, 2012, our compensation committee authorized contingent awards in the form of restricted class A common stock and cash bonuses to our chief executive officer, Stephen D. Plavin, chief financial officer, Geoffrey G. Jervis, and our chief credit officer, Thomas C. Ruffing. Subject to their continued employment, these awards vest if a strategic transaction has been consummated, or definitive documentation governing a strategic transaction has been entered into, prior to December 31, 2012.

These awards provided for grants of 125,000, 100,000 and 50,000 shares of restricted common stock to Messrs. Plavin, Jervis, and Ruffing, respectively.

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Fair Value (Narrative) (Detail) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012
Other Property
Loss severities - maximum	79.00%	[1]
Securitization Vehicles | Subordinated interests in mortgages
Principal Balance	82,100
Maturity	2012-02-28
Coupon or Weighted Average Coupon	3.70%
Number of loans - reported at fair value	6
Securitization Vehicles | Subordinated interests in mortgages | Hotel Loan
Principal Balance	60,900
Number of loans - reported at fair value	3
Securitization Vehicles | Subordinated interests in mortgages | Office Loan
Principal Balance	6,600
Number of loans - reported at fair value	1
Securitization Vehicles | Subordinated interests in mortgages | Retail Loan
Principal Balance	4,400
Number of loans - reported at fair value	1
Securitization Vehicles | Subordinated interests in mortgages | Other Property
Principal Balance	10,200
Number of loans - reported at fair value	1
CT Legacy REIT
Discount Rate	20.00%
Discount rate, basis point change	100
Basis point change, amount	2,300
CT Legacy REIT | Minimum
Loss severities - maximum	0.00%
CT Legacy REIT | Maximum
Loss severities - maximum	100.00%

[1] In certain cases a loss severity based on inputs from parties including appraisals on, and bids for, underlying collateral were utilized to compute the fair value of the impaired loans.

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Subsequent Events (Details Narrative)	9 Months Ended
	Sep. 30, 2012
Subsequent Events [Abstract]
Event description	The holders of our outstanding warrants exercised on a cashless basis all of the outstanding warrants.
Subsequent event date	Nov. 08, 2012
Number of shares issued pursuant to terms of warrants	1,690,466

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Consolidated Statements of Operations (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Income from loans and other investments:
Interest and related income	$ 6,944	$ 25,642	$ 28,423	$ 95,187
Less: Interest and related expenses	5,147	21,838	33,902	80,381
Income from loans and other investments, net	1,797	3,804	(5,479)	14,806
Other revenues:
Management fees from affiliates	1,546	1,753	4,741	4,927
Servicing fees	2,206	1,460	5,591	2,208
Total other revenues	3,752	3,213	10,332	7,135
Other expenses:
General and administrative	7,141	4,941	16,193	19,868
Total other expenses	7,141	4,941	16,193	19,868
Total other-than-temporary impairments of securities		(30,687)		(35,620)
Portion of other-than-temporary impairments of securities recognized in other comprehensive income		173	(160)	(3,098)
Impairment of real estate held-for-sale		(1,055)		(1,055)
Net impairments recognized in earnings		(31,569)	(160)	(39,773)
Recovery of provision for loan losses	2,811	17,152	2,819	34,401
Valuation allowance on loans held-for-sale				(224)
Gain on extinguishment of debt		20,054		271,031
Fair value adjustment on investment in CT Legacy Asset	11,987		19,645
Gain on deconsolidation of subsidiary			146,380
Income from equity investments in unconsolidated subsidiaries	411	307	1,312	2,105
Income before income taxes	13,617	8,020	158,656	269,613
Income tax provision (benefit)	717	(236)	1,783	1,214
Net income	12,900	8,256	156,873	268,399
Net (income) loss attributable to noncontrolling interests	(5,901)	5,466	(81,038)	(1,935)
Net income attributable to Capital Trust, Inc.	$ 6,999	$ 13,722	$ 75,835	$ 266,464
Net income per share of common stock:
Basic	$ 0.30	$ 0.60	$ 3.30	$ 11.77
Diluted	$ 0.28	$ 0.57	$ 3.10	$ 11.08
Weighted average shares of common stock outstanding:
Basic	23,173,426	22,730,080	22,969,103	22,630,672
Diluted	24,616,026	24,121,973	24,442,061	24,057,374

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Debt Obligations

9 Months Ended

Sep. 30, 2012

Debt Obligations

Debt Obligations

Note 5. Debt Obligations

As described in Note 1, on March 31, 2011, we restructured, amended, or extinguished all of our outstanding recourse debt obligations. In addition, as described in Note 1, our consolidated balance sheets separately state our direct assets and liabilities and certain assets and liabilities of consolidated subsidiaries. See Note 6 for disclosures regarding debt obligations of CT Legacy REIT, and see Note 7 for comparable disclosures regarding debt obligations of consolidated securitization vehicles, all of which are non-recourse to us, as separately stated on our consolidated balance sheets.

In conjunction with our March 2011 restructuring and the corresponding satisfaction of our senior credit facility and junior subordinated notes, wholly-owned subsidiaries issued secured notes to these former creditors, which secured notes are non-recourse to us. The secured notes had an aggregate initial face balance of $7.8 million and are secured by 93.5% of our equity interests in the class A-1 and class A-2 common stock of CT Legacy REIT, which represents 48.3% of the total outstanding class A-1 and class A-2 common stock of CT Legacy REIT. The secured notes mature on March 31, 2016 and bear interest at a rate of 8.2% per annum, which interest may be deferred until maturity. All dividends we receive from our equity interests in the common stock of CT Legacy REIT which serve as collateral under the secured notes must be used to pay, or prepay, interest and principal due thereunder, and only after the notes’ full satisfaction will we receive any cash flow from the common equity interests in CT Legacy REIT that serve as collateral for the notes. Any prepayment, or partial prepayment, of the secured notes will incur a prepayment premium resulting in a total payment of principal and interest under the secured notes of $11.1 million.

We had secured notes outstanding with an accreted book value of $8.3 million and $7.8 million as of September 30, 2012 and December 31, 2011, respectively.

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Equity Investments in Unconsolidated Subsidiaries

9 Months Ended

Sep. 30, 2012

Equity Investments In Unconsolidated Subsidiaries

Equity Investments in Unconsolidated Subsidiaries

Note 4. Equity Investments in Unconsolidated Subsidiaries

Our equity investments in unconsolidated subsidiaries consist of our co-investments in investment management vehicles that we sponsor and manage. As of September 30, 2012, we had a co-investment in two such vehicles, CT Opportunity Partners I, LP, or CTOPI, and CT High Grade Partners II, LLC, or CT High Grade II.

In December 2007, we made a commitment to invest up to $25.0 million in CTOPI, or 4.6% of CTOPI’s total capital commitments. We have funded $17.1 million of our commitment as of September 30, 2012 and received $6.9 million as a return of capital, resulting in a $10.2 million funded and a $14.8 million unfunded commitment balance. Subsequent to the expiration of CTOPI’s investment period in September 2012, our obligation to fund additional capital to CTOPI is limited.

In accordance with the CTOPI management agreement, CTIMCO may earn incentive compensation in an amount equal to 17.7% of the fund’s profits, after a 9% preferred return and 100% return of capital to the CTOPI partners. While we have not yet received any incentive distributions from CTOPI, we have been allocated $5.9 million of incentive compensation based on a hypothetical liquidation of the fund at its net asset value as of September 30, 2012. Accordingly, we have recognized this allocation as part of our equity investment in CTOPI, however we have deferred the recognition of income until cash is collected or appropriate contingencies have been eliminated.

In April 2012, we purchased a 0.44% interest in CT High Grade II from an existing investor for $2.8 million, representing our initial co-investment in CT High Grade II. Our co-investment represents a $2.9 million total capital commitment to CT High Grade II, of which our unfunded commitment is $480,000 as of September 30, 2012. As CT High Grade II’s investment period expired in May 2011, our obligation to fund additional capital to CT High Grade II is limited.

Activity relating to our equity investments in unconsolidated subsidiaries for the nine months ended September 30, 2012 was as follows (in thousands):

	CTOPI			CT High Grade II		Total
December 31, 2011		$10,399			$—		$10,399
Contributions		1,241			2,789		4,030
Income from equity investments in     unconsolidated subsidiaries (1)		7,068			153		7,221
Distributions		(2,940	)		—		(2,940	)
September 30, 2012		$15,768			$2,942		$18,710

(1) Includes $5.9 million of incentive income allocated to us from CTOPI under the equity method of accounting. This incentive income has not been recognized into earnings, but recorded as a deferred incentive income liability under accounts payable, accrued expenses and other liabilities on our consolidated balance sheet.

As of September 30, 2012, our maximum exposure to loss from CTOPI and CT High Grade II was $7.7 million and $2.8 million, respectively.

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Subsequent Events

9 Months Ended

Sep. 30, 2012

Subsequent Events [Abstract]

Subsequent Events

Note 16. Subsequent Events

Subsequent to quarter end, on November 8, 2012, the holders of our outstanding warrants exercised on a cashless basis all of the outstanding warrants. As a result, we issued 1,690,466 shares of our class A common stock pursuant to the terms of the warrants.

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Fair Values

9 Months Ended

Sep. 30, 2012

Fair Values

Fair Values

Note 12. Fair Values

Assets and Liabilities Recorded at Fair Value

Certain of our assets and liabilities are measured at fair value either (i) on a recurring basis, as of each quarter-end, or (ii) on a nonrecurring basis, as a result of impairment or other events. Generally, loans held-for-sale, real estate held-for-sale, the investment in CT Legacy Asset, and interest rate swaps are measured at fair value on a recurring basis, while impaired loans and securities are measured at fair value on a nonrecurring basis. These fair values are determined using a variety of inputs and methodologies, which are detailed below.

As discussed in Note 2, the “Fair Value Measurement and Disclosures” Topic of the Codification establishes a fair value hierarchy that prioritizes the inputs used in determining fair value under GAAP, which includes the following classifications, in order of priority:

· Level 1 generally includes only unadjusted quoted prices in active markets for identical assets or liabilities as of the reporting date.

· Level 2 inputs are those which, other than Level 1 inputs, are observable for identical or similar assets or liabilities.

· Level 3 inputs generally include anything which does not meet the criteria of Levels 1 and 2, particularly any unobservable inputs.

The following table summarizes our assets and liabilities, including those of CT Legacy REIT and our consolidated securitization vehicles, which are recorded at fair value as of September 30, 2012 (in thousands):

				Fair Value Measurements Using
				Quoted Prices		Other			Significant
	Total			in Active		Observable			Unobservable
	Fair Value at			Markets		Inputs			Inputs
	September 30, 2012			(Level 1)		(Level 2)			(Level 3)
Measured on a recurring basis:
Investment in CT Legacy Asset		$100,100			$—		$—			$100,100
Securitization vehicles' interest rate hedge liabilities		($19,089	)		$—		($19,089	)		$—
Measured on a nonrecurring basis:
Securitization vehicles' impaired loans receivable (1) :
Subordinate interests in mortgages		$4,130			$—		$—			$4,130

(1) Loans receivable against which we have recorded a provision for loan losses as of September 30, 2012.

The following table reconciles the beginning and ending balances of assets measured at fair value on a recurring basis using Level 3 inputs (in thousands):

	Loans			Real Estate			Investment in
	Held-for-Sale			Held-for-Sale			CT Legacy Assets
December 31, 2011		$30,875			$10,342			$—
Deconsolidation of CT Legacy Asset		(30,875	)		(10,342	)		89,676
Contributions to CT Legacy Asset		—			—			73,064
Distributions from CT Legacy Asset		—			—			(82,285	)
Adjustments to fair value included in earnings:
Fair value adjustment on investment in CT Legacy Asset		—			—			19,645
September 30, 2012		$—			$—			$100,100

The fair values of each type of asset recorded at fair value using Level 3 inputs are determined by an internal committee comprised of senior management including our chief executive officer, chief financial officer and our chief credit officer and head of asset management. The following methods and assumptions were used to estimate the fair value of each type of asset and liability which was recorded at fair value as of September 30, 2012:

Investment in CT Legacy Asset: We have elected the fair value option of accounting for CT Legacy REIT’s investment in CT Legacy Asset, pursuant to which we record this investment at fair value rather than at our historical cost investment amount. We made this election due to our determination that the fair value of the investment in CT Legacy Asset, as a net liquidating portfolio of assets subject to a non-recourse repurchase facility, is more meaningful and indicative of our interests in CT Legacy Asset than equity method accounting. Consequently, we arrive at the fair value of our Investment in CT Legacy Asset by discounting expected cash flows after the repayment of the repurchase facility. To determine the expected cash flows of CT Legacy Asset, management estimates the timing and recovery amount for each of its assets, and then applies the proceeds to first satisfy the repurchase facility. The remaining cash flows are discounted to their present value to arrive at the fair value of CT Legacy Asset. The key assumptions for significant unobservable inputs are: (i) a discount rate of 20%, and (ii) loss severities ranging from 0% to 100% against the underlying assets. A change in the discount rate used by 100 basis points would change the fair value of CT Legacy REIT’s investment in CT Legacy Asset by approximately $2.3 million.

Interest rate hedge liabilities: Interest rate hedges are valued using advice from a third-party derivative specialist, based on a combination of observable market-based inputs, such as interest rate curves, and unobservable inputs such as credit valuation adjustments due to the risk of non-performance by both us and our counterparties. See Note 7 for additional details on our interest rate hedges. We have made an accounting policy decision to utilize the so-called “portfolio exception” under ASC paragraph 820-10-35-18D, and have valued our interest rate hedge liabilities, as applicable, on a net basis.

Impaired securities held-to-maturity: Securities which are other-than-temporarily impaired are generally valued by a combination of (i) obtaining assessments from third-party dealers and, (ii) in cases where such assessments are unavailable or, in the opinion of management, deemed not to be indicative of fair value, discounting expected cash flows using internal cash flow models and estimated market discount rates. In the case of internal models, expected cash flows of each security are based on management’s assumptions regarding the collection of principal and interest on the underlying loans and securities. There were no securities which were impaired during the three months ended September 30, 2012. Previously impaired securities have been subsequently adjusted for amortization, and are therefore no longer reported at fair value as of September 30, 2012.

Impaired loans: The loans identified for impairment are collateral dependent loans. Impairment on these loans is measured by comparing management’s estimation of fair value of the underlying collateral to the book value of the respective loan. These valuations require significant judgments, which include assumptions regarding capitalization rates, leasing, creditworthiness of major tenants, occupancy rates, availability of financing, exit plan, loan sponsorship, actions of other lenders and other factors deemed necessary by management. The table above includes all impaired loans, regardless of the period in which impairment was recognized.

Additional details of our consolidated securitization vehicles’ loans which were recorded at fair value as of September 30, 2012 are described below:

Subordinate interests in mortgages: Six of our consolidated securitization vehicles’ subordinate interests in mortgage loans with an aggregate principal balance of $82.1 million are reported at fair value as of September 30, 2012, including three hotel loans ($60.9 million), one office loan ($6.6 million), one retail loan ($4.4 million) and one mixed-use/other loan ($10.2 million). The loans have a weighted average maturity of February 2012 and a weighted average coupon of 3.7% per annum as of September 30, 2012.

The following table lists the range of key assumptions used for arriving at the fair value of each of these types of loans.

	Assumption Ranges for Significant Unobservable Inputs (Level 3)
Collateral Type	Capitalization Rate	Occupancy	Loss Severity (1)
Office	N/A	N/A	70%
Hotel	9% - 15%	75% - 83%	N/A
Retail	10%	90%	N/A
Mixed Use / Other	N/A	N/A	79%

(1) In certain cases a loss severity based on inputs from third-parties including appraisals on, and bids for, underlying collateral were utilized to compute the fair value of the impaired loans.

Fair Value of Financial Instruments

In addition to the above disclosures for assets and liabilities which are recorded at fair value, GAAP also requires disclosure of fair value information about financial instruments, whether or not recognized in the statement of financial position, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are estimated using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the estimated market discount rate and the estimated future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in an immediate settlement of the instrument. Rather, these fair values reflect the amounts that management believes are realizable in an orderly transaction among willing parties. These disclosure requirements exclude certain financial instruments and all non-financial instruments.

The following table details the carrying amount, face amount, and approximate fair value of the financial instruments described above (in thousands). All fair value estimates are measured using significant unobservable inputs, or Level 3 inputs as further described above.

Fair Value of Financial Instruments
	September 30, 2012						December 31, 2011
	Carrying Amount		Face Amount		Fair Value		Carrying Amount		Face Amount		Fair Value
Financial assets:
Cash and cash equivalents		$38,867		$38,867		$38,867		$34,818		$34,818		$34,818
Loans receivable, net		—		—		—		19,282		19,282		17,354
CT Legacy REIT
Restricted cash		16,145		16,145		16,145		12,985		12,985		12,985
Securities held-to-maturity		N/A		N/A		N/A		2,602		29,251		1,638
Loans receivable, net		N/A		N/A		N/A		206,514		435,973		180,439
Investment in CT Legacy Asset		100,100		N/A		100,100		N/A		N/A		N/A
Securitization Vehicles
Securities held-to-maturity		154,848		236,390		144,742		358,972		490,940		350,180
Loans receivable, net		214,457		292,828		200,028		612,598		815,716		570,936
Financial liabilities:
Secured notes		8,326		8,326		7,158		7,847		7,847		6,436
Participations sold		—		—		—		19,282		19,282		17,354
CT Legacy REIT
Repurchase obligations		N/A		N/A		N/A		58,464		58,464		54,556
Mezzanine loan		N/A		N/A		N/A		55,111		55,111		71,475
Participations sold		N/A		N/A		N/A		97,465		97,465		—
Securitization Vehicles
Securitized debt obligations		497,423		497,423		302,698		1,211,407		1,210,992		767,619

The following methods and assumptions were used to estimate the fair value of each class of financial instruments, excluding those described above that are carried at fair value, for which it is practicable to estimate that value:

Cash and cash equivalents: The carrying amount of cash on deposit and in money market funds is considered to be a reasonable estimate of fair value.

Loans receivable, net: Other than impaired loans, these assets are recorded at their amortized cost and not at fair value. The fair values presented above were estimated by management taking into consideration factors including capitalization rates, leasing, occupancy rates, availability and cost of financing, exit plan, sponsorship, actions of other lenders and indications of market value from other market participants.

Restricted cash: The carrying amount of restricted cash is considered to be a reasonable estimate of fair value.

Securities held-to-maturity: These investments, other than securities that have been other-than-temporarily impaired, are recorded on an amortized cost basis and not at fair value. The fair values presented above have been estimated by a combination of (i) obtaining assessments from third-party dealers and, (ii) in cases where such assessments are unavailable or, in the opinion of management, deemed not to be indicative of fair value, discounting expected cash flows using internal cash flow models and estimated market discount rates. The expected cash flows of each security are based on management’s assumptions regarding the collection of principal and interest on the underlying loans and securities.

Secured notes: These notes are recorded at their aggregate principal balance and not at fair value. The fair value was estimated based on the rate at which a similar credit facility would be priced today.

Participations sold: These liabilities are recorded at their amortized cost and not at fair value. The fair values presented above are consistent with those presented for the related loan assets.

Repurchase obligations: These facilities were recorded at their aggregate principal balance and not at fair value. The fair value was estimated based on the rate at which a similar credit facility would be priced today.

Mezzanine loan: This instrument was recorded at its amortized cost and not at fair value. The fair value was estimated based on the rate at which a similar credit facility would be priced today.

Securitized debt obligations: These obligations are recorded at the face value of outstanding obligations to third-parties and not at fair value.The fair values presented above have been estimated by obtaining assessments from third-party dealers.

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Fair Value (Details 3) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Financial assets:
Investment in CT Legacy Asset
CT Legacy REIT
Financial assets:
Investment in CT Legacy Asset	100,100
Securitization Vehicles
Financial assets:
Securities held-to-maturity	144,700	350,200
Carrying Amount
Financial assets:
Cash and cash equivalents	38,867	34,818
Loans receivable, net		19,282
Financial liabilities:
Secured notes	8,326	7,847
Participations sold		19,282
Carrying Amount | CT Legacy REIT
Financial assets:
Loans receivable, net		206,514
Restricted cash	16,145	12,985
Securities held-to-maturity		2,602
Investment in CT Legacy Asset	100,100
Financial liabilities:
Participations sold		97,465
Repurchase obligations		58,464
Mezzanine loan		55,111
Carrying Amount | Securitization Vehicles
Financial assets:
Loans receivable, net	214,457	612,598
Securities held-to-maturity	154,848	358,972
Financial liabilities:
Securitized debt obligations	497,423	1,211,407
Face Amount
Financial assets:
Cash and cash equivalents	38,867	34,818
Loans receivable, net		19,282
Financial liabilities:
Secured notes	8,326	7,847
Participations sold		19,282
Face Amount | CT Legacy REIT
Financial assets:
Loans receivable, net		435,973
Restricted cash	16,145	12,985
Securities held-to-maturity		29,251
Financial liabilities:
Participations sold		97,465
Repurchase obligations		58,464
Mezzanine loan		55,111
Face Amount | Securitization Vehicles
Financial assets:
Loans receivable, net	292,828	815,716
Securities held-to-maturity	236,390	490,940
Financial liabilities:
Securitized debt obligations	497,423	1,210,992
Fair Value
Financial assets:
Cash and cash equivalents	38,867	34,818
Loans receivable, net		17,354
Financial liabilities:
Secured notes	7,158	6,436
Participations sold		17,354
Fair Value | CT Legacy REIT
Financial assets:
Loans receivable, net		180,439
Restricted cash	16,145	12,985
Securities held-to-maturity		1,638
Investment in CT Legacy Asset	100,100
Financial liabilities:
Participations sold
Repurchase obligations		54,556
Mezzanine loan		71,475
Fair Value | Securitization Vehicles
Financial assets:
Loans receivable, net	200,028	570,936
Securities held-to-maturity	144,742	350,180
Financial liabilities:
Securitized debt obligations	$ 302,698	$ 767,619

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Shareholders' Equity

9 Months Ended

Sep. 30, 2012

Shareholders Equity

Shareholders' Equity

Note 8. Shareholders’ Equity

Authorized Capital

We have the authority to issue up to 200,000,000 shares of stock, consisting of 100,000,000 shares of class A common stock and 100,000,000 shares of preferred stock. Subject to applicable NYSE listing requirements, our board of directors is authorized to issue additional shares of authorized stock without shareholder approval. In addition, to the extent not issued, currently authorized stock may be reclassified between class A common stock and preferred stock.

Common Stock

Shares of class A common stock are entitled to vote on all matters presented to a vote of shareholders, except as provided by law or subject to the voting rights of any outstanding preferred stock. Holders of record of shares of class A common stock on the record date fixed by our board of directors are entitled to receive such dividends as may be declared by the board of directors subject to the rights of the holders of any outstanding preferred stock. A total of 23,191,622 shares of class A common stock and stock units were issued and outstanding as of September 30, 2012.

We did not repurchase any of our class A common stock during the nine months ended September 30, 2012, other than the 6,959 shares we acquired pursuant to elections by incentive plan participants to satisfy tax withholding obligations through the surrender of shares equal in value to the amount of the withholding obligation incurred upon the vesting of restricted class A common stock.

Preferred Stock

We have not issued any shares of preferred stock since we repurchased all of the previously issued and outstanding preferred stock in 2001.

Warrants

In conjunction with the March 2009 restructuring of our legacy repurchase obligations, we issued to our former repurchase lenders warrants to purchase an aggregate 3,479,691 shares of our class A common stock at an exercise price of $1.79 per share. The warrants became exercisable on March 16, 2012, will expire on March 16, 2019, and may be exercised in a cashless manner at the option of the warrant holders. The fair value assigned to these warrants, totaling $940,000, has been recorded as an increase to additional paid-in capital, and was amortized into interest expense over the term of the related debt obligations. The warrants were valued using the Black-Scholes valuation method.

On November 8, 2012, all of our outstanding warrants were exercised in a cashless manner. See Note 16 for further discussion.

Dividends

We generally intend to distribute each year substantially all of our taxable income (which does not necessarily equal net income as calculated in accordance with GAAP) to our shareholders to comply with the REIT provisions of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code.

In addition, ourdividend policy remains subject to revision at the discretion of our board of directors. All distributions will be made at the discretion of our board of directors and will depend upon our taxable income, our financial condition, our maintenance of REIT status and other factors as our board of directors deems relevant.

No dividends were declared during the nine months ended September 30, 2012 or 2011.

Accumulated Other Comprehensive Loss

The following table details the primary components of accumulated other comprehensive loss as of September 30, 2012, and significant activity for the nine months ended September 30, 2012 (in thousands):

Accumulated Other Comprehensive Loss	Market on Interest Rate Hedges			Deferred Gains on Settled Hedges			Other-than- Temporary Impairments			Unrealized Gains on Securities			Total
Total as of December 31, 2011		($27,423	)		$56			($16,578	)		$3,361			($40,584	)
Unrealized gain on derivative     financial instruments		5,853			—			—			—			5,853
Ineffective portion of cash flow     hedges (1)		2,481			—			—			—			2,481
Amortization of net unrealized gains     on securities		—			—			—			(770	)		(770	)
Amortization of net deferred gains     on settlement of swaps		—			(56	)		—			—			(56	)
Other-than-temporary impairments     of securities (2)		—			—			409			—			409
Deconsolidation of CT Legacy     Asset (3)		—			—			3,879			(2,586	)		1,293
Total as of September 30, 2012		($19,089	)		$—			($12,290	)		$5			($31,374	)
Allocation to non-controlling interest (3)														—
Accumulated other comprehensive loss as of September 30, 2012														($31,374	)

(1)	As a result of the deconsolidation of CT Legacy Asset in the first quarter of 2012, the balance of accumlated other comprehensive income related to cash flow hedges of CT Legacy Asset was reclassified to interest expense.
(2)	Represents other-than-temporary impairments of securities in excess of credit losses, including amortization of prior other-than-temporary impairments of $248,000.
(3)	As further described in Note 1 above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the balances of accumulated other comprehensive income related to CT Legacy Asset, including those allocable to noncontrolling interests are no longer included in our consolidated financial statements.

Noncontrolling Interests

The noncontrolling interests included on our consolidated balance sheet represent the equity interests in CT Legacy REIT which are not owned by us, as described in Note 6. CT Legacy REIT’s outstanding common stock includes class A-1 common stock, class A-2 common stock, and subordinate class B common stock. A portion of CT Legacy REIT’s consolidated equity and results of operations are allocated to these noncontrolling interests based on their pro-rata ownership of CT Legacy REIT.

The following table describes activity relating to noncontrolling interests for the nine months ended September 30, 2012 (in thousands):

	Noncontrolling Interests
December 31, 2011		($18,515	)
Net income attributable to noncontrolling interests		81,038
Other comprehensive income attributable to     noncontrolling interests		10
Distributions to noncontrolling interests		(8	)
September 30, 2012		$62,525

As of December 31, 2011, the noncontrolling interests recorded on our consolidated balance sheet was a deficit, which reflected the consolidated book value of CT Legacy REIT, including certain securitization vehicles in which losses had been recorded in excess of CT Legacy REIT’s net investment. As a result of our deconsolidation of CT Legacy Asset during the first quarter of 2012, the impact of these excess losses has been reversed, resulting in a positive allocation to noncontrolling interests as of September 30, 2012.

Earnings Per Share

The following table sets forth the calculation of Basic and Diluted earnings per share, or EPS, based on the weighted average of both restricted and unrestricted class A common stock outstanding, for the three and nine months ended September 30, 2012 (in thousands, except share and per share amounts):

	Three Months Ended September 30, 2012						Nine Months Ended September 30, 2012
	Net		Wtd. Avg.		Per Share		Net		Wtd. Avg.		Per Share
	Income		Shares		Amount		Income		Shares		Amount
Basic EPS:
Net income allocable to      common stock		$6,999		23,173,426		$0.30		$75,835		22,969,103		$3.30
Effect of Dilutive Securities:
Warrants outstanding for the      purchase of common stock		—		1,442,600				—		1,472,958
Diluted EPS:
Net income per share of      common stock and assumed      conversions		$6,999		24,616,026		$0.28		$75,835		24,442,061		$3.10

The following table sets forth the calculation of Basic and Diluted EPS based on the weighted average of both restricted and unrestricted class A common stock outstanding, for the three and nine months ended September 30, 2011 (in thousands, except share and per share amounts):

	Three Months Ended September 30, 2011						Nine Months Ended September 30, 2011
	Net		Wtd. Avg.		Per Share		Net		Wtd. Avg.		Per Share
	Income		Shares		Amount		Income		Shares		Amount
Basic EPS:
Net income allocable to      common stock		$13,722		22,730,080		$0.60		$266,464		22,630,672		$11.77
Effect of Dilutive Securities:
Warrants outstanding for the      purchase of common stock		—		1,391,893				—		1,426,702
Diluted EPS:
Net income per share of      common stock and assumed      conversions		$13,722		24,121,973		$0.57		$266,464		24,057,374		$11.08

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Consolidated Securitization Vehicles (Details 7) (Securitization Vehicles, USD $) In Millions, unless otherwise specified	9 Months Ended		12 Months Ended
	Sep. 30, 2011		Dec. 31, 2011		Sep. 30, 2012
Number of investments			52		33
Loans Receivable
Number of investments			71		14
Fixed / (in millions)			$ 280	[1]	$ 44	[1]
Floating			$ 333	[1]	$ 170	[1]
Coupon			5.11%	[2],[3]	4.34%	[2],[3]
Yield			5.72%	[2],[3]	4.63%	[2],[3]
Maturity (years)	3 years	[2],[4]	3 years 6 months	[2],[4]

[1] Represents the aggregate net book value of the portfolio allocated between fixed rate and floating rate securities.

[2] Represents a weighted average as of September 30, 2012 and December 31, 2011, respectively.

[3] Calculations for floating rate loans are based on LIBOR of 0.21% and 0.30% as of September 30, 2012 and December 31, 2011, 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.

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CT Legacy REIT

9 Months Ended

Sep. 30, 2012

Ct Legacy Reit

CT Legacy REIT

Note 6. CT Legacy REIT

As discussed in Note 1, in connection with the March 2011 restructuring, we transferred substantially all of our directly held interest earning assets to a subsidiary of CT Legacy REIT. CT Legacy REIT is beneficially owned 52% by us, 24% by an affiliate of Five Mile Capital (the former mezzanine lender to CT Legacy REIT), and 24% by the former lenders under our senior credit facility. In addition, the former holders of our junior subordinated notes received class B common stock, a subordinate class of common stock which entitles its holders to receive approximately 25% of the dividends that would otherwise be payable to us on our equity interest in the common stock of CT Legacy REIT, after aggregate cash distributions of $50.0 million have been paid to all other classes of common stock. We manage CT Legacy REIT and CT Legacy Asset as a liquidating portfolio.

On February 10, 2012, we refinanced CT Legacy REIT’s mezzanine loan and repurchase facility with a single, new $124.0 million repurchase facility with JPMorgan. The borrower under the new JPMorgan facility, CT Legacy Asset, is a wholly owned subsidiary of CT Legacy REIT and owns all of its assets, other than cash. As a result of the refinancing, we discontinued consolidation of CT Legacy Asset. As a result, its assets and liabilities were deconsolidated from our financial statements as of February 10, 2012. We recognized a gain of $146.4 million on the deconsolidation of CT Legacy Asset, which was primarily the reversal of charges to GAAP equity resulting from losses previously recorded in excess of our economic interests in securitization vehicles which were consolidated by CT Legacy Asset.

As of September 30, 2012, our consolidated balance sheet includes (i) restricted cash of $16.1 million at CT Legacy REIT, and (ii) a $100.1 million investment in CT Legacy Asset, a 100% owned subsidiary of CT Legacy REIT. Prior to February 10, 2012, CT Legacy Asset was consolidated and therefore our consolidated balance sheet included its loans receivables, securities held-to-maturity, other assets, debt obligations and other liabilities.

The liabilities of CT Legacy Asset are all non-recourse to CT Legacy REIT and us. Neither we, nor CT Legacy REIT is obligated to provide, nor have we or CT Legacy REIT provided, any financial support to CT Legacy Asset.

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. The following disclosures relate specifically to the direct assets and liabilities of CT Legacy REIT, as separately stated on our consolidated balance sheets.

A. Securities Held-to-Maturity – CT Legacy REIT

CT Legacy REIT’s securities portfolio consists of CMBS, CDOs, and other securities. Activity relating to these securities for the nine months ended September 30, 2012 was as follows (in thousands):

	CMBS			CDOs & Other			Total Book Value
December 31, 2011		$1,346			$1,256			$2,602
Principal paydowns		(17	)		—			(17	)
Discount/premium amortization & other		18			7			25
Deconsolidation of CT Legacy Asset (1)		(1,347	)		(1,263	)		(2,610	)
September 30, 2012		$—			$—			$—

(1) As further described above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the securities owned by CT Legacy REIT are no longer included in our consolidated financial statements.

The following table details overall statistics for CT Legacy REIT’s securities portfolio as of September 30, 2012 and December 31, 2011:

	September 30, 2012	December 31, 2011
Number of securities	─	6
Number of issues	─	5
Rating (1) (2)	N/A	CCC+
Fixed / Floating (in millions) (3)	$─ / $─	$2 / $1
Coupon (1) (4)	N/A	5.43%
Yield (1) (4)	N/A	3.31%
Life (years) (1) (5)	N/A	4.9

(1)	Represents a weighted average as of December 31, 2011.
(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 0.30% as of December 31, 2011.
(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 CT Legacy REIT’s securities as of December 31, 2011 (in thousands):

	Rating as of December 31, 2011
			CCC and
Vintage		B	Below		Total
2003		$—		$1,256		$1,256
1997		179		—		179
1996		—		1,167		1,167
Total		$179		$2,423		$2,602

Other-than-temporary impairments

The following table summarizes activity related to the other-than-temporary impairments of CT Legacy REIT’s securities during the nine months ended September 30, 2012 (in thousands):

	Gross Other-Than-Temporary Impairments			Credit Related Other-Than-Temporary Impairments			Non-Credit Related Other-Than-Temporary Impairments
December 31, 2011		$26,557			$26,105			$452
Amortization of other-than-temporary impairments		(24	)		(11	)		(13	)
Deconsolidation of CT Legacy Asset (1)		(26,533	)		(26,094	)		(439	)
September 30, 2012		$—			$—			$—

(1) As further described in Note 1 above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the securities owned by CT Legacy REIT, some of which were other-than-temporarily impaired, are no longer included in our consolidated financial statements.

Unrealized losses and fair value of securities

Certain of CT Legacy REIT’s securities were 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 December 31, 2011, and that are not deemed to be other-than-temporarily impaired (in millions):

	Less Than 12 Months				Greater Than 12 Months					Total
			Gross				Gross					Gross
	Estimated		Unrealized		Estimated		Unrealized			Estimated		Unrealized
	Fair Value		Loss		Fair Value		Loss			Fair Value		Loss			Book Value (1)
Floating Rate		$—		$—		$0.2		($1.1	)		$0.2		($1.1	)		$1.3
Fixed Rate		1.2		—		—		—			1.2		—			1.2
Total		$1.2		$—		$0.2		($1.1	)		$1.4		($1.1	)		$2.5

(1) Excludes, as of December 31, 2011, $179,000 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, 2011, two of CT Legacy REIT's securities with an aggregate book value of $2.5 million were carried at a value in excess of their fair value. Fair value for these securities was $1.4 million as of December 31, 2011. In total, as of December 31, 2011, CT Legacy REIT had six investments in securities with an aggregate book value of $2.6 million that have an estimated fair value of $1.6 million, including two investments in CMBS with an estimated fair value of $1.4 million and four investments in CDOs and other securities with an estimated fair value of $158,000.

We determine fair values using a combination of third-party dealer assessments of value and our own internal financial model-based estimations of fair value. See Note 12 for further discussion of fair value.

Our estimation of cash flows expected to be generated by our securities portfolio is based upon an internal review of the underlying loans securing our investments both on an absolute basis and compared to our initial underwriting for each investment. Our efforts are supplemented by third-party research reports, third-party market assessments and our dialogue with market participants. We attribute the difference between book value and estimated fair value to the current market dislocation and a general negative bias against structured financial products such as CMBS and CDOs.

B. Loans Receivable, Net – CT Legacy REIT

Activity relating to CT Legacy REIT’s loans receivable for the nine months ended September 30, 2012 was as follows (in thousands):

	Gross Book  Value			Provision for  Loan Losses			Net Book Value (1)
December 31, 2011		$436,314			($229,800	)		$206,514
Principal paydowns		(254	)		—			(254	)
Discount/premium amortization & other		28			—			28
Deconsolidation of CT Legacy Asset (2)		(436,088	)		229,800			(206,288	)
September 30, 2012		$—			$—			$—

(1)	Includes loans with a total principal balance of $436.0 million as of December 31, 2011.
(2)	As further described above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the loans owned by CT Legacy REIT are no longer included in our consolidated financial statements.

The following table details overall statistics for CT Legacy REIT’s loans receivable portfolio as of September 30, 2012 and December 31, 2011:

	September 30, 2012	December 31, 2011
Number of investments	─	17
Fixed / Floating (in millions) (1)	$─ / $─	$56 / $151
Coupon (2) (3)	N/A	4.59%
Yield (2) (3)	N/A	5.21%
Maturity (years) (2) (4)	N/A	1.4

(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 December 31, 2011.
(3)	Calculations for floating rate loans are based on LIBOR of 0.30% as of December 31, 2011.
(4)	Represents the final maturity of each investment assuming all extension options are executed.

The tables below detail the types of loans in CT Legacy REIT’s portfolio, as well as the property type and geographic distribution of the properties securing these loans, as of September 30, 2012 and December 31, 2011 (in thousands):

	September 30, 2012					December 31, 2011
Asset Type	Book Value		Percentage			Book Value		Percentage
Senior mortgages		$—		―	%		$77,986		37	%
Subordinate interests in     mortgages		—		—			58,078		28
Mezzanine loans		—		—			47,271		23
Other		—		—			23,179		12
Total		$—		―	%		$206,514		100	%
Property Type	Book Value		Percentage			Book Value		Percentage
Office		$—		―	%		$84,519		41	%
Hotel		—		—			75,240		36
Multifamily		—		—			14,212		7
Other		—		—			32,543		16
Total		$—		―	%		$206,514		100	%
Geographic Location	Book Value		Percentage			Book Value		Percentage
Northeast		$—		―	%		$64,040		31	%
Southwest		—		—			40,353		19
West		—		—			38,179		18
Southeast		—		—			20,076		10
Northwest		—		—			9,364		5
International		—		—			34,502		17
Total		$—		―	%		$206,514		100	%

Loan risk ratings

Quarterly, management evaluates CT Legacy REIT’s 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 CT Legacy REIT’s loans receivable based on our internal risk ratings as of September 30, 2012 and December 31, 2011 (dollars in thousands):

		Loans Receivable as of September 30, 2012						Loans Receivable as of December 31, 2011
Risk Rating		Number of Loans		Principal Balance		Net Book Value		Number of Loans		Principal Balance		Net Book Value
	1 - 3		—		$—		$—		5		$91,940		$92,333
	4 - 5		—		—		—		5		64,151		64,127
	6 - 8		—		—		—		7		279,882		50,054
Total			—		$—		$—		17		$435,973		$206,514

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 CT Legacy REIT’s loans receivable by both loan type and our internal risk ratings as of September 30, 2012 and December 31, 2011 (dollars in thousands):

		Senior Mortgage Loans
		as of September 30, 2012						as of December 31, 2011
Risk Rating		Number of Loans		Principal Balance		Net Book Value		Number of Loans		Principal Balance		Net Book Value
	1 - 3		—		$—		$—		1		$27,503		$27,503
	4 - 5		—		—		—		2		21,000		20,976
	6 - 8		—		—		—		2		42,569		29,507
Total			—		$—		$—		5		$91,072		$77,986
		Subordinate Interests in Mortgages
		as of September 30, 2012						as of December 31, 2011
Risk Rating		Number of Loans		Principal Balance		Net Book Value		Number of Loans		Principal Balance		Net Book Value
	1 - 3		—		$—		$—		1		$13,000		$13,000
	4 - 5		—		—		—		1		24,531		24,531
	6 - 8		—		—		—		4		85,024		20,547
Total			—		$—		$—		6		$122,555		$58,078
		Mezzanine & Other Loans
		as of September 30, 2012						as of December 31, 2011
Risk Rating		Number of Loans		Principal Balance		Net Book Value		Number of Loans		Principal Balance		Net Book Value
	1 - 3		—		$—		$—		3		$51,437		$51,830
	4 - 5		—		—		—		2		18,620		18,620
	6 - 8		—		—		—		1		152,289		—
Total			—		$—		$—		6		$222,346		$70,450

 

C. Loans Held-for-Sale, Net – CT Legacy REIT

Activity relating to CT Legacy REIT’s loans held-for-sale for the nine months ended September 30, 2012 was as follows (in thousands):

	Gross Book Value			Valuation Allowance			Net Book Value
December 31, 2011		$32,331			($1,456	)		$30,875
Deconsolidation of CT Legacy Asset (1)		(32,331	)		1,456			(30,875	)
September 30, 2012		$—			$—			$—

(1) As further described above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the loans held-for-sale owned by CT Legacy REIT are no longer included in our consolidated financial statements.

D. Debt Obligations – CT Legacy REIT

As of September 30, 2012, CT Legacy REIT did not have any debt obligations outstanding. As of December 31, 2011, CT Legacy REIT had $113.6 million of total debt obligations outstanding. The balances of each category of debt were as follows (in thousands):

	September 30,				December 31,
	2012				2011
Debt Obligations	Principal Balance (1)		Book Value (1)		Principal Balance		Book Value
Repurchase obligation (JPMorgan)		$—		$—		$58,464		$58,464
Mezzanine loan		—		—		65,275		55,111
Total/Weighted Average		$—		$—		$123,739		$113,575

(1) As further described above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the debt obligations of CT Legacy REIT are no longer included in our consolidated financial statements.

Repurchase Obligations

In conjunction with our restructuring on March 31, 2011, our three legacy repurchase obligations were assumed by wholly-owned subsidiaries of CT Legacy REIT, and the recourse to Capital Trust, Inc. was eliminated. On February 10, 2012, we refinanced CT Legacy REIT’s one remaining repurchase facility and its mezzanine loan with a single, new $124.0 million repurchase facility with JPMorgan. The new facility is an obligation of CT Legacy Asset, matures in December 2014, carries a rate of LIBOR+6.00% as of September 30, 2012, and has paydown hurdles and associated potential rate increases over the term of the facility. As a result of the refinancing, we discontinued consolidation of CT Legacy Asset. See Note 1 and the introduction to Note 6 for further discussion on the deconsolidation of CT Legacy Asset.

Mezzanine Loan

On March 31, 2011, CT Legacy REIT entered into an $83.0 million mezzanine loan with Five Mile Capital that carried an interest rate of 15.0% per annum, of which 7.0% may be deferred, and that had a maturity date of March 31, 2016. The mezzanine loan was not recourse to Capital Trust, Inc. except for certain limited non-recourse, “bad boy” carve outs.

As of December 31, 2011, the mezzanine loan had an outstanding principal balance of $65.3 million (including deferred interest) and a book balance of $55.1 million. As discussed above, on February 10, 2012, we refinanced CT Legacy REIT’s JPMorgan repurchase facility and its mezzanine loan with a single, new $124.0 million repurchase facility with JPMorgan. As a result of the refinancing, we discontinued consolidation of CT Legacy Asset. See Note 1 and the introduction to Note 6 for further discussion on the deconsolidation of CT Legacy Asset.

E. Participations Sold – CT Legacy REIT

Participations sold represent interests in certain loans that we originated and subsequently sold to one of our investment management vehicles or to third-parties. We have historically presented these participations sold as both assets and non-recourse liabilities because these arrangements do not qualify as sales under GAAP. Generally, participations sold are recorded as assets and liabilities in equal amounts on our consolidated balance sheets, and an equivalent amount of interest income and interest expense is recorded on our consolidated statements of operations. However, impaired loan assets must be reduced through the provision for loans losses while the associated non-recourse liability cannot be reduced until the participation has been contractually extinguished. This can result in an imbalance between the loan participations sold asset and liability. We have no economic exposure to these liabilities.

The following table describes CT Legacy REIT’s participations sold assets and liabilities as of December 31, 2011 (in thousands):

	September 30,		December 31,
	2012		2011
Participations sold assets
Gross carrying value		$—		$97,465
Less: Provision for loan losses		—		(97,465	)
Net book value of assets		—		—
Participations sold liabilities
Net book value of liabilities		—		97,465
Net impact to shareholders' equity		$—		($97,465	)

F. Derivative Financial Instruments – CT Legacy REIT

As discussed in Note 1, on February 10, 2012, we refinanced CT Legacy REIT’s mezzanine loan and repurchase facility with a single, new $124.0 million repurchase facility with JPMorgan. As a result of the refinancing, we discontinued consolidation of CT Legacy Asset as of February 10, 2012.

CT Legacy REIT is not party to any interest rate swap agreements. As of December 31, 2011, CT Legacy REIT’s formerly consolidated subsidiary, CT Legacy Asset, was party to five interest rate swaps with a notional amount of $60.8 million and fair value of $8.8 million.

During the period from January 1, 2012 to February 10, 2012, while we consolidated CT Legacy Asset, it made net payments of $262,000 under its interest rate swaps which were recorded as a component of interest expense. During the same period, we recognized $291,000 as a component of interest expense for the change in fair value of these swaps. In addition, as a result of the deconsolidation of CT Legacy Asset, we reclassified $1.8 million from other comprehensive income to interest expense. This amount represents the unamortized balance of prior fair value adjustments to these interest rate swaps from the second quarter of 2011, when we discontinued the designation of these swaps as cash flow hedges.

G. Investment in CT Legacy Asset – CT Legacy REIT

As discussed in Note 1, on February 10, 2012, we refinanced CT Legacy REIT’s mezzanine loan and repurchase facility with a single, new $124.0 million repurchase facility with JPMorgan. The borrower under the new JPMorgan facility, CT Legacy Asset, is a wholly owned subsidiary of CT Legacy REIT and owns all of its assets, other than cash. As a result of the refinancing, we discontinued consolidation of CT Legacy Asset. As a result, its assets and liabilities were deconsolidated from our financial statements as of February 10, 2012.

We have elected the fair value option of accounting for CT Legacy REIT’s investment in CT Legacy Asset, pursuant to which we record this investment at fair value rather than at our historical cost investment amount. Additionally, changes in the fair value of this investment are recognized in our consolidated statement of operations. The fair value of CT Legacy REIT’s investment in CT Legacy Asset was $89.7 million and $100.1 million at February 10, 2012 and September 30, 2012, respectively.

The liabilities of CT Legacy Asset are all non-recourse to us, and we are not obligated to provide, nor have we provided, any financial support to CT Legacy Asset or CT Legacy REIT. We are only exposed to investment losses in CT Legacy Asset via our investment in CT Legacy REIT, which itself holds only two assets, cash of $16.1 million and an investment in CT Legacy Asset of $100.1 million. Net of noncontrolling interests, our investment in CT Legacy REIT is $53.1 million. After giving effect to the $11.1 million which will ultimately be payable under our secured notes and $7.8 million payable under the CT Legacy REIT management incentive awards plan, our maximum exposure to loss from CT Legacy REIT, and therefore CT Legacy Asset, is $34.2 million.

The following table represents summarized financial information for CT Legacy Asset (in thousands):

	For the Period from February 11, 2012
	through September 30, 2012 (1)
Income Statement
Total revenues (2)		$140,741
Total expenses (3)		(12,001	)
Net gain		$128,740
	As of September 30, 2012
Balance Sheet
Total assets		$615,720

(1)	Includes activity and balances of VIEs consolidated by CT Legacy Asset.
(2)	Includes interest income and gain on extinguishment of debt.
(3)	Includes interest expense, general and administrative expenses, provisions and impairments.

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Consolidated Securitization Vehicles

9 Months Ended

Sep. 30, 2012

ConsolidatedSecuritizationVehiclesAbstract

Consolidated Securitization Vehicles

Note 7. Consolidated Securitization Vehicles

As of September 30, 2012, our consolidated balance sheet includes an aggregate $402.2 million of assets and $517.1 million of liabilities related to four consolidated securitization vehicles. 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.

Due to the deconsolidation of CT Legacy Asset on February 10, 2012, as discussed in Note 1, we deconsolidated one CT CDO, CT CDO III, and three other securitization vehicles that are owned by CT Legacy Asset.

CT CDOs

We currently consolidate three 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 three 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 7. 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.

Other Consolidated Securitization Vehicles

As discussed above, we currently consolidate one other securitization vehicle, which is substantially similar to the CT CDOs. This securitization vehicle invests in commercial real estate debt instruments, which investments were not originated or transferred to the entity by us. In addition to our investment in the subordinate classes of the securities issued by this vehicle, we are named special servicer on its collateral assets. As a result of consolidation, our ownership interest in this consolidation vehicle has been eliminated, and our balance sheet reflects both the assets held and debt issued by this vehicle to third-parties. Similarly, our operating results and cash flows include the gross amounts related to the assets and liabilities of the securitization vehicle, as opposed to our net economic interest in this entity. Special servicing fees paid to us on assets owned by this vehicle are eliminated in consolidation.

Our interest in the assets held by this securitization vehicle, which are consolidated on our balance sheet, is restricted by the structural provisions of this entity, and a recovery of our investment in the vehicle will be limited by its distribution provisions. The liabilities of the securitization vehicle, which are also consolidated on our balance sheet, are non-recourse to us, and can generally only be satisfied from its collateral assets.

We are not obligated to provide, nor have we provided, any financial support to this consolidated securitization vehicle. In addition, this investment has been made through one of our CT CDOs, which limits our exposure to loss as discussed above. We have recognized losses on the collateral assets of this CT CDO in excess of our investment therein, resulting in a zero net exposure to loss as of September 30, 2012.

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. 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 nine months ended September 30, 2012 was as follows (in thousands):

	CMBS			CDOs & Other			Total Book Value (1)
December 31, 2011		$357,037			$1,935			$358,972
Principal paydowns		(38,393	)		(1,935	)		(40,328	)
Discount/premium amortization & other (2)		(259	)		202			(57	)
Other-than-temporary impairments:
Recognized in earnings		(160	)		—			(160	)
Recognized in accumulated other comprehensive income		160			—			160
Deconsolidation of CT Legacy Asset (3)		(193,737	)		29,998			(163,739	)
September 30, 2012		$124,648			$30,200			$154,848

(1)	Includes securities with a total face value of $236.4 million and $490.9 million as of September 30, 2012 and December 31, 2011, 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.
(3)	As further described above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the securities owned by its consolidated securitization vehicle are no longer included in our consolidated financial statements. Also, certain securities which are owned by our consolidated securitization vehicles, that had previously been eliminated in consolidation, are now included in our consolidated financial statements. See Note 6 for additional discussion on CT Legacy Asset.

As of both September 30, 2012 and December 31, 2011, 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 September 30, 2012 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		$136,933			$30,200		$167,133
Mark-to-market adjustments on securities     previously classified as available-for-sale		6			—		6
Other-than-temporary impairments recognized in    accumulated other comprehensive income		(12,291	)		—		(12,291	)
Total book value as of September 30, 2012		$124,648			$30,200		$154,848

The following table details overall statistics for our consolidated securitization vehicles’ securities portfolio as of September 30, 2012 and December 31, 2011:

	September 30, 2012	December 31, 2011
Number of securities	33	52
Number of issues	23	36
Rating (1) (2)	B+	BB+
Fixed / Floating (in millions) (3)	$154 / $1	$358 / $1
Coupon (1) (4)	6.15%	6.49%
Yield (1) (4)	6.32%	7.41%
Life (years) (1) (5)	3.1	2.5

(1)	Represents a weighted average as of September 30, 2012 and December 31, 2011, 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 0.21% and 0.30% as of September 30, 2012 and December 31, 2011, 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 September 30, 2012 (in thousands):

	Rating as of September 30, 2012
Vintage	AAA		AA		A	BBB		BB		B	CCC and Below		Total
2006		$—		$—	$—		$—		$—	$—		$15,130		$15,130
2005		—		—	—		—		—	—		36,672		36,672
2004		—		—	—		24,753		—	—		—		24,753
2003		—		—	—		3,005		1,977	—		—		4,982
2002		—		—	—		—		6,729	—		2,384		9,113
2001		—		—	—		—		—	5,426		2,557		7,983
2000		2,894		—	—		—		19,056	—		3,997		25,947
1999		—		—	4,000		—		15,023	—		—		19,023
1998		—		2,160	7,397		—		151	—		1,537		11,245
Total		$2,894		$2,160	$11,397		$27,758		$42,936	$5,426		$62,277		$154,848

The table below details the ratings and vintage distribution of our consolidated securitization vehicles’securities as of December 31, 2011 (in thousands):

	Rating as of December 31, 2011
											CCC and
Vintage	AAA		AA		A	BBB		BB		B	Below		Total
2006		$—		$—	$—		$—		$—	$—		$14,884		$14,884
2005		—		—	—		—		—	—		7,060		7,060
2004		—		24,780	1,935		—		—	—		—		26,715
2003		9,908		—	—		3,011		1,966	—		—		14,885
2002		—		—	—		—		6,712	—		2,283		8,995
2001		—		—	—		—		—	5,426		1,730		7,156
2000		2,891		—	—		—		19,935	—		3,985		26,811
1999		—		—	11,233		1,414		17,380	—		—		30,027
1998		45,956		46,315	37,580		43,607		11,901	—		5,000		190,359
1997		4,434		—	16,159		—		5,223	2,762		3,502		32,080
Total		$63,189		$71,095	$66,907		$48,032		$63,117	$8,188		$38,444		$358,972

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 nine months ended September 30, 2012, we determined that $160,000 of impairments previously recorded in other comprehensive income should be recognized as credit losses due to a decrease in cash flow expectation for one 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 these 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 nine months ended September 30, 2012 (in thousands):

	Gross Other-Than-Temporary Impairments			Credit Related Other-Than-Temporary Impairments			Non-Credit Related Other-Than-Temporary Impairments
December 31, 2011		$130,360			$114,223			$16,137
Additions due to change in expected      cash flows		—			160			(160	)
Amortization of other-than-temporary      impairments		(373	)		(128	)		(245	)
Reductions due to realized losses		(26,263	)		(26,263	)		—
Deconsolidation of CT Legacy Asset (1)		(25,567	)		(22,126	)		(3,441	)
September 30, 2012		$78,157			$65,866			$12,291

(1) As further described in Note 1, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the securities owned by its consolidated securitization vehicles, some of which were other-than-temporarily impaired, are no longer included in our consolidated financial statements.

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 September 30, 2012 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		18.6		(11.6	)		57.6		(5.8	)		76.2		(17.4	)		93.6
Total		$18.6		($11.6	)		$57.6		($5.8	)		$76.2		($17.4	)		$93.6

(1) Excludes, as of September 30, 2012, $61.2 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 September 30, 2012, 16 of our consolidated securitization vehicles' securities with an aggregate book value of $93.6 million were carried at values in excess of their fair values. Fair value for these securities was $76.2 million as of September 30, 2012. In total, as of September 30, 2012, our consolidated securitization vehicles had 33 investments in securities with an aggregate book value of $154.8 million that have an estimated fair value of $144.7 million, including 29 investments in CMBS with an estimated fair value of $126.1 million and four investments in CDOs and other securities with an estimated fair value of $18.6 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, 2011 and that are not deemed to be other-than-temporarily impaired (in millions):

	Less Than 12 Months					Greater Than 12 Months					Total
			Gross					Gross					Gross
	Estimated		Unrealized			Estimated		Unrealized			Estimated		Unrealized
	Fair Value		Loss			Fair Value		Loss			Fair Value		Loss			Book Value (1)
Floating Rate		$—		$—			$—		$—			$—		$—			$—
Fixed Rate		154.1		(4.7	)		130.1		(11.1	)		284.2		(15.8	)		300.0
Total		$154.1		($4.7	)		$130.1		($11.1	)		$284.2		($15.8	)		$300.0

(1) Excludes, as of December 31, 2011, $59.0 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, 2011, 35 of our consolidated securitization vehicles' securities with an aggregate book value of $300.0 million were carried at values in excess of their fair values. Fair value for these securities was $284.2 million as of December 31, 2011. In total, as of December 31, 2011, our consolidated securitization vehicles had 52 investments in securities with an aggregate book value of $359.0 million that have an estimated fair value of $350.2 million, including 51 investments in CMBS with an estimated fair value of $348.3 million and one investment in CDOs and other securities with an estimated fair value of $1.9 million.

We determine fair values using a combination of third-party dealer assessments of value and our own internal financial model-based estimations of fair value. See Note 12 for further discussion of fair value. We regularly examine our consolidated securitization vehicles’ 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 consolidated securitization vehicles’ securities, against which we have recognized other-than-temporary-impairments. See Note 6A for additional discussion of fair value estimations.

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 for 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. The notional amount of the subordinate debt and equity interests we retained in our CT CDOs is $162.0 million. After giving effect to certain transfers of these interests, provisions for loan losses and other-than-temporary impairments recorded as of September 30, 2012, we have no remaining net exposure to loss from these entities.

B. Loans Receivable, Net – Consolidated Securitization Vehicles

Activity relating to our consolidated securitization vehicles’ loans receivable for the nine months ended September 30, 2012 was as follows (in thousands):

	Gross Book Value			Provision for  Loan Losses			Net Book Value (1)
December 31, 2011		$814,572			($201,974	)		$612,598
Satisfactions (2)		(62,950	)		—			(62,950	)
Principal paydowns		(1,816	)		—			(1,816	)
Discount/premium amortization & other		156			—			156
Recovery of provision for loan losses		—			2,819			2,819
Realized loan losses		(22,001	)		22,001			—
Deconsolidation of CT Legacy Asset (3)		(435,744	)		99,394			(336,350	)
September 30, 2012		$292,217			($77,760	)		$214,457

(1)	Includes loans with a total principal balance of $292.8 million and $815.7 million as of September 30, 2012 and December 31, 2011, respectively.
(2)	Includes final maturities and full repayments.
(3)	As further described in Note 1, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the loans owned by its consolidated securitization vehicles are no longer included in our consolidated financial statements.

The following table details overall statistics for our consolidated securitization vehicles’ loans receivable portfolio as of September 30, 2012 and December 31, 2011:

	September 30, 2012	December 31, 2011
Number of investments	14	71
Fixed / Floating (in millions) (1)	$44 / $170	$280 / $333
Coupon (2) (3)	4.34%	5.11%
Yield (2) (3)	4.63%	5.72%
Maturity (years) (2) (4)	3.0	3.6

(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 September 30, 2012 and December 31, 2011, respectively.
(3)	Calculations for floating rate loans are based on LIBOR of 0.21% and 0.30% as of September 30, 2012 and December 31, 2011, 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 September 30, 2012 and December 31, 2011 (in thousands):

	September 30, 2012					December 31, 2011
Asset Type	Book Value		Percentage			Book Value			Percentage
Subordinate interests in     mortgages		$129,509		60	%		$225,773			36	%
Senior mortgages		65,000		30			241,323			39
Mezzanine loans		19,948		10			152,934			25
Total		$214,457		100	%		$620,030			100	%
Property Type	Book Value		Percentage			Book Value			Percentage
Office		$185,006		86	%		$317,940			51	%
Hotel		27,322		13			174,419			28
Retail		—		—			72,701			12
Healthcare		—		—			18,837			3
Other		2,129		1			36,133			6
Total		$214,457		100	%		$620,030			100	%
Geographic Location	Book Value		Percentage			Book Value			Percentage
Northeast		$98,757		46	%		$199,361			32	%
West		78,700		37			152,774			25
Southeast		21,707		10			124,456			20
Southwest		15,293		7			57,046			9
Midwest		—		—			24,957			4
Diversified		—		—			61,436			10
Total		$214,457		100	%		$620,030			100	%
Unallocated loan loss provision (1)		—					(7,432	)
Net book value		$214,457					$612,598

(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, 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 September 30, 2012 and December 31, 2011 (dollars in thousands):

		Loans Receivable as of September 30, 2012						Loans Receivable as of December 31, 2011
Risk Rating (1)		Number of Loans		Principal Balance		Net Book Value		Number of Loans		Principal Balance		Net Book Value
	1 - 3		5		$118,333		$118,006		22		$416,032		$415,661
	4 - 5		2		78,700		78,622		3		44,057		43,945
	6 - 8		7		95,795		17,829		17		271,988		76,784
	N/A		—		—		—		29		83,639		83,640
Total			14		$292,828		$214,457		71		$815,716		$620,030
Unallocated loan loss provision:							—						(7,432	)
Net book value							$214,457						$612,598

(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 information.

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 September 30, 2012 and December 31, 2011 (dollars in thousands):

		Senior Mortgage Loans
		as of September 30, 2012						as of December 31, 2011
Risk Rating (1)		Number of Loans		Principal Balance		Net Book Value		Number of Loans		Principal Balance		Net Book Value
	1 - 3		—		$—		$—		10		$117,452		$117,452
	4 - 5		1		65,000		65,000		1		12,551		12,551
	6 - 8		—		—		—		4		43,988		27,680
	N/A		—		—		—		29		83,639		83,640
Total			1		$65,000		$65,000		44		$257,630		$241,323

(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 September 30, 2012						as of December 31, 2011
Risk Rating (1)		Number of Loans		Principal Balance		Net Book Value		Number of Loans		Principal Balance		Net Book Value
	1 - 3		4		$98,295		$98,058		8		$175,560		$175,314
	4 - 5		1		13,700		13,622		2		31,506		31,394
	6 - 8		7		95,795		17,829		9		122,306		19,065
	N/A		—		—		—		—		—		—
Total			12		$207,790		$129,509		19		$329,372		$225,773

(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.

		Mezzanine & Other Loans
		as of September 30, 2012						as of December 31, 2011
Risk Rating (1)		Number of Loans		Principal Balance		Net Book Value		Number of Loans		Principal Balance		Net Book Value
	1 - 3		1		$20,038		$19,948		4		$123,020		$122,895
	4 - 5		—		—		—		—		—		—
	6 - 8		—		—		—		4		105,694		30,039
	N/A		—		—		—		—		—		—
Total			1		$20,038		$19,948		8		$228,714		$152,934

(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.

Loan impairments

The following table describes our consolidated securitization vehicles’ impaired loans as of September 30, 2012, including impaired loans that are current in their interest payments and those that are delinquent on contractual payments (dollars in thousands):

	September 30, 2012
Impaired Loans	No. of Loans		Gross Book Value		Provision for Loan Loss			Net Book Value
Performing loans		1		$15,062		($15,062	)		$—
Non-performing loans		5		66,828		(62,698	)		4,130
Total impaired loans		6		$81,890		($77,760	)		$4,130

The following table details the allocation of our consolidated securitization vehicles’ provision for loan losses as of September 30, 2012 (in thousands):

	September 30, 2012
Impaired Loans	Principal Balance		Provision for Loan Loss		Loss Severity
Subordinate interests in mortgages		$82,094		$77,760		95	%
Total/Weighted Average		$82,094		$77,760		95	%

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 September 30, 2012, our consolidated securitization vehicles had two loans with a net book value of $52.7 million which were in maturity default but had no provision recorded. We expect to collect all principal and interest due under this loan upon their 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 nine months ended September 30, 2012 (in thousands):

Income on Impaired Loans for the Nine Months ended September 30, 2012
Asset Type	Average Net Book Value		Income Recorded (1)
Senior Mortgage Loans		$4,232		$168
Subordinate Interests in Mortgages		5,097		404
Mezzanine & Other Loans		5,135		210
Total		$14,464		$782

(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 September 30, 2012.

The following table details our consolidated securitization vehicles’ loans receivable which are on nonaccrual status as of September 30, 2012 (in thousands):

Nonaccrual Loans Receivable as of September 30, 2012
Asset Type	Principal Balance		Net Book Value
Subordinate Interests in Mortgages		$82,094		$4,130
Total		$82,094		$4,130

Loan modifications

During the nine months ended September 30, 2012, there was one modification of a loan in a consolidated securitization vehicle that was considered a troubled debt restructuring, as defined under GAAP. A troubled debt restructuring is generally any modification of a loan to a borrower that is experiencing financial difficulties, where a lender agrees to terms that are more favorable to the borrower than is otherwise available in the current market. This loan modification included a six-month extension of a $6.6 million subordinate mortgage loan with no interest rate increase. This loan has been individually assessed for impairment, and no impairment beyond the existing $4.6 million impairment was determined to be necessary.

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

Activity relating to our consolidated securitization vehicles’ real estate held-for-sale for the nine months ended September 30, 2012 was as follows (in thousands):

	Gross Book Value			Other-Than-Temporary Impairment			Net Book Value
December 31, 2011		$24,960			($14,618	)		$10,342
Deconsolidation of CT Legacy Asset (1)		(24,960	)		14,618			(10,342	)
September 30, 2012		$—			$—			$—

(1) As further described in Note 1 above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the real estate held-for-sale owned by its consolidated securitization vehicles is no longer included in our consolidated financial statements.

D. Debt Obligations – Consolidated Securitization Vehicles

As of September 30, 2012 and December 31, 2011, our consolidated securitization vehicles had $497.4 million and $1.2 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):

	September 30, 2012				December 31, 2011		September 30, 2012
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		$91,044		$91,044		$121,409		1.26	%		1.28	%		July 2039
CT CDO II		156,900		156,900		199,751		0.92	%		1.21	%		March 2050
CT CDO III		—		—		199,553		N/A			N/A				N/A
CT CDO IV (3)		198,927		198,927		221,540		1.07	%		1.23	%		October 2043
Total CT CDOs		446,871		446,871		742,253		1.06	%		1.23	%		February 2045
Other securitization vehicles
GMACC 1997-C1		—		—		83,672		N/A			N/A				N/A
GECMC 00-1 H		—		—		24,847		N/A			N/A				N/A
GSMS 2006-FL8A		50,552		50,552		50,552		1.06	%		1.06	%		June 2020
MSC 2007-XLCA		—		—		310,083		N/A			N/A				N/A
JPMCC 2004-FL1A		—		—		—		N/A			N/A				N/A
Total other securitization vehicles		50,552		50,552		469,154		1.06	%		1.06	%		June 2020
Total/Weighted Average		$497,423		$497,423		$1,211,407		1.06	%		1.21	%	(4)	August 2042

(1)	Represents a weighted average for each respective facility, assuming LIBOR of 0.21% at September 30, 2012 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 generally expected to occur prior to the maturity date above.
(3)	Comprised, at September 30, 2012, of $184.9 million of floating rate notes sold and $14.0 million of fixed rate notes sold.
(4)	Including the impact of interest rate hedges with an aggregate notional balance of $273.7 million as of September 30, 2012, the effective all-in cost of our consolidated securitization vehicles’ debt obligations would be 4.09% per annum.

As discussed above in the introduction to this Note 7, 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.

CT CDOs

As of September 30, 2012, our consolidated CT CDOs, CT CDO I, CT CDO II, and CT CDO IV, included three separate issuances with a total face value of $446.9 million. As of September 30, 2012, loans receivable and securities with a book balance of $149.5 million and $154.8 million, respectively, were financed by our three consolidated CT CDOs. As of December 31, 2011, loans receivable and securities with a book balance of $208.3 million and $359.0 million, respectively, were financed by our four consolidated CT CDOs, one of which was deconsolidated as of February 10, 2012.

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 three of our consolidated 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 three of our consolidated CT CDOs. Other than collateral management fees, we currently do not receive any cash payments from these consolidated CDOs.

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 consolidated CT CDOs has and will continue to increase.

In March 2012, the trustee for CT CDO II informed us of an event of default resulting from a failure of CT CDO II to pay the full amount of interest due to its Class B Notes, which failure resulted from a shortage of funds available to the CDO for such payments. We are not obligated to, nor have we, provided any financial support to CT CDO II to rectify this event of default.

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 $722.5 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 consolidate one other securitization vehicle which was not sponsored or issued by us. The debt obligations of this entity 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 the entity’s collateral pool, or will be discharged when losses are realized.

As of September 30, 2012, loans receivable with an aggregate book value of $65.0 million serve as collateral for the securities issued by this other consolidated securitization vehicle. As of December 31, 2011, loans receivable with an aggregate book value of $404.3 million serve as collateral for the securities issued by these five other consolidated securitization vehicles, three of which was deconsolidated as of February 10, 2012.

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 September 30, 2012 and December 31, 2011 (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	September 30, 2012 Notional Amount		Interest Rate (1)			Maturity		September 30, 2012 Fair Value			December 31, 2011 Fair Value
Swiss RE Financial		$223,802		5.10	%		2015		($15,631	)		($20,540	)
Bank of America		34,270		4.58	%		2014		(1,499	)		(2,368	)
Bank of America		10,535		5.05	%		2016		(1,387	)		(1,461	)
Bank of America		5,104		4.12	%		2016		(572	)		(573	)
Total/Weighted Average		$273,711		5.01	%		2015		($19,089	)		($24,942	)

(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 September 30, 2012 and December 31, 2011, 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 nine months ended September 30, 2012 and 2011 (in thousands):

	Amount of net loss recognized					Amount of loss reclassified from OCI
	in OCI for the nine months ended (1)					to income for the nine months ended (2)
Hedge	September 30, 2012			September 30, 2011		September 30, 2012			September 30, 2011
Interest rate swaps		($5,853	)		$1,980		($10,182	)		($11,512	)

(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 $9.8 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 September 30, 2012, our consolidated securitization vehicles have not posted any assets as collateral under derivative agreements.

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General and Administrative Expenses

9 Months Ended

Sep. 30, 2012

General And Administrative Expenses

General and Administrative Expenses

Note 9. General and Administrative Expenses

General and administrative expenses for the nine months ended September 30, 2012 and 2011 consisted of the following (in thousands):

	Nine Months Ended September 30,
General and Administrative Expenses	2012		2011
Personnel costs		$7,642		$7,162
Restructuring awards		—		2,750
Professional services		2,468		3,914
Pending sale of investment management platform		2,135		—
Operating and other costs		2,267		1,617
Subtotal		14,512		15,443
Non-cash personnel costs
Management incentive awards plan - CT Legacy REIT		944		3,395
Employee stock-based compensation		675		411
Subtotal		1,619		3,806
Expenses of consolidated securitization vehicles		62		619
Total		$16,193		$19,868

Management Incentive Awards Plan

Upon completion of our March 2011 restructuring, we granted senior level employees incentive awards issued under our long term incentive plan that participate in amounts earned from our retained equity interest in CT Legacy REIT. The awards provide payments to an employee pool of an amount equal to as much as 6.75% of the dividends paid (subject to certain caps) to the common equity holders of CT Legacy REIT’s obligations, when and if distributed to us as dividends. See Note 11 for further discussion.

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Consolidated Securitization Vehicles (Details 11) (Securitization Vehicles, USD $) In Thousands, unless otherwise specified	Sep. 30, 2012
Impaired Loans
Principal Balance	$ 82,094
Provision for Loan Loss	77,760
Loss Severity	95.00%
Subordinated interests in mortgages
Principal Balance	82,094
Provision for Loan Loss	$ 77,760
Loss Severity	95.00%

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Supplemental Disclosures for Consolidated Statements of Cash Flows (Narrative) (Details) (USD $)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Supplemental Disclosures For Consolidated Statements Of Cash Flows Narrative Details
Interest paid, net	$ 21,900,000	$ 85,200,000
Income taxes paid, net	$ 788,000	$ 2,400,000

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Consolidated Securitization Vehicles (Details 13) (Securitization Vehicles, Non-performing loans, USD $) In Thousands, unless otherwise specified	Sep. 30, 2012
Principal Balance	$ 82,094
Net Book Value	4,130
Subordinated interests in mortgages
Principal Balance	82,094
Net Book Value	$ 4,130

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Consolidated Securitization Vehicles (Details 10) (Securitization Vehicles, USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Number of Loans	14	71
Performing loans
Gross Book Value	15,062
Provision for Loan Loss	(15,062)
Net Book Value
Number of Loans	1
Non-performing loans
Gross Book Value	66,828
Provision for Loan Loss	(62,698)
Net Book Value	4,130
Number of Loans	5
Impaired Loans
Gross Book Value	81,890
Provision for Loan Loss	(77,760)
Net Book Value	4,130
Number of Loans	6

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Summary of Significant Accounting Policies (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Summary Of Significant Accounting Policies Narrative Details
Probability of default or principal loss - low			15.00%
Probability of default or principal loss - medium			33.00%
Probability of default or principal loss - high			67.00%
Total Comprehensive Income	$ 15,205	$ 9,524	$ 164,800	$ 279,826
Outstanding principal balances of loans less than	$ 10,000		$ 10,000

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CT Legacy REIT (Details 12) (CT Legacy REIT, USD $) In Thousands, unless otherwise specified	8 Months Ended
	Sep. 30, 2012
CT Legacy REIT
Income Statement
Total revenues	$ 140,741	[1],[2]
Total expenses	(12,001)	[1],[3]
Net gain	128,740
Total assets	$ 615,720

[1] Includes activity and balances of VIEs consolidated by CT Legacy Asset.

[2] Includes interest income and gain on extinguishment of debt.

[3] Includes interest expense, general and administrative expenses, provisions and impairments.

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Transactions with Related Parties

9 Months Ended

Sep. 30, 2012

Transactions With Related Parties

Transactions with Related Parties

Note 14. Transactions with Related Parties

We earn base management and incentive fees in our capacity as investment manager for multiple vehicles which we have sponsored. Due to the nature of our relationship with these vehicles, all management fees are considered revenue from related parties under GAAP. In addition, we have investments which are senior, junior, or pari passu to investments in our investment management vehicles, which could produce conflicts of interest between our direct portfolio and those of our managed accounts.

On November 9, 2006, we commenced our CT High Grade MezzanineSM, or CT High Grade I, investment management initiative and entered into three separate account agreements with affiliates of W. R. Berkley Corporation, or WRBC, with an aggregate commitment of $250.0 million, which was subsequently increased to $350.0 million in July 2007. Subsequent to the expiration of the CT High Grade I investment period, we continued to invest on behalf of WRBC under the CT High Grade I platform on a non-discretionary basis, bringing CT High Grade I’s total investments to $594.0 million as of September 30, 2012. Pursuant to these agreements, we invested capital on behalf of WRBC in commercial real estate mortgages, mezzanine loans and participations therein. The separate accounts are entirely funded with committed capital from WRBC and are managed by a subsidiary of CTIMCO. CTIMCO earns a management fee equal to 0.25% per annum on invested assets.

WRBC beneficially owned common stock representing approximately 15.4% of our outstanding common stock and stock units as of November 9, 2012, and a member of our board of directors is an employee of WRBC. In addition, wholly-owned subsidiaries of WRBC are investors in certain private funds under Five Mile Capital’s management. As discussed in Notes 1 and 7, Five Mile Capital provided an $83.0 million mezzanine loan to CT Legacy REIT in connection with our March 2011 restructuring, and holds a significant interest in the common equity of CT Legacy REIT. In February 2012 we refinanced CT Legacy REIT’s Five Mile Capital mezzanine loan and repurchase facility with a single, new $124.0 million repurchase facility with JPMorgan.

In July 2008, CTOPI, a private equity fund that we manage, held its final closing completing its capital raise with $539.9 million total equity commitments. EGI-Private Equity II, L.L.C., an affiliate under common control of the chairman of our board of directors, owns a 3.7% limited partner interest in CTOPI. During the nine months ended September 30, 2012, we recorded $2.0 million of fees from CTOPI, $80,000 of which were attributable to EGI-Private Equity II, L.L.C.

CTOPI has purchased $75.5 million face value of our CT CDO notes in the open market for $40.4 million. These purchases were from third-parties, and were not sold by us.

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CT Legacy REIT (Tables)

9 Months Ended

Sep. 30, 2012

Ct Legacy Reit Tables

CT Legacy REIT's securities portfolio activity

Activity relating to these securities for the nine months ended September 30, 2012 was as follows (in thousands):

	CMBS			CDOs & Other			Total Book Value
December 31, 2011		$1,346			$1,256			$2,602
Principal paydowns		(17	)		—			(17	)
Discount/premium amortization & other		18			7			25
Deconsolidation of CT Legacy Asset (1)		(1,347	)		(1,263	)		(2,610	)
September 30, 2012		$—			$—			$—

(1) As further described above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the securities owned by CT Legacy REIT are no longer included in our consolidated financial statements.

Overall statistics for CT Legacy REIT's securities portfolio

The following table details overall statistics for CT Legacy REIT’s securities portfolio as of September 30, 2012 and December 31, 2011:

	September 30, 2012	December 31, 2011
Number of securities	─	6
Number of issues	─	5
Rating (1) (2)	N/A	CCC+
Fixed / Floating (in millions) (3)	$─ / $─	$2 / $1
Coupon (1) (4)	N/A	5.43%
Yield (1) (4)	N/A	3.31%
Life (years) (1) (5)	N/A	4.9

(1)	Represents a weighted average as of December 31, 2011.
(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 0.30% as of December 31, 2011.
(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.

Ratings and vintage distribution of CT Legacy REIT's securities

The table below details the ratings and vintage distribution of CT Legacy REIT’s securities as of December 31, 2011 (in thousands):

	Rating as of December 31, 2011
			CCC and
Vintage		B	Below		Total
2003		$—		$1,256		$1,256
1997		179		—		179
1996		—		1,167		1,167
Total		$179		$2,423		$2,602

Other-than-temporary impairments of CT Legacy REIT

The following table summarizes activity related to the other-than-temporary impairments of CT Legacy REIT’s securities during the nine months ended September 30, 2012 (in thousands):

	Gross Other-Than-Temporary Impairments			Credit Related Other-Than-Temporary Impairments			Non-Credit Related Other-Than-Temporary Impairments
December 31, 2011		$26,557			$26,105			$452
Amortization of other-than-temporary impairments		(24	)		(11	)		(13	)
Deconsolidation of CT Legacy Asset (1)		(26,533	)		(26,094	)		(439	)
September 30, 2012		$—			$—			$—

(1) As further described in Note 1 above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the securities owned by CT Legacy REIT, some of which were other-than-temporarily impaired, are no longer included in our consolidated financial statements.

Unrealized losses and fair value of securities

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 December 31, 2011, and that are not deemed to be other-than-temporarily impaired (in millions):

	Less Than 12 Months				Greater Than 12 Months					Total
			Gross				Gross					Gross
	Estimated		Unrealized		Estimated		Unrealized			Estimated		Unrealized
	Fair Value		Loss		Fair Value		Loss			Fair Value		Loss			Book Value (1)
Floating Rate		$—		$—		$0.2		($1.1	)		$0.2		($1.1	)		$1.3
Fixed Rate		1.2		—		—		—			1.2		—			1.2
Total		$1.2		$—		$0.2		($1.1	)		$1.4		($1.1	)		$2.5

(1) Excludes, as of December 31, 2011, $179,000 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.

Activity relating to CT Legacy REIT's loans receivable

Activity relating to CT Legacy REIT’s loans receivable for the nine months ended September 30, 2012 was as follows (in thousands):

	Gross Book  Value			Provision for  Loan Losses			Net Book Value (1)
December 31, 2011		$436,314			($229,800	)		$206,514
Principal paydowns		(254	)		—			(254	)
Discount/premium amortization & other		28			—			28
Deconsolidation of CT Legacy Asset (2)		(436,088	)		229,800			(206,288	)
September 30, 2012		$—			$—			$—

(1)	Includes loans with a total principal balance of $436.0 million as of December 31, 2011.
(2)	As further described above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the loans owned by CT Legacy REIT are no longer included in our consolidated financial statements.

Overall Statics for CT Legacy REIT's loans receivable portfolio

The following table details overall statistics for CT Legacy REIT’s loans receivable portfolio as of September 30, 2012 and December 31, 2011:

	September 30, 2012	December 31, 2011
Number of investments	─	17
Fixed / Floating (in millions) (1)	$─ / $─	$56 / $151
Coupon (2) (3)	N/A	4.59%
Yield (2) (3)	N/A	5.21%
Maturity (years) (2) (4)	N/A	1.4

(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 December 31, 2011.
(3)	Calculations for floating rate loans are based on LIBOR of 0.30% as of December 31, 2011.
(4)	Represents the final maturity of each investment assuming all extension options are executed.

Types of loans in CT Legacy REIT's portfolio, as well as the property type and geographic distribution of the properties securing these loans

The tables below detail the types of loans in CT Legacy REIT’s portfolio, as well as the property type and geographic distribution of the properties securing these loans, as of September 30, 2012 and December 31, 2011 (in thousands):

	September 30, 2012					December 31, 2011
Asset Type	Book Value		Percentage			Book Value		Percentage
Senior mortgages		$—		―	%		$77,986		37	%
Subordinate interests in     mortgages		—		—			58,078		28
Mezzanine loans		—		—			47,271		23
Other		—		—			23,179		12
Total		$—		―	%		$206,514		100	%
Property Type	Book Value		Percentage			Book Value		Percentage
Office		$—		―	%		$84,519		41	%
Hotel		—		—			75,240		36
Multifamily		—		—			14,212		7
Other		—		—			32,543		16
Total		$—		―	%		$206,514		100	%
Geographic Location	Book Value		Percentage			Book Value		Percentage
Northeast		$—		―	%		$64,040		31	%
Southwest		—		—			40,353		19
West		—		—			38,179		18
Southeast		—		—			20,076		10
Northwest		—		—			9,364		5
International		—		—			34,502		17
Total		$—		―	%		$206,514		100	%

Loans receivable based on our internal risk ratings, CT Legacy REIT

The following table allocates the net book value and principal balance of CT Legacy REIT’s loans receivable based on our internal risk ratings as of September 30, 2012 and December 31, 2011 (dollars in thousands):

		Loans Receivable as of September 30, 2012						Loans Receivable as of December 31, 2011
Risk Rating		Number of Loans		Principal Balance		Net Book Value		Number of Loans		Principal Balance		Net Book Value
	1 - 3		—		$—		$—		5		$91,940		$92,333
	4 - 5		—		—		—		5		64,151		64,127
	6 - 8		—		—		—		7		279,882		50,054
Total			—		$—		$—		17		$435,973		$206,514

Loans receivable by both loan type and risk ratings

The following tables further allocate CT Legacy REIT’s loans receivable by both loan type and our internal risk ratings as of September 30, 2012 and December 31, 2011 (dollars in thousands):

		Senior Mortgage Loans
		as of September 30, 2012						as of December 31, 2011
Risk Rating		Number of Loans		Principal Balance		Net Book Value		Number of Loans		Principal Balance		Net Book Value
	1 - 3		—		$—		$—		1		$27,503		$27,503
	4 - 5		—		—		—		2		21,000		20,976
	6 - 8		—		—		—		2		42,569		29,507
Total			—		$—		$—		5		$91,072		$77,986
		Subordinate Interests in Mortgages
		as of September 30, 2012						as of December 31, 2011
Risk Rating		Number of Loans		Principal Balance		Net Book Value		Number of Loans		Principal Balance		Net Book Value
	1 - 3		—		$—		$—		1		$13,000		$13,000
	4 - 5		—		—		—		1		24,531		24,531
	6 - 8		—		—		—		4		85,024		20,547
Total			—		$—		$—		6		$122,555		$58,078
		Mezzanine & Other Loans
		as of September 30, 2012						as of December 31, 2011
Risk Rating		Number of Loans		Principal Balance		Net Book Value		Number of Loans		Principal Balance		Net Book Value
	1 - 3		—		$—		$—		3		$51,437		$51,830
	4 - 5		—		—		—		2		18,620		18,620
	6 - 8		—		—		—		1		152,289		—
Total			—		$—		$—		6		$222,346		$70,450

 

Activity of loans held-for-sale - Ct Legacy REIT

Activity relating to CT Legacy REIT’s loans held-for-sale for the nine months ended September 30, 2012 was as follows (in thousands):

	Gross Book Value			Valuation Allowance			Net Book Value
December 31, 2011		$32,331			($1,456	)		$30,875
Deconsolidation of CT Legacy Asset (1)		(32,331	)		1,456			(30,875	)
September 30, 2012		$—			$—			$—

(1) As further described above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the loans held-for-sale owned by CT Legacy REIT are no longer included in our consolidated financial statements.

Debt obligations outstanding; balances of each category of debt

The balances of each category of debt were as follows (in thousands):

	September 30,				December 31,
	2012				2011
Debt Obligations	Principal Balance (1)		Book Value (1)		Principal Balance		Book Value
Repurchase obligation (JPMorgan)		$—		$—		$58,464		$58,464
Mezzanine loan		—		—		65,275		55,111
Total/Weighted Average		$—		$—		$123,739		$113,575

(1) As further described above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the debt obligations of CT Legacy REIT are no longer included in our consolidated financial statements.

Participations sold assets and liabilities of CT Legacy REIT

The following table describes CT Legacy REIT’s participations sold assets and liabilities as of December 31, 2011 (in thousands):

	September 30,		December 31,
	2012		2011
Participations sold assets
Gross carrying value		$—		$97,465
Less: Provision for loan losses		—		(97,465	)
Net book value of assets		—		—
Participations sold liabilities
Net book value of liabilities		—		97,465
Net impact to shareholders' equity		$—		($97,465	)

Summarized financial information for CT Legacy Asset

The following table represents summarized financial information for CT Legacy Asset (in thousands):

	For the Period from February 11, 2012
	through September 30, 2012 (1)
Income Statement
Total revenues (2)		$140,741
Total expenses (3)		(12,001	)
Net gain		$128,740
	As of September 30, 2012
Balance Sheet
Total assets		$615,720

(1)	Includes activity and balances of VIEs consolidated by CT Legacy Asset.
(2)	Includes interest income and gain on extinguishment of debt.
(3)	Includes interest expense, general and administrative expenses, provisions and impairments.

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CT Legacy REIT (Details 10) (USD $) In Thousands, unless otherwise specified	9 Months Ended			9 Months Ended			12 Months Ended
	Sep. 30, 2012	Sep. 30, 2012 CT Legacy REIT	Dec. 31, 2011 CT Legacy REIT	Sep. 30, 2012 CT Legacy REIT Repurchase obligation	Dec. 31, 2011 CT Legacy REIT Repurchase obligation	Dec. 31, 2011 CT Legacy REIT Mezzanine Loan	Dec. 31, 2011 CT Legacy REIT Mezzanine Loans
Debt Lender				JP Morgan			Five Mile
Principal Balance			$ 123,739		$ 58,464	$ 65,275
Book Value, ending balance			113,575		58,464	55,111
Face amount		$ 124,000				$ 83,000
Maturity date	Mar. 31, 2016			Dec. 15, 2014			Mar. 31, 2016
Refinance date							2011-03-31
Interest rate, description				LIBOR+6.00%			Rate of interest that maybe be deferred - 7%
Interest rate						15.00%
Refinance date				Feb. 10, 2012

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CT Legacy REIT (Details 2) (CT Legacy REIT, USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Ratings and vintage distribution of CT Legacy REIT's securities
2003		$ 1,256
1997		179
1996		1,167
Total		2,602
HeldToMaturity | B
Ratings and vintage distribution of CT Legacy REIT's securities
2003
1997		179
1996
Total		179
HeldToMaturity | CCC and Below
Ratings and vintage distribution of CT Legacy REIT's securities
2003		1,256
1997
1996		1,167
Total		$ 2,423

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Consolidated Statements of Comprehensive Income (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Income Statement [Abstract]
Net income	$ 12,900	$ 8,256	$ 156,873	$ 268,399
Other comprehensive income (loss):
Unrealized gain (loss) on derivative financial instruments	2,103	(633)	5,853	2,912
Gain on interest rate swaps not designated as cash flow hedges		1,246	2,481	4,447
Amortization of unrealized gains and losses on securities	(4)	413	(770)	(93)
Amortization of deferred gains and losses on settlement of swaps		(28)	(56)	(75)
Other-than-temporary impairments of securities related to fair value adjustments in excess of expected credit losses, net of amortization	206	270	419	4,236
Other comprehensive income	2,305	1,268	7,927	11,427
Comprehensive income	15,205	9,524	164,800	279,826
Comprehensive (income) loss attributable to noncontrolling interests	(5,901)	5,466	(81,048)	(1,935)
Comprehensive income attributable to Capital Trust, Inc.	$ 9,304	$ 14,990	$ 83,752	$ 277,891

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Segment Reporting (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
Interest and related income	$ 6,944	$ 25,642	$ 28,423	$ 95,187
Less: Interest and related expenses	5,147	21,838	33,902	80,381
Income from loans and other investments, net	1,797	3,804	(5,479)	14,806
Management fees from affiliates	1,546	1,753	4,741	4,927
Servicing fees	2,206	1,460	5,591	2,208
Total other revenues	3,752	3,213	10,332	7,135
General and administrative	7,141	4,941	16,193	19,868
Servicing fee expense
Total other expenses	7,141	4,941	16,193	19,868
Total other-than-temporary impairments of securities		(30,687)		(35,620)
Portion of other-than-temporary impairments of securities recognized in other comprehensive income		173	(160)	(3,098)
Impairment of real estate held-for-sale		(1,055)		(1,055)
Net impairments recognized in earnings		(31,569)	(160)	(39,773)
Valuation allowance on loans held-for-sale				(224)
Recovery of provision for loan losses	2,811	17,152	2,819	34,401
Fair value adjustment on investment in CT Legacy Asset	11,987		19,645
Gain on extinguishment of debt		20,054		271,031
Gain on deconsolidation of subsidiary			146,380
Income from equity investments in unconsolidated subsidiaries	411	307	1,312	2,105
Income before income taxes	13,617	8,020	158,656	269,613
Income tax provision (benefit)	717	(236)	1,783	1,214
Net income	12,900	8,256	156,873	268,399
Net (income) loss attributable to noncontrolling interests	(5,901)	5,466	(81,038)	(1,935)
Net income attributable to Capital Trust, Inc.	6,999	13,722	75,835	266,464
Total assets	581,197	1,539,889	581,197	1,539,889	1,366,316
Balance Sheet Investment
Interest and related income	6,944	25,642	28,423	95,187
Less: Interest and related expenses	5,147	21,838	33,902	80,381
Income from loans and other investments, net	1,797	3,804	(5,479)	14,806
Management fees from affiliates
Servicing fees
Total other revenues
General and administrative	3,381	2,427	6,551	5,372
Servicing fee expense	1,031		1,400	632
Total other expenses	4,412	2,427	7,951	6,004
Total other-than-temporary impairments of securities		(30,687)		(35,620)
Portion of other-than-temporary impairments of securities recognized in other comprehensive income		173	(160)	(3,098)
Impairment of real estate held-for-sale		(1,055)		(1,055)
Net impairments recognized in earnings		(31,569)	(160)	(39,773)
Valuation allowance on loans held-for-sale				(224)
Recovery of provision for loan losses	2,811	17,152	2,819	34,401
Fair value adjustment on investment in CT Legacy Asset	11,987		19,645
Gain on extinguishment of debt		20,054		271,031
Gain on deconsolidation of subsidiary			146,380
Income from equity investments in unconsolidated subsidiaries
Income before income taxes	12,183	7,014	155,254	274,237
Income tax provision (benefit)	167	703	467	2,615
Net income	12,016	6,311	154,787	271,622
Net (income) loss attributable to noncontrolling interests	(5,901)	5,466	(81,038)	(1,935)
Net income attributable to Capital Trust, Inc.	6,115	11,777	73,749	269,687
Total assets	556,003	1,528,441	556,003	1,528,441
Investment Management
Interest and related income
Less: Interest and related expenses
Income from loans and other investments, net
Management fees from affiliates	2,165	2,372	6,597	6,171
Servicing fees	3,237	1,671	6,991	2,840
Total other revenues	5,402	4,043	13,588	9,011
General and administrative	4,379	3,344	11,498	15,740
Servicing fee expense
Total other expenses	4,379	3,344	11,498	15,740
Total other-than-temporary impairments of securities
Portion of other-than-temporary impairments of securities recognized in other comprehensive income
Net impairments recognized in earnings
Fair value adjustment on investment in CT Legacy Asset
Gain on deconsolidation of subsidiary
Income from equity investments in unconsolidated subsidiaries	411	307	1,312	2,105
Income before income taxes	1,434	1,006	3,402	(4,624)
Income tax provision (benefit)	550	(939)	1,316	(1,401)
Net income	884	1,945	2,086	(3,223)
Net (income) loss attributable to noncontrolling interests
Net income attributable to Capital Trust, Inc.	884	1,945	2,086	(3,223)
Total assets	25,194	11,448	25,194	11,448
Inter-Segment Activities
Interest and related income
Less: Interest and related expenses
Income from loans and other investments, net
Management fees from affiliates	(619)	(619)	(1,856)	(1,244)
Servicing fees	(1,031)	(211)	(1,400)	(632)
Total other revenues	(1,650)	(830)	(3,256)	(1,876)
General and administrative	(619)	(830)	(1,856)	(1,244)
Servicing fee expense	(1,031)		(1,400)	(632)
Total other expenses	(1,650)	(830)	(3,256)	(1,876)
Total other-than-temporary impairments of securities
Portion of other-than-temporary impairments of securities recognized in other comprehensive income
Net impairments recognized in earnings
Fair value adjustment on investment in CT Legacy Asset
Gain on deconsolidation of subsidiary
Income from equity investments in unconsolidated subsidiaries
Income before income taxes
Income tax provision (benefit)
Net income
Net (income) loss attributable to noncontrolling interests
Net income attributable to Capital Trust, Inc.
Total assets

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Loans Receivable, Net and Loan Participations Sold

9 Months Ended

Sep. 30, 2012

Loans Receivable Net And Loan Participations Sold

Loans Receivable, Net and Loan Participations Sold

Note 3. Loans Receivable, Net and Loan Participations Sold

As described in Note 1, in conjunction with our March 2011 restructuring of our recourse debt obligations, a significant portion of our assets, including all of our loans, were transferred to a majority-owned subsidiary, CT Legacy REIT. Our only remaining loan was one which had previously been sold to a third-party and recorded as a participation sold asset and liability. In addition, as described in Note 2, our consolidated balance sheets separately state our direct assets and liabilities and certain assets and liabilities of consolidated subsidiaries. See Note 6 for disclosures regarding loans receivable that have been transferred to CT Legacy REIT, and see Note 7 for comparable disclosures regarding loans receivable that are held in consolidated securitization vehicles, as separately stated on our consolidated balance sheets.

Participations sold represent interests in certain loans that we originated and subsequently sold to one of our investment management vehicles or to third-parties. We have historically presented these participations sold as both assets and non-recourse liabilities because these arrangements do not qualify as sales under GAAP. Generally, participations sold are recorded as assets and liabilities in equal amounts on our consolidated balance sheets, and an equivalent amount of interest income and interest expense is recorded on our consolidated statements of operations. We have no economic exposure to these liabilities.

During September 2012, our one remaining loan participation sold was repaid.

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Consolidated Securitization Vehicles (Details 5) (Securitization Vehicles, USD $) In Thousands, unless otherwise specified	Sep. 30, 2012		Dec. 31, 2011
Less than 12 months, Estimated Fair Value	$ 18,600		$ 154,100
Less than 12 months, Gross Unrealized Losses	(11,600)		(4,700)
Greater than 12 months , Estimated Fair Value	57,600		130,100
Greater than 12 months , Gross Unrealized Losses	(5,800)		(11,100)
Total, Estimated Fair Value	76,200		284,200
Total Gross Unrealized Losses	(17,400)		(15,800)
[HeldToMaturitySecuritiesExcluded]	93,600	[1]	300,000	[2]
Floating Rate
Less than 12 months, Estimated Fair Value
Less than 12 months, Gross Unrealized Losses
Greater than 12 months , Estimated Fair Value
Greater than 12 months , Gross Unrealized Losses
Total, Estimated Fair Value
Total Gross Unrealized Losses
[HeldToMaturitySecuritiesExcluded]		[1]		[2]
Fixed Rate
Less than 12 months, Estimated Fair Value	18,600		154,100
Less than 12 months, Gross Unrealized Losses	(11,600)		(4,700)
Greater than 12 months , Estimated Fair Value	57,600		130,100
Greater than 12 months , Gross Unrealized Losses	(5,800)		(11,100)
Total, Estimated Fair Value	76,200		284,200
Total Gross Unrealized Losses	(17,400)		(15,800)
[HeldToMaturitySecuritiesExcluded]	$ 93,600	[1]	$ 300,000	[2]

[1] Excludes, as of June 30, 2012, $61.2 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.

[2] Excludes, as of December 31, 2011, $59.0 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.

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Fair Value (Details 1) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012
Loans Held For Sale
Beginning of Period	$ 30,875
Deconsolidation of CT Legacy Asset	(30,875)
Fair value adjustment on investment in CT Legacy Asset
End of Period
Real Estate Held For Sale
Beginning of Period	10,342
Deconsolidation of CT Legacy Asset	(10,342)
Fair value adjustment on investment in CT Legacy Asset
End of Period
Investment in CT Legacy Assets
Beginning of Period
Deconsolidation of CT Legacy Asset	89,676
Contributions to CT Legacy Asset	73,064
Distributions from CT Legacy Asset	(82,285)
Fair value adjustment on investment in CT Legacy Asset	19,645
End of Period	$ 100,100

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Consolidated Securitization Vehicles (Details 16) (Securitization Vehicles, USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012		Dec. 31, 2011
Fair Value	$ (19,089)		$ (24,942)
Interest Rate Swaps
Notional Amount	273,711
Fair Value	(19,089)		(24,942)
Interest Rate	5.01%
Derivative Maturity	Dec. 31, 2015
Interest Rate Swaps | SwissRe
Notional Amount	223,802
Fair Value	(15,631)		(20,540)
Interest Rate	5.10%	[1]
Derivative Counterparty	Swiss RE Financial
Derivative Maturity	Dec. 31, 2015
Interest Rate Swaps | Bank of America
Notional Amount	34,270
Fair Value	(1,499)		(2,368)
Interest Rate	4.58%	[1]
Derivative Counterparty	Bank of America
Derivative Maturity	Dec. 31, 2014
Interest Rate Swaps | BankOfAmerica1Member
Notional Amount	10,535
Fair Value	(1,387)		(1,461)
Interest Rate	5.05%	[1]
Derivative Counterparty	Bank of America
Derivative Maturity	Dec. 31, 2016
Interest Rate Swaps | BankOfAmerica2Member
Notional Amount	5,104
Fair Value	$ (572)		$ (573)
Interest Rate	4.12%	[1]
Derivative Counterparty	Bank of America
Derivative Maturity	Dec. 31, 2016

[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.

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Consolidated Securitization Vehicles (Tables)

9 Months Ended

Sep. 30, 2012

Securitization Vehicles Tables

Consolidated Securitization Vehicles' Securities Portfolio

Activity relating to these securities for the nine months ended September 30, 2012 was as follows (in thousands):

	CMBS			CDOs & Other			Total Book Value (1)
December 31, 2011		$357,037			$1,935			$358,972
Principal paydowns		(38,393	)		(1,935	)		(40,328	)
Discount/premium amortization & other (2)		(259	)		202			(57	)
Other-than-temporary impairments:
Recognized in earnings		(160	)		—			(160	)
Recognized in accumulated other comprehensive income		160			—			160
Deconsolidation of CT Legacy Asset (3)		(193,737	)		29,998			(163,739	)
September 30, 2012		$124,648			$30,200			$154,848

(1)	Includes securities with a total face value of $236.4 million and $490.9 million as of September 30, 2012 and December 31, 2011, 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.
(3)	As further described above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the securities owned by its consolidated securitization vehicle are no longer included in our consolidated financial statements. Also, certain securities which are owned by our consolidated securitization vehicles, that had previously been eliminated in consolidation, are now included in our consolidated financial statements. See Note 6 for additional discussion on CT Legacy Asset.

Book value consolidated securitization vehicles' securities

The following table allocates the book value of our consolidated securitization vehicles’ securities as of September 30, 2012 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		$136,933			$30,200		$167,133
Mark-to-market adjustments on securities     previously classified as available-for-sale		6			—		6
Other-than-temporary impairments recognized in    accumulated other comprehensive income		(12,291	)		—		(12,291	)
Total book value as of September 30, 2012		$124,648			$30,200		$154,848

Overall statistics for consolidated securitization vehicles' securities portfolio

The following table details overall statistics for our consolidated securitization vehicles’ securities portfolio as of September 30, 2012 and December 31, 2011:

	September 30, 2012	December 31, 2011
Number of securities	33	52
Number of issues	23	36
Rating (1) (2)	B+	BB+
Fixed / Floating (in millions) (3)	$154 / $1	$358 / $1
Coupon (1) (4)	6.15%	6.49%
Yield (1) (4)	6.32%	7.41%
Life (years) (1) (5)	3.1	2.5

(1)	Represents a weighted average as of September 30, 2012 and December 31, 2011, 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 0.21% and 0.30% as of September 30, 2012 and December 31, 2011, 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.

Ratings and vintage distribution of consolidated securitization vehicles' securities

The table below details the ratings and vintage distribution of our consolidated securitization vehicles’ securities as of September 30, 2012 (in thousands):

	Rating as of September 30, 2012
Vintage	AAA		AA		A	BBB		BB		B	CCC and Below		Total
2006		$—		$—	$—		$—		$—	$—		$15,130		$15,130
2005		—		—	—		—		—	—		36,672		36,672
2004		—		—	—		24,753		—	—		—		24,753
2003		—		—	—		3,005		1,977	—		—		4,982
2002		—		—	—		—		6,729	—		2,384		9,113
2001		—		—	—		—		—	5,426		2,557		7,983
2000		2,894		—	—		—		19,056	—		3,997		25,947
1999		—		—	4,000		—		15,023	—		—		19,023
1998		—		2,160	7,397		—		151	—		1,537		11,245
Total		$2,894		$2,160	$11,397		$27,758		$42,936	$5,426		$62,277		$154,848

The table below details the ratings and vintage distribution of our consolidated securitization vehicles’securities as of December 31, 2011 (in thousands):

	Rating as of December 31, 2011
											CCC and
Vintage	AAA		AA		A	BBB		BB		B	Below		Total
2006		$—		$—	$—		$—		$—	$—		$14,884		$14,884
2005		—		—	—		—		—	—		7,060		7,060
2004		—		24,780	1,935		—		—	—		—		26,715
2003		9,908		—	—		3,011		1,966	—		—		14,885
2002		—		—	—		—		6,712	—		2,283		8,995
2001		—		—	—		—		—	5,426		1,730		7,156
2000		2,891		—	—		—		19,935	—		3,985		26,811
1999		—		—	11,233		1,414		17,380	—		—		30,027
1998		45,956		46,315	37,580		43,607		11,901	—		5,000		190,359
1997		4,434		—	16,159		—		5,223	2,762		3,502		32,080
Total		$63,189		$71,095	$66,907		$48,032		$63,117	$8,188		$38,444		$358,972

Other-than-temporary impairments of consolidated securitization vehicles' securities

The following table summarizes activity related to the other-than-temporary impairments of our consolidated securitization vehicles’ securities during the nine months ended September 30, 2012 (in thousands):

	Gross Other-Than-Temporary Impairments			Credit Related Other-Than-Temporary Impairments			Non-Credit Related Other-Than-Temporary Impairments
December 31, 2011		$130,360			$114,223			$16,137
Additions due to change in expected      cash flows		—			160			(160	)
Amortization of other-than-temporary      impairments		(373	)		(128	)		(245	)
Reductions due to realized losses		(26,263	)		(26,263	)		—
Deconsolidation of CT Legacy Asset (1)		(25,567	)		(22,126	)		(3,441	)
September 30, 2012		$78,157			$65,866			$12,291

(1) As further described in Note 1, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the securities owned by its consolidated securitization vehicles, some of which were other-than-temporarily impaired, are no longer included in our consolidated financial statements.

Unrealized losses and fair value of securities

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 September 30, 2012 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		18.6		(11.6	)		57.6		(5.8	)		76.2		(17.4	)		93.6
Total		$18.6		($11.6	)		$57.6		($5.8	)		$76.2		($17.4	)		$93.6

(1) Excludes, as of September 30, 2012, $61.2 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.

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, 2011 and that are not deemed to be other-than-temporarily impaired (in millions):

	Less Than 12 Months					Greater Than 12 Months					Total
			Gross					Gross					Gross
	Estimated		Unrealized			Estimated		Unrealized			Estimated		Unrealized
	Fair Value		Loss			Fair Value		Loss			Fair Value		Loss			Book Value (1)
Floating Rate		$—		$—			$—		$—			$—		$—			$—
Fixed Rate		154.1		(4.7	)		130.1		(11.1	)		284.2		(15.8	)		300.0
Total		$154.1		($4.7	)		$130.1		($11.1	)		$284.2		($15.8	)		$300.0

(1) Excludes, as of December 31, 2011, $59.0 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.

Activity relating to consolidated securitization vehicles' loans receivable

Activity relating to our consolidated securitization vehicles’ loans receivable for the nine months ended September 30, 2012 was as follows (in thousands):

	Gross Book Value			Provision for  Loan Losses			Net Book Value (1)
December 31, 2011		$814,572			($201,974	)		$612,598
Satisfactions (2)		(62,950	)		—			(62,950	)
Principal paydowns		(1,816	)		—			(1,816	)
Discount/premium amortization & other		156			—			156
Recovery of provision for loan losses		—			2,819			2,819
Realized loan losses		(22,001	)		22,001			—
Deconsolidation of CT Legacy Asset (3)		(435,744	)		99,394			(336,350	)
September 30, 2012		$292,217			($77,760	)		$214,457

(1)	Includes loans with a total principal balance of $292.8 million and $815.7 million as of September 30, 2012 and December 31, 2011, respectively.
(2)	Includes final maturities and full repayments.
(3)	As further described in Note 1, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the loans owned by its consolidated securitization vehicles are no longer included in our consolidated financial statements.

Overall statistics for consolidated securitization vehicles' loans receivable portfolio

The following table details overall statistics for our consolidated securitization vehicles’ loans receivable portfolio as of September 30, 2012 and December 31, 2011:

	September 30, 2012	December 31, 2011
Number of investments	14	71
Fixed / Floating (in millions) (1)	$44 / $170	$280 / $333
Coupon (2) (3)	4.34%	5.11%
Yield (2) (3)	4.63%	5.72%
Maturity (years) (2) (4)	3.0	3.6

(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 September 30, 2012 and December 31, 2011, respectively.
(3)	Calculations for floating rate loans are based on LIBOR of 0.21% and 0.30% as of September 30, 2012 and December 31, 2011, 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.

Types of loans in consolidated securitization vehicles' loan portfolio, as well as the property type and geographic distribution of the properties securing these loans

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 September 30, 2012 and December 31, 2011 (in thousands):

	September 30, 2012					December 31, 2011
Asset Type	Book Value		Percentage			Book Value			Percentage
Subordinate interests in     mortgages		$129,509		60	%		$225,773			36	%
Senior mortgages		65,000		30			241,323			39
Mezzanine loans		19,948		10			152,934			25
Total		$214,457		100	%		$620,030			100	%
Property Type	Book Value		Percentage			Book Value			Percentage
Office		$185,006		86	%		$317,940			51	%
Hotel		27,322		13			174,419			28
Retail		—		—			72,701			12
Healthcare		—		—			18,837			3
Other		2,129		1			36,133			6
Total		$214,457		100	%		$620,030			100	%
Geographic Location	Book Value		Percentage			Book Value			Percentage
Northeast		$98,757		46	%		$199,361			32	%
West		78,700		37			152,774			25
Southeast		21,707		10			124,456			20
Southwest		15,293		7			57,046			9
Midwest		—		—			24,957			4
Diversified		—		—			61,436			10
Total		$214,457		100	%		$620,030			100	%
Unallocated loan loss provision (1)		—					(7,432	)
Net book value		$214,457					$612,598

(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, collateral property type, or geographic location, but rather to an overall pool of loans. See Note 2 for additional details.

Allocates the net book value and principal balance of consolidated securitization vehicles' loans receivable based on internal risk ratings

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 September 30, 2012 and December 31, 2011 (dollars in thousands):

		Loans Receivable as of September 30, 2012						Loans Receivable as of December 31, 2011
Risk Rating (1)		Number of Loans		Principal Balance		Net Book Value		Number of Loans		Principal Balance		Net Book Value
	1 - 3		5		$118,333		$118,006		22		$416,032		$415,661
	4 - 5		2		78,700		78,622		3		44,057		43,945
	6 - 8		7		95,795		17,829		17		271,988		76,784
	N/A		—		—		—		29		83,639		83,640
Total			14		$292,828		$214,457		71		$815,716		$620,030
Unallocated loan loss provision:							—						(7,432	)
Net book value							$214,457						$612,598

(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 information.

Allocation consolidated securitization vehicles' loans receivable by both loan type and internal risk ratings

The following tables further allocate our consolidated securitization vehicles’ loans receivable by both loan type and our internal risk ratings as of September 30, 2012 and December 31, 2011 (dollars in thousands):

		Senior Mortgage Loans
		as of September 30, 2012						as of December 31, 2011
Risk Rating (1)		Number of Loans		Principal Balance		Net Book Value		Number of Loans		Principal Balance		Net Book Value
	1 - 3		—		$—		$—		10		$117,452		$117,452
	4 - 5		1		65,000		65,000		1		12,551		12,551
	6 - 8		—		—		—		4		43,988		27,680
	N/A		—		—		—		29		83,639		83,640
Total			1		$65,000		$65,000		44		$257,630		$241,323

(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 September 30, 2012						as of December 31, 2011
Risk Rating (1)		Number of Loans		Principal Balance		Net Book Value		Number of Loans		Principal Balance		Net Book Value
	1 - 3		4		$98,295		$98,058		8		$175,560		$175,314
	4 - 5		1		13,700		13,622		2		31,506		31,394
	6 - 8		7		95,795		17,829		9		122,306		19,065
	N/A		—		—		—		—		—		—
Total			12		$207,790		$129,509		19		$329,372		$225,773

(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.

		Mezzanine & Other Loans
		as of September 30, 2012						as of December 31, 2011
Risk Rating (1)		Number of Loans		Principal Balance		Net Book Value		Number of Loans		Principal Balance		Net Book Value
	1 - 3		1		$20,038		$19,948		4		$123,020		$122,895
	4 - 5		—		—		—		—		—		—
	6 - 8		—		—		—		4		105,694		30,039
	N/A		—		—		—		—		—		—
Total			1		$20,038		$19,948		8		$228,714		$152,934

(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.

Consolidated securitization vehicles' impaired loans

The following table describes our consolidated securitization vehicles’ impaired loans as of September 30, 2012, including impaired loans that are current in their interest payments and those that are delinquent on contractual payments (dollars in thousands):

	September 30, 2012
Impaired Loans	No. of Loans		Gross Book Value		Provision for Loan Loss			Net Book Value
Performing loans		1		$15,062		($15,062	)		$—
Non-performing loans		5		66,828		(62,698	)		4,130
Total impaired loans		6		$81,890		($77,760	)		$4,130

Allocation of consolidated securitization vehicles' provision for loan losses

The following table details the allocation of our consolidated securitization vehicles’ provision for loan losses as of September 30, 2012 (in thousands):

	September 30, 2012
Impaired Loans	Principal Balance		Provision for Loan Loss		Loss Severity
Subordinate interests in mortgages		$82,094		$77,760		95	%
Total/Weighted Average		$82,094		$77,760		95	%

Average balance of impaired loans by loan type, and the income recorded on such loans subsequent to their impairment

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 nine months ended September 30, 2012 (in thousands):

Income on Impaired Loans for the Nine Months ended September 30, 2012
Asset Type	Average Net Book Value		Income Recorded (1)
Senior Mortgage Loans		$4,232		$168
Subordinate Interests in Mortgages		5,097		404
Mezzanine & Other Loans		5,135		210
Total		$14,464		$782

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

Consolidated securitization vehicles' loans receivable nonaccrual status

The following table details our consolidated securitization vehicles’ loans receivable which are on nonaccrual status as of September 30, 2012 (in thousands):

Nonaccrual Loans Receivable as of September 30, 2012
Asset Type	Principal Balance		Net Book Value
Subordinate Interests in Mortgages		$82,094		$4,130
Total		$82,094		$4,130

Activity of consolidated securitization vehicles' real estate held-for-sale

Activity relating to our consolidated securitization vehicles’ real estate held-for-sale for the nine months ended September 30, 2012 was as follows (in thousands):

	Gross Book Value			Other-Than-Temporary Impairment			Net Book Value
December 31, 2011		$24,960			($14,618	)		$10,342
Deconsolidation of CT Legacy Asset (1)		(24,960	)		14,618			(10,342	)
September 30, 2012		$—			$—			$—

(1) As further described in Note 1 above, we deconsolidated CT Legacy Asset in the first quarter of 2012. As a result, the real estate held-for-sale owned by its consolidated securitization vehicles is no longer included in our consolidated financial statements.

Balances of each entity's outstanding securitized debt obligations, their respective coupons and all-in effective costs, including the amortization of fees and expenses

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):

	September 30, 2012				December 31, 2011		September 30, 2012
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		$91,044		$91,044		$121,409		1.26	%		1.28	%		July 2039
CT CDO II		156,900		156,900		199,751		0.92	%		1.21	%		March 2050
CT CDO III		—		—		199,553		N/A			N/A				N/A
CT CDO IV (3)		198,927		198,927		221,540		1.07	%		1.23	%		October 2043
Total CT CDOs		446,871		446,871		742,253		1.06	%		1.23	%		February 2045
Other securitization vehicles
GMACC 1997-C1		—		—		83,672		N/A			N/A				N/A
GECMC 00-1 H		—		—		24,847		N/A			N/A				N/A
GSMS 2006-FL8A		50,552		50,552		50,552		1.06	%		1.06	%		June 2020
MSC 2007-XLCA		—		—		310,083		N/A			N/A				N/A
JPMCC 2004-FL1A		—		—		—		N/A			N/A				N/A
Total other securitization vehicles		50,552		50,552		469,154		1.06	%		1.06	%		June 2020
Total/Weighted Average		$497,423		$497,423		$1,211,407		1.06	%		1.21	%	(4)	August 2042

(1)	Represents a weighted average for each respective facility, assuming LIBOR of 0.21% at September 30, 2012 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 generally expected to occur prior to the maturity date above.
(3)	Comprised, at September 30, 2012, of $184.9 million of floating rate notes sold and $14.0 million of fixed rate notes sold.
(4)	Including the impact of interest rate hedges with an aggregate notional balance of $273.7 million as of September 30, 2012, the effective all-in cost of our consolidated securitization vehicles’ debt obligations would be 4.09% per annum.

The notional amounts and fair values of consolidated securitization vehicles interest rate swaps

The following table summarizes the notional amounts and fair values of our consolidated securitization vehicles’ interest rate swaps as of September 30, 2012 and December 31, 2011 (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	September 30, 2012 Notional Amount		Interest Rate (1)			Maturity		September 30, 2012 Fair Value			December 31, 2011 Fair Value
Swiss RE Financial		$223,802		5.10	%		2015		($15,631	)		($20,540	)
Bank of America		34,270		4.58	%		2014		(1,499	)		(2,368	)
Bank of America		10,535		5.05	%		2016		(1,387	)		(1,461	)
Bank of America		5,104		4.12	%		2016		(572	)		(573	)
Total/Weighted Average		$273,711		5.01	%		2015		($19,089	)		($24,942	)

(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.

Table of amounts recorded to other comprehensive income and amounts recorded to interest expense from other comprehensive income

The table below shows amounts recorded to other comprehensive income and amounts recorded to interest expense from other comprehensive income for the nine months ended September 30, 2012 and 2011 (in thousands):

	Amount of net loss recognized					Amount of loss reclassified from OCI
	in OCI for the nine months ended (1)					to income for the nine months ended (2)
Hedge	September 30, 2012			September 30, 2011		September 30, 2012			September 30, 2011
Interest rate swaps		($5,853	)		$1,980		($10,182	)		($11,512	)

(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.

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Shareholders' Equity (Details 2) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Shareholders Equity Details 2
Earnings per share, basic	$ 0.30	$ 0.60	$ 3.30	$ 11.77
Net income allocable to common stock, basic	$ 6,999	$ 13,722	$ 75,835	$ 266,464
Net income per share of common stock and assumed conversions	$ 6,999	$ 13,722	$ 75,835	$ 266,464
Weighted Average Number Shares, basic	23,173,426	22,730,080	22,969,103	22,630,672
Warrants outstanding for the purchase of common stock	1,442,600	1,391,893	1,472,958	1,426,702
Weighted Average Number Shares, diluted	24,616,026	24,121,973	24,442,061	24,057,374
Earnings per share, diluted	$ 0.28	$ 0.57	$ 3.10	$ 11.08

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CT Legacy REIT (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended									1 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011	Sep. 30, 2012 Five Mile	Sep. 30, 2012 Former lenders under credit facility	Sep. 30, 2012 CT Legacy REIT	Dec. 31, 2011 CT Legacy REIT	Dec. 31, 2011 CT Legacy REIT CMBS Securities	Dec. 31, 2011 CT Legacy REIT CDOs & Other Securities	Feb. 10, 2012 CT Legacy Asset	Dec. 31, 2011 CT Legacy Asset
Beneficial ownership of CT Legacy REIT	52.00%		52.00%			24.00%	24.00%
Percentage of Class B dividends payable to holders	25.00%		25.00%
Aggregate cash distributions to all other classes of stock	$ 50,000		$ 50,000
Investment in CT Legacy Asset, at fair value								100,100					89,700
Investment in CT Legacy Asset, net								53,100
Payable under secured notes								11,100
Payable under management incentive award plans								7,800
Maximum exposure to loss								34,200
Notional Amount													60,800
Fair Value									(8,817)				8,800
Non-cash interest expense, interest rate swaps												291
Reclassification due to termination of effective hedge designation		1,246	2,481	4,447								1,800
Interest rate swaps, net payments ineffective hedge												262
Number of interest rate swaps													5
Number of securities										2	4
[HeldToMaturitySecuritiesFairValue]										$ 1,400	$ 158
Number of securities with recognized other-than-temporary-impairments								11

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Supplemental Disclosures for Consolidated Statements of Cash Flows

9 Months Ended

Sep. 30, 2012

Supplemental Disclosures For Consolidated Statements Of Cash Flows

Supplemental Disclosures for Consolidated Statements of Cash Flows

Note 13. Supplemental Disclosures for Consolidated Statements of Cash Flows

As described in Note 2, following the deconsolidation described in Note 1, our financial statements include five consolidated securitization vehicles. The consolidation of these entities has materially impacted our statement of cash flows, primarily the amounts reported as principal collections of loans and repayments of securitized debt obligations. Notwithstanding the gross presentation on our consolidated statement of cash flows, the consolidation of these entities has no impact on our net cash flow.

Interest paid on our outstanding debt obligations during the nine months ended September 30, 2012 and 2011 was $21.9 million and $85.2 million, respectively. This includes interest paid by consolidated variable interest entities. The difference between interest expense on our consolidated statement of operations and interest paid is primarily due to non-cash interest expense recorded on amortization of discount of the Five Mile Capital mezzanine loan, interest rate swaps, loan participations sold and deferred interest on various debt obligations.

Net taxes paid by us during the nine months ended September 30, 2012 and 2011 were $788,000 and $2.4 million, respectively. The taxes paid in 2012 relate primarily to the investment management activities of our taxable REIT subsidiary, CTIMCO.

Significant non-cash investing and financing activities, which are not presented on our consolidated statements of cash flows, primarily includes the repayments of our loan participations sold assets and liabilities.