10-K

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

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2005
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)

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

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
class A common stock, $0.01 par value (“class A common stock”)	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

Yes o No ý

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 the filing requirements for at least the past 90 days.

Yes ý No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   ý

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

Large accelerated filer o Accelerated filer ý Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes o No ý

MARKET VALUE

The aggregate market value of the outstanding class A common stock held by non-affiliates of the registrant was approximately $410,033,546 as of June 30, 2005 (the last business day of the registrant’s most recently completed second fiscal quarter) based on the closing sale price on the New York Stock Exchange on that date.

OUTSTANDING STOCK

As of March 6, 2006 there were 15,324,248 outstanding shares of class A common stock. The class A common stock is listed on the New York Stock Exchange (trading symbol “CT”).  Trading is reported in many newspapers as “CapTr”.

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates information by reference from the registrant’s definitive proxy statement to be filed with the Commission within 120 days after the close of the registrant’s fiscal year.

CAPITAL TRUST, INC.

PART I
Item 1.	Business
Item 1A.	Risk Factors
Item 1B.	Unresolved Staff Comments
Item 2.	Properties
Item 3.	Legal Proceedings
Item 4.	Submission of Matters to a Vote of Security Holders
PART II
Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6.	Selected Financial Data
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk
Item 8.	Financial Statements and Supplementary Data
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.	Controls and Procedures
Item 9B.	Other Information
PART III
Item 10.	Directors and Executive Officers of the Registrant
Item 11.	Executive Compensation
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13.	Certain Relationships and Related Transactions
Item 14.	Principal Accounting Fees and Services
PART IV
Item 15.	Exhibits, Financial Statement Schedules and Reports on Form 8-K
Signatures
Index to Consolidated Financial Statements

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PART I

Item 1.Business

Overview

We are a fully integrated, self-managed finance and investment management company that specializes in credit-sensitive structured financial products.  To date, our investment programs have focused on loans, securities and related instruments backed by income-producing commercial real estate assets.  We invest for our own account and for private equity funds that we manage on behalf of third party investors.  From the commencement of our finance business in 1997 through December 31, 2005, we have completed  $5.9 billion of investments both directly and on behalf of our managed funds.  We conduct our operations in order to qualify as a real estate investment trust, or REIT, for federal income tax purposes.

Developments during Fiscal Year 2005

During the year ended December 31, 2005, we originated $1.5 billion of loan, securities and related investments, representing a record year of investment activity for us.  We originated $1.1 billion directly for our balance sheet and $400.0 million for our managed funds.

On March 15, 2005, we issued our second collateralized debt obligation, or CDO, that we refer to as CDO II.  CDO II is a reinvesting CDO secured by a $337.8 million pool of mezzanine loans, B Notes, subordinate commercial mortgage-backed securities, or CMBS, and cash.  At issuance, we sold notes rated AAA to BBB- with a face value of $299.0 million to third parties at par.  The notes we sold bear interest at a weighted average floating rate of the London Interbank Offered Rate, or LIBOR, plus 0.49% (4.88% at December 31, 2005).  We retained all of the unrated and below investment grade rated notes and the preferred and common equity interests in the wholly-owned CDO issuers.  We incurred $5.2 million of issuance costs which will be amortized on a level yield basis over the expected life of CDO II.  Including amortization of the issuance costs, the all in effective rate fo r the notes sold was LIBOR plus 0.71% (5.10% at December 31, 2005).  CDO II was structured with a five-year reinvestment period that allows us to reinvest principal proceeds from collateral repayments into new investments, effectively extending the life of this non-recourse, non-mark-to-market financing. For accounting purposes, CDO II is consolidated in our financial statements.

On June 2, 2005, CT Mezzanine Partners III, Inc.’s, or Fund III’s, two-year investment period expired.  Since the inception of Fund III, $1.2 billion investments were made in 35 separate transactions.  With the expiration of Fund III’s investment period, we resumed balance sheet investments in the type of large “mezzanine” loans previously reserved for the Fund III investment program.  Since June 2, 2005, we have originated or purchased 10 such loans totaling $235.4 million for our balance sheet.

During 2005 we received our first fund management incentive compensation payments from CT Mezzanine Partners II LP, or Fund II.  A total of $8.0 million was received in four separate payments, one in each quarter of 2005.

On August 4, 2005, we issued our third CDO that we refer to as CDO III.  CDO III is secured by a static pool of $341.3 million of fixed rate subordinate CMBS.  At issuance, we sold notes rated AAA through BBB with a total face value of $269.6 million to third parties for proceeds of $272.2 million.  We retained the BBB- rated notes, all of the unrated and below investment grade rated notes, and the preferred and common equity interests in the wholly-owned CDO issuers.  The fixed rate notes we sold carry a weighted average coupon of 5.22%, were sold at a $2.6 million premium to face, and have an effective cash cost to us of 5.17%.  CDO III provides index matched, non-recourse and non-mark-to-market financing for the underlying collateral.  We incurred $2.1 million of issuance costs that will be amortized on a level yield basis over the expected life of CDO III.  Including amortization of the issuance costs, the all in effective rate for the notes sold was 5.25%.  For accounting purposes, CDO III is consolidated in our financial statements.

On August 4, 2005, pursuant to the provisions of Statement of Financial Accounting Standard, or SFAS, No. 115, we made a decision to change the accounting classification of our existing CMBS investments from available for sale to held to maturity.  In accordance with this decision, CMBS with an amortized cost of $410.1 million and a market value of $422.3 million were reclassified from available for sale to held to maturity.  As was the case prior to this reclassification, the difference between amortized cost and expected recovery

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on these investments will continue to be accreted through the income statement using the level yield method accretion schedules in place prior to the reclassification.  The difference between amortized cost and market value as of the reclassification date, $12.2 million, was segregated within accumulated other comprehensive income and will be amortized over the remaining life of the securities using the level yield method without impact to the income statement.  We made the decision to reclassify these investments based upon our intent and ability to hold these investments to maturity.  Going forward, new originations of held to maturity investments will be accounted for at cost plus the amortization of any premiums or discounts and any premiums or discounts will be amortized through the income statement using the level yield method.  Other than in the instance of impairment, these held to maturity investments will be shown in our financial statements at their adjusted values pursuant to the methodology described above.

On December 30, 2005 we sold an ownership interest in Global Realty Outsourcing, Inc., which we refer to herein as GRO, in conjunction with the acquisition of GRO by a third party.  As a result, we recorded a gain on sale of investment of $5.0 million in the fourth quarter of 2005.  Our contract, pursuant to which GRO provides 16 dedicated employees to assist us in monitoring assets and evaluating potential investments, remains in place.

Platform

We are a fully integrated, self managed, commercial real estate specialty finance company founded in 1997 and headquartered in New York City.  Our platform includes 28 professionals with extensive real estate credit, capital markets and structured finance expertise and our senior management team has over 20 years average industry experience.  Founded on long-standing relationships with our origination partners, our extensive network produces a pipeline of investment opportunities from which we select only those transactions that we believe exhibit a compelling risk/return profile.  Once a transaction that meets our parameters is identified, we apply a disciplined process founded on four elements:

•intense credit underwriting;

•creative financial structuring;

•efficient use of leverage; and

•aggressive asset management.

The first element, and the foundation of our past and future success, is our expertise in credit underwriting. For each prospective investment, an in-house underwriting team is assigned to perform an intense ground-up analysis of all aspects of credit risk. Our rigorous underwriting process is embodied in our proprietary credit policies and procedures that detail the due diligence steps from initial client contact through closing. We have developed the capability to apply this methodology to a high volume of investment opportunities, including CMBS transactions with a large number of underlying loans, through the combination of personnel, procedures and technology. On all levels, input is received from our finance, capital markets, credit and legal teams, as well as from various third-parties, including our credit providers.

Creative financial structuring is the second critical element.  In our direct investment program, we strive to create a customized structure for each investment that has the necessary real estate credit, interest rate and other applicable protections for us while meeting the varying needs of our clients.  We believe our demonstrated ability to structure solutions gives us a distinct competitive advantage in the marketplace.  In the structured products arena, our broad capital markets expertise enables us to better analyze the risks and opportunities embedded in complex vehicles such as CMBS and synthetic securities.

The prudent use of leverage is the third integral element of our platform. Leverage can increase returns on equity and portfolio diversification, but can also increase risk. We control this financial risk by actively managing our capital structure, seeking to minimize recourse and mark-to-market exposure of our liabilities and to match the duration and interest rate index of our assets and liabilities (in some cases, utilizing hedging instruments to manage interest rate exposure). Our objective is to maximize our return on equity while managing the risk inherent in a leveraged investment strategy.  As such, we are careful to maintain the liquidity necessary to defend the balance sheet against capital markets and real estate market volatility.  To

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achieve our objectives, we pursue innovative debt financing alternatives, such as CDOs to finance our balance sheet investments.

The final element of our platform is aggressive asset management.  We pride ourselves on our active style of managing our portfolios.  From closing an investment through its final repayment, our dedicated asset management team is in constant contact with our borrowers and servicers, monitoring performance of the collateral and enforcing our rights as necessary.  Our designation as a rated/approved Special Servicer by all three rating agencies allows us to exercise a substantial level of control over certain CMBS and related investments.

By adhering to these four key elements that define our platform, from July 1997 through December 31, 2005, we have originated $5.9 billion of investments, both directly and on behalf of our managed funds, and limited the loss experience of our portfolios to less than 1.0%.

Business Model

Our business model is designed to produce a unique mix of net interest spread from our balance sheet investments and fee income from our investment management operations. We allocate opportunities between our balance sheet and investment management vehicles based upon our assessment of the availability and relative cost of capital, the risk and return profiles of the various opportunities and applicable regulatory requirements.  The combination of balance sheet and investment management capabilities allows us to maximize the scope of opportunities upon which we can capitalize.  Our goal is to deliver a stable, growing stream of earnings from these two complementary activities.

We currently manage two private equity funds, Fund II and Fund III, both of which have completed their investment periods and are in the process of ordinary course liquidation.  Both funds were formed to make large-balance commercial real estate mezzanine loans. Fund II made $1.2 billion of investments during its investment period (April 2001 to April 2003) and, as of December 31, 2005, Fund II’s remaining investments totalled $60.4 million, all of which were performing. Fund III also made $1.2 billion of investments during its investment period (June 2003 to June 2005) and, as of December 31, 2005, Fund III’s remaining investments, totalled $460.3 million, all of which were performing. We have made co-investments in Fund II and Fund III of 5.9% and 4.7%, respectively and our wholly-owned taxable REIT subsidiary, CT Investment Management Co. LLC, serves as the manager to both funds. In addition to our pro-rata share of income as a co-investor, we earn base management fees and performance-oriented incentive management fees from each fund.  Our investment management activities are described further under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

In 2005, we originated a total of $1.5 billion of investment opportunities for our own balance sheet and on behalf of our managed funds.  $1.1 billion was allocated to our balance sheet and $400.0 million was allocated to Fund III, before the end of its investment period in June 2005.  Currently, we are allocating our entire investment program to the balance sheet and, going forward, it is anticipated that future investment management vehicles will invest in non-competitive, complementary opportunities.

We employ leverage on our balance sheet assets to enhance our return on equity.  We determine the degree of leverage used based upon the credit profile of each asset as well as the cost and terms of the best available financing.  In 2005, we issued our second and third CDOs, selling notes with a face value of $568.6 million to third parties and bringing our total CDO debt outstanding to $823.7 million.  We also borrowed under repurchase obligation agreements and a credit facility from multiple providers with utilization of these facilities, based upon our capital needs, fluctuating between $39.0 million and $400.5 million during 2005.

We operate our business to qualify as a REIT for federal income tax purposes. Our primary objective in maintaining our REIT status is to pay dividends to our shareholders on a tax-efficient basis. We manage our balance sheet investments to produce a portfolio that meets the asset and income tests necessary to maintain our REIT qualification and otherwise conduct our investment management business through our wholly-owned subsidiary, CT Investment Management Co., which is subject to federal income tax.

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Investment Strategies

Since 1997, our investment programs have focused on various strategies designed to take advantage of investment opportunities that have developed in the commercial real estate “mezzanine” sector. These investment opportunities have been created largely by the evolution and growing importance of securitization in the commercial real estate capital markets. With approximately $2.5 trillion outstanding as of September 30, 2005, U.S. commercial real estate debt is a large and dynamic market that had traditionally been dominated by institutional lenders such as banks, insurance companies and thrifts making first mortgage loans for retention in their own portfolios. In the last decade, securitized debt has captured an increasing share of this market, growing from 6% of the total amount outstanding in the third quarter of 1995 to approximately 20% by the end of the third quarter in 2005. More importantly, according to industry estimates, CMBS now accounts for roughly 40-50% of annual new originations, with domestic CMBS issuance in 2005 exceeding $169 billion. In addition, many traditional lenders have adopted CMBS standards in their portfolio lending programs, further extending the influence of securitization in the market.

The essence of securitization is risk segmentation, whereby whole mortgage loans (or pools of loans) are tranched into multiple classes and sold to different buyers based on their risk tolerance and return requirements. The most senior classes, which have the lowest risk and therefore the lowest return, are rated investment grade (AAA through BBB-) by the credit rating agencies. Debt that is subordinate to these investment grade classes is either sold as securities rated below investment grade or outside the securitized pools as individual property (or portfolio) specific loans.  In either case, these investments are subordinate to the senior debt but senior to the owner/operator’s equity investment and command a higher yield than the senior indebtedness. These “mezzanine” tranches may carry sub-investment grade ratings or no rating at all.

Depending on our assessment of relative value, our real estate investments may take a variety of forms including:

•Property Mezzanine Loans — These are secured property loans that are subordinate to a first mortgage loan, but senior to the owner’s equity. A mezzanine loan is evidenced by its own promissory note and is typically made to the owner of the property-owning entity, which is typically the senior loan borrower. It is not secured by the first mortgage on the property, but by a pledge of the mezzanine borrower’s ownership interest in the property-owning entity. Subject to negotiated contractual restrictions, the mezzanine lender generally has the right, following foreclosure, to become the owner of the property, subject to the lien of the first mortgage.

•B Notes — These are loans evidenced by a junior participation in a first mortgage on one or more properties; the senior participation is known as an A Note. Although a B Note may be evidenced by its own promissory note, it shares a single borrower and mortgage with the A Note and is secured by the same collateral. B Note lenders have the same obligations, collateral and borrower as the A Note lender and in most instances are contractually limited in rights and remedies in the case of a default. The B Note is subordinate to the A Note by virtue of a contractual arrangement between the A Note lender and the B Note lender.

•Subordinate CMBS — these commercial mortgage-backed securities are the junior classes of securitized pools of individual first mortgage loans. Cash flows from the underlying mortgages are aggregated and allocated to the different classes in accordance with their seniority, typically ranging from the AAA rated through the unrated, first-loss tranche. Administration and contractually defined servicing of the pool are performed by a trustee and servicers, who act on behalf of all holders in accordance with contractual agreements. Our investments generally represent the subordinated tranches ranging from the BBB rated through the unrated class.  When possible, we are designated the special servicer for the CMBS trusts in which we have appropriate ownership interests enabling us to control the resolution of matters which require lender approval.

•Corporate Mezzanine Loans — These are investments in or loans to real estate-related operating companies, including REITs. Such investments may take the form of secured debt, preferred stock and other hybrid instruments such as convertible debt. Corporate mezzanine loans may finance,

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among other things, operations, mergers and acquisitions, management buy-outs, recapitalizations, start-ups and stock buy-backs generally involving real estate and real estate-related entities.

•First Mortgage Loans — These are secured property loans evidenced by a first mortgage which is senior to any mezzanine financing and the owner’s equity. These loans are typically bridge loans for property owners that require interim financing until permanent financing can be obtained. Our first mortgage loans are generally relatively short in duration, with extension options as deemed appropriate, and typically require a balloon payment of principal at maturity. We may also originate and fund first mortgage loans in which we intend to sell the senior tranche, thereby creating a B Note. These loans may include parri passu participations in first mortgage loans.

•Synthetic Interests in Real Estate Debt and Related Products — These instruments are contracts between parties whereby payments are exchanged based upon the performance of an underlying reference obligation.  The type of obligation referenced may be any of the above described asset types.  These investments can take the form of either a total return swap, an arrangement where the counterparty owns the reference obligation and under certain circumstances may put the referenced obligation to the investor, or a credit default swap, where the counterparty generally does not own the specific reference obligation and the ultimate risk is limited to the size of the investment.  In addition to the performance of the reference obligation, these synthetic interests carry the additional risk of the performance of the counterparty.

We finance single properties, multiple property portfolios and operating companies, with our investment typically representing a portion of the capital structure ranging up to 85% of underlying collateral value. We have created portfolios which are diversified in terms of investment format, property type and geographic market. The following charts illustrate the diversification achieved from July 1997 through December 31, 2005.

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2005 was a record year for us in terms of origination volume, with $1.5 billion of total investments made for our balance sheet and our funds under management.  The charts below exhibit the diversification of the assets we originated in 2005.

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Business Plan

Our business strategy is to continue to grow our balance sheet investments and our third-party assets under management. We expect the growth of our business to be driven primarily by the following activities:

•we will continue to make commercial real estate “mezzanine” investments for our balance sheet;

•we will expand our investment management business through additional offerings of subsequent managed vehicles; and

•we may incubate or acquire complementary balance sheet and investment management businesses that leverage our core skills in credit underwriting and financial structuring.

Competition

We are engaged in a highly competitive business. We compete for loan and investment opportunities with numerous public and private investment vehicles, including financial institutions, specialty finance companies, mortgage banks, pension funds, opportunity funds, hedge funds, REITs and other institutional investors, as well as individuals.  Many competitors are significantly larger than us, have well-established operating histories and may have greater access to capital and other resources and may have other advantages over us.  These competitors may be willing to accept lower risk adjusted returns on their investments or compromise underwriting standards and, as a result, our origination volume and profit margins could be adversely affected.  In addition, the investment management industry is highly competitive and there are numerous well-established competitors possessing substantially greater financial, marketing, personnel and other resources than us.  We compete with other investment management companies in attracting capital for funds under management.

Government Regulation

Our activities, including the financing of our operations, are subject to a variety of federal and state regulations.  In addition, a majority of states have ceilings on interest rates chargeable to certain customers in financing transactions.

Employees

As of December 31, 2005, we had 28 full-time employees.  None of our employees are covered by a collective bargaining agreement and management considers the relationship with our employees to be good.

Code of Business Conduct and Ethics and Corporate Governance Documents

We have adopted a code of business conduct and ethics that applies to all of our employees, including our principal executive officer and principal financial and accounting officer.  This code of business conduct and ethics is designed to comply with SEC regulations and New York Stock Exchange corporate governance rules related to codes of conduct and ethics and is posted on our corporate website at http://www.capitaltrust.com.  In addition, our corporate governance guidelines and charters for our audit, compensation and corporate governance committees of the board of directors are also posted on our corporate website.  Copies of our code of business conduct and ethics, our corporate governance guidelines and our committee charters are also available free of charge, upon request directed to Investor Relations, Capital Trust, Inc., 410 Park Avenue, 14th Floor, New York, NY 10022.

Website Access to Reports

We maintain a website at www.capitaltrust.com. Effective as of January 1, 2003, through our website, we make available, free of charge, our annual proxy statement, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.  The SEC maintains a website that contains these reports at http://www.sec.gov.

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Item 1A.Risk Factors

FORWARD-LOOKING INFORMATION

Our Annual Report on Form l0-K for the year ended December 31, 2005, our 2005 Annual Report to Shareholders, any of our Quarterly Reports on Form 10-Q or Current Reports on Form 8-K of the Company, or any other oral or written statements made in press releases or otherwise by or on behalf of Capital Trust, Inc., may contain forward-looking statements within the meaning of the Section 21E of the Securities and Exchange Act of 1934, as amended, which involve certain risks and uncertainties.  Forward-looking statements predict or describe our future operations, our business plans, our business and investment strategies and portfolio management and the performance of our investments and funds under management.  These forward-looking statements are identified by their use of such terms and phrases as “intends,” “intend,” “intended,” “goal,” “estimate,” “estimates,” “expects,” “expect,” “expected,” “project,” “projected,” “projections,” “plans,” “seeks,” “anticipates,” “anticipated,” “should,” “could,” “may,” “will,” “designed to,” “foreseeable future,” “believe,” “believes” and “scheduled” and similar expressions.  Our actual results or outcomes may differ materially from those anticipated.  Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Our actual results may differ significantly from any results expressed or implied by these forward-looking statements. Some, but not all, of the factors that might cause such a difference include, but are not limited to:

•the general political, economic and competitive conditions, in the United States;

•the level and volatility of prevailing interest rates and credit spreads, adverse changes in general economic conditions and real estate markets, the deterioration of credit quality of borrowers and the risks associated with the ownership and operation of real estate;

•a significant compression of the spreads of the interest rates earned on interest-earning assets over the interest rates paid on interest-bearing liabilities that adversely affects operating results;

•adverse developments in the availability of desirable loan and investment opportunities and the ability to obtain and maintain targeted levels of leverage and borrowing costs;

•adverse changes in local market conditions, competition, increases in operating expenses and uninsured losses affecting a property owner’s ability to cover operating expenses and the debt service on financing provided by us;

•authoritative generally accepted  accounting principles or policy changes from such standard-setting bodies as the Financial Accounting Standards Board and the Securities and Exchange Commission; and

•the risk factors set forth below.

Risks Related to Our Investment Program

Our existing loans and investments expose us to a high degree of risk associated with investing in commercial real estate-related 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 on many factors beyond our control. The ultimate performance and value of our investments is subject to the varying degrees of risk generally

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incident to the ownership and operation of the commercial properties which collateralize or support our investments. The ultimate performance and value of our loans and investments depends upon the commercial property owner’s ability to operate the property so that it produces cash flows needed to pay the interest and principal due to us on our loans and investments. Revenues and cash flows may be adversely affected by:

•changes in national economic conditions;

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

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

•changes in interest rates and in the availability of mortgage financing;

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

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

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

•adverse changes in zoning laws;

•the impact of present or future environmental legislation and compliance with environmental laws; 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 our loans or investments experiences any of the foregoing events or occurrences, the value of, and return on, such investments, our profitability and the market price of our class A common stock would be negatively impacted.

We may change our investment strategy without shareholder consent which may result in riskier investments than our current investments.

As part of our strategy, we may seek to expand our investment activities beyond real estate-related investments.  We may change our investment activities at any time without the consent of our shareholders, which could result in our making investments that are different from, and possibly riskier than, our current real estate investments.  New investments we may make outside of our area of expertise may not perform as well as our current portfolio of real estate investments.

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

Our investments involve the risks attendant to investments consisting of subordinated loan positions.  In many cases, management of our investments and our remedies with respect thereto, including the ability to foreclose on or direct decisions with respect to the collateral securing such investments, is subject to the rights of senior lenders and the rights set forth in inter-creditor or servicing agreements.

We may not be able to obtain the level of leverage necessary to optimize our return on investment.

Our return on investment depends, in part, upon our ability to grow our balance sheet portfolio of invested assets and those of our funds through the use of leverage at interest rates that are lower than the interest rates earned on our investments. We generally obtain leverage through bank credit facilities, repurchase agreements and other borrowings. Our ability to obtain the necessary leverage on attractive terms ultimately depends upon the quality of the portfolio assets that are being pledged and our ability to maintain interest coverage ratios meeting prevailing market underwriting standards which vary according to lenders’ assessments of our and our funds’ creditworthiness and the terms of the borrowings. Our failure to obtain and/or maintain leverage at desired levels, or to obtain leverage on attractive terms, could have a material adverse effect on our performance or that of our funds. Moreover, we are dependent upon a few lenders to provide the primary credit facilities for our origination or acquisition of loans and investments. Our ability to obtain financing through collateralized debt obligations is subject to conditions in the debt

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capital markets, which may be adverse from time to time, that affect the level of investor demand for such securities, which are impacted by factors beyond our control.

We are subject to the risks of holding leveraged investments.

Leverage creates an opportunity for increased return on equity, but at the same time creates other risks. For example, leveraging magnifies changes in the net worth of our funds. We and our funds will leverage assets only when there is an expectation that leverage will enhance returns, although we cannot assure you that the use of leverage will prove to be beneficial. Increases in credit spreads in the market generally may adversely affect the market value of our investments. Because borrowings under our credit facilities are secured by our investments, the borrowings available to us may decline if the market value of our investments decline. Moreover, we cannot assure you that we and our funds will be able to meet debt service obligations and, to the extent such obligations are not met, there is a risk of loss of some or all of our and their assets through foreclosure or a financial loss if we or they are required to liquidate assets at a commercially inopportune time to satisfy our debt obligations.

Our success depends on the availability of attractive investments and our ability to identify, structure, consummate, 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, manage and realize returns on, credit-sensitive investment opportunities. In general, the availability of desirable credit sensitive investment opportunities and, consequently, our balance sheet returns and our funds’ investment returns, will be affected by the level and volatility of interest rates, by conditions in the financial markets, by general economic conditions, by the market and demand for credit-sensitive investment opportunities, and by the supply of capital for such investment opportunities. We cannot assure you 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, notwithstanding the fact that we earn base management fees based upon committed capital during the investment period, if we are not successful in investing all available equity capital for our funds, the potential revenues we earn, including base management fees that are charged on the amount of invested assets after the investment period and incentive management fees, 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. 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 funds 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 than us, which provides them with greater operating flexibility.

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

Our current balance sheet investment program emphasizes loans with “floating” interest rates to protect against fluctuations in interest rates. We do, however, from time to time make fixed rate loans and purchase fixed rate securities, which are subject to the risk of fluctuations in interest rates. Depending on market conditions, fixed rate assets may become a greater portion of our new loan originations. In such cases, we may employ various hedging strategies to limit the effects of changes in interest rates, including engaging in interest rate swaps, caps, floors and other interest rate derivative products. No strategy can completely insulate us or our funds from the risks associated with interest rate changes and there is a risk that they may provide no protection at all. 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 assure you that we will be able to enter into hedging transactions or that such hedging transactions will adequately protect us or our funds against

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the foregoing risks. In addition, cash flow hedges which are not perfectly correlated with a variable rate financing will impact our reported income as gains, and losses on the ineffective portion of such hedges will be recorded.

Our loans and investments may be illiquid which will constrain our ability to vary our portfolio of investments.

Our real estate investments are relatively illiquid.  Such illiquidity may limit our ability to vary our portfolio or our funds’ 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 one of our or our funds’ investments.  We cannot assure you that the fair market value of any of the real property serving as security will not decrease in the future, leaving our or our funds’ 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 funds may:

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

•acquire only a participation in an underlying investment;

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

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

Therefore, we may not be able to exercise control over the loan or investment.  Such financial assets may involve risks not present in investments where senior creditors, servicers or third party controlling investors are not involved.  Our rights to control the process following a 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 funds, or may be in a position to take action contrary to our or our funds’ investment objectives.  In addition, we and our funds may, in certain circumstances, be liable for the actions of our third party partners or co-venturers.

We may not achieve our targeted rate of return on our investments.

We originate or acquire investments based on our estimates or projections of overall rates of return on such investments, which in turn are based on, among other considerations, assumptions regarding the performance of assets, the amount and terms of available financing to obtain desired leverage and the manner and timing of dispositions, including possible asset recovery and remediation strategies, all of which are subject to significant uncertainty.  In addition, events or conditions that we have not anticipated may occur and may have a significant effect on the actual rate of return received on an investment.

We are currently experiencing a low interest rate environment which negatively impacts our ability to originate or acquire investments that produce rates of returns similar to existing investments that were added to our portfolio during a higher interest rate environment.  As we acquire or originate investments for our balance sheet portfolio, whether as new additions or as replacements for maturing investments, there can be no assurance that we will be able to originate or acquire investments that produce rates of return comparable to rates on our existing investments.

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

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

Our investments in subordinated CMBS 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, then by a cash reserve fund or letter of credit, if any, and then by the most junior security holder.  In the event of default and the exhaustion of any equity support, reserve fund, letter of credit and any classes of securities junior to those in which we invest, we may not be able to recover all of our investment in the securities we purchase.  In addition, if the underlying mortgage portfolio has been overvalued by the originator, or if the values subsequently decline and, as a result, less collateral is available to satisfy interest and principal payments due on the related mortgage-backed securities, the securities in which we invest may incur significant losses.

The prices of lower credit quality securities 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 securities because the ability of borrowers of the mortgages underlying the mortgage-backed securities to make principal and interest payments may be impaired. In such event, existing credit support in the securitization structure may be insufficient to protect us against loss of our principal on these securities.

We may invest in troubled assets that are subject to a higher degree of financial risk.

We may make investments in non-performing or other troubled assets that involve a higher degree of financial risk. We cannot assure you that our investment objectives will be realized or that there will be any return on our investment. Furthermore, investments in properties subject to work-out conditions or under bankruptcy protection laws may, in certain circumstances, be subject to additional potential liabilities that could exceed the value of our original investment, including equitable subordination and/or disallowance of claims or lender liability.

We may not be able to acquire eligible investments for a collateralized debt obligation issuance, or may not be able to issue collateralized debt obligation securities on attractive terms, which may require us to utilize more costly financing for our investments.

We intend to capitalize on opportunities to finance certain of our investments on a non-recourse, long-term basis, such as through the issuance of collateralized debt obligations. During the period that we are acquiring these investments, we intend to finance our purchases through our credit and repurchase obligation facilities. We use these facilities to finance our acquisition of investments until we have accumulated a sufficient quantity of investments, at which time we may refinance these lines through a securitization, such as a collateralized debt obligation issuance, or other types of long-term financing. As a result, we are subject to the risk that we will not be able to acquire a sufficient amount of eligible investments to maximize the efficiency of a collateralized debt obligation issuance. In addition, conditions

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in the capital markets may make the issuance of collateralized debt obligations less attractive to us when we do have a sufficient pool of collateral. If we are unable to issue a collateralized debt obligation to finance these investments, we may be required to utilize other forms of potentially less attractive financing.

We may not be able to find suitable replacement investments for collateralized debt obligations with reinvestment periods.

Some collateralized debt obligations have periods where principal proceeds received from assets securing the collateralized debt obligation can be reinvested for a defined period of time, commonly referred to as a reinvestment period. Our ability to find suitable investments during the reinvestment period that meet the criteria set forth in the collateralized debt obligation documentation and by rating agencies may determine the success of our collateralized debt obligation investments. Our potential inability to find suitable investments may cause, among other things, interest deficiencies, hyper-amortization of the senior collateralized debt obligation liabilities and may cause us to reduce the life of our collateralized debt obligations and accelerate the amortization of certain fees and expenses.

The use of collateralized debt obligation financings with over-collateralization and interest coverage requirements may have a negative impact on our cash flow.

The terms of collateralized debt obligations will generally provide that the principal amount of investments must exceed the principal balance of the related bonds by a certain amount and that interest income exceeds interest expense by a certain amount. We anticipate that the collateralized debt obligation terms will provide that, if certain delinquencies and/or losses or other factors cause a decline in collateral or cash flow levels, the cash flow otherwise payable on our investment may be redirected to repay classes of CDOs senior to ours until the issuer or the collateral is in compliance with the terms of the governing documents. Other tests (based on delinquency levels or other criteria) may restrict our ability to receive net income from assets pledged to secure collateralized debt obligations. We cannot assure you that the performance tests will be satisfied. Nor can we assure you, in advance of completing negotiations with the rating agencies or other key transaction parties as to the actual terms of the delinquency tests, over-collateralization and interest coverage terms, cash flow release mechanisms or other significant factors upon which net income to us will be calculated. Failure to obtain favorable terms with regard to these matters may adversely affect the availability of net income to us. If our investments fail to perform as anticipated, our over-collateralization, interest coverage or other credit enhancement expense associated with our collateralized debt obligation financings will increase.

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

If any of the loans we originate or acquire and sell or securitize through collateralized debt obligations 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 impact of the events of September 11, 2001 and the resulting effect 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 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. With the enactment of the Terrorism Risk Insurance Act of 2002, or TRIA, and the subsequent enactment of the Terrorism Risk Insurance Extension Act of 2005, which

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extended the TRIA through the end of 2007, insurers must make terrorism insurance available under their property and casualty insurance policies, but this legislation does not regulate the pricing of such insurance. 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 the adverse effects than others, such as hotel loans, which may experience a significant reduction in occupancy rates following any future attacks. 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.

Risks Related to Our Investment Management Business

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

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

•manage our funds successfully by investing a majority of our funds’ capital in suitable investments that meet the funds’ specified investment criteria;

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

•incentivize our management and professional staff to the task of developing and operating the investment management business; and

•Structure, sponsor and capitalize future funds and other investment products under our management that provide investors with attractive investment opportunities.

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

We may pursue fund management opportunities related to other classes of investments where we do not have prior investment experience.

We may expand our fund management business to the management of private equity funds involving 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 investment, 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 mezzanine and other funds to third party investors.

We face significant competition from large financial and other institutions that have proven track records in marketing and managing private equity investment funds 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 the mezzanine and other fund investments offered by us, we will find it more difficult to attract investors and to capitalize our mezzanine and other funds.

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

Risks Related to Our Company

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

Our ability to develop and operate our business depends to a substantial extent upon the experience, relationships and expertise of our senior management and key employees.  We cannot assure you that these individuals will remain in our employ.  The employment agreement with our chief executive officer, John R. Klopp, expires on December 31, 2008, unless further extended.  The employment agreement with our chief operating officer, Stephen D. Plavin, expires on December 28, 2008, unless further extended.  The loss of the services of our senior management and key employees could have a material adverse effect on our operations.

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

We are subject to a number of potential conflicts between our interests and the interests of our managed investment funds. Although we have agreed to offer Fund III the first opportunity to invest in investment opportunities which have characteristics and projected leveraged returns which meet Fund III’s investment and return objectives, we are subject to potential conflicts of interest in the allocation of investment opportunities between our balance sheet and our managed funds. 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 managed funds. Our interests in such investments may conflict with the interests of our managed funds in related investments at the time of origination or in the event of a default or restructuring of the investment. In the event a default occurs with respect to such an investment, the directors of Fund III appointed by us have agreed to recuse themselves from any vote of the board of Fund III concerning such investment and our co-sponsor’s controlled advisor to Fund III will assume and perform our asset management responsibility with respect to such investment. Finally, our officers and employees may have conflicts in allocating their time and services among us and our managed funds.

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

We rely on an exception from registration as an investment company afforded by Section 3(c)(5)(C) of the Investment Company Act of 1940.  Under this exception, we are required to maintain, on the basis of positions taken by the SEC staff in interpretive and no-action letters, a minimum of 55% of the value of the total assets of our portfolio in “mortgages and other liens on and interests in real estate,” which we refer to as “Qualifying Interests” and a minimum of 80% in an Qualifying Interests and real estate-related assets.  Because registration as an investment company would significantly affect our ability to engage in certain transactions or to organize ourselves in the manner we are currently organized, we intend to maintain our qualification for this exception from registration.  In the past, when required due to the mix of assets in our balance sheet portfolio, we have purchased all of the outstanding interests in pools of whole residential mortgage loans, which we treat as Qualifying Interests based on SEC staff positions.  Investments in such pools of whole residential mortgage loans may not represent an optimum use of our investable capital when compared to the available investments we target pursuant to our investment strategy.  We continue to analyze our investments and may acquire other pools of whole loan mortgage-backed securities when and if required for compliance purposes.  In addition, certain of our investments in subordinated CMBS have terms which we believe allow them to be categorized as Qualifying Interests, including rights

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to cure any defaults on senior CMBS classes, rights to acquire such senior classes in the event of a default and special servicing rights to service defaulted mortgage loans, including rights to control the oversight and management of the resolution of such mortgage loans by workout or modification of loan provisions, foreclosure, deed in lieu of foreclosure or otherwise, and to control decisions with respect to the preservation of the collateral generally, including property management and maintenance decisions.  We also believe that certain of our investments in B Notes will have terms that are similar to those listed above for subordinated CMBS investments that will allow them to be treated as Qualifying Interests. 

In addition, we treat certain of our investments in mezzanine loans as Qualifying Interests when these investments are secured by a first priority, perfected security interest in all of the outstanding beneficial ownership interests in a limited liability company or limited partnership that directly or indirectly owns real property (or a leasehold interest in real property) and engages in no other business but ownership of the real property. We also consider participations in mezzanine loans as Qualifying Interests if these investments have terms that are similar to those listed above for subordinated CMBS and B Notes.

We emphasize that we have not obtained an exemptive order or no-action letter or other form of interpretive guidance from the SEC or its staff to support our positions. Therefore, any decision by the SEC or its staff which advances a position contrary to any of our positions would require us to no longer treat our investments in subordinated CMBS, B Notes, mezzanine loans or participations in mazzanine loans as Qualifying Interests.

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

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

We may expand our franchise through business acquisitions and the recruitment of financial professionals, which may present additional costs and other challenges and may not prove successful.

Our business plan contemplates expansion of our franchise into complementary investment strategies involving other credit-sensitive structured financial products. We may undertake such expansion through business acquisitions or the recruitment of financial professionals with experience in other products. We may also expend a substantial amount of time and capital pursuing opportunities to expand into complementary investment strategies that we do not consummate. The expansion of our operations could place a significant strain on our management, financial and other resources. Our ability to manage future expansion will depend upon our ability to monitor operations, maintain effective quality controls and significantly expand our internal management and technical and accounting systems, all of which could result in higher operating expenses and could adversely affect our current business, financial condition and results of operations.

We cannot assure you that we will be able to identify and integrate businesses or professional teams we acquire to pursue complementary investment strategies and expand our business. Moreover, any decision to pursue expansion into businesses with complementary investment strategies will be in the discretion of our management and may be consummated without prior notice or shareholder approval. In such instances, shareholders will be relying on our management to assess the relative benefits and risks associated with any such expansion.

Risks Relating to Our Class A Common Stock

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

By virtue of their direct and indirect share ownership, John R. Klopp, a director and our president and chief executive officer, Craig M. Hatkoff, a director and former officer, and other shareholders indirectly owned by trusts for the benefit of our chairman of the board, Samuel Zell, have the power to significantly influence our affairs and are able to influence the outcome of matters required to be submitted to shareholders for approval, including the election of our directors, amendments to our charter, mergers, sales of assets and other acquisitions or sales. The influence exerted by these shareholders over our affairs might not be consistent with the interests of some or all of our other shareholders. We cannot assure you that these shareholders will not exercise their influence over us in a manner detrimental to your interests. As of December 31, 2005, these shareholders collectively own and control 2,522,473 shares of our class A

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common stock representing approximately 16.5% of our outstanding class A common stock. This concentration of ownership 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.

W. R. Berkley Corporation owns 2,000,000 shares of our class A common stock which represents 13.1% of our outstanding class A common stock.  An officer of Berkley serves on our board of directors and, therefore, has the power to significantly influence our affairs.  In addition, Vornado Realty, L.P. owns 1,424,474 shares of our class A common stock which represents 9.3% of our outstanding class A common stock. Through their significant ownership of our class A common stock, these security holders may have the ability to influence the outcome of matters submitted for shareholder approval.

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

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

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

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

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

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

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

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

The statute permits various exemptions from its provisions, including business combinations that are exempted by the board of directors prior to the time that an interested shareholder becomes an interested shareholder.  Our board of directors has exempted any business combination involving family partnerships controlled separately by John R. Klopp and Craig M. Hatkoff, and a limited liability company indirectly controlled by a trust for the benefit of Samuel Zell and his family.  As a result, these persons and Berkley may enter into business combinations with us without compliance with the super-majority vote requirements and the other provisions of the statute.

We are subject to the Maryland Control Share Acquisition Act. With certain exceptions, the Maryland General Corporation Law provides that “control shares” of a Maryland corporation acquired in a control share acquisition have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter, excluding shares owned by the acquiring person or by our officers or 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 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 which exemptions extend to Berkley, family partnerships controlled separately by John R. Klopp and Craig M. Hatkoff, and a limited liability company indirectly controlled by a trust for the benefit of Samuel Zell and his family.

We are also subject to the Maryland Unsolicited Takeovers Act which permits our board of directors, among other things and notwithstanding any provision in our charter or bylaws, to elect on our behalf to stagger the terms of directors, to increase the shareholder vote required to remove a director and to provide that shareholder-requested meetings may be called only upon the request of shareholders entitled to cast at least a majority of the votes entitled to be cast at the meeting. 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.

The market value of our class A common stock may be adversely affected by many factors.

As with any public company, a number of factors may adversely influence the price of our class A common stock, many of which are beyond our control. These factors include:

•the level of institutional interest in us;

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

•the attractiveness of securities of REITs in comparison to other companies; and

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•the market’s perception of our growth potential and potential future cash dividends.

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

One of the factors that will influence the price of our class A common stock will be the dividend yield on our stock (distributions as a percentage of the price of our stock) relative to market interest rates. An increase in market interest rates may lead prospective purchasers of our class A common stock to expect a higher dividend yield, which would adversely affect the market price of our class A common stock.

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

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

Risks Related to our REIT Status

Our charter does not permit any individual to own more than over 2.5% of our class A common stock, and attempts to acquire our class A common stock in excess of the 2.5% limit would be void without the prior approval of our board of directors.

For the purpose of preserving our qualification as a REIT for federal income tax purposes, our charter prohibits direct or constructive ownership by any individual of more than 2.5% of the lesser of the total number or value of the outstanding shares of our 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 2.5% of our outstanding class A common stock by an individual or entity could cause an individual to own constructively in excess of 2.5% 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 this ownership limit in the future.  Any attempt to own or transfer shares of our class A common stock in excess of the ownership limit without the consent of our board of directors will be void, and will result in the shares being transferred by operation of law to a charitable trust, and the person who acquired such excess shares will not be entitled to any distributions thereon or to vote such excess shares.

Our charter contains a provision that exempts certain of our officers, directors and their related persons from this ownership limit and we increased the limit for William R. Berkley to 6.0% and for one other major shareholder of Berkley identified to us to 4.0%. The 2.5% 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.

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

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

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

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

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

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

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

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

•unless we were entitled to relief under applicable statutory provisions, we would be required to pay taxes, and thus, our cash available for distribution to shareholders would be reduced for each of the years during which we did not qualify as a REIT.

Income from our fund 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.

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.

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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.  In addition, no more than 5% of the value of our assets can consist of the securities of any one issuer.  If we fail to comply with these requirements, we must dispose of a portion of our assets within 30 days after the end of the calendar quarter in order to avoid losing our REIT status and suffering adverse tax consequences.

Complying with REIT requirements may force us to borrow to make distributions to shareholders.

From time to time, our taxable income may be greater than our cash flow available for distribution to shareholders.  If we do not have other funds available in these situations, we may be unable to distribute substantially all of our taxable income as required by the REIT provisions of the Internal Revenue Code.  Thus, we could be required to borrow funds, sell a portion of our assets at disadvantageous prices or find another alternative.  These options could increase our costs or reduce our equity.

The “taxable mortgage pool” rules may limit the manner in which we effect future securitizations.

Certain of our securitizations could be considered taxable mortgage pools for federal income tax purposes. Since we conduct our operations to qualify as a REIT, so long as we own 100% of the equity interests in a taxable mortgage pool, we should not be adversely affected by the characterization of the securitization as a taxable mortgage pool (assuming that we do not have any shareholders who might cause a corporate income tax to be imposed upon us by reason of our owning a taxable mortgage pool). We would be precluded, however, from selling to outside investors equity interests in such securitizations or from selling any debt securities issued in connection with such securitizations that might be considered to be equity interests for tax purposes. These limitations will preclude us from using certain techniques to maximize our returns from securitization transactions. If the securitization vehicles in which we participate were considered a taxable mortgage pool, shareholders who are tax-exempt and shareholders who are not United States persons may be required to pay tax on their share of any excess inclusion income.

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Item 1B.Unresolved Staff Comments

None.

Item 2.Properties

Our principal executive and administrative offices are located in approximately 11,885 square feet of office space leased at 410 Park Avenue, 14th Floor, New York, New York 10022. Our telephone number is (212) 655-0220 and our website address is http;//www.capitaltrust.com. Our lease for office space expires in June 2008. We believe that this office space is suitable for our current operations for the foreseeable future.

Item 3.Legal Proceedings

We are not party to any material litigation or legal proceedings, or to the best of our knowledge, any threatened litigation or legal proceedings, which, in our opinion, individually or in the aggregate, would have a material adverse effect on our results of operations or financial condition.

Item 4.Submission of Matters to a Vote of Security Holders

We did not submit any matters to a vote of security holders during the fourth quarter of 2005.

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PART II

Item 5.Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our class A common stock is listed for trading on the New York Stock Exchange under the symbol “CT.”  The table below sets forth, for the calendar quarters indicated, the reported high and low sale prices for the class A common stock as reported on the NYSE composite transaction tape and the per share cash dividends declared on the class A common stock.

	High		Low		Dividend
2005
Fourth Quarter	$	32.30	$	28.87	$	0.80
Third Quarter	34.50		30.57		0.55
Second Quarter	34.97		32.06		0.55
First Quarter	34.00		28.86		0.55
2004
Fourth Quarter	$	34.56	$	27.32	$	0.50
Third Quarter	29.10		23.25		0.45
Second Quarter	27.25		22.40		0.45
First Quarter	26.15		22.50		0.45
2003
Fourth Quarter	$	23.40	$	19.71	$	0.45
Third Quarter	20.99		18.60		0.45
Second Quarter	19.62		14.49		0.45
First Quarter	18.75		13.35		0.45

The last reported sale price of the class A common stock on March 6, 2006 as reported on the NYSE composite transaction tape was $32.29.  As of March 6, 2006, there were 1,272 holders of record of the class A common stock.  By including persons holding shares in broker accounts under street names, however, we estimate our shareholder base to be approximately 3,568 as of March 6, 2006.

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 generally accepted accounting principles) to our shareholders so as to comply with the REIT provisions of the Internal Revenue Code. We intend to make dividend distributions quarterly and, if necessary for REIT qualification purposes, we may need to distribute any taxable income remaining after the distribution of the final regular quarterly dividend each year, together with the first regular quarterly dividend payment of the following taxable year or, at our discretion, in a special dividend distributed prior thereto.  Furthermore, we seek to set our recurring dividend at a level that we believe is comfortably sustainable.

In the fourth quarter of 2005, we distributed $0.80 per share comprised of a regular quarterly dividend of $0.60 per share and a special dividend of $0.20 per share, representing 2005 REIT taxable income in excess of the amount paid out in our recurring, quarterly distributions.

Our dividend policy is 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.  All dividends declared in 2004 and 2005 are ordinary income.

We did not repurchase any of our common stock during the year ended December 31, 2005.

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Item 6.Selected Financial Data

The following table sets forth selected consolidated financial data, which was derived from our historical consolidated financial statements included in our Annual Reports on Form 10-K for the years then ended.

Certain reclassifications have been made to all periods presented prior to 2005 to reflect the application of Financial Accounting Standards Board Interpretation No. 46R on January 1, 2004, following the adoption of which we no longer consolidated CT Convertible Trust I, the entity which had purchased our junior subordinated debentures and issued convertible trust common and preferred securities. During the 2004 fiscal year, these securities were either redeemed or converted.

We began to conduct our operations to qualify as a REIT for federal income tax purposes for the 2003 fiscal year, and elected REIT status when we filed our 2003 federal tax return on September 15, 2004. This election resulted in a material reduction of our tax liability for 2005, 2004 and 2003. As a result, our income tax expense and net income after tax for 2005, 2004 and 2003 will not be comparable to our income tax expense and net income after tax for periods prior to 2003.

You should read the following information together with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the notes thereto included in “Item 8. Financial Statements and Supplementary Data”.

	Years Ended December 31,
	2005			2004			2003		2002			2001
	(in thousands, except for per share data)
STATEMENT OF OPERATIONS DATA:
REVENUES:
Interest and investment income	$	86,753		$	46,639		$	38,577	$	47,655		$	68,200
(Loss)/income from equity investments in affiliated Funds	(222		)	2,407			1,526		(2,534		)	2,991
Advisory, special servicing and investment banking fees	—			10			—		2,207			277
Gain on sale of investments	4,951			300			—		—			—
Management and advisory fees from Funds	13,124			7,853			8,020		10,123			7,664
Total revenues	104,606			57,209			48,123		57,451			79,132
OPERATING EXPENSES:
Interest expense	37,229			20,141			19,575		34,184			42,856
General and administrative expenses	21,939			15,229			13,320		13,996			15,382
Depreciation and amortization	1,114			1,100			1,057		992			909
Net unrealized (gain)/loss on derivative securities and corresponding hedged risk on CMBS	—			—			—		(21,134		)	542
Net realized loss on sale of fixed assets, investments and settlement of derivative securities	—			—			—		28,715			—
Unrealized loss on available-for-sale securities for other-than-temporary impairment	—			5,886			—		—			—
(Recapture of)/provision for allowance for possible credit losses	—			(6,672		)	—		(4,713		)	748
Total operating expenses	60,282			35,684			33,952		52,040			60,437
Income before income tax expense	44,324			21,525			14,171		5,411			18,695
Income tax expense/(benefit)	213			(451		)	646		15,149			9,325
NET INCOME/(LOSS)	44,111			21,976			13,525		(9,738		)	9,370
Less: Preferred stock dividend and dividend requirement	—			—			—		—			606
Net income/(loss) allocable to common stock	$	44,111		$	21,976		$	13,525	$	(9,738	)	$	8,764
PER SHARE INFORMATION:
Net income/(loss) per share of common stock:
Basic	$	2.92		$	2.17		$	2.27	$	(1.62	)	$	1.30
Diluted	$	2.88		$	2.14		$	2.23	$	(1.62	)	$	1.12
Dividends declared per share of common stock	$	2.45		$	1.85		$	1.80	$	—		$	—
Weighted average shares of common stock outstanding:
Basic	15,124			10,141			5,947		6,009			6,722
Diluted	15,336			10,277			10,288		6,009			12,041

	As of December 31,
	2005		2004		2003		2002		2001
BALANCE SHEET DATA:
Total assets	$	1,557,530	$	877,766	$	399,926	$	387,759	$	683,451
Total liabilities	1,218,680		561,269		303,909		303,703		580,823
Shareholders’ equity	338,850		316,497		96,017		84,056		102,628

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Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

We are a fully integrated, self-managed finance and investment management company that specializes in credit-sensitive structured financial products.  To date, our investment programs have focused on loans, securities and related instruments backed by income-producing commercial real estate assets.  We invest for our own account and for private equity funds that we manage on behalf of third party investors.  From the commencement of our finance business in 1997 through December 31, 2005, we have completed  $5.9 billion of investments both directly and on behalf of our managed funds.  We conduct our operations in order to qualify as a real estate investment trust, or REIT, for federal income tax purposes.

Balance Sheet Overview

During the year ended December 31, 2005, we purchased 27 classes of commercial mortgage-backed securities, or CMBS, with a face value of $269.1 million for $245.1 million. These investments were comprised of 20 fixed-rate CMBS for $193.2 million ($217.2 million face) that earn interest at an average rate of 6.34% and seven floating-rate CMBS for $51.9 million ($51.9 million face) that earn interest at an average rate of  the London Interbank Offered Rate, or LIBOR, plus 1.89% (6.28% at December 31, 2005). During the year, we received partial repayments on two commercial mortgage-backed securities totaling $6.5 million and one CMBS for $7.8 million was satisfied and repaid.

At December 31, 2005, we held 45 investments in 29 separate issues of commercial mortgage-backed securities with an aggregate face value of $526.6 million.  CMBS with a face value of $106.7 million earn interest at an average variable rate of LIBOR plus 2.50% (6.89% at December 31, 2005).  The remaining CMBS, $419.9 million face value, earn interest at fixed rates averaging 6.97% of the face value.  We purchased the CMBS at a net discount of $49.9 million. We expect to recover, net of anticipated losses and other than temporary impairment, $494.5 million. As of December 31, 2005, the remaining net discount to be amortized into income over the remaining lives of the securities was $18.1 million.  At December 31, 2005, with discount amortization, the CMBS earn interest at a blended rate of 8.03% of the adjusted cost net of the unamortized discount.  As of December 31, 2005, the securities were carried at adjusted cost of $488.0 million, reflecting a $11.6 million unrealized gain to their amortized cost. The CMBS mature at various dates from June 2006 to July 2027.  At December 31, 2005, the expected average life for the CMBS portfolio is 81 months.

During the year ended December 31, 2005, we purchased or originated 45 loans for $791.0 million. Of the 45 loans, five loans with a cost of $84.3 million earn interest at an average fixed rate of 7.12% and 40 loans with a cost of $706.7 million earn interest at an average variable rate of LIBOR plus 3.16% (7.55% at December 31, 2005). The new loans were comprised of four first mortgage loans for $75.2 million, 11 property mezzanine loans for $253.2 million and 30 B Notes for $462.6 million. During the year, we received partial repayments on 24 loans totaling $56.7 million. One first mortgage loan, three property mezzanine loans and 32 B Notes totaling $302.7 million were satisfied and repaid.  We have no outstanding loan commitments at December 31, 2005.

At December 31, 2005, we had 76 performing loans receivable with a current carrying value of $987.2 million.  Our entire portfolio of loans has a face value of $996.1 million and we estimate the market value of the portfolio at $998.7 million.  Eight of the loans totaling $164.2 million bear interest at an average fixed rate of interest of 8.70%.  The 68 remaining loans, totaling $822.9 million, bear interest at a variable rate of interest averaging LIBOR plus 3.52% (7.91% at December 31, 2005).  One mortgage loan receivable with an original principal balance of $8.0 million reached maturity on July 15, 2000 and has not been repaid with respect to principal and interest.  In December 2002, the loan was written down to $4.0 million through a charge to the allowance for possible credit losses.  Since the write-down, we have received proceeds of $1.0 million reducing the carrying value of the loan to $3.0 million.  In accordance with our policy for revenue

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recognition, income recognition has been suspended on this loan and for the year ended December 31, 2005, $1.1 million of potential interest income has not been paid or recorded.  All other loans are performing in accordance with their terms.

At December 31, 2005, we had one investment in a total return swap agreement.  Under the terms of the agreement, we have posted $4.0 million of cash collateral as security for a $20.0 million synthetic interest in an underlying referenced loan that is secured by shares of a publicly traded REIT.  We receive interest at LIBOR flat on the $4.0 million cash collateral balance and LIBOR plus 3.75% on the $20.0 million interest in the referenced loan and pay LIBOR plus 1.00% on the $20.0 million referenced loan.  At December 31, 2005, we are receiving LIBOR plus 13.75% on the $4.0 million cash collateral balance (18.14% at December 31, 2005).  We collected an origination fee with the execution of the agreement which adds an additional 2.95% to the return. If the price of the stock which serves as collateral for the referenced loan falls below a specified level, we will be required to increase our cash collateral to 30% of the loan balance.  If the referenced loan was to default, we would be required to purchase the loan, thereby eliminating the total return swap agreement. The total return swap is treated as a non-hedge derivative for accounting purposes and therefore changes in market value are recorded through the income statement.  At December 31, 2005 the total return swap has a fair market value of $4.0 million.

At December 31, 2005, we had investments in Funds of $14.3 million, including $4.6 million of unamortized costs that were incurred and capitalized, primarily in connection with entering into our venture agreement with Citigroup Alternative Investments LLC and the commencement of the related fund management business. These costs are being amortized and are reflected as a reduction in income/(loss) from equity investments in Funds.

At December 31, 2005, we were party to repurchase agreements with six counterparties with total repurchase commitments of $775.0 million and had total outstanding borrowings of $369.8 million.  The weighted average cash borrowing cost for all the repurchase agreements outstanding at December 31, 2005 was LIBOR plus 0.94% (5.33% at December 31, 2005). Assuming no additional utilization under the repurchase agreements and including the amortization of all fees paid and capitalized over the remaining term of the repurchase agreements, the all-in effective borrowing cost was LIBOR plus 1.18% (5.57% at December 31, 2005).  At December 31, 2005, if all of the assets pledged under repurchase agreements were drawn upon, we could obtain an additional $89.0 million of financing.

With our issuance of collateralized debt obligations, commonly known as CDOs, we have substantially restructured the manner in which we finance our business.  While we still finance a portion of our investment activity through our repurchase agreements, 69% of our debt was in the form of CDOs at December 31, 2005. The CDOs we have issued  are non-recourse, non-mark-to-market, index matched financings that generally carry lower interest rates and allow for higher levels of leverage than our previously utilized financing sources.

On March 15, 2005, we issued our second collateralized debt obligation, or CDO, that we refer to as CDO II.  CDO II is a reinvesting CDO secured by a $337.8 million pool of mezzanine loans, B Notes, CMBS and cash.  At issuance, we sold notes rated AAA to BBB- with a face value of $299.0 million to third parties at par.  The notes we sold bear interest at a weighted average floating rate of LIBOR plus 0.49% (4.88% at December 31, 2005).  We retained all of the unrated and below investment grade rated notes and the preferred and common equity interests in the wholly-owned CDO issuers.  We incurred $5.2 million of issuance costs which will be amortized on a level yield basis over the expected life of CDO II.  Including amortization of the issuance costs, the all in effective rate for the notes sold was LIBOR plus 0.71% (5.10% at December 31, 2005).  CDO II was stru ctured with a five-year reinvestment period that allows us to reinvest principal proceeds from collateral repayments into new investments, effectively extending the life of this non-recourse, non-mark-to-market financing. For accounting purposes, CDO II is consolidated in our financial statements.

On August 4, 2005, we issued our third CDO that we refer to as CDO III.  CDO III is secured by a static pool of $341.3 million of fixed rate subordinate CMBS.  At issuance, we sold notes rated AAA through BBB with a total face value of $269.6 million to third parties for proceeds of $272.2 million.  We retained the BBB- rated notes, all of the unrated and below investment grade rated notes, and the preferred and common equity interests in the wholly-owned CDO issuers.  The fixed rate notes we sold carry a weighted average coupon of 5.22%, were sold at a $2.6 million premium to face, and have an effective cash cost to us of 5.17%.  CDO III provides index matched, non-recourse and non-mark-to-market financing for the underlying collateral.  We incurred $2.1 million of issuance costs that will be amortized on a level yield basis over the expected life of CDO III.  Including amortization of the issuance costs, the all in effective rate for the notes sold was 5.25%.  For accounting purposes, CDO III is consolidated in our financial statements.

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At December 31, 2005, we had collateralized debt obligations outstanding from three separate issuances with a total face value of $821.3 million.  Our CDOs are financing vehicles for our assets and, as such, are consolidated on our balance sheet at $823.7 million, representing the amortized sales price of the securities sold to third parties.  In total, our two floating rate CDOs provide us with $551.7 million of debt financing at a stated average interest rate of LIBOR plus 0.55% (4.94% at December 31, 2005) and an all-in effective rate (including the amortization of issuance costs) of LIBOR plus 0.87% (5.26% at December 31, 2005).  Our fixed rate CDO provides us with $269.6 million of notional balance financing (which we sold for proceeds of $272.2 million) with a cash cost of 5.22% (5.17% based upon proceeds) and an all in effective interest rate of 5.25%. On a combined basis, our CDOs provide us with $823.7 million of non-recourse, non-mark-to-market, index matched financing at a weighted average cash credit spread of 0.52% over the applicable index (4.91% December 31, 2005) and a weighted average all in cost of 0.79% over the applicable index (5.18% at December 31, 2005).

We were party to thirteen cash flow interest rate swaps with a total notional value of $183.7 million as of December 31, 2005.  These cash flow interest rate swaps effectively convert floating rate debt to fixed rate debt, which is utilized to finance assets that earn interest at fixed rates.  We receive a rate equal to LIBOR (4.39% at December 31, 2005) and pay an average rate of 4.53%.  The market value of the swaps at December 31, 2005 was $2.3 million, which is recorded as an interest rate hedge asset and as a component of accumulated other comprehensive gain/(loss) on our balance sheet.

In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46, “Consolidation of Variable Interest Entities,” an interpretation of Accounting Research Bulletin 51. In evaluating Interpretation No. 46, we concluded that we could no longer consolidate CT Convertible Trust I, or the Trust, the entity which had purchased our step up convertible junior subordinated debentures and issued company-obligated, mandatory redeemable, convertible trust common and preferred securities.  In 1998, we had issued the convertible junior subordinated debentures and had purchased the convertible trust common securities.  The consolidation of CT Convertible Trust I resulted in the elimination of both the convertible junior subordinated debentures and the convertible trust common securities with the convertible trust preferred securities being reported on our balance sheet after liabilities but before equity and the related expense being reported on the income statement below income taxes and net of income tax benefits.  After the deconsolidation, we reported the convertible junior subordinated debentures as liabilities and the convertible trust common securities as other assets.  The expense from the payment of interest on the debentures was reported as interest and related expenses on convertible junior subordinated debentures and the income received from our investment in the common securities was reported as a component of interest and related income.  We have elected to restate prior periods for the application of Interpretation 46R.  The restatement was effected by a cumulative type change in accounting principle on January 1, 2002.  There was no change to previously reported net income as a result of such restatement.

As of December 31, 2004, the entire $92.5 million aggregate principal amount of our convertible junior subordinated debentures outstanding at December 31, 2003 had been redeemed or converted into class A common stock.  Certain holders converted $44.9 million of the principal amount due on the convertible junior subordinated debentures in connection with the closing of our public offering of class A common stock on July 28, 2004.  On September 29, 2004, following our issuance of a notice of redemption to be effected on September 30, 2004, holders of $44.9 million principal amount of the convertible junior subordinated debentures outstanding converted the principal amount due thereon into 2.2 million shares of our class A common stock at a conversion price of approximately $21.00 per share.  The remaining $3.0 million of the convertible junior subordinated debentures outstanding were repaid to the Trust and then the Trust redeemed the common securities held by us.

In 2000, we announced an open market share repurchase program under which we may purchase, from time to time, up to 666,667 shares of our class A common stock.  Since that time the authorization has been increased by the board of directors to purchase cumulatively up to 2.4 million shares of class A common stock.  At December 31, 2005 we had 666,339 shares remaining authorized for repurchase under the program.  We did not repurchase any of our common stock during the year ended December 31, 2005.

At December 31, 2005, we had 15,273,447 shares of our class A common stock outstanding.

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Investment Management Overview

We operated principally as a balance sheet investor until the start of our investment management business in March 2000 when we entered into a venture with affiliates of Citigroup Alternative Investments to co-sponsor and invest capital in a series of commercial real estate mezzanine investment funds managed by us.  Pursuant to the venture agreement, we have co-sponsored CT Mezzanine Partners I, LLC, or Fund I, Fund II and Fund III, respectively.  We have capitalized costs of $4.6 million, net, from the formation of the venture and the Funds that are being amortized over the remaining anticipated lives of the Funds and the related venture agreement.

Fund I commenced its investment operations in May 2000 with equity capital supplied solely by Citigroup Alternative Investments (75%) and us (25%).  From May 11, 2000 to April 8, 2001, the investment period for the fund, Fund I completed $330 million of total investments in 12 transactions.  On January 31, 2003, we purchased the interest in Fund I held by an affiliate of our co-sponsor, Citigroup Alternative Investments,  LLC, and began consolidating the operations of Fund I in our consolidated financial statements.

Fund II had its initial closing on equity commitments on April 9, 2001 and its final closing on August 7, 2001, ultimately raising $845.2 million of total equity commitments, including $49.7 million (5.9%) from us and $198.9 million (23.5%) from Citigroup Alternative Investments.  Third-party private equity investors, including public and corporate pension plans, endowment funds, financial institutions and high net worth individuals, made the balance of the equity commitments.  During its two-year investment period, which expired on April 9, 2003, Fund II invested $1.2 billion in 40 separate transactions.  CT Investment Management Co. LLC, our wholly-owned taxable REIT subsidiary, acts as the investment manager to Fund II and receives 100% of the base management fees paid by the fund.  As of April 9, 2003, the end of the Fund II investment period, CT Investment Management Co. began earning annual base management fees of 1.287% of invested capital.

We and Citigroup Alternative Investments, through our collective ownership of the general partner, are also entitled to receive incentive management fees from Fund II if the return on invested equity is in excess of 10% after all invested capital has been returned.  The Fund II incentive management fees are split equally between Citigroup Alternative Investments and us.  We will pay 25% of our share of the Fund II incentive management fees as long-term incentive compensation to our employees.  During the twelve months ended December 31, 2005, we received $8.0 million in incentive management fees from Fund II.   The amount of incentive fees to be received in the future will depend upon a number of factors, including the level of interest rates and the fund’s ability to generate returns in excess of 10%, which is in turn impacted by the duration and ultimate performance of the fund’s assets.  Potential incentive fees received as Fund II winds down could result in significant additional income from operations in certain periods during which such payments can be recorded as income.  If Fund II’s assets were sold and liabilities were settled on January 1, 2006 at the recorded book value, and the fund’s equity and income were distributed, we would record approximately $2.1 million of additional gross incentive fees.

We do not anticipate making any additional equity contributions to Fund II or its general partner.  Our net investment in Fund II and its general partner at December 31, 2005 was $2.0 million.  As of December 31, 2005, Fund II had six outstanding loans and investments totaling $60.4 million, all of which were performing in accordance with the terms of their agreements.

On June 2, 2003, Fund III effected its initial closing on equity commitments and on August 8, 2003, its final closing, raising a total of $425.0 million in equity commitments.  Our equity commitment was $20.0 million (4.7%) and Citigroup Alternative Investments’ equity commitment was $80.0 million (18.8%), with the balance made by third-party private equity investors.  From the initial closing through December 31, 2005, we have made equity investments in Fund III of $15.9 million.  Through December 31, 2005, Fund III had made loans and investments of approximately $1.2 billon and as of December 31, 2005.

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CT Investment Management Co. receives 100% of the base management fees from Fund III calculated at a rate equal to 1.42% per annum of committed capital during Fund III’s two-year investment period, which expired June 2, 2005, and 1.42% of invested capital thereafter.  We and our co-sponsor are also entitled to receive incentive management fees from Fund III if the return on invested equity is in excess of 10% after all invested capital has been returned.  We will receive 62.5% and our co-sponsor will receive 37.5% of the total incentive management fees.  We will distribute a portion of our share (up to 40%) of the Fund III incentive management fees as long-term incentive compensation to our employees. No incentive management fees have been earned from Fund III at December 31, 2005 and as such, no amount of such potential fees has been accrued as income in our financial statements. The amount of incentive fees to be received in the future will depend upon a number of factors, including the level of interest rates and the fund’s ability to generate returns in excess of 10%, which is in turn impacted by the duration and ultimate performance of the fund’s assets.  Potential incentive fees received as Fund III winds down could result in significant additional income from operations in certain periods during which such payments can be recorded as income. If Fund III’s assets were sold and liabilities were settled on January 1, 2006 at the recorded book value, and the fund’s equity and income were distributed, we would record approximately $5.4 million of gross incentive fees.

We do not anticipate making any additional equity contributions to Fund III.  Our net investment in Fund III at December 31, 2005 was $8.3 million.  As of December 31, 2005, Fund III had 15 outstanding loans and investments totaling $460.3 million, all of which were performing in accordance with the terms of their agreements.

Year Ended December 31, 2005 Compared to Year Ended December 31, 2004

We reported net income of $44.1 million for the year ended December 31, 2005, an increase of $22.1 million or over 100.0% from the net income of $22.0 million for the year ended December 31, 2004.  These increases were primarily the result of an increase in net interest income from loans and other investments (due to both higher levels of aggregate investments and increases in average LIBOR), the receipt of incentive management fees from Fund II, a gain on the sale of our investment in GRO, income from accelerated amortization from early pay-off’s, and the reduction in the cost of debt through the use of CDO financings.  These increases were partially offset by increases in general and administrative expenses associated with Fund II employee incentive management payments, one time charges for third party services, accelerated amortization of capitalized costs associated with the fund management business and increases in tax expense.

Interest and related income from loans and other investments amounted to $86.2 million for the year ended December 31, 2005, an increase of $39.6 million or 85.0% from the $46.6 million amount for the year ended December 31, 2004.  Average interest-earning assets increased from approximately $552.9 million for the year ended December 31, 2004 to approximately $1.1 billion for the year ended December 31, 2005. The average interest rate earned on such assets decreased from 8.40% for the year ended December 31, 2004 to 8.08% for the year ended December 31, 2005. During the year ended December 31, 2005, we recognized $4.0 million in additional income on the early repayment of loans and the applicable acceleration of net premium amortization. The decrease in rates was due primarily to a change in the mix of our investment portfolio to include more lower risk B Notes in 2005 (which generally carry lower interest rates than mezzanine loans) and a general decrease in credit spreads obtained on newly originated investments, partially offset by a higher average LIBOR rate, which increased by 1.89% from 1.50% for the twelve months ended December 31, 2004 to 3.39% for the twelve months ended December 31, 2005.

We utilize our existing collateralized debt obligations and repurchase obligations to finance our interest-earning assets.

Interest and related expenses on secured debt amounted to $37.2 million for the year ended December 31, 2005, an increase of $23.5 million from the $13.7 million amount for the year ended December 31, 2004.  The increase in expense was due to an increase in the amount of average interest-bearing liabilities outstanding from approximately $333.5 million for the year ended December 31, 2004 to approximately $780.9 million for the year ended December 31, 2005 and an increase in the average rate paid on interest-bearing liabilities from 4.10% to 4.70% for the same periods.  The increase in the average rate is substantially due to increases in the average LIBOR rate, partially offset by the use of collateralized debt obligations and more favorable terms under our repurchase obligations.

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During 2004, we also utilized the convertible junior subordinated debentures to finance our interest-earning assets, recognizing $6.4 million of expenses related to the convertible junior subordinated debentures. No expense was recorded for the twelve months ended December 31, 2005, as the liability was extinguished in 2004 upon the conversion of one half of the principal amount due on the debentures into common stock on July 28, 2004 and the conversion of the remaining amount due on the debentures into common stock on September 29, 2004.

Other revenues increased $7.8 million from $10.6 million for the twelve months ended December 31, 2004 to $18.4 million for the twelve months ended December 31, 2005.  The increase was primarily due to the sale of an equity investment which resulted in a $5.0 million gain and the receipt of incentive management fees from Fund II of $8.0 million during the twelve months ended December 31, 2005. These items were partially offset by a decrease in base management fees and investment income from Fund II, due to lower levels of investment in 2005 as the fund winds down, and a decrease in base management fees and investment income from Fund III, as Fund III reached the end of its investment period on June 2, 2005 and the base fees are now charged on invested capital as opposed to committed capital.  Furthermore, in connection with the receipt of the incentive management fees, Fund II GP, which is 50% owned by us and is the general partner of Fund II, expensed costs that it had previously capitalized of $2.4 million, of which $1.2 million flowed through to us.

General and administrative expensesincreased $6.7 million to $21.9 million for the twelve months ended December 31, 2005 from $15.2 million for the twelve months ended December 31, 2004.  The increase in general and administrative expenses was primarily due to the allocation of Fund II incentive management fees for payment to employees (representing 25% of the total received, or $2.0 million), increases in employee compensation expense from the issuance of additional restricted stock and the annual bonus accrual, due diligence costs of $475,000 from an abandoned corporate acquisition, $282,000 of expenses from the abandonment of a proposed fund and additional expenses related to the services provided under our contract with GRO which began in April 2004.

On at least a quarterly basis, management reevaluates the reserve for possible credit losses based upon our current portfolio of loans. Each loan in our portfolio is evaluated using our proprietary loan risk rating system, which considers loan to value, debt yield, cash flow stability, exit plan, sponsorship, loan structure and any other factors necessary to assess the likelihood of delinquency or default.  If we believe that there is a potential for delinquency or default, a downside analysis is prepared to estimate the value of the collateral underlying our loan, and this potential loss is multiplied by the likelihood of default.  Based upon our detailed review at December 31, 2004, we concluded that a reserve for possible credit losses was no longer warranted and the reserve was recaptured.  Based upon the changes in conditions of these loans and the evaluations completed on the remainder of the portfolio, we concluded that a reserve for possible credit losses was not warranted at December 31, 2005.

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

At December 31, 2005 and 2004, we were in compliance with all REIT requirements and, as such, have not provided for income tax expense on our REIT taxable income for the years ended December 31, 2005 and 2004.  We also have taxable REIT subsidiaries which are subject to tax at regular corporate rates.  During the year ended December 31, 2005 we recorded $213,000 of income tax expense for income that was attributable to our taxable REIT subsidiaries. During the year ended December 31, 2004, we recorded an income tax benefit resulting from losses generated by our taxable REIT subsidiary of $451,000.

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Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

We reported net income of $22.0 million for the year ended December 31, 2004, an increase of $8.5 million from the net income of $13.5 million for the year ended December 31, 2003.  These increases were primarily the result of an increase in net interest income from loans and other investments.  In 2004, we raised significant new capital, increased interest earning assets by $442.0 million, and financed our business more efficiently through the CDO I transaction.  As a result, debt costs as a percentage of interest income have decreased.  The significance of the more efficient financing is further demonstrated when $2.8 million of prepayment penalties which were collected in 2003 are eliminated from interest income for comparison purposes.

Interest and related income from loans and other investments amounted to $46.6 million for the year ended December 31, 2004, an increase of $8.0 million from the $38.5 million amount for the year ended December 31, 2003.  Average interest-earning assets increased from approximately $359.5 million for the year ended December 31, 2003 to approximately $552.9 million for the year ended December 31, 2004. The average interest rate earned on such assets decreased from 10.7% for the year ended December 31, 2003 to 8.4% for the year ended December 31, 2004.  During the year ended December 31, 2003, we recognized $2.8 million in additional income on the early repayment of loans.  Without this additional interest income, the average earning rate for the 2003 year would have been 9.9%.  The decrease in rates that occurred was due to the repayment of two fixed rates loans (which earned interest at rates in excess of the portfolio average), a change in the mix of our investment portfolio to include lower risk B Notes in 2004 (which generally carry lower interest rates than mezzanine loans) and a general decrease in spreads being obtained on newly originated investments, partially offset by a higher average LIBOR rate, which increased by 0.3% to 1.5% for the 2004 year.

We utilize our existing credit facility, collateralized debt obligations and repurchase obligations to finance our interest-earning assets.

Interest and related expenses on secured debt amounted to $13.7 million for the year ended December 31, 2004, an increase of $3.9 million from the $9.8 million amount for the year ended December 31, 2003.  The increase in expense was due to an increase in the amount of average interest-bearing liabilities outstanding from approximately $193.8 million for the year ended December 31, 2003 to approximately $333.5 million for the year ended December 31, 2004, offset partially by a decrease in the average rate paid on interest-bearing liabilities from 5.1% to 4.1% for the same periods.  The decrease in the average rate is substantially due to the use of collateralized debt obligations to finance a large portion of the portfolio at lower rates than the credit facility and term redeemable securities contract, partially offset by the increase in average LIBOR.

We also utilized the convertible junior subordinated debentures to finance our interest-earning assets.  During the year ended December 31, 2004 and 2003, we recognized $6.4 million and $9.7 million, respectively, of expenses related to the convertible junior subordinated debentures.  The decrease results from the conversion of one half of the principal amount due on the debentures into common stock on July 28, 2004 and the conversion of the remaining debentures into common stock on September 29, 2004.

Other revenues increased $1.0 million from $9.6 million for the year ended December 31, 2003 to $10.6 million for the year ended December 31, 2004.  The increase is primarily due to the receipt of management fees from Fund III for the full year in 2004 as compared to the receipt of fees for only part of the year in 2003, as Fund III commenced its investment period in June 2003.  The increase also resulted from an increase in earnings from our equity investment in Fund III and the recognition of a $300,000 gain on the sale of available-for-sale securities.  This was partially offset by a decrease in the management fees from Fund II, due to lower levels of investment in 2004 as the fund winds down.

General and administrative expensesincreased $1.9 million to $15.2 million for the year ended December 31, 2004 from $13.3 million for the year ended December 31, 2003.  The increase in general and administrative expenses was primarily due to increases in employee compensation and benefits, internal control documentation and testing costs in excess of $500,000, and additional expenses related to the services provided under the GRO contract, offset by reduced legal costs.

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On at least a quarterly basis, management reevaluates the reserve for possible credit losses based upon our current portfolio of loans. Each loan in our portfolio is evaluated using our proprietary loan risk rating system, which considers loan to value, debt yield, cash flow stability, exit plan, sponsorship, loan structure and any other factors necessary to assess the likelihood of delinquency or default.  If we believe that there is a potential for delinquency or default, a downside analysis is prepared to estimate the value of the collateral underlying our loan, and this potential loss is multiplied by the likelihood of default.  Based upon our detailed review at December 31, 2004, we concluded that a reserve for possible credit losses was no longer warranted and the reserve was recaptured.

At December 31, 2004 our CMBS investments were carried as available for sale, and were therefore valued at their estimated fair value with net unrealized gains or losses reported as a component of accumulated other comprehensive income/(loss) in shareholders’ equity, unless an other-than-temporary impairment is deemed to have occurred.  During the fourth quarter of 2004, changes in our expected cash flow on two of our CMBS investments resulted in our concluding that these CMBS had incurred other-than-temporary impairment and as a result, we recorded a charge of $5.9 million through the income statement to record these investments at the current market value.  We expect a full recovery from our other securities and did not recognize any other-than-temporary impairment on the remaining CMBS investments.

At December 31, 2004 and 2003, we were in compliance with all REIT requirements and, as such, have not provided for income tax expense on our REIT taxable income for the years ended December 31, 2004 and 2003.  We also have taxable REIT subsidiaries which are subject to tax at regular corporate rates.  During the year ended December 31, 2004, we recorded a $451,000 income tax benefit resulting from losses generated by our taxable REIT subsidiaries.  During the year ended December 31, 2003, we recorded $646,000 of income tax expense for income that was earned by our taxable REIT subsidiaries.

Liquidity and Capital Resources

At December 31, 2005, we had $25.0 million in cash, $1.3 million in restricted cash and $89.0 million of immediately available liquidity from our repurchase obligations.  Our primary sources of liquidity for 2006 are expected to be cash on hand, cash generated from operations, principal and interest payments received on loans and investments, additional borrowings through trust preferred and CDO issuances and under our repurchase obligations and issuances of common equity and other related instruments. We also believe these sources of capital will be adequate to meet our near term cash requirements in 2006.  We expect that during 2006, we will use a significant amount of our available capital resources to originate or purchase new loans and investments for our balance sheet.  We intend to continue to employ leverage on our balance sheet assets to enhance our return on equity.

We experienced a net increase in cash of $391,000 during the year ended December 31, 2005, compared to a net increase in cash of $15.8 million during the year ended December 31, 2004.  Cash provided by operating activities during the year ended December 31, 2005 was $50.8 million, compared to $22.0 million during the same period of 2004.  For the year ended December 31, 2005, cash used in investing activities was $663.0 million, compared to $419.1 million during the same period in 2004.  The change was primarily due to our increased loan and investment originations partially offset by increased levels of principal collections when comparing 2005 to 2004.  For the year ended December 31, 2005, cash provided by financing activities was $612.6 million as compared to $413.0 million during the same period in 2004.  We financed the new investment activity with additional borrowings under our repurchase obligations and through the issuance of CDOs.

At December 31, 2005, we had outstanding borrowings under our collateralized debt obligations of $823.7 million and outstanding repurchase obligations totaling $369.8 million.  The terms of these agreements are described in Note 7 of the consolidated financial statements.  At December 31, 2005, we had pledged assets that enable us to borrow an additional $89.0 million and had unpledged assets of $15.6 million, which when pledged will generate approximately $12.1 million of additional liquidity.   We had $454.1 million of credit available for the financing of new and existing unpledged assets pursuant to these sources of financing.  Additional liquidity will be generated when assets that are currently pledged under repurchase obligations are contributed to our CDO’s.  CDOs generally have higher borrowing advance rates than corresponding repurchase obligations. At December 31, 2005, we had additional liquidity of  $1.3 million in our CDO’s in the form of restricted cash.

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The following table sets forth information about our contractual obligations as of December 31, 2005:

	Payment due by period
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(in thousands)
Long-Term Debt Obligations
Repurchase obligations	$	369,751	$	144,626	$	186,620	$	38,505	$	—
Collateralized debt obligations	821,245		—		89,437		303,607		428,201
Operating Lease Obligations	2,438		975		1,463		—		—
Total (1)	$	1,193,434	$	145,601	$	277,520	$	342,112	$	428,201

(1)We are also subject to interest rate swaps for which we can not estimate future payments due.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Impact of Inflation

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

Critical Accounting Policies

Changes in management judgment, estimates and assumptions could have a material effect on our consolidated financial statements.  Management has the obligation to ensure that its policies and methodologies are in accordance with generally accepted accounting principles.  During 2005, management reviewed and evaluated its critical accounting policies and believes them to be appropriate.  Our accounting policies are described in Note 2 to our consolidated financial statements.  The following is a summary of our accounting policies that we believe are the most affected by management judgments, estimates and assumptions:

Commercial Mortgage-Backed Securities (“CMBS”)

On August 4, 2005, pursuant to the provisions of Statement of Financial Accounting Standard No. 115, or SFAS 115, we made a decision to change the accounting classification of our CMBS investments from available for sale to held to maturity.  In accordance with this decision, CMBS with an amortized cost of $410.1 million and a market value of $422.3 million were reclassified from available for sale to held to maturity.  As was the case prior to this reclassification, the difference between amortized cost and expected recovery on these investments will continue to be accreted through the income statement using the level yield method accretion schedules in place prior to the reclassification.  The difference between amortized cost and market value as of the reclassification date, $12.2 million, was segregated within accumulated other comprehensive income and will be amortized over the remaining life of the securities using the level yield method without impact to the income statement.  We made the decision to reclassify these investments based upon our intent and ability to hold these investments to maturity.  Going forward, new originations of held to maturity investments will be stated at cost plus the amortization of any premiums or discounts and any premiums or discounts will be amortized through the income statement using the level yield method.  Other than in the instance of impairment, these held to maturity investments will be shown in our financial statements at their adjusted values pursuant to the methodology described above.

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

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

Management must also assess whether unrealized losses on securities reflect a decline in value that is other than temporary, and, accordingly, write the impaired security down to its fair value, through a charge to earnings.  We have assessed our securities to first determine whether there is an indication of possible other-than-temporary impairment and then where an indication exists to determine if other-than-temporary impairment did in fact exist.  Significant judgment of management is required in this analysis that includes, but is not limited to, making assumptions regarding the collectibility of the principal and interest, net of related expenses, on the underlying loans.

Income on these available-for-sale securities is recognized based upon a number of assumptions that are subject to uncertainties and contingencies.  Examples of these 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 rate fluctuations.  Additional factors that may affect our reported interest income on our mortgage-backed securities include interest payment shortfalls due to delinquencies on the underlying mortgage loans and the timing and magnitude of credit losses on the mortgage loans underlying the securities that are a result of 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.

Loans Receivable and Provision for Loan Losses

We purchase and originate commercial mortgage and mezzanine loans to be held as long-term investments at amortized cost.  Management must periodically evaluate each of these loans for possible impairment.  Impairment is indicated when it is deemed probable that we will not be able to collect all amounts due according to the contractual terms of the loan.  If a loan were determined to be permanently impaired, we would write down the loan through a charge to the reserve for possible credit losses.  Given the nature of our loan portfolio and the underlying commercial real estate collateral, significant judgment of management is required in determining permanent impairment and the resulting charge to the reserve, which includes but is not limited to making assumptions regarding the value of the real estate that secures the mortgage loan.

Quarterly, management reevaluates the reserve for possible credit losses based upon our current portfolio of loans. Each loan in our portfolio is evaluated using our loan risk rating system which considers loan to value, debt yield, cash flow stability, exit plan, loans sponsorship, the loan structure and any other factors necessary to assess the likelihood of delinquency or default.  If we believe that there is a potential for delinquency or default, a downside analysis is prepared to estimate the value of the collateral underlying our loan, and this potential loss is multiplied by the default likelihood.  A detailed review of the entire portfolio

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was completed at December 31, 2005 and certain loans that we previously had specific concerns about were either repaid or the conditions which caused the concern were eliminated.  Based upon the changes in conditions of these loans and the evaluations completed on the remainder of the portfolio, we concluded that a reserve for possible credit losses was not warranted.

Repurchase Obligations

In certain circumstances, we have financed the purchase of investments from counterparty through a repurchase agreement with that same counterparty.  We currently record these investments in the same manner as other investments financed with repurchase agreements, with the investment recorded as an asset and the related borrowing under any repurchase agreement as a liability on our consolidated balance sheet.  Interest income earned on the investments and interest expense incurred on the repurchase obligations are reported separately on the consolidated income statement.  There is discussion, based upon a technical interpretation of SFAS 140, that these transactions will not qualify as a purchase by us.  We believe, and it is industry practice, that it is accounting for these transactions in an appropriate manner, however, if these investments do not qualify as a purchase under SFAS 140, we would be required to present the net investment on its balance sheet together with an embedded derivative with the corresponding change in fair value of the derivative being recorded in the income statement.  The value of the derivative would reflect not only changes in the value of the underlying investment, but also changes in the value of the underlying credit provided by the counterparty.  Furthermore, hedge instruments related to these assets and liabilities, currently deemed effective, may no longer be effective and may have to be accounted for as non-hedge derivatives.  As of December 31, 2005 we had entered into eight such transactions, with a book value of the associated assets of $189.3 million financed with repurchase obligations of $118.2 million.  As of December 31, 2004, we had entered into four such transactions, with a book value of the associated assets of $38.9 million financed with repurchase obligations of $25.8 million.  Adoption of the aforementioned treatment would result in a reduction in total assets and liabilities on our consolidated balance sheet of $71.1 million and $13.1 million at December 31, 2005 and 2004, respectively.

Revenue Recognition

Interest income for our loans and investments is recognized over the life of the investment using the effective interest method and recognized on the accrual basis.

Fees received in connection with loan commitments, net of direct expenses, are deferred until the loan is advanced and are then recognized over the term of the loan as an adjustment to yield.  Fees on commitments that expire unused are recognized at expiration.  Exit fees are also recognized over the estimated term of the loan as an adjustment to yield.  Purchased discounts for credit quality are amortized over the estimated term of the loan as an adjustment to yields.  Cash flows received in excess of original estimates are recognized prospectively as an adjustment to yield.

Income recognition is generally suspended for loans at the earlier of the date at which payments become 90 days past due or when, in the opinion of management, a full recovery of income and principal becomes doubtful.  Income recognition is resumed when the loan becomes contractually current and performance is demonstrated to be resumed.

Fees from investment management services and special servicing are recognized when earned on an accrual basis.  Fees from professional advisory services are generally recognized at the point at which all of our services have been performed and no significant contingencies exist with respect to entitlement to payment.  Fees from asset management services are recognized as services are rendered.

We account for incentive fees we can potentially earn from the Funds in accordance with Method 1 of Emerging Issues Task Force Topic D-96. Under Method 1, no incentive income is recorded until all contingencies have been eliminated.  Method 1 is the preferred method as it eliminates the potential that revenue will be recognized in one quarter and reversed in a future quarter. Incentive income received prior to that date is recorded as unearned income (a liability). During the year ended December 31, 2005 we received $8.0 million in incentive management fees from Fund II, which have been reflected in our consolidated statements of operations. No incentive management fees have been earned from Fund III at December 31, 2005 and as such, no amount of such potential fees has been accrued as income in our financial statements. The amount of incentive fees to be received in the future will depend upon a number of

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factors, including the level of interest rates and the fund’s ability to generate returns in excess of 10%, which is in turn impacted by the duration and ultimate performance of the fund’s assets.  Potential incentive fees received as Funds wind down could result in significant additional income from operations in certain periods during which such payments can be recorded as income.  If Fund II’s and Fund III’s assets were sold and liabilities were settled on January 1, 2006 at the recorded book value, and the fund’s equity and income were distributed, we would record approximately $2.1 million and $5.4 million of gross incentive fees from Fund II and Fund III, respectively.

Accounting for Stock-Based Compensation

We comply with the provisions of the Financial Accounting Standards Board’s Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation”.  Statement of Financial Accounting Standards No. 123 encourages the adoption of a new fair-value based accounting method for employee stock-based compensation plans.  Statement of Financial Accounting Standards No. 123 also permits companies to continue accounting for stock-based compensation plans as prescribed by Accounting Principles Board Opinion No. 25.  However, companies electing to continue accounting for stock-based compensation plans under Accounting Principles Board Opinion No. 25 must make pro forma disclosures as if they adopted the cost recognition requirements under Statement of Financial Accounting Standards No. 123.

Through December 31, 2003, we accounted for stock-based compensation under Accounting Principles Board Opinion No. 25.  Accordingly, no compensation cost has been recognized for the years ended December 31, 2003 and 2002 for awards under our stock plans in the accompanying consolidated statements of operations as the exercise price of the stock options granted thereunder equaled the market price of the underlying stock on the date of the grant.  During the fourth quarter of 2004, we elected to adopt the fair value recognition provisions of Statement of Financial Accounting Standards No. 123 using the modified prospective method provided in Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure”.  Under the modified prospective method, we recognized stock-based employee compensation costs based upon the fair value recognition provisions of Statement of Financial Accounting Standards No. 123 effective January 1, 2004.  Compensation expense is recognized on the accelerated attribution method under Financial Accounting Standards Board Interpretation No. 28.

Risk Management and Financial Instruments

We utilize derivative financial instruments as a means to help to manage our interest rate risk exposure on a portion of our variable rate debt obligations, through the use of cash flow hedges.  The instruments utilized are generally pay-fixed swaps which are widely used in the industry and typically entered into with major financial institutions.  Our accounting policies generally reflect these instruments at their fair value with unrealized changes in fair value reflected in “Accumulated other comprehensive income” on our consolidated balance sheets.  Realized effects on cash flows are generally recognized currently in income.

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 have and intend to continue to operate in a manner that will continue to allow us to be taxed as a REIT and, as a result, do not expect to pay substantial corporate-level taxes, other than taxes payable by our taxable REIT subsidiaries.  Many of these requirements, however, are highly technical and complex.  If we were to fail to meet these requirements, we would be subject to Federal income tax.

New Accounting Standard

On December 16, 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123(R), “Share-Based Payment”, which is a revision of Statement of Financial Accounting Standards No. 123 and supersedes APB Opinion No. 25. SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be valued at fair value on the date of grant, and to be expensed over the applicable vesting period. Pro forma disclosure of the income statement effects of share-based payments is no longer an alternative. Statement of Financial Accounting

36

Standards No. 123(R) is effective for all stock-based awards granted on or after July 1, 2005. In addition, companies must also recognize compensation expense related to any awards that are not fully vested as of the effective date. Compensation expense for the unvested awards will be measured based on the fair value of the awards previously calculated in developing the pro forma disclosures in accordance with the provisions of Statement of Financial Accounting Standards No. 123. As we have adopted Statement of Financial Accounting Standards No. No. 123 effective January 1, 2004, we do not believe that adoption of SFAS 123(R) will have a material impact on our future financial results.

37

Item 7A.Quantitative and Qualitative Disclosures about Market Risk

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

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

The following table provides information about our financial instruments that are sensitive to changes in interest rates at December 31, 2005.  For financial assets and debt obligations, the table presents cash flows to the expected maturity and weighted average interest rates based upon the current carrying values.  For interest rate swaps, the table presents notional amounts and weighted average fixed pay and variable receive interest rates by contractual maturity dates.  Notional amounts are used to calculate the contractual cash flows to be exchanged under the contract.  Weighted average variable rates are based on rates in effect as of the reporting date.

	Expected Maturity Dates
	2006			2007			2008			2009			2010			Thereafter			Total			Fair Value
	(dollars in thousands)
Assets:
CMBS
Fixed Rate	$	—		$	7,533		$	4,716		$	6,403		$	8,189		$	360,966		$	387,808		$	382,878
Average interest rate	—			6.97		%	6.96		%	6.96		%	6.95		%	6.58		%	6.83		%
Variable Rate	$	6,374		$	29,752		$	59,831		$	7,658		$	—		$	3,051		$	106,666		$	105,474
Average interest rate	6.83		%	6.72		%	6.86		%	7.15		%	—			7.79		%	6.89		%
Loans receivable
Fixed Rate	$	1,055		$	8,050		$	60,425		$	775		$	873		$	97,755		$	168,933		$	171,855
Average interest rate	8.64		%	8.65		%	8.09		%	7.40		%	7.40		%	7.16		%	7.74		%
Variable Rate	$	335,356		$	250,681		$	86,368		$	48,406		$	106,369		—			$	827,180		$	826,815
Average interest rate	8.03		%	8.04		%	8.05		%	8.19		%	6.55		%	—			7.99		%
Total Return Swap
Variable Rate	$	4,000		—			—			—			—			—			$	4,000		$	4,000
Average interest rate	18.14		%	—			—			—			—			—			18.14		%
Interest rate swaps
Notional amounts	$	398		$	18,194		$	1,240		$	29,681		$	5,602		$	128,578		$	183,693		$	2,273
Average fixed pay rate	3.80		%	4.29		%	4.55		%	4.58		%	4.80		%	4.55		%	4.53		%
Average variable receive rate	4.39		%	4.39		%	4.39		%	4.39		%	4.39		%	4.39		%	4.39		%
Liabilities:
Repurchase obligations
Variable Rate	$	144,626		$	20,826		$	165,794		—			—			$	38,505		$	369,751		$	369,751
Average interest rate	5.24		%	5.39		%	5.39		%	—			—			5.39		%	5.33		%
CDO’s
Fixed Rate	—			$	5,000		$	3,419		$	2,864		$	2,325		$	255,946		$	269,554		$	267,715
Average interest rate	—				5.09	%		5.09	%		5.09	%		5.09	%		5.22	%		5.22	%
Variable Rate	—				—		$	81,018		$	162,037		$	136,381		$	172,255		$	551,691		$	551,691
Average interest rate	—			—			4.72		%	5.07		%	4.80		%	5.03		%	4.94		%

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Item 8.Financial Statements and Supplementary Data

The financial statements required by this item and the reports of the independent accountants thereon required by Item 14(a)(2) appear on pages F-2 to F-40.  See accompanying Index to the Consolidated Financial Statements on page F-1.  The supplementary financial data required by Item 302 of Regulation S-K appears in Note 20 to the consolidated financial statements.

Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None

Item 9A.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, as of the end of the period covered by this annual report on Form 10-K was made under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer.  Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (a) are effective to ensure that information required to be disclosed by us in reports filed or submitted under the Securities Exchange Act is timely recorded, processed, summarized and reported and (b) include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submitted under the Securities Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting

Management’s Report on Internal Control over Financial Reporting, which appears on page F-3, is incorporated herein by reference.

Changes in Internal Controls

There have been no significant changes in our “internal control over financial reporting” (as defined in rule 13a-15(f) of the Exchange Act) that occurred during the quarter ended December 31, 2005 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Item 9B.Other Information

None

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PART III

Item 10.Directors and Executive Officers of the Registrant

The information required by Items 401, 405 and 406 of Regulation S-K is incorporated herein by reference to the Company’s definitive proxy statement to be filed not later than April 30, 2006 with the Securities and Exchange Commission pursuant to Regulation 14A under the Exchange Act.

Item 11.Executive Compensation

The information required by Item 402 of Regulation S-K is incorporated herein by reference to the Company’s definitive proxy statement to be filed not later than April 30, 2006 with the Securities and Exchange Commission pursuant to Regulation 14A under the Exchange Act.

Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by Items 201(d) and 403 of Regulation S-K is incorporated herein by reference to the Company’s definitive proxy statement to be filed not later than April 30, 2006 with the Securities and Exchange Commission pursuant to Regulation 14A under the Exchange Act.

Item 13.Certain Relationships and Related Transactions

The information required by Item 404 of Regulation S-K is incorporated herein by reference to the Company’s definitive proxy statement to be filed not later than April 30, 2006 with the Securities and Exchange Commission pursuant to Regulation 14A under the Exchange Act.

Item 14.Principal Accounting Fees and Services

The information required by Item 9(e) of Schedule 14A is incorporated herein by reference to the Company’s definitive proxy statement to be filed not later than April 30, 2006 with the Securities and Exchange Commission pursuant to Regulation 14A under the Exchange Act.

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PART IV

Item 15.Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) (1)	Financial Statements
	See the accompanying Index to Financial Statement Schedule on page F-1.
(a) (2)	Consolidated Financial Statement Schedules
	See the accompanying Index to Financial Statement Schedule on page F-1.

(a) (3) Exhibits

EXHIBIT INDEX

Exhibit Number	Description
3.1	Charter of the 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).
3.2	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 January 29, 1999 and incorporated herein by reference).
3.3	First Amendment to Amended and Restated Bylaws of Capital Trust, Inc. (filed as Exhibit 3.2 to Capital Trust, Inc.’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on August 16, 2004 and incorporated herein by reference).
+ 10.1	Capital Trust, Inc. Second Amended and Restated 1997 Long-Term Incentive Stock Plan (the “1997 Plan”) (filed as Exhibit 10.1 to Capital Trust, Inc.’s Annual Report on Form 10-K (File No. 1-14788) filed on March 10, 2005 and incorporated herein by reference).
+ 10.2	Capital Trust, Inc. Amended and Restated 1997 Non-Employee Director Stock Plan (filed as Exhibit 10.2 to Capital Trust, Inc.’s Current Report on Form 8-K (File No. 1-14788) filed on January 29, 1999 and incorporated herein by reference) (the “1997 Director Plan”).
+ 10.3	Capital Trust, Inc. 1998 Employee Stock Purchase Plan (filed as Exhibit 10.3 to Capital Trust, Inc.’s Current Report on Form 8-K (File No. 1-14788) filed on January 29, 1999 and incorporated herein by reference).
+ 10.4	Capital Trust, Inc. 1998 Non-Employee Stock Purchase Plan (filed as Exhibit 10.4 to Capital Trust, Inc.’s Current Report on Form 8-K (File No. 1-14788) filed on January 29, 1999 and incorporated herein by reference).
+ 10.5	Capital Trust, Inc. Amended and Restated 2004 Long-Term Incentive Plan (the “2004 Plan”) (filed as Exhibit 10.5 to Capital Trust, Inc.’s Annual Report on Form 10-K (File No. 1-14788) filed on March 10, 2005 and incorporated herein by reference).

41

+ 10.6	Form of Award Agreement granting Restricted Shares and Performance Units under the 2004 Plan (filed as Exhibit 99.1 to Capital Trust, Inc.’s Current Report on Form 8-K (File No. 1-14788) filed on February 10, 2005 and incorporated herein by reference).
+ 10.7	Form of Award Agreement granting Performance Units under the 2004 Plan (filed as Exhibit 10.7 to Capital Trust, Inc.’s Annual Report on Form 10-K (File No. 1-14788) filed on March 10, 2005 and incorporated herein by reference).
+ 10.8	Form of Award Agreement granting Performance Units under the 2004 Plan (filed as Exhibit 10.8 to Capital Trust, Inc.’s Annual Report on Form 10-K (File No. 1-14788) filed on March 10, 2005 and incorporated herein by reference).
+ 10.9	Form of Award Agreement granting Performance Units under the 2004 Plan (filed as Exhibit 10.9 to Capital Trust, Inc.’s Annual Report on Form 10-K (File No. 1-14788) filed on March 10, 2005 and incorporated herein by reference).
+ 10.10	Form of Stock Option Award Agreement under the 2004 Plan (filed as Exhibit 10.10 to Capital Trust, Inc.’s Annual Report on Form 10-K (File No. 1-14788) filed on March 10, 2005 and incorporated herein by reference).
+ 10.11	Form of Restricted Share Award Agreement under the 2004 Plan (filed as Exhibit 10.11 to Capital Trust, Inc.’s Annual Report on Form 10-K (File No. 1-14788) filed on March 10, 2005 and incorporated herein by reference).
+ 10.12	Deferral and Distribution Election Form for Restricted Share Award Agreement under the 2004 Plan (filed as Exhibit 10.12 to Capital Trust, Inc.’s Annual Report on Form 10-K (File No. 1-14788) filed on March 10, 2005 and incorporated herein by reference).
+ 10.13	Form of Restricted Share Unit Award Agreement under the 2004 Plan (filed as Exhibit 10.13 to Capital Trust, Inc.’s Annual Report on Form 10-K (File No. 1-14788) filed on March 10, 2005 and incorporated herein by reference).
+ 10.14	Deferral and Distribution Election Form for Restricted Share Unit Award Agreement under the 2004 Plan (filed as Exhibit 10.14 to Capital Trust, Inc.’s Annual Report on Form 10-K (File No. 1-14788) filed on March 10, 2005 and incorporated herein by reference).
+ 10.15	Deferred Share Unit Program Election Forms under the 2004 Plan (filed as Exhibit 10.15 to Capital Trust, Inc.’s Annual Report on Form 10-K (File No. 1-14788) filed on March 10, 2005 and incorporated herein by reference).
+ 10.16	Director Retainer Deferral Election Form for Stock Units under the 1997 Plan. (filed as Exhibit 10.16 to Capital Trust, Inc.’s Annual Report on Form 10-K (File No. 1-14788) filed on March 10, 2005 and incorporated herein by reference).
+10.17	Form of Award Agreement granting Performance Awards under the Company’s Amended and Restated 2004 Long-Term Incentive Plan (filed as Exhibit 10.1 to Capital Trust, Inc.’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on May 4, 2005 and incorporated herein by reference).
+10.18	Employment Agreement, dated as of February 24, 2004, by and between Capital Trust, Inc. and CT Investment Management Co., LLC and John R. Klopp (filed as Exhibit 10.1 to Capital Trust, Inc.’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on May 12, 2004 and incorporated herein by reference).
• + 10.19	Employment Agreement, dated as of December 28, 2005, by and between Capital Trust, Inc. and Stephen D. Plavin.
+10.20	Termination Agreement, dated as of December 29, 2000, by and between Capital Trust, Inc. and Craig M. Hatkoff (filed as Exhibit 10.9 to Capital Trust, Inc.’s Annual Report on Form 10-K (File No. 1-14788) filed on April 2, 2001 and incorporated herein by reference).
+10.21	Transition Agreement dated May 26, 2005, by and between the Company and Brian H. Oswald (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 1-14788) filed on May 27, 2005 and incorporated herein by reference).

42

+10.22	Consulting Services Agreement, dated as of January 1, 2003, by and between CT Investment Management Co., LLC and Craig M. Hatkoff. (filed as Exhibit 10.1 to Capital Trust, Inc.’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on November 6, 2003 and incorporated herein by reference).
10.23	Agreement of Lease dated as of May 3, 2000, between 410 Park Avenue Associates, L.P., owner, and Capital Trust, Inc., tenant (filed as Exhibit 10.11 to Capital Trust, Inc.’s Annual Report on Form 10-K (File No. 1-14788) filed on April 2, 2001 and incorporated herein by reference).
10.24.a	Amended and Restated Master Loan and Security Agreement, dated as of June 27, 2003, between Capital Trust, Inc., CT Mezzanine Partners I LLC and Morgan Stanley Mortgage Capital Inc. (filed as Exhibit 10.4 to Capital Trust, Inc.’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on November 6, 2003 and incorporated herein by reference).
10.24.b	Joinder and Amendment, dated as of July 20, 2004, among Capital Trust, Inc., CT Mezzanine Partners I LLC, CT RE CDO 2004-1 Sub, LLC and Morgan Stanley Mortgage Capital Inc. (filed as Exhibit 10.21.b to Capital Trust, Inc.’s Annual Report on Form 10-K (File No. 1-14788) filed on March 10, 2005 and incorporated herein by reference).
10.25	Master Repurchase Agreement, dated as of July 29, 2005, by and between the Company and Morgan Stanley Bank (filed as Exhibit 10.1 to Capital Trust, Inc.’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on November 1, 2005 and incorporated herein by reference).
10.26.a	Master Repurchase Agreement, dated as of July 29, 2005, by and among the Company, CT RE CDO 2004-1 Sub, LLC, CT RE CDO 2005-1 Sub, LLC and Morgan Stanley Bank (filed as Exhibit 10.2 to Capital Trust, Inc.’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on November 1, 2005 and incorporated herein by reference).
10.26.b	Amendment No. 1 to the Master Repurchase Agreement, dated as of November 4, 2005, by and among Capital Trust, Inc., CT RE CDO 2004-1 Sub, LLC, CT RE CDO 2005-1 Sub, LLC and Morgan Stanley Bank (filed as Exhibit 10.1 to Capital Trust, Inc.’s Current Report on Form 8-K (File No. 1-14788) filed on November 9, 2005 and incorporated herein by reference).
10.27.a	Master Repurchase Agreement, dated as of May 28, 2003, between Goldman Sachs Mortgage Company and Capital Trust, Inc. (filed as Exhibit 10.2 to Capital Trust, Inc.’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on November 6, 2003 and incorporated herein by reference).
10.27.b	First Amendment to the Master Repurchase Agreement, dated as of August 26, 2003, between Goldman Sachs Mortgage Company and Capital Trust, Inc. (filed as Exhibit 10.3 to Capital Trust, Inc.’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on November 6, 2003 and incorporated herein by reference).
10.27.c	Second Amendment to Master Repurchase Agreement, dated as of June 1, 2004, by and between Goldman Sachs Mortgage Company, Commerzbank AG, New York Branch and Capital Trust, Inc. (filed as Exhibit 10.3 to Capital Trust, Inc.’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on August 16, 2004 and incorporated herein by reference).
10.27.d	Third Amendment to Master Repurchase Agreement, dated as of November 14, 2004, by and among Goldman Sachs Mortgage Company, Commerzbank AG, New York Branch and Capital Trust, Inc. (filed as Exhibit 10.22.d to Capital Trust, Inc.’s Annual Report on Form 10-K (File No. 1-14788) filed on March 10, 2005 and incorporated herein by reference).
10.27.e	Fourth Amendment to Master Repurchase Agreement, dated as of February 28, 2005, by and among Goldman Sachs Mortgage Company, Commerzbank AG, New York Branch and Capital Trust, Inc. (filed as Exhibit 10.22.e to Capital Trust, Inc.’s Annual Report on Form 10-K (File No. 1-14788) filed on March 10, 2005 and incorporated herein by reference).
10.28	Master Loan Repurchase Facility, dated as of August 17, 2004, by and between Goldman Sachs Mortgage Company and Capital Trust, Inc. (filed as Exhibit 10.1 to Capital Trust, Inc.’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on November 3, 2004 and incorporated herein by reference).

43

10.29.a	Master Repurchase Agreement, dated as of February 19, 2002, by and between Liquid Funding, Ltd. and CT LF Funding Corp. (filed as Exhibit 10.24.a to Capital Trust, Inc.’s Annual Report on Form 10-K (File No. 1-14788) filed on March 10, 2005 and incorporated herein by reference).
10.29.b	Terms Annex, dated March 1, 2005, by and between Liquid Funding, Ltd. and CT LF Funding Corp. (filed as Exhibit 10.24.b to Capital Trust, Inc.’s Annual Report on Form 10-K (File No. 1-14788) filed on March 10, 2005 and incorporated herein by reference).
10.30	Master Repurchase Agreement, dated as of March 4, 2005, by and among Capital Trust, Inc., Bank of America, N.A. and Banc of America Securities LLC. (filed as Exhibit 10.25 to Capital Trust, Inc.’s Annual Report on Form 10-K (File No. 1-14788) filed on March 10, 2005 and incorporated herein by reference).
• 10.31.a	Amended and Restated Master Repurchase Agreement, dated as of February 15, 2006, by and among Bear, Stearns Funding, Inc., Capital Trust, Inc. and CT BSI Funding Corp.
• 10.31.b	Letter agreement, dated as of February 15, 2006, by and among Bear, Stearns Funding, Inc., Capital Trust, Inc. and CT BSI Funding Corp.
• 10.32.a	Amended and Restated Master Repurchase Agreement, dated as of February 15, 2006, by and among Bear, Stearns International Limited, Capital Trust, Inc. and CT BSI Funding Corp.
• 10.32.b	Letter agreement, dated as of February 15, 2006, by and among Bear, Stearns International Limited, Capital Trust, Inc. and CT BSI Funding Corp.
10.33	Limited Liability Company Agreement of CT MP II LLC, by and among Travelers General Real Estate Mezzanine Investments II, LLC and CT-F2-GP, LLC, dated as of March 8, 2000 (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K (File No. 1-14788) filed on March 23, 2000 and incorporated herein by reference).
10.34	Venture Agreement amongst Travelers Limited Real Estate Mezzanine Investments I, LLC, Travelers General Real Estate Mezzanine Investments II, LLC, Travelers Limited Real Estate Mezzanine Investments II, LLC, CT-F1, LLC, CT-F2-GP, LLC, CT-F2-LP, LLC, CT Investment Management Co., LLC and Capital Trust, Inc., dated as of March 8, 2000 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 1-14788) filed on March 23, 2000 and incorporated herein by reference).
10.35	Guaranty of Payment, by Capital Trust, Inc. in favor of Travelers Limited Real Estate Mezzanine Investments I, LLC, Travelers General Real Estate Mezzanine Investments II, LLC and Travelers Limited Real Estate Mezzanine Investments II, LLC, dated as of March 8, 2000 (filed as Exhibit 10.6 to the Company’s Current Report on Form 8-K (File No. 1-14788) filed on March 23, 2000 and incorporated herein by reference).
10.36	Guaranty of Payment, by The Travelers Insurance Company in favor of Capital Trust, Inc., CT-F1, LLC, CT-F2-GP, LLC, CT-F2-LP, LLC and CT Investment Management Co., LLC, dated as of March 8, 2000 (filed as Exhibit 10.8 to the Company’s Current Report on Form 8-K (File No. 1-14788) filed on March 23, 2000 and incorporated herein by reference).
• 10.37	Amended and Restated Investment Management Agreement, dated as of April 9, 2001, by and among CT Investment Management Co. LLC, CT MP II LLC and CT Mezzanine Partners II LP.
10.38	Registration Rights Agreement, dated as of July 28, 1998, among Capital Trust, Vornado Realty L.P., EOP Limited Partnership, Mellon Bank N.A., as trustee for General Motors Hourly-Rate Employes Pension Trust, and Mellon Bank N.A., as trustee for General Motors Salaried Employes Pension Trust (filed as Exhibit 10.2 to Capital Trust’s Current Report on Form 8-K (File No. 1-8063) filed on August 6, 1998 and incorporated herein by reference).
10.39	Registration Rights Agreement, dated as of February 7, 2003, by and between Capital Trust, Inc. and Stichting Pensioenfonds ABP (filed as Exhibit 10.24 to Capital Trust, Inc.’s Annual Report on Form 10-K (File No. 1-14788) filed on March 28, 2003 and incorporated herein by reference).

44

10.40	Registration Rights Agreement, dated as of June 18, 2003, by and among Capital Trust, Inc. and the parties named therein (filed as Exhibit 10.2 to Capital Trust, Inc.’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on May 12, 2004 and incorporated herein by reference).
10.41	Securities Purchase Agreement, dated as of May 11, 2004, by and among Capital Trust, Inc. W. R. Berkley Corporation and certain shareholders of Capital Trust, Inc. (filed as Exhibit 10.1 to Capital Trust, Inc.’s Current Report on Form 8-K (File No. 1-14788) filed on May 11, 2004 and incorporated herein by reference).
10.42	Registration Rights Agreement dated as of May 11, 2004, by and among Capital Trust, Inc. and W. R. Berkley Corporation (filed as Exhibit 10.2 to Capital Trust, Inc.’s Current Report on Form 8-K (File No. 1-14788) filed on May 11, 2004 and incorporated herein by reference).
11.1	Statements regarding Computation of Earnings per Share (Data required by Statement of Financial Accounting Standard No. 128, Earnings per Share, is provided in Note 10 to the consolidated financial statements contained in this report).
•14.1	Capital Trust, Inc. Code of Business Conduct and Ethics
•21.1	Subsidiaries of Capital Trust, Inc.
•23.1	Consent of Ernst & Young LLP
•31.1	Certification of John R. Klopp, Chief Executive Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
•31.2	Certification of Geoffrey G. Jervis, Chief Financial Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
•32.1	Certification of John R. Klopp, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
•32.2	Certification of Geoffrey G. Jervis, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

+Represents a management contract or compensatory plan or arrangement.

•Filed  herewith.

45

SIGNATURES

Pursuant to the requirements of Section 13 or Section 15(d) 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.

March 9, 2006	/s/ John R. Klopp
Date	John R. Klopp Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

March 9, 2006	/s/ Samuel Zell
Date	Samuel Zell Chairman of the Board of Directors
March 9, 2006	/s/ John R. Klopp
Date	John R. Klopp Chief Executive Officer and Director
March 9, 2006	/s/ Geoffrey G. Jervis
Date	Geoffrey G. Jervis Chief Financial Officer
March 9, 2006	/s/ Thomas E. Dobrowski
Date	Thomas E. Dobrowski, Director
March 9, 2006	/s/ Martin L. Edelman
Date	Martin L. Edelman, Director
March 9, 2006	/s/ Craig M. Hatkoff
Date	Craig M. Hatkoff, Director
March 9, 2006	/s/ Edward S. Hyman
Date	Henry N. Nassau, Director
March 9, 2006	/s/ Henry N. Nassau
Date	Henry N. Nassau, Director
March 9, 2006	/s/ Joshua A. Polan
Date	Joshua A. Polan, Director
March 9, 2006	/s/ Lynne B. Sagalyn
Date	Lynne B. Sagalyn, Director

46

Index to Consolidated Financial Statements and Schedules

Audited Financial Statements

Schedule IV – Mortgage Loans on Real Estate

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The Board of Directors and Shareholders of Capital Trust, Inc. and Subsidiaries

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control over Financial Reporting, that Capital Trust, Inc. and Subsidiaries (the “Company”) maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on the COSO criteria.  Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based onthe COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of December 31, 2005 and 2004, and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2005of the Company and our report dated March 9, 2006 expressed an unqualified opinion thereon.

	/s/ Ernst & Young LLP
New York, NY
March 9, 2006

F-2

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING

Management is responsible for establishing and maintaining adequate internal control over financial reporting, and for performing an assessment of the effectiveness of internal control over financial reporting as of December 31, 2005. Internal control over financial reporting is a process designed 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. The Company’s system of internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

All internal control systems, no matter how well designed, have inherent limitations.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Management performed an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005 based upon criteria in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (‘‘COSO’’). Based on our assessment, management determined that the Company’s internal control over financial reporting was effective as of December 31, 2005 based on the criteria in Internal Control-Integrated Framework issued by COSO.

Our management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which appears herein.

Dated:  March 9, 2006

John R. Klopp	Geoffrey G. Jervis
President and Chief Executive Officer	Chief Financial Officer

F-3

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL
STATEMENTS

Capital Trust, Inc.’s management is responsible for the integrity and objectivity of all financial information included in this Annual Report. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The financial statements include amounts that are based on the best estimates and judgments of management. All financial information in this Annual Report is consistent with that in the consolidated financial statements.

Ernst & Young LLP, an independent registered public accounting firm, has audited these consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) and have expressed herein their unqualified opinion on those financial statements.

The Audit Committee of the Board of Directors, which oversees Capital Trust, Inc.’s financial reporting process on behalf of the Board of Directors, is composed entirely of independent directors (as defined by the New York Stock Exchange). The Audit Committee meets periodically with management, the independent accountants, and the internal auditors to review matters relating to the Company’s financial statements and financial reporting process, annual financial statement audit, engagement of independent accountants, internal audit function, system of internal controls, and legal compliance and ethics programs as established by Capital Trust, Inc.’s management and the Board of Directors. The internal auditors and the independent accountants periodically meet alone with the Audit Committee and have access to the Audit Committee at any time.

Dated:  March 9, 2006

John R. Klopp	Geoffrey G. Jervis
President and Chief Executive Officer	Chief Financial Officer

F-4

REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM

The Board of Directors and Shareholders of Capital Trust, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of Capital Trust, Inc. and Subsidiaries (the “Company”) as of December 31, 2005 and 2004, and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2005.  Our audits also included the financial statement schedule listed in the Index to Consolidated Financial Statements and Schedules.  These financial statements and schedule are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2005 and 2004, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.  Also, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Note 2 to the financial statements, in 2004 the Company changed its method of accounting for stock based compensation.

As discussed in Note 2 to the consolidated financial statements, in 2004 the Company adopted Financial Accounting Standards Board Interpretation No. 46 (R), “Consolidation of Variable Interest Entities an interpretation of ARB No. 51.”

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 9, 2006 expressed an unqualified opinion thereon.

	/s/ Ernst & Young LLP
New York, New York
March 9, 2006

F-5

Capital Trust, Inc. and Subsidiaries

Consolidated Balance Sheets

December 31, 2005 and 2004

(in thousands, except per share data)

	2005			2004
Assets
Cash and cash equivalents	$	24,974		$	24,583
Restricted cash	1,264			611
Commercial mortgage-backed securities	487,970			247,765
Loans receivable	990,142			556,164
Total return swap	4,000			—
Equity investment in CT Mezzanine Partners I LLC (“Fund I”), CT Mezzanine Partners II LP (“Fund II”), CT MP II LLC (“Fund II GP”) and CT Mezzanine Partners III, Inc. (“Fund III”) (together “Funds”)	14,301			21,376
Deposits and other receivables	5,679			10,282
Accrued interest receivable	9,437			4,029
Interest rate hedge assets	2,273			194
Deferred income taxes	3,979			5,623
Prepaid and other assets	13,511			7,139
Total assets	$	1,557,530		$	877,766
Liabilities and Shareholders’ Equity
Liabilities:
Accounts payable and accrued expenses	$	24,957		$	17,388
Credit facility	—			65,176
Repurchase obligations	369,751			225,091
Collateralized debt obligations (“CDOs”)	823,744			252,778
Deferred origination fees and other revenue	228			836
Total liabilities	1,218,680			561,269
Shareholders’ equity:
Class A common stock, $0.01 par value, 100,000 shares authorized, 14,870 and 14,769 shares issued and outstanding at December 31, 2005 and 2004, respectively (“class A common stock”)	149			148
Restricted class A common stock, $0.01 par value, 404 and 283 shares issued and outstanding at December 31, 2005 and 2004, respectively (“restricted class A common stock” and together with class A common stock, “common stock”)	4			3
Additional paid-in capital	326,299			321,937
Accumulated other comprehensive gain	14,879			3,815
Accumulated deficit	(2,481		)	(9,406		)
Total shareholders’ equity	338,850			316,497
Total liabilities and shareholders’ equity	$	1,557,530		$	877,766

See accompanying notes to consolidated financial statements.

F-6

Capital Trust, Inc. and Subsidiaries

Consolidated Statements of Operations

For the Years Ended December 31, 2005, 2004 and 2003

(in thousands, except per share data)

		2005			2004			2003
Income from loans and other investments:
Interest and related income		$	86,200		$	46,561		$	38,524
Less:	Interest and related expenses	(37,229		)	(13,724		)	(9,845		)
Less:	Interest and related expenses on step up convertible junior subordinated debentures	—			(6,417		)	(9,730		)
Income from loans and other investments, net		48,971			26,420			18,949
Other revenues:
Management and advisory fees from affiliated Funds managed		13,124			7,853			8,020
(Loss)/income from equity investments in Funds		(222		)	2,407			1,526
Gain on sales of investments		4,951			300			—
Special servicing fees		—			10			—
Other interest income		553			78			53
Total other revenues		18,406			10,648			9,599
Other expenses:
General and administrative		21,939			15,229			13,320
Depreciation and amortization		1,114			1,100			1,057
Unrealized loss on available-for-sale securities for other-than-temporary impairment		—			5,886			—
Recapture of allowance for possible credit losses		—			(6,672		)	—
Total other expenses		23,053			15,543			14,377
Income before income taxes		44,324			21,525			14,171
Income tax expense/(benefit)		213			(451		)	646
Net income		$	44,111		$	21,976		$	13,525
Per share information:
Net earnings per share of common stock
Basic		$	2.92		$	2.17		$	2.27
Diluted		$	2.88		$	2.14		$	2.23
Dividends declared per share of common stock		$	2.45		$	1.85		$	1.80
Weighted average shares of common stock outstanding
Basic		15,124,187			10,141,380			5,946,718
Diluted		15,335,914			10,276,886			10,287,721

See accompanying notes to consolidated financial statements.

F-7

Capital Trust, Inc. and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity

For the Years Ended December 31, 2005, 2004 and 2003

(in thousands)

	Comprehensive Income/(Loss)			Class A Common Stock		Restricted Class A Common Stock		Additional Paid-In Capital		Unearned Compensation		Accumulated Other Comprehensive Income/(Loss)		Accumulated Deficit		Total
Balance at December 31, 2002				54		1		126,919		(320	)	(28,988	)	(13,610	)	84,056
Net income	$	13,525		—		—		—		—		—		13,525		13,525
Unrealized gain on derivative financial instruments, net of related income taxes	1,990			—		—		—		—		1,990		—		1,990
Unrealized loss on available-for-sale securities, net of related income taxes	(6,882		)	—		—		—		—		(6,882	)	—		(6,882	)
Issuance of restricted class A common stock	—			—		—		356		(356	)	—		—		—
Restricted class A common stock earned	—			—		—		—		237		—		—		237
Sale of shares of class A common stock under stock option agreement	—			—		—		281		—		—		—		281
Cancellation of restricted class A common stock	—			—		—		(192	)	192		—		—		—
Vesting of restricted class A common stock to unrestricted class A common stock	—			1		(1	)	—		—		—		—		—
Repurchase and retirement of shares of class A common stock previously outstanding	—			(1	)	—		(946	)	—		—		—		(947	)
Repurchase of warrants to purchase shares of class A common stock	—			—		—		(2,132	)	—		—		—		(2,132	)
Dividends declared on class A common stock	—			—		—		—		—		—		(11,238	)	(11,238	)
Shares redeemed in one for three reverse stock split	—			—		—		(8	)	—		—		—		(8	)
Shares of class A common stock issued in private offering	—			11		—		17,124		—		—		—		17,135
Balance at December 31, 2003	$	8,633		65		—		141,402		(247	)	(33,880	)	(11,323	)	96,017
Net income	$	21,976		—		—		—		—		—		21,976		21,976
Unrealized gain on derivative financial instruments	26			—		—		—		—		26		—		26
Unrealized gain on available-for-sale securities	37,669			—		—		—		—		37,669		—		37,669
Implementation of SFAS No. 123	—			—		—		(247	)	247		—		—		—
Issuance of restricted class A common stock	—			—		3		(3	)	—		—		—		—
Sale of shares of class A common stock under stock option agreement	—			1		—		813		—		—		—		814
Conversion of class A common stock units to class A common stock	—			—		—		411		—		—		—		411
Conversion of step up convertible junior subordinated debentures into class A common stock	—			43		—		90,048		—		—		—		90,091
Restricted class A common stock earned	—			—		—		1,342		—		—		—		1,342
Shares of class A common stock issued in public offering	—			19		—		41,600		—		—		—		41,619
Shares of class A common stock issued in direct public offering	—			16		—		37,963		—		—		—		37,979
Shares of class A common stock issued upon exercise of warrants	—			4		—		8,537		—		—		—		8,541
Stock options expensed under SFAS No. 123	—			—		—		71		—		—		—		71
Dividends declared on class A common stock	—			—		—		—		—		—		(20,059	)	(20,059	)
Balance at December 31, 2004	$	59,671		148		3		321,937		—		3,815		(9,406	)	316,497
Net income	$	44,111		—		—		—		—		—		44,111		44,111
Unrealized gain on derivative financial instruments	2,079			—		—		—		—		2,079		—		2,079
Unrealized gain on securities	8,684			—		—		—		—		8,684		—		8,684
Amortization of unrealized gain on securities	(671		)	—		—		—		—		(671	)	—		(671	)
Deferred gain on settlement of swap	—			—		—		—		—		1,410		—		1,410
Amortization of deferred gain on settlement of swap	—			—		—		—		—		(438	)	—		(438	)
Sale of shares of class A common stock under stock option agreement	—			1		—		1,570		—		—		—		1,571
Restricted class A common stock earned	—			—		1		2,804		—		—		—		2,805
Restricted class A common stock forfeited	—			—		—		(260	)	—		—		—		(260	)
Reimbursement of offering expenses	—			—		—		248		—		—		—		248
Dividends declared on class A common stock	—			—		—		—		—		—		(37,186	)	(37,186	)
Balance at December 31, 2005	$	54,203		149		4		326,299		—		14,879		(2,481	)	338,850

See accompanying notes to consolidated financial statements.

F-8

Capital Trust, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2005, 2004 and 2003

(in thousands)

	2005			2004			2003
Cash flows from operating activities:
Net income	$	44,111		$	21,976		$	13,525
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes	1,644			(2,254		)	(1,784		)
Recapture of provision for possible credit losses	—			(6,672		)	—
Unrealized loss on available-for-sale securities for other-than-temporary impairment	—			5,886			—
Depreciation and amortization	1,114			1,100			1,057
Loss/(income) from equity investments in Funds	222			(2,407		)	(1,526		)
Distributions from equity investments in Funds	1,704			2,407			1,487
Net gain on sales of CMBS and available-for-sale securities	—			(300		)	—
Restricted class A common stock earned, net	2,545			1,342			237
Amortization of premiums and accretion of discounts on loans, investments and CMBS, net	(3,842		)	(1,327		)	(1,277		)
Amortization of deferred gain on interest rate hedges	(437		)	—			—
Accretion of discounts and fees on convertible trust preferred securities, net	—			276			478
Stock option expense	—			71			—
Changes in assets and liabilities:
Deposits and other receivables	4,603			63			86
Accrued interest receivable	(5,408		)	(806		)	3,126
Prepaid and other assets	2,238			2,482			799
Deferred origination fees and other revenue	(608		)	(2,371		)	2,165
Accounts payable and accrued expenses	2,876			2,521			(1,084		)
Net cash provided by operating activities	50,762			21,987			17,289
Cash flows from investing activities:
Principal collections on and proceeds from sales of available-for-sale securities	—			19,561			43,409
Purchases of CMBS	(245,175		)	(59,550		)	(6,157		)
Principal collections on and proceeds from sale of CMBS	14,339			5,048			—
Origination and purchase of loans receivable	(790,997		)	(489,480		)	(99,600		)
Principal collections on loans receivable	359,383			106,422			87,210
Equity investments in Funds	(4,660		)	(8,460		)	(9,931		)
Return of capital from Funds	8,812			8,075			9,271
Purchase of total return swap	(4,000		)	—			—
Purchases of equipment and leasehold improvements, net	(23		)	(119		)	(26		)
Increase in restricted cash	(653		)	(611		)	—
Purchase of remaining interest in Fund I	—			—			(19,947		)
Net cash (used in)/provided by investing activities	(662,974		)	(419,114		)	4,229
Cash flows from financing activities:
Proceeds from repurchase obligations	713,474			189,882			55,672
Repayment of repurchase obligations	(568,814		)	(111,685		)	(68,834		)
Proceeds from credit facilities	104,704			246,852			104,015
Repayment of credit facilities	(169,880		)	(220,544		)	(129,232		)
Proceeds from term redeemable securities contract	—			—			20,000
Repayment of term redeemable securities contract	—			(11,651		)	(8,349		)
Proceeds from issuance of collateralized debt obligations	571,087			252,778			—
Settlement of interest rate hedges	1,410			—			—
Payment of deferred financing costs	(8,704		)	(6,140		)	(2,270		)
Sale of shares of class A common stock under stock option agreement	1,571			815			281
Dividends paid on class A common stock	(32,493		)	(15,474		)	(8,297		)
Proceeds from exercise of warrants for shares of class A common stock	—			8,541			—
Repurchase of warrants to purchase shares of class A common stock	—			—			(2,132		)
Proceeds from sale of shares of class A common stock	—			79,598			17,135
Reimbursement of offering costs	248			—			—
Repurchase and retirement of shares of common and preferred stock previously outstanding	—			—			(955		)
Net cash provided by/(used in) financing activities	612,603			412,972			(22,966		)
Net increase/(decrease) in cash and cash equivalents	391			15,845			(1,448		)
Cash and cash equivalents at beginning of year	24,583			8,738			10,186
Cash and cash equivalents at end of year	$	24,974		$	24,583		$	8,738

See accompanying notes to consolidated financial statements.

F-9

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2005, 2004 and 2003

1.  Organization

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

We are a fully integrated, self-managed finance and investment management company that specializes in credit-sensitive structured financial products.  To date, our investment programs have focused on loans and securities backed by income-producing commercial real estate assets.  We invest for our own account and for private equity funds that we manage on behalf of institutional and individual investors.  From the commencement of our finance business in 1997 through December 31, 2005, we have completed  $5.9 billion of investments both directly and on behalf of our managed funds.  We conduct our operations as a real estate investment trust, or REIT, for federal income tax purposes.

On April 2, 2003, our charter was amended and restated and then further amended to eliminate from our authorized stock the entire 100,000,000 shares of our authorized but unissued class B common stock and to effect a one (1) for three (3) reverse stock split of our class A common stock.  Fractional shares resulting from the reverse stock split were settled in cash at a rate of $16.65 multiplied by the percentage of a share owned after the split.

All per share information concerning the computation of earnings per share, dividends per share, authorized stock, and per share conversion and exercise prices reported in the accompanying consolidated interim financial statements and these notes to consolidated financial statements have been adjusted as if the amendments to our charter were in effect for all fiscal periods and as of all balance sheet dates presented.

In December 2002, we elected to be taxed as a real estate investment trust (“REIT”) beginning with the 2003 tax year.  In view of our election to be taxed as a REIT, we have tailored our balance sheet investment program to originate or acquire loans and investments to produce a portfolio that meets the asset and income tests necessary to maintain qualification as a REIT.

All  dividends declared in 2005, 2004 and 2003 are ordinary income.

2.  Summary of Significant Accounting Policies

Principles of Consolidation

Our consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries as well as all variable interest entities in which we are the primary beneficiary.  All significant intercompany balances and transactions have been eliminated in consolidation.

In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46, “Consolidation of Variable Interest Entities,” an interpretation of Accounting Research Bulletin 51. Interpretation No. 46 provides guidance on identifying entities for which control is achieved through means other than through voting rights, and how to determine when and which business enterprise should consolidate a variable interest entity. In addition, Interpretation No. 46 requires that both the primary beneficiary and all other enterprises with a significant variable interest in a variable interest entity make additional disclosures. The transitional disclosure requirements took effect almost immediately and are required for all financial statements initially issued after January 31, 2003. In December 2003, the Financial Accounting Standards Board issued a revision of Interpretation No. 46, Interpretation No. 46R, to clarify the provisions of Interpretation No. 46. The application of Interpretation No. 46R is effective for public companies, other than small business issuers, after March 15, 2004. We have evaluated all of our investments and other interests in entities that may be deemed variable interest entities under the provisions of Interpretation No. 46 and have concluded that no additional entities need to be consolidated.

F-10

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

2.  Summary of Significant Accounting Policies, continued

In evaluating Interpretation No. 46R, we concluded that we could no longer consolidate CT Convertible Trust I, the entity which had purchased our step up convertible junior subordinated debentures and issued company-obligated, mandatory redeemable, convertible trust common and preferred securities. The restatement was effected by a cumulative type change in accounting principle on January 1, 2002. There was no change to previously reported net income as a result of such restatement. As of December 31, 2004 all of the securities had been redeemed or converted.

Revenue Recognition

Interest income for our loans and other investments is recognized over the life of the investment using the effective interest method and recorded on the accrual basis. Fees received in connection with loan commitments, net of direct expenses, are deferred until the loan is advanced and are then recognized over the term of the loan as an adjustment to yield.  Fees on commitments that expire unused are recognized at expiration.  Exit fees are also recognized over the estimated term of the loan as an adjustment to yield.  Purchased discounts are amortized over the estimated term of the loan as an adjustment to yields. Income recognition is generally suspended for loans at the earlier of the date at which payments become 90 days past due or when, in the opinion of management, a full recovery of income and principal becomes doubtful.  Income recognition is resumed when the loan becomes contractually current and performance is demonstrated to be resumed.

We account for incentive fees we can potentially earn from the Funds in accordance with Method 1 of Emerging Issues Task Force Topic D-96. Under Method 1, no incentive income is recorded until all contingencies have been eliminated. Incentive income received prior to that date is recorded as unearned income (a liability). During the year ended December 31, 2005 we received $8.0 million in incentive management fees from Fund II, which have been reflected in our consolidated statements of operations. No incentive management fees have been earned from Fund III at December 31, 2005 and as such, no amount of such potential fees has been accrued as income in our financial statements. The amount of incentive fees to be received in the future will depend upon a number of factors, including the level of interest rates and the fund’s ability to generate returns in excess of 10%, which is in turn impacted by the duration and ultimate performance of the fund’s assets.  Potential incentive fees received as Funds wind down could result in significant additional income from operations in certain periods during which such payments can be recorded as income.  If Fund II’s and Fund III’s assets were sold and liabilities were settled on January 1, 2006 at the recorded book value, and the fund’s equity and income were distributed, we would record approximately $2.1 million and $5.4 million of gross incentive fees from Fund II and Fund III, respectively. Fees from asset management services are recognized as services are rendered.

Cash and Cash Equivalents

We classify highly liquid investments with original maturities of three months or less from the date of purchase as cash equivalents.  At December 31, 2005 and 2004, a majority of the cash and cash equivalents consisted of overnight investments in commercial paper.  We had no bank balances in excess of federally insured amounts at December 31, 2005 and 2004.  We have not experienced any losses on our demand deposits, commercial paper or money market investments.

Restricted Cash

Restricted cash is comprised of $1.0 million and $264,000 on deposit with the trustee’s for CDO 2004-1 and CDO 2005-1, respectively, representing the principle proceeds of loan repayments which will be used to purchase replacement loans (either from third parties or us) as collateral for the CDO’s.

F-11

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

2.  Summary of Significant Accounting Policies, continued

Commercial Mortgage-Backed Securities (“CMBS”)

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

We classify our investments in pursuant to SFAS No. 115 on the date of acquisition of the investment. On August 4, 2005, we made a decision to change the accounting classification of our CMBS investments from available for sale to held to maturity. CMBS with an amortized cost of $410.0 million, and a market value of $422.3 million were reclassified from available for sale to held to maturity.  As was the case prior to this reclassification, the difference between amortized cost and expected recovery on these investments will continue to be accreted through the income statement using the level yield method accretion schedules in place prior to the reclassification.  The difference between amortized cost and market value as of the reclassification date, $12.2 million, was segregated within accumulated other comprehensive income and will be amortized over the remaining life of the securities using the level yield method.  We made the decision to reclassify these investments based upon our intent and ability to hold these investments to maturity.  Going forward, new originations of held to maturity investments will be stated at cost plus the amortization of any premiums or discounts and any premiums or discounts will be amortized through the income statement using the level yield method.  Other than in the instance of impairment, these held to maturity investments will be shown in our financial statements at their adjusted values pursuant to the methodology described above.

We may from time to time invest in commercial mortgage-backed securities and certain other securities which may be classified as available-for-sale.  Available-for-sale securities are carried at estimated fair value with the net unrealized gains or losses reported as a component of accumulated other comprehensive income/(loss) in shareholders’ equity.  Many of these investments are relatively illiquid and management must estimate their values.

In making these estimates, management utilizes market prices provided by dealers who make markets in these securities, but may, under certain circumstances, adjust these valuations based on management’s judgment.  Changes in the valuations do not affect our reported income or cash flows, but impact shareholders’ equity and, accordingly, book value per share.

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

F-12

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

2.  Summary of Significant Accounting Policies, continued

During the fourth quarter of 2004, we concluded that two of our CMBS investments had incurred other-than-temporary impairment and we incurred a charge of $5.9 million through the income statement.  At December 31, 2005 we believe there has not been any adverse change in cash flows since December 31, 2004, therefore we did not recognize any other-than-temporary impairment on any CMBS investments.  Significant judgment of management is required in this analysis that includes, but is not limited to, making assumptions regarding the collectibility of the principal and interest, net of related expenses, on the underlying loans.

Income on these CMBS securities is recognized based upon a number of assumptions that are subject to uncertainties and contingencies.  Examples of these 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 rate fluctuations.  Additional factors that may affect our reported interest income on our mortgage-backed securities include interest payment shortfalls due to delinquencies on the underlying mortgage loans and the timing and magnitude of credit losses on the mortgage loans underlying the securities that are a result of 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.

Loans Receivable and Reserve for Possible Credit Losses

We purchase and originate commercial mortgage and mezzanine loans to be held as long-term investments at amortized cost.  Management must periodically evaluate each of these loans for possible impairment.  Impairment is indicated when it is deemed probable that we will not be able to collect all amounts due according to the contractual terms of the loan.  If a loan were determined to be permanently impaired, we would write down the loan through a charge to the reserve for possible credit losses.  Given the nature of our loan portfolio and the underlying commercial real estate collateral, significant judgment of management is required in determining permanent impairment and the resulting charge to the reserve, which includes but is not limited to making assumptions regarding the value of the real estate that secures the mortgage loan.

Our accounting policies require that an allowance for estimated credit losses be reflected in our financial statements based upon an evaluation of known and inherent risks in our mortgage and mezzanine loans.  Quarterly, management reevaluates our current portfolio to determine the reserve for possible credit losses. Each loan in our portfolio is evaluated using our loan risk rating system which considers loan to value, debt yield, cash flow stability, exit plan, loan sponsorship, loan structure and any other factors necessary to assess the loans likelihood of delinquency or default.  If we believe that there is a potential for delinquency or default, a downside analysis is prepared to estimate the value of the collateral underlying our loan, and this potential loss is multiplied by the default likelihood to determine the size of the reserve.  Actual losses, if any, could ultimately differ from these estimates.

Equity investments in Fund I, Fund II, CT MP II LLC (which we refer to as Fund II GP) and Fund III (which together we refer to as Funds)

As the Funds are not majority owned or controlled by us, we do not consolidate the Funds in our consolidated financial statements.  We account for our interest in the Funds under the equity method of accounting.  As such, we report a percentage of the earnings of the Funds equal to our ownership percentage on a single line item in the consolidated statement of operations as income from equity investments in the Funds.

F-13

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

2.  Summary of Significant Accounting Policies, continued

Deferred Financing Costs

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

Derivative Financial Instruments

In the normal course of business, we use derivative financial instruments to manage, or hedge, cash flow variability caused by interest rate fluctuations.  Specifically we use interest rate swaps to effectively convert variable rate debt, that is financing fixed rate assets, to fixed rate debt.  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 debt.  The swap agreements are generally held-to-maturity, and in cases where they are terminated early any gain or loss is generally amortized over the remaining life of the hedged item.  We do not use any derivative financial instruments for trading purposes.

The swap agreements must be effective in reducing the variability of cash flows of the hedged items in order to qualify for hedge accounting.  Changes in value of effective cash flow hedges are reflected in our financial statements through other comprehensive income and do not affect our net income.  To the extent a derivative does not qualify for hedge accounting, the changes in its value are included in net income until the derivative instrument matures or is settled.

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

Income Taxes

Our financial results generally do not reflect provisions for current or deferred income taxes on our REIT taxable income.  Management believes that we have and intend to continue to operate in a manner that will continue to allow us to be taxed as a REIT and, as a result, do not expect to pay substantial corporate-level taxes (other than taxes payable by our taxable REIT subsidiaries in accordance with Statement of Financial Accounting Standards No. 109).  Many of these requirements, however, are highly technical and complex.  If we were to fail to meet these requirements, we would be subject to Federal income tax.

F-14

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

2.  Summary of Significant Accounting Policies, continued

Accounting for Stock-Based Compensation

We comply with the provisions of the Financial Accounting Standards Board’s Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation”.  Statement of Financial Accounting Standards No. 123 encourages the adoption of a fair-value based accounting method for employee stock-based compensation plans, but also permits companies to continue accounting for stock-based compensation plans as prescribed by Accounting Principles Board Opinion No. 25.  However, companies electing to continue accounting for stock-based compensation plans under Accounting Principles Board Opinion No. 25 must make pro forma disclosures as if they adopted the cost recognition requirements of Statement of Financial Accounting Standards No. 123.

Through December 31, 2003, we accounted for stock-based compensation under Accounting Principles Board Opinion No. 25.  Accordingly, no compensation cost has been recognized for the years ended December 31, 2003 and 2002 for awards under our stock plans in the accompanying consolidated statements of operations as the exercise price of the stock options granted thereunder equaled the market price of the underlying stock on the date of the grant.  During the fourth quarter of 2004, we elected to adopt the fair value recognition provisions of Statement of Financial Accounting Standards No. 123 using the modified prospective method provided in Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure”.  Under the modified prospective method, we recognized stock-based employee compensation costs based upon the fair value recognition provisions of Statement of Financial Accounting Standards No. 123 effective January 1, 2004.  Compensation expense is recognized on the accelerated attribution method under Financial Accounting Standards Board Interpretation No. 28.

For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options’ vesting period.  Our pro forma information for the years ended December 31, 2003 and 2002 is as follows (in thousands, except for net earnings/(loss) per share of common stock):

	2003				2002
	As reported		Pro forma		As reported			Pro forma
Net income	$	13,525	$	13,280	$	(9,738	)	$	(10,038	)
Net earnings per share of common stock:
Basic	$	2.27	$	2.23	$	(0.54	)	$	(0.56	)
Diluted	$	2.23	$	2.21	$	(0.54	)	$	(0.56	)

Comprehensive Income

We comply with the provisions of the Financial Accounting Standards Board’s Statement of Financial Accounting Standards No. 130, “Reporting Comprehensive Income (“SFAS No. 130”) in reporting comprehensive income and its components in the full set of general-purpose financial statements. Total comprehensive income/(loss) was $54.2 million, $59.7 million and $8.6 million, for the years ended December 31, 2005, 2004 and 2003, respectively.  The primary component of comprehensive income other than net income was the unrealized gain/(loss) on derivative financial instruments and available-for-sale securities.  At December 31, 2005, accumulated other comprehensive income is $14.9 million, comprised of unrealized gains on CMBS of $11.6 million, unrealized gains on cash flow swaps of $2.3 million and  $972,000 of deferred gains on the settlement of cash flow swaps.

F-15

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

2.  Summary of Significant Accounting Policies, continued

Earnings per Share of Common Stock

Earnings per share of common stock are presented based on the requirements of the FASB’s Statement of Accounting Standards No. 128 (“SFAS No. 128”).  Basic EPS is computed based on the income applicable to common stock divided by weighted average number of shares of common stock outstanding during the period.  Diluted EPS is based on the net earnings applicable to common stock plus, if dilutive, interest paid on convertible trust preferred securities, net of tax benefit, divided by weighted average number of shares of common stock and potentially dilutive shares of common stock that were outstanding during the period.  At December 31, 2005, potentially dilutive shares of common stock include dilutive common stock options.  At December 31, 2004, potentially dilutive shares of common stock include convertible trust preferred securities and dilutive common stock options.

Use of Estimates

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

Reclassifications

Certain reclassifications have been made in the presentation of the 2004 and 2003 consolidated financial statements to conform to the 2005 presentation.

Segment Reporting

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

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

The Investment Management segment includes all of our activities related to investment management services provided to us and third-party funds under management and our activities as a special servicer and includes our taxable REIT subsidiary, CT Investment Management Co., LLC and its subsidiaries.

New Accounting Pronouncements

On December 16, 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123(R), ‘‘Share-Based Payment’’, which is a revision of Statement of Financial Accounting Standards No. 123 and supersedes APB Opinion No. 25.  Statement of Financial Accounting Standards No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be valued at fair value on the date of grant, and to be expensed over the applicable vesting period. Pro forma disclosure of the income statement effects of share-based payments is no longer an alternative. Statement of Financial Accounting Standards No. 123(R) is effective for all stock-based awards granted on or after July 1, 2005. In addition, companies must also recognize compensation expense related to any awards that are n ot fully vested as of the effective date. Compensation expense for the unvested awards will be measured based on the fair value of the awards previously calculated in developing the pro forma disclosures in accordance with the provisions of Statement of Financial Accounting Standards No. 123. As we have adopted Statement of Financial Accounting Standards No. 123 effective January 1, 2004, we do not believe that adoption of Statement of Financial Accounting Standards  123(R) will have a material impact on our future financial results.

F-16

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

3.  Commercial Mortgage-Backed Securities

We acquire rated and unrated subordinated investments in CMBS, as detailed in Note 2, on August 4, 2005, pursuant to the provisions of Statement of Financial Accounting Standard (“SFAS”) No. 115, we made a decision to change the accounting classification of our then portfolio of CMBS investments from available for sale to held to maturity. During the fourth quarter, we acquired one CMBS investment that we classify as available for sale.

At December 31, 2005, we held 45 investments in 29 separate issues of commercial mortgage-backed securities with an aggregate face value of $526.6 million.  Commercial mortgage-backed securities with a face value of $106.7 million earn interest at an average variable rate of LIBOR plus 2.50% (6.89% at December 31, 2005).  The remaining commercial mortgage-backed securities, $419.9 million face value, earn interest at fixed rates averaging 6.97% of the face value.  We purchased the commercial mortgage-backed securities at a net discount of $49.9 million. We expect to recover, net of anticipated losses and other than temporary impairment, $494.5 million. As of December 31, 2005, the remaining net discount to be amortized into income over the remaining lives of the securities was $18.1 million.  At December 31, 2005, with discount amortization, the commercial mortgage-backed securities earn interest at a blended rate of 8.03% of the adjusted cost net of the unamortized discount.  As of December 31, 2005, the securities were carried at adjusted cost of $488.0 million, reflecting a $11.6 million unrealized gain to their amortized cost. The CMBS mature at various dates from June 2006 to July 2027.  At December 31, 2005, the expected average life for the CMBS portfolio is 81 months.

At December 31, 2005, we had one CMBS investment that we designated and account for on an available-for-sale basis with a face value of $10.0 million. The security earns interest at a rate of 8.0%.  As of December 31, 2005, the security was carried at an adjusted cost of $10.7 million, reflecting a unrealized gain to its amortized cost. The investment matures in February 2010.

At December 31, 2004, we held 19 investments in 14 separate issues of commercial mortgage-backed securities with an aggregate face value of $271.8 million.  Commercial mortgage-backed securities with a face value of $61.3 million, earn interest at a variable rate, which averages the London Interbank Offered Rate, or LIBOR, plus 2.28% (4.67% at December 31, 2004).  The remaining commercial mortgage-backed securities, $210.6 million, face value, earn interest at fixed rates averaging 7.65% of the face value.  We purchased all of the commercial mortgage-backed securities at discounts.  As of December 31, 2004, the remaining discount to be amortized into income over the remaining lives of the securities was $22.3 million.  At December 31, 2004, with discount amortization, the commercial mortgage-backed securities earn interest at a blended rate of 8.58% of the fair value net of the unamortized discount.  As of December 31, 2004, the securities were carried at fair value of $247.8 million, reflecting a $3.6 million, unrealized gain to their amortized cost. The CMBS mature at various dates from October 2005 to September 2015.  At December 31, 2004, the expected average life for the CMBS portfolio is 75 months.

During the fourth quarter of 2004, we concluded that two of our CMBS investments with face amounts totaling $11.7 million had incurred other-than-temporary impairment due to changes in the expected cash flows and recorded a charge of $5.9 million through the income statement to record these two investments at the current market value.  Our estimates of recoverability indicate that we will not recover $1.8 million of the face value on one of the securities written down and expect full collection of the face value on the other security

F-17

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

4.  Loans Receivable

At December 31, 2005, we had 76 performing loans receivable with a current carrying value of $987.2 million.  Our portfolio of loans has a face value of $996.1 million and we estimate the market value of the portfolio at $998.7 million.  Eight of the loans totaling $164.2 million bear interest at an average fixed rate of interest of 8.70%.  The 68 remaining loans, totaling $822.9 million, bear interest at a variable rate of interest averaging LIBOR plus 3.52% (7.91% at December 31, 2005).

We have classified our loans receivable into the following general categories:

•First Mortgage Loans — These are secured property loans evidenced by a first mortgage which is senior to any mezzanine financing and the owner’s equity. These loans are typically bridge loans for property owners that require interim financing until permanent financing can be obtained. Our first mortgage loans are generally of a relatively short duration, with extension options as deemed appropriate, and typically require a balloon payment of principal at maturity. We may also originate and fund first mortgage loans in which we intend to sell the senior tranche, thereby creating a B Note. These loans may include parri passu participations in first mortgage loans.

•Property Mezzanine Loans — These are secured property loans that are subordinate to a first mortgage loan, but senior to the owner’s equity. A mezzanine loan is evidenced by its own promissory note and is typically made to the owner of the property-owning entity, which is typically the senior loan borrower. It is not secured by the first mortgage on the property, but by a pledge of the mezzanine borrower’s ownership interest in the property-owning entity. Subject to negotiated contractual restrictions, the mezzanine lender generally has the right, following foreclosure, to become the owner of the property, subject to the lien of the first mortgage.

•B Notes — These are loans evidenced by a junior participation in a first mortgage against one or more properties; the senior participation is known as an A Note. Although a B Note may be evidenced by its own promissory note, it shares a single borrower and mortgage with the A Note and is secured by the same collateral. B Note lenders have the same obligations, collateral and borrower as the A Note lender and in most instances are contractually limited in rights and remedies in the case of a default. The B Note is subordinate to the A Note by virtue of a contractual arrangement between the A Note lender and the B Note lender.

At December 31, 2005 and 2004, our loans receivable consisted of the following (in thousands):

	2005		2004
First mortgage loans	$	69,509	$	3,038
Property mezzanine loans	345,762		159,506
B Notes	574,871		393,620
	990,142		556,164
Less: reserve for possible credit losses	—		—
Total loans	$	990,142	$	556,164

One first mortgage loan with an original principal balance of $8.0 million reached maturity on July 15, 2000 and has not been repaid with respect to principal and interest.  In December 2002, the loan was written down to $4.0 million, through a charge to the allowance for possible credit losses. During the years ended December 31, 2004 and 2003, we received proceeds of $231,000 and $731,000, respectively, reducing the carrying value of the loan to $3.0 million, In accordance with our policy for revenue recognition, income recognition has been suspended on this loan and for the years ended December 31, 2005, 2004 and 2003, $1.1 million, $930,000 and $912,000, respectively, of potential interest income has not been recorded.

F-18

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

4. Loans Receivable, continued

At December 31, 2005, the weighted average interest rate in effect, including amortization of fees and premiums, for our performing loans receivable were as follows:

First mortgage loans	8.32	%
Property mezzanine loans	7.90	%
B Notes	8.20	%
Weighted average	8.11	%

At December 31, 2005, $822.9 million, or 83% of the aforementioned performing loans bear interest at floating rates ranging from LIBOR plus 1.64% to LIBOR plus 7.25%.  The remaining $164.2 million, or 17% of the performing loans, bear interest at fixed rates ranging from 6.12% to 11.67%.

The range of maturity dates and weighted average maturity at December 31, 2005 of our performing loans receivable was as follows:

Category	Range of Maturity Dates	Weighted Average Maturity
First mortgage loans	May 2006 to October 2008	19 Months
Property mezzanine loans	May 2006 to December 2014	36 Months
B Notes	January 2006 to July 2015	21 Months
Performing Loans	January 2006 to July 2015	26 Months

There are no loans to a single borrower or to related groups of borrowers that exceed ten percent of total assets.  Approximately 15% and 10% of all performing loans are secured by properties in New York and California, respectively.  Approximately 30% of all performing loans are secured by office buildings and approximately 31% are secured by hotels.

In connection with the aforementioned loans, at December 31, 2005 and 2004, we have deferred origination fees, net of direct costs of $101,000 and $575,000, respectively, which are being amortized into income over the life of the loan.  At December 31, 2005 and 2004, we have recorded $113,000 and $99,000, respectively, of exit fees, which will be collected at the loan pay-off.  These fees are recorded as interest income on a basis to realize a level yield over the life of the loans.

Quarterly, management reevaluates the reserve for possible credit losses based upon our current portfolio of loans. Each loan in our portfolio is evaluated using our loan risk rating system which considers loan to value, debt yield, cash flow stability, exit plan, loans sponsorship, loan structure and any other factors necessary to assess the likelihood of delinquency or default.  If we believe that there is a potential for delinquency or default, a downside analysis is prepared to estimate the value of the collateral underlying our loan, and this potential loss is multiplied by the default likelihood. At December 31, 2004, a detailed review of the entire portfolio was completed and we concluded that a reserve for possible credit losses was no longer warranted and the reserve was recaptured. At December 31, 2005, a detailed review of the entire portfolio was completed and we concluded that a reserve for possible credit losses was not warranted. The activity on the reserve for possible credit losses on loans receivable was as follows for the years ended December 31, 2005, 2004 and 2003 (in thousands):

	2005		2004			2003
Beginning balance	$	—	$	6,672		$	4,982
Provision for (recapture of) allowance for possible credit losses	—		(6,672		)	—
Additional reserve established with Fund I purchase	—		—			1,690
Amounts charged against reserve for possible credit losses	—		—			—
Ending balance	$	—	$	—		$	6,672

F-19

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

5. Total Return Swap

During the twelve months ended December 31, 2005, we entered into one total return swap agreement.  Under the terms of the agreement, we have posted $4.0 million, of cash collateral as security for a $20.0 million, synthetic interest in an underlying referenced loan that is secured by shares of a publicly traded REIT.  We receive interest at LIBOR flat on the $4.0 million, cash collateral balance and LIBOR plus 3.75% on the $20.0 million interest in the referenced loan and pay LIBOR plus 1.00% on the $20.0 million referenced loan.  At December 31, 2005, we are receiving LIBOR plus 13.75% on the $4.0 million cash collateral balance (18.14% at December 31, 2005).  We collected an origination fee with the execution of the agreement which adds an additional 2.95% to the return. If the price of the stock which serves as collateral for the referenced loan falls below a specified level, we will be required to increase our cash collateral to 30% of the loan balance.  If the loan was to default, we would be required to purchase the loan, thereby eliminating the total return swap agreement. The total return swap is treated as a non-hedge derivative for accounting purposes and therefore changes in market value are recorded through the income statement.  At December 31, 2005 the total return swap has a fair market value of $4.0 million.

6.  Equity Investment in Funds

On March 8, 2000, we entered into a venture with affiliates of Citigroup Alternative Investments LLC pursuant to which they agreed, among other things, to co-sponsor and invest capital in a series of commercial real estate mezzanine investment funds managed by us with certain investment criteria.  Pursuant to the venture agreement, which was amended in 2003, we co-sponsor three funds; CT Mezzanine Partners I LLC, CT Mezzanine Partners II LP and CT Mezzanine Partners III, Inc., which we refer to as Fund I, Fund II and Fund III, respectively. Our wholly-owned subsidiary, CT Investment Management Co., LLC, serves as the exclusive investment manager to Fund I, Fund II and Fund III. All of these Fund’s have concluded their respective investment periods and we currently have no plans to sponsor a new fund under this agreement. All three funds have ceased making new investments, and we have not formed another fund which would be subject to the venture agreement with Citigroup Alternative Investments.

Fund I

As part of the venture with Citigroup Alternative Investments, we held an equity investment in Fund I during the year ended December 31, 2003.    The activity for our equity investment in Fund I for the years ended December 31, 2003 was as follows (in thousands):

	2003
Beginning balance	$	6,609
Company portion of Fund I income	143
Purchase of remaining fund equity	(6,752		)
Ending balance	$	—

On January 31, 2003, we purchased from an affiliate of Citigroup Alternative Investments its 75% interest in Fund I for $38.4 million (including the assumption of liabilities).  As of January 31, 2003, we began consolidating the operations of Fund I in our consolidated financial statements.

For the years ended December 31, 2003 we received $17,000 of fees for management of Fund I.

F-20

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

6. Equity Investment in Funds, continued

Fund II

We had equity investments in Fund II during the years ended December 31, 2005, 2004 and 2003.  We account for Fund II on the equity method of accounting as we have a 50% ownership interest in the general partner of Fund II.  The activity for our equity investment in Fund II for the years ended December 31, 2005, 2004 and 2003 was as follows (in thousands):

	2005			2004			2003
Beginning balance	$	3,059		$	9,209		$	12,277
Capital contributions to Fund II	—			—			5,459
Company portion of Fund II (loss) income	(673		)	1,975			2,144
Distributions from Fund II	(1,108		)	(8,125		)	(10,671		)
Ending balance	$	1,278		$	3,059		$	9,209

As of December 31, 2005, Fund II has loans and investments outstanding totaling $60.4 million, all of which are performing in accordance with the terms of the loan agreements.

For the years ended December 31, 2005, 2004 and 2003, we received $508,000, $1.8 million and $3.9 million, respectively, of fees for management of Fund II.

Fund II GP

Fund II GP serves as the general partner for Fund II.  Fund II GP is owned 50% by us and 50% by Citigroup.

We had equity investments in Fund II GP during the years ended December 31, 2005, 2004 and 2003. The activity for our equity investment in Fund II GP was as follows (in thousands):

	2005			2004			2003
Beginning balance	$	2,431		$	3,470		$	3,499
Capital contributions to Fund II GP	—			—			757
Company portion of Fund II GP loss	(1,253		)	(339		)	(786		)
Distributions from Fund II GP	(487		)	(700		)	—
Ending balance	$	691		$	2,431		$	3,470

In addition, we earned $600,000 of consulting fees from Fund II GP during the year ended December 31, 2003.

In accordance with the limited partnership agreement of Fund II, Fund II GP may earn incentive compensation when certain returns are achieved for the limited partners of Fund II, which will be accrued if and when earned. During the year ended December 31, 2005, we received $8.0 million in incentive compensation.

F-21

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

6. Equity Investment in Funds, continued

Fund III

We had equity investments in Fund III during the years ended December 31, 2005, 2004 and 2003.  We account for Fund III on the equity method of accounting. The activity for our equity investment in Fund III for the years ended December 31, 2005, 2004 and 2003 was as follows (in thousands):

	2005			2004			2003
Beginning balance	$	10,985		$	3,563		$	—
Capital invested	4,660			8,460			2,800
Costs capitalized	—			—			914
Company portion of Fund III income	1,704			772			25
Amortization of capitalized costs	(153		)	(153		)	(88		)
Distributions received from Fund III	(8,921		)	(1,657		)	(88		)
Ending balance	$	8,275		$	10,985		$	3,563

As of December 31, 2005, Fund III has loans and investments outstanding totaling $460.3 million, all of which are performing in accordance with the terms of the loan agreements.

For the years ended December 31, 2005, 2004 and 2003, we received $4.6 million, $6.0 million and $3.5 million, respectively, of fees for management of Fund III.

Investment Costs Capitalized

In connection with entering into the venture agreement and related fund business, we capitalized certain costs, including the cost of warrants issued and legal costs incurred in negotiating and concluding the venture agreement with Citigroup Alternative Investments.  These costs are being amortized over the expected life of the fund business and related venture agreement (10 years).  The activity for these investment costs for the years ended December 31, 2005, 2004 and 2003 was as follows (in thousands):

	2005			2004			2003
Beginning balance	$	4,901		$	5,745		$	6,589
Costs capitalized	—			—			—
Amortization of capitalized costs	(844		)	(844		)	(844		)
Ending balance	$	4,057		$	4,901		$	5,745

7.  Debt

At December 31, 2005 we had $1.19 billion of total debt outstanding ($369.8 million were repurchase obligations and $823.7 million were CDOs). Collateral securing the repurchase obligations was $492.3 million ($119.1 million of CMBS and $373.2 million of loans). Collateral securing the CDOs was $973.7 million ($371.0 million of CMBS and $602.7 million of loans). The annual maturities of our debt are as follows (in millions):

	2006		2007		2008		2009		2010		Thereafter		Total
Repurchase obligations	$	144.7	$	20.8	$	165.8	$	—	$	—	$	38.5	$	369.8
CDOs	—		5.0		84.4		164.9		138.7		430.7		823.7
Total debt	$	144.7	$	25.8	$	250.2	$	164.9	$	138.7	$	469.2	$	1,193.5

F-22

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

7. Debt, continued

Credit Facility

Effective June 27, 2003, we entered into a $150 million credit agreement with a commercial lender who has been providing credit to us since June 8, 1998. At July 15, 2005 all outstanding borrowings under the credit facility were repaid and the facility was converted to a repurchase agreement that provides for $150.0 million of repurchase commitments.

At December 31, 2004, we have borrowed $65.2 million under the credit facility at an average interest rate of LIBOR plus 1.74% (4.02% at December 31, 2004). At December 31, 2004, the unused amount of potential credit under the remaining credit facility was $84.8 million.  Assuming no additional utilization under the credit facility and including the amortization of fees paid and capitalized over the term of the credit facility, the all-in effective borrowing cost was 5.37% at December 31, 2004.  We had pledged assets of $107.4 million as collateral for the borrowing against such credit facility.

Repurchase Obligations

At December 31, 2005, we were party to repurchase agreements with six counterparties with total repurchase commitments of $775.0 million and had total outstanding borrowings of $369.8 million.  The weighted average cash borrowing cost for all outstanding borrowings under the repurchase agreements in effect at December 31, 2005 was LIBOR plus 0.94% (5.33% at December 31, 2005). Assuming no additional utilization under the repurchase agreements and including the amortization of all fees paid and capitalized over the remaining term of the repurchase agreements, the all-in effective borrowing cost was LIBOR plus 1.18% (5.57% at December 31, 2005).  At December 31, 2005, if all of the assets securing repurchase arrangements were drawn upon, we could obtain an additional $89.0 million of financing.

In February 2002, we entered into a $150.0 million repurchase agreement with Liquid Funding, LTD., an affiliate of Bear Stearns. The agreement had an initial term of one year, which expired in February 2003.  We extended the agreement three times, and its current maturity is March 2006.  In February 2003, we increased the amount of its repurchase commitment to $200.0 million.  The agreement is designed to provide us with non recourse financing for our general securities investment activity.  Under the agreement, advance rates are up to 85.0% and cash costs of funds range from LIBOR plus 0.40% to LIBOR plus 1.70%.  At December 31, 2005, we had incurred borrowings under the agreement of $42.4 million.

In May 2003, we entered into a $50.0 million repurchase agreement with Goldman Sachs and Commerzbank. The agreement had an initial term of two years, expiring June 2005.  In August 2003, we amended the agreement to increase its size to $100.0 million and extend its term to June 2006.  The agreement is designed to provide us with recourse financing for our general investment activity.  Under the agreement, advance rates are up to 85.0% and cash costs of funds range between LIBOR plus 1.00% and LIBOR plus 2.00%.  At December 31, 2005, we had incurred borrowings under the agreement of $53.5 million.

In August 2004, we entered into an additional $50.0 million repurchase agreement with Goldman Sachs.  The agreement has a term of three years, expiring in September 2007.  The agreement is designed to provide us with recourse financing for assets designated for one or more of our CDOs.  Under the agreement, advance rates are up to 85.0% and cash costs of funds range between LIBOR plus 1.00% and LIBOR plus 1.75%.  At December 31, 2005, we had incurred borrowings under the agreement of $20.8 million.

In March 2005, we entered into a $150.0 million repurchase agreement with Bank of America.  The agreement has a term of five years, expiring in March 2010.  Pursuant to the terms of the agreement, the amount of its repurchase commitment was reduced to $75.0 million upon the closing of our second CDO in March 2005.  The agreement is designed to finance on a recourse basis assets designated for our second CDO with advance rates of 85.0% and a cash cost of funds of LIBOR plus 1.00%.  At December 31, 2005, we had incurred borrowings under the agreement of $38.5 million.

F-23

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

7. Debt, continued

In July, 2005, we entered into a $75.0 million repurchase agreement with Morgan Stanley.  The agreement has a term of three years, expiring July 2008.  In October and November 2005, we amended the agreement to increase the amount of its repurchase commitment to $125.0 million and to $150.0 million, respectively.  The November amendment also provides for a further increase of the repurchase commitment to $200.0 million as of January 2006.  The agreement is designed to provide us with recourse financing for our general loan and securities investment activity.  Under the agreement, advance rates are up to 90.0% and cash costs of funds range from LIBOR plus 0.40% to LIBOR plus 2.00%.  At December 31, 2005, we had incurred borrowings under the agreement of $98.9 million and had the ability to borrow an additional $40.7 million against the assets collateralizing the agreement.

In July 2005, we entered into an additional $75.0 million repurchase agreement with Morgan Stanley. The agreement has a term of three years, expiring in July 2008.  The agreement is designed to finance on a recourse basis assets designated for one or more of our CDOs with advance rates of up to 85.0% and cash costs of funds ranging between LIBOR plus 1.00% and LIBOR plus 1.75%.  At December 31, 2005, we had incurred no borrowings under the agreement.

In August 2005, we entered into a $75.0 million repurchase agreement with Bear Stearns.  The agreement has an initial term of three years, expiring in August 2008.  In December 2005, we entered into a related repurchase agreement with Bear Stearns, enabling us to use additional types of collateral.  The related agreement increased the combined repurchase commitment under both facilities to $125.0 million and cross referenced borrowing between the two agreements.  The agreements together are designed to finance on a recourse basis our general investment activity as well as assets designated for one or more of our CDOs.  Under the agreement, advance rates are up to 85.0% and cash costs of funds range from LIBOR plus 0.55% to LIBOR plus 2.00%.  At December 31, 2005, we had incurred borrowings under the agreements of $67.0 million and had the ability to borrow an additional $20.4 million against the assets collateralizing the agreement.

We were also a party to 15 asset specific repurchase obligations, outside of the agreements described above, with certain of the counterparties listed above.  14 of these repurchase obligations financed securities investments and one financed a loan asset.  The term of these agreements are generally one year or less and advance rates are up to 88.0% with cash costs ranging from LIBOR plus 0.35% to LIBOR plus 1.50%.  These one-off repurchase obligations represent borrowings of $48.8 million which we could increase by $27.9 million without posting additional collateral or entering into new agreements.

At December 31, 2004, we were party to repurchase agreements with three counterparties with total repurchase commitments of $350.0 million and had total outstanding borrowings of $225.1 million.  The weighted average cash cost for all the repurchase agreements outstanding at December 31, 2004 was LIBOR plus 1.02% (3.32% at December 31, 2004). Assuming no additional utilization under the repurchase agreements and including the amortization of fees paid and capitalized over the term of the repurchase agreements, the all-in effective borrowing cost was 3.41% at December 31, 2004.

In certain circumstances, we have financed the purchase of investments from a counterparty through a repurchase agreement with that same counterparty.  We currently record these investments in the same manner as other investments financed with repurchase agreements, with the investment recorded as an asset and the related borrowing under any repurchase agreement as a liability on our consolidated balance sheet. Interest income earned on the investments and interest expense incurred on the repurchase obligations are reported separately on the consolidated income statement.  There is discussion, based upon a technical interpretation of SFAS 140, that these transactions will not qualify as a purchase by us.  We believe, and it is industry practice, that we are accounting for these transactions in an appropriate manner, however, if these investments do not qualify as a purchase under SFAS 140, we would be required to present the net investment on our balance sheet together with an embedded derivative with the corresponding change in fair value of the derivative being recorded in the income statement.  The value of the derivative would reflect not only changes in the value of the underlying investment, but also changes in the value of the underlying credit provided by the counterparty.  Furthermore, hedge instruments related to these assets and liabilities, currently deemed

F-24

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

7. Debt, continued

effective, may no longer be effective and may have to be accounted for as non hedge derivatives.  As of December 31, 2005 we had entered into eight such transactions, with a book value of the associated assets of $189.3 million financed with repurchase obligations of $118.2 million.  As of December 31, 2004, we had entered into four such transactions, with a book value of the associated assets of $38.9 million financed with repurchase obligations of $25.8 million.  Adoption of the aforementioned treatment would result in a reduction in total assets and liabilities on our consolidated balance sheet of $71.1 million and $13.1 million at December 31, 2005 and 2004, respectively.

Collateralized Debt Obligations

At December 31, 2005, we had collateralized debt obligations outstanding from three separate issuances with a total face value of $821.3 million.  Our CDOs are financing vehicles for our assets and, as such, are consolidated on our balance sheet at $823.7 million, representing the amortized sales price of the securities sold to third parties.  In total, our two floating rate CDOs provide us with $551.7 million of debt financing at a stated average interest rate of LIBOR plus 0.55% (4.94% at December 31, 2005) and an all-in effective rate (including the amortization of issuance costs) of LIBOR plus 0.87% (5.26% at December 31, 2005).  Our fixed rate CDO provides us with $269.6 million of notional balance financing (which we sold for proceeds of $272.2 million) with a cash cost of 5.22% (5.17% based upon proceeds) and an all in effective interest rate of 5.25%. On a combined basis, our CDOs provide us with $823.7 million of non-recourse, non-mark-to-market, index matched financing at a weighted average cash credit spread of 0.52% over the applicable index (4.91% December 31, 2005) and a weighted average all in cost of 0.79% over the applicable index (5.18% at December 31, 2005).

In July 2004 we issued our first CDO, which we refer to as CDO I, issuing and selling to third party private investors $252.8 million of notes  rated AAA through BBB- and retaining all of the below investment grade notes, as well as the equity in the CDO issuers.  CDO I is collateralized by a $324.0 million pool of commercial real estate related assets and is a reinvesting CDO.  During its four year reinvestment period, expiring in June 2008, principal proceeds from collateral repayments can be reinvested into replacement collateral subject to certain criteria.  We have the option to call the entire financing at par beginning in July 2006.  As a financing, CDO I has a cash cost of LIBOR plus 0.62% (5.01% at December 31, 2005) and including the amortization of fees and expenses, an all in effective rate of LIBOR plus 1.04% (5.43% at December 31, 2005).

In March 2005 we issued our second CDO, which we refer to as CDO II, issuing and selling to third party private investors  $299.0 million of notes rated AAA through BBB- and retaining all of the below investment grade notes, as well as the equity in the CDO issuers.  CDO II is collateralized by a pool of $337.8 million of commercial real estate related assets and is a reinvesting CDO.  During its five year reinvestment period, expiring in February 2010, principal proceeds from collateral repayments can be reinvested into replacement collateral subject to certain rating agency criteria.  We have the option to call the entire financing at par beginning in March 2007.  As a financing, CDO II has a cash cost of LIBOR plus 0.49% (4.88% at December 31, 2005) and including the amortization of fees and expenses, an all in effective rate of LIBOR plus 0.71% (5.10% at December 31, 2005).

In August 2005, we issued our third CDO, which we call CDO III, issuing and selling to third party private investors  $269.6 million of notes rated AAA through BBB for proceeds of $272.2 million.  We retained all of the BBB- and below investment grade rated notes, as well as the equity in the CDO issuers.  CDO III is collateralized by a pool of $341.3 million (face value) of CMBS and is a static pool CDO.  As such, it provides for the amortization of the CDO notes rather than reinvestment with principal proceeds from collateral repayments.  We have the option to call the entire financing subject to yield maintenance beginning in September 2011.  As a financing, CDO III has a cash cost of 5.17% and including the amortization of fees and expenses, an all in effective rate of 5.25%.

F-25

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

8.  Derivative Financial Instruments

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

We account for derivative financial instruments in accordance with Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended by Statement of Financial Accounting Standards No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities.”  Statement of Financial Accounting Standards No. 133 requires an entity to recognize all derivatives as either assets or liabilities in the consolidated balance sheets and to measure those instruments at fair value.  Additionally, the fair value adjustments will affect either shareholders’ equity or net income depending upon whether the derivative instrument qualifies as a hedge for accounting purposes and, if so, the nature of the hedging activity.

The following table summarizes the notional and fair values of our derivative financial instruments at December 31, 2005. The notional value provides an indication of the extent of our involvement in the instruments at that time, but does not represent exposure to credit or interest rate.

Hedge	Type	Notional Value	Interest Rate		Maturity	Fair Value
Swap	Cash Flow Hedge	$74,094,246	4.5840	%	2014	$934,000
Swap	Cash Flow Hedge	19,217,713	3.9500	%	2011	746,000
Swap	Cash Flow Hedge	18,437,903	4.5890	%	2015	294,000
Swap	Cash Flow Hedge	16,894,095	4.8325	%	2014	(53,000	)
Swap	Cash Flow Hedge	8,850,000	4.7730	%	2011	(7,000	)
Swap	Cash Flow Hedge	8,682,735	4.6475	%	2018	151,000
Swap	Cash Flow Hedge	8,006,836	4.7700	%	2011	(7,000	)
Swap	Cash Flow Hedge	7,444,525	4.4700	%	2013	136,000
Swap	Cash Flow Hedge	6,327,750	4.7770	%	2007	(4,000	)
Swap	Cash Flow Hedge	5,464,079	3.1175	%	2007	124,000
Swap	Cash Flow Hedge	4,134,000	4.7600	%	2007	(1,000	)
Swap	Cash Flow Hedge	3,982,500	4.8850	%	2010	(23,000	)
Swap	Cash Flow Hedge	2,156,755	4.9000	%	2012	(17,000	)
Total/Weighted Average		$183,693,138	4.5338	%	2013	$2,273,000

On December 31, 2005 and 2004 the derivative financial instruments were reported at their fair value of $2.3 million and $194,000, respectively, as interest rate hedge assets.

During the twelve months ended December 31, 2005, we received $1.4 million from counterparties in settlement of two interest rate swaps with a notional balance of $109.0 million.  Recognition of these settlements has been deferred and is being amortized over the remaining life of the previously hedged item using an approximation of the level yield basis.  We also entered into eleven new cash flow hedges during the twelve months ended December 31, 2005.

F-26

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

9.  Convertible Junior Subordinated Debentures

On July 28, 1998, we sold 8.25% step up convertible junior subordinated debentures in the aggregate principal amount of $154.7 million to CT Convertible Trust I, referred to as the “Trust”. The Trust then privately placed and originally issued 150,000 8.25% step up convertible trust preferred securities (liquidation amount $1,000 per security) with an aggregate liquidation amount of $150 million to third parties. On May 10, 2000, we modified the terms of the step up convertible junior subordinated debentures canceling the original underlying convertible debentures and new 8.25% step up convertible junior subordinated debentures in the aggregate principal amount of $92.5 million and new 13% step up non-convertible junior subordinated debentures in the aggregate principal amount of $62.1 million were issued.

On September 30, 2002, the non-convertible debentures were redeemed in full, utilizing additional borrowings from the credit facility and repurchase agreements, resulting in a corresponding redemption in full of the related non-convertible amount of convertible trust preferred securities.  On July 28, 2004, certain holders of the step up convertible junior subordinated debentures outstanding converted $44.9 million of the debentures into 2,136,711 shares of class A common stock and sold the shares in a public offering. On September 29, 2004, following our issuance of a notice of redemption to be effected on September 30, 2004, the remaining $44.9 million of the outstanding convertible debentures were converted into 2,136,711 shares of our class A common stock at a conversion price of approximately $21.00 per share.  The remaining $3.0 million due on the convertible debentures was repaid to the Trust and then the Trust redeemed the common securities held by us.

For financial reporting purposes, in accordance with Financial Accounting Standards Board Interpretation No. 46, “Consolidation of Variable Interest Entities,” we are not treating the Trust as our subsidiary and, accordingly, the accounts of the Trust are not included in our consolidated financial statements. Intercompany transactions between the Trust and us have not been eliminated in our consolidated financial statements.

10.  Shareholders’ Equity

Authorized Capital

We have the authority to issue up to 200,000,000 shares of stock, consisting of (i) 100,000,000 shares of class A common stock and (ii) 100,000,000 shares of preferred stock. The board of directors is generally authorized to issue additional shares of authorized stock without shareholder approval.

Common Stock

Class A common stock are voting shares 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.

Preferred Stock

We have 100,000,000 shares of preferred stock authorized and have not issued any shares of preferred stock since we repurchased all of the previously issued and outstanding preferred stock in 2001.

F-27

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

10. Shareholders’ Equity, continued

Common and Preferred Stock Transactions

In March 2000, we commenced an open market stock repurchase program under which we were initially authorized to purchase, from time to time, up to 666,667 shares of class A common stock. Since that time the authorization has been increased by the board of directors to purchase up to 2,366,923 shares of class A common stock. As of December 31, 2005, we had purchased and retired, pursuant to the program, 1,700,584 shares of class A common stock at an average price of $13.13 per share (including commissions).  We did not repurchase any of our common stock during the years ended December 31, 2005 and 2004.

On June 18, 2003, we issued 1,075,000 shares of class A common stock in a private placement to thirty-two separate investors. We received net proceeds of $17.1 million after payment of offering expenses and fees.

On May 11, 2004, we closed on the initial tranche of a direct public offering to designated controlled affiliates of W. R. Berkley Corporation, which we refer to as Berkley. We issued 1,310,000 shares of our class A common stock and stock purchase warrants to purchase 365,000 shares of our class A common stock for a total purchase price of $30.7 million. On June 21, 2004, we closed on the second tranche of the direct public offering and issued an additional 325,000 shares of our class A common stock for a total purchase price of $7.6 million. The warrants, which were set to expire on December 31, 2004, were exercised on September 13, 2004 to purchase 365,000 shares of our class A common stock for a total purchase price of $8.5 million.  Pursuant to a director designation right granted to Berkley in the transaction, we appointed Joshua A. Polan to our board of directors.

On July 28, 2004, we closed on a public offering of our class A common stock pursuant to which we sold 1,888,289 shares and certain selling shareholders sold 2,136,711 shares obtained upon the concurrent conversion of $44.9 million of our outstanding convertible junior subordinated debentures. All 4,025,000 shares were sold to the public at a price of $23.75 per share.  After payment of underwriting discounts and commissions and expenses, we received net proceeds from the offering of $41.6 million. During the twelve months ended December 31, 2005 we received $248,000 from one of the selling shareholders, representing reimbursement of certain offering expenses in regards to this transaction.

On September 29, 2004, following our issuance of a notice of redemption to be effected on September 30, 2004, $44.9 million of the convertible junior subordinated debentures outstanding were converted into 2,136,711 shares of our class A common stock at a conversion price of approximately $21.00 per share.

F-28

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

10. Shareholders’ Equity, continued

Earnings per Share

The following table sets forth the calculation of Basic and Diluted EPS for the years ended December 31, 2005 and 2004:

	Year Ended December 31, 2005					Year Ended December 31, 2004
	Net Income		Shares	Per Share Amount		Net Income		Shares	Per Share Amount
Basic EPS:
Net earnings allocable to common stock	$	44,111,000	15,124,187	$	2.92	$	21,976,000	10,141,380	$	2.17
Effect of Dilutive Securities: Options outstanding for the Purchase of common stock	—		211,727			—		135,506
Diluted EPS:
Net earnings per share of common stock and assumed conversions	$	44,111,000	15,335,914	$	2.88	$	21,976,000	10,276,886	$	2.14

The following table sets forth the calculation of Basic and Diluted EPS for the year ended December 31, 2003:

	Year Ended December 31, 2003
	Net Income		Shares	Per Share Amount
Basic EPS:
Net earnings allocable to common stock	$	13,525,000	5,946,718	$	2.27
Effect of Dilutive Securities:
Options outstanding for the purchase of common stock	—		67,581
Convertible trust preferred securities exchangeable for shares of common stock	9,452,000		4,273,422
Diluted EPS:
Net earnings per share of common stock and assumed conversions	$	22,977,000	10,287,721	$	2.23

F-29

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

11.  General and Administrative Expenses

General and administrative expenses for the years ended December 31, 2005, 2004 and 2003 consisted of (in thousands):

	2005		2004		2003
Salaries and benefits	$	14,628	$	9,713	$	8,306
Professional services	3,512		2,233		2,127
Other	3,799		3,283		2,887
Total	$	21,939	$	15,229	$	13,320

12.   Income Taxes

We made an election to be taxed as a REIT under Section 856(c) of the Internal Revenue Code of 1986, as amended, commencing with the tax year ending December 31, 2003. As a REIT, we generally are not subject to federal income tax. To maintain qualification as a REIT, we must distribute at least 90% of our REIT taxable income to our shareholders and meet certain other requirements. If we fail to qualify as a REIT in any taxable year, we will be subject to federal, state and local income tax on our taxable income at regular corporate rates. Under certain circumstances, federal income and excise taxes may be due on our undistributed taxable income. At December 31, 2005 and 2004, we were in compliance with all REIT requirements.

During the year ended December 31, 2005, we recorded $213,000 of income tax expense for income that was attributable to our taxable REIT subsidiary.  Our effective tax rate for the year ended December 31, 2005 attributable to our taxable REIT subsidiary was 23.6%.  The difference between the U.S. federal statutory tax rate of 35% and the effective tax rate was primarily compensation in excess of deductible limits and the net deductibility of syndication costs.

During the year ended December 31, 2004, we recorded $451,000 of income tax benefit resulting from book losses generated by our taxable REIT subsidiary.

During the year ended December 31, 2003, we recorded $646,000 of income tax expense for income that was attributable to our taxable REIT subsidiary.  Our effective tax rate for the year ended December 31, 2003 attributable to our taxable REIT subsidiary was 107.9%.  The difference between the U.S. federal statutory tax rate of 35% and the effective tax rate was primarily state and local taxes, net of federal tax benefit, and compensation in excess of deductible limits.

The REIT has federal net operating loss carryforwards as of December 31, 2005 of approximately $4.2 million.  Such net operating loss carryforwards expire through 2021.  Due to an ownership change in January 1997 and another prior ownership change, a substantial portion of the net operating loss carryforwards are limited for federal income tax purposes. Any unused portion of such annual limitation can be carried forward to future periods.  We also have federal capital loss carryforwards as of December 31, 2005 of approximately $35.0 million that expire through 2008.  The utilization of these carryforwards would not reduce federal income taxes but would reduce required distributions to maintain REIT status.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax reporting purposes.

As we are operating in a manner to meet the qualifications to be taxed as a REIT for federal income tax purposes during the 2005 tax year, we do not expect we will be liable for income taxes or taxes on “built-in gain” on our assets at the federal and state level in future years, other than on our taxable REIT subsidiary. The amounts for 2005 and 2004 relate only to differences related to taxable earnings of our taxable REIT subsidiary.

F-30

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

12. Income Taxes, continued

The components of the net deferred tax assets are as follows (in thousands):

	December 31,
	2005		2004
Fund II incentive management fees recognized for tax purposes not recorded for book, net	$	1,842	$	4,788
Unearned compensation expense for book purposes not recognized for tax	1,703		511
Other	434		324
	$	3,979	$	5,623

13.  Employee Benefit Plans

Employee 401(k) and Profit Sharing Plan

We sponsor a 401(k) and profit sharing plan that allows eligible employees to contribute up to 15% of their salary into the plan on a pre-tax basis, subject to annual limits.  We have committed to make contributions to the plan equal to 3% of all eligible employees’ compensation subject to annual limits and may make additional contributions based upon earnings.  Our contribution expense for the years ended December 31, 2005, 2004 and 2003, was $104,000, $99,000 and $103,000, respectively.

1997 Long-Term Incentive Stock Plan

Our 1997 second amended and restated long-term incentive stock plan permits the grant of nonqualified stock option, incentive stock option, restricted stock, stock appreciation right, performance unit, performance stock and stock unit awards.  A maximum of 505,525 shares of class A common stock may be issued during the fiscal year 2006 pursuant to awards under the incentive stock plan and the director stock plan (as discussed below) in addition to the shares subject to awards outstanding under the two plans at December 31, 2005.  The maximum number of shares that may be subject to awards to any employee during the term of the plan may not exceed 333,334 shares and the maximum amount payable in cash to any employee with respect to any performance period pursuant to any performance unit or performance stock award is $1.0 million.

Incentive stock options shall be exercisable no more than ten years after their date of grant and five years after the grant in the case of a 10% shareholder and vest over a period of three years with one-third vesting at each anniversary date.  Payment of an option may be made with cash, with previously owned class A common stock, by foregoing compensation in accordance with performance compensation committee or compensation committee rules or by a combination of these.

Restricted stock may be granted under the long-term incentive stock plan with performance goals and periods of restriction as the board of directors may designate.  The performance goals may be based on the attainment of certain objective and/or subjective measures.  In 2004 and 2003, we issued 52,515 shares and 17,500 shares, respectively, of restricted stock at a weighted average price of $22.85 and $20.35 per share, respectively. In 2003 12,707 shares were canceled upon the resignation of employees prior to vesting. The shares of restricted stock issued in 2004 were split with one-half subject to performance and time vesting and one-half subject only to time vesting.  The performance and time based grants vest on January 26, 2008 if certain performance measures are met and the grantee is employed on that date.  The time vest only grants vest one-third on each of the following dates: January 26, 2005, January 26, 2006 and January 26, 2007.  The shares of restricted stock issued in 2003 vest one-third on each of the following dates: February 1, 2004, February 1, 2005 and February 1, 2006.

F-31

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

13.  Employee Benefit Plans, continued

The long-term incentive stock plan also authorizes the grant of stock units at any time and from time to time on such terms as shall be determined by the board of directors or administering compensation committee.  Stock units shall be payable in class A common stock upon the occurrence of certain trigger events.  The terms and conditions of the trigger events may vary by stock unit award, by the participant, or both.

The following table summarizes the activity under the long-term incentive stock plan for the years ended December 31, 2005, 2004 and 2003:

	Options Outstanding		Exercise Price per Share		Weighted Average Exercise Price per Share
Outstanding at December 31, 2002	657,250		$	12.375 -$30.00	$	18.51
Granted in 2003	(18,445	)	$	12.375 - $18.00	15.20
Canceled in 2003	(121,337	)	$	12.375 -$30.00	18.51
Outstanding at December 31, 2003	517,468		$	12.375 -$30.00	$	19.09
Exercised in 2004	(56,079	)	$	12.375 -$18.00	14.52
Canceled in 2004	(2,391	)	$	15.000 -$15.90	15.48
Outstanding at December 31, 2004	458,998		$	12.375 -$30.00	$	19.67
Exercised in 2005	(83,815	)	$	12.375 -$30.00	18.75
Canceled in 2005	(22,223	)	$	30.00	30.00
Outstanding at December 31, 2005	352,960		$	12.375 -$30.00	$	19.23

At December 31, 2005, 2004 and 2003, options to purchase 352,960, 428,995 and 417,730 shares, respectively, were exercisable.  At December 31, 2005, the outstanding options have various remaining contractual lives ranging from 1.54 to 6.09 years with a weighted average life of 3.94 years.  The following table presents the options outstanding and exercisable at December 31, 2005 within price ranges:

	Range for Exercise Prices per Share	Total Options Outstanding	Total Options Exercisable
$	12.375 -$15.00	75,866	75,866
$	15.01 -$18.00	190,426	190,426
$	18.01 -$21.00	—	—
$	21.01 -$24.00	—	—
$	24.01 -$27.00	33,334	33,334
$	27.01 -$30.00	53,334	53,334
	Total	352,960	352,960

1997 Non-Employee Director Stock Plan

Our 1997 amended and restated non-employee director stock plan permits the grant of nonqualified stock option, restricted stock, stock appreciation right, performance unit, performance stock and stock unit awards.  A maximum of 505,525 shares of class A common stock may be issued during the fiscal year 2006 pursuant to awards under the director stock plan and the long-term incentive stock plan, in addition to the shares subject to awards outstanding under the two plans at December 31, 2005.

F-32

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

13.  Employee Benefit Plans, continued

The board of directors shall determine the purchase price per share of class A common stock covered by nonqualified stock options granted under the director stock plan.  Payment of nonqualified stock options may be made with cash, with previously owned shares of class A common stock, by foregoing compensation in accordance with board rules or by a combination of these payment methods.  Stock appreciation rights may be granted under the plan in lieu of nonqualified stock options, in addition to nonqualified stock options, independent of nonqualified stock options or as a combination of the foregoing.  A holder of stock appreciation rights is entitled upon exercise to receive shares of class A common stock, or cash or a combination of both, as the board of directors may determine, equal in value on the date of exercise to the amount by which the fair market value of one share of class A common stock on the date of exercise exceeds the exercise price fixed by the board on the date of grant (which price shall not be less than 100% of the market price of a share of class A common stock on the date of grant) multiplied by the number of shares in respect to which the stock appreciation rights are exercised.

Restricted stock may be granted under the director stock plan with performance goals and periods of restriction as the board of directors may designate.  The performance goals may be based on the attainment of certain objective and/or subjective measures.  The director stock plan also authorizes the grant of stock units at any time and from time to time on such terms as shall be determined by the board of directors.  Stock units shall be payable in shares of class A common stock upon the occurrence of certain trigger events.  The terms and conditions of the trigger events may vary by stock unit award, by the participant, or both.

The following table summarizes the activity under the director stock plan for the years ended December 31, 2005, 2004 and 2003:

	Options Outstanding	Exercise Price per Share		Weighted Average Exercise Price per Share
Outstanding at January 1, 2003	85,002	$	18.00-30.00	27.65
Granted in 2003	—	$	—	—
Outstanding at December 31, 2003	85,002	$	18.00-30.00	27.65
Granted in 2004	—	$	—	—
Outstanding at December 31, 2004	85,002	$	18.00-30.00	27.65
Granted in 2005	—	$	—	—
Outstanding at December 31, 2005	85,002	$	18.00-30.00	$	27.65

At December 31, 2005, 2004 and 2003, all of the options outstanding were exercisable. At December 31, 2005, the outstanding options have a remaining contractual life of 1.54 years to 2.08 years with a weighted average life of 1.98 years.  16,668 of the options are priced at $18.00 and the remaining 68,334 are priced at $30.00.

2004 Long-Term Incentive Plan

Our 2004 amended and restated long-term incentive plan, or the 2004 Plan, permits the grant of nonqualified stock option, incentive stock option, share appreciation right, restricted share, unrestricted share, performance unit, performance share and deferred share unit awards.  A maximum of 1,000,000 shares of class A common stock may be issued under the 2004 Plan.  No participant may receive options or share appreciation rights that relate to more than 500,000 shares per calendar year.

Incentive stock options shall be exercisable no more than ten years after their date of grant and five years after the grant in the case of a 10% shareholder.  Payment of an option exercise price may be made with cash, with previously owned class A common stock, through a cashless exercise program, surrender of restricted shares, restricted share units, share appreciation rights or deferred share units or by a combination of these methods of payment.

Restricted stock may be granted under the 2004 Plan with performance goals and periods of restriction as the board of directors may designate.  The performance goals may be based on the attainment of certain objective and/or subjective measures.

F-33

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

13.  Employee Benefit Plans, continued

The 2004 Plan also authorizes the grant of share units at any time and from time to time on such terms as shall be determined by the board of directors or administering compensation committee.  Share units shall be payable in shares of class A common stock upon the occurrence of certain trigger events.  The terms and conditions of the trigger events may vary by share unit award, by the participant, or both.

On December 28, 2005, pursuant to the 2004 Plan, we issued 90,000 restricted shares in accordance with Mr. Plavin’s new employment agreement at a price of $30.95 per share, 50% of which will be subject to time vesting in eight equal quarterly increments commencing on March 31, 2007 and 50% of which will be issued as a performance compensation award and will vest on December 31, 2008 if the total shareholder return, measured from December 28, 2005 through December 28, 2008, is at least 13% per annum.

On July 15, 2004, pursuant to the 2004 Plan, we issued 218,818 restricted shares in accordance with Mr. Klopp’s new employment agreement at a price of $26.47 per share, 50% of which will be subject to time vesting in eight equal quarterly increments commencing on March 31, 2007 and 50% of which will be issued as a performance compensation award and will vest on December 31, 2008 if the total shareholder return, measured from January 1, 2004 through December 31, 2008, is at least 13% per annum.

A maximum of 691,182 shares of class A common stock may be issued during the fiscal year 2006 pursuant to awards under the 2004 Plan in addition to the shares subject to awards outstanding at December 31, 2005.

On February 4, 2005, pursuant to the Plan, we issued 56,073 shares to employees at a weighted average price of $32.49 per share. In 2005, 8,703 shares were canceled upon the resignation of employees prior to vesting. The shares of restricted stock issued in 2005 were split with one-half subject to performance and time vesting and one-half subject only to time vesting.  The performance based grants vest on February 4, 2009 if certain performance measures are met and the grantee is employed on that date.  The time based grants vest one-third on each of the following dates: February 4, 2006, February 4, 2007 and February 4, 2008.

14.  Fair Values of Financial Instruments

The Financial Accounting Standards Board’s Statement of Financial Accounting Standards No. 107, “Disclosures about Fair Value of Financial Instruments,” requires disclosure of fair value information about financial instruments, whether or not recognized in the statement of financial condition, for which it is practicable to estimate that value.  In cases where quoted market prices are not available, fair values are based upon estimates using present value or other valuation techniques.  Those techniques are significantly affected by the assumptions used, including the 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 immediate settlement of the instrument.  Statement of Financial Accounting Standards No. 107 excludes certain financial instruments and all non-financial instruments from our disclosure requirements.  Accordingly, the aggregate fair value amounts do not represent the underlying value of Capital Trust.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

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

Commercial mortgage-backed securities: These investments are presented on a held to maturity basis and not at fair value. The fair values were attained from a securities dealer.

Loans receivable, net: These instruments are presented at the lower of cost or market value and not at fair value. The fair values were estimated by using current institutional purchaser yield requirements for loans with similar credit characteristics.

F-34

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

14. Fair Values of Financial Instruments, continued

Total return swap: This instrument is presented at fair value. The fair value was obtained from a third party valuation.

Interest rate swap agreements: These instruments are presented at fair value. The fair value was obtained from a third party valuation.

Credit facility: The credit facility bears interest at rates that are similar to those available in the market currently.  Therefore, the carrying value is a reasonable estimate of fair value.

Repurchase obligations: The repurchase obligations bear interest at rates that are similar to those available in the market currently.  Therefore, the carrying value is a reasonable estimate of fair value.

Collateralized debt obligations: These obligations are presented on the basis of proceeds received at issuance and not at fair value.The fair value was estimated based upon the amount at which similar placed financial instruments would be valued today.

The carrying amounts of all assets and liabilities approximate the fair value except as follows (in thousands):

	December 31, 2005						December 31, 2004
	Carrying Amount		Face Value		Fair Value		Carrying Amount		Face Value		Fair Value
Financial Assets:
CMBS	$	487,970	$	494,474	$	488,352	$	247,765	$	271,757	$	247,765
Loans receivable	990,142		996,113		998,670		556,164		557,695		566,919
CDOs	823,744		821,245		819,406		252,778		252,778		252,778

15.  Supplemental Schedule of Non-Cash and Financing Activities

Interest paid on our outstanding debt for 2005, 2004 and 2003 was $34.3 million, $19.0 million and $19.0 million, respectively. Income taxes paid by us in 2005, 2004 and 2003 were $7,000, $2.4 million and $2.5 million, respectively.

16.  Transactions with Related Parties

Effective January 1, 2003, we entered into a consulting agreement with a director with a term of two years and five months that expired on May 31, 2005. During the years ended December 31, 2005, 2004 and 2003, we incurred expenses of $50,000, $120,000 and $120,000, respectively in connection with this agreement.

We pay Equity Group Investments, L.L.C. and Equity Risk Services, Inc., affiliates under common control of the chairman of the board of directors, for certain corporate services provided to us.  These services include consulting on insurance matters, risk management, and investor relations.  During the years ended December 31, 2005, 2004 and 2003, we incurred $49,000, $49,000 and $48,000, respectively, of expenses in connection with these services.

We pay Global Realty Outsourcing, Inc., a company in which we had an equity investment and upon which our president and chief executive officer served on its board of directors prior to the sale of the company, for consulting services relating to monitoring assets and evaluating potential investments.  During the years ended December 31, 2005, 2004 and 2003, we incurred $557,000, $568,000 and $147,000, respectively, of expenses in connection with these services.  On December 30, 2005 we sold our equity investment in Global Realty Outsourcing, Inc. which resulted in a $5.0 million gain. At December 31, 2005, we are indebted to Global Realty Outsourcing, Inc. for $57,400 which is included in accounts payable and accrued expenses.

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

F-35

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

17.  Commitments and Contingencies

Leases

We lease premises and equipment under operating leases with various expiration dates.  Minimum annual rental payments at December 31, 2005 are as follows (in thousands):

Years ending December 31:
2006	$	975
2007	975
2008	488
	$	2,438

Rent expense for office space and equipment amounted to $959,000, $903,000 and $902,000 for the years ended December 31, 2005, 2004 and 2003, respectively.

Litigation

In the normal course of business, we are subject to various legal proceedings and claims, the resolution of which, in management’s opinion, will not have a material adverse effect on our consolidated financial position or our results of operations.

Employment Agreements

John R. Klopp serves as our chief executive officer and president pursuant to an employment agreement entered into on July 15, 1997, which terminated effective July 15, 2004, the effective date of his new employment agreement that was entered into as of February 24, 2004. The new employment agreement provides for Mr. Klopp’s employment as chief executive officer and president through December 31, 2008 (subject to earlier termination under certain circumstances).

Under the new employment agreement, Mr. Klopp receives a base salary and is eligible to receive annual performance compensation awards of cash and restricted shares of common stock.  As of the effective date of the new agreement, July 15, 2004, Mr. Klopp was granted an initial award of 218,818 restricted shares, 50% of which will be subject to time vesting in eight equal quarterly increments commencing on March 31, 2007 and 50% of which will be issued as a performance compensation award and will vest on December 31, 2008 if the total shareholder return, measured from January 1, 2004 through December 31, 2008, is at least 13% per annum.  As of the effective date, Mr. Klopp was also awarded performance compensation awards tied to the amount of cash we receive, if any, as incentive management fees from Fund III.   The agreement provides for severance payments under certain circumstances and contains provisions relating to non-competition during the term of employment, protection of our confidential information and intellectual property, and non-solicitation of our employees, which provisions extend for 24 months following termination in certain circumstances.

Effective December 28, 2005, we entered into an employment agreement with our chief operating officer, Mr. Stephen D. Plavin. The agreement provides for Mr. Plavin’s employment as chief operating officer through December 31, 2008 (subject to earlier termination under certain circumstances). Pursuant to the employment agreement, Mr. Plavin receives a base salary and is eligible to receive annual performance compensation awards of cash. As of the effective date of the new agreement, Mr. Plavin was granted an award of 90,000 restricted shares, 50% of which will be subject to time vesting in eight equal quarterly increments commencing on March 31, 2007 and 50% of which will be issued as a performance compensation award and will vest on December 31, 2008 if the total shareholder return, measured from December 28, 2005 through December 28, 2008, is at least 13% per annum.  As of the effective date, Mr. Plavin was also awarded performance compensation awards tied to the amount of cash we receive, if any, as incentive management fees from Fund III.   The agreement provides for severance payments under certain circumstances and contains provisions relating to non-competition during the term of employment, protection of our confidential information and intellectual property, and non-solicitation of our employees, which provisions extend for up to 18 months following termination in certain circumstances.

F-36

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

18.    Segment Reporting

We have 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 all of our activities related to direct loan and investment activities (including direct investments in Funds) and the financing thereof.

The Investment Management segment includes all of our activities related to investment management services provided to us and third-party funds under management and includes our taxable REIT subsidiary, CT Investment Management Co., LLC and its subsidiaries.

The following table details each segment’s contribution to our overall profitability and the identified assets attributable to each such segment for the year ended and as of December 31, 2005, respectively (in thousands):

	Balance Sheet Investment			Investment Management			Inter-Segment Activities			Total
Income from loans and other investments:
Interest and related income	$	86,200		$	—		$	—		$	86,200
Less: Interest and related expenses on credit facility, term redeemable securities contract and repurchase obligations	(37,229		)	—			—			(37,229		)
Income from loans and other investments, net	48,971			—			—			48,971
Other revenues:
Management and advisory fees	—			19,053			(5,929		)	13,124
Income/(loss) from equity investments in Funds	1,031			(1,253		)	—			(222		)
Gain on sale of investments	4,951			—			—			4951
Other interest income	471			90			(8		)	553
Total other revenues	6,453			17,890			(5,937		)	18,406
Other expenses:
General and administrative	10,352			17,516			(5,929		)	21,939
Other interest expense	8			—			(8		)	—
Depreciation and amortization	844			270			—			1,114
Total other expenses	11,204			17,786			(5,937		)	23,053
Income before income taxes	44,220			104			—			44,324
Provision for income taxes	—			213			—			213
Net income	$	44,220		$	(109	)	$	—		$	44,111
Total Assets	$	1,558,260		$	10,396		$	(11,126	)	$	1,557,530

All revenues were generated from external sources within the United States.  The Investment Management segment earned fees of $5.9 million for management of the Lending and Investment segment and $8,000 for inter-segment interest for the year ended December 31, 2005, respectively, which is reflected as offsetting adjustments to other revenues and other expenses in the Inter-Segment Activities column in the tables above.

F-37

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

18. Segment Reporting, continued

The following table details each segment’s contribution to our overall profitability and the identified assets attributable to each such segment for the year ended and as of December 31, 2004, respectively (in thousands):

	Balance Sheet Investment			Investment Management			Inter-Segment Activities			Total
Income from loans and other investments:
Interest and related income	$	46,561		$	—		$	—		$	46,561
Less: Interest and related expenses on credit facility, term redeemable securities contract and repurchase obligations	(13,724		)	—			—			(13,724		)
Less: Interest and related expenses on convertible junior subordinated debentures	(6,417		)	—			—			(6,417		)
Income from loans and other investments, net	26,420			—			—			26,420
Other revenues:
Management and advisory fees	—			11,477			(3,624		)	7,853
Income/(loss) from equity investments in Funds	2,746			(339		)	—			2,407
Gain on sale of investments	300			—			—			300
Special servicing fees	—			10			—			10
Other interest income	62			287			(271		)	78
Total other revenues	3,108			11,435			(3,895		)	10,648
Other expenses:
General and administrative	6,581			12,272			(3,624		)	15,229
Other interest expense	271			—			(271		)	—
Depreciation and amortization	845			255			—			1100
Unrealized loss on available-for-sale securities for other-than-temporary impairment	5,886			—			—			5,886
Recapture of allowance for possible credit losses	(6,672		)	—			—			(6,672		)
Total other expenses	6,911			12,527			(3,895		)	15,543
Income before income taxes	22,617			(1,092		)	—			21,525
Provision for income taxes	—			(451		)	—			(451		)
Net income	$	22,617		$	(641	)	$	—		$	21,976
Total Assets	$	876,032		$	13,402		$	(11,668	)	$	877,766

All revenues were generated from external sources within the United States.  The Investment Management segment earned fees of $3.6 million for management of the Lending and Investment segment and $271,000 for inter-segment interest for the year ended December 31, 2004, respectively, which is reflected as offsetting adjustments to other revenues and other expenses in the Inter-Segment Activities column in the tables above.

F-38

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

19.  Summary of Quarterly Results of Operations (Unaudited)

The following is a summary of the unaudited quarterly results of operations for the years ended December 31, 2005, 2004 and 2003 (in thousands except per share data):

	March 31		June 30		September 30		December 31
2005
Revenues	$	22,203	$	21,967	$	24,872	$	35,564
Net income	$	9,150	$	8,848	$	9,799	$	16,314
Net income per share of common stock:
Basic	$	0.61	$	0.59	$	0.65	$	1.07
Diluted	$	0.60	$	0.58	$	0.64	$	1.06
2004
Revenues	$	11,504	$	11,942	$	15,209	$	18,554
Net income	$	3,052	$	3,531	$	5,858	$	9,535
Net income per share of common stock:
Basic	$	0.46	$	0.48	$	0.51	$	0.63
Diluted	$	0.46	$	0.47	$	0.50	$	0.63
2003
Revenues	$	11,139	$	10,652	$	14,517	$	11,537
Net income	$	2,545	$	2,586	$	4,786	$	3,608
Net income per share of common stock:
Basic	$	0.46	$	0.46	$	0.74	$	0.55
Diluted	$	0.46	$	0.46	$	0.66	$	0.54

F-39

Capital Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

20.  Subsequent Event

On February 10, 2006, we sold $50 million of trust preferred securities through our subsidiary, CT Preferred Trust I, in a private transaction exempt from registration under the Securities Act of 1933, as amended.  The Trust Preferred Securities have a 30-year term ending April 2036, are redeemable at par on or after April 30, 2011 and pay distributions at a fixed rate of 7.45% for the first ten years ending April 2016 and thereafter, at a floating rate of three month LIBOR plus 2.65%.  The assets of CT Preferred Trust I consist solely of $51.6 million of junior subordinated notes concurrently issued by us with terms that mirror the Trust Preferred Securities in exchange for the $51.6 million of proceeds from the issuance of the (i) trust preferred securities and (ii) undivided common beneficial interests in the assets of CT Preferred Trust I purchased by us.

On February 13, 2006, we announced our fourth collateralized debt obligation which we refer to as CDO IV.  CDO IV is secured by a $490 million portfolio of CMBS and other commercial real estate debt.  The collateral is comprised of $186 million of assets which we own and $304 million of CMBS that we will purchase in connection with the closing of CDO IV.  We expect to sell $431 million of floating rate CDO notes to third parties and retain all of the below investment grade notes and issuer equity.

F-40

Capital Trust, Inc. and Subsidiaries

Schedule IV – Mortgage Loans on Real Estate
As of December 31, 2005

(Dollars in thousands)

Type of Loan/Borrower	Description/Location	Interest Payment Rates		Final Maturity Date	Periodic Payment Terms (1)	Prior Liens (2)		Face Amount of Loans		Carrying Amount of Loans
First Mortgage Loans:
All other first mortgage loans individually less than 3%						$	—	$	74,471	$	69,509
Total first mortgage loans						—		74,471		69,509
Mezzanine Loans:
Borrower A	Office/New York	11.67	%	7/11/2009	P&I	110,441		48,244		48,244
Borrower B	Hotel/Various	LIBOR + 7.25	%	9/11/2010	IO	1,655,307		31,410		31,410
All other mezzanine loans individually less than 3%						2,157,152		270,062		266,108
Total mezzanine loans						3,922,900		349,716		345,762
B Notes:
Borrower C	Retail/Various	LIBOR + 2.60	%	1/9/2010	IO	101,000		45,507		45,507
Borrower D	Hotel/Various	LIBOR + 2.60	%	10/11/2009	IO	65,993		34,300		34,300
Borrower E	Office/Boston, Ma	LIBOR + 2.76	%	11/5/2009	IO	172,860		32,140		32,140
All other B notes individually less than 3%						2,952,024		464,941		462,924
Total B notes						3,291,877		576,888		574,871
Total loans						$	7,214,777	$	1,001,075	$	990,142

Explanatory Notes:

(1)P&I = principal and interest, IO = interest only

(2)Represents only third-party liens

S-1

EX-10.19

Exhibit 10.19

EMPLOYMENT AGREEMENT

I, Stephen D. Plavin, agree to the terms and conditions of employment with Capital Trust, Inc. (the “Company”) set forth in this Employment Agreement (this “Agreement”) dated as of December 28, 2005 (“Effective Date”).

1.Term of Employment.

(a)Term.  My employment under this Agreement shall commence effective as of the Effective Date and shall end on December 31, 2008 (“Expiration Date”) or such earlier date on which my employment is terminated under Section 5 of this Agreement (the period from the Effective Date through the Expiration Date, or such earlier termination as provided for herein being referred to herein as the “Term”).  If the Company continues to employ me beyond the Expiration Date without entering into a written agreement extending the term of this Agreement, except as provided in a new written employment agreement between the Company and me, I shall continue to receive the base salary in effect as of the Expiration Date for as long as I remain employed by the Company, but all other obligations and rights under this Agreement shall prospectively lapse as of the Expiration Date, except my right to payment of compensation accrued or earned prior to the Expiration Date or any other rights which by their terms extend beyond the Expiration Date, including the Company’s ongoing indemnification obligation under Section 4, any post-termination payment provisions under Section 5(a), my confidentiality and other obligations under Section 6, and our mutual arbitration obligations under Section 8, and I thereafter shall be an at-will employee of the Company.

(b)Company’s Option to Extend Expiration Date.  The Company shall have the option, but not the obligation, to extend the Expiration Date by one year (i.e., to December 31, 2009) by so notifying me in writing no earlier than June 30, 2008 and no later than September 1, 2008.

2.Nature of Duties.  I shall be the Company’s Chief Operating Officer and shall have all of the customary powers and duties associated with that position.  I shall manage the origination, closing, and asset management for all of the Company’s (including controlled affiliates and subsidiaries acquired or established during the term of the Agreement) subordinate real estate loan and securities investment activities.  All of the employees engaged in such activities shall (directly or indirectly) report to me.  I shall report directly to the Company’s Chief Executive Officer (“CEO”), and shall devote my full business time and effort to the performance of my duties for the Company.  I shall be subject to the Company’s policies, procedures and approval practices, as generally in effect from time to time and made known to me, to the extent consistent with this Agreement.  I shall not, while employed by the Company, engage in, accept employment from or provide services to any other person, firm, corporation, governmental agency or other entity; provided, however, that subject to Section 6(c) hereof, I may (a) devote a reasonable amount of time to civic activities and (b) maintain not more than two outside board positions with companies which do not compete with the Company, subject to the prior consent of the Company’s Board of Directors (“Board”), which consent shall not be unreasonably withheld, provided that such activities do not conflict with or detract from my diligent performance of my duties hereunder.

3.Place of Performance.  I shall be based in New York City, except for required travel on the Company’s business.

4.Compensation and Related Matters.

(a)Base Salary.  The Company shall pay me base salary at an annual rate of $450,000 for the remainder of calendar year 2005.  As of January 1, 2006, my base salary shall be increased to $500,000, subject to future upward adjustments at the discretion of the Board.  My base salary shall be paid in conformity with the Company’s salary payment practices generally applicable to senior Company executives.

(b)Annual Bonuses; Annual Long Term Equity Incentive Grants.  The Company shall pay me annual bonuses and grant me annual long term equity incentives, determined as follows:

(i)For calendar year 2005, I shall receive a cash bonus in the amount of $750,000.

(ii)For each calendar year of the Term commencing with January 1, 2006, I shall receive pursuant to Section 10(b) of the Company’s 2004 Long Term Incentive Plan (the “LTIP”), a Performance Compensation Award grant that provides for an annual cash bonus opportunity for that calendar year ranging from 100% of my base salary at threshold performance to 200% of my base salary at maximum performance (with a target of 150% of my base salary at target performance) achieved in respect of Annual Performance Measures (as defined below) established for the calendar year as the Performance Period.  Before March 31 of each such calendar year, the Performance Measures containing threshold, target and maximum performance criteria shall be set by the Compensation Committee of the Board (the “Compensation Committee”), but only after consultation with me in advance and only when the performance measures are substantially uncertain to be satisfied (the “Annual Performance Measures”).  Any cash bonus earned pursuant to such Performance Compensation Award shall be paid in conformity with the Company’s bonus payment practices generally applicable to senior Company executives.

(iii)I shall be eligible for such other bonuses and other incentive compensation under bonus and incentive stock plans (including plans that provide for performance compensation tied to carried interest and incentive investment management fees from funds under management) generally available to other senior Company executives as the Compensation Committee determines in its sole discretion.

(c)Stock Options, Restricted Stock, and Incentive Plans.

(i)As of the Effective Date, pursuant to the LTIP, the Company shall grant to me 90,000 Restricted Shares of Class A common stock of the Company (the “Initial Grant”).  The Initial Grant shall (unless my employment has terminated or as otherwise provided for herein) vest as follows:  (I) 50% of the shares shall vest in eight equal installments at the end of each calendar quarter in 2007 and 2008, and (II) 50% of the shares shall be structured as a “Performance Compensation Award” pursuant to Section 10(b) of the LTIP, and shall vest on the Expiration Date, subject to satisfaction of the Grant

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Performance Hurdle (as defined below), measured for the three-year period commencing on the Effective Date and ending on the third anniversary of the Effective Date.  For purposes of this Agreement, “Grant Performance Hurdle” shall mean a total shareholder return of 13% per annum (consisting of dividends, plus share price growth, plus any other property or consideration received by shareholders in connection with their ownership of Class A common stock of the Company).  All dividends that are earned and accrue with respect to all vested and unvested Restricted Shares issued pursuant to the Initial Grant shall be currently paid to me. For the purpose of calculating whether the Grant Performance Hurdle has been achieved, the starting and ending share price shall be determined based on the average closing price of the Class A common stock of the Company for the ten trading day periods which end on the Effective Date and on the third anniversary of the Effective Date.

(ii)If the Company exercises its option to extend the Expiration Date to December 31, 2009 under Section 1(b), above, the Company shall grant to me on or about January 1, 2009, pursuant to the LTIP, an additional 30,000 Restricted Shares of Class A common stock of the Company (the “Additional Grant”).  The Additional Grant shall (unless my employment has terminated or as otherwise provided for herein) vest as follows:  (I) 50% of the shares shall vest on December 31, 2009, and (II) 50% of the shares shall be structured as a “Performance Compensation Award” pursuant to Section 10(b) of the LTIP, and shall vest on December 31, 2009, subject to satisfaction of the Grant Performance Hurdle, measured for the one-year period commencing on January 1, 2009 and ending on December 31, 2009.  For the purpose of calculating whether the Grant Performance Hurdle has been achieved, the starting and ending share price shall be determined based on the average closing price of the Class A common stock of the Company for the ten trading day periods which end on 1/1/09 and 12/31/09. All dividends that are earned and accrue with respect to all vested and unvested Restricted Shares issued pursuant to the Additional Grant shall be paid to me upon issuance.

(d)Performance Compensation Award.  As of the Effective Date, pursuant to the LTIP, the Company shall grant to me a Performance Compensation Award that provides for cash payments to me equal to 2% of any payments received by the Company as incentive management fees paid by CT Mezzanine Partners III, Inc. (“Fund III”) (representing 5% of the fees allocated to employees of the Company).  The Performance Compensation Award shall (unless otherwise provided for herein) vest as follows: 65% shall be vested as of the Effective Date and the remaining 35% shall be vested upon the Company’s receipt of the incentive management fees.

(e)Standard Benefits.  During my employment, I shall be entitled to participate in all employee benefit plans and programs, including paid vacations, to the same extent generally available to other senior Company executives, in accordance with the terms of those plans and programs, including, without limitation, continued coverage for me under the term life insurance policy as in effect immediately prior to the Effective Date.

(f)Indemnification.  The Company shall extend to me the same indemnification arrangements as are generally provided to other senior Company executives, including after the termination of my employment.  Notwithstanding the foregoing, during the Term, the Company shall continue in effect, at a minimum, the same level of indemnification

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and the same level of Directors and Officers insurance coverage as were in effect immediately prior to the Effective Date.

(g)Expenses.  I shall be entitled to receive prompt reimbursement, which the Company shall make within two and one-half months after I submit adequate documentation, for all reasonable and customary travel and business expenses I incur in connection with my employment but I must incur and account for those expenses in accordance with the policies and procedures established by the Company

(h)Sarbanes-Oxley Act Loan Prohibition.  To the extent that any Company benefit, program, practice, arrangement, or this Agreement would or might otherwise result in my receipt of an illegal loan (“Loan”), the Company shall use reasonable efforts to provide me with a substitute for the Loan that is lawful and of at least equal value to me.

5.Termination.

(a)Rights and Duties.  If my employment is terminated, I shall be entitled to the amounts or benefits shown on the applicable row of the following table, subject to the balance of this Section 5 and to the terms and conditions set forth in Section 13, below.  The Company and I shall have no further obligations to each other, except the Company’s ongoing indemnification obligation under Section 4, my confidentiality and other obligations under Section 6, and our mutual arbitration obligations under Section 8, or as set forth in any written agreement I subsequently enter into with the Company.

DISCHARGE FOR CAUSE

Payment or provision when due of (1) any unpaid base salary, expense reimbursements, and vacation days accrued prior to termination of employment, and (2) other unpaid vested amounts or benefits under Company compensation, incentive, and benefit plans (including, without limitation vested interests I may have with respect to Fund II and Fund III or any previous grant of equity). In addition, I may continue to exercise my vested options for up to the earlier of (a) the expiration date of such options or (b) the date 90 days following my termination.

DISABILITY

Same as for “Discharge for Cause” EXCEPT that (I) my base salary, less any payments I receive under any state-mandated or other disability insurance policy, shall continue for six months following my termination, (II) I shall be entitled to receive a pro-rated bonus determined for the year in which my disability became effective hereunder, and calculated at “target,” (III) the Company shall pay the COBRA premiums associated with continuing medical insurance coverage for my benefit and the benefit of my spouse and dependent children for one year following my disability effective date, and (IV) I will continue to vest for one year following my disability effective date in all awards previously granted to me, and in determining the Grant Performance Hurdle for any remaining performance vesting period, I will be credited with the shareholder return for the full year preceding the year of my disability effective date. In addition, I may

4

	continue to exercise my options that vested on or before December 31, 2004 for up to one year following my termination, or if later, up until the expiration date of such options, and I may continue to exercise my options that are granted or first vest after 2004 until the later of December 31 of the year in which my employment terminates and the date two and one-half months after my employment terminates (but in no event after the expiration date of such options).
DISCHARGE OTHER THAN FOR CAUSE OR DISABILITY	Same as for “Discharge for Cause” EXCEPT that, in exchange for my execution of a release in accordance with this section, (1) I shall be entitled to receive a lump-sum payment equal to the greater of (x) the sum of my base salary and cash bonus payable through December 31, 2008 (with the cash bonus based on target and assuming the satisfaction of all Annual Performance Measures or (y) 1.5 times the sum of (I) my base salary then payable and (II) the highest annual bonus paid to me during the Term, (2) all restricted stock grants made prior thereto and the Initial Grant shall immediately vest in full, (3) the Performance Compensation Award described in Section 4(d), above, shall immediately vest in full, (4) I may continue to exercise my options that vested on or before December 31, 2004 for up to one year following my discharge or, if later, up until the expiration date of such options, (5) I may continue to exercise my options that are granted or first vest after 2004 until the later of December 31 of the year in which my employment terminates and the date two and one-half months after my employment terminates (but in no event after the expiration date of such options, and (6) the Company shall pay the COBRA premiums associated with continuing medical insurance coverage for my benefit and the benefit of my spouse and dependent children for 18 months following my date of discharge or such earlier time I shall obtain comparable coverage through another employer. In addition, if the Company exercises its option to extend the Expiration Date to December 31, 2009 under Section 1(b), above, and I am discharged other than for Cause or Disability between January 1, 2009 and December 31, 2009, the Additional Grant shall immediately vest in full.
RESIGNATION WITHOUT GOOD REASON	Same as for “Discharge for Cause.”
RESIGNATION WITH GOOD REASON	Same as for “Discharge Other Than for Cause or Disability.”
DEATH	Same as for “Discharge for Cause” EXCEPT that (1) my legal representative shall be entitled to receive any death benefits payable under the life insurance maintained on my behalf by the Company as well as any earned but as of yet unpaid bonus amounts from the year preceding the date of my death, (2) any equity and performance

5

compensation awards I have shall continue to vest for one year following the date of my death, and in determining the Grant Performance Hurdle for any remaining performance vesting period, my estate will be credited with the shareholder return for the full year preceding the year of my death, (3) the Company shall pay the COBRA premiums associated with continuing medical insurance coverage for the benefit of my spouse and dependent children for one year following my date of death, (4) my options that vested on or before December 31, 2004 may continue to be exercised for up to one year following my death, or if later, up until the expiration date of such options, and (5) my options that are granted or first vest after 2004 may continue to be exercised until the later of December 31 of the year in which my employment terminates and the date two and one-half months after my employment terminates (but in no event after the expiration date of such options

(b)Discharge for Cause. The Company may terminate my employment at any time if the Board has Cause to terminate me. “Cause” shall include, but not be limited to:

(i)Fraud and Dishonesty.  My commission of a willful act of fraud, embezzlement or misappropriation of any money or properties of the Company or its affiliates (other than an insubstantial and unintentional misappropriation that has been remedied within 10 days after the Company provides me with notice of such misappropriation).

(ii)Criminal Act.  My conviction of a felony or any material violation of any federal or state securities law (whether by plea of nolo contendere or otherwise) or my being enjoined from violating any federal or state securities law or being determined to have violated any such law.

(iii)Reckless Conduct.  My engaging in willful or reckless misconduct in connection with any property or activity, the purpose or effect of which materially and adversely affects the Company and/or its subsidiaries and affiliates, and/or their predecessors and successors (collectively, the “Group”).

(iv)Substance Abuse.  My repeated and intemperate use of alcohol or illegal drugs after written notice from the Board that such use, if continued, would result in the termination of my employment hereunder.

(v)Breach of Agreement.  My failure to cure my material breach of any of my obligations under this Agreement (other than by reason of physical or mental illness, injury, or condition) after having received 10 days’ notice from the Board of the breach.

6

(vi)Barred from Office.  My becoming barred or prohibited by the SEC from holding my position with the Company.

(vii)Material Breach of Company Policy or Code of Ethics.  My material breach of any Company policy (provided that I have been provided with a copy of or access to, or am otherwise aware of, the policy) or of the Company’s Code of Ethics.

(viii)Failure to Perform Duties.  My continued failure or refusal to perform any material duty or responsibility under this Agreement (other than by reason of physical or mental illness, injury, or condition) after having received 10 days’ notice from the Board.

(c)Termination for Disability.  Except as prohibited by applicable law, the Company may terminate my employment on account of Disability, or may transfer me to inactive employment status, which shall have the same effect under this Agreement as a termination for Disability.  “Disability” means a physical or mental illness, injury, or condition that prevents me from performing substantially all of my duties under this Agreement for at least 120 consecutive calendar days or for at least 180 calendar days, whether or not consecutive, in any 365 calendar day period, or is likely to do so, as certified by a physician selected by the Board.

(d)Discharge Other Than for Cause or Disability.  The Company may terminate my employment at any time for any reason, and without advance notice.  If I am terminated by the Company other than for Cause under Section 5(b) or Disability under Section 5(c), I will only receive the special benefits provided for a Discharge other than for Cause or Disability under Section 5(a) if I sign a separation agreement and general release in the form attached hereto as Schedule A and do not thereafter revoke the release.

(e)Resignation.  If I resign other than for Good Reason, the Company may accept my resignation effective on the date set forth in my notice or any earlier date. If I resign other than for Good Reason, I agree that the Restricted Period (as defined in Section 6(b)) shall begin on the date of my resignation.  If I resign for Good Reason, my employment will end on my last date of work and I will receive the benefits to which I am entitled under Section 5(a), but only if I sign the separation agreement and general release described in Section 5(d), above, and I do not thereafter revoke the release.  “Good Reason” means that, without my express written consent and through no fault of my own, one or more of the following events occurred after my execution of this Agreement:

(i)Demotion.  I am assigned any duties, responsibilities or title materially inconsistent with my rights under this Agreement.

(ii)Compensation Reduction.  My compensation provided for under this Agreement is materially reduced (other than any reduction resulting from the good faith application by the Compensation Committee of performance factors under the LTIP).

7

(iii)Relocation.  The Company requires me, without my consent, to be based at any office or location outside of a 40-mile radius of midtown Manhattan, New York, New York.

(iv)Breach of Promise.  The Company fails to cure its material breach of this Agreement within thirty business days after I give it written notice thereof.

(v)Discontinuance of Benefits.  The Company stops providing me with benefits that, in the aggregate, are substantially as valuable to me as those I enjoyed immediately prior to the Effective Date other than a result of across-the-board benefit reductions affecting all executives of similar status employed by the Company and any entity in control of the Company.

(vi)Change of Control.  The Company is involved in:

(1)a merger or acquisition in which 50% or more of the Company’s voting stock outstanding after the merger or acquisition is held by holders different from those who held the Company’s voting stock immediately prior to such merger or acquisition;

(2)the sale, transfer or other disposition of all or substantially all of the assets of the Company in liquidation or dissolution of the Company;

(3)a transfer of all or substantially all of the Company’s assets pursuant to a partnership or joint venture agreement or similar arrangement where the Company’s resulting interest is or becomes less than 50%;

(4)on or after the Effective Date, a change in ownership of the Company through an action or series of transactions, such that any person is or becomes the beneficial owner, directly or indirectly, of 50% or more of the Company’s voting stock; or

(5)a change occurs in the composition of the Board during any two-year period such that the individuals who, as of the beginning of such two-year period, constitute the Board (such Board shall be hereinafter referred to as the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that for purposes of this definition, any individual who becomes a member of the Board subsequent to the beginning of the two-year period, whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) shall be considered as though such individual were a member of the Incumbent Board; and provided further, however, that any such individual whose initial assumption of office occurs as a result of or in connection with a solicitation subject to Rule 14a-12(c) of Regulation 14A promulgated under the Exchange Act of 1934, as amended, or other actual or threatened solicitation of proxies or consents by or on behalf of an entity other than the Board shall not be so considered as a member of the Incumbent Board.

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(vii)Notice of Prospective Action.  I am officially notified (or it is officially announced) that the Company will take any of the actions listed above during the term of this Agreement.

However, an event that is or would constitute Good Reason shall cease to be Good Reason if: (1) I do not give the Company written notice of my intent to terminate my employment within 45 days after the event occurs; (2) the Company reverses the action or cures the default that constitutes Good Reason within 30 days after I notify it in writing that Good Reason exists before I terminate employment; or (3) I was a primary instigator of the Good Reason event and the circumstances make it inappropriate for me to receive Good Reason resignation benefits under this Agreement.

(f)Death.  If I die while employed under this Agreement, the payments required by Section 5(a) in the event of my death shall be made.

6.Confidentiality and Other Obligations.

(a)Confidential Information. During the term of my employment, in exchange for my promises to use such information solely for the Company’s benefit, the Company has provided and will continue to provide me with Confidential Information concerning, among other things, its business, operations, clients, investors, and business partners. “Confidential Information” refers to information not generally known by others in the form in which it is used by the Company, and which gives the Company a competitive advantage over other companies which do not have access to this information, including secret, confidential, or proprietary information or trade secrets of the Company and its subsidiaries and affiliates, conveyed orally or reduced to a tangible form in any medium, including information concerning the operations, future plans, customers, business models, strategies, and business methods of the Company and its subsidiaries and affiliates, as well as information about the Company’s active and prospective investors, clients and business partners and their respective investment preferences, risk tolerances, portfolio allocations and amounts, cash flow requirements, contact information, and other information about how to best serve their needs and preferences. “Confidential Information” does not include information that (i) I knew prior to my employment with the Company, (ii) subsequently came into my possession other than through my work for the Company and not as a result of a breach of any duty owed to the Company, or (iii) is generally known within the relevant industry.

(b)Promise Not to Disclose. I promise never to use or disclose any Confidential Information before it has become generally known within the relevant industry through no fault of my own. I agree that this promise shall never expire.

(c)Promise Not to Solicit.  Because my position enables me to learn Confidential Information regarding the investors in the Company and its funds and how best to serve them, I further agree that, during the “Restricted Period” (as defined below) (1) as to any investor in the Company (or in any investment fund or vehicle owned, managed, or established by the Company) with whom I had dealings or about whom I acquired proprietary information during my employment, I will not solicit or attempt to solicit (or assist others to solicit) the investor to invest in or do business with any person, entity, or investment fund or vehicle other

9

than the Company (or its funds or vehicles); and (2) I will not solicit or attempt to solicit (or assist others to solicit) for employment any person who is, or within the preceding six months was, an officer, manager, employee, or consultant of the Company. I agree that the restrictions set forth in this paragraph should not prohibit me from engaging in my livelihood and do not foreclose my working with investors not identified in this paragraph.

The “Restricted Period” shall mean the period of my employment with the Company and:

(i)Eighteen (18) months after my termination for Cause under Section 5(b), resignation without Good Reason under Section 5(e), or resignation with Good Reason under Section 5(e)(vi); and

(ii)Six (6) months after my resignation with Good Reason under Section 5(e)(i) through (v).

(d)Promise Not to Engage in Certain Employment.  I agree that, during the Restricted Period, I will not, without the prior written consent of the Board, accept any employment, provide any services, advice or information; or assist or engage in any activity (whether as an employee, consultant, or in any other capacity, whether paid or unpaid) with (1) any specialty finance firm or investment management company focused on commercial real estate-related debt instruments or (2) any business that, as of the date of my termination, directly competes with the Company.

(e)Return of Information.  When my employment with the Company ends, I will promptly deliver to the Company, or, at its written instruction, destroy, all documents, data, drawings, manuals, letters, notes, reports, electronic mail, recordings, and copies thereof, of or pertaining to it or any other Group member in my possession or control. In addition, during my employment with the Company or the Group and thereafter, I agree to meet with Company personnel and, based on knowledge or insights I gained during my employment with the Company and the Group, answer any question they may have related to the Company or the Group.

(f)Intellectual Property.  Intellectual property (including such things as all ideas, concepts, inventions, plans, developments, software, data, configurations, materials (whether written or machine-readable), designs, drawings, illustrations, and photographs, that may be protectable, in whole or in part, under any patent, copyright, trademark, trade secret, or other intellectual property law), developed, created, conceived, made, or reduced to practice during my Company employment (except intellectual property that has no relation to the Group or any Group customer that I developed, etc., purely on my own time and at my own expense), shall be the sole and exclusive property of the Company, and I hereby assign all my rights, title, and interest in any such intellectual property to the Company.

(g)Enforcement of This Section.  This section shall survive the termination of this Agreement for any reason.  I acknowledge that (a) my services are of a special, unique, and extraordinary character and it would be very difficult or impossible to replace them, (b) this section’s terms are reasonable and necessary to protect the Company’s

10

legitimate interests, (c) this section’s restrictions will not prevent me from earning or seeking a livelihood, (d) this section’s restrictions shall apply wherever permitted by law, and (e) my violation of any of this section’s terms would irreparably harm the Company. Accordingly, I agree that, if I violate any of the provisions of this section, the Company or any Group member may be entitled to seek, in addition to other remedies available to it, an injunction to be issued by any court of competent jurisdiction restraining me from committing or continuing any such violation.

7.Notice.

(a)To the Company.  I will send all communications to the Company in writing, by mail, hand delivery or facsimile, addressed as follows (or in any other manner the Company notifies me to use):

	Capital Trust, Inc.
	Attention: Mr. John R. Klopp
	410 Park Avenue, 14th Floor
	New York, New York 10022
	Fax: (212) 655-0044
	Tel.: (212) 655-0220
With copy to:	Martin L. Edelman, Esq.
	Michael L. Zuppone, Esq.
	Paul, Hastings, Janofsky & Walker LLP
	75 East 55th Street
	New York, New York 10022-3205

(b)To Me.  All communications from the Company to me relating to this Agreement must be sent to me in writing at my Company office or in any other manner I notify the Company to use.

With copy to:	Stephan Bachelder, Esq.
	22 Free Street, Suite 201
	Portland, Maine 04101-3900
	Tel: (207) 761-8100

(c)Time Notice Deemed Given.  Notice shall be deemed to have been given when delivered or, if earlier (1) when mailed by United States certified or registered mail, return receipt requested, postage prepaid, or (2) faxed with confirmation of delivery, in either case, addressed as required in this section.

8.Registration Rights and Related Assistance.  During the Term and for so long thereafter as I or my estate directly or indirectly own class A common stock, stock options or equity-based awards issued by the Company, and for so long as the Company’s common stock is publicly traded, (A) the Company shall file with the Securities and Exchange Commission and thereafter maintain the effectiveness of one or more registration statements on Form S-8 (or any successor form) registering under the Securities Act of 1933, as amended (the

11

“1933 Act”), the offer and sale of shares by the Company to me pursuant to stock options or other equity-based awards granted to me under this Agreement, Company compensation plans or otherwise and (B) to the extent that I (or my estate) determine to engage in an exempt sale of any common stock or other securities of the Company, the Company shall take all commercially reasonable steps to cooperate with and assist me (or my estate) in connection with such sale.

9.Arbitration of Disputes.  Except for the Company’s right to seek injunctive relief in accordance with Section 6(g), above, all disputes between the Company and me are to be resolved by final and binding arbitration in accordance with the separate Arbitration Agreement attached as Schedule B to this Agreement. This section shall remain in effect after the termination of this Agreement.

10.Amendment.  No provisions of this Agreement may be modified, waived, or discharged except by a written document signed by a duly authorized Company officer and me. Thus, for example, promotions, commendations, and/or bonuses shall not, by themselves, modify, amend, or extend this Agreement. A waiver of any conditions or provisions of this Agreement in a given instance shall not be deemed a waiver of such conditions or provisions at any other time.

11.Interpretation; Exclusive Forum.  The validity, interpretation, construction, and performance of this Agreement shall be governed by the laws of the state of New York (excluding any that mandate the use of another jurisdiction’s laws). Any litigation, arbitration, or similar proceeding with respect to such matters only may be brought within that state, and all parties to this Agreement consent to that state’s jurisdiction and agree that venue anywhere in that state would be proper.

12.Successors.  This Agreement shall be binding upon, and shall inure to the benefit of, me and my estate, but I may not assign or pledge this Agreement or any rights arising under it, except to the extent permitted under the terms of the benefit and compensation plans in which I participate.

13.Taxes.  I am solely responsible for the payment of any tax liabilities (including any taxes and penalties arising under Section 409A of the Internal Revenue Code (the “Code”) that may result from any payments or benefits that I receive pursuant to this Agreement.  The Company shall not have any obligation to pay, mitigate, or protect me from any such tax liabilities.  Nevertheless, if the Company reasonably determines that my receipt of payments or benefits pursuant to Section 5 above would cause me to incur liability for additional tax under Section 409A of the Code, then the Company may in its discretion suspend such payments or benefits until the end of the six-month period following termination of my employment (the “409A Suspension Period”).  As soon as reasonably practical after the end of the 409A Suspension Period, the Company will make a lump sum payment to me, in cash, in an amount equal to any payments and benefits that the Company does not make during the 409A Suspension Period.  Thereafter, I will receive any remaining payments and benefits due pursuant to Section 5 in accordance with the terms of that Section (as if there had not been any suspension beforehand).  The Company shall withhold taxes from payments it makes pursuant to this Agreement as it determines to be required by applicable law.

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14.Validity.  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

15.Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute the same instrument.

16.Entire Agreement.  All oral or written agreements or representations, express or implied, with respect to the subject matter of this Agreement are set forth in this Agreement.  Notwithstanding the foregoing, I agree to comply with the Company’s policies and Code of Ethics.

[SIGNATURE PAGE FOLLOWS]

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I ACKNOWLEDGE THAT ALL UNDERSTANDINGS AND AGREEMENTS BETWEEN THE COMPANY AND ME RELATING TO THE SUBJECTS COVERED IN THIS AGREEMENT ARE CONTAINED IN IT AND THAT I HAVE ENTERED INTO THIS AGREEMENT VOLUNTARILY AND NOT IN RELIANCE ON ANY PROMISES OR REPRESENTATIONS BY THE COMPANY OTHER THAN THOSE CONTAINED IN THIS AGREEMENT ITSELF.

I FURTHER ACKNOWLEDGE THAT I HAVE CAREFULLY READ THIS AGREEMENT, THAT I UNDERSTAND ALL OF IT, AND THAT I HAVE BEEN GIVEN THE OPPORTUNITY TO DISCUSS THIS AGREEMENT WITH MY PRIVATE LEGAL COUNSEL AND HAVE AVAILED MYSELF OF THAT OPPORTUNITY TO THE EXTENT I WISHED TO DO SO. I UNDERSTAND THAT BY SIGNING THIS AGREEMENT I AM GIVING UP MY RIGHT TO A JURY TRIAL.

Dated:  December 28, 2005	CAPITAL TRUST, INC.
	By:		/s/ John R. Klopp
	Name:			John R. Klopp
	Title:			Chief Executive Officer
Dated:  December 28, 2005	/s/ Stephen D. Plavin
		STEPHEN D. PLAVIN

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SCHEDULE A

SEPARATION AGREEMENT AND GENERAL RELEASE

This SEPARATION AGREEMENT AND GENERAL RELEASE (“Release”) made this      day of             ,       by and between Capital Trust, Inc. (the “Company”) and Stephen D. Plavin (“Executive”):

In exchange for the mutual promises exchanged herein and other good and valid consideration, the receipt of which is hereby acknowledged, the parties agree as follows:

1.Employment Termination

Executive agrees that his employment with the Company has ended or will end on [date].  Executive will be entitled to those separation and other benefits as set forth in his Employment Agreement with the Company dated as of [date].

2.ClaimsReleased

In exchange for the benefits provided herein, Executive irrevocably and unconditionally releases the Company, its current or former parents, subsidiaries, or affiliates, their past, present, or future employees or agents, their successors, their benefit plans and the administrators of such plans (collectively, the “Released Parties”), from all known or unknown claims that Executive presently may have arising out of his employment with, or separation from, the Company, other than claims (i) seeking enforcement of this Release, (ii) for vested awards or benefits under the Company’s employee benefit plans, including the 2004 Long-Term Incentive Program, and (iii) to indemnification and coverage under the Company’s directors and officers’ insurance policies (“Claims”).  The Claims Executive is releasing include, without limitation, claims under the Age Discrimination in Employment Act of 1967 (“ADEA”), Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Employee Retirement Income Security Act of 1974, the Fair Labor Standards Act, the Family and Medical Leave Act, the New York State Human Rights Law; the New York City Human Rights Law; or any other federal, state, or local common law, statute, regulation, or law of any other type.  Executive acknowledges that he is releasing Claims he knows he has and Claims he may not know he has, and understands the significance of doing so.

3.Pursuit of Released Claims

Executive agrees to withdraw with prejudice all complaints or charges, if any, he has filed against any Released Party with any agency or court.  Executive agrees that he will never file any lawsuit or complaint against them based on the Claims purportedly released in this Release.  Executive promises never to seek any damages, remedies, or other relief for himself personally (any right to which he hereby waives) by filing or prosecuting a charge with any administrative agency with respect to any Claim purportedly released by this Release.  Executive promises to request any administrative agency or other body assuming jurisdiction of any such lawsuit, complaint, or charge to withdraw from the matter or dismiss the matter with prejudice.

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4.Nonadmission of Liability

Executive agrees that this Release is not an admission of guilt or wrongdoing by the Released Parties and acknowledges that the Released Parties do not believe or admit that they have done anything wrong.

5.Confidentiality and Non-Disparagement

Executive agrees to keep the fact and terms of this Release in strict confidence.  Executive agrees not to disclose this document, its contents or subject matter to any person other than his immediate family, attorney, accountant or income tax preparer, or otherwise as required by law.  Executive agrees that he will not denigrate, disparage, defame, impugn, or otherwise damage or assail the reputation or integrity of the Company or any Released Party.

6.Consideration of Release

Executive acknowledges that, before signing this Release, he was given at least 21 calendar days to consider this Release.  Executive waives any right he might have to additional time beyond this consideration period within which to consider this Release.  Executive acknowledges that: (a) he took advantage of that time to consider this Release before signing it; (b) he carefully read this Release; (c) he fully understands what this Release means; (d) he is entering into it voluntarily; (e) he is receiving valuable consideration in exchange for his execution of this Release that he would not otherwise be entitled to receive; and (f) the Company, in writing, encouraged him to discuss this Release with his attorney (at his own expense) before signing it, and that he did so to the extent he deemed appropriate.  Executive may revoke his release of claims under the ADEA within seven (7) days after he signs this Release, in which case he will not be entitled to receive all of the benefits set forth herein.

7.Miscellaneous

This Release sets forth the entire agreement between Executive and the Company pertaining to the subject matter of this Release.  This Release may not be modified or canceled in any manner except by a writing signed by both Executive and an authorized Company official.  Executive acknowledge that the Company has made no representations or promises to him other than those in this Release.  If any provision in this Release is found to be unenforceable, all other provisions will remain fully enforceable.  It is not necessary that the Company sign this Release for it to become binding on both Executive and the Company.  This Release binds Executive’s heirs, administrators, representatives, executors, successors, and assigns, and will inure to the benefit of the Released Parties and their heirs, administrators, representatives, executors, successors, and assigns.  This Release shall be construed as a whole according to its fair meaning; it shall not be construed strictly for or against Executive or the Released Parties.  Unless the context indicates otherwise, the term “or” shall be deemed to include the term “and”

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and the singular or plural number shall be deemed to include the other.  Disputes under this Release are to be resolved in accordance with the existing arbitration agreement between the parties.  Except to the extent governed by federal law, this Release shall be governed by the statutes and common law of the State of New York (excluding any that mandate the use of another jurisdiction’s laws).  Section headings in this Agreement are included for convenience of reference only and shall not be a part of this Agreement for any other purpose.

TAKE THIS RELEASE HOME, READ IT, AND CAREFULLY CONSIDER ALL OF ITS PROVISIONS BEFORE SIGNING IT.  THIS RELEASE INCLUDES A RELEASE OF KNOWN AND UNKNOWN CLAIMS.

Date:	CAPITAL TRUST, INC.
	By:
	Name:
	Title:
Date:
		STEPHEN D. PLAVIN

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SCHEDULE B

MUTUAL AGREEMENT TO ARBITRATE CLAIMS

I recognize that differences may arise between Capital Trust, Inc. (the “Company”) and me during or following my employment with the Company, and that those differences may or may not be related to my employment.  I understand and agree that by entering into this Agreement to Arbitrate Claims (“Agreement”), I anticipate gaining the benefits of a speedy, impartial dispute-resolution procedure.

Except as provided in this Agreement, the Federal Arbitration Act shall govern the interpretation, enforcement and all proceedings pursuant to this Agreement.  To the extent that the Federal Arbitration Act either is inapplicable, or held not to require arbitration of a particular claim or claims, New York law pertaining to agreements to arbitrate shall apply.

I understand that any reference in this Agreement to the Company will be a reference also to all of its subsidiary and affiliated entities, all benefit plans, the benefit plans’ sponsors, fiduciaries, administrators, and affiliates, and all successors and assigns of any of them.

Claims Covered by the Agreement

The Company and I mutually consent to the resolution by arbitration of all claims or controversies (“claims”), past, present or future, which arise, directly or indirectly, out of my employment (or its termination) or the business of the Company, that the Company may have against me or that I may have against the Company or against its officers, directors, employees or agents in their capacity as such or otherwise.  The claims covered by this Agreement include, but are not limited to, claims for wages or other compensation due; claims for breach of any contract or covenant (express or implied); tort claims; claims for discrimination (including, but not limited to, race, sex, sexual orientation, religion, national origin, age, marital status, or medical condition, handicap or disability); and claims for violation of any federal, state, or other governmental law, statute, regulation, or ordinance, except claims excluded elsewhere in this Agreement.

Except as otherwise provided in this Agreement, both the Company and I agree that neither of us shall initiate or prosecute any lawsuit or administrative action (other than an administrative charge of discrimination to the EEOC or similar fair employment practices agency, or an administrative charge within the jurisdiction of the National Labor Relations Board or U.S. Department of Labor), in any way related to any claim covered by this Agreement.

Claims Not Covered by the Agreement

This Agreement does not cover claims for workers’ compensation or unemployment compensation benefits; or any claim as to which final and binding arbitration cannot be required as a matter of law.

Claims, either by the Company or by me, seeking injunctive relief for alleged violations of intellectual property rights and non-disclosure and non-solicitation covenants also are not covered by this Agreement (although all other aspects of such claims, including any claims for damages, are covered by this Agreement).

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Required Notice of All Claims and Statute of Limitations

The Company and I agree that the aggrieved party must give written notice of any claim to the other party no later than the applicable Statute of Limitations as may be prescribed by law.

Written notice to the Company, or its officers, directors, employees or agents, shall be sent to the addresses set forth in my Employment Agreement.  I will be given written notice at the last address recorded in my personnel file.

The written notice shall identify and describe the nature of all claims asserted and the facts upon which such claims are based.  The notice shall be sent to the other party by certified or registered mail, return receipt requested.

Representation

Any party may be represented by an attorney or other representative selected by the party.

Discovery

Each party shall have the right to take the deposition of three (3) individuals and any expert witness designated by another party.  Each party also shall have the right to make requests for production of documents to any party.  The subpoena right specified below shall be applicable to discovery pursuant to this paragraph.  Additional discovery may be had where the arbitrator selected pursuant to this Agreement so orders, upon an appropriate showing of justification.

Designation of Witnesses

At least 30 days before the arbitration, the parties must exchange lists of witnesses, including any expert, and copies of all exhibits intended to be used at the arbitration.

Subpoenas

Each party shall have the right to subpoena witnesses and documents for the arbitration.

Arbitration Procedures

The arbitration will be held under the auspices of the American Arbitration Association (“AAA”).

The Company and I agree that, except as provided in this Agreement, the arbitration shall be in accordance with the AAA’s National Rules for Resolution of Employment Disputes (or other then-current employment arbitration procedures).  The arbitrator shall be either a retired judge, or an attorney licensed to practice law in the state in which the arbitration is convened and with demonstrated experience and expertise in executive compensation matters (the “Arbitrator”).  The arbitration shall take place in or near the city in which I am or was last employed by the Company.

The Arbitrator shall be selected as follows.  The sponsoring organization shall give each party a list of 11 arbitrators drawn from its panel of employment dispute arbitrators.  Each party may strike all names on the list it deems unacceptable.  If only one common name

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remains on the lists of all parties, that individual shall be designated as the Arbitrator.  If more than one common name remains on the lists of all parties, the parties shall strike names alternately from the list of common names until only one remains.  The party who did not initiate the claim shall strike first.  If no common name exists on the lists of all parties, the sponsoring organization shall furnish an additional list and the process shall be repeated.  If no arbitrator has been selected after two lists have been distributed, then the parties shall strike alternately from a third list, with the party initiating the claim striking first, until only one name remains.  That person shall be designated as the Arbitrator.

The Arbitrator shall apply the substantive law (and the law of remedies, if applicable) of the state in which the claim arose, or federal law, or both, as applicable to the claim(s) asserted.  If the parties’ dispute concerns a contract in which the parties have included a choice of law provision, the Arbitrator shall apply the law as designated by the parties.  The Arbitrator is without jurisdiction to apply any different substantive law, or law of remedies.  The Arbitrator, and not any federal, state, or local court or agency, shall have exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of this Agreement, including but not limited to any claim that all or any part of this Agreement is void or voidable.  The arbitration shall be final and binding upon the parties, except as provided in this Agreement.

The Arbitrator shall have jurisdiction to hear and rule on pre-hearing disputes and is authorized to hold pre-hearing conferences by telephone or in person, as the Arbitrator deems necessary.  The Arbitrator shall have the authority to entertain a motion to dismiss and/or a motion for summary judgment by any party and shall apply the standards governing such motions under the Federal Rules of Civil Procedure.

Either party may obtain a court reporter to provide a stenographic record of proceedings.

Either party, upon request at the close of hearing, shall be given leave to file a post-hearing brief.  The time for filing such a brief shall be set by the Arbitrator.

The Arbitrator shall render a written award and opinion in the form setting forth his/her findings and conclusions.

Either party shall have the right, within 20 days of issuance of the Arbitrator’s opinion, to file with the Arbitrator a motion to reconsider (accompanied by a supporting brief), and the other party shall have 20 days from the date of the motion to respond.  The Arbitrator thereupon shall reconsider the issues raised by the motion and, promptly, either confirm or change the decision, which (except as provided by this Agreement) shall then be final and conclusive upon the parties.

Arbitration Fees and Costs

The Company will be responsible for paying any filing fee and the fees and costs of the Arbitrator and the arbitration; provided, however, that if I am the party initiating the claim, I am responsible for contributing an amount equal to the filing fee to initiate a claim in the court of general jurisdiction in the state in which I am (or was last) employed by the Company.  Each

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party shall pay for its own costs and attorneys’ fees, if any.  However, if any party prevails on a statutory claim which affords the prevailing party attorneys’ fees, or if there is a written agreement providing for fees, the Arbitrator may award reasonable fees to the prevailing party, under the standards for fee shifting provided by law.

Judicial Review

Either party may bring an action in any court of competent jurisdiction to compel arbitration under this Agreement and to enforce an arbitration award.

Interstate Commerce

I understand and agree that the Company is engaged in transactions involving interstate commerce and that the Federal Arbitration Act applies to this Agreement.

Requirements for Modification or Revocation

This Agreement to arbitrate shall survive the termination of my employment.  It can only be revoked or modified by a writing signed by the parties which specifically states an intent to revoke or modify this Agreement.

Sole and Entire Agreement

This is the complete agreement of the parties on the subject of arbitration of disputes.  This Agreement supersedes any prior or contemporaneous oral or written understandings on the subject.  No party is relying on any representations, oral or written, on the subject of the effect, enforceability or meaning of this Agreement, except as specifically set forth in this Agreement.

Severability

If any provisions of this Agreement are adjudged to be void or otherwise unenforceable, in whole or in part, such adjudication shall not affect the validity of the remainder of the Agreement, as the parties hereto intend to create a binding agreement to arbitrate regardless of the unenforceability of any particular term or terms.

Consideration

The promises by the Company and by me to arbitrate differences, rather than litigate them before courts or other bodies, provide consideration for each other.

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Voluntary Agreement

I ACKNOWLEDGE THAT I HAVE CAREFULLY READ THIS AGREEMENT, THAT I UNDERSTAND ITS TERMS, THAT ALL UNDERSTANDINGS AND AGREEMENTS BETWEEN THE COMPANY AND ME RELATING TO THE SUBJECTS COVERED IN THE AGREEMENT ARE CONTAINED IN IT, AND THAT I HAVE ENTERED INTO THE AGREEMENT VOLUNTARILY AND NOT IN RELIANCE ON ANY PROMISES OR REPRESENTATIONS BY THE COMPANY OTHER THAN THOSE CONTAINED IN THIS AGREEMENT ITSELF.

I UNDERSTAND THAT BY SIGNING THIS AGREEMENT I AM GIVING UP MY RIGHT	Employee initials:
TO A JURY TRIAL.

I FURTHER ACKNOWLEDGE THAT I HAVE BEEN GIVEN THE OPPORTUNITY TO DISCUSS THIS AGREEMENT WITH MY PRIVATE LEGAL COUNSEL AND HAVE AVAILED MYSELF OF THAT OPPORTUNITY TO THE EXTENT I WISH TO DO SO.

Dated: December     , 2005			CAPITAL TRUST, INC.
	By:
	Name:	John R. Klopp
	Title:	Chief Executive Officer
Dated: December     , 2005
		STEPHEN D. PLAVIN

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EX-10.31.A

Exhibit 10.31.a

EXECUTION COPY

AMENDED AND RESTATED
MASTER REPURCHASE AGREEMENT

Dated as of February 15, 2006

Between:

BEAR, STEARNS FUNDING, INC.,
as Buyer

and

CAPITAL TRUST, INC.,
as Seller jointly and severally with the other Seller

and

CT BSI FUNDING CORP.,
as Seller jointly and severally with the other Seller

APPLICABILITY

From time to time the parties hereto may enter into transactions in which Bear, Stearns Funding, Inc. (“Buyer”) may, in its sole discretion, agree to purchase Eligible Loans from Capital Trust, Inc. and/or CT BSI Funding Corp. (individually “Seller” and collectively “Sellers”), with a simultaneous agreement by Buyer to transfer to Seller such Eligible Loans at a date certain or on demand of Seller subject to and in accordance with the exercise of Buyer’s remedies under this Agreement, against the transfer of funds by Seller. Each such transaction shall be referred to herein as a “Transaction” and shall be governed by this Agreement, as the same shall be amended from time to time.

1.             DEFINITIONS

“Accelerated Repurchase Date” shall have the meaning set forth in Section 14 of this Agreement.

“Accepted Servicing Practices” shall mean with respect to any Purchased Loan, those mortgage or mezzanine loan servicing practices of prudent lending institutions which service loans of the same type as such Purchased Loan in the jurisdiction where the related underlying real estate directly or indirectly securing such Purchased Loan is located.

“Act of Insolvency” shall mean with respect to Buyer or either Seller, (i) the commencement by such party as debtor of any case or proceeding under any bankruptcy,

insolvency, reorganization, liquidation, dissolution or similar law, or such party seeking the appointment of a receiver, trustee, custodian or similar official for such party or any substantial part of its property, or (ii) the commencement of any such case or proceeding against such party, or another seeking such an appointment, or the filing against a party of an application for a protective decree under the provisions of the Securities Investor Protection Act of 1970, which (A) is consented to or not timely contested by such party, (B) results in the entry of an order for relief, such an appointment, the issuance of such a protective decree or the entry of an order having a similar effect, or (C) is not dismissed within 15 days, (iii) the making by a party of a general assignment for the benefit of creditors, or (iv) the admission in writing by a party of such party’s inability to pay such party’s debts as they become due.

“Additional Loans” shall have the meaning set forth in Section 3(a) of this Agreement.

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

“Agreement” shall mean this Amended and Restated Master Repurchase Agreement dated as of February 15, 2006, by and between Buyer and Seller.

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

“Authorized Representative of Seller” shall mean the individuals, set forth on Exhibit II hereto.

“Bailee” shall mean an attorney, title company or other closing agent, appointed by Seller and reasonably acceptable to Buyer, who is party to a Bailee Agreement and executes a Trust Receipt in connection with a Table Funded Loan.

“Bailee Agreement” shall mean a written agreement between Seller and a Bailee relating to the bailment in connection with Table Funded Loans, naming Buyer as a third party beneficiary and substantially in the form of Exhibit XIII hereto.

“BSIL Repurchase Agreement” shall mean the Master Repurchase Agreement, dated as of February 15, 2006, between Bear, Stearns International Limited, Capital Trust, Inc. and CT BSI Funding Corp.

“Trust Receipt” shall mean the trust receipt and certification attached to the form of Bailee Agreement at Exhibit XIII hereto.

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

“Buyer” shall mean Bear, Stearns Funding, Inc., or any successor.

“Buyer’s Margin Ratio” shall mean, with respect to any Transaction, as of any date, a percentage agreed to by Buyer and Seller or, in the absence of any such agreement, the percentage obtained by dividing the Purchase Price of the Purchased Loans on the Purchase Date by the Market Value on such date for such Transaction.

“CDO Assets” shall mean the aggregate of the CDO I Assets and the CDO II Assets.

“CDO I Assets” shall mean Eligible Assets, as specified in the CTRE CDO 2004-1 Indenture, which are to be designated as CDO I Assets.

“CDO II Assets” shall mean Eligible Assets, as specified in the CTRE CDO 2005-1 Indenture, which are to be designated as CDO II Assets.

“Collateral” shall have the meaning set forth in Section 5 of this Agreement.

“Collection Account” shall mean a segregated interest bearing account established and maintained at the Depository, in the name of and for the benefit of Buyer pursuant to the terms of the Depository Agreement.

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

“Commitment Expiration Date” shall mean August 15, 2008.

“Confirmation” shall have the meaning specified in Section 2(b) of this Agreement.

“Custodial Agreement” shall mean the Custodial Agreement, dated as of August 16, 2005, among the Custodian, Sellers and Buyer, as amended, restated, modified and in effect from time to time.

“Custodial Delivery” shall mean the form executed by Seller in order to deliver the Purchased Loan Schedule and the Purchased Loan File to Buyer or its designee (including the Custodian) pursuant to Section 6, a form of which is attached hereto as Exhibit IV.

“Custodian” shall mean Deutsche Bank Trust Company Americas or any successor Custodian appointed by Buyer and Seller with the prior written consent of Seller (which consent shall not be unreasonably withheld).

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

“Debt” means, with respect to any Person at any date, all indebtedness or other obligations of such Person in accordance with GAAP excluding any indebtedness secured by the unfunded equity commitments of shareholders.

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

“Depository” shall mean PNC Bank, National Association or any successor Depository appointed by Seller and approved by Buyer, which approval shall not be unreasonably withheld, conditioned or delayed.

“Depository Agreement” shall mean the agreement governing the Collection Account between the Depository and Buyer and Seller and their respective successors and assigns as the same may be modified, amended or supplemented from time to time.

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

“Direction Letter” shall mean a letter signed by Seller directing the Servicer to send all Income with respect to the Purchased Loans, as well as any payments in respect of associated Hedging Transactions, to the Collection Account held by the Depository within one (1) Business Day of receipt.

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

“Early Repurchase Date” shall have the meaning specified in Section 2(g) of this Agreement.

“EBITDA” shall mean earnings before interest, tax, depreciation and amortization.

“Eligible Loans” shall mean any of the following types of loans, which loans shall not provide for any restrictions (other than notice) on transfer to or by Buyer and otherwise are acceptable to Buyer in the exercise of its commercially reasonable business judgment, and are secured directly or indirectly by a property that is a multifamily, retail, office, warehouse, industrial, or hospitality property (or any other property type acceptable to Buyer), is located in the United States of America, its territories or possessions, meet all of the other requirements of this Amended and Restated Master Repurchase Agreement, and which would not, if the same became Eligible Loans, cause the aggregate Purchase Price of all Eligible Loans to exceed the Maximum Aggregate Purchase Price:

(i)            Whole Loans that are performing (i.e., current and not in monetary or material non-monetary default such that remedies can be

4

exercised by any Person) commercial mortgage loans secured by first liens on multifamily and commercial real property with respect to which the ratio of loan to value as determined by Buyer, in the exercise of its commercially reasonable judgment, for the real property securing directly such loan (including for purposes of this calculation, such loan and any loan senior to or pari passu with such loan and secured, directly or indirectly, by the related property) does not exceed the percentage stated in the Confirmation.

(ii)           Subordinate interests in Whole Loans (“B Notes”) that are  performing (i.e., current and not in monetary or material non-monetary default such that remedies can be exercised by any Person), commercial mortgage loans secured by first liens on multifamily and commercial real property with respect to which the ratio of loan to value as determined by Buyer, in the exercise of its commercially reasonable judgment, for the real property securing directly such loan (including for purposes of this calculation, such loan and any loan senior to or pari passu with such loan and secured, directly or indirectly, by the related property) does not exceed the percentage stated in the Confirmation.

(iii)          Mezzanine Loans that are performing (i.e., current and not in monetary or material non-monetary default such that remedies can be exercised by any Person) and with respect to which the ratio of total loan to value as determined by Buyer, in the exercise of its commercially reasonable judgment, for the real property securing indirectly such loan (including for purposes of this calculation, such loan and any loan senior to or pari passu with such loan and secured, directly or indirectly, by the related property) does not exceed the percentage stated in the Confirmation.

(iv)          any other investment presented to and approved by Buyer in its sole discretion which does not conform to the criteria set forth in clauses (i), (ii) and (iii) above and which Buyer elects in its sole discretion to purchase, in which case the criteria for the ratio of total loan to value and any modifications to the Maximum Aggregate Purchase Price with respect to such loan, shall be set forth in the related Confirmation for the Transaction under which such loan or interest is purchased by Buyer.

An Eligible Loan must have the related loan document files segregated and held by the Custodian. Non-performing loans and loans secured by undeveloped land, coop shares and construction loans are not eligible for inclusion as Eligible Loans.

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

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“ERISA Affiliate” means any corporation or trade or business that is a member of any group of organizations (i) described in Section 414(b) or (c) of the Code of which Seller is a member and (ii) solely for purposes of potential liability under Section 302(c)(l1) of ERISA and Section 412(c)(ll) of the Code and the lien created under Section 302(f) of ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of which Seller is a member.

“Event of Default” shall have the meaning set forth in Section 13 of this Agreement.

“Exit Fee” shall have the meaning specified in Section 2(g).

“Filings” shall have the meaning specified in Section 5 of this Agreement.

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

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

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

“Income” shall mean, with respect to any Eligible Loan at any time, any principal (including any principal prepayments) thereof and all interest, dividends or other distributions thereon and with respect to any associated Hedging Transaction, all proceeds thereof.

“Indemnified Amounts” and “Indemnified Parties” shall have the meaning specified in Section 19 of this Agreement.

“Intercreditor Agreement” shall mean the agreement between Seller and the holder of the senior co-lender interest (such as a “B” noteholder’s interest in an “A/B” loan structure) in a commercial mortgage loan secured by a first lien on multifamily and commercial real property.

“LIBOR” shall mean, unless otherwise agreed to by the parties hereto, the rate per annum (rounded upwards, if necessary, to the next 1/100th of 1%) calculated on each Pricing Rate Determination Date for the next Pricing Rate Period as equal to the rate for U.S. dollar deposits for a one month period which appears on Telerate Page 3750 as of 10:00 am, New York City time, on such Pricing Rate Determination Date; provided,

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however, that if such rate does not appear on Telerate Page 3750, “LIBOR” determined on each Pricing Rate Determination Date for the next Pricing Rate Period shall mean a rate per annum equal to the rate at which U.S. dollar deposits are offered in immediately available funds in the London Interbank Market to the London office of National Westminster Bank, Plc (or its successors) by leading banks in the Eurodollar market at 10:00 a.m., New York City time, on the Pricing Rate Determination Date. “Telerate Page 3750” means the display designated as “Page 3750” on the Associated Press-Dow Jones Telerate Service (or such other page as may replace Page 3750 on the Associated Press-Dow Jones Telerate Service or such other service as may be nominated by the British Bankers’ Association as the information vendor for the purpose of displaying British Banker’s Association interest settlement rates for U.S. Dollar deposits). LIBOR determined on the basis of the rate displayed on Telerate Page 3750 in accordance with the provisions hereof shall be subject to corrections, if any, made in such rate and displayed by the Associated Press-Dow Jones Telerate Service within one (1) hour of the time when such rate is first displayed by such Service.

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

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

“Margin Call” shall have the meaning set forth in Section 3(a) of this Agreement.

“Margin Deficit” shall have the meaning set forth in Section 3(a) of this Agreement.

“Market Value” shall mean, with respect to any Purchased Loans, as of any relevant date, the market value for such Purchased Loans on such date, as determined by Buyer in the exercise of its commercially reasonable judgment exercised in good faith and may be determined on each Business Day during the term of this Agreement, or less frequently from time to time if Buyer elects in its sole discretion. Any provision hereof to the contrary notwithstanding, a Market Value of zero shall, unless otherwise determined by Buyer in its sole discretion, be assigned to (i) any Purchased Loan that has been delinquent for at least sixty (60) days, (ii) any Purchased Loan released by the Custodian for more than 10 Business Days other than with the consent of Buyer or (iii) any Purchased Loan has become a specially serviced loan as defined in the applicable servicing agreement.

“Maximum Aggregate Purchase Price” shall mean the sum of the Maximum Committed Aggregate Purchase Price and the Maximum CDO Aggregate Purchase Price.

“Maximum CDO Aggregate Purchase Price” shall mean $50,000,000 less the aggregate Purchase Price for CDO Assets owed to Bear, Stearns International Limited under the BSIL Repurchase Agreement.

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“Maximum Committed Aggregate Purchase Price” shall mean $150,000,000 less the aggregate amount owed, excluding the aggregate Purchase Price for CDO Assets, to Bear, Stearns International Limited under the BSIL Repurchase Agreement; provided, however, that for the purposes of calculating the Purchase Fee hereunder, the Maximum Committed Aggregate Purchase Price shall be deemed to be as provided in Section 2(e) hereof.

“MERS” shall mean the Mortgage Electronic Registration Systems, Inc.

“MERS Purchased Loan” shall mean Purchased Loan that is registered with MERS.

“Mezzanine Loan” shall mean a loan secured by pledges of substantially all of the equity ownership interests in entities that own directly or indirectly multifamily and commercial properties.

“Mezzanine Loan Documents” shall mean any and all documents required in connection with the financing of a Mezzanine Loan.

“Mezzanine Note” shall mean a note evidencing Mezzanine Loan indebtedness.

“Modified Debt” shall mean Debt reduced by (i) amounts of liabilities resulting from the sale of participation interests,(ii) liabilities resulting from consolidation of Debt associated with securitizations where Seller has no recourse obligation for the Debt and which Debt was not issued by Seller or its subsidiaries and (iii) liabilities resulting from the consolidation of vehicles managed by Seller or a Subsidiary of Seller where Seller has less than a 50% equity interest.

“Modified Recourse Debt” shall mean Debt reduced by (i) amounts of liabilities resulting from the sale of participation interests, (ii) liabilities resulting from consolidation of Debt associated with securitizations where Seller has no recourse obligation for the Debt and (iii) liabilities resulting from the consolidation of vehicles managed by Seller or a Subsidiary of Seller where Seller has less than a 50% equity interest.

“Moody’s” shall mean Moody’s Investor Service, Inc. or any successor thereto.

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

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

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

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

“Net Worth” means with respect to any Person at any date, the excess of the total assets over total liabilities of such Person on such date, each to be determined in accordance with GAAP consistent with those applied in the preparation of the most recent audited financial statements.

“New Loan” shall mean any loan that Seller proposes to be included as  an Eligible Loan.

“Non-Usage Fee” shall have the meaning specified in Section 2(h) herein.

“Originated Loan” shall mean any loan that is an Eligible Loan and whose Purchased Loan Documents were prepared by or on behalf of Seller or Buyer.

“Outstanding Purchase Price” shall mean, with respect to any Transaction, the original Purchase Price reduced by all principal payments and paydowns received by Buyer (other than payments with respect to accrued Price Differential) and plus any additional amounts advanced by Buyer with respect to the related Eligible Loans.

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

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

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

“Preliminary Due Diligence Package” shall mean with respect to any New Loan, a summary memorandum outlining the proposed transaction, including potential transaction benefits and material underwriting risks, all Underwriting Issues and all other characteristics of the proposed transaction that a reasonable buyer would consider material, together with due diligence information relating to the New Loan to be provided by Seller to Buyer pursuant to this Agreement, including, but not limited to:

With respect to each Eligible Loan:

(i)the Loan Information;

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(ii)description of the property or properties;

(iii)description of the borrower, including experience with other projects (real estate owned) and net worth and liquidity statements if available. In the event that such statements are not available, evidence of the credit strength of the borrower acceptable to Buyer;

(iv)description of the ownership structure of the borrower (including, without limitation, independent director(s)/member(s));

(v)term sheet outlining the transaction generally, including description of existing or proposed senior debt;

(vi)debt service coverage and loan to value ratios;

(vii)Seller’s relationship with the Borrower, if any;

(viii)with respect to any New Loan that is a Pre-Existing Loan, a list that specifically and expressly identifies any Purchased Loan Documents that relate to such New Loan but are not in Seller’s possession;

(ix)any exceptions to the representations and warranties set forth in Exhibit VI or Exhibit VII to this Agreement;

(x)asset summary books which include, to the extent provided to Seller, the following:

(A)loan detail and asset description, including market information on competing properties, terrorism and other insurance coverage;

(B)map, photo;

(C)current rent roll;

(D)historical, current and pro forma cash flow and operating information;

(E)appraisal, environmental, engineering summary;

(F)information relating to valuation, security or underwriting issues, special or unique loan features and structural issues;

(xi)Securitization Documents and Intercreditor Agreements, if any;

(xii)legal opinions delivered with respect to the Eligible Loan  in Seller’s possession; and

(xiii)closing binder in respect of the Purchased Loan (or if not yet prepared, an execution copy of the loan agreement).

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

“Pricing Rate” shall mean, for any Pricing Rate Period with respect to any Transaction, an annual rate equal to LIBOR for such Pricing Rate Period plus the relevant spread for such Transaction as determined pursuant to the Side Letter and indicated on the applicable Confirmation.

“Pricing Rate Determination Date” shall mean in the case of the first Pricing Rate Period with respect to any Transaction, the first day on which the Pricing Rate Period begins.

“Pricing Rate Period” shall mean, (a) in the case of the first Pricing Rate Period with respect to any Transaction, the period commencing on and including the Purchase Date for such Transaction and ending on and including the last day of the month in which the Purchase Date occurs and (b) in the case of any subsequent Pricing Rate Period, the period commencing on the first calendar day of each month and ending on and including the last calendar day of such month; provided, however, that in no event shall any Pricing Rate Period end subsequent to the Repurchase Date.

“Principal Payment” shall mean, with respect to any Purchased Loans, any payment or prepayment of principal or any proceeds of redemption which are applied to principal and received by the Depository in respect thereof.

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

“Purchase Agreement” shall mean the agreement pursuant to which Seller acquired the Purchased Loan.

“Purchase Date” shall mean the date on which Eligible Loans are to be transferred by Seller to Buyer.

“Purchase Fee” shall have the meaning specified in Section 2(e).

“Purchase Price” shall mean, with respect to any Purchased Loans, the price at which such Purchased Loans are sold by Seller to Buyer on the applicable Purchase Date as set forth in the Side Letter or the Confirmation, as applicable.

“Purchased Loan” or “Purchased Loans” shall mean (i) with respect to any Transaction, the Eligible Loans sold by Seller to Buyer in such Transaction until such Eligible Loans are repurchased by Seller pursuant to this Agreement and (ii) with respect to the Transactions in general, all Eligible Loans sold by Seller to Buyer and any

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Additional Loans delivered by Seller to Buyer pursuant to Section 3(a) of this Agreement until (x) such Eligible Loans are repurchased by Seller pursuant to this Agreement or (y) such Additional Loans are re-delivered to Seller by Buyer pursuant to Section 3 of this Agreement.

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

“Purchased Loan File” shall mean the documents specified as the “Purchased Loan File” in Section 6(b), together with any additional documents and information required to be delivered to Buyer or its designee (including the Custodian) pursuant to this Agreement.

“Purchased Loan Schedule” shall mean a schedule of Purchased Loans attached to each Trust Receipt and Custodial Delivery containing information substantially similar to the Loan Information.

 “Remittance Date” shall mean the eleventh (11^th) calendar day of each month, or the next succeeding Business Day, if such calendar day shall not be a Business Day or such other day of the month as shall be agreed upon by both Buyer and Seller.

“Repurchase Date” shall mean the date on which Seller is to repurchase the Purchased Loans from Buyer, which shall be the date specified in the related Confirmation or determined by application of the provisions hereof.

“Repurchase Price” shall mean, with respect to any Purchased Loans as of any date, the price at which such Purchased Loans are to be transferred from Buyer to Seller upon termination of the related Transaction; such price will be determined in each case as the sum of the Outstanding Purchase Price of such Purchased Loans and the accrued but unpaid Price Differential with respect to such Purchased Loans as of the date of such determination.

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

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

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

“Seller” and “Sellers” shall mean Capital Trust, Inc., a Maryland corporation, and CT BSI Funding Corp., a Delaware corporation, individually and collectively as applicable and in all cases jointly and severally.

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“Servicing Agreement” has the meaning specified in Section 21(b).

“Servicing Records” has the meaning specified in Section 21(b).

“Side Letter” shall mean the letter dated as of February 15, 2006, by and between Buyer and Seller, relating to the pricing of Transactions hereunder.

“Standard & Poor’s” shall mean Standard & Poor’s Ratings Services, a Division of The McGraw-Hill Companies, Inc.

“Subsidiary” shall mean, with respect to Seller, an entity that is wholly owned or controlled by Seller but excluding any vehicles where Seller has less than a 50% equity interest.

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

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

“Table Funded Loan” shall mean a Purchased Loan, designated in the related Confirmation as a Table Funded Loan, where the Purchased Loan File is in the custody of the Bailee or enroute to the Custodian.

“Title Policy” shall have the meaning specified in paragraph 8 of the first section of Exhibit VI.

“Transaction Conditions Precedent” shall have the meaning specified in Section 2(b) of this Agreement.

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

“Trust Receipt” shall mean a trust receipt issued by Custodian to Buyer confirming the Custodian’s possession of certain Purchased Loan Files which are the property of and held by Custodian for the benefit of Buyer (or any other holder of such trust receipt).

“UCC” shall have the meaning specified in Section 5 of this Agreement.

“Underwriting Issues” shall mean, with respect to any New Loans as to which Seller intends to request a Transaction, all material information that has come to Seller’s attention that, based on the making of commercially reasonable inquiries and the exercise of commercially reasonable care and diligence under the circumstances, would be

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considered a materially “negative” factor (either separately or in the aggregate with other information), or a material defect in loan documentation or closing deliveries (such as any absence of any material Purchased Loan Document(s)), to a commercially reasonable institutional Buyer in determining whether to originate or acquire the New Loans in question.

“Undrawn Available Amount” shall mean the excess of the maximum drawable amount of a Purchased Loan (as agreed to by Buyer and Seller) over the aggregate Purchase Price of such Purchased Loan (calculated on an asset-by-asset basis).

“Whole Loan” shall mean a commercial mortgage loan or note secured by a first lien on multifamily and commercial real property.

2.             INITIATION; CONFIRMATION; REVOLVING TRANSACTIONS; TERMINATION; FEES

(a)           On or after the date hereof and prior to the Commitment Expiration Date and subject to the terms and conditions set forth in this Agreement (including, without limitation, the “Transaction Conditions Precedent” specified in Section 2(b) of this Agreement), an agreement to enter into a Transaction shall be made in writing at the initiation of Seller as provided below; provided, however, that entering into any Transaction shall be in Buyer’s sole and absolute discretion and that the aggregate Repurchase Price (excluding the Price Differential with respect to the Purchased Loans as of the date of determination) for all Transactions shall not exceed the Maximum Aggregate Purchase Price. Seller shall give Buyer written notice of each proposed Transaction and Buyer shall inform Seller of its determination with respect to any assets proposed to be sold to Buyer by Seller solely in accordance with Exhibit IX attached hereto. Buyer shall have the right to review all Eligible Loans proposed to be sold to Buyer in any Transaction and to conduct, at its own expense, its own due diligence investigation of such Eligible Loans as Buyer determines. Upon receipt of all Diligence Materials and other required documentation, Buyer shall complete its due diligence review and financial modeling with respect to the assets proposed to be sold to Buyer by Seller. Buyer shall be entitled to make a determination, in the exercise of its sole discretion, that it shall not purchase any or all of the assets proposed to be sold to Buyer by Seller, such determination to be made in accordance with Exhibit IX attached hereto. On the Purchase Date for the Transaction which shall be not less than one (1) Business Day following the approval of an Eligible Loan by Buyer in accordance with Exhibit IX hereto, the Purchased Loans shall be transferred to Buyer or its agent against the transfer of the Purchase Price in immediately available funds to an account designated by Seller. To the extent Buyer enters into a Transaction with Seller with respect to a Purchased Loan which is an Eligible Loan of the type described in Clause (iv) of the definition thereof (i.e., such Eligible Loan does not satisfy the characteristics described in clauses (i)-(iii) of the definition thereof), then such loan shall be deemed to be an Eligible Loan for all purposes of this Agreement.

(b)           Upon agreeing to enter into a Transaction hereunder, provided each of the Transaction Conditions Precedent (as hereinafter defined) shall have been satisfied (or waived by Buyer), Buyer shall promptly deliver to Seller a written confirmation substantially in the form of Exhibit I attached hereto of each Transaction (a “Confirmation”). In the absence of execution

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and delivery by Buyer of a Confirmation for a proposed Transaction, Buyer shall under no circumstance be deemed to have agreed to enter into such Transaction. Such Confirmation shall describe the Purchased Loan(s) (and, in this connection, shall set forth (a) the name of the borrower with respect to the related Purchased Loan, (b) a description (including the date) of the loan agreement or other document, agreement or instrument pursuant to which the related Purchased Loan is made or governed, and (c) the initial or then outstanding principal amount of the related Purchased Loan) which shall be the subject of the proposed Transaction, shall identify Buyer and Seller, and shall set forth (i) the Purchase Date, (ii) the Purchase Price for such Purchased Loan(s), (iii) the Repurchase Date, (iv) the Pricing Rate applicable to the Transaction and (v) any additional terms or conditions not inconsistent with this Agreement. Each Confirmation shall be deemed incorporated herein by reference with the same effect as if set forth herein at length. With respect to any Transaction, the Pricing Rate shall be determined initially on the Pricing Rate Determination Date applicable to the first Pricing Rate Period for such Transaction, and shall be reset on each Reset Date for the next succeeding Pricing Rate Period for such Transaction. Buyer or its agent shall determine, in accordance with the terms of the Side Letter, the Pricing Rate on each Pricing Rate Determination Date for the related Pricing Rate Period and notify Seller of such rate for such period on the Reset Date. For purposes of this Section 2(b), the “Transaction Conditions Precedent” shall be deemed to have been satisfied with respect to any proposed Transaction if:

(1)           no Default or Event of Default under this Agreement shall have occurred and be continuing as of the Purchase Date for such proposed Transaction;

(2)           Seller shall have certified to Buyer in writing the acquisition cost of such Purchased Loans (including therein reasonable supporting documentation required by Buyer, if any);

(3)           the representations and warranties made by Seller in any of the Transaction Documents shall be true and correct in respect of the Eligible Loan in question in all material respects as of the Purchase Date for such Transaction;

(4)           Buyer shall have received the Diligence Materials and completed to Buyer’s satisfaction its due diligence review and financial modeling with respect to the assets proposed to be sold to Buyer by Seller;

(5)           Buyer or the Custodian on behalf of Buyer shall have received the applicable Transaction documents and other documents and opinions specified in Section 6 of this Agreement. The Custodian shall have delivered a trust receipt satisfactory to Buyer no later than 3 p.m. on the Purchase Date;

(6)           Buyer shall have determined, in accordance with the applicable provisions of Section 2(a) of this Agreement, that the assets proposed to be sold to Buyer by Seller in such Transaction are Eligible Loans;

(7)           none of the following shall have occurred and be continuing:

(i)            an event or events shall have occurred resulting in the effective absence of a “securities market” for securities backed by mortgage loans; or

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(ii)           there shall have occurred a material adverse change in the “repo market” or comparable “lending market”.

If any of the events in this subparagraph (7) shall occur, Buyer agrees to reimburse Seller for the Purchase Fee on a pro rata basis;

(8)           the purchase by Buyer from Seller of the Purchased Loans which are not CDO Assets  shall be completed prior to the Commitment Expiration Date and the aggregate of the Purchase Prices for all Transactions shall not exceed the Maximum Aggregate Purchase Price; and

(9)           on or prior to the Purchase Date for the initial Transaction hereunder and from time to time thereafter as Buyer shall reasonably request, Seller shall have delivered to Buyer an opinion of Seller’s counsel, in form and substance reasonably acceptable to Buyer, addressing the matters set forth at Exhibit XII.

Notwithstanding anything to the contrary contained in this Agreement, in no event shall any Transaction hereunder be consummated until such time as Buyer has received all of the following, each in form and substance reasonably satisfactory to Buyer:  (i) the fully executed Custodial Agreement and related trust receipt; (ii) a Depository Agreement with respect to the Collection Account executed by the Depository; (iii) such legal opinions as Buyer may reasonably require; (iv) a Direction Letter, (v) Seller’s organizational documents, to the extent not delivered as of the date hereof, and (vi) a fully executed Side Letter and the Servicing Agreement.

(c)           Each Confirmation shall be executed by Seller and Buyer and, together with this Agreement, shall be conclusive evidence of the terms of the Transaction(s) covered thereby.

(d)           Seller may, at its option so long as an Event of Default shall not have occurred and be continuing, increase or decrease the Outstanding Purchase Price with respect to any Transaction subsequent to the Purchase Date; provided, however, that such action on the part of Seller shall not be permitted if it would create a Margin Deficit.

(e)           Seller shall pay Buyer on or prior to the initial Purchase Date a one-time, up front amount (the “Purchase Fee”) as set forth in the Side Letter; provided, however, that solely for purposes of calculating the Purchase Fee hereunder, the Maximum Committed Aggregate Purchase Price shall be deemed to be $75,000,000.

(f)            Each Transaction entered into between Buyer and Seller shall remain outstanding from the initial Purchase Date until the earlier of the Repurchase Date or the Commitment Expiration Date. The spread over LIBOR stated in the related Confirmation for each Transaction will not change for such Transaction until February 15, 2008.

(g)           Seller shall be entitled to terminate a Transaction and repurchase any or all of the Purchased Loans from Buyer on two (2) Business Days’ notice on any Business Day prior to the Repurchase Date (an “Early Repurchase Date”).

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If Seller terminates any Transaction pursuant to the preceding sentence, then, except as provided below, Seller shall pay to Buyer a termination fee (the “Exit Fee”) on the Early Repurchase Date. The Exit Fee shall be calculated as the product of (i) the Outstanding Purchase Price and (ii) the following amount:  (A) if the Early Repurchase Date is less than one year from the Repurchase Date, no Exit Fee will be payable, (B) if the Early Repurchase Date is at least one year but less than two years from the Repurchase Date, [****], and (C) if the Early Repurchase Date is at least two years from the Repurchase Date, [****]. Additionally:

(i)            No Exit Fee will be payable for the early repurchase of Purchased Assets resulting from (a) the sale of the underlying assets to Buyer, or any of its Affiliates, (b) the sale of the underlying assets to Buyer, or any of its Affiliates, under a Master Repurchase Agreement, (c) the sale of the underlying assets to a securitization vehicle for which Buyer, or any of its Affiliates, are acting in a lead or co-lead manager or co-manager role, (d) maturity of the underlying loan, (e) contractual defaults by either party to the underlying loan documents and agreements, (f) any paydowns, prepayments or defaults on the Purchased Assets, (g) any roll of a Purchased Asset into a new Transaction, (h) pay-offs resulting from a margin call or Market Value calculation dispute between Seller and Buyer including, without limitation, for a Margin Call in accordance with Section 13(ix) hereof, (i) Seller’s Termination of a Transaction in response to a demand by Buyer pursuant to Section 2(i) hereof or (j) in the event additional costs are imposed by Buyer pursuant to Section 2(j) hereof and Seller elects to terminate a transaction or transactions as a result thereof.

(ii)           Additional Purchased Assets acceptable to Buyer may be substituted and no Exit Fee will be payable in connection with such substitutions. No other substitutions will be exempt from payment of the Exit Fee.

(iii)          No Exit Fee will be payable for the early repurchase of any Purchased Asset which is a CDO I Asset or a CDO II Asset.

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

(h)           In the event that an Undrawn Available Amount exists at the end of any calendar quarter, Seller shall remit to Buyer a non-usage fee (the “Non-Usage Fee”) reasonably promptly upon written notice from Buyer to Seller that such Undrawn Available Amount exists. The Non-Usage Fee shall be calculated as the product of (i) the Undrawn Available Amount and (ii) [****] divided by 360 for each day such Undrawn Available Amount exists during such calendar quarter.

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

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

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

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

and the result of any of the foregoing is to increase the cost to Buyer, by an amount which Buyer deems to be material, of entering into, continuing or maintaining Transactions or to reduce any amount receivable under the Transaction Documents in respect thereof; then, in any such case, Seller shall promptly pay Buyer, upon its demand, any additional amounts necessary to compensate Buyer for such increased cost or reduced amount receivable which is actually incurred by Buyer. If Buyer becomes entitled to claim any additional amounts pursuant to this Section 2(i), it shall promptly notify Seller of the event by reason of which it has become so entitled. In the event that Seller elects to terminate a Transaction in response to a demand by Buyer pursuant to this Section 2(i), no Exit Fee with respect to such termination shall be due by Seller and the Purchase Fee relating to that Transaction shall be refunded on a pro rata basis. A certificate as to the calculation of any additional amounts payable pursuant to this subsection shall be submitted by Buyer to Seller and shall be conclusive and binding upon Seller in the absence of manifest error. This covenant shall survive the termination of this Agreement and the repurchase by Seller of any or all of the Purchased Loans.

(j)            If Buyer shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by Buyer or any corporation controlling Buyer with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof does or shall have the effect of reducing the rate of return on Buyer’s or such corporation’s capital as a consequence of its obligations hereunder to a level below that which Buyer or such corporation could have achieved but for such adoption, change or compliance (taking into consideration Buyer’s or such corporation’s policies with respect to capital adequacy) by an amount deemed by Buyer to be material, then from time to time, after submission by Buyer to Seller of a written request therefor, Seller shall pay to Buyer such additional amount or amounts as will compensate Buyer for such reduction which is actually incurred by Buyer. A certificate as to the calculation of any additional amounts payable pursuant to this subsection shall be submitted by Buyer to Seller and shall be conclusive and

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binding upon Seller in the absence of manifest error. This covenant shall survive the termination of this Agreement and the repurchase by Seller of any or all of the Purchased Loans.

(k)           Any provision hereof to the contrary notwithstanding, Seller shall pay all reasonable fees and expenses of Buyer (including all reasonable legal fees) associated with the purchase of any Eligible Loan under this Agreement and shall pay the fees and expenses of counsel to Buyer in connection with the preparation and execution of this Agreement and all other Transaction Documents.

(l)            Any provision hereof to the contrary notwithstanding, Transactions entered into hereunder shall be at the sole discretion of Buyer. Buyer is not required to enter into any Transaction and Buyer may, in its sole discretion, reject for inclusion in any Transaction any Eligible Loans offered for sale hereunder by Seller.

(m)          In the event that the Repurchase Date in respect of the CDO Assets occurs more than six (6) months after the related Purchase Date, the pricing terms set forth in the Side Letter relating to the CDO Assets shall no longer be applicable and the pricing terms set forth for all other Eligible Assets shall apply to such CDO Assets; provided, however, that such CDO Assets shall still be included in any calculation of the Maximum CDO Aggregate Purchase Price.

3.             MARGIN MAINTENANCE

(a)           If at any time the product of the aggregate Market Value of all Purchased Loans and Buyer’s Margin Ratio shall be less than the aggregate outstanding Repurchase Price for such Purchased Loans, (a “Margin Deficit”), then Buyer may by notice to Seller (a “Margin Call”) require Seller to transfer to Buyer (A) cash or (B) Additional Loans acceptable to Buyer in its sole and absolute discretion (such cash or Additional Loans paid by Seller to Buyer are herein referred to as “Additional Loans”), so that the sum of cash plus the product of (i) the aggregate Market Value of the Purchased Loans and such Additional Loans and (ii) Buyer’s Margin Ratio shall at least equal the aggregate outstanding Repurchase Price. Any cash received by Buyer pursuant to a Margin Call shall be applied to reduce the Outstanding Purchase Price. Seller’s failure to cure any Margin Deficit as required by the preceding sentence prior to expiration of one (1) Business Day after notice shall constitute an Event of Default under the Transaction Documents and shall entitle Buyer to exercise its remedies under Section 14 of this Agreement (including, without limitation, the liquidation remedy provided for in Section 14(iv) of this Agreement).

(b)           If any Margin Call is given by Buyer under Section 3(a) of this Agreement, Seller shall transfer cash or Additional Loans as provided in Section 3(a) by no later than one (1) Business Day after the giving of such notice. Notice required pursuant to Section 3(a) of this Agreement may be given by any means, including by telephone, telecopier or email transmission. The failure of Buyer on any one or more occasions, to exercise its rights under Section 3(a) of this Agreement shall not constitute a waiver of such default or change or alter the terms and conditions to which this Agreement is subject or limit the right of Buyer or Seller to do so at a later date. Buyer and Seller agree that any failure or delay by Buyer to exercise its rights under Section 3(a) of this Agreement shall not limit such party’s rights under this Agreement or otherwise existing by law or in any way create additional rights for such party.

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(c)           If at any time the product of the aggregate Market Value of all Purchased Loans and Buyer’s Margin Ratio shall be greater than the aggregate outstanding Repurchase Price for such Purchased Loans (a “Margin Excess”), then Seller may by notice to Buyer require Buyer to transfer to Seller (1) cash or (2) Purchased Loans that become subject to this Agreement as Additional Loans so that the product of (i) the aggregate Market Value of the Purchased Loans and such Additional Loans and (ii) Buyer’s Margin Ratio shall not exceed the aggregate outstanding Repurchase Price. In no event shall any Purchased Loans that did not become subject to this Agreement in the form of Additional Loans be released from the lien of this Agreement due to a Margin Excess.

(d)           If any notice is given by Seller under Section 3(c) of this Agreement, Buyer shall transfer cash or Additional Loans as provided in Section 3(c) by no later than one (1) Business Day after the giving of such notice. Notice required pursuant to Section 3(c) of this Agreement may be given by any means, including by telephone, telecopier or email transmission. Buyer and Seller agree that any failure or delay by Seller on any one or more occasions to exercise its rights under Section 3(c) of this Agreement shall not constitute a waiver of such rights or limit such party’s rights under Section 3(c) of this Agreement or otherwise existing by law or in any way create additional rights for such party. In addition, in no event shall Buyer be required to create a Margin Deficit in order to comply with Section 3(d) of this Agreement.

(e)           Any cash transferred to Buyer pursuant to Section 3(a) of this Agreement shall be used to reduce the Repurchase Price.

(f)            If any representation or warranty within this Agreement is in fact not accurate, then notwithstanding any of the knowledge qualifiers, Buyer has the right to mark the asset to market with such frequency as deemed prudent in accordance with this Section 3.

4.             INCOME PAYMENTS AND PRINCIPAL PAYMENTS

(a)           The Collection Account shall be established at the Depository concurrently with the execution and delivery of this Agreement by Seller and Buyer. Buyer shall have sole dominion and control over the Collection Account. Seller shall instruct the Servicer to deposit all Income in respect of the Purchased Loans, as well as any payments in respect of associated Hedging Transactions, into the Collection Account within one (1) Business Day of receipt. The amounts on deposit in the Collection Account shall be remitted by the Depository in accordance with the Depository Agreement and the applicable provisions of Sections 4(b), 4(c), 4(d), 4(e) and 16 of this Agreement. Seller shall direct the Servicer to remit all payments to Depository until such time as Buyer directs the borrower otherwise. If any payments are made by the borrower to Seller after the Purchase Date, or in the event that Seller receives any payments in respect of associated Hedging Transactions after the Purchase Date, Seller shall wire such payments to the Collection Account with the Depository within one (1) Business Day of receipt.

(b)           So long as an Event of Default hereunder shall not have occurred and be continuing and so long as such action would not result in the creation of a Margin Deficit, all Income received by the Depository in respect of the Purchased Loans and the associated Hedging Transactions shall be paid to Seller on the Business Day next following the Business Day on which such funds are deposited in the Collection Account.

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(c)           So long as no Event of Default shall have occurred and be continuing, and in the event that a Margin Deficit exists with respect to the Purchased Loans, then until Seller cures such Margin Deficit, all Income received by the Depository in respect of the Purchased Loans and the associated Hedging Transactions shall be applied by the Depository on the Business Day next following the Business Day on which such funds are deposited in the Collection Account as follows:

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

(ii)           second, to transfer cash to Buyer, so that the product of the aggregate Market Value of the Purchased Loans (including any Additional Loans) and Buyer’s Margin Ratio will at least equal the aggregate Outstanding Purchase Price; and

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

(d)           If an Event of Default shall have occurred and be continuing, all Income (including all Principal Payments) received by the Depository in respect of the Purchased Loans and the associated Hedging Transactions shall be applied by the Depository on the Business Day next following the Business Day on which such funds are deposited in the Collection Account as follows:

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

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

(iii)          third, to remit to Buyer an amount equal to any costs or expenses due and owing by Seller as of such Business Day; and

(iv)          fourth, to remit to Seller the remainder.

(e)           Buyer is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all amounts held by Buyer against any other obligations at any time owing to Buyer, or an Affiliate of Buyer to or for the credit or the account of Seller or a Subsidiary of Seller against any of or all the obligations of Seller now or hereafter existing under this Agreement irrespective of whether or not Buyer shall have made any demand under this Agreement (and without prior notice to Seller) and although such obligations may be unmatured, whereupon such obligations owing by Buyer or its Affiliates to Seller or its Subsidiaries shall, to the extent (and only to the extent) of such set off actually made by Buyer, be discharged. The rights of Buyer under this Section are in addition to other rights and remedies (including other rights of setoff) which Buyer may have.

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5.             SECURITY INTEREST

Buyer and Seller intend that all Transactions hereunder be sales to Buyer of the Purchased Loans and not loans from Buyer to Seller secured by the Purchased Loans. However, in the event any such Transaction is deemed to be a loan, Seller hereby pledges all of its right, title, and interest in, to and under and grants a first priority lien on, and security interest in, all of the following property, whether now owned or hereafter acquired, now existing or hereafter created and wherever located (collectively, the “Collateral”) to Buyer to secure the payment and performance of all amounts or obligations owing to Buyer pursuant to this Agreement and the related documents described herein:

(a)the Purchased Loans, including those identified in the Confirmations, Servicing Agreements, Servicing Records, Hedging Transactions, insurance relating to the Purchased Loans, and all “deposit accounts” (as defined in the UCC, including, without limitation, collection and escrow accounts) relating to the Purchased Loans;

(b)the Collection Account and all monies from time to time on deposit in the Collection Account;

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

(d)all “supporting obligations” and “letter of credit rights” as defined in the UCC relating to or constituting any and all of the foregoing;

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

(f)all proceeds of the foregoing.

Buyer’s security interest in the Collateral shall terminate only upon termination of a Transaction with respect to such Collateral under this Agreement and the documents delivered in connection herewith and therewith. For purposes of the grant of the security interest pursuant to this Section 5 of this Agreement, this Agreement shall be deemed to constitute a security agreement under the Uniform Commercial Code as in effect in any applicable jurisdiction (the “UCC”). Buyer shall have all of the rights and may exercise all of the remedies of a secured creditor under the UCC and the other laws of any applicable jurisdiction, including the State of New York. In furtherance of the foregoing, (i) Buyer shall cause to be filed as a protective filing with respect to the Purchased Loans and as a UCC filing with respect to the security interests granted in this Section 5 (i) a UCC financing statement in the form of Schedule 1-A attached hereto (to be filed in the filing office indicated therein), (ii) amendments to such UCC financing statement in the form of Schedule 1-B attached hereto and having attached to each such UCC financing statement amendment a description of the Purchased Loans which identifies the Purchased Loans by setting forth (a) the name of the borrower with respect to each Purchased

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Loan, (b) the loan agreement (including the date) or other document, agreement or instrument pursuant to which each Purchased Loan was made or is governed, and (c) the initial or then outstanding principal amount of each Purchased Loan, and (iii) such other UCC filings, in such locations as may be necessary to perfect and maintain perfection and priority of the outright transfer and the security interest granted hereby and, in each case, continuation statements and any amendments thereto (collectively, the “Filings”), and shall forward copies of such Filings to Seller upon completion thereof, and (b) Seller shall from time to time, at its own expense, deliver and cause to be duly filed all such further filings, instruments and documents and take all such further actions as may be necessary or desirable or as may be requested by Buyer with respect to the perfection and priority of the outright transfer of the Purchased Loans and the security interest deemed granted hereunder and in the Purchased Loans and the rights and remedies of Buyer with respect to the Purchased Loans (including the payments of any fees and taxes required in connection with the execution and delivery of the Agreement).

6.             PAYMENT, TRANSFER AND CUSTODY

(a)           On the Purchase Date for each Transaction, ownership of the Purchased Loans shall be transferred to Buyer or its designee (including the Custodian) against the simultaneous transfer of the Purchase Price in immediately available funds to an account of Seller specified in the Confirmation relating to such Transaction. Buyer shall have the right to request Seller to provide an officer’s certificate of Seller with respect to any copy of a document required to be delivered certifying that to its knowledge such represents a true and correct copy of the original.

(b)           On or before each Purchase Date, Seller shall deliver or cause to be delivered to Buyer or its designee the Custodial Delivery in the form attached hereto as Exhibit IV. In connection with each sale, transfer, conveyance and assignment of a Purchased Loan, on or prior to each Purchase Date with respect to such Purchased Loan, Seller shall deliver or cause to be delivered and released to the Custodian the following original documents (collectively, the “Purchased Loan File”), pertaining to each of the Purchased Loans identified in the Custodial Delivery delivered therewith:

With respect to each Purchased Loan which is a Whole Loan or with respect to a B Note a copy of the documents in (ii) – (xxiii) below to the extent the same exist and are available to Seller.

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

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(ii)           A copy of any guarantee executed in connection with the Mortgage Note (if any) together with an officer’s certificate of Seller certifying that such represents a true and correct copy of the original.

(iii)          Except with respect to MERS Purchased Loans, a copy of the Mortgage with evidence of recording thereon, or a copy thereof together with an officer’s certificate of Seller certifying that such represents a true and correct copy of the original and that such original has been submitted for recordation in the appropriate governmental recording office of the jurisdiction where the Property is located.

(iv)          Copies of all assumption, modification, consolidation or extension agreements with evidence of recording thereon, or copies thereof together with an officer’s certificate of Seller certifying that such represent true and correct copies of the originals and that such originals have each been submitted for recordation in the appropriate governmental recording office of the jurisdiction where the Property is located.

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

(vi)          Except with respect to MERS Purchased Loans, copies of all intervening assignments of mortgage with evidence of recording thereon, or copies thereof together with an officer’s certificate of Seller certifying that such represent true and correct copies of the originals and that such originals have each been submitted for recordation in the appropriate governmental recording office of the jurisdiction where the Property is located.

(vii)         Copies of any attorney’s opinion of title and abstract of title or the original mortgagee title insurance policy, or if the original mortgagee title insurance policy has not been issued, the irrevocable marked commitment to issue the same together with an officer’s certificate of Seller certifying that such represent true and correct copies of the originals.

(viii)        A copy of any security agreement, chattel mortgage or equivalent document executed in connection with the Purchased Loan together with an officer’s certificate of Seller certifying that such represent true and correct copies of the originals.

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(ix)           A copy of any assignment of leases and rents, if any, with evidence of recording thereon, or a copy thereof together with an officer’s certificate of Seller, certifying that such copy represents a true and correct copy of the original that has been submitted for recordation in the appropriate governmental recording office of the jurisdiction where the Property is located.

(x)            Copies of all intervening assignments of assignment of leases and rents, if any, or copies thereof, with evidence of recording thereon.

(xi)           A copy of the UCC financing statements, certified as true and correct by Seller, and all necessary UCC continuation statements with evidence of filing thereon or copies thereof certified by Seller to have been sent for filing, and UCC assignments from Seller to Buyer or its designee, which UCC assignments shall be in form and substance acceptable for filing.

(xii)          A copy of any environmental indemnity agreement (if any).

(xiii)         A copy of any omnibus assignment in blank (if any).

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

(xv)         A copy of the Mortgagor’s certificate or title affidavit (if any).

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

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

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

(xix)         A copy of any assignment of any interest rate cap agreement or other interest rate protection agreement entered into by the Mortgagor or its affiliates.

(xx)          A copy of the fully executed intercreditor agreement or any other agreement that allocates assets among the parties, if any.

(xxi)         A copy of any estoppel letter from the mortgagor.

(xxii)        A copy of any executed servicing agreement.

(xxiii)       A copy of the Purchase Agreement.

(xxiv)       A copy of any loan agreement.

(xxv)        any other documents or instruments necessary in the reasonable opinion of Buyer to consummate the sale of such Purchased Loan to Buyer

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subject to the terms of this Agreement or required to be delivered pursuant to the terms of this Agreement, or, if such Transaction is recharacterized as a secured financing, to create and perfect in favor of Buyer a valid perfected first priority security interest in such Purchased Loan.

With respect to each Purchased Loan which is a Mezzanine Loan:

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

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

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

(iv)          The original security agreement executed in connection with the Purchased Loan.

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

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

(vii)         Except with respect to MERS Purchased Loans, the assignment of Purchased Loan (in blank) sufficient to transfer to Buyer all of Seller’s rights, title and interest in and to the Purchased Loan.

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

(ix)A copy of the UCC financing statements, certified as true and correct by Seller, and all necessary UCC continuation statements with evidence of filing thereon or copies thereof certified by Seller to have been sent for filing, and

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UCC assignments from Seller to Buyer or its designee, which UCC assignments shall be in form and substance acceptable for filing.

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

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

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

(xiii)         If no original stock certificate is provided, evidence satisfactory to Buyer that the pledged ownership interests have been transferred to, or otherwise made subject to a first priority security interest in favor of, Seller.

(xiv)        Copies of all loan documents and related closing documents pertaining to the closing of the senior indebtedness incurred or owed by the owner of the real property with respect to which the borrower of the Mezzanine Loan has pledged its ownership interests, whether directly or indirectly through intermediate entities, including without limitation the organizational documents of such owner together with an officer’s certificate of Seller certifying that such represent true and correct copies of the originals.

(xv)         An assignment of any interest rate cap agreement or other interest rate protection agreement entered into by the borrower under the Purchased Loan or its affiliates with respect to the Purchased Loan.

(xvi)        the original servicing agreement, if any, executed in connection with the Purchased Loan.

(xvii)       A copy of the Purchase Agreement.

(xviii)      A copy of the borrower’s fee title insurance policy in respect of the mezzanine loan and a copy of the related survey.

With respect to each Purchased Loan which is of the type described in clause (iv) of the definition of Eligible Loan, any of the documentation referred to above in this Section 6(b) of this Agreement which is determined by Buyer to be necessary to effectuate the sale, transfer, conveyance and assignment of such Purchased Loan subject to the terms of this Agreement.

In addition, with respect to each Purchased Loan, Seller shall deliver an instruction letter from Seller to the servicer with respect to such Purchased Loan, instructing the servicer to remit all sums required to be remitted to the holder of such Purchased Loan under the loan documents to the Depository for deposit in the Collection Account.

From time to time, Seller shall forward to the Custodian additional original documents or additional documents evidencing any assumption, modification, consolidation or extension of a

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

(c)           Notwithstanding the provisions of Section 6(b) above requiring the execution of the Custodial Delivery and corresponding delivery of the Purchased Loan File to the Custodian on or prior to the related Purchase Date, with respect to each Transaction involving a Purchased Loan which is identified in the related Confirmation as a Table Funded Loan, Seller shall, in lieu of effectuating the delivery of all or a portion of the Purchased Loan File on or prior to the related Purchase Date, (i) deliver the Purchased Loan File (or the portion thereof not then delivered to the Custodian) to Buyer on or prior to the Purchase Date by means of delivery of the same to the Bailee, (ii) cause the Bailee to deliver to Seller, Buyer and the Custodian by facsimile on or before the related Purchase Date for the Transaction (A) a fully executed Bailee Agreement and Trust Receipt issued by the Bailee thereunder, (B) the promissory note(s) in favor of Seller evidencing the making of the Purchased Loan, with Seller’s endorsement of such note to Buyer or original stock certificate (if certificated), (C) such other components of the Purchased Loan File as Buyer may require on a case by case basis with respect to the particular Transaction and (D) evidence satisfactory to Buyer that all documents necessary to perfect Seller’s (and, by means of assignment to Buyer on the Purchase Date, Buyer’s) interest in the Collateral for the Purchased Loan, and (iii) not later than the third (3rd) Business Day following

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the Purchase Date, deliver to Buyer the Custodial Delivery and to the Custodian the entire Purchased Loan File.

(d)           Unless an Event of Default shall have occurred and be continuing, Seller shall exercise all voting, corporate and servicing rights with respect to the Purchased Loans. Upon the occurrence and during the continuation of an Event of Default, Buyer shall be entitled to exercise all voting and corporate rights with respect to the Purchased Loans without regard to Seller’s instructions (including, but not limited to, if an Act of Insolvency shall occur with respect to Seller, to the extent Seller controls or is entitled to control selection of the special servicer, Buyer may transfer such special servicing to an entity satisfactory to Buyer).

7.             SALE, TRANSFER, HYPOTHECATION OR PLEDGE OF PURCHASED LOANS

(a)           Title to all Purchased Loans shall pass to Buyer on the applicable Purchase Date, and Buyer shall have free and unrestricted use of all Purchased Loans. Nothing in this Agreement or any other Transaction Document shall preclude Buyer from engaging in repurchase or financing transactions with the Purchased Loans or otherwise selling, transferring, pledging, repledging, hypothecating, or rehypothecating the Purchased Loans, but no such transaction shall relieve Buyer of its obligations to transfer the Purchased Loans to Seller pursuant to Sections 2 or 11 of this Agreement or of Buyer’s obligation to credit or pay Income to, or apply Income to the obligations of, Seller pursuant to Section 4 hereof.

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

8.             SUBSTITUTION; SEGREGATION OF DOCUMENTS RELATING TO ELIGIBLE LOANS

(a)           Substitution of Eligible Loans is subject to satisfaction of the conditions to the acquisition of the Purchased Loans.

(b)           All documents relating to Purchased Loans in the possession of Seller shall be segregated from other documents and securities in its possession and shall be identified as being subject to this Agreement.

9.             REPRESENTATIONS

(a)           Buyer and each Seller represent and warrant, and shall on and as of the Purchase Date of any Transaction be deemed to represent and warrant, to the other that:

(i)            it is duly authorized to execute and deliver this Agreement, to enter into the Transactions contemplated hereunder and to perform its obligations hereunder and has taken all necessary action to authorize such execution, delivery and performance;

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(ii)           it will engage in such Transactions as principal (or, if agreed in writing in advance of any Transaction by the other party hereto, as agent for a disclosed principal);

(iii)          the person signing this Agreement on its behalf is duly authorized to do so on its behalf (or on behalf of any such disclosed principal);

(iv)          it has obtained all authorizations of any governmental body required in connection with this Agreement and the Transactions hereunder and such authorizations are in full force and effect; and

(v)           the execution, delivery and performance of this Agreement and the Transactions hereunder will not violate any law, ordinance, charter, by-law or rule applicable to it or any agreement by which it is bound or by which any of its assets are affected.

(b)           Each Seller represents and warrants to Buyer that as of the Purchase Date for the purchase of any Purchased Loans by Buyer from either Seller and any Transaction thereunder and as of the date of this Agreement and at all times while this Agreement and any Transaction thereunder is in full force and effect:

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

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

(iii)          Non-Contravention. Neither the execution and delivery of the Transaction Documents, nor consummation by either Seller of the transactions contemplated by the Transaction Documents (or any of them), nor compliance by either Seller with the terms, conditions and provisions of the Transaction Documents (or any of them) will conflict with or result in a breach of any of the terms, conditions or provisions of (i) the formation, organizational or other governing documents of Seller, (ii) any contractual obligation to which such party is now a party or the rights under which have been assigned to such party or the obligations under which have been assumed by such party or to which the assets of such party are subject or constitute a default thereunder, or result thereunder in

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the creation or imposition of any lien upon any of the assets of such party, other than pursuant to the Transaction Documents, (iii) any judgment or order, writ, injunction, decree or demand of any court applicable to such party, or (iv) any applicable Requirement of Law. Seller has all necessary licenses, permits and other consents from Governmental Authorities necessary to acquire, own and sell the Purchased Loans and for the performance of its obligations under the Transaction Documents.

(iv)          Litigation:  Requirements of Law. There is no action, suit, proceeding, investigation, or arbitration pending or, to the best knowledge of Seller, threatened against either Seller or any of its assets, nor is there any action, suit, proceeding, investigation, or arbitration pending or, to the best knowledge of Seller, threatened against either Seller which may result in any material adverse change in the business, operations, financial condition, properties, or assets of such Seller, or which may have an adverse effect on the validity of the Transaction Documents or the Purchased Loans or any action taken or to be taken in connection with the obligations of Seller under any of the Transaction Documents. Seller is in compliance in all material respects with all Requirements of Law. Seller is not in default in any material respect with respect to any judgment, order, writ, injunction, decree, rule or regulation of any arbitrator or Governmental Authority.

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

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

(vii)         No Default. No Default or Event of Default exists under or with respect to the Transaction Documents.

(viii)        Representations and Warranties Regarding Purchased Loans; Delivery of Purchased Loan File. Seller represents and warrants to Buyer that each Purchased Loan sold hereunder and each pool of Purchased Loans sold in a

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Transaction hereunder, as of each Purchase Date for a Transaction conform to the applicable representations and warranties set forth in Exhibit VI or Exhibit VII attached hereto, except as disclosed to Buyer in writing prior to the related Purchase Date for the Transaction in which such Purchased Loan is purchased by Buyer; provided, however, that Seller does not make the representations and warranties set forth in Exhibit VI or Exhibit VII with respect to any Purchased Loan originated by Buyer or any of its Affiliates. It is understood and agreed that the representations and warranties set forth in Exhibit VI or Exhibit VII hereto, if any, shall survive delivery of the respective Purchased Loan File to Buyer or its designee (including the Custodian). With respect to each Purchased Loan, the Mortgage Note or Mezzanine Note, the Mortgage (if any), the Assignment of Mortgage (if any) and any other documents required to be delivered under this Agreement and the Custodial Agreement for such Purchased Loan have been delivered to Buyer or the Custodian on its behalf. Seller or its designee is in possession of a complete, true and accurate Purchased Loan File with respect to each Purchased Loan, except for such documents the originals of which have been delivered to the Custodian. Any provision hereof to the contrary notwithstanding, Buyer’s remedy for a breach of this representation and warranty with respect to any Purchased Loan shall be to mark such Purchased Loan to market; provided, however, that in the event that a breach of this representation and warranty causes a breach of some other covenant of Seller hereunder (such as to maintain adequate margin), then Buyer shall be entitled to exercise all rights and remedies granted to it hereunder.

(ix)           Adequate Capitalization:  No Fraudulent Transfer. Each Seller has, as of such Purchase Date, adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations. Each Seller is generally able to pay, and as of the date hereof is paying, its debts as they come due. Neither Seller has become, nor is it presently, financially insolvent nor will such Seller be made insolvent by virtue of such Seller’s execution of or performance under any of the Transaction Documents within the meaning of the bankruptcy laws or the insolvency laws of any jurisdiction. Neither Seller has entered into any Transaction Document or any Transaction pursuant thereto in contemplation of insolvency or with intent to hinder, delay or defraud any creditor.

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

(xi)           Ownership. Each Seller is a publicly held corporation.

(xii)          Organizational Documents. Seller has delivered to Buyer certified copies of its formation, organizational and other governing documents, together with all amendments thereto.

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(xiii)         No Encumbrances. There are (i) no outstanding rights, options, warrants or agreements on the part of Seller for a purchase, sale or issuance, in connection with the Purchased Loans and (ii) no agreements on the part of Seller to issue, sell or distribute the Purchased Loans.

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

(xv)         Taxes. Each Seller has filed or caused to be filed all tax returns which to the knowledge of Seller would be delinquent if they had not been filed on or before the date hereof and has paid all taxes shown to be due and payable on or before the date hereof on such returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it and any of its assets by any Governmental Authority; no tax liens have been filed against any of Seller’s assets and, to Seller’s knowledge, no claims are being asserted with respect to any such taxes, fees or other charges.

(xvi)        ERISA. Seller does not have any Plans.

(xvii)       Judgments/Bankruptcy. Except as disclosed in writing to Buyer, there are no judgments in excess of $10,000,000 against either Seller unsatisfied of record or docketed in any court located in the United States of America and no Act of Insolvency has ever occurred with respect to Seller.

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

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

(xx)          Chief Executive Office. On the date of this Agreement, Seller’s chief executive office and principal place of business is located at 410 Park Avenue, 14^th Floor, New York, New York 10022. The location where Seller

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keeps its books and records, including all computer tapes and records relating to the Eligible Loans is its chief executive office.

(xxi)         Purchase Agreement Representations and Warranties. Seller has provided Buyer with a copy of the Purchase Agreement (to the extent applicable) containing representations and warranties made to Seller by the party designated as seller under such Purchase Agreement.

(xxii)        Loan to Value Ratio. The combined loan to value ratio of any Purchased Loan and any senior liens on a related Property shall not at any time exceed the requirements set forth in the Side Letter.

(c)           On the Purchase Date for any Transaction, Seller shall be deemed to have made all of the representations set forth in Section 9(b) of this Agreement as of such Purchase Date.

10.           NEGATIVE COVENANTS OF SELLER

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

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

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

(c)           create, incur or permit to exist any lien, encumbrance or security interest in or on the Purchased Loans, except as described in Section 5 of this Agreement;

(d)           consent or assent to any amendment or supplement to, or termination of, any Securitization Document, any note, loan agreement, mortgage or guaranty relating to the Purchased Loans or other material agreement or instrument relating to the Purchased Loans other than in accordance with Section 6(c);

(e)           use any of the Purchase Price for any Purchased Loan either directly or indirectly to acquire any security, as that term is defined in Regulation T of the Regulations of the Board of Governors of the Federal Reserve System, or take any action that might cause any Transaction to violate any regulation of the Federal Reserve Board;

(f)            after the occurrence and during the continuation of any Default or Event of Default, make any distribution, payment on account of, or set apart assets for any equity or ownership interest of Seller, or for a sinking or other analogous fund for the purchase, redemption, defeasance, retirement or other acquisition of any equity or ownership interest of Seller, whether now or hereafter outstanding, or make any other distribution in respect to any

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equity or ownership interest of Seller, either directly or indirectly, whether in cash or property or in obligations of Seller; provided, that the foregoing shall not restrict Seller from making distributions, from assets other than the Purchased Loans, required to maintain Seller’s status under the Code as a real estate investment trust (“REIT”) within the meaning of Section 856 through 860 of the Code, in the event Seller then qualifies as a REIT under the Code;

(g)           file a UCC financing statement, with respect to a Purchased Loan, or an amendment or termination statement with respect to a UCC financing statement with respect to a Purchased Loan, except as approved by Buyer in each instance;

(h)           enter into Transactions for which the Purchased Assets are CDO Assets which would cause the aggregate of the Purchase Prices for such CDO Assets to exceed the Maximum CDO Aggregate Purchase Price; or

(i)            enter into Transactions for which Purchased Assets other than the CDO Assets which would cause the aggregate of the Purchase Prices for such Assets to exceed the Maximum Committed Aggregate Purchase Price.

11.           AFFIRMATIVE COVENANTS OF SELLER

(a)           Seller shall promptly notify Buyer of any material adverse change in its business operations and/or financial condition; provided, however, that nothing in this Section 11 shall relieve Seller of its obligations under this Agreement.

(b)           Seller shall provide Buyer with copies of such documents as Buyer may reasonably request evidencing the truthfulness of the representations set forth in Section 9.

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

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

(e)           Seller shall promptly (and in any event not later than two (2) Business Days following receipt) deliver to Buyer (i) any notice of the occurrence of an event of default under or report received by or required to be delivered by Seller pursuant to the Securitization Documents; (ii) any notice of transfer of servicing under the Securitization Documents and (iii) any other information with respect to the Purchased Loans as may be reasonably requested by Buyer from time to time.

(f)            Seller will permit Buyer (at Buyer’s cost) or its designated representative to inspect Seller’s records with respect to the Purchased Loans and the conduct and operation of its business related thereto upon reasonable prior written notice from Buyer or its designated

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representative, at such reasonable times and with reasonable frequency, and to make copies of extracts of any and all thereof, subject to the terms of any confidentiality agreement between Buyer and Seller.

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

(h)           At any time from time to time upon request of Buyer, at the sole expense of Seller, Seller will promptly and duly execute and deliver such further instruments and documents and take such further actions as Buyer may reasonably request for the purposes of obtaining or preserving the full benefits of this Agreement including the first priority security interest granted hereunder and of the rights and powers herein granted (including, among other things, filing such Uniform Commercial Code financing statements as Buyer may reasonably request). If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note, other instrument, negotiable document, certificated security or chattel paper, such note, instrument, document, security or chattel paper shall be immediately delivered to Buyer, duly endorsed in a manner satisfactory to Buyer, to be held as Collateral pursuant to this Agreement, and the documents delivered in connection herewith. Seller hereby irrevocably authorizes Buyer at any time and from time to time to file in any filing office in any jurisdiction any initial financing statements and amendments thereto that (1) indicate the Collateral (i) as all Purchased Loans, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the UCC or such jurisdiction, or (ii) as being of an equal or lesser scope or with greater detail, and (2) contain any other information required by part 5 of Article 9 of the UCC for the sufficiency or filing office acceptance of any financing statement or amendment, including (i) whether Seller is an organization, the type of organization and any organization identification number issued to Seller, and (ii) in the case of a financing statement filed as a fixture filing or indicating Collateral as as-extracted collateral or timber to be cut, a sufficient description of real property to which the Collateral relates. Seller agrees to furnish any such information to Buyer promptly upon request. Seller also ratifies its authorization for Buyer to have filed in any jurisdiction any initial financing statements or amendments thereto if filed prior to the date hereof.

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

(i)            Within 60 days after the last day of the first three fiscal quarters in any fiscal year, Seller’s unaudited consolidated statements of income and statements of changes in cash flow for such quarter and balance sheets as of the end of such quarter (which statements and balance sheets shall separately break out the statements of income and changes in cash flow and balance sheets of

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Seller), in each case presented in Seller’s usual form as previously approved by Buyer;

(ii)           Within 120 days after the last day of its fiscal year, Seller’s audited consolidated statements of income and statements of changes in cash flow for such year and balance sheets as of the end of such year (which statements and balance sheets shall separately break out the statements of income and changes in cash flow and balance sheets of Seller), in each case presented in Seller’s usual form as previously approved by Buyer;

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

(iv)          within 60 days after the last day of each calendar month in any fiscal year, any and all property level financial information with respect to the Purchased Loans that is in the possession of Seller or an Affiliate, or such other information as may be mutually determined and agreed upon in writing by both Buyer and Seller, including, without limitation, rent rolls and income statements; and

(v)           Within 20 days after each month end, a monthly reporting package containing all information set forth on Exhibit III attached hereto.

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

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

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

(m)          Seller shall advise Buyer in writing of the opening of any new chief executive office or the closing of any such office and of any change in Seller’s name or the places where

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the books and records pertaining to the Purchased Loans are held not less than fifteen (15) Business Days prior to taking any such action.

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

(o)           Seller shall provide Buyer with access to operating statements, the occupancy status and other property level information, with respect to the Properties, plus any such additional reports as Buyer may reasonably request.

(p)           Seller hereby covenants and agrees that all interest and original issue discount  received or accrued with respect to the Purchased Loans shall be treated as portfolio interest within the meaning of Sections 871(h) and 881(c) of the Internal Revenue Code, as amended, and no amount will be required to be deducted from any remittance on the Purchased Loans on account of withholding tax  or otherwise.

(q)           Seller shall notify Buyer in writing of any proposed extension or material modification of any Purchased Loan not less than ten (10) Business Days prior to taking any such action and shall reasonably provide Buyer with any documentation required for such Purchased Loan to be modified or extended after any such action has been taken.

(r)            Seller shall pay all reasonable and actually incurred expenses (including the reasonable fees and expenses of counsel to Buyer) of Buyer in connection with the negotiation and documentation of this Agreement.

(s)           Seller shall be solely responsible for the fees and expenses of Custodian.

12.           [Reserved]

13.           EVENTS OF DEFAULT

Each of the following shall constitute an “Event of Default” under this Agreement:

(i)            either (A) the Transaction Documents shall for any reason not cause, or shall cease to cause, Buyer to be the owner free of any adverse claim of any of the Purchased Loans, or (B) if a Transaction is recharacterized as a secured financing, the Transaction Documents with respect to any Transaction shall for any reason cease to create a valid first priority security interest in favor of Buyer in any of the Purchased Loans;

(ii)           in the event that Buyer or any of its Affiliates is a party to any Hedging Transaction and a default or breach occurs thereunder on the part of Seller or any of its Subsidiaries which results in the early termination of such Hedging Transaction or otherwise is not cured within the cure period for such

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default or breach provided under the terms and conditions of such Hedging Transaction;

(iii)          failure of Buyer to receive no later than one (1) Business Day following any Remittance Date the accrued, but unpaid Price Differential (less any amount of such Price Differential previously paid by Seller to Buyer) (including, without limitation, in the event the Income paid or distributed on or in respect of the Purchased Loans is insufficient to make such payment and Seller does not make such payment or cause such payment to be made);

(iv)          failure of Buyer to receive the Repurchase Price for any Purchased Loans on the date the same is due under this Agreement (whether on the Repurchase Date, Early Repurchase Date or otherwise as provided herein);

(v)           failure of a Seller to make any other payment (i.e., a payment of a type not specified in any other clause of this Section 13) owing to Buyer which has become due, whether by acceleration or otherwise under the terms of this Agreement which failure is not remedied within the applicable period in the case of a failure pursuant to Section 3 or three Business Days in the case of any other such failure;

(vi)          any governmental, regulatory, or self-regulatory authority shall have taken any action to remove, limit, restrict, suspend or terminate the rights, privileges, or operations of a Seller, which suspension has a material adverse effect on the financial condition or business operations of a Seller, taken as a whole;

(vii)         Buyer shall have determined, in the exercise of its good faith business judgment, (A) that there has been a material adverse change in the corporate structure with respect to Seller (including, without limitation, any breach of the provisions of Section 12 hereof) or financial condition or creditworthiness, taken as a whole, of a Seller; (B) that a Seller will not meet or has breached any of its obligations under any Transaction pursuant to any of the Transaction Documents; or (C) that a material adverse change in the financial condition of a Seller may occur due to the pendency of a material legal action against a Seller;

(viii)        an Act of Insolvency shall have occurred with respect to a Seller;

(ix)           any (A) representation or warranty made by a Seller shall have been incorrect or untrue in any material respect when made or repeated or deemed to have been made or repeated; provided, however that Buyer’s remedy for a breach of a representation and warranty with respect to any Purchased Loan shall be to mark such Purchased Loan to market; or (B) covenant made by a Seller shall have been breached in a material respect;

(x)            a final judgment by any competent court in the United States of America for the payment of money in an amount greater than $10,000,000 shall

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have been rendered against a Seller, and remained undischarged or unpaid for a period ninety (90) days, during which period execution of such judgment is not effectively stayed;

(xi)           a Seller or Buyer shall breach or fail to perform any of the terms, covenants, obligations or conditions of this Agreement, and such breach or failure to perform is not remedied within twenty (20) days, provided that any failure to comply with Section 11(j) must be cured within 5 days (unless otherwise specifically referred to in this definition of “Event of Default”);

(xii)          a Seller shall have defaulted, such default having not previously occurred, (beyond applicable notice and cure period) or failed to perform under any other note, indenture, loan agreement, guaranty, swap agreement or any other contract, agreement or transaction to which it is a party, which default (A) involves the failure to pay an obligation in excess of $5,000,000, or (B) permits the acceleration of the maturity of obligations in excess of $5,000,000 by any other party to or beneficiary of such note, indenture, loan agreement, guaranty, swap agreement or other contract agreement or transaction, or Seller shall breach any covenant or condition, shall fail to perform, admits its inability to perform or state its intention not to perform its obligations under any Transaction or in respect of any repurchase agreement, reverse repurchase agreement, securities contract or derivative transaction with any party;

(xiii)        Seller at any time fails to maintain a ratio of Seller’s EBITDA to its interest expense coverage of more than 1.2x;

(xiv)        the Debt to Net Worth ratio of Seller at any time exceeds 30:1;

(xv)         the ratio of Modified Debt to Net Worth exceeds 10:1; or

(xvi)        the ratio of Modified Recourse Debt to Net Worth exceeds 5:1.

All of the financial tests and covenants in this Agreement will be measured based on the consolidated position of Capital Trust, Inc. and its Subsidiaries.

Any provision hereof to the contrary notwithstanding, an Event of Default on the part of either Seller hereunder shall be deemed to be an Event of Default by both Sellers.

14.           REMEDIES

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

(i)            At the option of Buyer, exercised by written notice to either Seller (which option shall be deemed to have been exercised, even if no notice is given, immediately upon the occurrence of an Act of Insolvency with respect to either Seller), the Repurchase Date for all Transactions hereunder (for both Sellers) shall, if it has not already occurred, be deemed immediately to occur (the date on

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which such option is exercised or deemed to have been exercised being referred to hereinafter as the “Accelerated Repurchase Date”).

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

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

(B)to the extent permitted by applicable law, the Pricing Rate with respect to each Transaction (determined as of the Accelerated Repurchase Date) shall be the Pricing Rate prior to the date of the Event of Default plus 200 basis points; and

(C)the Custodian shall, upon the request of Buyer, deliver to Buyer all instruments, certificates and other documents then held by the Custodian relating to the Purchased Loans,

(iii)          Unless Seller has tendered the Repurchase Price, upon the occurrence and during the continuance of an Event of Default which has not previously occurred with respect to Seller (with respect to which Buyer has not agreed to forbearance or accepted a workout arrangement), Buyer may (A) immediately sell, at a public or private sale at such price or prices as Buyer may deem satisfactory any or all of the Purchased Loans or (B) in its sole discretion elect, in lieu of selling all or a portion of such Purchased Loans, to give Seller credit for such Purchased Loans in an amount equal to the Market Value of such Purchased Loans against the aggregate unpaid Repurchase Price for such Purchased Loans and any other amounts owing by Seller under the Transaction Documents. Notwithstanding the definition of “Market Value” set forth in Section 1 herein, for purposes of this Section 14(iii), as to any Purchased Loan that has been delinquent for at least sixty (60) days, Buyer shall determine a market value for such Purchased Loan in good faith. The proceeds of any disposition of Purchased Loans effected pursuant to this Section 14(iii) shall be applied, (w) first, to the costs and expenses, including legal expenses, incurred by Buyer in connection with Seller’s default; (x) second, to the Repurchase Price; and (y) third, to any other outstanding obligation of Seller to Buyer or its Affiliates.

(iv)          The parties recognize that it may not be possible to purchase or sell all of the Purchased Loans on a particular Business Day, or in a transaction with the same purchaser, or in the same manner because the market for such Purchased Loans may not be liquid. In view of the nature of the Purchased Loans, the parties agree that liquidation of a Transaction or the Purchased Loans does not require a public purchase or sale and that a good faith private purchase or sale shall be deemed to have been made in a commercially reasonable manner.

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Accordingly, Buyer may elect, in its sole discretion, the time and manner of liquidating any Purchased Loans, and nothing contained herein shall (A) obligate Buyer to liquidate any Purchased Loans on the occurrence and during the continuance of an Event of Default or to liquidate all of the Purchased Loans in the same manner or on the same Business Day or (B) constitute a waiver of any right or remedy of Buyer or its Affiliates.

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

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

(vii)         Buyer may exercise any or all of the remedies available to Buyer immediately upon the occurrence of an Event of Default with respect to Seller (with respect to which Buyer has not agreed to forbearance or accepted a workout arrangement) and at any time during the continuance thereof. All rights and remedies arising under the Transaction Documents, as amended from time to time, are cumulative and not exclusive of any other rights or remedies which Buyer may have.

(viii)        Buyer may enforce its rights and remedies hereunder without prior judicial process or hearing, and Seller hereby expressly waives any defenses Seller might otherwise have to require Buyer to enforce its rights by judicial process. Seller also waives any defense Seller might otherwise have arising from the use of nonjudicial process, disposition of any or all of the Purchased Loans, or from any other election of remedies. Seller recognizes that nonjudicial remedies are consistent with the usages of the trade, are responsive to commercial necessity and are the result of a bargain at arm’s length.

(ix)           To the extent that applicable law imposes duties on Buyer to exercise remedies in a commercially reasonable manner, Seller acknowledges and agrees that it is not commercially unreasonable for Buyer (i) to fail to incur expenses reasonably deemed significant by Buyer to prepare the Purchased Loans for disposition or otherwise to complete raw material or work in process into

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finished goods or other finished products for disposition, (ii) to fail to obtain third party consents for access to Purchased Loans to be disposed of, or to obtain or, if not required by other law, to fail to obtain governmental or third party consents for the collection or disposition of the Purchased Loans to be collected or disposed of, (iii) to fail to exercise collection remedies against Persons obligated on the Purchased Loans or to remove liens on or any adverse claims against the Purchased Loans, (iv) to exercise collection remedies against Persons obligated on the Purchased Loans directly or through the use of collection agencies and other collection specialists, (v) to advertise dispositions of the Purchased Loans through publications or media of general circulation, whether or not the Purchased Loans are of a specialized nature, (vi) to contact other Persons, whether or not in the same business as Seller, for expressions of interest in acquiring all or any portion of such Purchased Loans, (vii) to hire one or more professional auctioneers to assist in the disposition of the Purchased Loans, whether or not the Purchased Loans are of a specialized nature, (viii) to dispose of the Purchased Loans by utilizing internet sites that provide for the auction of assets of the types included in the Purchased Loans or that have the reasonable capacity of doing so, or that match buyers and sellers of assets, (ix) to dispose of assets in wholesale rather than retail markets, (x) to disclaim disposition warranties, such as title, possession or quiet enjoyment, (xi) to purchase, at Buyer’s expense, insurance or credit enhancements to insure Buyer against risks of loss, collection or disposition of the Purchased Loans or to provide to Buyer a guaranteed return from the collection or disposition of the Purchased Loans, or (xii) to the extent deemed appropriate by Buyer, to obtain the services of other brokers, investment bankers, consultants and other professionals to assist Buyer in the collection or disposition of any of the Purchased Loans. Seller acknowledges that the purpose of this Section 14(ix) is to provide non-exhaustive indications of what actions or omissions by Buyer would not be commercially unreasonable in Buyer’s exercise of remedies against the Purchased Loans and that other actions or omissions by Buyer shall not be deemed commercially unreasonable solely on account of not being indicated in this Section 14(ix). Without limitation upon the foregoing, nothing contained in this Section 14(ix) shall be construed to grant any rights to Seller or to impose any duties on Buyer that would not have been granted or imposed by this Agreement or by applicable law in the absence of this Section 14(ix).

(x)            Buyer shall not be required to make any demand upon, or pursue or exhaust any of its rights or remedies against, Seller, any other obligor, guarantor, pledgor or any other Person with respect to the payment of the obligations of Seller hereunder or to pursue or exhaust any of its rights or remedies with respect to any Purchased Loans therefor or any direct or indirect guarantee thereof. Buyer shall not be required to marshal the Purchased Loans or any guarantee of the obligations of Seller hereunder or to resort to the Purchased Loans or any such guarantee in any particular order, and all of its rights hereunder or under any other document or instrument executed in connection herewith shall be cumulative. To the extent it may lawfully do so, Seller absolutely and irrevocably waives and relinquishes the benefit and advantage of, and covenants

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not to assert against Buyer, any valuation, stay, appraisement, extension, redemption or similar laws and any and all rights or defenses it may have as a surety now or hereafter existing which, but for this provision, might be applicable to the sale of any Purchased Loans made under the judgment, order or decree of any court, or privately under the power of sale conferred by this Agreement, or otherwise.

(xi)           Seller hereby appoints Buyer as attorney-in-fact of Seller for the purpose, after the occurrence and during the continuance of an Event of Default, of carrying out the provisions of this Agreement and taking any action and executing or endorsing any instruments that Buyer may deem necessary or advisable to accomplish the purposes hereof, which appointment as attorney-in-fact is irrevocable and coupled with an interest.

15.           NOTICES AND OTHER COMMUNICATIONS

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

if to Buyer:	Bear, Stearns Funding, Inc.
	383 Madison Avenue
	New York, New York 10179
	Attn:	Eileen Albus
	Telephone:	(212) 272-7502
	Fax:	(212) 272-2053
with a copy to:
	Sidley Austin LLP
	787 Seventh Avenue
	New York, New York 10019
	Attn:	Michael P. Peck
	Telephone:	(212) 839-5576
	Fax:	(212) 839-5599

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if to Seller:		Capital Trust, Inc.
		410 Park Avenue
		14th Floor
		New York, New York 10022
		Attn:	Geoffrey Jervis
		Telephone:	(212) 655-0247
		Fax:	(212) 655-0044
with a copy to:
		Paul, Hastings, Janofsky & Walker LLP
		75 East 55th Street
		New York, New York 10022
		Attn:	Robert J. Grados, Esq.
		Telephone:	(212) 318-6923
		Fax:	(212) 230-7830
if to CT BSI Funding Corp.:
	CT BSI Funding Corp.
	410 Park Avenue
	14th Floor
	New York, New York 10022
	Attn:		Geoffrey Jervis
	Telephone:		(212) 655-0247
	Fax:		(212) 655-0044
with a copy to:
	Paul, Hastings, Janofsky & Walker LLP
	75 East 55th Street
	New York, New York 10022
	Attn:		Robert J. Grados, Esq.
	Telephone:		(212) 318-6923
	Fax:		(212) 230-7830

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

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16.           NON-ASSIGNABILITY

(a)           The rights and obligations of the parties under the Transaction Documents and under any Transaction shall not be assigned by either party without the prior written consent of the other party; provided, however, that Buyer may assign its rights and obligations under the Transaction Documents and/or under any Transaction to an Affiliate, without the prior written consent of Seller so long as that Affiliate has a Net Worth at least equal to that of Buyer as of the Purchase Date; and provided further, however, that upon the occurrence and during the continuation of an Event of Default, the non-defaulting party shall have an unfettered right to assign its rights and obligations without the consent of the defaulting party.

(b)           The transferring party pursuant to subsection (a) above shall be responsible for the payment of all fees and expenses relating to such transfer of its rights and obligations.

(c)           Buyer shall be entitled to issue one or more participation interests with respect to any or all of the Transactions.

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

17.           GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL

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

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

(c)           Each party hereby irrevocably waives, to the fullest extent they may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding and irrevocably consent to the service of any summons and complaint and any other process by the mailing via certified mail, return receipt requested of copies of such process to them at their respective address specified herein. Each party hereby agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Section 17 shall affect the right of Buyer to serve legal process in any other manner permitted by law or affect the right of Buyer to bring any action or proceeding against Seller or its property in the courts of other jurisdictions.

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

18.           NO RELIANCE

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

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

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

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

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

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

19.           INDEMNITY

Seller hereby agrees to indemnify Buyer, Buyer’s designee and each of its officers, directors, employees and agents (“Indemnified Parties”) from and against any and all liabilities, obligations, actual, out-of-pocket losses, actual, out-of-pocket damages, actual, out-of-pocket penalties, actions, judgments, suits, taxes (including stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Purchased Loans or in connection with any of the transactions contemplated by this Agreement and the documents delivered in connection herewith, other than income taxes, franchise taxes or other similar taxes of Buyer), actual, out-of-pocket fees, actual, out-of-pocket costs, actual, out-of-pocket expenses

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(including reasonable attorneys’ fees and disbursements) or disbursements (all of the foregoing, collectively “Indemnified Amounts”) which may at any time (including, without limitation, such time as this Agreement shall no longer be in effect and the Transactions shall have been repaid in full) be imposed on or asserted against any Indemnified Party in any way whatsoever arising out of or in connection with, or relating to, this Agreement or any Transactions thereunder or any action taken or omitted to be taken by any Indemnified Party under or in connection with any of the foregoing; provided, that Seller shall not be liable for Indemnified Amounts resulting from the gross negligence or willful misconduct of any Indemnified Party. Without limiting the generality of the foregoing, Seller agrees to hold Buyer harmless from and indemnify Buyer against all Indemnified Amounts with respect to all Purchased Loans relating to or arising out of any violation or alleged violation of any environmental law, rule or regulation or any consumer credit laws, including without limitation ERISA, the Truth in Lending Act and/or the Real Estate Settlement Procedures Act, that, in each case, results from anything other than Buyer’s gross negligence or willful misconduct. In any suit, proceeding or action brought by Buyer in connection with any Purchased Loan for any sum owing thereunder, or to enforce any provisions of any Purchased Loan, Seller will save, indemnify and hold Buyer harmless from and against all expense (including, without limitation, reasonable attorneys’ fees and expenses), loss or damage suffered by reason of any defense, set-off, counterclaim, recoupment or reduction or liability whatsoever of the account debtor or obligor thereunder, arising out of a breach by Seller of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to or in favor of such account debtor or obligor or its successors from Seller and the enforcement or the preservation of Buyer’s rights under this Agreement or any Transaction contemplated hereby, including without limitation the reasonable fees and disbursements of its counsel. Seller hereby acknowledges that, the obligation of Seller hereunder is a recourse obligation of Seller.

20.           DUE DILIGENCE

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

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access to any and all documents, records, agreements, instruments or information relating to such Purchased Loans in the possession, or under the control, of Seller.

21.           SERVICING

(a)           Notwithstanding the purchase and sale of the Purchased Loans hereby, Seller shall continue to cause the Purchased Loans to be serviced for the benefit of Buyer and, if Buyer shall exercise its rights to pledge or hypothecate the Purchased Loans prior to the Repurchase Date pursuant to Section 7, Buyer’s assigns. Seller shall service or cause the servicer to service the Purchased Loans in accordance with Accepted Servicing Practices approved by Buyer and maintained by other prudent mortgage lenders with respect to mortgage loans similar to the Purchased Loans.

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

(c)           Seller shall provide to Buyer on a monthly basis, or more frequently at the request of Buyer, any and all information that is pertinent or related to the assessment and valuation of loans that are included in Purchased Loans, as or when received or available from Seller. Such information includes, but is not limited to, property operating statements, rent rolls, financial statements and other financial reports for each Purchased Loan, as well as any other information or events affecting the interests in or valuation of the Purchased Loans.

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

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

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

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(g)           To the extent permitted under the servicing agreement the payment of servicing fees shall be subordinate to payment of amounts outstanding under any Transaction and this Agreement.

(h)           The servicer and Seller may not enter into any modification or extension agreement without the written consent or approval of Buyer.

22.           WIRE INSTRUCTIONS

(a)           Any amounts to be transferred by Buyer to either Seller hereunder shall be sent by wire transfer in immediately available funds to

(i) the account of Seller at:

Bank: JPMorgan Chase Bank

Acct. No.: 230254632

ABA #: 021-000021

Acct. Name: Capital Trust, Inc. Corporate Account

Attn: John Warch (212) 655-0225;

or (ii) to an account designated by Seller in writing, provided that such designation is made by at least two (2) Authorized Representatives of Seller.

(b)           Any amounts to be transferred by Seller to Buyer hereunder shall be sent by wire transfer in immediately available funds to the account of Buyer at:

Acct.:  For the A/C of Bear Stearns MBS, FNB Chicago
Acct. No.:  5801230
ABA No.:  071000013
Attn:  Eileen Albus

(c)           Amounts other than the Purchase Price for a Purchased Loan received after 3:00 p.m., New York City time, on any Business Day shall be deemed to have been paid and received on the next succeeding Business Day.

23.           CONFIDENTIALITY

Each of the parties acknowledges that this Agreement, the Custodial Agreement and the terms of each Transaction (including information disclosed in due diligence) are confidential in nature and each such party agrees that, unless an Event of Default shall occur and be continuing, or as otherwise directed by a court or regulatory entity of competent jurisdiction or as may be required by federal or state law (which determination as to federal or state law shall be based upon written advice of counsel), it shall limit the distribution of such documents and the disclosure of such information to its officers, employees, attorneys, accountants, investors and agents as required in order to conduct its business with the other parties hereto. Notwithstanding the foregoing, Buyer shall be permitted to provide a copy of this Agreement and the Custodial Agreement, and shall be permitted to describe the terms of each Transaction, in connection with the re-hypothecation of the Eligible Loans subject to the terms of this Agreement. This Section

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shall not apply to information which has entered the public domain through means other than a breach of the foregoing covenant by the party seeking to distribute such documents or which the other party has given written permission to disclose.

Seller hereby acknowledges and agrees that any and all information concerning Seller (the “Information”) that is furnished by Seller to Buyer and any of its Affiliates may be used and relied upon by any other of Buyer’s Affiliates without any liability to Seller to the extent such information is obtained by Buyer or an Affiliate from another of its Affiliates without any liability to Seller, provided, however, that no Information will be used by a Buyer or an Affiliate in violation of federal or state securities laws.

Seller further acknowledges and agrees that any confidentiality agreement that may now or hereafter exist between Seller and Buyer or an Affiliate shall not preclude the disclosure of any Information between or among Buyer and any of its Affiliates.

24.           SINGLE TRANSACTION

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

25.           JOINT AND SEVERAL LIABILITY OF SELLERS

Each Seller agrees to be jointly and severally liable for the obligations of each Seller hereunder and all representations, warranties, covenants and agreements made by or on behalf of each Seller in the Agreement or in any exhibit hereto or any document, instrument or certificate delivered pursuant hereto shall be deemed to have been made by each Seller, jointly and severally. Each Seller further agrees that, notwithstanding any right of Buyer to investigate fully the affairs of a Seller and notwithstanding any knowledge of facts determined or determinable by Buyer, Buyer has the right to rely fully on the representations, warranties, covenants and agreements of each Seller contained in the Agreement and upon the accuracy of any document, instrument, certificate or exhibit given or delivered hereunder. The joint and several obligation of each Seller hereunder is absolute, unconditional, irrevocable, present and continuing and, with respect to any payment to be made to Buyer, is a guaranty of payment (and not of collectability) and is in no way conditional or contingent upon the continued existence of the other Sellers and is not and will not be subject to any setoffs. Any notice or other communication provided to a Seller pursuant hereto shall be deemed to have been given each Seller and failures to be sent any

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notice or communication contemplated hereby shall not relieve a Seller from its joint and several liability for the obligations of each Seller hereunder.

26.           NO WAIVERS, ETC.

No express or implied waiver of any Event of Default by either party shall constitute a waiver of any other Event of Default and no exercise of any remedy hereunder by any party shall constitute a waiver of its right to exercise any other remedy hereunder. No modification or waiver of any provision of this Agreement and no consent by any party to a departure herefrom shall be effective unless and until such shall be in writing and duly executed by both of the parties hereto. Without limitation on any of the foregoing, the failure to give a notice pursuant to Section 3(a) hereof will not constitute a waiver of any right to do so at a later date.

27.           USE OF EMPLOYEE PLAN ASSETS

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

(b)           Subject to the last sentence of subsection (a) of this Section 27, any such Transaction shall proceed only if Seller furnishes or has furnished to Buyer its most recent available audited statement of its financial condition and its most recent subsequent unaudited statement of its financial condition.

(c)           By entering into a Transaction pursuant to this Section 27, Seller shall be deemed to represent to Buyer that since the date of Seller’s latest such financial statements, there has been no material adverse change in Seller’s financial condition which Seller has not disclosed to Buyer which would affect, in any material respect, Seller’s ability to perform its obligations hereunder.

28.           NO PERSONAL LIABILITY; FURTHER ASSURANCES; MISCELLANEOUS

(a)           None of the officers, members, shareholders or directors of Seller shall be liable for the payment or performance of Seller hereunder.

(b)           Seller agrees that, from time to time upon the prior written request of Buyer, it shall (i) execute and deliver such further documents, provide such additional information and reports and perform such other acts as Buyer may reasonably request in order to insure compliance with the provisions hereof (including, without limitation, compliance with the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot Act) Act of 2001) and to fully effectuate the purposes of this Agreement and (ii) provide such opinions of counsel concerning matters relating to this Agreement as Buyer may reasonably request; provided, however, that nothing in this Section 28(b)

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shall be construed as requiring Buyer to conduct any inquiry or decreasing Seller’s responsibility for its statements, representations, warranties or covenants hereunder.

(c)           Time is of the essence under the Transaction Documents and all Transactions thereunder and all references to a time shall mean New York time in effect on the date of the action unless otherwise expressly stated in the Transaction Documents.

(d)           All rights, remedies and powers of Buyer hereunder and in connection herewith are irrevocable and cumulative, and not alternative or exclusive, and shall be in addition to all other rights, remedies and powers of Buyer whether under law, equity or agreement. In addition to the rights and remedies granted to it in this Agreement, Buyer shall have all rights and remedies of a secured party under the Uniform Commercial Code.

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

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

(g)           Without limiting the rights and remedies of Buyer under the Transaction Documents, Seller shall pay Buyer’s reasonable out-of-pocket costs and expenses, including reasonable fees and expenses of accountants, attorneys and advisors, incurred in connection with the preparation, negotiation, execution and consummation of, and any amendment, supplement or modification to, the Transaction Documents and the Transactions thereunder up to $75,000. Seller agrees to pay Buyer on demand all costs and expenses (including reasonable expenses for legal services of every kind) of any subsequent enforcement of any of the provisions hereof, or of the performance by Buyer of any obligations of Seller in respect of the Purchased Loans, or any actual or attempted sale, or any exchange, enforcement, collection; compromise or settlement in respect of any of the Purchased Loans and for the custody, care or preservation of the Purchased Loans (including insurance costs) and defending or asserting rights and claims of Buyer in respect thereof, by litigation or otherwise. In addition, Seller agrees to pay Buyer on demand all reasonable costs and expenses (including reasonable expenses for legal services) incurred in connection with the maintenance of the Collection Account and registering the Purchased Loans in the name of Buyer or its nominee. All such expenses shall be recourse obligations of Seller to Buyer under this Agreement.

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

(i)            The parties acknowledge and agree that although they intend to treat each Transaction as a sale of the Purchased Loans, in the event that such sale shall be recharacterized as a secured financing, this Agreement shall also serve as a security agreement with respect to Buyer’s rights in the Collateral. In order to secure and to provide for the prompt and

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unconditional repayment of the Repurchase Price and the performance of its obligations under this Agreement, Seller hereby pledges to Buyer and hereby grants to Buyer a first priority security interest in all of its rights in the Collateral referred to in Section 5 hereof. Buyer may without Seller’s execution, consent or approval, and Seller hereby covenants that it shall at Buyer’s request duly execute any Form UCC financing statements as may be required by Buyer in order to perfect its security interest created hereby in such rights and obligations granted above, it being agreed that Seller shall pay any and all fees required to file such financing statements.

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

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

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

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

(n)           Any notice, acknowledgment, statement or certificate (including, without limitation, any Confirmation) given by Buyer to any Seller shall be effective as, and shall be deemed to be, a notice, acknowledgment, statement or certificate given to each and every Seller. Buyer may, without necessity of any inquiry, rely solely upon any notice, acknowledgment, statement or certificate of any of (1) any Seller or (2) any authorized representative of Seller set forth on Exhibit II or otherwise designated by any Seller from time to time, as constituting the joint and several statement and certificate of Seller fully authorized by Seller. Any disbursements of funds to Seller provided for in Section 4 of this Agreement or otherwise in this Agreement or the Transaction Documents shall be deemed properly made to Seller if disbursed to any Seller or its designee.

29.           DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS

The parties acknowledge that they have been advised that:

(a)           in the case of Transactions in which one of the parties is a broker or dealer registered with the Securities and Exchange Commission (“SEC”) under Section 15 of the Securities Exchange Act of 1934 (“1934 Act”), the Securities Investor Protection Corporation

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has taken the position that the provisions of the Securities Investor Protection Act of 1970 (“SIPA”) do not protect the other party with respect to any Transaction hereunder;

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

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

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the 15th day of February, 2006.

BUYER:
BEAR, STEARNS FUNDING, INC.
By:	/s/ Michael A. Forastiere
Name:  Michael A. Forastiere
Title: Vice President
SELLER:
CAPITAL TRUST, INC.
(jointly and severally with the other Seller)
By:	/s/ Geoffrey G. Jervis
Name:  Geoffrey G. Jervis
Title:  Chief Financial Officer
SELLER:
CT BSI FUNDING CORP.
(jointly and severally with the other Seller)
By:	/s/ Geoffrey G. Jervis
Name:  Geoffrey G. Jervis
Title:  Chief Financial Officer

EXHIBITS

EXHIBIT I	Form of Confirmation
EXHIBIT II	Authorized Representatives of Sellers
EXHIBIT III	Monthly Reporting Package
EXHIBIT IV	Form of Custodial Delivery
EXHIBIT V	Form of Power of Attorney
EXHIBIT VI	Representations and Warranties Regarding Individual Purchased Loans
EXHIBIT VII	Representations and Warranties Regarding Individual Mezzanine Loan
EXHIBIT VIII	Loan Information
EXHIBIT IX	Transaction Procedure
EXHIBIT X	[RESERVED]
EXHIBIT XI	[RESERVED]
EXHIBIT XII	Form of Opinion of Counsel to Sellers
EXHIBIT XIII	Form of Bailee Agreement
SCHEDULE 1-A	Form of UCC Financing Statement
SCHEDULE 1-B	Form of UCC Financing Statement Amendment

EXHIBIT I

CONFIRMATION STATEMENT
BEAR, STEARNS FUNDING, INC.

Ladies and Gentlemen:

Bear, Stearns Funding, Inc., is pleased to deliver our written Confirmation of our agreement to enter into the Transaction pursuant to which Bear, Stearns Funding, Inc., shall purchase from you the Purchased Loans identified in the Amended and Restated Master Repurchase Agreement between Bear, Stearns Funding, Inc. (the “Buyer”) and Capital Trust, Inc., a Maryland corporation, and CT BSI Funding Corp., a Delaware corporation (each a “Seller” with joint and several liability for the obligations of the other Seller), dated as of February 15, 2006 (the “Agreement”; capitalized terms used herein without definition have the meanings given in the Agreement), as follows below and on the attached Schedule 1 :

Purchase Date:
Purchased Loans:	As identified on attached Schedule 1
Aggregate Principal Amount of Purchased Loans	As identified on attached Schedule 1
Repurchase Date:
Purchase Price:	$
Pricing Rate:	one month LIBOR plus            % [             ]
Buyer’s Margin Ratio:
Original Principal Amount:
Current Principal Amount:
Original Market Value:
Due Date:
Governing Agreements:	[             ]
Name and address for communications:	Buyer:
		Attention: Telephone: Telecopy:

I-1

Seller:
[Capital Trust, Inc.] [CT BSI Funding Corp.]
	Attention: Telephone: Telecopy:

BEAR, STEARNS FUNDING, INC.

By:

Name:

Title:

AGREED AND ACKNOWLEDGED:
	,	a
By:
Its:

I-2

Schedule 1 to Confirmation Statement

Purchased Loans:

Aggregate Principal Amount:

I-3

EXHIBIT II

AUTHORIZED REPRESENTATIVES OF SELLERS

Name	Specimen Signature
John R. Klopp
Stephen D. Plavin
Geoffrey G. Jervis
Jeremy FitzGerald
Peter S. Ginsberg
Thomas C. Ruffing
John E. Warch

II-1

EXHIBIT III

MONTHLY REPORTING PACKAGE

Name:

Loan Number:

Borrower Name:

Property Address:

Property City:

Property State:

Property County:

Property Zip:

Lien Position:

Adjustment Type:

Property Type:

Occupancy:

Loan Purpose:

Original Coupon:

Current Coupon:

Original Balance:

Current Balance:

Outstanding Senior Debt**:

Original Accrued P&I:

Current Accrued Interest 3/31/04:

Origination Date:

First Payment Date:

Maturity Date:

Date Next Due:

Original Term:

Original Amortization Term:

Product Type:

Balloon Flag:

Original LTV:

Combined Current LTV**:

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Original Appraisal:

Original Spread:

Payment Frequency:

Servicing Fee:

Prepayment Penalty Period:

Prepayment Penalty Description:

Index Type:

Rounding Factor:

Convertible:

New Amortization Flag:

Negative Amortization Cap:

Periodic Payment Cap:

Margin:

Maximum Life Rate:

Minimum Life Rate:

Initial Periodic Rate Cap:

Subsequent Periodic Rate Cap:

First Rate Adjustment Date:

First Payment Adjustment Date:

Next Rate Adjustment Date:

Next Payment Adjustment Date:

Rate Adjustment Period:

Payment Adjustment Period:

III-2

EXHIBIT IV

FORM OF CUSTODIAL DELIVERY

On this          of         , 200    , Capital Trust, Inc., a Maryland corporation, and CT BSI Funding Corp., a Delaware corporation (each a “Seller” with joint and several liability for the obligations of the other Seller), as Sellers under that certain Amended and Restated Master Repurchase Agreement, dated as of February 15, 2006 (the “Repurchase Agreement”) between Seller and Bear, Stearns Funding, Inc. (“Buyer”), does hereby deliver to Deutsche Bank Trust Company Americas, as custodian (“Custodian”), as custodian under that certain Custodial Agreement, dated as of February 15, 2006, between Buyer and Custodian, the Purchased Loan Files with respect to the Purchased Loans to be purchased by Buyer pursuant to the Repurchase Agreement, which Purchased Loans are listed on the Purchased Loan Schedule attached hereto and which Purchased Loans shall be subject to the terms of the Custodial Agreement on the date hereof.

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

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

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

	,	a
By:
Its:

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EXHIBIT V

FORM OF POWER OF ATTORNEY

“Know All Men by These Presents, that Capital Trust, Inc., a Maryland corporation, and CT BSI Funding Corp., a Delaware corporation (each a “Seller” with joint and several liability for the obligations of the other Seller), does each hereby appoint Bear, Stearns Funding, Inc. (“Buyer”), its attorney-in-fact to act in Seller’s name, place and stead in any way which Seller could do with respect to (i) the completion of the endorsements of the Mortgage Notes and the Assignments of Mortgages and the Mezzanine Notes, (ii) the recordation of the Assignments of Mortgages and (iii) the enforcement of Seller’s rights under the Purchased Loans purchased by Buyer pursuant to the Amended and Restated Master Repurchase Agreement, dated as of February 15, 2006 (the “Amended and Restated Master Repurchase Agreement”), between Seller and Buyer and to take such other steps as may be necessary or desirable to enforce Buyer’s rights against such Purchased Loans, the related Purchased Loan Files and the Servicing Records to the extent that Seller is permitted by law to act through an agent.

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

Capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in the Amended and Restated Master Repurchase Agreement.

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IN WITNESS WHEREOF Seller has caused this Power of Attorney to be executed and Seller’s seal to be affixed this 15th day of February, 2006.

CAPITAL TRUST, INC.

By:

Name: Geoffrey G. Jervis

Title: Chief Financial Officer

CT BSI FUNDING CORP.

By:

Name:

Title:

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EXHIBIT VI

REPRESENTATIONS AND WARRANTIES
REGARDING EACH INDIVIDUAL PURCHASED LOAN
WHICH IS A WHOLE LOAN OR B NOTE

1.             Purchased Loan Schedule and Loan Information. The information set forth in the Purchased Loan Schedule and the Loan Information is complete, true and correct in all material respects.

2.             Whole Loan; Ownership of Purchased Loans. Each Purchased Loan is a whole loan and not a participation interest in a whole loan. Immediately prior to the transfer to Buyer of the Purchased Loans, Seller had good and marketable title to, and was the sole owner of, each Purchased Loan. Seller has full right, power and authority to transfer and assign each of the Purchased Loans to or at the direction of Buyer and has validly and effectively conveyed (or caused to be conveyed) to Buyer or its designee all of Seller’s legal and beneficial interest in and to the Purchased Loans free and clear of any and all pledges, liens, charges, security interests, participation interests and/or other encumbrances. The sale of the Purchased Loans to Buyer or its designee does not require Seller to obtain any governmental or regulatory approval or consent that has not been obtained.

3.             Payment Record. No scheduled payment of principal and interest under any Purchased Loan was 30 days or more past due as of the Purchase Date without giving effect to any applicable grace period, and no Purchased Loan was 30 days or more delinquent in the twelve-month period immediately preceding the Purchase Date.

4.             Lien; Valid Assignment. The Mortgage related to and delivered in connection with each Purchased Loan constitutes a valid and, subject to the exceptions set forth in paragraph 13 below, enforceable first priority lien upon the related Property, prior to all other liens and encumbrances and there are no liens or encumbrances pari passu with the lien of the Mortgage, except for (a) the lien for current real estate taxes and assessments not yet due and payable, (b) covenants, conditions and restrictions, rights of way, easements and other matters that are of public record and/or are referred to in the related lender’s title insurance policy, (c) exceptions and exclusions specifically referred to in such lender’s title insurance policy, and (d) other matters to which like properties are commonly subject, none of which matters referred to in clause (b), (c) or (d) individually or in the aggregate materially interferes with the security intended to be provided by such Mortgage or the marketability or current use of the Property or the current ability of the Property to generate operating income sufficient to service the Purchased Loan debt (the foregoing items (a) through (d) being herein referred to as the “Permitted Encumbrances”). The related assignment of such Mortgage executed and delivered in favor of Buyer is in recordable form and constitutes a legal, valid and binding assignment, sufficient to convey to the assignee named therein all of the assignor’s right, title and interest in, to and under such Mortgage. Such Mortgage, together with any separate security agreements, chattel mortgages or equivalent instruments, establishes and creates a valid and, subject to the exceptions set forth in paragraph 13 below, enforceable security interest in favor of the holder thereof in all of the related Mortgagor’s personal property used in, and reasonably necessary to operate the related Property. A Uniform Commercial Code financing statement has been filed

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and/or recorded in all places necessary to perfect a valid security interest in such personal property, and such security interest is a first priority security interest, subject to any prior purchase money security interest in such personal property and any personal property leases applicable to such personal property. Notwithstanding the foregoing, no representation is made as to the perfection of any security interest in rents or other personal property to the extent that possession or control of such items or actions other than the filing of Uniform Commercial Code financing statements are required in order to effect such perfection.

5.             Assignment of Leases and Rents. The assignment of leases and rents (“Assignment of Leases”) set forth in the Mortgage (or in a separate instrument) and related to and delivered in connection with each Purchased Loan establishes and creates a valid, subsisting and, subject to the exceptions set forth in paragraph 13 below, enforceable first priority perfected lien and together with the Mortgage, first priority perfected security interest in the related Mortgagor’s interest in all leases, subleases, licenses or other agreements pursuant to which any person is entitled to occupy, use or possess all or any portion of the real property subject to the related Mortgage, and each assignor thereunder has the full right to assign the same. The related assignment of any Assignment of Leases, not included in a Mortgage, executed and delivered in favor of Buyer is in recordable form and constitutes a legal, valid and binding assignment, sufficient to convey to the assignee named therein all of the assignor’s right, title and interest in, to and under such Assignment of Leases. If an Assignment of Leases exists with respect to any Mortgage Loan (whether as part of the related Mortgage or separately), then the related Mortgage or related Assignment of Leases, subject to applicable law, provides for, upon an event of default under the Mortgage Loan, the appointment of a receiver for the collection of rents or for the related mortgagee to enter into possession to collect the rents or for rents to be paid directly to the mortgagee.

6.             Mortgage Status; Waivers and Modifications. In the case of each Mortgage Loan, (a) no Mortgage has been satisfied, canceled, rescinded or subordinated in whole or in material part, (b) the related Property has not been released from the lien of such Mortgage, in whole or in material part, (c) no instrument has been executed that would effect any such satisfaction, cancellation, subordination, rescission or release except for any partial reconveyances of portions of the real property that do not materially adversely affect the value of the property, and (d) no Mortgagor has been released from its obligations under the related Mortgage in whole or in material part. None of the terms of any Mortgage Note, Mortgage or Assignment of Leases have been impaired, waived, altered or modified in any respect, except by written instruments, all of which are included in the related Mortgage File.

7.             Condition of Property; Condemnation. Except as set forth in an engineering report prepared in connection with the origination of the related Purchased Loan and dated not more than 12 months prior to the Purchase Date, each Property is, to Seller’s knowledge, free and clear of any damage that would materially and adversely affect its value as security for the related Purchased Loan (normal wear and tear excepted). Seller has received no notice, and has no knowledge, of any pending or threatened proceeding for the condemnation of all or any material portion of any Property. To Seller’s knowledge, as of the date of the origination of each Purchased Loan (based on surveys and/or title insurance obtained in connection with the origination of the Purchased Loans) (a) all of the improvements on the related Property which were considered material in determining the appraised value of the

VI-2

Property lay wholly within the boundaries and building restriction lines of such property, except for encroachments that are insured against by the Title Policy referred to in paragraph 8 herein or that do not materially and adversely affect the value, principal use, or marketability of such Property, and (b) no improvements on adjoining properties encroached upon such Property so as to materially and adversely affect the value, principal use, or marketability of such Property, except those encroachments that are insured against by the Title Policy referred to in paragraph 8 herein.

8.             Title Insurance. Each Property is covered by an American Land Title Association (or an equivalent form thereof approved for use in the applicable jurisdiction) lender’s title insurance policy (the “Title Policy”) in the original principal amount of the related Purchased Loan after all advances of principal. Each Title Policy insures that the related Mortgage is a valid first priority lien on such Property, subject only to the exceptions stated therein (or a preliminary title policy with escrow instructions or a marked up title insurance commitment on which the required premium has been paid exists which is binding on the title insurer and which evidences that such Title Policy will be issued). Each Title Policy (or, if it has yet to be issued, the coverage to be provided thereby) is in full force and effect, all premiums thereon have been paid, insures the originator of the Mortgage Loan, its successors and assigns and, to Seller’s knowledge, (i) no material claims have been made thereunder and no claims have been paid thereunder and (ii) was issued by a title insurance company qualified at origination to do business in the jurisdiction in which the Property is located to the extent such qualification was required in order for the Title Policy to be enforceable. No holder of the related Mortgage has done, by act or omission, anything that would materially impair the coverage under such Title Policy. Immediately following the transfer and assignment of the related Purchased Loan to Buyer, such Title Policy (or, if it has yet to be issued, the coverage to be provided thereby) will inure to the benefit of Buyer without the consent of or notice to the insurer. Such Title Policy contains no exclusion for, or it affirmatively insures (unless the related Property is located in a jurisdiction where such affirmative insurance is not available), the following:  (a) access to a public road; and (b) that if a survey was reviewed or prepared in connection with the origination of the related Mortgage Loan, the area shown on such survey is the same as the property legally described in the related Mortgage.

9.             No Holdbacks. The proceeds of each Purchased Loan have been fully disbursed and there is no obligation for future advances with respect thereto. With respect to each Purchased Loan, any and all requirements as to completion of any on-site or off-site improvement and as to disbursements of any funds escrowed for such purpose that were to have been complied with on or before the Purchase Date have been complied with, or any such funds so escrowed have not been released.

10.           Mortgage Provisions. The Mortgage Note or Mortgage for each Purchased Loan, together with applicable state law, contains customary and enforceable provisions for comparable mortgaged properties similarly situated (subject to the exceptions set forth in paragraph 13) such as to render the rights and remedies of the holder thereof adequate for the practical realization against the related Property of the principal benefits of the security intended to be provided thereby, including, without limitation, foreclosure or similar proceedings as applicable for the jurisdiction in which the related Property is located.

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11.           Buyer under Deed of Trust. If any Mortgage is a deed of trust, (a) a trustee, duly qualified under applicable law to serve as such, is properly designated and serving under such Mortgage, and (b) no fees or expenses are payable to such trustee by Seller, Buyer or any transferee thereof except in connection with a trustee’s sale after default by the related Mortgagor or in connection with any full or partial release of the related Property or related security for the related Purchased Loan.

12.           Environmental Conditions. With respect to each Property (a) an environmental site assessment (or an update of a previous assessment) was performed by an independent third party environmental consultant with respect to each Property in connection with the origination of the related Purchased Loan, (b) a report of each such assessment (an “Environmental Report”) is dated no earlier than 12 months prior to the Purchase Date and has been delivered to Buyer, and (c) to Seller’s knowledge there is no violation of applicable environmental laws and regulations with respect to, or any material and adverse environmental condition or circumstance affecting any Property that was not disclosed in such report. Each Mortgage requires the related Mortgagor to comply with all applicable federal, state and local environmental laws and regulations. Where such Environmental Report disclosed a violation of applicable environmental laws and regulations or the existence of a material and adverse environmental condition or circumstance affecting any Property, (i) a party not related to the Mortgagor was identified as the responsible party for such condition or circumstance, (ii) the related Mortgagor was required either to provide additional security and/or to obtain an operations and maintenance plan or (iii) the related Mortgagor provided evidence satisfactory to the originator of such Mortgage Loan that applicable federal, state or local governmental authorities would not take any action, or require the taking of any action, in respect of such violation, condition or circumstance. The related Purchased Loan Documents contain provisions pursuant to which the related Mortgagor or a principal of such Mortgagor has agreed to indemnify the mortgagee for damages resulting from violations of any applicable Environmental Laws.

13.           Loan Document Status. Each Mortgage Note, Mortgage and other agreement that evidences or secures a Purchased Loan and that was executed by or on behalf of the related Mortgagor is the legal, valid and binding obligation of the maker thereof (subject to any non-recourse provisions contained in any of the foregoing agreements and any applicable state anti-deficiency or market value limit deficiency legislation), enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights generally, and by general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law) and there is no valid defense, counterclaim or right of offset or rescission available to the related Mortgagor with respect to such Mortgage Note, Mortgage or other agreements.

14.           Insurance. Each Property is, and is required pursuant to the related Mortgage to be, insured by (a) an all risk insurance policy issued by an insurer meeting the requirements of such Purchased Loan providing coverage against loss or damage sustained by reason of fire, lightning, windstorm, hail, explosion, riot, riot attending a strike, civil commotion, aircraft, vehicles and smoke, and, to the extent required as of the date of origination by the originator of such Purchased Loan consistent with its normal commercial mortgage lending

VI-4

practices, against other risks insured against by persons operating like properties in the locality of the Property in an amount not less than the lesser of the principal balance of the related Purchased Loan and 100% of the replacement cost (not allowing reduction in insurance proceeds for depreciation) of the Property, and not less than the amount necessary to avoid the operation of any co-insurance provisions with respect to the Property; (b) a business interruption or rental loss insurance policy; providing coverage for at least twelve months (other than for manufactured housing communities) and for eighteen months of coverage if the Property is a special purpose property or if the Mortgage Loan is in excess of $25 million; (c) a flood insurance policy (if any portion of the Property is located in an area identified by the Federal Emergency Management Agency as having special flood hazards) and (d) a comprehensive general liability insurance policy in amounts as are generally required by commercial mortgage lenders, and in any event not less than $1 million per occurrence. Such insurance policy contains a standard mortgagee clause that names the holder of the Mortgage, its successors and assigns as mortgagee as an additional insured in the case of liability insurance policies or as a loss payee in the case of property insurance policies. Such insurance policy is not terminable (nor may the amount of coverage provided thereunder be reduced) without prior written notice to the holder of the Mortgage, and no such notice has been received, including any notice of nonpayment of premiums, that has not been cured. Each Mortgage obligates the related Mortgagor to maintain all such insurance and, upon such Mortgagor’s failure to do so, authorizes the holder of the Mortgage to purchase and maintain such insurance at the Mortgagor’s cost and expense and to seek reimbursement therefor from such Mortgagor. Other than as set forth in paragraph 17(h) hereof, each Mortgage provides that casualty insurance proceeds will be applied either to the restoration or repair of the related Property or to the reduction or defeasance of the principal amount of the Purchased Loan.

15.           Taxes and Assessments. There are no delinquent or unpaid taxes or assessments (including assessments payable in future installments), or other outstanding charges affecting any Property which are or may become a lien of priority equal to or higher than the lien of the related Mortgage. For purposes of this representation and warranty, real property taxes and assessments shall not be considered unpaid until the date on which interest and/or penalties would be first payable thereon.

16.           Mortgagor Bankruptcy. No Mortgagor, non-recourse carve-out guarantor or tenant physically occupying 25% or more (by square feet) of the net rentable area of a Property is a debtor in any state or federal bankruptcy or insolvency proceeding.

17.           Leasehold Estate. Each Property consists of the related Mortgagor’s fee simple estate in real estate or, if the related Purchased Loan is secured in whole or in part by the interest of a Mortgagor as a lessee under a ground lease of a Property (a “Ground Lease”), by the related Mortgagor’s interest in the Ground Lease but not by the related fee interest in such Property (the “Fee Interest”). With respect to any Purchased Loan secured by a Ground Lease but not by the related Fee Interest:

a.Such Ground Lease or a memorandum thereof has been duly recorded; such Ground Lease (or the related estoppel letter or lender protection agreement between Seller and related lessor) permits the current use of the Property and permits the interest of the lessee thereunder to be

VI-5

encumbered by the related Mortgage and does not restrict the use of the related Property by such lessee, its successors or assigns in a manner that would adversely effect the security provided by the related Mortgage by limiting in any way its current use; and there has been no material change in the terms of such Ground Lease since the origination of the related Purchased Loan, with the exception of material changes reflected in written instruments that are a part of the related Mortgage File;

b.The lessee’s interest in such Ground Lease is not subject to any liens or encumbrances superior to, or of equal priority with, the related Mortgage, other than the related Fee Interest and Permitted Encumbrances;

c.The Mortgagor’s interest in such Ground Lease is assignable to Buyer and is further assignable by Buyer, its successors and assigns upon notice to, but without the consent of, the lessor thereunder (or, if such consent is required, it has been obtained prior to the Purchase Date) and, in the event that it is so assigned, is further assignable by Buyer and its successors and assigns upon notice to, but without the need to obtain the consent of, such lessor. If required by the Ground Lease, the lessor has received notice of the lien of the related Mortgage in accordance with the provisions of the Ground Lease;

d.In connection with the origination of such Mortgage Loan, the related ground lessor provided an estoppel to the originator confirming that the related Mortgagor was not then in default under such Ground Lease. The Ground Lease provides that no material amendment to the Ground Lease is effective against the mortgagee under such Mortgage Loan unless the mortgagee has consented thereto. Such Ground Lease is in full force and effect, and Seller and any servicer acting on Seller’s behalf have received no notice that an event of default has occurred thereunder or that the Ground lease has terminated, and, to Seller’s knowledge, there exists no condition that, but for the passage of time or the giving of notice, or both, would result in an event of default under the terms of such Ground Lease;

e.Such Ground Lease, or an estoppel letter or other agreement, (A) requires the lessor under such Ground Lease to give notice of any default by the lessee to the mortgagee, provided that the mortgagee has provided the lessor with notice of its lien in accordance with the provisions of such Ground Lease to the extent such Ground Lease requires such notice, further (B) provides that no notice of termination given under such Ground Lease (including rejection of such Ground Lease in a bankruptcy proceeding) is effective against the holder of the Mortgage unless a copy of such notice has been delivered to such holder and the lessor has offered to enter into a new lease with such holder on terms that do not materially vary from the economic terms of the Ground Lease;

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f.A mortgagee is permitted a reasonable opportunity (including, where necessary, sufficient time to gain possession of the interest of the lessee under such Ground Lease by foreclosure or otherwise if possession is necessary to effect a cure) to cure any default under such Ground Lease, which is curable after the receipt of notice of any such default, before the lessor thereunder may terminate such Ground Lease;

g.Such Ground Lease has an original term (including any extension options set forth therein which, under all circumstances, may be exercised, and will be enforceable, by the mortgagee if it takes possession of such leasehold interest) which extends not less than twenty years beyond the stated maturity date of the related Purchased Loan and ten years beyond the amortization period for the related Purchased Loan;

h.Under the terms of such Ground Lease and the related Mortgage, taken together, any related insurance proceeds or condemnation award other than in respect of a total loss will be applied either to the repair or restoration of all or part of the related Property, with the mortgagee or a trustee appointed by it having the right to hold and disburse such proceeds as the repair or restoration progresses (except in such cases where a provision entitling another party to hold and disburse such proceeds would not be viewed as commercially unreasonable by a prudent commercial mortgage lender for conduit programs), or to the payment or defeasance of the outstanding principal balance of the Purchased Loan together with any accrued interest thereon;

i.Such Ground Lease does not impose any restrictions on subletting which would be viewed as commercially unreasonable by prudent commercial mortgage lenders in the lending area where the Property is located and such Ground Lease contains a covenant that the ground lessor is not permitted, in the absence of an uncured default, to disturb the possession, interest or quiet enjoyment of the lessee thereunder for any reason or in any manner which would materially adversely affect the security provided by the related Mortgage; and

j.Such Ground Lease provides, or the lessor has otherwise agreed, that such Ground Lease may not be amended or modified or any such amendment or modification will not be effective against the mortgagee without the prior written consent of the mortgagee under such Purchased Loan any such action without such consent is not binding on such mortgagee, its successors and assigns, provided such mortgagee has provided the ground lessor with notice of its lien in accordance with the terms of the Ground Lease.

18.           Escrow Deposits. All escrow deposits and payments (including capital improvements, environmental remediation reserves and other reserve deposits, if any) relating to each Purchased Loan that are, as of the Purchase Date, required to be deposited or paid to the

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lender under the terms of the related Mortgage Loan documents have been so deposited or paid and, to the extent of any remaining balances of such escrow deposits, are in the possession or under the control of Seller or its agents (which shall include the applicable servicer of the Mortgage Loan). Any and all material requirements under each Mortgage Loan as to completion of any material improvements and as to disbursement of any funds escrowed for such purpose, which requirements were to have been complied with on or before the Purchase Date, have been complied with in all material respects or, if and to the extent not so complied with, the escrowed funds (or an allocable portion thereof) have not been released except in accordance with the terms of the related loan documents.

19.           LTV Ratio. The gross proceeds of each Purchased Loan to the related Mortgagor at origination did not exceed the non-contingent principal amount of the Purchased Loan and either:  (a) such Purchased Loan is secured by an interest in real property having a fair market value (i) at the date the Purchased Loan was originated at least equal to 80 percent of the original principal balance of the Purchased Loan or (ii) at the Purchase Date at least equal to 80 percent of the principal balance of the Purchased Loan on such date; provided that for purposes hereof, the fair market value of the real property interest must first be reduced by (x) the amount of any lien on the real property interest that is senior to the Purchased Loan and (y) a proportionate amount of any lien that is in parity with the Purchased Loan (unless such other lien secures a Purchased Loan that is cross-collateralized with such Purchased Loan, in which event the computation described in clauses (a)(i) and (a)(ii) of this paragraph 19 shall be made on a pro rata basis in accordance with the fair market values of the Properties securing such cross-collateralized Purchased Loans; or (b) substantially all the proceeds of such Purchased Loan were used to acquire, refinance, improve or protect the real property which served as the only security for such Purchased Loan (other than a recourse feature or other third party credit enhancement within the meaning of Treasury Regulations Section 1.860G-2(a)(l)(ii)).

20.           Qualified Mortgage; Purchased Loan Modifications. Each Mortgage Loan is a “qualified mortgage” within the meaning of Section 860G(a)(3) of the Code and Treasury regulation section 1.860G-2(a) (but without regard to the rule in Treasury regulation section 1.860G-2(f)(2)). Any Purchased Loan that was “significantly modified” prior to the Purchase Date so as to result in a taxable exchange under Section 1001 of the Code either (a) was modified as a result of the default or reasonably foreseeable default of such Purchased Loan or (b) satisfies the provisions of either clause (a)(i) of paragraph 19 (substituting the date of the last such modification for the date the Purchased Loan was originated) or clause (a)(ii) of paragraph 19, including the proviso thereto.

21.           Advancement of Funds by Seller. No holder of a Purchased Loan has advanced funds or induced, solicited or knowingly received any advance of funds from a party other than the owner of the related Property, directly or indirectly, for the payment of any amount required by such Purchased Loan.

22.           No Mechanics’ Liens. As of the date of the Mortgage, and to the actual knowledge of Seller as of the Purchase Date, each Property is free and clear of any and all mechanics’ and materialmen’s liens that are prior or equal to the lien of the related Mortgage, and no rights are outstanding that under law could give rise to any such lien that would be prior

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or equal to the lien of the related Mortgage except, in each case, for liens insured against by the Title Policy referred to herein or otherwise bonded.

23.           Compliance with Usury Laws. Each Purchased Loan complied with, or is exempt from, all applicable usury laws in effect at its date of origination.

24.           Cross-collateralization; Cross-default. No Purchased Loan is cross-collateralized or cross-defaulted with any loan other than one or more other Purchased Loans.

25.           Releases of Property. Except as described in the next sentence, no Mortgage Note or Mortgage requires the mortgagee to release all or any material portion of the related Property from the lien of the related Mortgage except upon payment in full or defeasance of all amounts due under the related Purchased Loan. The Mortgages relating to those Purchased Loans identified on the Purchased Loan Schedule require the mortgagee to grant releases of portions of the related Properties upon (a) the satisfaction of certain legal and underwriting requirements and (b) except where the portion of the Property permitted to be released was not considered by, Seller to be material in the underwriting of the Purchased Loan, either (1) the payment of a release price set forth therein and prepayment consideration in connection therewith or (2) the partial defeasance of such Purchased Loan.

No Purchased Loan permits the release or substitution of collateral if such release or substitution (a) would create a “significant modification” of such Purchased Loan within the meaning of Treas. Reg. § 1.1001 3 or (b) would cause such Purchased Loan not to be a “qualified mortgage” within the meaning of Section 860G(a)(3) of the Code (without regard to clauses (A)(i) or (A)(ii) thereof).

26.           No Equity Participation or Contingent Interest. No Purchased Loan contains any equity participation by the lender or provides for negative amortization or for any contingent or additional interest in the form of participation in the cash flow of the related Property, or is convertible by its terms into an equity ownership interest in the related Property or the related Mortgagor, except that, in the case of an ARD Loan, such Mortgage Loan provides that, during the period commencing on or about the related anticipated repayment date and continuing until such Mortgage Loan is paid in full, (a) additional interest shall accrue and may be compounded monthly and (b) a portion of the cash flow generated by such Property will be applied each month to pay down the principal balance thereof in addition to the principal portion of the related monthly payment.

27.           No Material Default. There exists no monetary default and to Seller’s knowledge, there exists no material non-monetary default, breach, violation or event of acceleration (and no event which, with the passage of time or the giving of notice, or both, would constitute any of the foregoing) under the documents evidencing or securing the Purchased Loan, in any such case to the extent the same materially and adversely affects the value of the Purchased Loan and the related Property; provided, however, that this representation and warranty does not address or otherwise cover any default, breach, violation or event of acceleration that specifically pertains to any matter otherwise covered by any other representation and warranty made by Seller in any of paragraphs 3, 7, 12, 14, 15 and 17. Neither the Mortgage Loan Seller nor any servicer acting on its behalf has issued any notice of default,

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breach or violation related to the Mortgage Loan, accelerated the Mortgage Loan or commenced judicial or non-judicial foreclosure proceedings with respect to the Mortgage Loan.

28.           Inspections. Seller (or if Seller is not the originator, the originator of the Purchased Loan) has inspected or caused to be inspected each Property in connection with, and during the 12 month period prior to, the origination of the related Purchased Loan.

29.           Local Law Compliance. Based on due diligence considered reasonable by prudent commercial mortgage lenders in the lending area where each Property is located, to Seller’s knowledge the improvements located on or forming part of each Property complies in all material respects with applicable zoning laws and ordinances, or constitutes a legal non-conforming use or structure or, if any such improvement does not so comply and does not constitute a legal non-conforming use or structure, such non-compliance and failure does not materially and adversely affect (i) the value of the related Property as determined by the appraisal performed at origination or (ii) the principal use of the Property as of the date of the origination of such Mortgage Loan. As of the date of origination, with respect to each legal non-conforming use or structure, the originator determined based on due diligence considered reasonable by prudent commercial mortgage lenders in the lending area where the subject Property is located that if a casualty occurred at that time, the Property could have been restored or repaired to such an extent that the use or structure of the restored or repaired property would be substantially the same use or structure, or law and ordinance insurance has been obtained, or a holdback was established and the Mortgagor is required to cause the Property to become a conforming use or structure.

30.           Junior Liens. None of the Purchased Loans permits the related Property to be encumbered by any lien junior to or of equal priority with the lien of the related Mortgage without the prior written consent of the holder thereof or the satisfaction of debt service coverage or similar criteria specified therein. Each Purchased Loan contains a “due on sale” clause that provides for the acceleration of the payment of the unpaid principal balance of the Purchased Loan if, without the prior written consent of the holder of the Purchased Loan, the related Property, or any material portion thereof, or a controlling interest in the direct or indirect ownership interests in the Mortgagor is directly or indirectly transferred, sold or pledged.

31.           Actions Concerning Purchased Loans. To the knowledge of Seller, there are no actions, suits, governmental investigations or proceedings pending or threatened before any court, governmental authority, administrative agency or arbitrator concerning any Purchased Loan or related Mortgagor or Property that, if determined adversely to the Purchased Loan, Mortgagor, or Property, would adversely affect title to the Purchased Loan or the validity or enforceability of the related Mortgage or that might materially and adversely affect the value of the Property, the current ability of the Property to generate net operating income to service the Mortgage Loan, the principal benefit of the security intended to be provided for the Purchased Loan, or the current use of the Property.

32.           Servicing. The servicing and collection practices used by Seller and any servicer of the Mortgage Loan have been in all material respects legal, proper and prudent and have met customary industry standards for servicing of commercial Purchased Loans for conduit programs.

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33.           Licenses and Permits. To Seller’s knowledge, as of the date of origination of each Purchased Loan, the related Mortgagor was in possession of all material licenses, permits and franchises required by applicable law for the ownership and operation of the related Property as it was then operated and, as of the Purchase Date, the Mortgage Loan Seller has no written notice that the related Mortgagor was not in possession of such licenses, permits and franchises or that such licenses, permits and franchises have not otherwise been issued. The Mortgage Loan requires the related Property to be in material compliance with laws and regulations applicable to the Property, in each case to the extent required by law.

34.           Assisted Living Facility Regulation. If any Property is operated as an assisted living facility, to Seller’s knowledge, (a) the related Mortgagor and operator, if different, is in compliance in all material respects with all federal and state laws applicable to the use and operation of the related Property and (b) if the operator of the Property participates in Medicare or Medicaid programs, the facility is in compliance in all material respects with the requirements for participation in such programs.

35.           Non-Recourse Exceptions. The related Mortgage Loan documents contain provisions providing for recourse against the related Mortgagor, a principal of such Mortgagor or an entity controlled by a principal of such Mortgagor, or a natural person, for damages sustained in connection with the Mortgagor’s (i) fraud, (ii) intentional misrepresentation, (iii) misappropriation or misapplication of rents or amounts due lender, insurance proceeds or condemnation proceeds, (iv) voluntary bankruptcy, (v) failure to obtain prior consent to any encumbrance of the pledged equity under the Mezzanine Loan Documents and (vi) willful misconduct resulting in waste of a Property. The related Mortgage Loan documents contain provisions pursuant to which the related Mortgagor, a principal of such Mortgagor or an entity controlled by a principal of such Mortgagor, or a natural person, has agreed to indemnify the mortgagee for damages resulting from violations of any applicable environmental covenants.

36.           Single Purpose Entity. The Mortgagor on each Purchased Loan was, as of the origination of the Purchased Loan, a Single Purpose Entity. For this purpose, a “Single Purpose Entity” shall mean an entity, other than an individual, whose organizational documents provide substantially to the effect that it was formed or organized solely for the purpose of owning and operating one or more Properties securing the Purchased Loans and prohibit it from engaging in any business unrelated to such Property or Properties, and whose organizational documents further provide, or which entity represented in the related Purchased Loan documents, substantially to the effect that it does not have any assets other than those related to its interest in and operation of such Property or Properties, or any indebtedness other than as permitted by the related Mortgage or the other related Purchased Loan documents, that it has its own books and records and accounts separate and apart from any other person, that it will not guarantee or assume the debts of any other person, that it will not commingle assets with affiliates, and that it will not transact business with affiliates except on an arm’s length basis.

Each Mortgagor of a Purchased Loan is an entity which has represented in connection with the origination of the Purchased Loan, or whose organizational documents as of the date of origination of the Purchased Loan provide that so long as the Purchased Loan is outstanding it will have at least one independent director. There are Insolvency/Non-Consolidation opinions

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with respect to the Pledgor and, to Seller’s knowledge, all of the assumptions made in each such opinion are true and correct.

37.           Separate Tax Parcels. Each Property constitutes one or more complete separate tax lots or is subject to an endorsement under the related title insurance policy.

38.           Defeasance. Each Purchased Loan containing provisions for defeasance of mortgage collateral either (i) requires the prior written consent of, and compliance with the conditions set by, the holder of the Purchased Loan, or (ii) requires that (A) defeasance may not occur prior to the time permitted by applicable “real estate mortgage investment conduit” rules and regulations (if applicable), (B) the replacement collateral consist of U.S. governmental securities in an amount sufficient to make all scheduled payments under the Mortgage Note when due, (C) independent public accountants certify that the collateral is sufficient to make such payments, (D) counsel provide an opinion that Buyer has a perfected security interest in such collateral prior to any other claim or interest, and (E) all costs and expenses arising from the defeasance of the mortgage collateral shall be borne by the Mortgagor.

39.           Operating or Financial Statement. The related Purchased Loan Documents require the related Mortgagor to furnish to the mortgagee at least quarterly and annually an operating statement and rent roll (if there is more than one tenant) with respect to the related Property and at least annually financial statements of the Mortgagor.

40.           Letters of Credit. No Purchased Loan consists of or is secured by a Letter of Credit.

41.           Security Interests in Hospitality Properties. If any Property securing a Mortgage Loan is operated as a hospitality property then (a) the security agreements, financing statements or other instruments, if any, related to the Mortgage Loan secured by such Property establish and create a valid and enforceable (subject to the exceptions set forth in Paragraph 13 above) first priority security interest in all items of personal property owned by the related Borrower which are material to the conduct in the ordinary course of the Borrower’s business on the related Property, subject only to purchase money security interests, personal property leases and security interests to secure revolving lines of credit and similar financing; and (b) one or more Uniform Commercial Code financing statements covering such personal property have been filed or recorded (or have been sent for filing or recording) wherever necessary to perfect under applicable law such security interests (to the extent a security interest in such personal property can be perfected by the filing of a Uniform Commercial Code financing statement under applicable law).

42.           Prepayment Premiums. Prepayment Premiums payable with respect to each Mortgage Loan, if any, constitute “customary prepayment penalties” within meaning of Treasury Regulation Section 1.860G-1(b)(2).

43.           Assignment of Collateral. There is no material collateral securing any Mortgage Loan that has not been assigned to the Purchaser.

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44.           Fee Simple or Leasehold Interests. The interest of the related Borrower in the Property securing each Mortgage Loan includes a fee simple and/or leasehold estate or interest in real property and the improvements thereon.

45.           Appraisals. An appraisal of the related Property was conducted in connection with the origination of the Mortgage Loan, which appraisal is signed by an appraiser, who, to Seller’s knowledge, had no interest, direct or indirect, in the Property or the Borrower or in any loan made on the security thereof, and whose compensation is not affected by the approval or disapproval of the Mortgage Loan; in connection with the origination of the Mortgage Loan, each appraiser has represented in such appraisal or in a supplemental letter that the appraisal satisfies the requirements of the “Uniform Standards of Professional Appraisal Practice” as adopted by the Appraisal Standards Board of the Appraisal Foundation.

46.           No Capital Contributions. The mortgagee has no obligation to make any capital contributions to the related Borrower under the Mortgage Loan.

47.           Due Dates and Grace Periods. The related Mortgage or Mortgage Note provides for Monthly  Payments to be made on the first day of each month (“Due Date”) and a grace period for Monthly Payments no longer than ten (10) days from the related Due Date.

48.           Terrorism Insurance. With respect to each Mortgage Loan, the related all risk insurance policy and business interruption policy did not as of the date of origination of the Mortgage Loan, and, to Seller’s knowledge, does not as of the date hereof, specifically exclude acts of terrorism from coverage. With respect to each of the Mortgage Loans, the related Mortgage Loan documents do not expressly waive or prohibit the mortgagee from requiring coverage for acts of terrorism or damages related thereto, except to the extent that any right to require such coverage may be limited by commercially reasonable availability.

49.           Fraud. To Seller’s knowledge, no Borrower is guilty of defrauding or making an intentional material misrepresentation to the Mortgage Loan Seller in connection with the origination of the Mortgage Loan.

50.           Transfers and Pledges. The Mezzanine Loan Collateral consists of the pledge of all of the ownership interests of the Mortgagor. Transfer and pledge restrictions under the Mezzanine Loan Documents apply to [Name of Sponsor entity], Borrower, Principal, Mortgage Borrower, Mortgage Principal and any Affiliated Manager or any shareholder, partner, member, non-member manager, any direct or indirect legal or beneficial owner of, Mortgage Borrower, Mortgage Principal, Principal, Borrower, any Guarantor, any Affiliated Manager, or any Pledgor, and Affiliated Franchisor or any non-member manager.

51.           Management Agreement. The Management Agreement is in full force and effect and there is no default thereunder by any party thereto and no event has occurred that, with the passage of time and/or the giving of notice, would constitute a default thereunder.

52.           Illegal Activity. To Seller’s knowledge, no portion of any Property has been or will be purchased with proceeds of any illegal activity.

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53.           Embargoed Person. To the best of Seller’s knowledge, (a) none of the funds or other assets of Mortgagor, Mezzanine Borrower, Principal and Guarantor constitute property of, or are beneficially owned, directly or indirectly, by any person, entity or government subject to trade restrictions under U.S. law, including but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders or regulations promulgated thereunder with the result that the investment in Borrower, Principal or Guarantor, as applicable (whether directly or indirectly), is prohibited by law or the Mortgage Loan or Purchased Loan made by the Lender is in violation of law (“Embargoed Person”); (b) no Embargoed Person has any interest of any nature whatsoever in Mortgagor, Mezzanine Borrower, Principal or Guarantor, as applicable, with the result that the investment in Mortgagor, Mezzanine Borrower, Principal or Guarantor, as applicable (whether directly or indirectly), is prohibited by law or the Mortgage Loan or Purchased Loan is in violation of law; and (c) none of the funds of Mortgagor, Mezzanine Borrower, Principal or Guarantor, as applicable, have been derived from any unlawful activity with the result that the investment in Mortgagor, Mezzanine Borrower, Principal or Guarantor, as applicable (whether directly or indirectly), is prohibited by law or the Mortgage Loan or Purchased Loan is in violation of law.

54.           Franchise Agreement. The Franchise Agreement and the License granted thereby are in full force and effect and there is no default thereunder by any party thereto and no event has occurred that, with the passage of time and/or giving of notice, would constitute a default thereunder. Mortgage Borrower has all rights to use the License granted under the Franchise Agreement.

55.           Lockbox. Any agreements executed in connection with the creation of a Collection Account create a valid and continuing security interest (as defined in the Uniform Commercial Code in effect in the State of New York) in each of such Collection Accounts in favor of Buyer, which security interest is prior to all other liens, and is enforceable as such against creditors of and purchasers from Mortgagor. Each Collection Account constitutes a “deposit account” within the meaning of the Uniform Commercial Code in effect in the State of New York. Seller has directed the Servicer to cause each Depository to agree to comply with all written instructions originated by Buyer, without further consent by Borrower, directing disposition of all sums at any time held, deposited or invested in the Collection Accounts, together with any interest or other earnings thereon, and all proceeds thereof (including proceeds of sales and other dispositions), whether accounts, general intangibles, chattel paper, deposit accounts, instruments, documents or securities. The Collection Accounts are not in the name of any Person other than Mortgagor, as pledgor, or Lender, as pledgee. Seller has not consented to the Depository complying with instructions with respect to the Collection Account from any Person other than Buyer

56.           MERS Purchased Loans. With respect to each Mortgage Loan that is a MERS Purchased Loan, the related Mortgagor registered with MERS and each assignment of the MERS Purchased Loan has been registered with MERS.

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EXHIBIT VII

REPRESENTATIONS AND WARRANTIES
REGARDING EACH INDIVIDUAL MEZZANINE LOAN
WHICH IS A MEZZANINE LOAN

(1)           Mezzanine Loan Information. The information set forth in the Mezzanine Loan Schedule is complete, true and correct in all material respects.

(2)           No Default or Dispute Under Mezzanine Loan Documents. There exists no material default, breach, violation or event of acceleration (and no event which, with the passage of time or the giving of notice, or both, would constitute any of the foregoing) under the documents evidencing or securing the Mortgage Loan or Mezzanine Loan, in any such case to the extent the same materially and adversely affects the value of the Mezzanine Loan and the related underlying real property.

(3)           No Offsets, Defenses or Counterclaims. There is no valid right of offset or rescission, defense or counterclaim to such Mortgage Loan or Mezzanine Loan.

(4)           Equity Pledges. The pledge of ownership interests securing such Mezzanine Loan relates to all or substantially all direct or indirect equity or ownership interests in the underlying real property owner (so that, except for the equity interests pledged to Seller, there are no direct or indirect equity or ownership interests in underlying real property owner or in any constituent entity) and has been fully perfected in favor of Seller as mezzanine lender.

(5)           Depository Agreement The collection account administrator, if any, is not an Affiliate of Seller. Mezzanine lender has a perfected security interest in the Cash Management Agreement.

(6)           Enforceability. Mortgage Lender and Mezzanine Lender can rely on opinions from Mortgage Borrower’s and Mezzanine Borrower’s counsel to the effect that the Mortgage Loan and Mezzanine Loan Documents have been duly and properly executed by the parties thereto, and each is the legal, valid and binding obligation of the parties thereto, enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, receivership, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law). The Mezzanine Loan is not usurious. Seller has fully and validly perfected all security interests created or intended to be created pursuant to the Mezzanine Loan Documents.

(7)           Waivers and Modifications. The terms and provisions of the related Mortgage Loan and Mezzanine Loan Documents have not been impaired, waived, altered, supplemented, restated or modified in any material respect (other than by a written instrument which is included in the related Mortgage Loan and Mezzanine Loan File).

(8)           Valid Assignment. The assignment of Mezzanine Loan constitutes the legal, valid and binding assignment of such Mezzanine Loan from Seller to or for the benefit of Buyer. No consent or approval by any third party is required for any such assignment of such Mezzanine

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Loan, for Buyer’s exercise of any rights or remedies under the assignment of Mezzanine Loan, or for Buyer’s sale or other disposition of such Mezzanine Loan if Buyer acquires title thereto, other than consents and approvals which have been obtained. No third party (including underlying real property owner and underlying real property mortgagee) holds any “right of first refusal,” “right of first negotiation,” “right of first offer,” purchase option, or other similar rights of any kind on account of the occurrence of any of the foregoing. No other impediment exists to any such transfer.

(9)           Certain Representations and Warranties. To Seller’s knowledge, after having conducted due diligence customary by Seller and other purchasers of Mezzanine Loans with respect to the Mortgage Loan, Property, Mortgage borrower, Mezzanine Loan, pledged equity, mezzanine borrower, principals and sponsors, all representations and warranties in the Mortgage Loan and Mezzanine Loan Documents are true and correct in all material respects.

(10)         Parties Authorized. To the extent required under applicable law as of the Purchase Date, each party to the Mezzanine Loan Documents was authorized to do business in the jurisdiction in which the related underlying real property is located at all times when it held the Mezzanine Loan to the extent necessary to ensure the validity and enforceability of such Mezzanine Loan.

(11)         No Advances of Funds. No party to the Mortgage or Mezzanine Loan Documents has advanced funds on account of any default under the Mortgage or Mezzanine Loan Documents.

(12)         Servicing. The servicing and collection practices used by Seller for the Mezzanine Loan have complied with applicable law in all material respects and are consistent with those employed by prudent servicers of comparable Mezzanine Loans.

(13)         No Assignment. Seller has not effectuated any transfer, sale, assignment, hypothecation, or other conveyance of any of its rights and obligations under any Mezzanine Loan Document, except in connection with this Agreement.

(14)         No Bankruptcy. To Seller’s actual knowledge, none of the following parties is a debtor in any state or federal bankruptcy or insolvency proceeding:  Seller; underlying real property owner; mortgage loan property owner principal/sponsor, underlying real property mortgagee, mezzanine loan borrower, or mezzanine loan principal/sponsor.

(15)         Mezzanine Loan Documents. Exhibit [  ] represents a complete list of all material loan documents delivered by the mezzanine borrower in connection with the Mezzanine Loan Agreement and true counterpart originals of the Mezzanine Loan Documents and true and correct copies of the Mortgage Loan Documents have been delivered by Seller to Buyer.

(16)         Ownership. Seller is the sole owner of the Mezzanine Loan Documents and the related rights described above and that the Mezzanine Loan Documents and the related rights described above are not, and have not been, pledged, nor assigned, to another party and are not otherwise encumbered as of the execution and delivery of this Agreement.

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(17)         Organization. Seller is duly organized and is validly existing under the laws of the jurisdiction under which it was organized with full power to execute and deliver this Agreement and that all actions necessary to authorize the execution, delivery, and performance of this Agreement on behalf of Seller have been duly taken, and all such actions continue in full force and effect as of the date hereof. The execution, delivery and performance of this Agreement by Seller does not conflict with the organizational documents of Seller, or with any law, statute or regulation applicable to Seller.

(18)         Whole Loan; Ownership of Mezzanine Loans. Each Mezzanine Loan is a whole loan and not a participation interest in a whole loan. Immediately prior to the transfer to Buyer of the Mezzanine Loan, Seller had good and marketable title to, and was the sole owner of, each Mezzanine Loan. Seller has full right, power and authority to transfer and assign the Mezzanine Loan to or at the direction of Buyer and has validly and effectively conveyed (or caused to be conveyed) to Buyer or its designee all of Seller’s legal and beneficial interest in and to the Mezzanine Loan free and clear of any and all pledges, liens, charges, security interests, participation interests, and/or other encumbrances. The sale of the Mezzanine Loan to Buyer or its designee does not require Seller to obtain any governmental or regulatory approval or consent that has not been obtained.

(19)         Payment Record. No scheduled payment of principal and interest under any Mezzanine Loan or related Mortgage Loan was 30 days or more past due as of the Purchase Date without giving effect to any applicable grace period, and no Mezzanine Loan or related Mortgage Loan was 30 days or more delinquent in the twelve-month period immediately preceding the Purchase Date.

(20)         Lien. The Mortgage and Pledge related to and delivered in connection with each Mortgage Loan and Mezzanine Loan constitutes a valid and enforceable first priority security interest on the related Property and pledged equity, prior to all other liens and encumbrances and there are no liens or encumbrances pari passu with the lien of the Mortgage and pledge. A Uniform Commercial Code financing statement has been filed and/or recorded in all places necessary to perfect a valid security interest in such pledged equity, and such security interest is a first priority security interest. Seller, its successors and assigns is the beneficiary of an Eagle 9 policy or a title policy endorsement insuring that the UCC financing statement encumbering the Mezzanine Loan Collateral has been filed properly so as perfect Mezzanine Lender’s security interest in the Mezzanine Loan Collateral.

(21)         Mortgage and Pledge Status; Waivers and Modifications. In the case of each Mortgage and related Mezzanine Loan, (a)  no pledge or related Mortgage has been satisfied, canceled, rescinded or subordinated in whole or in material part,  (b) the related pledged equity or Property has not been released from the lien of such pledge or Mortgage, in whole or in material part, (c) no instrument has been executed that would effect any such satisfaction, cancellation, subordination, rescission or release, and (d) no pledgor or Mortgagor has been released from its obligations under the related pledge or Mortgage in whole or in material part. None of the terms of any note or pledge has been impaired, waived, altered or modified in any respect, except by written instruments, all of which are included in the related Loan File.

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(22)         Condition of Property; Condemnation. Except as set forth in an engineering report prepared in connection with the origination of the related Mortgage Loan and dated not more than 12 months prior to the Purchase date, each Property is, to Seller’s knowledge, free and clear of any damage that would materially and adversely affect its value as security for the related Mortgage Loan (normal wear and tear excepted). Seller has received no notice, and has no knowledge, of any pending or threatened proceeding for the condemnation of all or any material portion of any Property.

(23)         Title Insurance. Each Property is covered by an American Land Title Association (or an equivalent form thereof  approved for use in the applicable jurisdiction) lender’s title insurance policy (the “Title Policy”) in the original principal amount of the related Mortgage Loan after all advances of principal. Each Title Policy insures that the related Mortgage is a valid first priority lien on such Property, subject only to the exceptions stated therein (or a preliminary title policy with escrow instructions  or a marked up title insurance commitment on which the required premium has been paid exists which is binding on the title insurer and which evidences that such Title Policy will be issued). Each Title Policy (or, if it has yet to be issued, the coverage to be provided thereby) is in full force and effect, all premiums thereon have been paid, insures the originator of the Mortgage Loan, its successors and assigns and, to Seller’s knowledge, (i) no material claims have been made thereunder and no claims have been paid thereunder and (ii) was issued by a title insurance company qualified at origination to do business in the jurisdiction in which the Property is located to the extent such qualification was required in order for the Title Policy to be enforceable..

(24)         No Holdbacks. The proceeds of each Mezzanine Loan have been fully disbursed and there is no obligation for future advances with respect thereto.

(25)         Pledge and Mortgage Provisions. The note and pledge for each Mortgage Loan and related Mezzanine Loan, together with applicable state law, contains customary and enforceable provisions for comparable mortgaged properties and equity interests similarly situated (subject to customary bankruptcy and equity exceptions) such as to render the rights and remedies of the holder thereof adequate for the practical realization against the related Property and pledged equity of the principal benefits of the security intended to be provided thereby.

(26)         Environmental Conditions. With respect to each Property (a)  an environmental site assessment (or an update of a previous assessment) was performed by an independent third party environmental consultant with respect to each Property in connection with the origination of the related Mezzanine Loan, (b) a report of each such assessment (an “Environmental Report”) is dated no earlier than 12 months prior to the Purchase Date and has been delivered to Buyer, and (c) to Seller’s knowledge, there is no violation of applicable environmental laws and regulations with respect to, or any material and adverse environmental condition or circumstance affecting, any Property that was not disclosed in such report. Each Mortgage requires the related Mortgagor to comply with all applicable federal, state and local environmental laws and regulations. Where such  Environmental Report disclosed a violation of applicable environmental laws and regulations or the existence of a material and adverse environmental condition or circumstance affecting any Property, (i) a party not related to the Mortgagor was identified as the responsible party for such condition or circumstance, (ii) the related Mortgagor was required either to provide additional security and/or to obtain an operations and maintenance

VII-4

plan or (iii) the related Mortgagor provided evidence satisfactory to the originator of such Mortgage Loan that applicable federal, state or local governmental authorities would not take any action, or require the taking of any action, in respect of such violation, condition or circumstance. The related Mezzanine Loan Documents contain provisions pursuant to which the related Mortgagor or a principal of such Mortgagor has agreed to indemnify the mortgagee for damages resulting from violations of any applicable Environmental Laws.

(27)         Loan Document Status. Each Mortgage Note, Mortgage, Mezzanine Note, Pledge  and other agreement that evidences or secures a Mortgage Loan or related Mezzanine Loan and that was executed by or on behalf of the related Mortgagor or Pledgor is the legal, valid and binding obligation of the maker thereof (subject to any non-recourse provisions contained in any of the foregoing agreements and any applicable state anti-deficiency or market value limit deficiency legislation), enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights generally, and by general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law) and there is no valid defense, counterclaim or right of offset or rescission available to the related Mortgagor or Pledgor respect to such Mortgage Note, Mortgage, Mezzanine Note, Pledge, or other agreements.

(28)         Insurance. Each Property is, and is required pursuant to the related Mortgage to be, insured by (a) an all risk  insurance policy issued by an insurer meeting the requirements of such Mortgage Loan and, to the extent required as of the date of origination by the originator of such Mezzanine Loan consistent with its normal commercial mortgage lending practices, against other risks insured against by persons operating like properties in the locality of the Property in an amount not less than the lesser of the principal balance of the related Mezzanine Loan and 100% of the replacement cost (not allowing reduction in insurance proceeds for depreciation) of the Property, and not less than the amount necessary to avoid the operation of any co-insurance provisions with respect to the Property; (b) a business interruption or rental loss insurance policy providing  coverage  for at least  twelve months  (other than for manufactured housing communities) and for eighteen months of coverage if the Property is a special purpose property or if the Mortgage Loan is in excess of $25 million; (c) a flood insurance policy (if any portion of the Property is located in an area identified by the Federal Emergency Management Agency as having special flood hazards); and (d) a comprehensive general liability insurance policy in amounts as are generally required by commercial mortgage lenders, and in any event not less than $1 million per occurrence. Such insurance policy contains a standard mortgagee clause that names the holder of the Mortgage , its successors and assigns as mortgagee as an additional insured in the case of liability insurance policies or as a loss payee in the case of property insurance policies. Such insurance policy is not terminable (nor may the amount of coverage provided thereunder be reduced) without prior written notice to the holder of the Mortgage, and no such notice has been received, including any notice of nonpayment of premiums, that has not been cured. Each Mortgage obligates the related Mortgagor to maintain all such insurance and, upon such Mortgagor’s failure to do so, authorizes the holder of the Mortgage to purchase and maintain such insurance at the Mortgagor’s cost and expense and to seek reimbursement therefor from such Mortgagor. Each Mortgage provides that casualty insurance proceeds will be applied either to the restoration or repair of the related Property or to the reduction or defeasance of the principal amount of the Mezzanine Loan.

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(29)         Taxes and Assessments. There are no delinquent or unpaid taxes or assessments (including assessments payable in future installments), or other outstanding charges affecting any Property which are or may become a lien of priority equal to or higher than the lien of the related Mortgage. For purposes of this representation and warranty, real property taxes and assessments shall not be considered unpaid until the date on which interest and/or penalties would be first payable thereon.

(30)         Mortgagor Bankruptcy. No Mortgagor, Pledgor, non-recourse carve-out guarantor or tenant physically occupying 25% or more (by square feet) of the net rentable area of a Property is a debtor in any state or federal bankruptcy or insolvency proceeding.

(31)         Leasehold Estate. Each Property consists of the related Mortgagor’s fee simple estate in real estate or, if the related Mezzanine Loan is secured in whole or in part by the interest of a Mortgagor as a lessee under a ground lease of a Property (a “Ground Lease”), by the related Mortgagor’s interest in the Ground Lease but not by the related fee interest in such Property (the “Fee Interest”). With respect to any Mezzanine Loan secured by a Ground Lease but not by the related Fee Interest:

(a)           Such Ground Lease or a memorandum thereof has been duly recorded; such Ground Lease (or the related estoppel letter or lender protection agreement between Seller and related lessor) permits the current use of the Property and permits the interest of the lessee thereunder to be encumbered by the related Mortgage and does not restrict the use of the related Property by such lessee, its successors or assigns in a manner that would adversely effect the security provided by the related Mortgage by limiting in any way its current use; and there has been no material change in the  terms of such Ground Lease since the origination of the related Mezzanine Loan, with the exception of material changes reflected in written instruments that are a part of the related Mortgage File;

(b)           The lessee’s interest in such Ground Lease is not subject to any liens or encumbrances superior to, or of equal priority with, the related Mortgage, other than the related Fee Interest and Permitted Encumbrances;

(c)           The Mortgagor’s interest in such Ground Lease is assignable to Buyer and is further assignable by Buyer, its successors and assigns upon notice to, but without the consent of, the lessor thereunder (or, if such consent is required, it has been obtained prior to the Purchase Date) and, in the event that it is so assigned, is further assignable by Buyer and its successors and assigns upon notice to, but without the need to obtain the consent of, such lessor. If required by the Ground Lease, the lessor has received notice of the lien of the related Mortgage in accordance with the provisions of the Ground Lease;

(d)           In connection with the origination of such Mortgage Loan, the related ground lessor provided an estoppel to the originator confirming that the related Mortgagor was not then in default under such Ground Lease. The Ground Lease provides that no material amendment to the Ground lease is effective against the mortgagee under such Mortgage Loan unless the mortgagee has consented thereto. Such Ground Lease is in full force and effect, and Seller and any servicer acting on Seller’s behalf have  received no notice that an event of default has occurred thereunder or that the Ground lease has terminated, and, to Seller’s knowledge, there

VII-6

exists no condition that, but for the passage of time or the giving of notice, or both, would result in an event of default under the terms of such Ground Lease;

(e)           Such Ground Lease, or an estoppel letter or other agreement, (A) requires the lessor under such Ground Lease to give notice of any default by the lessee to the mortgagee, provided that the mortgagee has provided the lessor with notice of its lien in accordance with the provisions of such Ground Lease to the extent such Ground Lease requires such notice, further (B) provides that no notice of termination given under such Ground Lease (including rejection of such Ground Lease in a bankruptcy proceeding) is effective against the holder of the Mortgage unless a copy of such notice has been delivered to such holder and the lessor has offered to enter into a new lease with such holder on terms that do not materially vary from the economic terms of the Ground Lease;

(f)            A mortgagee is permitted a reasonable opportunity (including, where necessary, sufficient time to gain possession of the interest of the lessee under such Ground Lease by foreclosure or otherwise if possession is necessary to effect a cure) to cure any default under such Ground Lease, which is curable after the receipt of notice of any such default, before the lessor thereunder may terminate such Ground Lease;

(g)           Such Ground Lease has an original term (including any extension options set forth therein which, under all circumstances, may be exercised, and will be enforceable, by the mortgagee if it takes possession of such leasehold interest) which extends not less than twenty years beyond the stated maturity date of the related Mezzanine Loan and ten years beyond the amortization period for the related Mezzanine Loan;

(h)           Under the terms of such Ground Lease and the related Mortgage, taken together, any related insurance proceeds or condemnation award other than in respect of a total loss will be applied either to the repair or restoration of all or part of the related Property, with the mortgagee or a  trustee appointed by it having the right to hold and disburse such proceeds as the repair or restoration progresses (except in such cases where a provision entitling another party to hold and disburse such proceeds would not be viewed as commercially unreasonable by a prudent commercial mortgage lender for conduit programs), or to the payment or defeasance of the outstanding principal balance of the Mezzanine Loan together with any accrued interest thereon;

(i)            Such Ground Lease does not impose any restrictions on subletting which would be viewed as commercially unreasonable by prudent commercial mortgage lenders in the lending area where the Property is located and such ground Lease contains a covenant that the ground lessor is not permitted, in the absence of an uncured default, to disturb the possession, interest or quiet enjoyment of the lessee thereunder for any reason or in any manner which would materially adversely affect the security provided by the related Mortgage; and

(j)            Such Ground Lease provides, or the lessor has otherwise agreed, that such Ground Lease may not be amended or modified or any such amendment or modification will not be effective against the mortgagee without the prior written consent of the mortgagee under such Mezzanine Loan and any such action without such consent is not binding on such mortgagee, its successors and assigns, provided such mortgagee has provided the ground lessor with notice of its lien in accordance with the terms of the Ground Lease.

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(32)         Escrow Deposits. All escrow deposits and payments (including capital improvements, environmental remediation reserves and other reserve deposits, if any) relating to each Mortgage Loan and related Mezzanine Loan that are, as of the Purchase Date required to be deposited or paid to the lender under the terms of the related Mortgage Loan Documents have been so deposited or paid and, to the extent of any remaining balances of such escrow deposits, are in the possession or under the control of mortgagee or its agents (which shall include the applicable servicer of the Mortgage Loan). To Seller’s knowledge, any and all material requirements under each Mortgage Loan as to completion of any material improvements and as to disbursement of any funds escrowed for such purpose, which requirements were to have been complied with on or before the Purchase Date, have been complied with in all material respects or, if and to the extent not so complied with, the escrowed funds (or an allocable portion thereof) have not been released except in accordance with the terms of the related loan documents.

(33)         No Mechanics’ Liens. As of the date of the Mortgage, and to Seller’s knowledge as of the Purchase Date, each Property is free and clear of any and all mechanics’ and materialmen’s liens that are prior or equal to the lien of the related Mortgage, and no rights are outstanding that under law could give rise to any such lien that would be prior or equal to the lien of the related Mortgage except, in each case, for liens insured against by the Title Policy referred to herein or otherwise bonded.

(34)         Releases of Property. Except as described in the next sentence, no Mortgage Note or Mortgage requires the mortgagee to release all or any material portion of the related Property from the lien of the related Mortgage except upon payment in full or defeasance of all amounts due under the related Mezzanine Loan. The Mortgages relating to the Mezzanine Loans identified on the Mezzanine Loan Schedule require the mortgagee to grant releases of portions of the related Mortgaged Properties upon (a) the satisfaction of certain legal and underwriting requirements and (b) except where the portion of the Property permitted to be released was not considered by, Seller to be material in the underwriting of the Mezzanine Loan, either (1) the payment of a release price set forth therein and prepayment consideration in connection therewith or (2) the partial defeasance of such Mezzanine Loan.

(35)         No Material Default. There exists no monetary default and to Seller’s knowledge, there exists no material non-monetary default, breach, violation or event of acceleration (and no event which, with the passage of time or the giving of notice, or both, would constitute any of the foregoing) under the documents evidencing or securing the Mortgage Loan or the related Mezzanine Loan, in any such case to the extent the same materially and adversely affects the value of the Mezzanine Loan and the related Property. Neither the Mortgage Loan Seller nor any servicer acting on its behalf has issued any notice of default, breach or violation related to the Mortgage Loan, accelerated the Mortgage Loan or commenced judicial or non-judicial foreclosure proceedings with respect to the Mortgage Loan. Neither the Mezzanine Loan Seller nor any servicer acting on its behalf has issued any notice of default, breach or violation related to the Mezzanine Loan, accelerated the Mezzanine Loan or commenced judicial or non-judicial foreclosure proceedings with respect to the Mezzanine Loan.

(36)         Local Law Compliance. To Seller’s knowledge, the improvements located on or forming part of each Property complies in all material respects with applicable zoning laws and ordinances, or constitutes a legal non-conforming use or structure or, if any such improvement

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does not so comply and does not constitute a legal non-conforming use or structure, such non-compliance and failure does not materially and adversely affect (i) the value of the related Property as determined by the appraisal performed at origination or (ii) the principal use of the Property as of the date of the origination of such Mortgage Loan. To Seller’s knowledge, as of the date of origination of the Mortgage Loan, with respect to each legal non-conforming use or structure, if a casualty occurred at that time, the Property could have been restored or repaired to such an extent that the use or structure of the restored or repaired property would be substantially the same use or structure, or law and ordinance insurance has been obtained, or a holdback was established and the Mortgagor is required to cause the Property to become a conforming use or structure.

(37)         Junior Liens. None of the Mortgage Loans or related Mezzanine Loans permits the related Property or pledged equity to be encumbered by any lien junior to or of equal priority with the lien of the related Mortgage or Pledge without the prior written consent of the holder thereof or the satisfaction of debt service coverage or similar criteria specified therein. The pledged equity is not, and to Seller’s knowledge, none of the Mortgaged Properties is encumbered by any lien junior to the lien of the related Mortgage. Each Mezzanine Loan contains a “due on sale” clause that provides for the acceleration of the payment of the unpaid principal balance of the Mezzanine Loan or Mortgage Loan if, without the prior written consent of the holder thereof, the related Property, or any material portion thereof, or pledged equity or a controlling interest in the direct or indirect ownership interests in the Mortgagor is directly or indirectly transferred,  sold, or pledged.

(38)         Actions Concerning Mezzanine Loans. To Seller’s knowledge, there are no actions, suits, governmental investigations or proceedings pending or threatened before any court, governmental authority, administrative agency or arbitrator concerning any Mezzanine Loan or Mortgage Loan or the related pledgor or Mortgagor or pledged equity or Property that, if determined adversely,  would  adversely affect title to the Mezzanine Loan or Mortgage Loan or the validity or enforceability of the related pledge or Mortgage or that might materially and adversely affect the value of the pledged equity or Property, the current ability of the Property to generate net operating income to service the Mortgage Loan, the principal benefit of the security intended to be provided for the Mezzanine Loan or Mortgage Loan, or the current use of the Property.

(39)         Servicing. The servicing and collection practices used by Seller and any servicer of the Mortgage Loan or related Mezzanine Loan have been in all material respects legal, proper and prudent and have met customary industry standards for servicing of commercial Mortgage or Mezzanine Loans.

(40)         Licenses and Permits. To Seller’s knowledge, the related Mortgagor is in possession of all material licenses, permits and franchises required by applicable law for the ownership and operation of the related Property as it was then operated and, as of the Purchase Date, the  Seller has no written notice that the related Mortgagor was not in possession of such licenses, permits and franchises or that such licenses, permits and franchises have not otherwise been issued. The Mortgage Loan requires the related Property to be in material compliance with laws and regulations applicable to the Property, in each case to the extent required by law.

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(41)         Non-Recourse Exceptions. The related Mezzanine Loan and Mortgage Loan documents contain provisions providing for recourse against the related Pledgor or Mortgagor, a principal of such Pledgor or Mortgagor or an entity controlled by a principal of such Pledgor or Mortgagor, or a natural person, for damages sustained in connection with the Pledgor’s or Mortgagor’s (i) fraud, (ii) intentional misrepresentation, (iii) misappropriation or misapplication of rents or amounts due lender, insurance proceeds or condemnation proceeds, (iv) voluntary bankruptcy, (v) failure to obtain prior consent to any encumbrance of the pledged equity under the Mezzanine Loan Documents, (vi) willful misconduct resulting in waste of a Property. The related Mezzanine Loan and Mortgage Loan documents contain provisions pursuant to which the related pledgor or Mortgagor, a principal of such pledgor or Mortgagor or an entity controlled by a principal of such pledgor or Mortgagor, or a natural person, has agreed to indemnify the pledgee or mortgagee for damages resulting from violations of any applicable environmental covenants.

(42)         Single Purpose Entity. The pledgor and Mortgagor on each Mezzanine Loan and related Mortgage Loan were, as of the origination of the Mezzanine Loan, Single Purpose Entities. For this purpose, a “Single Purpose Entity” shall mean an entity, other than an individual, whose organizational documents provide substantially to the effect that it was formed or organized solely for the purpose of owning the pledged equity or the Mortgaged Properties securing the Mezzanine Loans or Mortgage Loans and prohibit it from engaging in any business unrelated to such pledged equity or Property or Properties, and whose organizational documents further provide, or which entity represented in the related Mezzanine Loan or Mortgage Loan documents, substantially to the effect that it does not have any assets other than those related to its interest in such pledged equity or interest in and operation of such Property or Properties, or any indebtedness other than as permitted by the related Pledge or Mortgage or the other related Mezzanine Loan or Mortgage Loan documents, that it has its own books and records and accounts separate and apart from any other person, and that it holds itself out as a legal entity, separate and apart from any other person, that it will not guarantee or assume the debts of any other person, that it will not commingle assets with affiliates, and that it will not transact business with affiliates except on an arm’s length basis. Each Pledgor and Mortgagor of a Mezzanine Loan and Mortgage Loan is an entity which has represented in connection with the origination of the Mezzanine Loan or Mortgage Loan, or whose organizational documents as of the date of origination of the Mezzanine Loan or Mortgage Loan provide that so long as the Mezzanine Loan is outstanding it will have at least one independent director. There are Insolvency/Non-Consolidation opinions with respect to each of the Pledgor and Mortgagor and, to Seller’s knowledge, all of the assumptions made in each such opinion are true and correct.

(43)         Separate Tax Parcels. Each Property constitutes one or more complete separate tax lots or is subject to an endorsement under the related title insurance policy.

(44)         Operating or Financial Statements. The related Mezzanine Loan Documents require the related Mortgagor to furnish to the mortgagee at least quarterly and annually an operating statement and rent roll (if there is more than one tenant) with respect to the related Property and at least annually financial statements of the Mortgagor.

(45)         Security Interests in Hospitality Properties. If any Property securing a Mortgage Loan is operated as a hospitality property then (a) the security agreements, financing statements

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or other instruments, if any, related to the Mortgage Loan secured by such Property establish and create a valid and enforceable (subject to the exceptions set forth in Paragraph 13 above) first priority security interest in all items of personal property owned by the related Borrower which are material to the conduct in the ordinary course of the Borrower’s business on the related Property, subject only to purchase money security interests, personal property leases and security interests to secure revolving lines of credit and similar financing; and (b) one or more Uniform Commercial Code financing statements covering such personal property have been filed or recorded (or have been sent for filing or recording) wherever necessary to perfect under applicable law such security interests (to the extent a security interest in such personal property can be perfected by the filing of a Uniform Commercial Code financing statement under applicable law).

(46)         Assignment of Collateral. There is no material collateral securing any Mortgage Loan that has not been assigned to the Purchaser.

(47)         Fee Simple or Leasehold Interests. The interest of the related Borrower in the Property securing each Mortgage Loan includes a fee simple and/or leasehold estate or interest in real property and the improvements thereon.

(48)         Assignment of Collateral. There is no material collateral securing any Mezzanine Loan that has not been assigned to the Purchaser.

(49)         Terrorism Insurance. With respect to each Mortgage Loan, the related all risk insurance policy and business interruption policy did not as of the date of origination of the Mortgage Loan, and, to Seller’s knowledge, does not as of the date hereof, specifically exclude acts of terrorism from coverage. With respect to each of the Mortgage Loans, the related Mortgage Loan documents do not expressly waive or prohibit the mortgagee from requiring coverage for acts of terrorism or damages related thereto, except to the extent that any right to require such coverage may be limited by commercially reasonable availability.

(50)         Transfers and Pledges. The Mezzanine Loan Collateral consists of the pledge of all of the ownership interests of the Mortgagor. Transfer and pledge restrictions under the Mezzanine Loan Documents apply to [Name of Sponsor entity], Borrower, Principal, Mortgage Borrower, Mortgage Principal and any Affiliated Manager or any shareholder, partner, member, non-member manager, any direct or indirect legal or beneficial owner of, Mortgage Borrower, Mortgage Principal, Principal, Borrower, any Guarantor, any Affiliated Manager, or any Pledgor, and Affiliated Franchisor or any non-member manager.

(51)         Management Agreement. The Management Agreement is in full force and effect and there is no default thereunder by any party thereto and no event has occurred that, with the passage of time and/or the giving of notice, would constitute a default thereunder.

(52)         Illegal Activity. To Seller’s knowledge, no portion of any Property has been or will be Mezzanine with proceeds of any illegal activity.

(53)         Embargoed Person. To the best of Seller’s knowledge, (a) none of the funds or other assets of Mortgagor, Mezzanine Borrower, Principal and Guarantor constitute property of, or are beneficially owned, directly or indirectly, by any person, entity or government subject to

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trade restrictions under U.S. law, including but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders or regulations promulgated thereunder with the result that the investment in Borrower, Principal or Guarantor, as applicable (whether directly or indirectly), is prohibited by law or the Mortgage Loan or Mezzanine Loan made by the Lender is in violation of law (“Embargoed Person”); (b) no Embargoed Person has any interest of any nature whatsoever in Mortgagor, Mezzanine Borrower, Principal or Guarantor, as applicable, with the result that the investment in Mortgagor, Mezzanine Borrower, Principal or Guarantor, as applicable (whether directly or indirectly), is prohibited by law or the Mortgage Loan or Mezzanine Loan is in violation of law; and (c) none of the funds of Mortgagor, Mezzanine Borrower, Principal or Guarantor, as applicable, have been derived from any unlawful activity with the result that the investment in Mortgagor, Mezzanine Borrower, Principal or Guarantor, as applicable (whether directly or indirectly), is prohibited by law or the Mortgage Loan or Mezzanine Loan is in violation of law.

(54)         Franchise Agreement. The Franchise Agreement and the License granted thereby are in full force and effect and there is no default thereunder by any party thereto and no event has occurred that, with the passage of time and/or giving of notice, would constitute a default thereunder. Mortgage Borrower has all rights to use the License granted under the Franchise Agreement.

(55)         Lockbox. Any agreements executed in connection with the creation of a Collection Account create a valid and continuing security interest (as defined in the Uniform Commercial Code in effect in the State of New York) in each of such Collection Accounts in favor of Buyer, which security interest is prior to all other liens, and is enforceable as such against creditors of and purchasers from Mortgagor. Each Collection Account constitutes a “deposit account” within the meaning of the Uniform Commercial Code in effect in the State of New York. Seller has directed the Servicer to cause each Depository to agree to comply with all written instructions originated by Buyer, without further consent by Borrower, directing disposition of all sums at any time held, deposited or invested in the Collection Accounts, together with any interest or other earnings thereon, and all proceeds thereof (including proceeds of sales and other dispositions), whether accounts, general intangibles, chattel paper, deposit accounts, instruments, documents or securities. The Collection Accounts are not in the name of any Person other than Mortgagor, as pledgor, or Lender, as pledgee. Seller has not consented to the Depository complying with instructions with respect to the Collection Account from any Person other than Buyer.

(56)         Compliance with Usury and Other Laws. The Mezzanine Loan, and, to Seller’s knowledge, each party involved in the origination of the Mezzanine Loan, complied as of the date of origination with, or is exempt from, applicable state or federal laws, regulations and other requirements pertaining to usury. Any and all other requirements of any federal, state or local laws applicable to the Mezzanine Loan have been complied with.

(57)         Authorized to do Business. To the extent required under applicable law, Seller is authorized to transact and do business in each jurisdiction in which a Mortgaged Property is located at all times when it held the Mezzanine Loan.

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(58)         Mezzanine Loan Documents. The Mezzanine Loan Documents contain provisions for the acceleration of the payment of the unpaid principal balance of the Mezzanine Loan if (A) the Obligor voluntarily transfers or encumbers all or any portion of any related Mezzanine collateral, or (B) any direct or indirect interest in Obligor is voluntarily transferred or assigned, other than, in each case, as permitted under the terms and conditions of the Mezzanine Loan Documents.

(59)         No Limitation on Assignability in Mezzanine Loan Documents. Except as expressly stated in the Mezzanine Loan Documents, Seller’s ability to assign, transfer and convey the Mezzanine Loan to any other person or entity is not limited or prohibited by any provision contained in the Mezzanine Loan Documents.

(60)         Collateral Secures Mezzanine Loans Only. The Mezzanine collateral does not secure any mezzanine loan other than the Mezzanine Loan being transferred and assigned to Buyer hereunder (except for Mezzanine Loans, if any, which are cross-collateralized with other Mezzanine Loans being conveyed to Buyer or subsequent transferee hereunder and identified on the Asset Schedule)

(61)         MERS Purchased Loans. With respect to each Mezzanine Loan that is a MERS Purchased Loan, the related Mortgagor registered with MERS and each assignment of the MERS Purchased Loan has been registered with MERS.

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EXHIBIT VIII

Loan Information

Investment & Loan Set-Up

I.	Investment Background
Investment name and location:
Borrower and principals: .
Type of investment:
CTIMCO deal team:
CTIMCO Closing Attorney:
Closing Date:
CT Funding Date:
Investment Amount:
Premium/discount (% and $ amount):
Adjusted gross investment commitment:
Participants:
Repo Advance Rate:
Net CT investment commitment:
Net CT investment funded at closing:
Net CT investment unfunded commitment:
Accrued interest acquired ($):
II.	Rate/Term/Fees/Guarantees/Reserves
Interest rate (floating/fixed):
LIBOR in place at CT funding date:
LIBOR Floor:
Amount of LIBOR Floor:
Interest due date:
Interest rate re-set date:
Interest Accrual Period:
1st Interest Payment Due Date:
Rate if fixed:
Index if floating:
Rounding factor for index:

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Spread if floating:
Calculation basis:
Pay/accrual:
Contingent interest:
Amortization:
Stub Interest (days):
Stub Interest ($):
Lock Box:
Servicing Fee:
Special Servicing Fee:
Trustee Servicing Fee:
Initial term:
Maturity date:
Origination/Commitment Fee:
Due Diligence Deposit:
Application Fee:
Additional Interest (Exit):
Extension Term:
Extended Maturity date:
Additional Interest (Extension):
Prepayment/Defeasance:
Reserves:
	Initial Tax Escrow: Required Repairs Reserve: Liquidity Reserve:
Tax escrows:
Insurance escrows:
Total Reserves:
Payment Guarantee (amount):
Guarantor:
Guaranty Collateral:
Lock-Out/Call Protection:
Financial Reporting Requirements:
		Monthly Statements:
		Quarterly Statements:
		Annual Statements:
		Annual Budget:

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III.			Seller/Repo Financing
Firm:
Advance Rate:
Cost of Financing:
Contact:
IV.		Senior / Junior Financing
First Mortgage Loan:
Senior Mezzanine Loan:
Junior Mezzanine Loan:
V.		Summary of Participation Rights:
1)
VI.	Hedging Information
Senior Loan Interest Rate Cap:
Date of Agreement:
Notional Amount:
Strike Prices:
Cost:
Beneficiary:
Counterparty:
Placement Agent:
Senior Mezzanine Loan Interest Rate Cap:
Date of Agreement:
Notional Amount:
Strike Prices:
Cost:
Beneficiary:
Counterparty:

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Placement Agent:
Junior Mezzanine Loan Interest Rate Cap:
Date of Agreement:
Notional Amount:
Strike Prices:
Cost:
Beneficiary:
Counterparty:
Placement Agent:
VII.	Non-Reimbursable Transaction Expenses
	Legal Fees
	Meals
	Travel/Airfare
	Insurance Review
	Total

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EXHIBIT IX

TRANSACTION PROCEDURE

Preliminary Approval of New Loan Which is an Eligible Loan.

(a)           Seller may, from time to time, submit to Buyer a Preliminary Due Diligence Package for Buyer’s review and approval in order to enter into a Transaction with respect to any New Loan that Seller proposes to be included as an Eligible Loan under this Agreement.

(b)           Buyer shall have the right to request additional diligence materials and deliveries that Buyer shall specify on a Supplemental Due Diligence List. Within five (5) Business Days after Buyer’s receipt of the Preliminary Due Diligence Package, Buyer shall either (i) notify Seller of the Purchase Price and the Market Value for the New Loan, subject to documentation satisfactory to Buyer, (ii) request additional diligence materials or (iii) deny, in Buyer’s sole and absolute discretion, Seller’s request for a Transaction. Within five (5) Business Days after receipt of all additional diligence materials, Buyer shall either approve or deny the proposal to include such Eligible Loan.

Final Approval of New Loan which is an Eligible Loan. Upon Buyer’s notification to Seller of the Purchase Price and the Market Value for any New Loan which is an Eligible Loan, Seller shall, if Seller desires to enter into a Transaction with respect to such New Loan, satisfy the conditions set forth below (in addition to satisfying the conditions precedent to obtaining each advance, as set forth in Section 2(b) of this Agreement) as a condition precedent to Buyer’s approval of such New Loan as an Eligible Loan, all in a manner reasonably satisfactory to Buyer and subject to documentation satisfactory to Buyer:

(a)           Delivery of Purchased Loan Documents. Seller shall deliver to Buyer:  (i) with respect to a New Loan that is a Pre-Existing Loan, each of the Purchased Loan Documents, except Purchased Loan Documents that Seller expressly and specifically disclosed in Seller’s Preliminary Due Diligence Package were not in Seller’s possession; and (ii) with respect to a New Loan that is an Originated Loan, each of the Purchased Loan Documents.

(b)           Environmental and Engineering. Buyer shall have received a satisfactory “Phase 1” (and, if necessary, a satisfactory “Phase 2”) environmental report, an asbestos survey, if applicable, and an engineering report, each in form reasonably satisfactory to Buyer, by an engineer or environmental consultant reasonably approved by Buyer.

(c)           Appraisal. Buyer shall have received either an appraisal approved by Buyer (or a Draft Appraisal, if Buyer approves such Draft Appraisal in lieu of a final appraisal), each by an MAI appraiser. If Buyer receives only a Draft Appraisal prior to entering into a Transaction, Seller shall deliver an appraisal approved by Buyer by an MAI appraiser on or before thirty (30) days after the Purchase Date.

(d)           Insurance. Buyer shall have received certificates or other evidence of insurance demonstrating insurance coverage in respect of the Property of types, in

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amounts, with insurers and otherwise in compliance with the terms, provisions and conditions set forth in the Purchased Loan Documents. Such certificates or other evidence shall indicate that Seller will be named as an additional insured under liability policies as its interest may appear and shall contain a loss payee endorsement under casualty policies in favor of Seller with respect to the policies required to be maintained under the Purchased Loan Documents.

(e)           Survey. Buyer shall have received all surveys of the Property that are in Seller’s possession.

(f)            Lien Search Reports. Buyer or Buyer’s counsel shall have received, as reasonably requested by Buyer, satisfactory reports of UCC, tax lien, judgment and litigation searches and title updates conducted by search firms and/or title companies acceptable to Buyer with respect to the Eligible Loan, Property, Seller and Mortgagor, such searches to be conducted in each location Buyer shall designate.

(g)           Opinions of Counsel. Buyer shall have received copies of all legal opinions in Seller’s possession with respect to the Eligible Loan which shall be in form and substance satisfactory to Buyer.

(h)           Additional Real Estate Matters. Seller shall have delivered to Buyer to the extent in Seller’s possession such other real estate related certificates and documentation as may have been requested by Buyer, such as:  (i) certificates of occupancy issued by the appropriate Governmental Authority and either letters certifying that the Property is in compliance with all applicable zoning laws issued by the appropriate Governmental Authority of evidence that the related Title Policy includes a zoning endorsement and (ii) copies of all leases in effect at the Property and estoppel certificates that were required in the origination of the applicable loan from any ground lessor and from any tenants .

(i)            Other Documents. Buyer shall have received such other documents as Buyer or its counsel shall reasonably deem necessary.

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EXHIBIT X

[RESERVED]

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EXHIBIT XI

[RESERVED]

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EXHIBIT XII

FORM OF OPINION OF COUNSEL TO SELLERS

1.             Each Seller is duly organized and validly existing as a corporation in good standing under the laws of the state of its incorporation and has power and authority to enter into and perform its obligations under this Agreement and the Custodial Agreement. Each Seller is duly qualified to do business and is in good standing in each jurisdiction in which the character of the business transacted by it requires such qualification and in which the failure so to qualify would have a material adverse effect on the business, properties, assets or condition (financial or other) of each Seller and its subsidiaries, considered as a whole.

2.             This Agreement and the Custodial Agreement have each been duly authorized, executed and delivered by each Seller, and each constitutes a valid and legally binding obligation of each Seller enforceable against each Seller in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors’ rights generally and to general equity principles.

3.             No consent, approval, authorization or order of any state or federal court or government agency or body is required to be obtained by either Seller for the consummation of the transactions contemplated by this Agreement or the Custodial Agreement.

4.             Theconsummation of any of the transactions contemplated by this Agreement and the Custodial Agreement will not conflict with, result in a breach of, or constitute a default under the articles of incorporation or bylaws of either Seller or the terms of any indenture or other agreement or instrument known to us to which either Seller is party or bound, or any order known to such counsel to be applicable to either Seller or any regulations applicable to either Seller, of any state or federal court, regulatory body, administrative agency, governmental body or arbitrator having jurisdiction over either Seller.

5.             There is no pending or threatened action, suit or proceeding before any court or governmental agency, authority or body or any arbitrator involving either Seller or relating to the transaction contemplated by this Agreement or the Custodial Agreement which, if adversely determined, would have a material adverse effect on either Seller.

6.             Buyer has a perfected security interest in the Purchased Loans.

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EXHIBIT XIII

FORM OF BAILEE AGREEMENT

[Capital Trust, Inc.]
[CT BSI Funding Corp.]
410 Park Avenue
14^th Floor
New York, New York 10022

                                 , 20   

Paul, Hastings, Janofsky & Walker LLP

75 East 55th Street

New York, New York 10022

Re: Bailee Agreement (the “Bailee Agreement”) in connection with the sale under a Amended and Restated Master Repurchase Agreement by Capital Trust, Inc. and CT BSI Funding Corp. (each a “Seller”) to Bear, Stearns Funding, Inc. (the “Buyer”)

Ladies and Gentlemen:

In consideration of the mutual promises set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller, Buyer and Paul, Hastings, Janofsky & Walker LLP (the “Bailee”) hereby agree as follows:

1.             The Seller shall deliver to the Bailee in connection with any Purchased Loans delivered to the Bailee hereunder an Identification Certificate in the form of Attachment 1 attached hereto to which shall be attached a Purchased Loan Schedule identifying which Purchased Loans are being delivered to the Bailee hereunder. Such Purchased Loan Schedule shall contain the following fields of information:  (a) the loan identifying number; (b) the obligor’s name; (c) the street address, city, state and zip code for the applicable real property; (d) the original balance; and (e) the current principal balance if different from the original balance and such other information as Seller and Buyer shall require.

2.             On or prior to the date indicated on the Custodial Delivery delivered by Seller (the “Purchase Date”), Seller shall have delivered to the Bailee, as bailee for hire, the original documents set forth on Schedule A attached hereto (collectively, the “Purchased Loan File”) for each of the Purchased Loans (each a “Purchased Loan” and collectively, the “Purchased Loans”) listed in Exhibit A to Attachment 1 attached hereto (the “Purchased Loan Schedule”).

3.             The Bailee shall issue and deliver to Buyer and the Custodian on or prior to the Purchase Date by facsimile (a) in the name of Buyer, an initial trust receipt and certification in the form of Attachment 2 attached hereto (the “Trust Receipt”) which Trust Receipt shall state

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that the Bailee has received the documents comprising the Purchased Loan File as set forth in the Custodial Delivery (as defined in that certain Custodial Agreement dated as of August 16, 2005, among Seller, Buyer and Custodian (as defined in Section 5 below), in addition to such other documents required to be delivered to Buyer and/or Custodian pursuant to the Amended and Restated Master Repurchase Agreement dated as of February 15, 2006, among Seller and Buyer (the “Amended and Restated Master Repurchase Agreement”).

4.             On the applicable Purchase Date, in the event that Buyer fails to purchase any New Loan from Seller that is identified in the related Custodial Delivery- Certificate, Buyer shall deliver by facsimile to the Bailee at (212) 230-7830 to the attention of Robert J. Grados, Esq., an authorization (the “Facsimile Authorization”) to release the Purchased Loan Files with respect to the Purchased Loans identified therein to Seller. Upon receipt of such Facsimile Authorization, the Bailee shall release the Purchased Loan Files to Seller in accordance with Seller’s instructions.

5.             Following the Purchase Date, the Bailee shall forward the Purchased Loan Files to Deutsche Bank Trust Company Americas, 1761 East St. Andrew Place, Santa Ana, California 92705, Attention:  Mortgage Custody-QT031C (the “Custodian”) by insured overnight courier for receipt by the Custodian no later than 1:00 p.m. on the third Business Day following the applicable Purchase Date (the “Delivery Date”).

6.             From and after the applicable Purchase Date until the time of receipt of the Facsimile Authorization or the applicable Delivery Date, as applicable, the Bailee (a) shall maintain continuous custody and control of the related Purchased Loan Files as bailee for Buyer and (b) is holding the related Purchased Loans as sole and exclusive bailee for Buyer unless and until otherwise instructed in writing by Buyer.

7.             The Seller agrees to indemnify and hold the Bailee and its partners, directors, officers, agents and employees harmless against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever, including reasonable attorney’s fees, that may be imposed on, incurred by, or asserted against it or them in any way relating to or arising out of this Bailee Agreement or any action taken or not taken by it or them hereunder unless such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements (other than special, indirect, punitive or consequential damages, which shall in no event be paid by the Bailee) were imposed on, incurred by or asserted against the Bailee because of the breach by the Bailee of its obligations hereunder, which breach was caused by negligence, lack of good faith or willful misconduct on the part of the Bailee or any of its partners, directors, officers, agents or employees. The foregoing indemnification shall survive any resignation or removal of the Bailee or the termination or assignment of this Bailee Agreement.

8.             (a)  In the event that the Bailee fails to produce a Mortgage Note, Mezzanine Note, assignment of a Purchased Loan or any other document related to a Purchased Loan that was in its possession within ten (10) business days after required or requested by Seller or Buyer (a “Delivery Failure”), the Bailee shall indemnify Seller or Buyer in accordance with the succeeding paragraph of this Section 8.

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(b)           The Bailee agrees to indemnify and hold Buyer and Seller, and their respective affiliates and designees harmless against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever, including reasonable attorney’s fees, that may be imposed on, incurred by, or asserted against it or them in any way relating to or arising out of a Custodial Delivery Failure or the Bailee’s negligence, lack of good faith or willful misconduct. The foregoing indemnification shall survive any termination or assignment of this Bailee Agreement.

9.             The Seller hereby represents, warrants and covenants that the Bailee is not an affiliate of or otherwise controlled by Seller. Notwithstanding the foregoing, the parties hereby acknowledge that the Bailee hereunder may act as Counsel to Seller in connection with a proposed loan and Paul, Hastings, Janofsky & Walker LLP, if acting as Bailee, has represented Seller in connection with negotiation, execution and delivery of the Amended and Restated Master Repurchase Agreement.

10.           In connection with a pledge of the Purchased Loans as collateral for an obligation of Buyer, Buyer may pledge its interest in the corresponding Purchased Loan Files held by the Bailee for the benefit of Buyer from time to time by delivering written notice to the Bailee that Buyer has pledged its interest in the identified Purchased Loans and Purchased Loan Files, together with the identity of the party to whom the Purchased Loans have been pledged (such party, the “Pledgee”). Upon receipt of such notice from Buyer, the Bailee shall mark its records to reflect the pledge of the Purchased Loans by Buyer to the Pledgee. The Bailee’s records shall reflect the pledge of the Purchased Loans by Buyer to the Pledgee until such time as the Bailee receives written instructions from Buyer that the Purchased Loans are no longer pledged by Buyer to the Pledgee, at which time the Bailee shall change its records to reflect the release of the pledge of the Purchased Loans and that the Bailee is holding the Purchased Loans as custodian for, and for the benefit of, Buyer.

11.           From time to time, subject to the acceptance and approval of Buyer, Seller may request pursuant to a request substantially in the form of Annex 6 to the Custodial Agreement the delivery by the Custodian to the Bailee of some or all of the Purchased Loan File for the purposes set forth in such request. Upon receipt of the Purchased Loan File or such portions thereof, Bailee shall hold the same as sole and exclusive bailee for Buyer until such time as the Purchased Loan File, or such portions thereof, are redelivered to the Custodian or to such other Persons, as otherwise directed by Buyer, subject in either case to the provisions set forth herein governing standards of care and indemnification and except as otherwise provided by any document specifically amending, supplementing or modifying the terms hereof which is executed and delivered by all parties hereto in connection with such delivery of the Purchased Loan File, or such portions thereof, to Bailee. Notwithstanding anything to the contrary contained in this Section 11, Bailee shall have the right to deliver such Purchased Loan File, or portions thereof, to Buyer upon five (5) days’ written notice to Buyer.

12.           The agreement set forth in this Bailee Agreement may not be modified, amended or altered, except by written instrument, executed by all of the parties hereto.

13.           This Bailee Agreement may not be assigned by Seller or the Bailee without the prior written consent of Buyer.

XIII-3

14.           For the purpose of facilitating the execution of this Bailee Agreement as herein provided and for other purposes, this Bailee Agreement may be executed simultaneously in any number of counterparts, each of which counterparts shall be deemed to be an original, and such counterparts shall constitute and be one and the same instrument.

15.           This Bailee Agreement shall be construed in accordance with the laws of the State of New York, and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws.

16.           Capitalized terms used herein and defined herein shall have the meanings ascribed to them in the Amended and Restated Master Repurchase Agreement.

[signatures begin on next page]

XIII-4

Very truly yours,

[CAPITAL TRUST, INC.]

[CT BSI FUNDING CORP.]

By:

Name:

Title:

ACCEPTED AND AGREED:

PAUL, HASTINGS, JANOFSKY & WALKER LLP,

Bailee

By:

Name: Robert J. Grados

ACCEPTED AND AGREED:

BEAR, STEARNS FUNDING, INC.

By:

Name:

Title:

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Schedule A

[List of Documents in the Purchased Loan File]

XIII-6

Attachment 1

IDENTIFICATION CERTIFICATE

On this              day of                              , 2006, the undersigned corporation (the “Seller”), under that certain Bailee Agreement of even date herewith (the “Bailee Agreement”), among Seller, Paul, Hastings, Janofsky & Walker LLP, (the “Bailee”), and Bear, Stearns Funding, Inc., as Buyer, does hereby instruct the Bailee to hold, in its capacity as Bailee, the Purchased Loan Files with respect to the Purchased Loans listed on Exhibit A hereto, which Purchased Loans shall be subject to the terms of the Bailee Agreement as of the date hereof.

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

IN WITNESS WHEREOF, Seller has caused this Identification Certificate to be executed and delivered by its duly authorized officer as of the day and year first above written.

[CAPITAL TRUST, INC.]

[CT BSI FUNDING CORP.]

Seller

By:

Name:

Title:

XIII-7

Exhibit A to Attachment 1

PURCHASED LOAN SCHEDULE

XIII-8

Attachment 2

FORM OF TRUST RECEIPT

                                , 200   

Bear, Stearns Funding, Inc.

383 Madison Avenue

New York, New York 10179

Re:Bailee Agreement, dated as of                         , 200     (the “Bailee Agreement”) among Capital Trust, Inc. and CT BSI Funding Corp. (the “Seller”), Bear, Stearns Funding, Inc. (the “Buyer”) and Paul, Hastings, Janofsky & Walker LLP (the “Bailee”)

Ladies and Gentlemen:

In accordance with the provisions of Paragraph 3 of the above-referenced Bailee Agreement, the undersigned, as the Bailee, hereby certifies that as to each Purchased Loan described in the Purchased Loan Schedule (Exhibit A to Attachment 1), a copy of which is attached hereto, it has reviewed the Purchased Loan File and has determined that (1) all documents listed in Schedule A attached to the Bailee Agreement are in its possession and (ii) such documents have been reviewed by it and appear regular on their face and relate to such Purchased Loan, and (iii) based on its examination, the foregoing documents on their face satisfy the requirements set forth in Paragraph 2 of the Bailee Agreement.

The Bailee hereby confirms that it is holding each such Purchased Loan File as agent and bailee for the exclusive use and benefit of Buyer pursuant to the terms of the Bailee Agreement.

All initially capitalized terms used herein shall have the meanings ascribed to them in the above-referenced Bailee Agreement.

PAUL, HASTINGS, JANOFSKY &
WALKER LLP, BAILEE

By:

Name:  Robert J. Grados, Esq.

XIII-9

SCHEDULE 1-A

Form of UCC Financing Statement

Debtor:	Secured Party:
[Capital Trust, Inc.]	Bear, Stearns Funding, Inc.
[CT BSI Funding Corp.]	383 Madison Avenue
410 Park Avenue, 14th Floor	New York, New York 10179
New York, New York 10022

ATTACHMENT A TO UCC FINANCING STATEMENT

This filing is for protective purposes only with respect to the Purchased Loans in case the sale of any Purchased Loan under the Repurchase Agreement is re-characterized as a grant of a security interest in any such Purchased Loan.

The collateral covered by this financing statement is all of the Debtor’s right, title and interest in, to and under the following property, whether now owned or existing, hereafter acquired or arising, or in which the Debtor now or hereafter has any rights, and wheresoever located (the “Collateral”):

(a)           all of the Purchased Loans including those identified in Schedule I hereto, all Income from such Purchased Loans and all proceeds of all of the foregoing, and

(b)           all Hedging Transactions relating to Purchased Loans entered into by Seller and all proceeds thereof.

The following terms shall have the following meanings. Such definition shall be equally applicable to the singular and plural forms of the terms defined.

“Buyer” means Secured Party.

“Custodian” means Deutsche Bank Trust Company Americas or any successor Custodian appointed by Buyer.

“Eligible Loans” means any of the following types of loans listed in (i) through (iv) below:

(i)            Whole Loans (as defined in the Repurchase Agreement) that are performing (i.e., current and not in monetary or material non-monetary default such that remedies can be exercised by any Person) commercial mortgage loans secured by first liens on multifamily and commercial real property with respect to which the ratio of loan to value as determined by Buyer, in the exercise of its commercially reasonable judgment, for the real property securing directly such loan (including for purposes of this calculation, such loan and any loan senior to or pari passu

1-A-1

with such loan and secured, directly or indirectly, by the related property) does not exceed the percentage stated in the Confirmation.

(ii)           Subordinate interests in Whole Loans (“B Notes”) that are  performing (i.e., current and not in monetary or material non-monetary default such that remedies can be exercised by any Person), commercial mortgage loans secured by first liens on multifamily and commercial real property with respect to which the ratio of loan to value as determined by Buyer, in the exercise of its commercially reasonable judgment, for the real property securing directly such loan (including for purposes of this calculation, such loan and any loan senior to or pari passu with such loan and secured, directly or indirectly, by the related property) does not exceed the percentage stated in the Confirmation.

(iii)          Mezzanine Loans (as defined in the Repurchase Agreement) that are performing (i.e., current and not in monetary or material non-monetary default such that remedies can be exercised by any Person) and with respect to which the ratio of total loan to value as determined by Buyer, in the exercise of its commercially reasonable judgment, for the real property securing indirectly such loan (including for purposes of this calculation, such loan and any loan senior to or pari passu with such loan and secured, directly or indirectly, by the related property) does not exceed the percentage stated in the Confirmation.

(iv)          any other investment presented to and approved by Buyer in its sole discretion which does not conform to the criteria set forth in clauses (i), (ii) and (iii) above and which Buyer elects in its sole discretion to purchase.

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

“Income” means, with respect to any Purchased Loan at any time, any principal (including any principal prepayments) thereof and all interest, dividends or other distributions thereon and with respect to any associated Hedging Transaction, all proceeds thereof.

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

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

“Purchased Loan File” shall mean the documents specified as the “Purchased Loan File” in Section 6(b) of the Repurchase Agreement, together with any additional documents and

1-A-2

information required to be delivered to Buyer or its designee (including the Custodian) pursuant to the Repurchase Agreement.

“Purchased Loans” means (i) with respect to any Transaction, the Eligible Loans sold by Seller to Buyer in such Transaction until such Eligible Loans are repurchased by Seller pursuant to this Agreement and (ii) with respect to the Transactions in general, all Eligible Loans sold by Seller to Buyer and any Additional Loans delivered by Seller to Buyer pursuant to Section 3(a) of the Repurchase Agreement until (x) such Eligible Loans are repurchased by Seller pursuant to the Repurchase Agreement or (y) such Additional Loans are re-delivered to Seller by Buyer pursuant to Section 3 of the Repurchase Agreement.

“Repurchase Agreement” means that certain Amended and Restated Master Repurchase Agreement dated as of February 15, 2006, between Bear, Stearns Funding, Inc. and Capital Trust, Inc. and CT BSI Funding Corp., a Delaware corporation (each a “Seller” with joint and several liability for the obligations of the other Seller) (together such other annexes and schedules attached thereto) as the same may be amended, restated or otherwise modified from time to time.

“Seller” means Debtor.

SCHEDULE 1

1.             [B] Participation Interest, dated              issued to                      . in the amount of $                    , in that certain Mortgage Loan [(in the original principal amount of $               )], dated as of           , made by                 . to                   under and pursuant to that certain Loan Agreement dated as of                between                 and               and secured by that certain property located in            , [as such B Participation Interest was assigned by                  to Capital Trust, Inc. pursuant to that certain Assignment and Assumption Agreement (Participation B) dated as of               ].

2.             [$           [Senior/Junior] Mezzanine Loan, dated as of             made by             to           , under and pursuant to that certain [Loan Agreement] dated as of            between             and           , [as assigned (together with such loan agreement and all of the other loan documents evidencing and securing such senior mezzanine loan) by            to Capital Trust, Inc. pursuant to that certain Omnibus Assignment dated as of           ].

1-A-3

SCHEDULE 1-B

Form of UCC Financing Statement Amendment

Debtor:	Secured Party:
Capital Trust, Inc.	Bear, Stearns Funding, Inc.
410 Park Avenue, 14th Floor	383 Madison Avenue
New York, New York 10022	New York, New York 10179

ATTACHMENT A TO UCC FINANCING STATEMENT AMENDMENT

This filing is for protective purposes only with respect to the Purchased Loans in case the sale of any Purchased Loan under the Repurchase Agreement is re-characterized as a grant of a security interest in any such Purchased Loan.

The collateral covered by this financing statement is all of the Debtor’s right, title and interest in, to and under the following property, whether now owned or existing, hereafter acquired or arising, or in which the Debtor now or hereafter has any rights, and wheresoever located (the “Collateral”):

(a)           all of the Purchased Loans including those identified in Schedule I hereto, all Income from such Purchased Loans and all proceeds of all of the foregoing, and

(b)           all Hedging Transactions relating to Purchased Loans entered into by Seller and all proceeds thereof.

The following terms shall have the following meanings. Such definition shall be equally applicable to the singular and plural forms of the terms defined.

“Buyer” means Secured Party.

“Custodian” means Deutsche Bank Trust Company Americas or any successor Custodian appointed by Buyer.

“Eligible Loans” means any of the following types of loans listed in (i) through (iv) below:

(i)            Whole Loans (as defined in the Repurchase Agreement) that are performing (i.e., current and not in monetary or material non-monetary default such that remedies can be exercised by any Person) commercial mortgage loans secured by first liens on multifamily and commercial real property with respect to which the ratio of loan to value as determined by Buyer, in the exercise of its commercially reasonable judgment, for the real property securing directly such loan (including for purposes of this calculation, such loan and any loan senior to or pari passu

1-B-1

with such loan and secured, directly or indirectly, by the related property) does not exceed the percentage stated in the Confirmation.

(ii)           Subordinate interests in Whole Loans (“B Notes”) that are  performing (i.e., current and not in monetary or material non-monetary default such that remedies can be exercised by any Person), commercial mortgage loans secured by first liens on multifamily and commercial real property with respect to which the ratio of loan to value as determined by Buyer, in the exercise of its commercially reasonable judgment, for the real property securing directly such loan (including for purposes of this calculation, such loan and any loan senior to or pari passu with such loan and secured, directly or indirectly, by the related property) does not exceed the percentage stated in the Confirmation.

(iii)          Mezzanine Loans (as defined in the Repurchase Agreement) that are performing (i.e., current and not in monetary or material non-monetary default such that remedies can be exercised by any Person) and with respect to which the ratio of total loan to value as determined by Buyer, in the exercise of its commercially reasonable judgment, for the real property securing indirectly such loan (including for purposes of this calculation, such loan and any loan senior to or pari passu with such loan and secured, directly or indirectly, by the related property) does not exceed the percentage stated in the Confirmation.

(iv)          any other investment presented to and approved by Buyer in its sole discretion which does not conform to the criteria set forth in clauses (i), (ii) and (iii) above and which Buyer elects in its sole discretion to purchase.

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

“Income” means, with respect to any Purchased Loan at any time, any principal (including any principal prepayments) thereof and all interest, dividends or other distributions thereon and with respect to any associated Hedging Transaction, all proceeds thereof.

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

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

“Purchased Loan File” shall mean the documents specified as the “Purchased Loan File” in Section 6(b) of the Repurchase Agreement, together with any additional documents and

1-B-2

information required to be delivered to Buyer or its designee (including the Custodian) pursuant to the Repurchase Agreement.

“Purchased Loans” means (i) with respect to any Transaction, the Eligible Loans sold by Seller to Buyer in such Transaction until such Eligible Loans are repurchased by Seller pursuant to this Agreement and (ii) with respect to the Transactions in general, all Eligible Loans sold by Seller to Buyer and any Additional Loans delivered by Seller to Buyer pursuant to Section 3(a) of the Repurchase Agreement until (x) such Eligible Loans are repurchased by Seller pursuant to the Repurchase Agreement or (y) such Additional Loans are re-delivered to Seller by Buyer pursuant to Section 3 of the Repurchase Agreement.

“Repurchase Agreement” means that certain Amended and Restated Master Repurchase Agreement dated as of February 15, 2006, between Bear, Stearns Funding, Inc. and Capital Trust, Inc. and CT BSI Funding Corp., a Delaware corporation (each a “Seller” with joint and several liability for the obligations of the other Seller) (together such other annexes and schedules attached thereto) as the same may be amended, restated or otherwise modified from time to time.

“Seller” means Debtor.

SCHEDULE 1

1.             [B] Participation Interest, dated          issued to                . in the amount of $                 , in that certain Mortgage Loan [(in the original principal amount of $                  )], dated as of                   , made by                  . to               under and pursuant to that certain Loan Agreement dated as of                between                    and                 and secured by that certain property located in               , [as such B Participation Interest was assigned by                     to Capital Trust, Inc. pursuant to that certain Assignment and Assumption Agreement (Participation B) dated as of               ].

2.             [$                     [Senior/Junior] Mezzanine Loan, dated as of                    made by                     to                   , under and pursuant to that certain [Loan Agreement] dated as of                    between                     and                   , [as assigned (together with such loan agreement and all of the other loan documents evidencing and securing such senior mezzanine loan) by                    to Capital Trust, Inc. pursuant to that certain Omnibus Assignment dated as of                   ].

1-B-3

EX-10.31.B

Exhibit 10.31.b

Bear, Stearns Funding, Inc.
383 Madison Avenue
New York, New York   10179

February 15, 2006

Capital Trust, Inc.

and

CT BSI Funding Corp.

410 Park Avenue

New York, New York  10022

Re: Pricing Terms for Amended and Restated Master Repurchase Agreement, dated as of February 15, 2006, by and between Bear, Stearns Funding, Inc., Capital Trust, Inc. and CT BSI Funding Corp.

Ladies and Gentlemen:

Reference is made to the Amended and Restated Master Repurchase Agreement, dated as of February 15, 2006 (the “Agreement”), by and between Bear, Stearns Funding, Inc. (“Buyer”), Capital Trust, Inc., and CT BSI Funding Corp. (each a “Seller” with joint and several liability for the obligations of the other Seller), as the same may be amended from time to time.  The purpose of this letter agreement (the “Letter Agreement”) is to set forth certain terms governing the circumstances under which the Buyer will enter into Transactions pursuant to the Agreement.  Capitalized terms used and not otherwise defined herein shall have the meanings set forth in the Agreement.

1.             Buyer’s Margin Ratio:  Unless otherwise agreed by the parties (which agreement shall be memorialized in writing in the related Confirmation), the Purchase Price on any Purchase Date prior to the Commitment Expiration Date shall be equal to the product of the Market Value of the Purchased Assets and the applicable Buyer’s Margin Ratio listed in the chart below.

2.             Purchase Fee:  The Purchase Fee shall be a one-time, up front amount, to be paid by Sellers on the initial Purchase Date, equal to the product of (i) the Maximum Committed Aggregate Purchase Price and (ii) [****] less any Purchase Fee paid under the Bear, Stearns Funding Repurchase Agreement.

3.             Pricing Rate:  The Pricing Rate with respect to each Transaction shall be one month LIBOR plus the spread listed in the chart below (unless otherwise agreed by the parties, which agreement shall be memorialized in writing in the related Confirmation):

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

Buyer’s Margin Ratio and Pricing Rate Spread for CDO I and CDO II Assets

	CDO I Assets	CDO II Assets
Buyers Margin Ratio	[****]	[****]
Pricing Rate Spread  (LIBOR plus number of basis points)	[****]	[****]

Buyer’s Margin Ratio and Pricing Rate Spread for Assets other than CDO I and CDO II Assets

Combined Property/ Underlying Assets Loan to Value Ratio		[****]	[****]	[****]	[****]	[****]	[****]	[****]	[****]
Mezzanine Loans, Junior Participations & B Notes
	Buyer’s Margin Ratio	[****]	[****]	[****]	[****]	[****]	[****]	[****]	[****]
	Pricing Rate Spread (LIBOR plus number of basis points)	[****]	[****]	[****]	[****]	[****]	[****]	[****]	[****]

All loan to value ratios are determined by a third-party appraiser mutually acceptable to Buyer and Sellers.  If an Eligible Asset is a hotel, the Buyer’s Margin Ratio and the Pricing Rate may change as agreed to by the parties.

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

4.             Sellers must enter into Transactions with respect to at least three (3) Eligible Assets within six (6) months of the initial Purchase Date (the “Required Transactions”) in order to maintain the Buyer’s Margin Ratios set forth above.  Buyer shall have the right in its sole discretion to reduce the applicable Buyer’s Margin Ratios by ten percent (10%) in the event that Sellers enter into Transactions with respect to one (1) or two (2) Eligible Assets.

 5.            If Buyer exercises its right to reduce the Buyer’s Margin Ratio as provided in paragraph 3 above within six (6) months prior to the Commitment Expiration Date and a Seller elects to effect an Early Repurchase Date after Buyer has exercised such right, then no Exit Fee shall be due or payable with respect to such Early Repurchase Date.

The terms of this Letter Agreement shall supersede all prior Letter Agreements between the parties.  The terms and provisions set forth in this Letter Agreement shall terminate upon the termination of the Agreement.  Any agreement by Buyer to extend the term of the Agreement shall not thereby extend any of the terms and provisions set forth herein with respect to any Transactions entered into on or after any renewal of the Agreement, unless expressly agreed to by Buyer.

This Letter Agreement may be executed in any number of counterparts, each of which counterparts shall be deemed to be an original, and all such counterparts shall constitute one and the same instrument.

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

In the event of any inconsistency between the terms and provisions contained herein and the Agreement, the terms and provisions of this Letter Agreement shall govern.

BEAR, STEARNS FUNDING, INC.
By:	/s/ David S. Marren
	Name:	David S. Marren
	Title:	Senior Vice President

Acknowledged and Agreed:

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

CT BSI FUNDING CORP.

By:	/s/ Geoffrey G. Jervis
	Name:  Geoffrey G. Jervis
	Title:  Chief Financial Officer

EX-10.32.A

Exhibit 10.32.a

EXECUTION COPY

AMENDED AND RESTATED
MASTER REPURCHASE AGREEMENT

Dated as of February 15, 2006

Between:

BEAR, STEARNS INTERNATIONAL LIMITED,

as Buyer

and

CAPITAL TRUST, INC.,

as Seller jointly and severally with the other Seller

and

CT BSI FUNDING CORP.,

as Seller jointly and severally with the other Seller

APPLICABILITY

From time to time the parties hereto may enter into transactions in which Bear, Stearns International Limited (“Buyer”) may, in its sole discretion, agree to purchase Eligible Assets from Capital Trust, Inc. and/or CT BSI Funding Corp. (individually “Seller” and collectively “Sellers”), with a simultaneous agreement by Buyer to transfer to Seller such Eligible Assets at a date certain or on demand of Seller subject to and in accordance with the exercise of Buyer’s remedies under this Agreement, against the transfer of funds by Seller. Each such transaction shall be referred to herein as a “Transaction” and shall be governed by this Agreement, as the same shall be amended from time to time.

1.DEFINITIONS

“Accelerated Repurchase Date” shall have the meaning set forth in Section 14 of this Agreement.

“Accepted Servicing Practices” shall mean with respect to any Purchased Asset, those mortgage or mezzanine loan servicing practices of prudent lending institutions which service loans of the same type as such Purchased Asset in the jurisdiction where the related underlying real estate directly or indirectly securing such Purchased Asset is located.

“Act of Insolvency” shall mean with respect to Buyer or either Seller, (i) the commencement by such party as debtor of any case or proceeding under any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law, or such party seeking

the appointment of a receiver, trustee, custodian or similar official for such party or any substantial part of its property, or (ii) the commencement of any such case or proceeding against such party, or another seeking such an appointment, or the filing against a party of an application for a protective decree under the provisions of the Securities Investor Protection Act of 1970, which (A) is consented to or not timely contested by such party, (B) results in the entry of an order for relief, such an appointment, the issuance of such a protective decree or the entry of an order having a similar effect, or (C) is not dismissed within 15 days, (iii) the making by a party of a general assignment for the benefit of creditors, or (iv) the admission in writing by a party of such party’s inability to pay such party’s debts as they become due.

“Additional Assets” shall have the meaning set forth in Section 3(a) of this Agreement.

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

“Agreement” shall mean this Amended and Restated Master Repurchase Agreement dated as of February 15, 2006, by and between Buyer and Seller.

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

“Authorized Representative of Seller” shall mean the individuals, set forth on Exhibit II hereto.

“B Note” shall mean the “B” noteholders interest in an “A/B” loan structure.

“Bailee” shall mean an attorney, title company or other closing agent, appointed by Seller and reasonably acceptable to Buyer, who is party to a Bailee Agreement and executes a Trust Receipt in connection with a Table Funded Asset.

“Bailee Agreement” shall mean a written agreement between Seller and a Bailee relating to the bailment in connection with Table Funded Assets, naming Buyer as a third party beneficiary and substantially in the form of Exhibit XIII hereto.

“Bear Stearns Funding Repurchase Agreement” shall mean the Amended and Restated Master Repurchase Agreement, dated as of August 16, 2006, between Bear, Stearns Funding, Inc. and Capital Trust, Inc., as the same may be amended from time to time.

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

“Buyer” shall mean Bear, Stearns International Limited, or any successor.

“Buyer’s Margin Ratio” shall mean, with respect to any Transaction, as of any date, a percentage agreed to by Buyer and Seller or, in the absence of any such agreement, the percentage obtained by dividing the Purchase Price of the Purchased Assets on the Purchase Date by the Market Value on such date for such Transaction.

“CDO Assets” shall mean the aggregate of the CDO I Assets and the CDO II Assets.

“CDO I Assets” shall mean Eligible Assets, as specified in the CTRE CDO 2004-1 Indenture, which are to be designated as CDO I Assets.

“CDO II Assets” shall mean Eligible Assets, as specified in the CTRE CDO 2005-1 Indenture, which are to be designated as CDO II Assets.

“Collateral” shall have the meaning set forth in Section 5 of this Agreement.

“Collection Account” shall mean a segregated interest bearing account established and maintained at the Depository, in the name of and for the benefit of Buyer pursuant to the terms of the Depository Agreement.

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

“Commitment Expiration Date” shall mean August 15, 2008.

“Confirmation” shall have the meaning specified in Section 2(b) of this Agreement.

“Custodial Agreement” shall mean the Custodial Agreement, dated as of December 22, 2005 among the Custodian, Sellers and Buyer, as amended, restated, modified and in effect from time to time.

“Custodial Delivery” shall mean the form executed by Seller in order to deliver the Purchased Asset Schedule and the Purchased Asset File to Buyer or its designee (including the Custodian) pursuant to Section 6, a form of which is attached hereto as Exhibit IV.

“Custodian” shall mean Deutsche Bank Trust Company Americas or any successor Custodian appointed by Buyer and Seller with the prior written consent of Seller (which consent shall not be unreasonably withheld).

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

“Debt” means, with respect to any Person at any date, all indebtedness or other obligations of such Person in accordance with GAAP.

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

“Depository” shall mean PNC Bank, National Association or any successor Depository appointed by Seller and approved by Buyer, which approval shall not be unreasonably withheld, conditioned or delayed.

“Depository Agreement” shall mean the agreement governing the Collection Account between the Depository and Buyer and Seller and their respective successors and assigns as the same may be modified, amended or supplemented from time to time.

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

“Direction Letter” shall mean a letter signed by Seller directing the Servicer to send all Income with respect to the Purchased Assets, as well as any payments in respect of associated Hedging Transactions, to the Collection Account held by the Depository within one (1) Business Day of receipt.

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

 “Early Repurchase Date” shall have the meaning specified in Section 2(g) of this Agreement.

“EBITDA” shall mean earnings before interest, tax, depreciation and amortization.

“Eligible Assets” shall mean any of the following types of assets, which assets shall not provide for any restrictions (other than notice) on transfer to or by Buyer and otherwise are acceptable to Buyer in the exercise of its commercially reasonable business judgment, and are secured directly or indirectly by a property that is a multifamily, retail, office, warehouse, industrial, or hospitality property (or any other property type acceptable to Buyer), is located in the United States of America, its territories or possessions, meet all of the other requirements of this Amended and Restated Master Repurchase Agreement, and which would not, if the same became Eligible Assets, cause the aggregate Purchase Price of all Eligible Assets to exceed the Maximum Aggregate Purchase Price:

(i)Participation Interests in Whole Loans, B Notes or Mezzanine Loans that are performing (i.e., current and not in monetary or material non-monetary default such that remedies can be exercised by any

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Person) commercial mortgage loans secured by first liens on multifamily and commercial real property with respect to which the ratio of loan to value as determined by Buyer, in the exercise of its commercially reasonable judgment, for the real property securing directly such loan (including for purposes of this calculation, such loan and any loan senior to or pari passu with such loan and secured, directly or indirectly, by the related property) does not exceed the percentage stated in the Confirmation; and

(ii)any other investment presented to and approved by Buyer in its sole discretion which does not conform to the criteria set forth in clause (i) above and which Buyer elects in its sole discretion to purchase, in which case the criteria for the ratio of total loan to value and any modifications to the Maximum Aggregate Purchase Price with respect to such asset, shall be set forth in the related Confirmation for the Transaction under which such asset is purchased by Buyer.

An Eligible Asset must have the related Purchased Asset File segregated and held by the Custodian. Participation Interests in non-performing loans and loans secured by undeveloped land, coop shares and construction loans are not eligible for inclusion as Eligible Assets.

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

“ERISA Affiliate” means any corporation or trade or business that is a member of any group of organizations (i) described in Section 414(b) or (c) of the Code of which Seller is a member and (ii) solely for purposes of potential liability under Section 302(c)(l1) of ERISA and Section 412(c)(ll) of the Code and the lien created under Section 302(f) of ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of which Seller is a member.

“Event of Default” shall have the meaning set forth in Section 13 of this Agreement.

“Exit Fee” shall have the meaning specified in Section 2(g).

“Filings” shall have the meaning specified in Section 5 of this Agreement.

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

“Governmental Authority” shall mean any national or federal government, any state, regional, local or other political subdivision thereof with jurisdiction and any

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Person with jurisdiction exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

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

 “Income” shall mean, with respect to any Eligible Asset at any time, any principal (including any principal prepayments) thereof and all interest, dividends or other distributions thereon and with respect to any associated Hedging Transaction, all proceeds thereof.

“Indemnified Amounts” and “Indemnified Parties” shall have the meaning specified in Section 19 of this Agreement.

“Intercreditor Agreement” shall mean the agreement between Seller and the holder of a senior participation interest in the related Eligible Asset.

“LIBOR” shall mean, unless otherwise agreed to by the parties hereto, the rate per annum (rounded upwards, if necessary, to the next 1/100th of 1%) calculated on each Pricing Rate Determination Date for the next Pricing Rate Period as equal to the rate for U.S. dollar deposits for a one month period which appears on Telerate Page 3750 as of 10:00 am, New York City time, on such Pricing Rate Determination Date; provided, however, that if such rate does not appear on Telerate Page 3750, “LIBOR” determined on each Pricing Rate Determination Date for the next Pricing Rate Period shall mean a rate per annum equal to the rate at which U.S. dollar deposits are offered in immediately available funds in the London Interbank Market to the London office of National Westminster Bank, Plc (or its successors) by leading banks in the Eurodollar market at 10:00 a.m., New York City time, on the Pricing Rate Determination Date. “Telerate Page 3750” means the display designated as “Page 3750” on the Associated Press-Dow Jones Telerate Service (or such other page as may replace Page 3750 on the Associated Press-Dow Jones Telerate Service or such other service as may be nominated by the British Bankers’ Association as the information vendor for the purpose of displaying British Banker’s Association interest settlement rates for U.S. Dollar deposits). LIBOR determined on the basis of the rate displayed on Telerate Page 3750 in accordance with the provisions hereof shall be subject to corrections, if any, made in such rate and displayed by the Associated Press-Dow Jones Telerate Service within one (1) hour of the time when such rate is first displayed by such Service.

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

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“Margin Call” shall have the meaning set forth in Section 3(a) of this Agreement.

“Margin Deficit” shall have the meaning set forth in Section 3(a) of this Agreement.

“Market Value” shall mean, with respect to any Purchased Assets, as of any relevant date, the market value for such Purchased Assets on such date, as determined by Buyer in the exercise of its commercially reasonable judgment exercised in good faith and may be determined on each Business Day during the term of this Agreement, or less frequently from time to time if Buyer elects in its sole discretion. Any provision hereof to the contrary notwithstanding, a Market Value of zero shall, unless otherwise determined by Buyer in its sole discretion, be assigned to (i) any Purchased Asset that has been delinquent for at least sixty (60) days, (ii) any Purchased Asset released by the Custodian for more than 10 Business Days other than with the consent of Buyer or (iii) any Purchased Asset has become a specially serviced loan as defined in the applicable servicing agreement.

“Maximum Aggregate Purchase Price”  shall mean the sum of the Maximum Committed Aggregate Purchase Price and the Maximum CDO Aggregate Purchase Price.

“Maximum CDO Aggregate Purchase Price” shall mean $50,000,000 less the aggregate Purchase Price for CDO Assets owed to Bear Stearns Funding, Inc. under the Bear Stearns Funding Repurchase Agreement.

“Maximum Committed Aggregate Purchase Price” shall mean $150,000,000 less the aggregate amount owed, excluding the aggregate Purchase Price for CDO Assets, to Bear Stearns Funding, Inc. under the Bear Stearns Funding Repurchase Agreement; provided, however, that for the purposes of calculating the Purchase Fee hereunder, the Maximum Committed Aggregate Purchase Price shall be deemed to be as provided in Section 2(e) hereof.

“MERS” shall mean the Mortgage Electronic Registration Systems, Inc.

“MERS Underlying Asset” shall mean an Underlying Asset that is registered with MERS.

“Mezzanine Loan” shall mean a loan secured by pledges of substantially all of the equity ownership interests in entities that own directly or indirectly multifamily and commercial properties.

“Mezzanine Loan Documents” shall mean any and all documents required in connection with the financing of a Mezzanine Loan.

“Mezzanine Note” shall mean a note evidencing Mezzanine Loan indebtedness.

“Modified Debt” shall mean Debt reduced by (i) amounts of liabilities resulting from the sale of participation interests, (ii) liabilities resulting from consolidation of Debt associated with securitizations where Seller has no recourse obligation for the Debt and

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which Debt was not issued by Seller or its subsidiaries and (iii) liabilities resulting from the consolidation of vehicles managed by Seller or a Subsidiary of Seller where Seller has less than a 50% equity interest.

“Modified Recourse Debt” shall mean Debt reduced by (i) amounts of liabilities resulting from the sale of participation interests, (ii) liabilities resulting from consolidation of Debt associated with securitizations where Seller has no recourse obligation for the Debt and (iii) liabilities resulting from the consolidation of vehicles managed by Seller or a Subsidiary of Seller where Seller has less than a 50% equity interest.

“Moody’s” shall mean Moody’s Investor Service, Inc. or any successor thereto.

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

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

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

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

“Net Worth” shall mean with respect to any Person at any date, the excess of the total assets over total liabilities of such Person on such date, each to be determined in accordance with GAAP consistent with those applied in the preparation of the most recent audited financial statements.

“New Asset” shall mean any asset that Seller proposes to be included as an Eligible Asset.

“Non-Usage Fee” shall have the meaning specified in Section 2(h) herein.

“Originated Asset” shall mean any asset that is an Eligible Asset and whose Purchased Asset Documents were prepared by or on behalf of Seller or Buyer.

“Outstanding Purchase Price” shall mean, with respect to any Transaction, the original Purchase Price reduced by all principal payments and paydowns received by Buyer (other than payments with respect to accrued Price Differential) and plus any additional amounts advanced by Buyer with respect to the related Eligible Assets.

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“Participation Agreement” shall mean the agreement creating the Participation Interest in the related Whole Loan, Mezzanine Loan or B Note.

“Participation Certificate” shall mean a certificate evidencing a Participation Interest.

“Participation Interest” shall mean an undivided interest in a Whole Loan, a Mezzanine Loan or a B Note and which is senior to, junior to or pari passu with other interests created pursuant to the related Participation Agreement.

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

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

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

“Preliminary Due Diligence Package” shall mean with respect to any New Asset, a summary memorandum outlining the proposed transaction, including potential transaction benefits and material underwriting risks, all Underwriting Issues and all other characteristics of the proposed transaction that a reasonable buyer would consider material, together with due diligence information relating to the New Asset to be provided by Seller to Buyer pursuant to this Agreement, including, but not limited to:

With respect to each Eligible Asset:

(i)the Underlying Loan Information;

(ii)description of the property or properties;

(iii)description of the borrower, including experience with other projects (real estate owned) and net worth and liquidity statements if available. In the event that such statements are not available, evidence of the credit strength of the borrower acceptable to Buyer;

(iv)description of the ownership structure of the borrower (including, without limitation, independent director(s)/member(s));

(v)term sheet outlining the transaction generally, including description of existing or proposed senior debt;

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(vi)debt service coverage and loan to value ratios;

(vii)Seller’s relationship with the Borrower, if any;

(viii)with respect to any New Asset that is a Pre-Existing Asset, a list that specifically and expressly identifies any Purchased Asset Documents that relate to such New Asset but are not in Seller’s possession;

(ix)sufficient information to permit Buyer to satisfy itself, in its sole discretion, that the statements set forth in Exhibit VI or Exhibit VII to this Agreement are materially correct;

(x)asset summary books which include, to the extent provided to Seller, the following:

(A)loan detail and asset description, including market information on competing properties, terrorism and other insurance coverage;

(B)map, photo;

(C)current rent roll;

(D)historical, current and pro forma cash flow and operating information;

(E)appraisal, environmental, engineering summary;

(F)information relating to valuation, security or underwriting issues, special or unique loan features and structural issues;

(xi)Securitization Documents, Intercreditor Agreements, if any, and Participation Agreements;

(xii)legal opinions delivered with respect to the Eligible Asset in Seller’s possession; and

(xiii)closing binder in respect of the Purchased Asset (or if not yet prepared, an execution copy of the Participation Agreement).

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

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“Pricing Rate” shall mean, for any Pricing Rate Period with respect to any Transaction, an annual rate equal to LIBOR for such Pricing Rate Period plus the relevant spread for such Transaction as determined pursuant to the Side Letter and indicated on the applicable Confirmation.

“Pricing Rate Determination Date” shall mean in the case of the first Pricing Rate Period with respect to any Transaction, the first day on which the Pricing Rate Period begins.

“Pricing Rate Period” shall mean, (a) in the case of the first Pricing Rate Period with respect to any Transaction, the period commencing on and including the Purchase Date for such Transaction and ending on and including the last day of the month in which the Purchase Date occurs and (b) in the case of any subsequent Pricing Rate Period, the period commencing on the first calendar day of each month and ending on and including the last calendar day of such month; provided, however, that in no event shall any Pricing Rate Period end subsequent to the Repurchase Date.

“Principal Payment” shall mean, with respect to any Purchased Assets, any payment or prepayment of principal or any proceeds of redemption which are applied to principal and received by the Depository in respect thereof.

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

“Purchase Agreement” shall mean the agreement pursuant to which Seller acquired the Purchased Asset.

“Purchase Date” shall mean the date on which Eligible Assets are to be transferred by Seller to Buyer.

“Purchase Fee” shall have the meaning specified in Section 2(e).

“Purchase Price” shall mean, with respect to any Purchased Assets, the price at which such Purchased Assets are sold by Seller to Buyer on the applicable Purchase Date as set forth in the Side Letter or the Confirmation, as applicable.

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

“Purchased Asset File” shall mean the documents specified as the “Purchased Asset File” in Section 6(b), together with any additional documents and information required to be delivered to Buyer or its designee (including the Custodian) pursuant to this Agreement.

“Purchased Asset Schedule” shall mean a schedule of Purchased Assets attached to each Trust Receipt and Custodial Delivery containing information substantially similar to the Underlying Loan Information.

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“Purchased Assets” shall mean (i) with respect to any Transaction, the Eligible Assets sold by Seller to Buyer in such Transaction until such Eligible Assets are repurchased by Seller pursuant to this Agreement and (ii) with respect to the Transactions in general, all Eligible Assets sold by Seller to Buyer and any Additional Assets delivered by Seller to Buyer pursuant to Section 3(a) of this Agreement until (x) such Eligible Assets are repurchased by Seller pursuant to this Agreement or (y) such Additional Assets are re-delivered to Seller by Buyer pursuant to Section 3 of this Agreement.

“Remittance Date” shall mean the eleventh (11^th) calendar day of each month, or the next succeeding Business Day, if such calendar day shall not be a Business Day or such other day of the month as shall be agreed upon by both Buyer and Seller.

“Repurchase Date” shall mean the date on which Seller is to repurchase the Purchased Assets from Buyer, which shall be the date specified in the related Confirmation or determined by application of the provisions hereof.

“Repurchase Price” shall mean, with respect to any Purchased Assets as of any date, the price at which such Purchased Assets are to be transferred from Buyer to Seller upon termination of the related Transaction; such price will be determined in each case as the sum of the Outstanding Purchase Price of such Purchased Assets and the accrued but unpaid Price Differential with respect to such Purchased Assets as of the date of such determination.

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

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

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

“Seller” and “Sellers” shall mean Capital Trust, Inc., a Maryland corporation, and CT BSI Funding Corp., a Delaware corporation, individually and collectively as applicable and in all cases jointly and severally.

“Servicing Agreement” has the meaning specified in Section 21(b).

“Servicing Records” has the meaning specified in Section 21(b).

“Side Letter” shall mean the letter dated as of February 15, 2006, by and between Buyer and Seller.

“Standard & Poor’s” shall mean Standard & Poor’s Ratings Services, a Division of The McGraw-Hill Companies, Inc.

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“Subsidiary” shall mean, with respect to Seller, an entity that is wholly owned or controlled by Seller but excluding any vehicles where Seller has less than a 50% equity interest.

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

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

“Table Funded Asset” shall mean a Purchased Asset, designated in the related Confirmation as a Table Funded Asset, where the Purchased Asset File is in the custody of the Bailee or en route to the Custodian.

“Title Policy” shall have the meaning specified in paragraph 8 of Exhibit VI.

“Transaction Conditions Precedent” shall have the meaning specified in Section 2(b) of this Agreement.

“Transaction Documents” shall mean, collectively, this Agreement, the Custodial Agreement, the Servicing Agreement, the Side Letter, the Subordination Agreement and all Confirmations executed pursuant to this Agreement in connection with specific Transactions.

“Trust Receipt” shall mean a trust receipt issued by Custodian to Buyer confirming the Custodian’s possession of certain Purchased Asset Files which are the property of and held by Custodian for the benefit of Buyer (or any other holder of such trust receipt).

“UCC” shall have the meaning specified in Section 5 of this Agreement.

“Underlying Asset” shall mean the Whole Loan, B Note, Mezzanine Loan or other asset approved by Buyer that underlies a Participation Interest.

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

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

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reasonable institutional Buyer in determining whether to originate or acquire the New Assets in question.

“Undrawn Available Amount” shall mean the excess of the maximum drawable amount of a Purchased Asset (as agreed to by Buyer and Seller) over the aggregate Purchase Price of such Purchased Asset (calculated on an asset-by-asset basis).

“Whole Loan” shall mean a commercial mortgage loan or note secured by a first lien on multifamily and commercial real property.

2.INITIATION; CONFIRMATION; REVOLVING TRANSACTIONS; TERMINATION; FEES

(a)On or after the date hereof and prior to the Commitment Expiration Date and subject to the terms and conditions set forth in this Agreement (including, without limitation, the “Transaction Conditions Precedent” specified in Section 2(b) of this Agreement), an agreement to enter into a Transaction shall be made in writing at the initiation of Seller as provided below; provided, however, that entering into any Transaction shall be in Buyer’s sole and absolute discretion and that the aggregate Repurchase Price (excluding the Price Differential with respect to the Purchased Assets as of the date of determination) for all Transactions shall not exceed the Maximum Aggregate Purchase Price. Seller shall give Buyer written notice of each proposed Transaction and Buyer shall inform Seller of its determination with respect to any assets proposed to be sold to Buyer by Seller solely in accordance with Exhibit X attached hereto. Buyer shall have the right to review all Eligible Assets proposed to be sold to Buyer in any Transaction and to conduct, at its own expense, its own due diligence investigation of such Eligible Assets as Buyer determines. Upon receipt of all Diligence Materials and other required documentation, Buyer shall complete its due diligence review and financial modeling with respect to the assets proposed to be sold to Buyer by Seller. Buyer shall be entitled to make a determination, in the exercise of its sole discretion, that it shall not purchase any or all of the assets proposed to be sold to Buyer by Seller, such determination to be made in accordance with Exhibit X attached hereto. On the Purchase Date for the Transaction which shall be not less than one (1) Business Day following the approval of an Eligible Asset by Buyer in accordance with Exhibit X hereto, the Purchased Assets shall be transferred to Buyer or its agent against the transfer of the Purchase Price in immediately available funds to an account designated by Seller. To the extent Buyer enters into a Transaction with Seller with respect to a Purchased Asset which is an Eligible Asset of the type described in Clause (ii) of the definition thereof (i.e., such Eligible Asset does not satisfy the characteristics described in clause (i) of the definition thereof), then such asset shall be deemed to be an Eligible Asset for all purposes of this Agreement.

(b)Upon agreeing to enter into a Transaction hereunder, provided each of the Transaction Conditions Precedent (as hereinafter defined) shall have been satisfied (or waived by Buyer), Buyer shall promptly deliver to Seller a written confirmation substantially in the form of Exhibit I attached hereto of each Transaction (a “Confirmation”). In the absence of execution and delivery by Buyer of a Confirmation for a proposed Transaction, Buyer shall under no circumstance be deemed to have agreed to enter into such Transaction. Such Confirmation shall describe the Purchased Asset(s) (and, in this connection, shall set forth (a) the name of the counterparty with respect to the Purchased Asset, (b) a description (including the date) of the

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loan agreement or other document, agreement or instrument pursuant to which the related Purchased Asset is made or governed, and (c) the initial or then outstanding principal amount of the related Purchased Asset) which shall be the subject of the proposed Transaction, shall identify Buyer and Seller, and shall set forth (i) the Purchase Date, (ii) the Purchase Price for such Purchased Asset(s), (iii) the Repurchase Date, (iv) the Pricing Rate applicable to the Transaction and (v) any additional terms or conditions not inconsistent with this Agreement. Each Confirmation shall be deemed incorporated herein by reference with the same effect as if set forth herein at length. With respect to any Transaction, the Pricing Rate shall be determined initially on the Pricing Rate Determination Date applicable to the first Pricing Rate Period for such Transaction, and shall be reset on each Reset Date for the next succeeding Pricing Rate Period for such Transaction. Buyer or its agent shall determine, in accordance with the terms of the Side Letter, the Pricing Rate on each Pricing Rate Determination Date for the related Pricing Rate Period and notify Seller of such rate for such period on the Reset Date. For purposes of this Section 2(b), the “Transaction Conditions Precedent” shall be deemed to have been satisfied with respect to any proposed Transaction if:

(1)no Default or Event of Default under this Agreement shall have occurred and be continuing as of the Purchase Date for such proposed Transaction;

(2)Seller shall have certified to Buyer in writing the acquisition cost of such Purchased Assets (including therein reasonable supporting documentation required by Buyer, if any);

(3)the representations and warranties made by Seller in any of the Transaction Documents shall be true and correct in respect of the Eligible Asset in question in all material respects as of the Purchase Date for such Transaction;

(4)Buyer shall have received the Diligence Materials and completed to Buyer’s satisfaction its due diligence review and financial modeling with respect to the assets proposed to be sold to Buyer by Seller;

(5)Buyer or the Custodian on behalf of Buyer shall have received the applicable Transaction documents and other documents and opinions specified in Section 6 of this Agreement. The Custodian shall have delivered a trust receipt satisfactory to Buyer no later than 3 p.m. on the Purchase Date;

(6)Buyer shall have determined, in accordance with the applicable provisions of Section 2(a) of this Agreement, that the assets proposed to be sold to Buyer by Seller in such Transaction are Eligible Assets;

(7)none of the following shall have occurred and be continuing:

(i)an event or events shall have occurred resulting in the effective absence of a “securities market” for securities backed by mortgage loans; or

(ii)there shall have occurred a material adverse change in the “repo market” or comparable “lending market”.

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If any of the events in this subparagraph (7) shall occur, Buyer agrees to reimburse Seller for the Purchase Fee on a pro rata basis;

(8)the purchase by Buyer from Seller of the Purchased Assets which are not CDO Assets shall be completed prior to the Commitment Expiration Date and the aggregate of the Purchase Prices for all Transactions shall not exceed the Maximum Aggregate Purchase Price; and

(9)on or prior to the Purchase Date for the initial Transaction hereunder and from time to time thereafter as Buyer shall reasonably request, Seller shall have delivered to Buyer an opinion of Seller’s counsel, in form and substance reasonably acceptable to Buyer, addressing the matters set forth at Exhibit XII.

Notwithstanding anything to the contrary contained in this Agreement, in no event shall any Transaction hereunder be consummated until such time as Buyer has received all of the following, each in form and substance reasonably satisfactory to Buyer: (i) the fully executed Custodial Agreement and related Trust Receipt; (ii) a Depository Agreement with respect to the Collection Account executed by the Depository; (iii) such legal opinions as Buyer may reasonably require; (iv) a Direction Letter, (v) Seller’s organizational documents, to the extent not delivered as of the date hereof, and (vi) an executed Subordination Agreement, a fully executed Side Letter and the Servicing Agreement.

(c)Each Confirmation shall be executed by Seller and Buyer and, together with this Agreement, shall be conclusive evidence of the terms of the Transaction(s) covered thereby.

(d)Seller may, at its option so long as an Event of Default shall not have occurred and be continuing, increase or decrease the Outstanding Purchase Price with respect to any Transaction subsequent to the Purchase Date; provided, however, that such action on the part of Seller shall not be permitted if it would create a Margin Deficit.

(e)Seller shall pay Buyer on or prior to the initial Purchase Date a one-time, up front amount (the “Purchase Fee”) as set forth in the Side Letter; provided, however, that solely for purposes of calculating the Purchase Fee hereunder, the Maximum Committed Aggregate Purchase Price shall be deemed to be $75,000,000.

(f)Each Transaction entered into between Buyer and Seller shall remain outstanding from the initial Purchase Date until the earlier of the Repurchase Date or the Commitment Expiration Date. The spread over LIBOR stated in the related Confirmation for each Transaction will not change for such Transaction until August 15, 2008.

(g)Seller shall be entitled to terminate a Transaction and repurchase any or all of the Purchased Assets from Buyer on two (2) Business Days’ notice on any Business Day prior to the Repurchase Date (an “Early Repurchase Date”).

If Seller terminates any Transaction pursuant to the preceding sentence, then, except as provided below, Seller shall pay to Buyer a termination fee (the “Exit Fee”) on the Early Repurchase Date. The Exit Fee shall be calculated as the product of (i) the Outstanding Purchase Price and (ii) the following amount: (A) if the Early Repurchase Date is less than one

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year from the Repurchase Date, no Exit Fee will be payable, (B) if the Early Repurchase Date is at least one year but less than two years from the Repurchase Date, [****], and (C) if the Early Repurchase Date is at least two years from the Repurchase Date, [****]. Additionally:

(i)No Exit Fee will be payable for the early repurchase of Purchased Assets resulting from (a) the sale of the underlying assets to Buyer, or any of its Affiliates, (b) the sale of the underlying assets to Buyer, or any of its Affiliates, under a Amended and Restated Master Repurchase Agreement, (c) the sale of the underlying assets to a securitization vehicle for which Buyer, or any of its Affiliates, are acting in a lead or co-lead manager or co-manager role, (d) maturity of the underlying loan, (e) contractual defaults by either party to the underlying loan documents and agreements, (f) any paydowns, prepayments or defaults on the Purchased Assets, (g) any roll of a Purchased Asset into a new Transaction, (h) pay-offs resulting from a margin call or Market Value calculation dispute between Seller and Buyer including, without limitation, for a Margin Call in accordance with Section 13(ix) hereof, (i) Seller’s Termination of a Transaction in response to a demand by Buyer pursuant to Section 2(i) hereof or (j) in the event additional costs are imposed by Buyer pursuant to Section 2(j) hereof and Seller elects to terminate a transaction or transactions as a result thereof.

(ii)Additional Purchased Assets acceptable to Buyer may be substituted and no Exit Fee will be payable in connection with such substitutions. No other substitutions will be exempt from payment of the Exit Fee.

(iii)No Exit Fee will be payable for the early repurchase of any Purchased Asset which is a CDO I Asset or a CDO II Asset.

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

(h)In the event that an Undrawn Available Amount exists at the end of any calendar quarter, Seller shall remit to Buyer a non-usage fee (the “Non-Usage Fee”) reasonably promptly upon written notice from Buyer to Seller that such Undrawn Available Amount exists. The Non-Usage Fee shall be calculated as the product of (i) the Undrawn Available Amount and (ii) [****] divided by 360 for each day such Undrawn Available Amount exists during such calendar quarter.

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

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

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

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

and the result of any of the foregoing is to increase the cost to Buyer, by an amount which Buyer deems to be material, of entering into, continuing or maintaining Transactions or to reduce any amount receivable under the Transaction Documents in respect thereof; then, in any such case, Seller shall promptly pay Buyer, upon its demand, any additional amounts necessary to compensate Buyer for such increased cost or reduced amount receivable which is actually incurred by Buyer. If Buyer becomes entitled to claim any additional amounts pursuant to this Section 2(i), it shall promptly notify Seller of the event by reason of which it has become so entitled. In the event that Seller elects to terminate a Transaction in response to a demand by Buyer pursuant to this Section 2(i), no Exit Fee with respect to such termination shall be due by Seller and the Purchase Fee relating to that Transaction shall be refunded on a pro rata basis. A certificate as to the calculation of any additional amounts payable pursuant to this subsection shall be submitted by Buyer to Seller and shall be conclusive and binding upon Seller in the absence of manifest error. This covenant shall survive the termination of this Agreement and the repurchase by Seller of any or all of the Purchased Assets.

(j)If Buyer shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by Buyer or any corporation controlling Buyer with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof does or shall have the effect of reducing the rate of return on Buyer’s or such corporation’s capital as a consequence of its obligations hereunder to a level below that which Buyer or such corporation could have achieved but for such adoption, change or compliance (taking into consideration Buyer’s or such corporation’s policies with respect to capital adequacy) by an amount deemed by Buyer to be material, then from time to time, after submission by Buyer to Seller of a written request therefor, Seller shall pay to Buyer such additional amount or amounts as will compensate Buyer for such reduction which is actually incurred by Buyer. A certificate as to the calculation of any additional amounts payable pursuant to this subsection shall be submitted by Buyer to Seller and shall be conclusive and binding upon Seller in the absence of manifest error. This covenant shall survive the termination of this Agreement and the repurchase by Seller of any or all of the Purchased Assets.

(k)Any provision hereof to the contrary notwithstanding, Seller shall pay all reasonable fees and expenses of Buyer (including all reasonable legal fees) associated with the purchase of any Eligible Asset under this Agreement and shall pay the fees and expenses of counsel to Buyer in connection with the preparation and execution of this Agreement and all other Transaction Documents.

(l)Any provision hereof to the contrary notwithstanding, Transactions entered into hereunder shall be at the sole discretion of Buyer. Buyer is not required to enter into any Transaction and Buyer may, in its sole discretion, reject for inclusion in any Transaction any Eligible Assets offered for sale hereunder by Seller.

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(m)In the event that the Repurchase Date in respect of the CDO Assets occurs more than six (6) months after the related Purchase Date, the pricing terms set forth in the Side Letter relating to the CDO Assets shall no longer be applicable and the pricing terms set forth for all other Eligible Assets shall apply to such CDO Assets; provided, however, that such CDO Assets shall still be included in any calculation of the Maximum CDO Aggregate Purchase Price.

3.MARGIN MAINTENANCE

(a)If at any time the product of the aggregate Market Value of all Purchased Assets and Buyer’s Margin Ratio shall be less than the aggregate outstanding Repurchase Price for such Purchased Assets, (a “Margin Deficit”), then Buyer may by notice to Seller (a “Margin Call”) require Seller to transfer to Buyer (A) cash or (B) Additional Assets acceptable to Buyer in its sole and absolute discretion (such cash or Additional Assets paid by Seller to Buyer are herein referred to as “Additional Assets”), so that the sum of cash plus the product of (i) the aggregate Market Value of the Purchased Assets and such Additional Assets and (ii) Buyer’s Margin Ratio shall at least equal the aggregate outstanding Repurchase Price. Any cash received by Buyer pursuant to a Margin Call shall be applied to reduce the Outstanding Purchase Price. Seller’s failure to cure any Margin Deficit as required by the preceding sentence prior to expiration of one (1) Business Day after notice shall constitute an Event of Default under the Transaction Documents and shall entitle Buyer to exercise its remedies under Section 14 of this Agreement (including, without limitation, the liquidation remedy provided for in Section 14(iv) of this Agreement).

(b)If any Margin Call is given by Buyer under Section 3(a) of this Agreement, Seller shall transfer cash or Additional Assets as provided in Section 3(a) by no later than one (1) Business Day after the giving of such notice. Notice required pursuant to Section 3(a) of this Agreement may be given by any means, including by telephone, telecopier or email transmission. The failure of Buyer on any one or more occasions, to exercise its rights under Section 3(a) of this Agreement shall not constitute a waiver of such default or change or alter the terms and conditions to which this Agreement is subject or limit the right of Buyer or Seller to do so at a later date. Buyer and Seller agree that any failure or delay by Buyer to exercise its rights under Section 3(a) of this Agreement shall not limit such party’s rights under this Agreement or otherwise existing by law or in any way create additional rights for such party.

(c)If at any time the product of the aggregate Market Value of all Purchased Assets and Buyer’s Margin Ratio shall be greater than the aggregate outstanding Repurchase Price for such Purchased Assets (a “Margin Excess”), then Seller may by notice to Buyer require Buyer to transfer to Seller (1) cash or (2) Purchased Assets that become subject to this Agreement as Additional Assets so that the product of (i) the aggregate Market Value of the Purchased Assets and such Additional Assets and (ii) Buyer’s Margin Ratio shall not exceed the aggregate outstanding Repurchase Price. In no event shall any Purchased Assets that did not become subject to this Agreement in the form of Additional Assets be released from the lien of this Agreement due to a Margin Excess.

(d)If any notice is given by Seller under Section 3(c) of this Agreement, Buyer shall transfer cash or Additional Assets as provided in Section 3(c) by no later than one (1) Business Day after the giving of such notice. Notice required pursuant to
Section 3(c) of this Agreement

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may be given by any means, including by telephone, telecopier or email transmission. Buyer and Seller agree that any failure or delay by Seller on any one or more occasions to exercise its rights under Section 3(c) of this Agreement shall not constitute a waiver of such rights or limit such party’s rights under Section 3(c) of this Agreement or otherwise existing by law or in any way create additional rights for such party. In addition, in no event shall Buyer be required to create a Margin Deficit in order to comply with Section 3(d) of this Agreement.

(e)Any cash transferred to Buyer pursuant to Section 3(a) of this Agreement shall be used to reduce the Repurchase Price.

(f)If any representation or warranty within this Agreement is in fact not accurate, then notwithstanding any of the knowledge qualifiers, Buyer has the right to mark the asset to market with such frequency as deemed prudent in accordance with this Section 3.

4.INCOME PAYMENTS AND PRINCIPAL PAYMENTS

(a)The Collection Account shall be established at the Depository concurrently with the execution and delivery of this Agreement by Seller and Buyer. Buyer shall have sole dominion and control over the Collection Account. Seller shall instruct the servicer to deposit all Income in respect of the Purchased Assets, as well as any payments in respect of associated Hedging Transactions, into the Collection Account within one (1) Business Day of receipt. The amounts on deposit in the Collection Account shall be remitted by the Depository in accordance with the Depository Agreement and the applicable provisions of Sections 4(b), 4(c), 4(d), 4(e) and 14 of this Agreement. Seller shall direct the servicer to remit all payments to Depository until such time as Buyer directs the borrower otherwise. If any payments are made by the borrower to Seller after the Purchase Date, or in the event that Seller receives any payments in respect of associated Hedging Transactions after the Purchase Date, Seller shall wire such payments to the Collection Account with the Depository within one (1) Business Day of receipt.

(b)So long as an Event of Default hereunder shall not have occurred and be continuing and so long as such action would not result in the creation of a Margin Deficit, all Income received by the Depository in respect of the Purchased Assets and the associated Hedging Transactions shall be paid to Seller on the Business Day next following the Business Day on which such funds are deposited in the Collection Account.

(c)So long as no Event of Default shall have occurred and be continuing, and in the event that a Margin Deficit exists with respect to the Purchased Assets, then until Seller cures such Margin Deficit, all Income received by the Depository in respect of the Purchased Assets and the associated Hedging Transactions shall be applied by the Depository on the Business Day next following the Business Day on which such funds are deposited in the Collection Account as follows:

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

(ii)second, to transfer cash to Buyer, so that the product of the aggregate Market Value of the Purchased Assets (including any Additional

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Assets) and Buyer’s Margin Ratio will at least equal the aggregate Outstanding Purchase Price; and

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

(d)If an Event of Default shall have occurred and be continuing, all Income (including all Principal Payments) received by the Depository in respect of the Purchased Assets and the associated Hedging Transactions shall be applied by the Depository on the Business Day next following the Business Day on which such funds are deposited in the Collection Account as follows:

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

(ii)second, to make a payment to Buyer on account of the Outstanding Purchase Price of the Purchased Assets until the Outstanding Purchase Price for all of the Purchased Assets has been reduced to zero; and

(iii)third, to remit to Buyer an amount equal to any costs or expenses due and owing by Seller as of such Business Day; and

(iv)fourth, to remit to Seller the remainder.

(e)Buyer is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all amounts held by Buyer against any other obligations at any time owing to Buyer, or an Affiliate of Buyer to or for the credit or the account of Seller against any of or all the obligations of Seller now or hereafter existing under this Agreement irrespective of whether or not Buyer shall have made any demand under this Agreement (and without prior notice to Seller) and although such obligations may be unmatured, whereupon such obligations owing by Buyer or its Affiliates to Seller shall, to the extent (and only to the extent) of such set off actually made by Buyer, be discharged. The rights of Buyer under this Section are in addition to other rights and remedies (including other rights of setoff) which Buyer may have.

5.SECURITY INTEREST

Buyer and Seller intend that all Transactions hereunder be sales to Buyer of the Purchased Assets and not loans from Buyer to Seller secured by the Purchased Assets. However, in the event any such Transaction is deemed to be a loan, Seller hereby pledges all of its right, title, and interest in, to and under and grants a first priority lien on, and security interest in, all of the following property, whether now owned or hereafter acquired, now existing or hereafter created and wherever located (collectively, the “Collateral”) to Buyer to secure the payment and performance of all amounts or obligations owing to Buyer pursuant to this Agreement and the related documents described herein:

(a)the Purchased Assets, including those identified in the Confirmations, Servicing Agreements, Servicing Records, Hedging Transactions, insurance relating to the

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Purchased Assets, and all “deposit accounts” (as defined in the UCC, including, without limitation, collection and escrow accounts) relating to the Purchased Assets;

(b)the Collection Account and all monies from time to time on deposit in the Collection Account;

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

(d)all “supporting obligations” and “letter of credit rights” as defined in the UCC relating to or constituting any and all of the foregoing;

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

(f)all proceeds of the foregoing.

Buyer’s security interest in the Collateral shall terminate only upon termination of a Transaction with respect to such Collateral under this Agreement and the documents delivered in connection herewith and therewith. For purposes of the grant of the security interest pursuant to this Section 5 of this Agreement, this Agreement shall be deemed to constitute a security agreement under the Uniform Commercial Code as in effect in any applicable jurisdiction (the “UCC”). Buyer shall have all of the rights and may exercise all of the remedies of a secured creditor under the UCC and the other laws of any applicable jurisdiction, including the State of New York. In furtherance of the foregoing, (i) Buyer shall cause to be filed as a protective filing with respect to the Purchased Assets and as a UCC filing with respect to the security interests granted in this Section 5 (i) a UCC financing statement in the form of Schedule 1-A attached hereto (to be filed in the filing office indicated therein), (ii) amendments to such UCC financing statement in the form of Schedule 1-B attached hereto and having attached to each such UCC financing statement amendment a description of the Purchased Assets which identifies the Purchased Assets by setting forth (a) the name of the borrower with respect to each Purchased Asset, (b) the Participation Agreement (including the date) or other document, agreement or instrument pursuant to which each Purchased Asset was made or is governed, and (c) the initial or then outstanding principal amount of each Purchased Asset, and (iii) such other UCC filings, in such locations as may be necessary to perfect and maintain perfection and priority of the outright transfer and the security interest granted hereby and, in each case, continuation statements and any amendments thereto (collectively, the “Filings”), and shall forward copies of such Filings to Seller upon completion thereof, and (b) Seller shall from time to time, at its own expense, deliver and cause to be duly filed all such further filings, instruments and documents and take all such further actions as may be necessary or desirable or as may be requested by Buyer with respect to the perfection and priority of the outright transfer of the Purchased Assets and the security interest deemed granted hereunder and in the Purchased Assets and the rights

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and remedies of Buyer with respect to the Purchased Assets (including the payments of any fees and taxes required in connection with the execution and delivery of the Agreement).

6.PAYMENT, TRANSFER AND CUSTODY

(a)On the Purchase Date for each Transaction, ownership of the Purchased Assets shall be transferred to Buyer or its designee (including the Custodian) against the simultaneous transfer of the Purchase Price in immediately available funds to an account of Seller specified in the Confirmation relating to such Transaction. Buyer shall have the right to request Seller to provide an officer’s certificate of Seller with respect to any copy of a document required to be delivered certifying that to its knowledge such represents a true and correct copy of the original.

(b)On or before each Purchase Date, Seller shall deliver or cause to be delivered to Buyer or its designee the Custodial Delivery in the form attached hereto as Exhibit IV. In connection with each sale, transfer, conveyance and assignment of a Purchased Asset, on or prior to each Purchase Date with respect to such Purchased Asset, Seller shall deliver or cause to be delivered and released to the Custodian (i) the original participation certificate representing the related Participation Interest with all applicable transfer documents, endorsed in blank, that would be required to effect a registration of transfer into Buyer’s name, the related Participation Agreement and (ii) to the extent not already delivered, an original Participation Agreement. In addition, in connection with each sale, transfer, conveyance and assignment of a Purchased Asset, on or prior to each Purchase Date, Seller shall deliver or cause to be delivered to Buyer copies of the following documents (collectively, the “Purchased Asset File”) pertaining to the Underlying Assets relating to each of the Purchased Assets identified in the related Custodial Delivery to the extent such documents exist and are available to Seller:

With respect to each Underlying Asset which is a Whole Loan or a B Note:

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

(ii)A copy of any guarantee executed in connection with the Mortgage Note (if any) together with an officer’s certificate of Seller certifying that such represents a true and correct copy of the original.

(iii)Except with respect to MERS Underlying Assets, a copy of the Mortgage with evidence of recording thereon, or a copy thereof together with an officer’s certificate of Seller certifying that such represents a true and correct copy of the original and that such original has been submitted for recordation in the

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appropriate governmental recording office of the jurisdiction where the Property is located.

(iv)Copies of all assumption, modification, consolidation or extension agreements with evidence of recording thereon, or copies thereof together with an officer’s certificate of Seller certifying that such represent true and correct copies of the originals and that such originals have each been submitted for recordation in the appropriate governmental recording office of the jurisdiction where the Property is located.

(v)Except with respect to MERS Underlying Assets, a copy of the original Assignment of Mortgage, in blank, in form and substance acceptable for recording and signed in the name of the Last Endorsee (in the event that the related Underlying Asset was acquired by the Last Endorsee in a merger, the signature must be in the following form: “[Last Endorsee], successor by merger to [name of predecessor]”; in the event that such Purchased Asset was acquired or originated while doing business under another name, the signature must be in the following form: “[Last Endorsee], formerly known as [previous name]”).

(vi)Except with respect to MERS Underlying Assets, copies of all intervening assignments of mortgage with evidence of recording thereon, or copies thereof together with an officer’s certificate of Seller certifying that such represent true and correct copies of the originals and that such originals have each been submitted for recordation in the appropriate governmental recording office of the jurisdiction where the Property is located.

(vii)Copies of any attorney’s opinion of title and abstract of title or the original mortgagee title insurance policy, or if the original mortgagee title insurance policy has not been issued, the irrevocable marked commitment to issue the same together with an officer’s certificate of Seller certifying that such represent true and correct copies of the originals.

(viii)A copy of any security agreement, chattel mortgage or equivalent document executed in connection with the Purchased Asset together with an officer’s certificate of Seller certifying that such represent true and correct copies of the originals.

(ix)A copy of any assignment of leases and rents, if any, with evidence of recording thereon, or a copy thereof together with an officer’s certificate of Seller, certifying that such copy represents a true and correct copy of the original that has been submitted for recordation in the appropriate governmental recording office of the jurisdiction where the Property is located.

(x)Copies of all intervening assignments of assignment of leases and rents, if any, or copies thereof, with evidence of recording thereon.

(xi)A copy of the UCC financing statements, certified as true and correct by Seller, and all necessary UCC continuation statements with evidence of

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filing thereon or copies thereof certified by Seller to have been sent for filing, and UCC assignments from Seller to Buyer or its designee, which UCC assignments shall be in form and substance acceptable for filing.

(xii)A copy of any environmental indemnity agreement (if any).

(xiii)A copy of any omnibus assignment in blank (if any).

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

(xv)A copy of the Mortgagor’s certificate or title affidavit (if any).

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

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

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

(xix)A copy of any assignment of any interest rate cap agreement or other interest rate protection agreement entered into by the Mortgagor or its affiliates.

(xx)A copy of the fully executed intercreditor agreement or any other agreement that allocates assets among the parties, if any.

(xxi)A copy of any estoppel letter from the mortgagor.

(xxii)A copy of any executed servicing agreement.

(xxiii)A copy of the Purchase Agreement.

(xxiv)A copy of any loan agreement.

With respect to each Underlying Asset which is a Mezzanine Loan:

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

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(ii)A copy of the original of the loan agreement and the guarantee, if any, executed in connection with the Purchased Asset.

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

(iv)A copy of the original security agreement executed in connection with the Purchased Asset.

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

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

(vii)Except with respect to MERS Underlying Assets, a copy of the assignment of the Underlying Asset (in blank) from the Last Endorsee sufficient to transfer all of such Last Endorsee’s rights, title and interest in and to the Underlying Asset.

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

(ix)A copy of the UCC financing statements, certified as true and correct by Seller, and all necessary UCC continuation statements with evidence of filing thereon or copies thereof certified by Seller to have been sent for filing, and UCC assignments from Seller to Buyer or its designee, which UCC assignments shall be in form and substance acceptable for filing.

(x)A copy of the pledge agreement and original certificates representing the pledged equity interests (if any).

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

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

(xiii)Evidence satisfactory to Buyer that the pledged ownership interests have been transferred to, or otherwise made subject to a first priority security interest in favor of, Seller.

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(xiv)Copies of all loan documents and related closing documents pertaining to the closing of the senior indebtedness incurred or owed by the owner of the real property with respect to which the borrower of the Mezzanine Loan has pledged its ownership interests, whether directly or indirectly through intermediate entities, including without limitation the organizational documents of such owner together with an officer’s certificate of Seller certifying that such represent true and correct copies of the originals.

(xv)A copy of an assignment of any interest rate cap agreement or other interest rate protection agreement entered into by the borrower under the Purchased Asset or its affiliates with respect to the Purchased Asset.

(xvi)A copy of the original servicing agreement, if any, executed in connection with the Purchased Asset.

(xvii)A copy of the Purchase Agreement.

(xviii)A copy of the borrower’s fee title insurance policy in respect of the mezzanine loan and a copy of the related survey.

With respect to each Purchased Asset which is of the type described in clause (ii) of the definition of Eligible Asset, Seller shall deliver or cause to be delivered to Buyer such documentation as is determined by Buyer to be necessary to effectuate the sale, transfer, conveyance and assignment of such Purchased Asset subject to the terms of this Agreement.

In addition, with respect to each Purchased Asset, Seller shall deliver an instruction letter from Seller to the servicer with respect to such Purchased Asset, instructing the servicer to remit all sums required to be remitted to the holder of such Purchased Asset under the loan documents to the Depository for deposit in the Collection Account.

From time to time, Seller shall forward to the Custodian copies of additional documents evidencing any assumption, modification, consolidation or extension of any Purchased Asset approved in accordance with the terms of this Agreement, and upon receipt of any such other documents, the Custodian shall hold such other documents as Buyer shall request from time to time. With respect to any documents which have been delivered or are being delivered to recording offices for recording and have not been returned from the recording office in time to permit copies thereof to be delivered hereunder at the time required, in lieu of delivering such original documents, Seller shall deliver to Buyer a true copy thereof with an officer’s certificate certifying that such copy is a true, correct and complete copy of the original, which has been transmitted for recordation. Seller shall deliver copies of such documents to the Custodian with recording information thereon promptly when they are received. With respect to all of the Purchased Assets, Seller shall execute an omnibus power of attorney substantially in the form of Exhibit V attached hereto irrevocably appointing Buyer its attorney-in-fact with full power, after the occurrence and during the continuation of an Event of Default to (i) complete and endorse the Purchased Asset and any transfer documents relating thereto and (ii) take such other steps as may be necessary or desirable to enforce Buyer’s rights against such Purchased Assets. The Purchased Asset Files shall be delivered by Seller to Buyer. Any Purchased Asset Files not

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delivered to Buyer or its designee (including the Custodian) are and shall be held in trust by Seller or its designee for the benefit of Buyer as the owner thereof. Seller or its designee shall maintain a copy of the Purchased Asset File. The books and records (including, without limitation, any computer records or tapes) of Seller or its designee shall be marked appropriately to reflect clearly the sale of the related Purchased Asset to Buyer. Seller or its designee shall release its custody of the Purchased Asset File only in accordance with written instructions from Buyer, unless such release is required as incidental to the servicing of the Purchased Assets or is in connection with a repurchase of any Purchased Asset by Seller.

(c)Notwithstanding the provisions of Section 6(b) above requiring the execution of the Custodial Delivery and corresponding delivery of the Purchased Asset File to Buyer on or prior to the related Purchase Date, with respect to each Transaction involving a Purchased Asset which is identified in the related Confirmation as a Table Funded Asset, Seller shall, in lieu of effectuating the delivery of all or a portion of the Purchased Asset File on or prior to the related Purchase Date, (i) deliver the Purchased Asset File (or the portion thereof not then delivered to the Custodian) to Buyer on or prior to the Purchase Date by means of delivery of the same to the Bailee, (ii) cause the Bailee to deliver to Seller, Buyer and the Custodian by facsimile on or before the related Purchase Date for the Transaction (A) a fully executed Bailee Agreement and Trust Receipt issued by the Bailee thereunder, (B) the promissory note(s) or Participation Certificate(s) in favor of Seller evidencing the making of the Purchased Asset, with Seller’s endorsement of such note to Buyer or original stock certificate (if certificated), (C) such other components of the Purchased Asset File as Buyer may require on a case by case basis with respect to the particular Transaction and (D) evidence satisfactory to Buyer that all documents necessary to perfect Seller’s (and, by means of assignment to Buyer on the Purchase Date, Buyer’s) interest in the Collateral for the Purchased Asset, and (iii) not later than the third (3^rd) Business Day following the Purchase Date, deliver to Buyer the Custodial Delivery and to the Custodian the entire Purchased Asset File.

(d)Unless an Event of Default shall have occurred and be continuing, Seller shall exercise all voting, corporate and servicing rights with respect to the Purchased Assets. Upon the occurrence and during the continuation of an Event of Default, Buyer shall be entitled to exercise all voting and corporate rights with respect to the Purchased Assets without regard to Seller’s instructions (including, but not limited to, if an Act of Insolvency shall occur with respect to Seller, to the extent Seller controls or is entitled to control selection of the special servicer, Buyer may transfer such special servicing to an entity satisfactory to Buyer).

7.SALE, TRANSFER, HYPOTHECATION OR PLEDGE OF PURCHASED ASSETS

(a)Title to all Purchased Assets shall pass to Buyer on the applicable Purchase Date, and Buyer shall have free and unrestricted use of all Purchased Assets. Nothing in this Agreement or any other Transaction Document shall preclude Buyer from engaging in repurchase or financing transactions with the Purchased Assets or otherwise selling, transferring, pledging, repledging, hypothecating, or rehypothecating the Purchased Assets, but no such transaction shall relieve Buyer of its obligations to transfer the Purchased Assets to Seller pursuant to Sections 2 or 11 of this Agreement or of Buyer’s obligation to credit or pay Income to, or apply Income to the obligations of, Seller pursuant to Section 4 hereof.

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(b)Nothing contained in this Agreement or any other Transaction Document shall obligate Buyer to segregate any Purchased Assets delivered to Buyer by Seller. Notwithstanding anything to the contrary in this Agreement or any other Transaction Document, no Purchased Asset shall remain in the custody of Seller or a Subsidiary of Seller.

8.SUBSTITUTION; SEGREGATION OF DOCUMENTS RELATING TO ELIGIBLE ASSETS

(a)Substitution of Eligible Assets is subject to satisfaction of the conditions to the acquisition of the Purchased Assets.

(b)All documents relating to Purchased Assets in the possession of Seller shall be segregated from other documents and securities in its possession and shall be identified as being subject to this Agreement.

9.REPRESENTATIONS

(a)Buyer and Sellers each represent and warrant, and shall on and as of the Purchase Date of any Transaction be deemed to represent and warrant, to the other that:

(i)it is duly authorized to execute and deliver this Agreement, to enter into the Transactions contemplated hereunder and to perform its obligations hereunder and has taken all necessary action to authorize such execution, delivery and performance;

(ii)it will engage in such Transactions as principal (or, if agreed in writing in advance of any Transaction by the other party hereto, as agent for a disclosed principal);

(iii)the person signing this Agreement on its behalf is duly authorized to do so on its behalf (or on behalf of any such disclosed principal);

(iv)it has obtained all authorizations of any governmental body required in connection with this Agreement and the Transactions hereunder and such authorizations are in full force and effect; and

(v)the execution, delivery and performance of this Agreement and the Transactions hereunder will not violate any law, ordinance, charter, by-law or rule applicable to it or any agreement by which it is bound or by which any of its assets are affected.

(b)Sellers each represent and warrant to Buyer that as of the Purchase Date for the purchase of any Purchased Assets by Buyer from either Seller and any Transaction thereunder and as of the date of this Agreement and at all times while this Agreement and any Transaction thereunder is in full force and effect:

(i)Organization. Each Seller is duly organized, validly existing and in good standing under the laws and regulations of the state of Seller’s

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

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

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

(iv)Litigation; Requirements of Law. There is no action, suit, proceeding, investigation, or arbitration pending or, to the best knowledge of Seller, threatened against either Seller or any of its assets, nor is there any action, suit, proceeding, investigation, or arbitration pending or, to the best knowledge of Seller, threatened against either Seller which may result in any material adverse change in the business, operations, financial condition, properties, or assets of such Seller, or which may have an adverse effect on the validity of the Transaction Documents or the Purchased Assets or any action taken or to be taken in connection with the obligations of Seller under any of the Transaction Documents. Seller is in compliance in all material respects with all Requirements of Law. Seller is not in default in any material respect with respect to any judgment, order, writ, injunction, decree, rule or regulation of any arbitrator or Governmental Authority.

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

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

(vii)No Default. No Default or Event of Default exists under or with respect to the Transaction Documents.

(viii)Representations and Warranties Regarding Purchased Assets; Delivery of Purchased Asset File. Seller represents and warrants to Buyer that each Purchased Asset sold hereunder and each pool of Purchased Assets sold in a Transaction hereunder, as of each Purchase Date for a Transaction conform to the applicable representations and warranties set forth in Exhibit VIII. It is understood and agreed that the representations and warranties set forth in Exhibit VIII and such other representations and warranties as are made by Seller to Buyer with respect to the Underlying Assets, if any (including, without limitation, any representations and warranties made by Seller pursuant to Section 9(d) hereof), shall survive delivery of the respective Purchased Asset File to Buyer or its designee (including the Custodian). Seller or its designee is in possession of a complete, true and accurate Purchased Asset File with respect to each Purchased Asset, except for such documents as have been delivered to Buyer. Any provision hereof to the contrary notwithstanding, Buyer’s remedy for a breach of this representation and warranty with respect to any Purchased Asset shall be to mark such Purchased Asset to market; provided, however, that in the event that a breach of this representation and warranty causes a breach of some other covenant of Seller hereunder (such as to maintain adequate margin), then Buyer shall be entitled to exercise all rights and remedies granted to it hereunder.

(ix)Adequate Capitalization: No Fraudulent Transfer. Each Seller has, as of such Purchase Date, adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations. Each Seller is generally able to pay, and as of the date hereof is paying, its debts as they come due. Neither Seller has become, or is presently,

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financially insolvent nor will either Seller be made insolvent by virtue of such Seller’s execution of or performance under any of the Transaction Documents within the meaning of the bankruptcy laws or the insolvency laws of any jurisdiction. Neither Seller has entered into any Transaction Document or any Transaction pursuant thereto in contemplation of insolvency or with intent to hinder, delay or defraud any creditor.

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

(xi)Ownership. Each Seller is a publicly held corporation.

(xii)Organizational Documents. Seller has delivered to Buyer certified copies of its formation, organizational and other governing documents, together with all amendments thereto.

(xiii)No Encumbrances. There are (i) no outstanding rights, options, warrants or agreements on the part of Seller for a purchase, sale or issuance, in connection with the Purchased Assets and (ii) no agreements on the part of Seller to issue, sell or distribute the Purchased Assets.

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

(xv)Taxes. Each Seller has filed or caused to be filed all tax returns which to the knowledge of Seller would be delinquent if they had not been filed on or before the date hereof and has paid all taxes shown to be due and payable on or before the date hereof on such returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it and any of its assets by any Governmental Authority; no tax liens have been filed against any of Seller’s assets and, to Seller’s knowledge, no claims are being asserted with respect to any such taxes, fees or other charges.

(xvi)ERISA. Seller does not have any Plans.

(xvii)Judgments/Bankruptcy. Except as disclosed in writing to Buyer, there are no judgments in excess of $10,000,000 against either Seller unsatisfied of record or docketed in any court located in the United States of America and no Act of Insolvency has ever occurred with respect to Seller.

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

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

(xx)Chief Executive Office. On the date of this Agreement, Seller’s chief executive office and principal place of business is located at 410 Park Avenue, 14^th Floor, New York, New York 10022. The location where Seller keeps its books and records, including all computer tapes and records relating to the Eligible Assets is its chief executive office.

(xxi)Purchase Agreement Representations and Warranties. Seller has provided Buyer with a copy of the Purchase Agreement (to the extent applicable) containing representations and warranties made to Seller by the party designated as seller under such Purchase Agreement.

(xxii)Loan to Value Ratio. The combined loan to value ratio of any Underlying Asset and any senior liens on a related Property shall not at any time exceed the requirements set forth in the Side Letter.

(c)On the Purchase Date for any Transaction, Seller shall be deemed to have made all of the representations set forth in Section 9(b) of this Agreement as of such Purchase Date.

(d)Seller agrees to make to Buyer the representations and warranties regarding each Purchased Asset that were made to Seller in connection with Seller’s acquisition of such Purchased Asset.

10.NEGATIVE COVENANTS OF SELLER

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

(a)take any action which would directly or indirectly impair or adversely affect Buyer’s title to or security interest in the Purchased Assets;

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

(c)create, incur or permit to exist any lien, encumbrance or security interest in or on the Purchased Assets or Underlying Assets, except as described in Section 5 of this Agreement;

(d)consent or assent to any amendment or supplement to, or termination of, any Securitization Document, any note, loan agreement, mortgage or guaranty relating to the Purchased Assets or Underlying Assets or other material agreement or instrument relating to the Purchased Assets other than in accordance with Section 6(c);

(e)use any of the Purchase Price for any Purchased Asset either directly or indirectly to acquire any security, as that term is defined in Regulation T of the Regulations of the Board of Governors of the Federal Reserve System, or take any action that might cause any Transaction to violate any regulation of the Federal Reserve Board;

(f)after the occurrence and during the continuation of any Default or Event of Default, make any distribution, payment on account of, or set apart assets for any equity or ownership interest of Seller, or for a sinking or other analogous fund for the purchase, redemption, defeasance, retirement or other acquisition of any equity or ownership interest of Seller, whether now or hereafter outstanding, or make any other distribution in respect to any equity or ownership interest of Seller, either directly or indirectly, whether in cash or property or in obligations of Seller; provided, that the foregoing shall not restrict Seller from making distributions, from assets other than the Purchased Assets, required to maintain Seller’s status under the Code as a real estate investment trust (“REIT”) within the meaning of Section 856 through 860 of the Code, in the event Seller then qualifies as a REIT under the Code;

(g)file a UCC financing statement, with respect to a Purchased Asset or Underlying Asset, or an amendment or termination statement with respect to a UCC financing statement with respect to a Purchased Asset or Underlying Asset, except as approved by Buyer in each instance;

(h)enter into Transactions for which the Purchased Assets are CDO Assets which would cause the aggregate of the Purchase Prices for such CDO Assets to exceed the Maximum CDO Aggregate Purchase Price; or

(i)enter into Transactions for which Purchased Assets other than the CDO Assets which would cause the aggregate of the Purchase Prices for such Assets to exceed the Maximum Committed Aggregate Purchase Price.

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11.AFFIRMATIVE COVENANTS OF SELLER

(a)Seller shall promptly notify Buyer of any material adverse change in its business operations and/or financial condition; provided, however, that nothing in this Section 11 shall relieve Seller of its obligations under this Agreement.

(b)Seller shall provide Buyer with copies of such documents as Buyer may reasonably request evidencing the truthfulness of the representations set forth in Section 9.

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

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

(e)Seller shall promptly (and in any event not later than two (2) Business Days following receipt) deliver to Buyer (i) any notice of the occurrence of an event of default under or report received by or required to be delivered by Seller pursuant to the Securitization Documents; (ii) any notice of transfer of servicing under the Securitization Documents and (iii) any other information with respect to the Purchased Assets as may be reasonably requested by Buyer from time to time.

(f)Seller will permit Buyer (at Buyer’s cost) or its designated representative to inspect Seller’s records with respect to the Purchased Assets and the conduct and operation of its business related thereto upon reasonable prior written notice from Buyer or its designated representative, at such reasonable times and with reasonable frequency, and to make copies of extracts of any and all thereof, subject to the terms of any confidentiality agreement between Buyer and Seller.

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

(h)At any time from time to time upon request of Buyer, at the sole expense of Seller, Seller will promptly and duly execute and deliver such further instruments and documents and take such further actions as Buyer may reasonably request for the purposes of obtaining or

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preserving the full benefits of this Agreement including the first priority security interest granted hereunder and of the rights and powers herein granted (including, among other things, filing such Uniform Commercial Code financing statements as Buyer may reasonably request). If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note, other instrument, negotiable document, certificated security or chattel paper, such note, instrument, document, security or chattel paper shall be immediately delivered to Buyer, duly endorsed in a manner satisfactory to Buyer, to be held as Collateral pursuant to this Agreement, and the documents delivered in connection herewith. Seller hereby irrevocably authorizes Buyer at any time and from time to time to file in any filing office in any jurisdiction any initial financing statements and amendments thereto that (1) indicate the Collateral (i) as all Purchased Assets, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the UCC or such jurisdiction, or (ii) as being of an equal or lesser scope or with greater detail, and (2) contain any other information required by part 5 of Article 9 of the UCC for the sufficiency or filing office acceptance of any financing statement or amendment, including (i) whether Seller is an organization, the type of organization and any organization identification number issued to Seller, and (ii) in the case of a financing statement filed as a fixture filing or indicating Collateral as as-extracted collateral or timber to be cut, a sufficient description of real property to which the Collateral relates. Seller agrees to furnish any such information to Buyer promptly upon request. Seller also ratifies its authorization for Buyer to have filed in any jurisdiction any initial financing statements or amendments thereto if filed prior to the date hereof.

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

(i)Within 60 days after the last day of the first three fiscal quarters in any fiscal year, Seller’s unaudited consolidated statements of income and statements of changes in cash flow for such quarter and balance sheets as of the end of such quarter (which statements and balance sheets shall separately break out the statements of income and changes in cash flow and balance sheets of Seller), in each case presented in Seller’s usual form as previously approved by Buyer;

(ii)Within 120 days after the last day of its fiscal year, Seller’s audited consolidated statements of income and statements of changes in cash flow for such year and balance sheets as of the end of such year (which statements and balance sheets shall separately break out the statements of income and changes in cash flow and balance sheets of Seller), in each case presented in Seller’s usual form as previously approved by Buyer;

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

(iv)Within 60 days after the last day of each calendar month in any fiscal year, any and all property level financial information with respect to the

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Purchased Assets that is in the possession of Seller or an Affiliate, or such other information as may be mutually determined and agreed upon in writing by both Buyer and Seller, including, without limitation, rent rolls and income statements; and

(v)Within 5 business days of receipt by Seller, a monthly reporting package with respect to the Underlying Assets containing all information set forth on Exhibit III attached hereto; provided, however, that if such information is not received by Seller, it shall have no obligation under this clause (v).

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

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

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

(m)Seller shall advise Buyer in writing of the opening of any new chief executive office or the closing of any such office and of any change in Seller’s name or the places where the books and records pertaining to the Purchased Assets are held not less than fifteen (15) Business Days prior to taking any such action.

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

(o)Seller shall provide Buyer with access to operating statements, the occupancy status and other property level information, with respect to the Properties, plus any such additional reports as Buyer may reasonably request.

(p)Seller hereby covenants and agrees that all interest and original issue discount received or accrued with respect to the Purchased Assets shall be treated as portfolio interest within the meaning of Sections 871(h) and 881(c) of the Internal Revenue Code, as amended,

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and no amount will be required to be deducted from any remittance on the Purchased Assets on account of withholding tax or otherwise.

(q)Seller shall notify Buyer in writing of any proposed extension or material modification of any Purchased Asset not less than ten (10) Business Days prior to taking any such action and shall reasonably provide Buyer with any documentation required for such Purchased Asset to be modified or extended after any such action has been taken.

(r)Seller shall pay all reasonable and actually incurred expenses (including the reasonable fees and expenses of counsel to Buyer) of Buyer in connection with the negotiation and documentation of this Agreement.

(s)Seller shall be solely responsible for the fees and expenses of Custodian.

(t)Seller shall, and shall cause each entity servicing any Purchased Assets to, promptly notify Buyer in writing of any payment in full or reasonably anticipated payment in full of a Purchased Asset.

12.[RESERVED]

13.EVENTS OF DEFAULT

Each of the following shall constitute an “Event of Default” under this Agreement:

(i)either (A) the Transaction Documents shall for any reason not cause, or shall cease to cause, Buyer to be the owner free of any adverse claim of any of the Purchased Assets, or (B) if a Transaction is recharacterized as a secured financing, the Transaction Documents with respect to any Transaction shall for any reason cease to create a valid first priority security interest in favor of Buyer in any of the Purchased Assets;

(ii)in the event that Buyer or any of its Affiliates is a party to any Hedging Transaction and a default or breach occurs thereunder on the part of Seller which results in the early termination of such Hedging Transaction or otherwise is not cured within the cure period for such default or breach provided under the terms and conditions of such Hedging Transaction;

(iii)failure of Buyer to receive no later than one (1) Business Day following any Remittance Date the accrued, but unpaid Price Differential (less any amount of such Price Differential previously paid by Seller to Buyer) (including, without limitation, in the event the Income paid or distributed on or in respect of the Purchased Assets is insufficient to make such payment and Seller does not make such payment or cause such payment to be made);

(iv)failure of Buyer to receive the Repurchase Price for any Purchased Assets on the date the same is due under this Agreement (whether on the Repurchase Date, Early Repurchase Date or otherwise as provided herein);

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(v)failure of a Seller to make any other payment (i.e., a payment of a type not specified in any other clause of this Section 13) owing to Buyer which has become due, whether by acceleration or otherwise under the terms of this Agreement which failure is not remedied within the applicable period in the case of a failure pursuant to Section 3 or three Business Days in the case of any other such failure;

(vi)any governmental, regulatory, or self-regulatory authority shall have taken any action to remove, limit, restrict, suspend or terminate the rights, privileges, or operations of a Seller, which suspension has a material adverse effect on the financial condition or business operations of a Seller, taken as a whole;

(vii)Buyer shall have determined, in good faith, (A) that there has been a material adverse change in the corporate structure with respect to Seller (including, without limitation, any breach of the provisions of Section 12 hereof) or financial condition or creditworthiness, taken as a whole, of a Seller; (B) that a Seller will not meet or has breached any of its obligations under any Transaction pursuant to any of the Transaction Documents; or (C) that a material adverse change in the financial condition of a Seller may occur due to the pendency of a material legal action against a Seller;

(viii)an Act of Insolvency shall have occurred with respect to either Seller;

(ix)any (A) representation or warranty made by a Seller shall have been incorrect or untrue in any material respect when made or repeated or deemed to have been made or repeated; provided, however that Buyer’s remedy for a breach of a representation and warranty with respect to any Purchased Asset shall be to mark such Purchased Asset to market; or (B) covenant made by a Seller shall have been breached in a material respect;

(x)a final judgment by any competent court in the United States of America for the payment of money in an amount greater than $10,000,000 shall have been rendered against a Seller, and remained undischarged or unpaid for a period ninety (90) days, during which period execution of such judgment is not effectively stayed;

(xi)a Seller or Buyer shall breach or fail to perform any of the terms, covenants, obligations or conditions of this Agreement, and such breach or failure to perform is not remedied within twenty (20) days, provided that any failure to comply with Section 11(j) must be cured within 5 days (unless otherwise specifically referred to in this definition of “Event of Default”);

(xii)a Seller shall have defaulted, such default having not previously occurred, (beyond applicable notice and cure period) or failed to perform under any other note, indenture, loan agreement, guaranty, swap agreement or any other

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contract, agreement or transaction to which it is a party, which default (A) involves the failure to pay an obligation in excess of $5,000,000, or (B) permits the acceleration of the maturity of obligations in excess of $5,000,000 by any other party to or beneficiary of such note, indenture, loan agreement, guaranty, swap agreement or other contract agreement or transaction, or a Seller shall breach any covenant or condition, shall fail to perform, admits its inability to perform or state its intention not to perform its obligations under any Transaction or in respect of any repurchase agreement, reverse repurchase agreement, securities contract or derivative transaction with any party;

(xiii)Seller at any time fails to maintain a ratio of Seller’s EBITDA to its interest expense coverage of more than 1.2x;

(xiv)the Debt to Net Worth ratio of Seller at any time exceeds 30:1;

(xv)the ratio of Modified Debt to Net Worth exceeds 10:1; or

(xvi)the ratio of Modified Recourse Debt to Net Worth exceeds 5:1.

All of the financial tests and covenants in this Agreement will be measured based on the consolidated position of Capital Trust, Inc. and its Subsidiaries.

Any provision hereof to the contrary notwithstanding, an Event of Default on the part of either Seller hereunder shall be deemed to be an Event of Default by both Sellers.

14.REMEDIES

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

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

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

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

(B)to the extent permitted by applicable law, the Pricing Rate with respect to each Transaction (determined as of the Accelerated Repurchase Date) shall be the Pricing Rate

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prior to the date of the Event of Default plus 200 basis points; and

(C)the Custodian shall, upon the request of Buyer, deliver to Buyer all instruments, certificates and other documents then held by the Custodian relating to the Purchased Assets,

(iii)Unless Seller has tendered the Repurchase Price, upon the occurrence and during the continuance of an Event of Default which has not previously occurred with respect to Seller (with respect to which Buyer has not agreed to forbearance or accepted a workout arrangement), Buyer may (A) immediately sell, at a public or private sale at such price or prices as Buyer may deem satisfactory any or all of the Purchased Assets or (B) in its sole discretion elect, in lieu of selling all or a portion of such Purchased Assets, to give Seller credit for such Purchased Assets in an amount equal to the Market Value of such Purchased Assets against the aggregate unpaid Repurchase Price for such Purchased Assets and any other amounts owing by Seller under the Transaction Documents. Notwithstanding the definition of “Market Value” set forth in Section 1 herein, for purposes of this Section 14(iii), as to any Purchased Asset that has been delinquent for at least sixty (60) days, Buyer shall determine a market value for such Purchased Asset in good faith. The proceeds of any disposition of Purchased Assets effected pursuant to this Section 14(iii) shall be applied, (w) first, to the costs and expenses, including legal expenses, incurred by Buyer in connection with Seller’s default; (x) second, to the Repurchase Price; and (y) third, to any other outstanding obligation of Seller to Buyer or its Affiliates.

(iv)The parties recognize that it may not be possible to purchase or sell all of the Purchased Assets on a particular Business Day, or in a transaction with the same purchaser, or in the same manner because the market for such Purchased Assets may not be liquid. In view of the nature of the Purchased Assets, the parties agree that liquidation of a Transaction or the Purchased Assets does not require a public purchase or sale and that a good faith private purchase or sale shall be deemed to have been made in a commercially reasonable manner. Accordingly, Buyer may elect, in its sole discretion, the time and manner of liquidating any Purchased Assets, and nothing contained herein shall (A) obligate Buyer to liquidate any Purchased Assets on the occurrence and during the continuance of an Event of Default or to liquidate all of the Purchased Assets in the same manner or on the same Business Day or (B) constitute a waiver of any right or remedy of Buyer or its Affiliates.

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

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

(vii)Buyer may exercise any or all of the remedies available to Buyer immediately upon the occurrence of an Event of Default with respect to Seller (with respect to which Buyer has not agreed to forbearance or accepted a workout arrangement) and at any time during the continuance thereof. All rights and remedies arising under the Transaction Documents, as amended from time to time, are cumulative and not exclusive of any other rights or remedies which Buyer may have.

(viii)Buyer may enforce its rights and remedies hereunder without prior judicial process or hearing, and Seller hereby expressly waives any defenses Seller might otherwise have to require Buyer to enforce its rights by judicial process. Seller also waives any defense Seller might otherwise have arising from the use of nonjudicial process, disposition of any or all of the Purchased Assets, or from any other election of remedies. Seller recognizes that nonjudicial remedies are consistent with the usages of the trade, are responsive to commercial necessity and are the result of a bargain at arm’s length.

(ix)To the extent that applicable law imposes duties on Buyer to exercise remedies in a commercially reasonable manner, Seller acknowledges and agrees that it is not commercially unreasonable for Buyer (i) to fail to incur expenses reasonably deemed significant by Buyer to prepare the Purchased Assets for disposition or otherwise to complete raw material or work in process into finished goods or other finished products for disposition, (ii) to fail to obtain third party consents for access to Purchased Assets to be disposed of, or to obtain or, if not required by other law, to fail to obtain governmental or third party consents for the collection or disposition of the Purchased Assets to be collected or disposed of, (iii) to fail to exercise collection remedies against Persons obligated on the Purchased Assets or to remove liens on or any adverse claims against the Purchased Assets, (iv) to exercise collection remedies against Persons obligated on the Purchased Assets directly or through the use of collection agencies and other collection specialists, (v) to advertise dispositions of the Purchased Assets through publications or media of general circulation, whether or not the Purchased Assets are of a specialized nature, (vi) to contact other Persons, whether or not in the same business as Seller, for expressions of interest in acquiring all or any portion of such Purchased Assets, (vii) to hire one or more professional

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auctioneers to assist in the disposition of the Purchased Assets, whether or not the Purchased Assets are of a specialized nature, (viii) to dispose of the Purchased Assets by utilizing internet sites that provide for the auction of assets of the types included in the Purchased Assets or that have the reasonable capacity of doing so, or that match buyers and sellers of assets, (ix) to dispose of assets in wholesale rather than retail markets, (x) to disclaim disposition warranties, such as title, possession or quiet enjoyment, (xi) to purchase, at Buyer’s expense, insurance or credit enhancements to insure Buyer against risks of loss, collection or disposition of the Purchased Assets or to provide to Buyer a guaranteed return from the collection or disposition of the Purchased Assets, or (xii) to the extent deemed appropriate by Buyer, to obtain the services of other brokers, investment bankers, consultants and other professionals to assist Buyer in the collection or disposition of any of the Purchased Assets. Seller acknowledges that the purpose of this Section 14(ix) is to provide non-exhaustive indications of what actions or omissions by Buyer would not be commercially unreasonable in Buyer’s exercise of remedies against the Purchased Assets and that other actions or omissions by Buyer shall not be deemed commercially unreasonable solely on account of not being indicated in this Section 14(ix). Without limitation upon the foregoing, nothing contained in this Section 14(ix) shall be construed to grant any rights to Seller or to impose any duties on Buyer that would not have been granted or imposed by this Agreement or by applicable law in the absence of this Section 14(ix).

(x)Buyer shall not be required to make any demand upon, or pursue or exhaust any of its rights or remedies against, Seller, any other obligor, guarantor, pledgor or any other Person with respect to the payment of the obligations of Seller hereunder or to pursue or exhaust any of its rights or remedies with respect to any Purchased Assets therefor or any direct or indirect guarantee thereof. Buyer shall not be required to marshal the Purchased Assets or any guarantee of the obligations of Seller hereunder or to resort to the Purchased Assets or any such guarantee in any particular order, and all of its rights hereunder or under any other document or instrument executed in connection herewith shall be cumulative. To the extent it may lawfully do so, Seller absolutely and irrevocably waives and relinquishes the benefit and advantage of, and covenants not to assert against Buyer, any valuation, stay, appraisement, extension, redemption or similar laws and any and all rights or defenses it may have as a surety now or hereafter existing which, but for this provision, might be applicable to the sale of any Purchased Assets made under the judgment, order or decree of any court, or privately under the power of sale conferred by this Agreement, or otherwise.

(xi)Seller hereby appoints Buyer as attorney-in-fact of Seller for the purpose, after the occurrence and during the continuance of an Event of Default, of carrying out the provisions of this Agreement and taking any action and executing or endorsing any instruments that Buyer may deem necessary or advisable to accomplish the purposes hereof, which appointment as attorney-in-fact is irrevocable and coupled with an interest.

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15.NOTICES AND OTHER COMMUNICATIONS

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

if to Buyer:	Bear, Stearns International Limited
	c/o Bear, Stearns & Co. Inc.
	383 Madison Avenue
	New York, New York 10179
	Attn:	Eileen Albus
	Telephone:	(212) 272-7502
	Fax:	(212) 272-2053
with a copy to:
	Sidley Austin Brown & Wood LLP
	787 Seventh Avenue
	New York, New York 10019
	Attn:	Michael P. Peck
	Telephone:	(212) 839-5576
	Fax:	(212) 839-5599
if to Capital Trust, Inc.:	Capital Trust, Inc.
	410 Park Avenue
	14th Floor
	New York, New York 10022
	Attn:	Geoffrey Jervis
	Telephone:	(212) 655-0247
	Fax:	(212) 655-0044
with a copy to:
	Paul, Hastings, Janofsky & Walker LLP
	75 East 55th Street
	New York, New York 10022
	Attn:	Robert J. Grados, Esq.
	Telephone:	(212) 318-6923
	Fax:	(212) 230-7830

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if to CT BSI Funding Corp.:	CT BSI Funding Corp.
	410 Park Avenue
	14th Floor
	New York, New York 10022
	Attn:	Geoffrey Jervis
	Telephone:	(212) 655-0247
	Fax:	(212) 655-0044
with a copy to:
	Paul, Hastings, Janofsky & Walker LLP
	75 East 55th Street
	New York, New York 10022
	Attn:	Robert J. Grados, Esq.
	Telephone:	(212) 318-6923
	Fax:	(212) 230-7830

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

16.NON-ASSIGNABILITY

(a)The rights and obligations of the parties under the Transaction Documents and under any Transaction shall not be assigned by either party without the prior written consent of the other party; provided, however, that Buyer may assign its rights and obligations under the Transaction Documents and/or under any Transaction to an Affiliate, without the prior written consent of Seller so long as that Affiliate has a Net Worth at least equal to that of Buyer as of the Purchase Date; and provided further, however, that upon the occurrence and during the continuation of an Event of Default, the non-defaulting party shall have an unfettered right to assign its rights and obligations without the consent of the defaulting party.

(b)The transferring party pursuant to subsection (a) above shall be responsible for the payment of all fees and expenses relating to such transfer of its rights and obligations.

(c)Buyer shall be entitled to issue one or more participation interests with respect to any or all of the Transactions.

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

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17.GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL

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

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

(c)Each party hereby irrevocably waives, to the fullest extent they may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding and irrevocably consent to the service of any summons and complaint and any other process by the mailing via certified mail, return receipt requested of copies of such process to them at their respective address specified herein. Each party hereby agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Section 17 shall affect the right of Buyer to serve legal process in any other manner permitted by law or affect the right of Buyer to bring any action or proceeding against Seller or its property in the courts of other jurisdictions.

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

18.NO RELIANCE

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

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

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

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

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

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

19.INDEMNITY

Seller hereby agrees to indemnify Buyer, Buyer’s designee and each of its officers, directors, employees and agents (“Indemnified Parties”) from and against any and all liabilities, obligations, actual, out-of-pocket losses, actual, out-of-pocket damages, actual, out-of-pocket penalties, actions, judgments, suits, taxes (including stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Purchased Assets or in connection with any of the transactions contemplated by this Agreement and the documents delivered in connection herewith, other than income taxes, franchise taxes or other similar taxes of Buyer), actual, out-of-pocket fees, actual, out-of-pocket costs, actual, out-of-pocket expenses (including reasonable attorneys’ fees and disbursements) or disbursements (all of the foregoing, collectively “Indemnified Amounts”) which may at any time (including, without limitation, such time as this Agreement shall no longer be in effect and the Transactions shall have been repaid in full) be imposed on or asserted against any Indemnified Party in any way whatsoever arising out of or in connection with, or relating to, this Agreement or any Transactions thereunder or any action taken or omitted to be taken by any Indemnified Party under or in connection with any of the foregoing; provided, that Seller shall not be liable for Indemnified Amounts resulting from the gross negligence or willful misconduct of any Indemnified Party. Without limiting the generality of the foregoing, Seller agrees to hold Buyer harmless from and indemnify Buyer against all Indemnified Amounts with respect to all Purchased Assets relating to or arising out of any violation or alleged violation of any environmental law, rule or regulation or any consumer credit laws, including without limitation ERISA, the Truth in Lending Act and/or the Real Estate Settlement Procedures Act, that, in each case, results from anything other than Buyer’s gross negligence or willful misconduct. In any suit, proceeding or action brought by Buyer in connection with any Purchased Asset for any sum owing thereunder, or to enforce any provisions of any Purchased Asset, Seller will save, indemnify and hold Buyer harmless from and against all expense (including, without limitation, reasonable attorneys’ fees and expenses), loss or damage suffered by reason of any defense, set-off, counterclaim, recoupment or reduction or liability whatsoever of the account debtor or obligor thereunder, arising out of a breach by Seller of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to or in favor of such account debtor or obligor or its successors from Seller and the enforcement or the preservation of Buyer’s rights under this Agreement or any Transaction

47

contemplated hereby, including without limitation the reasonable fees and disbursements of its counsel. Seller hereby acknowledges that, the obligation of Seller hereunder is a recourse obligation of Seller.

20.DUE DILIGENCE

Seller acknowledges that Buyer has the right, at its own cost and expense except as provided in the fourth sentence of this Section 20, to perform reasonable continuing due diligence reviews with respect to the Purchased Assets and the related Underlying Assets for purposes of verifying compliance with the representations, warranties and specifications made hereunder, or otherwise, and Seller agrees that upon reasonable prior notice to Seller, Buyer or its authorized representatives will be permitted during normal business hours to examine, inspect, and make copies and extracts of, the Purchased Asset Files, Servicing Records and any and all documents, records, agreements, instruments or information relating to such Purchased Assets and Underlying Assets in the possession or under the control of Seller, any other servicer or subservicer and/or the Custodian. Seller also shall make available to Buyer a knowledgeable financial or accounting officer for the purpose of answering questions respecting the Purchased Asset Files, the Purchased Assets and Underlying Assets. Without limiting the generality of the foregoing, Seller acknowledges that Buyer may enter into Transactions with Seller based solely upon the information provided by Seller to Buyer and the representations, warranties and covenants contained herein, and that Buyer, at its option, has the right at any time to conduct a partial or complete due diligence review on some or all of the Purchased Assets and Underlying Assets. Any provision hereof to the contrary not withstanding and except as provided in the following sentence with respect to the underwriting of Purchased Assets by Buyer or its designee, Seller shall pay the initial $7,500 (per Underlying Asset) of the reasonable costs and expenses of Buyer and its counsel incurred in connection with that portion of its due diligence review intended to satisfy it that the statements set forth in Exhibit VI and/or Exhibit VII, as applicable, are true and correct with respect to each Underlying Asset. Buyer may underwrite such Purchased Assets and Underlying Assets itself or, at its own cost and expense, engage a third party underwriter to perform such underwriting. Seller agrees to reasonably cooperate with Buyer and any third party underwriter in connection with such underwriting, including, but not limited to, providing Buyer and any third party underwriter with access to any and all documents, records, agreements, instruments or information relating to such Purchased Assets and Underlying Assets in the possession, or under the control, of Seller.

21.SERVICING

To the extent it has control over the servicing of the Purchased Assets and/or the Underlying Assets, Seller agrees as follows:

(a)Notwithstanding the purchase and sale of the Purchased Assets hereby, Seller shall continue to cause the Purchased Assets and the Underlying Assets to be serviced for the benefit of Buyer and, if Buyer shall exercise its rights to pledge or hypothecate the Purchased Assets prior to the Repurchase Date pursuant to Section 7, Buyer’s assigns. Seller shall service or cause the servicer to service the Purchased Assets and the Underlying Assets in accordance with Accepted Servicing Practices approved by Buyer and maintained by other prudent mortgage lenders with respect to assets similar to the Purchased Assets and the Underlying Assets.

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

(c)Seller shall provide to Buyer on a monthly basis, or more frequently at the request of Buyer, any and all information that is pertinent or related to the assessment and valuation of Underlying Assets that are included in Purchased Assets, as or when received or available from Seller. Such information includes, but is not limited to, property operating statements, rent rolls, financial statements and other financial reports for each Purchased Asset, as well as any other information or events affecting the interests in or valuation of the Purchased Assets.

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

(e)Seller shall not employ sub-servicers to service the Purchased Assets and the related Underlying Assets without the prior written approval of Buyer which approval shall not be unreasonably withheld. If the Purchased Assets and the related Underlying Assets are serviced by a sub-servicer, Seller shall irrevocably assign all rights, title and interest in the Servicing Agreements in the Purchased Assets and the related Underlying Assets to Buyer.

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

(g)To the extent permitted under the servicing agreement the payment of servicing fees shall be subordinate to payment of amounts outstanding under any Transaction and this Agreement.

(h)The servicer and Seller may not enter into any modification or extension agreement without the written consent or approval of Buyer.

22.WIRE INSTRUCTIONS

(a)Any amounts to be transferred by Buyer to either Seller hereunder shall be sent by wire transfer in immediately available funds

49

(i)to the account of Seller at:

Bank: JPMorgan Chase Bank

Acct. No.: 230254632

ABA #: 021-000021

Acct. Name: Capital Trust, Inc.

Corporate Account

Attn: John Warch (212) 655-0225

(ii)or to an account designated by Seller in writing, provided that such designation is made by at least two Authorized Representatives of the Seller.

(b)Any amounts to be transferred by Seller to Buyer hereunder shall be sent by wire transfer in immediately available funds to the account of Buyer at:

Acct.:  For the A/C of Bear Stearns MBS, FNB Chicago

Acct. No.:  5801230

ABA No.:  071000013

Attn:  Eileen Albus

(c)Amounts other than the Purchase Price for a Purchased Asset received after 3:00 p.m., New York City time, on any Business Day shall be deemed to have been paid and received on the next succeeding Business Day.

23.CONFIDENTIALITY

Each of the parties acknowledges that this Agreement, the Custodial Agreement and the terms of each Transaction (including information disclosed in due diligence) are confidential in nature and each such party agrees that, unless an Event of Default shall occur and be continuing, or as otherwise directed by a court or regulatory entity of competent jurisdiction or as may be required by federal or state law (which determination as to federal or state law shall be based upon written advice of counsel), it shall limit the distribution of such documents and the disclosure of such information to its officers, employees, attorneys, accountants, investors and agents as required in order to conduct its business with the other parties hereto. Notwithstanding the foregoing, Buyer shall be permitted to provide a copy of this Agreement and the Custodial Agreement, and shall be permitted to describe the terms of each Transaction, in connection with the re-hypothecation of the Eligible Assets subject to the terms of this Agreement. This Section shall not apply to information which has entered the public domain through means other than a breach of the foregoing covenant by the party seeking to distribute such documents or which the other party has given written permission to disclose.

Seller hereby acknowledges and agrees that any and all information concerning Seller (the “Information”) that is furnished by Seller to Buyer and any of its Affiliates may be used and relied upon by any other of Buyer’s Affiliates without any liability to Seller to the extent such information is obtained by Buyer or an Affiliate from another of its Affiliates without any liability to Seller, provided, however, that no Information will be used by a Buyer or an Affiliate in violation of federal or state securities laws.

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Seller further acknowledges and agrees that any confidentiality agreement that may now or hereafter exist between Seller and Buyer or an Affiliate shall not preclude the disclosure of any Information between or among Buyer and any of its Affiliates.

24.SINGLE TRANSACTION

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

25.JOINT AND SEVERAL LIABILITY OF SELLERS

Each Seller agrees to be jointly and severally liable for the obligations of each Seller hereunder and all representations, warranties, covenants and agreements made by or on behalf of each Seller in the Agreement or in any exhibit hereto or any document, instrument or certificate delivered pursuant hereto shall be deemed to have been made by each Seller, jointly and severally. Each Seller further agrees that, notwithstanding any right of Buyer to investigate fully the affairs of a Seller and notwithstanding any knowledge of facts determined or determinable by Buyer, Buyer has the right to rely fully on the representations, warranties, covenants and agreements of each Seller contained in the Agreement and upon the accuracy of any document, instrument, certificate or exhibit given or delivered hereunder. The joint and several obligation of each Seller hereunder is absolute, unconditional, irrevocable, present and continuing and, with respect to any payment to be made to Buyer, is a guaranty of payment (and not of collectability) and is in no way conditional or contingent upon the continued existence of the other Sellers and is not and will not be subject to any setoffs. Any notice or other communication provided to a Seller pursuant hereto shall be deemed to have been given each Seller and failures to be sent any notice or communication contemplated hereby shall not relieve a Seller from its joint and several liability for the obligations of each Seller hereunder.

26.NO WAIVERS, ETC.

No express or implied waiver of any Event of Default by either party shall constitute a waiver of any other Event of Default and no exercise of any remedy hereunder by any party shall constitute a waiver of its right to exercise any other remedy hereunder. No modification or waiver of any provision of this Agreement and no consent by any party to a departure herefrom shall be effective unless and until such shall be in writing and duly executed by both of the parties hereto. Without limitation on any of the foregoing, the failure to give a notice pursuant to Section 3(a) hereof will not constitute a waiver of any right to do so at a later date.

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27.USE OF EMPLOYEE PLAN ASSETS

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

(b)Subject to the last sentence of subsection (a) of this Section 27, any such Transaction shall proceed only if Seller furnishes or has furnished to Buyer its most recent available audited statement of its financial condition and its most recent subsequent unaudited statement of its financial condition.

(c)By entering into a Transaction pursuant to this Section 27, Seller shall be deemed to represent to Buyer that since the date of Seller’s latest such financial statements, there has been no material adverse change in Seller’s financial condition which Seller has not disclosed to Buyer which would affect, in any material respect, Seller’s ability to perform its obligations hereunder.

28.NO PERSONAL LIABILITY; FURTHER ASSURANCES; MISCELLANEOUS

(a)None of the officers, members, shareholders or directors of Seller shall be liable for the payment or performance of Seller hereunder.

(b)Seller agrees that, from time to time upon the prior written request of Buyer, it shall (i) execute and deliver such further documents, provide such additional information and reports and perform such other acts as Buyer may reasonably request in order to insure compliance with the provisions hereof (including, without limitation, compliance with the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot Act) Act of 2001) and to fully effectuate the purposes of this Agreement and (ii) provide such opinions of counsel concerning matters relating to this Agreement as Buyer may reasonably request; provided, however, that nothing in this Section 28(b) shall be construed as requiring Buyer to conduct any inquiry or decreasing Seller’s responsibility for its statements, representations, warranties or covenants hereunder.

(c)Time is of the essence under the Transaction Documents and all Transactions thereunder and all references to a time shall mean New York time in effect on the date of the action unless otherwise expressly stated in the Transaction Documents.

(d)All rights, remedies and powers of Buyer hereunder and in connection herewith are irrevocable and cumulative, and not alternative or exclusive, and shall be in addition to all other rights, remedies and powers of Buyer whether under law, equity or agreement. In addition to the rights and remedies granted to it in this Agreement, Buyer shall have all rights and remedies of a secured party under the Uniform Commercial Code.

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

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

(g)Without limiting the rights and remedies of Buyer under the Transaction Documents. Seller shall pay Buyer’s reasonable out-of-pocket costs and expenses, including the reasonable fees and expenses of accountants, attorneys and advisors, incurred in connection with the preparation, negotiation, execution and consummation of, and any amendment, supplement or modification to, the Transaction Documents and the Transactions thereunder up to $5,000. Seller agrees to pay Buyer on demand all costs and expenses (including reasonable expenses for legal services of every kind) of any subsequent enforcement of any of the provisions hereof, or of the performance by Buyer of any obligations of Seller in respect of the Purchased Assets, or any actual or attempted sale, or any exchange, enforcement, collection; compromise or settlement in respect of any of the Purchased Assets and for the custody, care or preservation of the Purchased Assets (including insurance costs) and defending or asserting rights and claims of Buyer in respect thereof, by litigation or otherwise. In addition, Seller agrees to pay Buyer on demand all reasonable costs and expenses (including reasonable expenses for legal services) incurred in connection with the maintenance of the Collection Account and registering the Purchased Assets in the name of Buyer or its nominee. All such expenses shall be recourse obligations of Seller to Buyer under this Agreement.

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

(i)The parties acknowledge and agree that although they intend to treat each Transaction as a sale of the Purchased Assets, in the event that such sale shall be recharacterized as a secured financing, this Agreement shall also serve as a security agreement with respect to Buyer’s rights in the Collateral. In order to secure and to provide for the prompt and unconditional repayment of the Repurchase Price and the performance of its obligations under this Agreement, Seller hereby pledges to Buyer and hereby grants to Buyer a first priority security interest in all of its rights in the Collateral referred to in Section 5 hereof. Buyer may without Seller’s execution, consent or approval, and Seller hereby covenants that it shall at Buyer’s request duly execute any Form UCC financing statements as may be required by Buyer in order to perfect its security interest created hereby in such rights and obligations granted above, it being agreed that Seller shall pay any and all fees required to file such financing statements.

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

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

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

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

(n)Any notice, acknowledgment, statement or certificate (including, without limitation, any Confirmation) given by Buyer to any Seller shall be effective as, and shall be deemed to be, a notice, acknowledgment, statement or certificate given to each and every Seller. Buyer may, without necessity of any inquiry, rely solely upon any notice, acknowledgment, statement or certificate of any of (1) any Seller or (2) any authorized representative of Seller set forth on Exhibit II or otherwise designated by any Seller from time to time, as constituting the joint and several statement and certificate of Seller fully authorized by Seller. Any disbursements of funds to Seller provided for in Section 4 of this Agreement or otherwise in this Agreement or the Transaction Documents shall be deemed properly made to Seller if disbursed to any Seller or its designee.

29.DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS

The parties acknowledge that they have been advised that:

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

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

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

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the 15^th day of February, 2006.

BUYER:
BEAR, STEARNS INTERNATIONAL LIMITED
By:	/s/ David S. Marren
Name:  David S. Marren
Title:  Authorized Signatory
SELLER:
CAPITAL TRUST, INC.
(jointly and severally with the other Seller)
By:	/s/ John R. Klopp
Name:  John R. Klopp
Title:  President and CEO
SELLER
CT BSI FUNDING CORP.
(jointly and severally with the other Seller)
By:	/s/ John R. Klopp
Name:  John R. Klopp
Title:  President and CEO

EXHIBITS

EXHIBIT I	Confirmation Statement — Bear, Stearns International Limited
EXHIBIT II	Authorized Representatives of Sellers
EXHIBIT III	Monthly Reporting Package
EXHIBIT IV	Form of Custodial Delivery
EXHIBIT V	Form of Power of Attorney
EXHIBIT VI	Due Diligence Review Regarding Each Underlying Asset Which Is a Whole Loan or B Note
EXHIBIT VII	Due Diligence Review Regarding Each Underlying Asset Which Is a Mezzanine Loan
EXHIBIT VIII	Representations and Warranties Regarding Each Participation Interest and the Related Underlying Asset
EXHIBIT IX	Underlying Loan Information
EXHIBIT X	Transaction Procedure
EXHIBIT XI	Ownership Chart for each Seller
EXHIBIT XII	Form of Opinion of Counsel to Sellers
EXHIBIT XIII	Form of Bailee Agreement
SCHEDULE 1-A	Form of UCC Financing Statement
SCHEDULE 1-B	Form of UCC Financing Statement Amendment

EXHIBIT I

CONFIRMATION STATEMENT
BEAR, STEARNS INTERNATIONAL LIMITED

Ladies and Gentlemen:

Bear, Stearns International Limited, is pleased to deliver our written Confirmation of our agreement to enter into the Transaction pursuant to which Bear, Stearns International Limited, shall purchase from you the Purchased Assets identified in the Amended and Restated Master Repurchase Agreement between Bear, Stearns International Limited (the “Buyer”) and Capital Trust, Inc., a Maryland corporation, and CT BSI Funding Corp., a Delaware Corporation (each a “Seller” with joint and several liability for the obligations of the other Seller), dated as of February 15, 2006 (the “Agreement”; capitalized terms used herein without definition have the meanings given in the Agreement), as follows below and on the attached Schedule 1 :

Purchase Date:
Purchased Assets:	As identified on attached Schedule 1
Aggregate Principal Amount of Purchased Assets	As identified on attached Schedule 1
Repurchase Date:
Purchase Price:	$
Pricing Rate:	one month LIBOR plus          % [             ]
Buyer’s Margin Ratio:
Original Principal Amount:
Current Principal Amount:
Original Market Value:
Due Date:
Name and address for communications:	Buyer:
	Attention:
	Telephone:
	Telecopy:

I-1

		Seller:
		[Capital Trust, Inc.] [CT BSI Funding Corp.]
		Attention:
		Telephone:
		Telecopy:
		BEAR, STEARNS INTERNATIONAL LIMITED
		By:
		Name:
		Title:
AGREED AND ACKNOWLEDGED:
	, a
By:
Its:

I-2

Schedule 1 to Confirmation Statement

Purchased Assets:

Aggregate Principal Amount:

I-3

EXHIBIT II

AUTHORIZED REPRESENTATIVES OF SELLERS

Name	Specimen Signature
John R. Klopp
Stephen D. Plavin
Geoffrey G. Jervis
Jeremy FitzGerald
Peter S. Ginsberg
Thomas C. Ruffing
John E. Warch

II-1

EXHIBIT III

MONTHLY REPORTING PACKAGE

Name:

Loan Number:

Borrower Name:

Property Address:

Property City:

Property State:

Property County:

Property Zip:

Lien Position:

Adjustment Type:

Property Type:

Occupancy:

Loan Purpose:

Original Coupon:

Current Coupon:

Original Balance:

Current Balance:

Outstanding Senior Debt**:

Original Accrued P&I:

Current Accrued Interest:

Origination Date:

First Payment Date:

Maturity Date:

Date Next Due:

Original Term:

Original Amortization Term:

Product Type:

Balloon Flag:

Original LTV:

Combined Current LTV**:

III-1

Original Appraisal:

Original Spread:

Payment Frequency:

Servicing Fee:

Prepayment Penalty Period:

Prepayment Penalty Description:

Index Type:

Rounding Factor:

Convertible:

New Amortization Flag:

Negative Amortization Cap:

Periodic Payment Cap:

Margin:

Maximum Life Rate:

Minimum Life Rate:

Initial Periodic Rate Cap:

Subsequent Periodic Rate Cap:

First Rate Adjustment Date:

First Payment Adjustment Date:

Next Rate Adjustment Date:

Next Payment Adjustment Date:

Rate Adjustment Period:

Payment Adjustment Period:

Interest Paid To:

Interest Paid Through Date:

III-2

EXHIBIT IV

FORM OF CUSTODIAL DELIVERY

On this          of           , 200  , Capital Trust, Inc., a Maryland corporation, and CT BSI Funding Corp., a Delaware Corporation (each a “Seller” with joint and several liability for the obligations of the other Seller), as Sellers under that certain Amended and Restated Master Repurchase Agreement, dated as of February 15, 2006 (the “Repurchase Agreement”) between Seller and Bear, Stearns International Limited (“Buyer”), does hereby deliver to Deutsche Bank Trust Company Americas, as custodian (“Custodian”), as custodian under that certain Custodial Agreement, dated as of February 15, 2006, between Buyer and Custodian, the Purchased Asset Files with respect to the Purchased Assets to be purchased by Buyer pursuant to the Repurchase Agreement, which Purchased Assets are listed on the Purchased Asset Schedule attached hereto and which Purchased Assets shall be subject to the terms of the Custodial Agreement on the date hereof.

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

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

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

	, a
By:
Its:

IV-1

EXHIBIT V

FORM OF POWER OF ATTORNEY

“Know All Men by These Presents, that Capital Trust, Inc., a Maryland corporation, and CT BSI Funding Corp., a Delaware Corporation (each a “Seller” with joint and several liability for the obligations of the other Seller), does each hereby appoint Bear, Stearns International Limited (“Buyer”), its attorney-in-fact to act in Seller’s name, place and stead in any way which Seller could do with respect to (i) complete and endorse the Purchased Asset and any transfer documents relating thereto and (ii) the enforcement of Seller’s rights under the Purchased Assets purchased by Buyer pursuant to the Amended and Restated Master Repurchase Agreement, dated as of February 15, 2006 (the “Amended and Restated Master Repurchase Agreement”), between Seller and Buyer and to take such other steps as may be necessary or desirable to enforce Buyer’s rights against such Purchased Assets, the related Purchased Asset Files and the Servicing Records to the extent that Seller is permitted by law to act through an agent.

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

Capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in the Amended and Restated Master Repurchase Agreement.

IN WITNESS WHEREOF Seller has caused this Power of Attorney to be executed this 15th day of February, 2006.

CAPITAL TRUST, INC.

By:

Name:

Title:

CT BSI FUNDING CORP.

By:

Name:

Title:

V-1

EXHIBIT VI

DUE DILIGENCE REVIEW
REGARDING EACH UNDERLYING ASSET
WHICH IS A WHOLE LOAN OR B NOTE

1.Purchased Asset Schedule and Underlying Loan Information. The information set forth in the Purchased Asset Schedule and the Underlying Loan Information is complete, true and correct in all material respects.

2.Ownership of Purchased Assets. Each Purchased Asset is a participation interest in a whole loan. Immediately prior to the transfer to Buyer of the Purchased Assets, Seller had good and marketable title to, and was the sole owner of, each Purchased Asset. Seller has full right, power and authority to transfer and assign each of the Purchased Assets to or at the direction of Buyer and has validly and effectively conveyed (or caused to be conveyed) to Buyer or its designee all of Seller’s legal and beneficial interest in and to the Purchased Assets free and clear of any and all pledges, liens, charges, security interests, participation interests and/or other encumbrances. The sale of the Purchased Assets to Buyer or its designee does not require Seller to obtain any governmental or regulatory approval or consent that has not been obtained.

3.Payment Record. No scheduled payment of principal and interest under any Purchased Asset was 30 days or more past due as of the Purchase Date without giving effect to any applicable grace period, and no Purchased Asset was 30 days or more delinquent in the twelve-month period immediately preceding the Purchase Date.

4.Lien; Valid Assignment. The Mortgage related to and delivered in connection with each Purchased Asset constitutes a valid and, subject to the exceptions set forth in paragraph 13 below, enforceable first priority lien upon the related Property, prior to all other liens and encumbrances and there are no liens or encumbrances pari passu with the lien of the Mortgage, except for (a) the lien for current real estate taxes and assessments not yet due and payable, (b) covenants, conditions and restrictions, rights of way, easements and other matters that are of public record and/or are referred to in the related lender’s title insurance policy, (c) exceptions and exclusions specifically referred to in such lender’s title insurance policy, and (d) other matters to which like properties are commonly subject, none of which matters referred to in clause (b), (c) or (d) individually or in the aggregate materially interferes with the security intended to be provided by such Mortgage or the marketability or current use of the Property or the current ability of the Property to generate operating income sufficient to service the Underlying Asset debt (the foregoing items (a) through (d) being herein referred to as the “Permitted Encumbrances”). The related assignment of such Mortgage executed and delivered in favor of Buyer is in recordable form and constitutes a legal, valid and binding assignment, sufficient to convey to the assignee named therein all of the assignor’s right, title and interest in, to and under such Mortgage. Such Mortgage, together with any separate security agreements, chattel mortgages or equivalent instruments, establishes and creates a valid and, subject to the exceptions set forth in paragraph 13 below, enforceable security interest in favor of the holder thereof in all of the related Mortgagor’s personal property used in, and reasonably necessary to operate the related Property. A Uniform Commercial Code financing statement has been filed and/or recorded in all places necessary to perfect a valid security interest in such personal

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property, and such security interest is a first priority security interest, subject to any prior purchase money security interest in such personal property and any personal property leases applicable to such personal property. Notwithstanding the foregoing, no representation is made as to the perfection of any security interest in rents or other personal property to the extent that possession or control of such items or actions other than the filing of Uniform Commercial Code financing statements are required in order to effect such perfection.

5.Assignment of Leases and Rents. The assignment of leases and rents (“Assignment of Leases”) set forth in the Mortgage (or in a separate instrument) and related to and delivered in connection with each Purchased Asset establishes and creates a valid, subsisting and, subject to the exceptions set forth in paragraph 13 below, enforceable first priority perfected lien and together with the Mortgage, first priority perfected security interest in the related Mortgagor’s interest in all leases, subleases, licenses or other agreements pursuant to which any person is entitled to occupy, use or possess all or any portion of the real property subject to the related Mortgage, and each assignor thereunder has the full right to assign the same. The related assignment of any Assignment of Leases, not included in a Mortgage, executed and delivered in favor of Buyer is in recordable form and constitutes a legal, valid and binding assignment, sufficient to convey to the assignee named therein all of the assignor’s right, title and interest in, to and under such Assignment of Leases. If an Assignment of Leases exists with respect to any Mortgage Loan (whether as part of the related Mortgage or separately), then the related Mortgage or related Assignment of Leases, subject to applicable law, provides for, upon an event of default under the Mortgage Loan, the appointment of a receiver for the collection of rents or for the related mortgagee to enter into possession to collect the rents or for rents to be paid directly to the mortgagee.

6.Mortgage Status; Waivers and Modifications. In the case of each Mortgage Loan, (a) no Mortgage has been satisfied, canceled, rescinded or subordinated in whole or in material part, (b) the related Property has not been released from the lien of such Mortgage, in whole or in material part, (c) no instrument has been executed that would effect any such satisfaction, cancellation, subordination, rescission or release except for any partial reconveyances of portions of the real property that do not materially adversely affect the value of the property, and (d) no Mortgagor has been released from its obligations under the related Mortgage in whole or in material part. None of the terms of any Mortgage Note, Mortgage or Assignment of Leases have been impaired, waived, altered or modified in any respect, except by written instruments, all of which are included in the related Mortgage File.

7.Condition of Property; Condemnation. Except as set forth in an engineering report prepared in connection with the origination of the related Purchased Asset and dated not more than 12 months prior to the Purchase Date, each Property is free and clear of any damage that would materially and adversely affect its value as security for the related Purchased Asset (normal wear and tear excepted). Seller has received no notice, and has no knowledge, of any pending or threatened proceeding for the condemnation of all or any material portion of any Property. As of the date of the origination of each Underlying Asset (based on surveys and/or title insurance obtained in connection with the origination of the Underlying Assets) (a) all of the improvements on the related Property which were considered material in determining the appraised value of the Property lay wholly within the boundaries and building restriction lines of such property, except for encroachments that are insured against by the Title Policy referred to in

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paragraph 8 herein or that do not materially and adversely affect the value, principal use, or marketability of such Property, and (b) no improvements on adjoining properties encroached upon such Property so as to materially and adversely affect the value, principal use, or marketability of such Property, except those encroachments that are insured against by the Title Policy referred to in paragraph 8 herein.

8.Title Insurance. Each Property is covered by an American Land Title Association (or an equivalent form thereof approved for use in the applicable jurisdiction) lender’s title insurance policy (the “Title Policy”) in the original principal amount of the related Underlying Asset after all advances of principal. Each Title Policy insures that the related Mortgage is a valid first priority lien on such Property, subject only to the exceptions stated therein (or a preliminary title policy with escrow instructions or a marked up title insurance commitment on which the required premium has been paid exists which is binding on the title insurer and which evidences that such Title Policy will be issued). Each Title Policy (or, if it has yet to be issued, the coverage to be provided thereby) is in full force and effect, all premiums thereon have been paid, insures the originator of the Mortgage Loan, its successors and assigns and (i) no material claims have been made thereunder and no claims have been paid thereunder and (ii) was issued by a title insurance company qualified at origination to do business in the jurisdiction in which the Property is located to the extent such qualification was required in order for the Title Policy to be enforceable. No holder of the related Mortgage has done, by act or omission, anything that would materially impair the coverage under such Title Policy. Immediately following the transfer and assignment of the related Purchased Asset to Buyer, such Title Policy (or, if it has yet to be issued, the coverage to be provided thereby) will inure to the benefit of Buyer without the consent of or notice to the insurer. Such Title Policy contains no exclusion for, or it affirmatively insures (unless the related Property is located in a jurisdiction where such affirmative insurance is not available), the following: (a) access to a public road; and (b) that if a survey was reviewed or prepared in connection with the origination of the related Mortgage Loan, the area shown on such survey is the same as the property legally described in the related Mortgage.

9.No Holdbacks. The proceeds of each Underlying Asset have been fully disbursed and there is no obligation for future advances with respect thereto. With respect to each Underlying Asset, any and all requirements as to completion of any on-site or off-site improvement and as to disbursements of any funds escrowed for such purpose that were to have been complied with on or before the Purchase Date have been complied with, or any such funds so escrowed have not been released.

10.Mortgage Provisions. The Mortgage Note or Mortgage for each Underlying Asset, together with applicable state law, contains customary and enforceable provisions for comparable mortgaged properties similarly situated (subject to the exceptions set forth in paragraph 13) such as to render the rights and remedies of the holder thereof adequate for the practical realization against the related Property of the principal benefits of the security intended to be provided thereby, including, without limitation, foreclosure or similar proceedings as applicable for the jurisdiction in which the related Property is located.

11.Buyer under Deed of Trust. If any Mortgage is a deed of trust, (a) a trustee, duly qualified under applicable law to serve as such, is properly designated and serving

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under such Mortgage, and (b) no fees or expenses are payable to such trustee by Seller, Buyer or any transferee thereof except in connection with a trustee’s sale after default by the related Mortgagor or in connection with any full or partial release of the related Property or related security for the related Underlying Asset.

12.Environmental Conditions. With respect to each Property (a) an environmental site assessment (or an update of a previous assessment) was performed by an independent third party environmental consultant with respect to each Property in connection with the origination of the related Underlying Asset, (b) a report of each such assessment (an “Environmental Report”) is dated no earlier than 12 months prior to the Purchase Date and has been delivered to Buyer, and (c) there is no violation of applicable environmental laws and regulations with respect to, or any material and adverse environmental condition or circumstance affecting any Property that was not disclosed in such report. Each Mortgage requires the related Mortgagor to comply with all applicable federal, state and local environmental laws and regulations. Where such Environmental Report disclosed a violation of applicable environmental laws and regulations or the existence of a material and adverse environmental condition or circumstance affecting any Property, (i) a party not related to the Mortgagor was identified as the responsible party for such condition or circumstance, (ii) the related Mortgagor was required either to provide additional security and/or to obtain an operations and maintenance plan or (iii) the related Mortgagor provided evidence satisfactory to the originator of such Mortgage Loan that applicable federal, state or local governmental authorities would not take any action, or require the taking of any action, in respect of such violation, condition or circumstance. The related Purchased Asset Documents contain provisions pursuant to which the related Mortgagor or a principal of such Mortgagor has agreed to indemnify the mortgagee for damages resulting from violations of any applicable Environmental Laws.

13.Loan Document Status. Each Mortgage Note, Mortgage and other agreement that evidences or secures an Underlying Asset and that was executed by or on behalf of the related Mortgagor is the legal, valid and binding obligation of the maker thereof (subject to any non-recourse provisions contained in any of the foregoing agreements and any applicable state anti-deficiency or market value limit deficiency legislation), enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights generally, and by general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law) and there is no valid defense, counterclaim or right of offset or rescission available to the related Mortgagor with respect to such Mortgage Note, Mortgage or other agreements.

14.Insurance. Each Property is, and is required pursuant to the related Mortgage to be, insured by (a) an all risk insurance policy issued by an insurer meeting the requirements of such Underlying Asset providing coverage against loss or damage sustained by reason of fire, lightning, windstorm, hail, explosion, riot, riot attending a strike, civil commotion, aircraft, vehicles and smoke, and, to the extent required as of the date of origination by the originator of such Underlying Asset consistent with its normal commercial mortgage lending practices, against other risks insured against by persons operating like properties in the locality of the Property in an amount not less than the lesser of the principal balance of the related Underlying Asset and 100% of the replacement cost (not allowing reduction in insurance

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proceeds for depreciation) of the Property, and not less than the amount necessary to avoid the operation of any co-insurance provisions with respect to the Property; (b) a business interruption or rental loss insurance policy; providing coverage for at least twelve months (other than for manufactured housing communities) and for eighteen months of coverage if the Property is a special purpose property or if the Mortgage Loan is in excess of $25 million; (c) a flood insurance policy (if any portion of the Property is located in an area identified by the Federal Emergency Management Agency as having special flood hazards) and (d) a comprehensive general liability insurance policy in amounts as are generally required by commercial mortgage lenders, and in any event not less than $1 million per occurrence. Such insurance policy contains a standard mortgagee clause that names the holder of the Mortgage, its successors and assigns as mortgagee as an additional insured in the case of liability insurance policies or as a loss payee in the case of property insurance policies. Such insurance policy is not terminable (nor may the amount of coverage provided thereunder be reduced) without prior written notice to the holder of the Mortgage, and no such notice has been received, including any notice of nonpayment of premiums, that has not been cured. Each Mortgage obligates the related Mortgagor to maintain all such insurance and, upon such Mortgagor’s failure to do so, authorizes the holder of the Mortgage to purchase and maintain such insurance at the Mortgagor’s cost and expense and to seek reimbursement therefor from such Mortgagor. Other than as set forth in paragraph 17(h) hereof, each Mortgage provides that casualty insurance proceeds will be applied either to the restoration or repair of the related Property or to the reduction or defeasance of the principal amount of the Underlying Asset.

15.Taxes and Assessments. There are no delinquent or unpaid taxes or assessments (including assessments payable in future installments), or other outstanding charges affecting any Property which are or may become a lien of priority equal to or higher than the lien of the related Mortgage. For purposes of this representation and warranty, real property taxes and assessments shall not be considered unpaid until the date on which interest and/or penalties would be first payable thereon.

16.Mortgagor Bankruptcy. No Mortgagor, non-recourse carve-out guarantor or tenant physically occupying 25% or more (by square feet) of the net rentable area of a Property is a debtor in any state or federal bankruptcy or insolvency proceeding.

17.Leasehold Estate. Each Property consists of the related Mortgagor’s fee simple estate in real estate or, if the related Underlying Asset is secured in whole or in part by the interest of a Mortgagor as a lessee under a ground lease of a Property (a “Ground Lease”), by the related Mortgagor’s interest in the Ground Lease but not by the related fee interest in such Property (the “Fee Interest”). With respect to any Underlying Asset secured by a Ground Lease but not by the related Fee Interest:

a.Such Ground Lease or a memorandum thereof has been duly recorded; such Ground Lease (or the related estoppel letter or lender protection agreement between Seller and related lessor) permits the current use of the Property and permits the interest of the lessee thereunder to be encumbered by the related Mortgage and does not restrict the use of the related Property by such lessee, its successors or assigns in a manner that would adversely effect the security provided by the related Mortgage by

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limiting in any way its current use; and there has been no material change in the terms of such Ground Lease since the origination of the related Underlying Asset, with the exception of material changes reflected in written instruments that are a part of the related Mortgage File;

b.The lessee’s interest in such Ground Lease is not subject to any liens or encumbrances superior to, or of equal priority with, the related Mortgage, other than the related Fee Interest and Permitted Encumbrances;

c.The Mortgagor’s interest in such Ground Lease is assignable to Buyer and is further assignable by Buyer, its successors and assigns upon notice to, but without the consent of, the lessor thereunder (or, if such consent is required, it has been obtained prior to the Purchase Date) and, in the event that it is so assigned, is further assignable by Buyer and its successors and assigns upon notice to, but without the need to obtain the consent of, such lessor. If required by the Ground Lease, the lessor has received notice of the lien of the related Mortgage in accordance with the provisions of the Ground Lease;

d.In connection with the origination of such Mortgage Loan, the related ground lessor provided an estoppel to the originator confirming that the related Mortgagor was not then in default under such Ground Lease. The Ground Lease provides that no material amendment to the Ground Lease is effective against the mortgagee under such Mortgage Loan unless the mortgagee has consented thereto. Such Ground Lease is in full force and effect, and Seller and any servicer acting on Seller’s behalf have received no notice that an event of default has occurred thereunder or that the Ground lease has terminated, and there exists no condition that, but for the passage of time or the giving of notice, or both, would result in an event of default under the terms of such Ground Lease;

e.Such Ground Lease, or an estoppel letter or other agreement, (A) requires the lessor under such Ground Lease to give notice of any default by the lessee to the mortgagee, provided that the mortgagee has provided the lessor with notice of its lien in accordance with the provisions of such Ground Lease to the extent such Ground Lease requires such notice, further (B) provides that no notice of termination given under such Ground Lease (including rejection of such Ground Lease in a bankruptcy proceeding) is effective against the holder of the Mortgage unless a copy of such notice has been delivered to such holder and the lessor has offered to enter into a new lease with such holder on terms that do not materially vary from the economic terms of the Ground Lease;

f.A mortgagee is permitted a reasonable opportunity (including, where necessary, sufficient time to gain possession of the interest of the lessee under such Ground Lease by foreclosure or otherwise if possession is necessary to effect a cure) to cure any default under such Ground Lease,

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which is curable after the receipt of notice of any such default, before the lessor thereunder may terminate such Ground Lease;

g.Such Ground Lease has an original term (including any extension options set forth therein which, under all circumstances, may be exercised, and will be enforceable, by the mortgagee if it takes possession of such leasehold interest) which extends not less than twenty years beyond the stated maturity date of the related Underlying Asset and ten years beyond the amortization period for the related Underlying Asset;

h.Under the terms of such Ground Lease and the related Mortgage, taken together, any related insurance proceeds or condemnation award other than in respect of a total loss will be applied either to the repair or restoration of all or part of the related Property, with the mortgagee or a trustee appointed by it having the right to hold and disburse such proceeds as the repair or restoration progresses (except in such cases where a provision entitling another party to hold and disburse such proceeds would not be viewed as commercially unreasonable by a prudent commercial mortgage lender for conduit programs), or to the payment or defeasance of the outstanding principal balance of the Underlying Asset together with any accrued interest thereon;

i.Such Ground Lease does not impose any restrictions on subletting which would be viewed as commercially unreasonable by prudent commercial mortgage lenders in the lending area where the Property is located and such Ground Lease contains a covenant that the ground lessor is not permitted, in the absence of an uncured default, to disturb the possession, interest or quiet enjoyment of the lessee thereunder for any reason or in any manner which would materially adversely affect the security provided by the related Mortgage; and

j.Such Ground Lease provides, or the lessor has otherwise agreed, that such Ground Lease may not be amended or modified or any such amendment or modification will not be effective against the mortgagee without the prior written consent of the mortgagee under such Underlying Asset any such action without such consent is not binding on such mortgagee, its successors and assigns, provided such mortgagee has provided the ground lessor with notice of its lien in accordance with the terms of the Ground Lease.

18.Escrow Deposits. All escrow deposits and payments (including capital improvements, environmental remediation reserves and other reserve deposits, if any) relating to each Underlying Asset that are, as of the Purchase Date, required to be deposited or paid to the lender under the terms of the related Mortgage Loan documents have been so deposited or paid and, to the extent of any remaining balances of such escrow deposits, are in the possession or under the control of Seller or its agents (which shall include the applicable servicer of the Mortgage Loan). Any and all material requirements under each Mortgage Loan as to completion

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of any material improvements and as to disbursement of any funds escrowed for such purpose, which requirements were to have been complied with on or before the Purchase Date, have been complied with in all material respects or, if and to the extent not so complied with, the escrowed funds (or an allocable portion thereof) have not been released except in accordance with the terms of the related loan documents.

19.LTV Ratio. The gross proceeds of each Underlying Asset to the related Mortgagor at origination did not exceed the non-contingent principal amount of the Underlying Asset and either: (a) such Underlying Asset is secured by an interest in real property having a fair market value (i) at the date the Underlying Asset was originated at least equal to 80 percent of the original principal balance of the Underlying Asset or (ii) at the Purchase Date at least equal to 80 percent of the principal balance of the Underlying Asset on such date; provided that for purposes hereof, the fair market value of the real property interest must first be reduced by (x) the amount of any lien on the real property interest that is senior to the Underlying Asset and (y) a proportionate amount of any lien that is in parity with the Underlying Asset (unless such other lien secures an Underlying Asset that is cross-collateralized with such Underlying Asset, in which event the computation described in clauses (a)(i) and (a)(ii) of this paragraph 19 shall be made on a pro rata basis in accordance with the fair market values of the Properties securing such cross-collateralized Underlying Assets; or (b) substantially all the proceeds of such Underlying Asset were used to acquire, refinance, improve or protect the real property which served as the only security for such Underlying Asset (other than a recourse feature or other third party credit enhancement within the meaning of Treasury Regulations Section 1.860G-2(a)(l)(ii)).

20.Qualified Mortgage; Underlying Asset Modifications. Each Mortgage Loan is a “qualified mortgage” within the meaning of Section 860G(a)(3) of the Code and Treasury regulation section 1.860G-2(a) (but without regard to the rule in Treasury regulation section 1.860G-2(f)(2)). Any Underlying Asset that was “significantly modified” prior to the Purchase Date for the related Purchased Asset so as to result in a taxable exchange under Section 1001 of the Code either (a) was modified as a result of the default or reasonably foreseeable default of such Underlying Asset or (b) satisfies the provisions of either clause (a)(i) of paragraph 19 (substituting the date of the last such modification for the date the Underlying Asset was originated) or clause (a)(ii) of paragraph 19, including the proviso thereto.

21.Advancement of Funds by Seller. No holder of a Purchased Asset has advanced funds or induced, solicited or knowingly received any advance of funds from a party other than the owner of the related Property, directly or indirectly, for the payment of any amount required by such Purchased Asset.

22.No Mechanics’ Liens. As of the date of the Mortgage, and to the actual knowledge of Seller as of the Purchase Date, each Property is free and clear of any and all mechanics’ and materialmen’s liens that are prior or equal to the lien of the related Mortgage, and no rights are outstanding that under law could give rise to any such lien that would be prior or equal to the lien of the related Mortgage except, in each case, for liens insured against by the Title Policy referred to herein or otherwise bonded.

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23.Compliance with Usury Laws. Each Underlying Asset complied with, or is exempt from, all applicable usury laws in effect at its date of origination.

24.Cross-collateralization; Cross-default. No Underlying Asset is cross-collateralized or cross-defaulted with any loan other than one or more other Underlying Assets.

25.Releases of Property. Except as described in the next sentence, no Mortgage Note or Mortgage requires the mortgagee to release all or any material portion of the related Property from the lien of the related Mortgage except upon payment in full or defeasance of all amounts due under the related Underlying Asset. The Mortgages relating to those Underlying Assets identified on the Purchased Asset Schedule require the mortgagee to grant releases of portions of the related Properties upon (a) the satisfaction of certain legal and underwriting requirements and (b) except where the portion of the Property permitted to be released was not considered by, Seller to be material in the underwriting of the Underlying Asset, either (1) the payment of a release price set forth therein and prepayment consideration in connection therewith or (2) the partial defeasance of such Underlying Asset.

No Underlying Asset permits the release or substitution of collateral if such release or substitution (a) would create a “significant modification” of such Underlying Asset within the meaning of Treas. Reg. § 1.1001 3 or (b) would cause such Underlying Asset not to be a “qualified mortgage” within the meaning of Section 860G(a)(3) of the Code (without regard to clauses (A)(i) or (A)(ii) thereof).

26.No Equity Participation or Contingent Interest. No Underlying Asset contains any equity participation by the lender or provides for negative amortization or for any contingent or additional interest in the form of participation in the cash flow of the related Property, or is convertible by its terms into an equity ownership interest in the related Property or the related Mortgagor, except that, in the case of an ARD Loan, such Mortgage Loan provides that, during the period commencing on or about the related anticipated repayment date and continuing until such Mortgage Loan is paid in full, (a) additional interest shall accrue and may be compounded monthly and (b) a portion of the cash flow generated by such Property will be applied each month to pay down the principal balance thereof in addition to the principal portion of the related monthly payment.

27.No Material Default. There exists no monetary default and there exists no material non-monetary default, breach, violation or event of acceleration (and no event which, with the passage of time or the giving of notice, or both, would constitute any of the foregoing) under the documents evidencing or securing the Underlying Asset, in any such case to the extent the same materially and adversely affects the value of the Underlying Asset and the related Property. Neither the Mortgage Loan Seller nor any servicer acting on its behalf has issued any notice of default, breach or violation related to the Mortgage Loan, accelerated the Mortgage Loan or commenced judicial or non-judicial foreclosure proceedings with respect to the Mortgage Loan.

28.Inspections. Seller (or if Seller is not the originator, the originator of the Underlying Asset) has inspected or caused to be inspected each Property in connection with, and during the 12 month period prior to, the origination of the related Underlying Asset.

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29.Local Law Compliance. Based on due diligence considered reasonable by prudent commercial mortgage lenders in the lending area where each Property is located the improvements located on or forming part of each Property complies in all material respects with applicable zoning laws and ordinances, or constitutes a legal non-conforming use or structure or, if any such improvement does not so comply and does not constitute a legal non-conforming use or structure, such non-compliance and failure does not materially and adversely affect (i) the value of the related Property as determined by the appraisal performed at origination or (ii) the principal use of the Property as of the date of the origination of such Mortgage Loan. As of the date of origination, with respect to each legal non-conforming use or structure, the originator determined based on due diligence considered reasonable by prudent commercial mortgage lenders in the lending area where the subject Property is located that if a casualty occurred at that time, the Property could have been restored or repaired to such an extent that the use or structure of the restored or repaired property would be substantially the same use or structure, or law and ordinance insurance has been obtained, or a holdback was established and the Mortgagor is required to cause the Property to become a conforming use or structure.

30.Junior Liens. None of the Underlying Assets permits the related Property to be encumbered by any lien junior to or of equal priority with the lien of the related Mortgage without the prior written consent of the holder thereof or the satisfaction of debt service coverage or similar criteria specified therein. Each Underlying Asset contains a “due on sale” clause that provides for the acceleration of the payment of the unpaid principal balance of the Underlying Asset if, without the prior written consent of the holder of the Underlying Asset, the related Property, or any material portion thereof, or a controlling interest in the direct or indirect ownership interests in the Mortgagor is directly or indirectly transferred, sold or pledged.

31.Actions Concerning Underlying Assets. To the knowledge of Seller, there are no actions, suits, governmental investigations or proceedings pending or threatened before any court, governmental authority, administrative agency or arbitrator concerning any Underlying Asset or related Mortgagor or Property that, if determined adversely to the Underlying Asset, Mortgagor, or Property, would adversely affect title to the Underlying Asset or the validity or enforceability of the related Mortgage or that might materially and adversely affect the value of the Property, the current ability of the Property to generate net operating income to service the Mortgage Loan, the principal benefit of the security intended to be provided for the Underlying Asset, or the current use of the Property.

32.Servicing. The servicing and collection practices used by Seller and any servicer of the Mortgage Loan have been in all material respects legal, proper and prudent and have met customary industry standards for servicing of commercial Underlying Assets for conduit programs.

33.Licenses and Permits. As of the date of origination of each Underlying Asset, the related Mortgagor was in possession of all material licenses, permits and franchises required by applicable law for the ownership and operation of the related Property as it was then operated and, as of the Purchase Date, the Mortgage Loan Seller has no written notice that the related Mortgagor was not in possession of such licenses, permits and franchises or that such licenses, permits and franchises have not otherwise been issued. The Mortgage Loan requires

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the related Property to be in material compliance with laws and regulations applicable to the Property, in each case to the extent required by law.

34.Assisted Living Facility Regulation. If any Property is operated as an assisted living facility (a) the related Mortgagor and operator, if different, is in compliance in all material respects with all federal and state laws applicable to the use and operation of the related Property and (b) if the operator of the Property participates in Medicare or Medicaid programs, the facility is in compliance in all material respects with the requirements for participation in such programs.

35.Non-Recourse Exceptions. The related Mortgage Loan documents contain provisions providing for recourse against the related Mortgagor, a principal of such Mortgagor or an entity controlled by a principal of such Mortgagor, or a natural person, for damages sustained in connection with the Mortgagor’s (i) fraud, (ii) intentional misrepresentation, (iii) misappropriation or misapplication of rents or amounts due lender, insurance proceeds or condemnation proceeds, (iv) voluntary bankruptcy, (v) failure to obtain prior consent to any encumbrance of the pledged equity under the Mezzanine Loan Documents and (vi) willful misconduct resulting in waste of a Property. The related Mortgage Loan documents contain provisions pursuant to which the related Mortgagor, a principal of such Mortgagor or an entity controlled by a principal of such Mortgagor, or a natural person, has agreed to indemnify the mortgagee for damages resulting from violations of any applicable environmental covenants.

36.Single Purpose Entity. The Mortgagor on each Underlying Asset was, as of the origination of the Underlying Asset, a Single Purpose Entity. For this purpose, a “Single Purpose Entity” shall mean an entity, other than an individual, whose organizational documents provide substantially to the effect that it was formed or organized solely for the purpose of owning and operating one or more Properties securing the Underlying Assets and prohibit it from engaging in any business unrelated to such Property or Properties, and whose organizational documents further provide, or which entity represented in the related Underlying Asset documents, substantially to the effect that it does not have any assets other than those related to its interest in and operation of such Property or Properties, or any indebtedness other than as permitted by the related Mortgage or the other related Underlying Asset documents, that it has its own books and records and accounts separate and apart from any other person, that it will not guarantee or assume the debts of any other person, that it will not commingle assets with affiliates, and that it will not transact business with affiliates except on an arm’s length basis.

Each Mortgagor of an Underlying Asset is an entity which has represented in connection with the origination of the Underlying Asset, or whose organizational documents as of the date of origination of the Underlying Asset provide that so long as the Underlying Asset is outstanding it will have at least one independent director. There are Insolvency/Non-Consolidation opinions with respect to the Pledgor and all of the assumptions made in each such opinion are true and correct.

37.Separate Tax Parcels. Each Property constitutes one or more complete separate tax lots or is subject to an endorsement under the related title insurance policy.

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38.Defeasance. Each Underlying Asset containing provisions for defeasance of mortgage collateral either (i) requires the prior written consent of, and compliance with the conditions set by, the holder of the Underlying Asset, or (ii) requires that (A) defeasance may not occur prior to the time permitted by applicable “real estate mortgage investment conduit” rules and regulations (if applicable), (B) the replacement collateral consist of U.S. governmental securities in an amount sufficient to make all scheduled payments under the Mortgage Note when due, (C) independent public accountants certify that the collateral is sufficient to make such payments, (D) counsel provide an opinion that Buyer has a perfected security interest in such collateral prior to any other claim or interest, and (E) all costs and expenses arising from the defeasance of the mortgage collateral shall be borne by the Mortgagor.

39.Operating or Financial Statement. The related Purchased Asset Documents require the related Mortgagor to furnish to the mortgagee at least quarterly and annually an operating statement and rent roll (if there is more than one tenant) with respect to the related Property and at least annually financial statements of the Mortgagor.

40.Letters of Credit. No Underlying Asset consists of or is secured by a Letter of Credit.

41.Security Interests in Hospitality Properties. If any Property securing a Mortgage Loan is operated as a hospitality property then (a) the security agreements, financing statements or other instruments, if any, related to the Mortgage Loan secured by such Property establish and create a valid and enforceable (subject to the exceptions set forth in Paragraph 13 above) first priority security interest in all items of personal property owned by the related Borrower which are material to the conduct in the ordinary course of the Borrower’s business on the related Property, subject only to purchase money security interests, personal property leases and security interests to secure revolving lines of credit and similar financing; and (b) one or more Uniform Commercial Code financing statements covering such personal property have been filed or recorded (or have been sent for filing or recording) wherever necessary to perfect under applicable law such security interests (to the extent a security interest in such personal property can be perfected by the filing of a Uniform Commercial Code financing statement under applicable law).

42.Prepayment Premiums. Prepayment Premiums payable with respect to each Mortgage Loan, if any, constitute “customary prepayment penalties” within meaning of Treasury Regulation Section 1.860G-1(b)(2).

43.Assignment of Collateral. There is no material collateral securing any Mortgage Loan that has not been assigned to the Mortgagee.

44.Fee Simple or Leasehold Interests. The interest of the related Borrower in the Property securing each Mortgage Loan includes a fee simple and/or leasehold estate or interest in real property and the improvements thereon.

45.Appraisals. An appraisal of the related Property was conducted in connection with the origination of the Mortgage Loan, which appraisal is signed by an appraiser, who had no interest, direct or indirect, in the Property or the Borrower or in any loan made on

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the security thereof, and whose compensation is not affected by the approval or disapproval of the Mortgage Loan; in connection with the origination of the Mortgage Loan, each appraiser has represented in such appraisal or in a supplemental letter that the appraisal satisfies the requirements of the “Uniform Standards of Professional Appraisal Practice” as adopted by the Appraisal Standards Board of the Appraisal Foundation.

46.No Capital Contributions. The mortgagee has no obligation to make any capital contributions to the related Borrower under the Mortgage Loan.

47.Due Dates and Grace Periods. The related Mortgage or Mortgage Note provides for Monthly Payments to be made on the first day of each month (“Due Date”) and a grace period for Monthly Payments no longer than ten (10) days from the related Due Date.

48.Terrorism Insurance. With respect to each Mortgage Loan, the related all risk insurance policy and business interruption policy did not as of the date of origination of the Mortgage Loan, and does not as of the date hereof, specifically exclude acts of terrorism from coverage. With respect to each of the Mortgage Loans, the related Mortgage Loan documents do not expressly waive or prohibit the mortgagee from requiring coverage for acts of terrorism or damages related thereto, except to the extent that any right to require such coverage may be limited by commercially reasonable availability.

49.Fraud. No Borrower is guilty of defrauding or making an intentional material misrepresentation to the Mortgage Loan Seller in connection with the origination of the Mortgage Loan.

50.Transfers and Pledges. The Mezzanine Loan Collateral consists of the pledge of all of the ownership interests of the Mortgagor. Transfer and pledge restrictions under the Mezzanine Loan Documents apply to name of sponsoring entity, borrower, principal, Mortgagor, mortgage principal and any affiliated manager or any shareholder, partner, member, non-member manager, any direct or indirect legal or beneficial owner of, Mortgagor, mortgage principal, principal, borrower, any guarantor, any affiliated manager, or any pledgor, and affiliated franchisor or any non-member manager.

51.Management Agreement. The Management Agreement is in full force and effect and there is no default thereunder by any party thereto and no event has occurred that, with the passage of time and/or the giving of notice, would constitute a default thereunder.

52.Illegal Activity. No portion of any Property has been or will be purchased with proceeds of any illegal activity.

53.Embargoed Person. With respect to each Underlying Asset, (a) none of the funds or other assets of Mortgagor, Mezzanine Borrower, Principal and Guarantor constitute property of, or are beneficially owned, directly or indirectly, by any person, entity or government subject to trade restrictions under U.S. law, including but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders or regulations promulgated thereunder with the result that the investment in Borrower, Principal or Guarantor, as applicable (whether directly or indirectly), is prohibited by law or the Mortgage Loan or Underlying Asset made by the

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Lender is in violation of law (“Embargoed Person”); (b) no Embargoed Person has any interest of any nature whatsoever in Mortgagor, Mezzanine Borrower, Principal or Guarantor, as applicable, with the result that the investment in Mortgagor, Mezzanine Borrower, Principal or Guarantor, as applicable (whether directly or indirectly), is prohibited by law or the Mortgage Loan or Underlying Asset is in violation of law; and (c) none of the funds of Mortgagor, Mezzanine Borrower, Principal or Guarantor, as applicable, have been derived from any unlawful activity with the result that the investment in Mortgagor, Mezzanine Borrower, Principal or Guarantor, as applicable (whether directly or indirectly), is prohibited by law or the Mortgage Loan or Underlying Asset is in violation of law.

54.Franchise Agreement. The Franchise Agreement and the License granted thereby are in full force and effect and there is no default thereunder by any party thereto and no event has occurred that, with the passage of time and/or giving of notice, would constitute a default thereunder. Mortgagor has all rights to use the License granted under the Franchise Agreement.

55.Lockbox. Any agreements executed in connection with the creation of a Collection Account create a valid and continuing security interest (as defined in the Uniform Commercial Code in effect in the State of New York) in each of such Collection Accounts in favor of Buyer, which security interest is prior to all other liens, and is enforceable as such against creditors of and purchasers from Mortgagor. Each Collection Account constitutes a “deposit account” within the meaning of the Uniform Commercial Code in effect in the State of New York. Seller has directed the Servicer to cause each Depository to agree to comply with all written instructions originated by Buyer, without further consent by Borrower, directing disposition of all sums at any time held, deposited or invested in the Collection Accounts, together with any interest or other earnings thereon, and all proceeds thereof (including proceeds of sales and other dispositions), whether accounts, general intangibles, chattel paper, deposit accounts, instruments, documents or securities. The Collection Accounts are not in the name of any Person other than Mortgagor, as pledgor, or Lender, as pledgee. Seller has not consented to the Depository complying with instructions with respect to the Collection Account from any Person other than Buyer.

56.MERS Underlying Asset. With respect to each Mortgage Loan that is a MERS Underlying Asset, the related Mortgagor is registered with MERS and each assignment of the MERS Underlying Asset has been registered with MERS.

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EXHIBIT VII

DUE DILIGENCE REVIEW

REGARDING EACH UNDERLYING ASSET

WHICH IS A MEZZANINE LOAN

(1)           Mezzanine Underlying Loan Information.  The information set forth in the Mezzanine Loan Schedule is complete, true and correct in all material respects.

(2)           No Default or Dispute Under Mezzanine Loan Documents.  There exists no material default, breach, violation or event of acceleration (and no event which, with the passage of time or the giving of notice, or both, would constitute any of the foregoing) under the documents evidencing or securing the Mortgage Loan or Mezzanine Loan, in any such case to the extent the same materially and adversely affects the value of the Mezzanine Loan and the related underlying real property.

(3)           No Offsets, Defenses or Counterclaims.  There is no valid right of offset or rescission, defense or counterclaim to such Mortgage Loan or Mezzanine Loan.

(4)           Equity Pledges.  The pledge of ownership interests securing such Mezzanine Loan relates to all or substantially all direct or indirect equity or ownership interests in the underlying real property owner (so that, except for the equity interests pledged to Seller, there are no direct or indirect equity or ownership interests in underlying real property owner or in any constituent entity) and has been fully perfected in favor of Seller as mezzanine lender.

(5)           Depository Agreement The collection account administrator, if any, is not an Affiliate of Seller.  Mezzanine lender has a perfected security interest in the Cash Management Agreement.

(6)           Enforceability.  Mortgage Lender and Mezzanine Lender can rely on opinions from Mortgagor’s and Mezzanine Borrower’s counsel to the effect that the Mortgage Loan and Mezzanine Loan Documents have been duly and properly executed by the parties thereto, and each is the legal, valid and binding obligation of the parties thereto, enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, receivership, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law).  The Mezzanine Loan is not usurious.  Seller has fully and validly perfected all security interests created or intended to be created pursuant to the Mezzanine Loan Documents.

(7)           Waivers and Modifications.  The terms and provisions of the related Mortgage Loan and Mezzanine Loan Documents have not been impaired, waived, altered, supplemented, restated or modified in any material respect (other than by a written instrument which is included in the related Mortgage Loan and Mezzanine Loan File).

(8)           Valid Assignment.  The assignment of Mezzanine Loan constitutes the legal, valid and binding assignment of such Mezzanine

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Loan from Seller to or for the benefit of Buyer.  No consent or approval by any third party is required for any such assignment of such Mezzanine Loan, for Buyer’s exercise of any rights or remedies under the assignment of Mezzanine Loan, or for Buyer’s sale or other disposition of such Mezzanine Loan if Buyer acquires title thereto, other than consents and approvals which have been obtained.  No third party (including underlying real property owner and underlying real property mortgagee) holds any “right of first refusal,” “right of first negotiation,” “right of first offer,” purchase option, or other similar rights of any kind on account of the occurrence of any of the foregoing.  No other impediment exists to any such transfer.

(9)           Certain Representations and Warranties.  All representations and warranties in the Mortgage Loan and Mezzanine Loan Documents are true and correct in all material respects.

(10)         Parties Authorized.  To the extent required under applicable law as of the Purchase Date, each party to the Mezzanine Loan Documents was authorized to do business in the jurisdiction in which the related underlying real property is located at all times when it held the Mezzanine Loan to the extent necessary to ensure the validity and enforceability of such Mezzanine Loan.

(11)         No Advances of Funds.  No party to the Mortgage or Mezzanine Loan Documents has advanced funds on account of any default under the Mortgage or Mezzanine Loan Documents.

(12)         Servicing.  The servicing and collection practices used by Seller for the Mezzanine Loan have complied with applicable law in all material respects and are consistent with those employed by prudent servicers of comparable Mezzanine Loans.

(13)         No Assignment.  Seller has not effectuated any transfer, sale, assignment, hypothecation, or other conveyance of any of its rights and obligations under any Mezzanine Loan Document, except in connection with this Agreement.

(14)         No Bankruptcy.  None of the following parties is a debtor in any state or federal bankruptcy or insolvency proceeding: Seller; underlying real property owner; mortgage loan property owner principal/sponsor, underlying real property mortgagee, mezzanine loan borrower, or mezzanine loan principal/sponsor.

(15)         Mezzanine Loan Documents.  A complete list of all material loan documents has been delivered by the mezzanine borrower in connection with the Mezzanine Loan Agreement and true counterpart originals of the Mezzanine Loan Documents and true and correct copies of the Mortgage Loan Documents have been delivered by Seller to Buyer.

(16)         Ownership.  Seller is the sole owner of the Mezzanine Loan Documents and the related rights described above and that the Mezzanine Loan Documents and the related rights described above are not, and have not been, pledged, nor assigned, to another party and are not otherwise encumbered as of the execution and delivery of this Agreement.

(17)         Ownership of Mezzanine Loans.  Each Mezzanine Loan is a participation interest in a whole loan.  Immediately prior to the transfer to Buyer of the Mezzanine Loan, Seller had good and marketable title to, and was the sole owner of, each Mezzanine Loan.  Seller has full right, power and authority to transfer and assign the Mezzanine Loan to or at the direction of

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Buyer and has validly and effectively conveyed (or caused to be conveyed) to Buyer or its designee all of Seller’s legal and beneficial interest in and to the Mezzanine Loan free and clear of any and all pledges, liens, charges, security interests, participation interests, and/or other encumbrances.  The sale of the Mezzanine Loan to Buyer or its designee does not require Seller to obtain any governmental or regulatory approval or consent that has not been obtained.

(18)         Payment Record.  No scheduled payment of principal and interest under any Mezzanine Loan or related Mortgage Loan was 30 days or more past due as of the Purchase Date without giving effect to any applicable grace period, and no Mezzanine Loan or related Mortgage Loan was 30 days or more delinquent in the twelve-month period immediately preceding the Purchase Date.

(19)         Lien.  The Mortgage and Pledge related to and delivered in connection with each Mortgage Loan and Mezzanine Loan constitutes a valid and enforceable first priority security interest on the related Property and pledged equity, prior to all other liens and encumbrances and there are no liens or encumbrances pari passu with the lien of the Mortgage and pledge.  A Uniform Commercial Code financing statement has been filed and/or recorded in all places necessary to perfect a valid security interest in such pledged equity, and such security interest is a first priority security interest.  Seller, its successors and assigns is the beneficiary of an Eagle 9 policy or a title policy endorsement insuring that the UCC financing statement encumbering the Mezzanine Loan Collateral has been filed properly so as perfect Mezzanine Lender’s security interest in the Mezzanine Loan Collateral.

(20)         Mortgage and Pledge Status; Waivers and Modifications.  In the case of each Mortgage and related Mezzanine Loan, (a) no pledge or related Mortgage has been satisfied, canceled, rescinded or subordinated in whole or in material part, (b) the related pledged equity or Property has not been released from the lien of such pledge or Mortgage, in whole or in material part, (c) no instrument has been executed that would effect any such satisfaction, cancellation, subordination, rescission or release, and (d) no pledgor or Mortgagor has been released from its obligations under the related pledge or Mortgage in whole or in material part.  None of the terms of any note or pledge has been impaired, waived, altered or modified in any respect, except by written instruments, all of which are included in the related Loan File.

(21)         Condition of Property; Condemnation.  Except as set forth in an engineering report prepared in connection with the origination of the related Mortgage Loan and dated not more than 12 months prior to the Purchase date, each Property is free and clear of any damage that would materially and adversely affect its value as security for the related Mortgage Loan (normal wear and tear excepted).  Seller has received no notice, and has no knowledge, of any pending or threatened proceeding for the condemnation of all or any material portion of any Property.

(22)         Title Insurance.  Each Property is covered by an American Land Title Association (or an equivalent form thereof approved for use in the applicable jurisdiction) lender’s title insurance policy (the “Title Policy”) in the original principal amount of the related Mortgage Loan after all advances of principal.  Each Title Policy insures that the related Mortgage is a valid first priority lien on such Property, subject only to the exceptions stated therein (or a preliminary title policy with escrow instructions or a marked up title insurance commitment on

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which the required premium has been paid exists which is binding on the title insurer and which evidences that such Title Policy will be issued).  Each Title Policy (or, if it has yet to be issued, the coverage to be provided thereby) is in full force and effect, all premiums thereon have been paid, insures the originator of the Mortgage Loan, its successors and assigns and (i) no material claims have been made thereunder and no claims have been paid thereunder and (ii) was issued by a title insurance company qualified at origination to do business in the jurisdiction in which the Property is located to the extent such qualification was required in order for the Title Policy to be enforceable..

(23)         No Holdbacks.  The proceeds of each Mezzanine Loan have been fully disbursed and there is no obligation for future advances with respect thereto.

(24)         Pledge and Mortgage Provisions.  The note and pledge for each Mortgage Loan and related Mezzanine Loan, together with applicable state law, contains customary and enforceable provisions for comparable mortgaged properties and equity interests similarly situated (subject to customary bankruptcy and equity exceptions) such as to render the rights and remedies of the holder thereof adequate for the practical realization against the related Property and pledged equity of the principal benefits of the security intended to be provided thereby.

(25)         Environmental Conditions.  With respect to each Property (a) an environmental site assessment (or an update of a previous assessment) was performed by an independent third party environmental consultant with respect to each Property in connection with the origination of the related Mezzanine Loan, (b) a report of each such assessment (an “Environmental Report”) is dated no earlier than 12 months prior to the Purchase Date and has been delivered to Buyer, and (c) there is no violation of applicable environmental laws and regulations with respect to, or any material and adverse environmental condition or circumstance affecting, any Property that was not disclosed in such report.  Each Mortgage requires the related Mortgagor to comply with all applicable federal, state and local environmental laws and regulations.  Where such Environmental Report disclosed a violation of applicable environmental laws and regulations or the existence of a material and adverse environmental condition or circumstance affecting any Property, (i) a party not related to the Mortgagor was identified as the responsible party for such condition or circumstance, (ii) the related Mortgagor was required either to provide additional security and/or to obtain an operations and maintenance plan or (iii) the related Mortgagor provided evidence satisfactory to the originator of such Mortgage Loan that applicable federal, state or local governmental authorities would not take any action, or require the taking of any action, in respect of such violation, condition or circumstance.  The related Mezzanine Loan Documents contain provisions pursuant to which the related Mortgagor or a principal of such Mortgagor has agreed to indemnify the mortgagee for damages resulting from violations of any applicable Environmental Laws.

(26)         Loan Document Status.  Each Mortgage Note, Mortgage, Mezzanine Note, Pledge and other agreement that evidences or secures a Mortgage Loan or related Mezzanine Loan and that was executed by or on behalf of the related Mortgagor or Pledgor is the legal, valid and binding obligation of the maker thereof (subject to any non-recourse provisions contained in any of the foregoing agreements and any applicable state anti-deficiency or market value limit deficiency legislation), enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the

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enforcement of creditors’ rights generally, and by general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law) and there is no valid defense, counterclaim or right of offset or rescission available to the related Mortgagor or Pledgor respect to such Mortgage Note, Mortgage, Mezzanine Note, Pledge, or other agreements.

(27)         Insurance.  Each Property is, and is required pursuant to the related Mortgage to be, insured by (a) an all risk insurance policy issued by an insurer meeting the requirements of such Mortgage Loan and, to the extent required as of the date of origination by the originator of such Mezzanine Loan consistent with its normal commercial mortgage lending practices, against other risks insured against by persons operating like properties in the locality of the Property in an amount not less than the lesser of the principal balance of the related Mezzanine Loan and 100% of the replacement cost (not allowing reduction in insurance proceeds for depreciation) of the Property, and not less than the amount necessary to avoid the operation of any co-insurance provisions with respect to the Property; (b) a business interruption or rental loss insurance policy providing coverage for at least twelve months (other than for manufactured housing communities) and for eighteen months of coverage if the Property is a special purpose property or if the Mortgage Loan is in excess of $25 million; (c) a flood insurance policy (if any portion of the Property is located in an area identified by the Federal Emergency Management Agency as having special flood hazards); and (d) a comprehensive general liability insurance policy in amounts as are generally required by commercial mortgage lenders, and in any event not less than $1 million per occurrence.  Such insurance policy contains a standard mortgagee clause that names the holder of the Mortgage, its successors and assigns as mortgagee as an additional insured in the case of liability insurance policies or as a loss payee in the case of property insurance policies.  Such insurance policy is not terminable (nor may the amount of coverage provided thereunder be reduced) without prior written notice to the holder of the Mortgage, and no such notice has been received, including any notice of nonpayment of premiums, that has not been cured.  Each Mortgage obligates the related Mortgagor to maintain all such insurance and, upon such Mortgagor’s failure to do so, authorizes the holder of the Mortgage to purchase and maintain such insurance at the Mortgagor’s cost and expense and to seek reimbursement therefor from such Mortgagor.  Each Mortgage provides that casualty insurance proceeds will be applied either to the restoration or repair of the related Property or to the reduction or defeasance of the principal amount of the Mezzanine Loan.

(28)         Taxes and Assessments.  There are no delinquent or unpaid taxes or assessments (including assessments payable in future installments), or other outstanding charges affecting any Property which are or may become a lien of priority equal to or higher than the lien of the related Mortgage.  For purposes of this representation and warranty, real property taxes and assessments shall not be considered unpaid until the date on which interest and/or penalties would be first payable thereon.

(29)         Mortgagor Bankruptcy.  No Mortgagor, Pledgor, non-recourse carve-out guarantor or tenant physically occupying 25% or more (by square feet) of the net rentable area of a Property is a debtor in any state or federal bankruptcy or insolvency proceeding.

(30)         Leasehold Estate.  Each Property consists of the related Mortgagor’s fee simple estate in real estate or, if the related Mezzanine Loan is secured in whole or in part by the interest

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of a Mortgagor as a lessee under a ground lease of a Property (a “Ground Lease”), by the related Mortgagor’s interest in the Ground Lease but not by the related fee interest in such Property (the “Fee Interest”).  With respect to any Mezzanine Loan secured by a Ground Lease but not by the related Fee Interest:

(a)           Such Ground Lease or a memorandum thereof has been duly recorded; such Ground Lease (or the related estoppel letter or lender protection agreement between Seller and related lessor) permits the current use of the Property and permits the interest of the lessee thereunder to be encumbered by the related Mortgage and does not restrict the use of the related Property by such lessee, its successors or assigns in a manner that would adversely effect the security provided by the related Mortgage by limiting in any way its current use; and there has been no material change in the terms of such Ground Lease since the origination of the related Mezzanine Loan, with the exception of material changes reflected in written instruments that are a part of the related Mortgage File;

(b)           The lessee’s interest in such Ground Lease is not subject to any liens or encumbrances superior to, or of equal priority with, the related Mortgage, other than the related Fee Interest and Permitted Encumbrances;

(c)           The Mortgagor’s interest in such Ground Lease is assignable to Buyer and is further assignable by Buyer, its successors and assigns upon notice to, but without the consent of, the lessor thereunder (or, if such consent is required, it has been obtained prior to the Purchase Date) and, in the event that it is so assigned, is further assignable by Buyer and its successors and assigns upon notice to, but without the need to obtain the consent of, such lessor.  If required by the Ground Lease, the lessor has received notice of the lien of the related Mortgage in accordance with the provisions of the Ground Lease;

(d)           In connection with the origination of such Mortgage Loan, the related ground lessor provided an estoppel to the originator confirming that the related Mortgagor was not then in default under such Ground Lease.  The Ground Lease provides that no material amendment to the Ground lease is effective against the mortgagee under such Mortgage Loan unless the mortgagee has consented thereto.  Such Ground Lease is in full force and effect, and Seller and any servicer acting on Seller’s behalf have  received no notice that an event of default has occurred thereunder or that the Ground lease has terminated, and there exists no condition that, but for the passage of time or the giving of notice, or both, would result in an event of default under the terms of such Ground Lease;

(e)           Such Ground Lease, or an estoppel letter or other agreement, (A) requires the lessor under such Ground Lease to give notice of any default by the lessee to the mortgagee, provided that the mortgagee has provided the lessor with notice of its lien in accordance with the provisions of such Ground Lease to the extent such Ground Lease requires such notice, further (B) provides that no notice of termination given under such Ground Lease (including rejection of such Ground Lease in a bankruptcy proceeding) is effective against the holder of the Mortgage unless a copy of such notice has been delivered to such holder and the lessor has offered to enter into a new lease with such holder on terms that do not materially vary from the economic terms of the Ground Lease;

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(f)            A mortgagee is permitted a reasonable opportunity (including, where necessary, sufficient time to gain possession of the interest of the lessee under such Ground Lease by foreclosure or otherwise if possession is necessary to effect a cure) to cure any default under such Ground Lease, which is curable after the receipt of notice of any such default, before the lessor thereunder may terminate such Ground Lease;

(g)           Such Ground Lease has an original term (including any extension options set forth therein which, under all circumstances, may be exercised, and will be enforceable, by the mortgagee if it takes possession of such leasehold interest) which extends not less than twenty years beyond the stated maturity date of the related Mezzanine Loan and ten years beyond the amortization period for the related Mezzanine Loan;

(h)           Under the terms of such Ground Lease and the related Mortgage, taken together, any related insurance proceeds or condemnation award other than in respect of a total loss will be applied either to the repair or restoration of all or part of the related Property, with the mortgagee or a trustee appointed by it having the right to hold and disburse such proceeds as the repair or restoration progresses (except in such cases where a provision entitling another party to hold and disburse such proceeds would not be viewed as commercially unreasonable by a prudent commercial mortgage lender for conduit programs), or to the payment or defeasance of the outstanding principal balance of the Mezzanine Loan together with any accrued interest thereon;

(i)            Such Ground Lease does not impose any restrictions on subletting which would be viewed as commercially unreasonable by prudent commercial mortgage lenders in the lending area where the Property is located and such ground Lease contains a covenant that the ground lessor is not permitted, in the absence of an uncured default, to disturb the possession, interest or quiet enjoyment of the lessee thereunder for any reason or in any manner which would materially adversely affect the security provided by the related Mortgage; and

(j)            Such Ground Lease provides, or the lessor has otherwise agreed, that such Ground Lease may not be amended or modified or any such amendment or modification will not be effective against the mortgagee without the prior written consent of the mortgagee under such Mezzanine Loan and any such action without such consent is not binding on such mortgagee, its successors and assigns, provided such mortgagee has provided the ground lessor with notice of its lien in accordance with the terms of the Ground Lease.

(31)         Escrow Deposits.  All escrow deposits and payments (including capital improvements, environmental remediation reserves and other reserve deposits, if any) relating to each Mortgage Loan and related Mezzanine Loan that are, as of the Purchase Date required to be deposited or paid to the lender under the terms of the related Mortgage Loan Documents have been so deposited or paid and, to the extent of any remaining balances of such escrow deposits, are in the possession or under the control of mortgagee or its agents (which shall include the applicable servicer of the Mortgage Loan).  Any and all material requirements under each Mortgage Loan as to completion of any material improvements and as to disbursement of any funds escrowed for such purpose, which requirements were to have been complied with on or before the Purchase Date, have been complied with in all material respects or, if and to the extent not so complied with, the escrowed funds (or an allocable portion thereof) have not been released except in accordance with the terms of the related loan documents.

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(32)         No Mechanics’ Liens.  As of the date of the Mortgage, each Property is free and clear of any and all mechanics’ and materialmen’s liens that are prior or equal to the lien of the related Mortgage, and no rights are outstanding that under law could give rise to any such lien that would be prior or equal to the lien of the related Mortgage except, in each case, for liens insured against by the Title Policy referred to herein or otherwise bonded.

(33)         Releases of Property.  Except as described in the next sentence, no Mortgage Note or Mortgage requires the mortgagee to release all or any material portion of the related Property from the lien of the related Mortgage except upon payment in full or defeasance of all amounts due under the related Mezzanine Loan.  The Mortgages relating to the Mezzanine Loans identified on the Mezzanine Loan Schedule require the mortgagee to grant releases of portions of the related Mortgaged Properties upon (a) the satisfaction of certain legal and underwriting requirements and (b) except where the portion of the Property permitted to be released was not considered by, Seller to be material in the underwriting of the Mezzanine Loan, either (1) the payment of a release price set forth therein and prepayment consideration in connection therewith or (2) the partial defeasance of such Mezzanine Loan.

(34)         No Material Default.  There exists no monetary default and no material non-monetary default, breach, violation or event of acceleration (and no event which, with the passage of time or the giving of notice, or both, would constitute any of the foregoing) under the documents evidencing or securing the Mortgage Loan or the related Mezzanine Loan, in any such case to the extent the same materially and adversely affects the value of the Mezzanine Loan and the related Property.  Neither the Mortgage Loan seller nor any servicer acting on its behalf has issued any notice of default, breach or violation related to the Mortgage Loan, accelerated the Mortgage Loan or commenced judicial or non-judicial foreclosure proceedings with respect to the Mortgage Loan.  Neither the Mezzanine Loan seller nor any servicer acting on its behalf has issued any notice of default, breach or violation related to the Mezzanine Loan, accelerated the Mezzanine Loan or commenced judicial or non-judicial foreclosure proceedings with respect to the Mezzanine Loan.

(35)         Local Law Compliance. The improvements located on or forming part of each Property complies in all material respects with applicable zoning laws and ordinances, or constitutes a legal non-conforming use or structure or, if any such improvement does not so comply and does not constitute a legal non-conforming use or structure, such non-compliance and failure does not materially and adversely affect (i) the value of the related Property as determined by the appraisal performed at origination or (ii) the principal use of the Property as of the date of the origination of such Mortgage Loan.  As of the date of origination of the Mortgage Loan, with respect to each legal non-conforming use or structure, if a casualty occurred at that time, the Property could have been restored or repaired to such an extent that the use or structure of the restored or repaired property would be substantially the same use or structure, or law and ordinance insurance has been obtained, or a holdback was established and the Mortgagor is required to cause the Property to become a conforming use or structure.

(36)         Junior Liens.  None of the Mortgage Loans or related Mezzanine Loans permits the related Property or pledged equity to be encumbered by any lien junior to or of equal priority with the lien of the related Mortgage or Pledge without the prior written consent of the holder thereof or the satisfaction of debt service coverage or similar criteria specified therein.  The

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pledged equity is not, and none of the Mortgaged Properties is, encumbered by any lien junior to the lien of the related Mortgage.  Each Mezzanine Loan contains a “due on sale” clause that provides for the acceleration of the payment of the unpaid principal balance of the Mezzanine Loan or Mortgage Loan if, without the prior written consent of the holder thereof, the related Property, or any material portion thereof, or pledged equity or a controlling interest in the direct or indirect ownership interests in the Mortgagor is directly or indirectly transferred, sold, or pledged.

(37)         Actions Concerning Mezzanine Loans.  There are no actions, suits, governmental investigations or proceedings pending or threatened before any court, governmental authority, administrative agency or arbitrator concerning any Mezzanine Loan or Mortgage Loan or the related pledgor or Mortgagor or pledged equity or Property that, if determined adversely, would adversely affect title to the Mezzanine Loan or Mortgage Loan or the validity or enforceability of the related pledge or Mortgage or that might materially and adversely affect the value of the pledged equity or Property, the current ability of the Property to generate net operating income to service the Mortgage Loan, the principal benefit of the security intended to be provided for the Mezzanine Loan or Mortgage Loan, or the current use of the Property.

(38)         Servicing.  The servicing and collection practices used by Seller and any servicer of the Mortgage Loan or related Mezzanine Loan have been in all material respects legal, proper and prudent and have met customary industry standards for servicing of commercial Mortgage or Mezzanine Loans.

(39)         Licenses and Permits.  The related Mortgagor is in possession of all material licenses, permits and franchises required by applicable law for the ownership and operation of the related Property as it was then operated and, as of the Purchase Date, Seller has no written notice that the related Mortgagor was not in possession of such licenses, permits and franchises or that such licenses, permits and franchises have not otherwise been issued.  The Mortgage Loan requires the related Property to be in material compliance with laws and regulations applicable to the Property, in each case to the extent required by law.

(40)         Non-Recourse Exceptions.  The related Mezzanine Loan and Mortgage Loan documents contain provisions providing for recourse against the related Pledgor or Mortgagor, a principal of such Pledgor or Mortgagor or an entity controlled by a principal of such Pledgor or Mortgagor, or a natural person, for damages sustained in connection with the Pledgor’s or Mortgagor’s (i) fraud, (ii) intentional misrepresentation, (iii) misappropriation or misapplication of rents or amounts due lender, insurance proceeds or condemnation proceeds, (iv) voluntary bankruptcy, (v) failure to obtain prior consent to any encumbrance of the pledged equity under the Mezzanine Loan Documents, (vi) willful misconduct resulting in waste of a Property.  The related Mezzanine Loan and Mortgage Loan documents contain provisions pursuant to which the related pledgor or Mortgagor, a principal of such pledgor or Mortgagor or an entity controlled by a principal of such pledgor or Mortgagor, or a natural person, has agreed to indemnify the pledgee or mortgagee for damages resulting from violations of any applicable environmental covenants.

(41)         Single Purpose Entity.  The pledgor and Mortgagor on each Mezzanine Loan and related Mortgage Loan were, as of the origination of the Mezzanine Loan, Single Purpose

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Entities.  For this purpose, a “Single Purpose Entity” shall mean an entity, other than an individual, whose organizational documents provide substantially to the effect that it was formed or organized solely for the purpose of owning the pledged equity or the Mortgaged Properties securing the Mezzanine Loans or Mortgage Loans and prohibit it from engaging in any business unrelated to such pledged equity or Property or Properties, and whose organizational documents further provide, or which entity represented in the related Mezzanine Loan or Mortgage Loan documents, substantially to the effect that it does not have any assets other than those related to its interest in such pledged equity or interest in and operation of such Property or Properties, or any indebtedness other than as permitted by the related Pledge or Mortgage or the other related Mezzanine Loan or Mortgage Loan documents, that it has its own books and records and accounts separate and apart from any other person, and that it holds itself out as a legal entity, separate and apart from any other person, that it will not guarantee or assume the debts of any other person, that it will not commingle assets with affiliates, and that it will not transact business with affiliates except on an arm’s length basis.  Each Pledgor and Mortgagor of a Mezzanine Loan and Mortgage Loan is an entity which has represented in connection with the origination of the Mezzanine Loan or Mortgage Loan, or whose organizational documents as of the date of origination of the Mezzanine Loan or Mortgage Loan provide that so long as the Mezzanine Loan is outstanding it will have at least one independent director.  There are Insolvency/Non-Consolidation opinions with respect to each of the Pledgor and Mortgagor and all of the assumptions made in each such opinion are true and correct.

(42)         Separate Tax Parcels.  Each Property constitutes one or more complete separate tax lots or is subject to an endorsement under the related title insurance policy.

(43)         Operating or Financial Statements.  The related Mezzanine Loan Documents require the related Mortgagor to furnish to the mortgagee at least quarterly and annually an operating statement and rent roll (if there is more than one tenant) with respect to the related Property and at least annually financial statements of the Mortgagor.

(44)         Security Interests in Hospitality Properties.  If any Property securing a Mortgage Loan is operated as a hospitality property then (a) the security agreements, financing statements or other instruments, if any, related to the Mortgage Loan secured by such Property establish and create a valid and enforceable (subject to the exceptions set forth in Paragraph 13 above) first priority security interest in all items of personal property owned by the related Borrower which are material to the conduct in the ordinary course of the Borrower’s business on the related Property, subject only to purchase money security interests, personal property leases and security interests to secure revolving lines of credit and similar financing; and (b) one or more Uniform Commercial Code financing statements covering such personal property have been filed or recorded (or have been sent for filing or recording) wherever necessary to perfect under applicable law such security interests (to the extent a security interest in such personal property can be perfected by the filing of a Uniform Commercial Code financing statement under applicable law).

(45)         Assignment of Collateral.  There is no material collateral securing any Mortgage Loan that has not been assigned to the Mortgagee.

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(46)         Fee Simple or Leasehold Interests.  The interest of the related Borrower in the Property securing each Mortgage Loan includes a fee simple and/or leasehold estate or interest in real property and the improvements thereon.

(47)         Assignment of Collateral.  There is no material collateral securing any Mezzanine Loan that has not been assigned to the Mortgagee.

(48)         Terrorism Insurance.  With respect to each Mortgage Loan, the related all risk insurance policy and business interruption policy did not as of the date of origination of the Mortgage Loan, and, does not as of the date hereof, specifically exclude acts of terrorism from coverage.  With respect to each of the Mortgage Loans, the related Mortgage Loan documents do not expressly waive or prohibit the mortgagee from requiring coverage for acts of terrorism or damages related thereto, except to the extent that any right to require such coverage may be limited by commercially reasonable availability.

(49)         Transfers and Pledges.  The Mezzanine Loan Collateral consists of the pledge of all of the ownership interests of the Mortgagor.  Transfer and pledge restrictions under the Mezzanine Loan Documents apply to the sponsoring entity, borrower, principal, Mortgagor, mortgage principal and any affiliated manager or any shareholder, partner, member, non-member manager, any direct or indirect legal or beneficial owner of, Mortgagor, mortgage principal, principal, borrower, any guarantor, any affiliated manager, or any pledgor, and affiliated franchisor or any non-member manager.

(50)         Management Agreement.  The Management Agreement is in full force and effect and there is no default thereunder by any party thereto and no event has occurred that, with the passage of time and/or the giving of notice, would constitute a default thereunder.

(51)         Illegal Activity.  No portion of any Property has been or will be Mezzanine with proceeds of any illegal activity.

(52)         Embargoed Person.  With respect to each Underlying Asset, (a) none of the funds or other assets of mortgagor, mezzanine borrower, principal and guarantor constitute property of, or are beneficially owned, directly or indirectly, by any person, entity or government subject to trade restrictions under U.S. law, including but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders or regulations promulgated thereunder with the result that the investment in borrower, principal or guarantor, as applicable (whether directly or indirectly), is prohibited by law or the Mortgage Loan or Mezzanine Loan made by the Lender is in violation of law (“Embargoed Person”); (b) no Embargoed Person has any interest of any nature whatsoever in mortgagor, mezzanine borrower, principal or guarantor, as applicable, with the result that the investment in mortgagor, mezzanine borrower, principal or guarantor, as applicable (whether directly or indirectly), is prohibited by law or the Mortgage Loan or Mezzanine Loan is in violation of law; and (c) none of the funds of mortgagor, mezzanine borrower, principal or guarantor, as applicable, have been derived from any unlawful activity with the result that the investment in mortgagor, mezzanine borrower, principal or guarantor, as applicable (whether directly or indirectly), is prohibited by law or the Mortgage Loan or Mezzanine Loan is in violation of law.

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(53)         Franchise Agreement.  The Franchise Agreement and the License granted thereby are in full force and effect and there is no default thereunder by any party thereto and no event has occurred that, with the passage of time and/or giving of notice, would constitute a default thereunder.  Mortgagor has all rights to use the License granted under the Franchise Agreement.

(54)         Lockbox.  Any agreements executed in connection with the creation of a Collection Account create a valid and continuing security interest (as defined in the Uniform Commercial Code in effect in the State of New York) in each of such Collection Accounts in favor of Buyer, which security interest is prior to all other liens, and is enforceable as such against creditors of and purchasers from Mortgagor.  Each Collection Account constitutes a “deposit account” within the meaning of the Uniform Commercial Code in effect in the State of New York.  Seller has directed the Servicer to cause each Depository to agree to comply with all written instructions originated by Buyer, without further consent by Borrower, directing disposition of all sums at any time held, deposited or invested in the Collection Accounts, together with any interest or other earnings thereon, and all proceeds thereof (including proceeds of sales and other dispositions), whether accounts, general intangibles, chattel paper, deposit accounts, instruments, documents or securities.  The Collection Accounts are not in the name of any Person other than Mortgagor, as pledgor, or Lender, as pledgee.  Seller has not consented to the Depository complying with instructions with respect to the Collection Account from any Person other than Buyer.

(55)         Compliance with Usury and Other Laws.  The Mezzanine Loan, and, each party involved in the origination of the Mezzanine Loan, complied as of the date of origination with, or is exempt from, applicable state or federal laws, regulations and other requirements pertaining to usury.  Any and all other requirements of any federal, state or local laws applicable to the Mezzanine Loan have been complied with.

(56)         Authorized to do Business.  To the extent required under applicable law, Seller is authorized to transact and do business in each jurisdiction in which a Mortgaged Property is located at all times when it held the Mezzanine Loan.

(57)         Mezzanine Loan Documents.  The Mezzanine Loan Documents contain provisions for the acceleration of the payment of the unpaid principal balance of the Mezzanine Loan if (A) the Mortgagor voluntarily transfers or encumbers all or any portion of any related Mezzanine collateral, or (B) any direct or indirect interest in Mortgagor is voluntarily transferred or assigned, other than, in each case, as permitted under the terms and conditions of the Mezzanine Loan Documents.

(58)         No Limitation on Assignability in Mezzanine Loan Documents.  Except as expressly stated in the Mezzanine Loan Documents, Seller’s ability to assign, transfer and convey the Mezzanine Loan to any other person or entity is not limited or prohibited by any provision contained in the Mezzanine Loan Documents.

(59)         Collateral Secures Mezzanine Loans Only.  The Mezzanine collateral does not secure any mezzanine loan other than the Mezzanine Loan being transferred and assigned to Buyer hereunder (except for Mezzanine Loans, if any, which are cross-collateralized with other

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Mezzanine Loans being conveyed to Buyer subsequent transferee hereunder and identified on the Asset Schedule).

(60)         MERS Underlying Asset.  With respect to each Mezzanine Loan that is a MERS Underlying Asset, the related Mortgagor is registered with MERS and each assignment of the MERS Underlying Asset has been registered with MERS.

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EXHIBIT VIII

REPRESENTATIONS AND WARRANTIES REGARDING
EACH PARTICIPATION INTEREST AND
THE RELATED UNDERLYING ASSET

1.             Validity of Documents.  The Participation Agreement and any other agreement executed and delivered by Seller in connection with a Participation Interest are genuine, and each is the legal, valid and binding obligation of the maker thereof enforceable in accordance with its terms.  Seller had legal capacity to enter into the Participation Agreement and the legal capacity to execute and deliver the Participation Agreement, and the Participation Agreement has been duly and properly executed by the maker thereof and any other signatory thereto.  The Participation Agreement is in full force and effect, and the enforceability of the Participation Agreement has not been contested by any person or entity.

2.             Original Terms Unmodified.  The terms of the Participation Agreement have not been impaired, altered or modified in any material respect.

3.             No Defenses.  The Participation Interest is not subject to any right of rescission, set-off, counterclaim or defense nor will the operation of any of the terms of the Participation Agreement, or the exercise of any right thereunder, render the Participation Agreement unenforceable in whole or in part and no such right of rescission, set-off, counterclaim or defense has been asserted with respect thereto.

4.             No Defaults.  There is no default, breach, violation or event of acceleration existing under the Participation Agreement and no event has occurred which, with the passage of time or giving of notice or both and the expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration thereunder.

5.             Delivery of Participation Documents.  The Participation Agreement has been delivered to Buyer or the Custodian.

6.             No Conflicts.  The execution, delivery and performance of the Participation Agreement by Seller do not conflict with or constitute a default under, or result in the creation or imposition of any lien (other than pursuant to the Participation Agreement) under, any mortgage, deed of trust, agreement, partnership agreement, or other agreement or instrument to which Seller is a party or to which any of its property is subject, nor will such action result in any violation of the provisions of any statute of any jurisdiction over Seller, and any qualification of or with any governmental authority required for the execution, delivery, and performance by Seller of the Participation Agreement has been obtained and is in full force and effect.

7.             Participation Interest Assignable.  The Participation Interest is assignable to Buyer.  The Participation Agreement permits Seller and Buyer to freely sell, assign, pledge, transfer or rehypothecate such Participation Interest subject to the terms of the Participation Agreement.

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8.             No Satisfaction or Prepayment of Participation Interest.  The Participation Interest has not been satisfied, canceled, subordinated, released or rescinded, in whole or in part, in any material respect.

9.             Ownership.  Seller is the sole owner and holder of the Participation Interest.  The Participation Interest has not been assigned or pledged by Seller, and Seller has good, indefeasible and marketable title to the Participation Interest, and has full right, subject to the terms of the Participation Agreement, to transfer, pledge and assign the Participation Interest to  Buyer free and clear of any encumbrance, equity, participation interest, lien, pledge, charge, claim or security interest, and has full right and authority, subject to the terms of the Participation Agreement but subject to no interest or participation of, or agreement with, any other party, to assign, transfer and pledge the Participation Interest pursuant to this Agreement, and following the pledge of the Participation Interest, Buyer will hold such Participation Interest free and clear of any encumbrance, equity, participation interest, lien, pledge, charge, claim or security interest except any such security interest created pursuant to the terms of this Agreement.

10.           Financial Information.  To Seller’s knowledge based upon the related participant’s representations and warranties, all financial data, including, without limitation the statements of cash flow and income and operating expense, that have been delivered to Seller (i) are true, complete, and correct in all material respects, and (ii) accurately represent the financial condition of such participant as of the date of such reports.

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EXHIBIT IX

Underlying Loan Information

Investment & Loan Set-Up

I.	Investment Background
Investment name and location:
Borrower and principals: .
Type of investment:
CTIMCO deal team:
CTIMCO Closing Attorney:
Closing Date:
CT Funding Date:
Investment Amount:
Premium/discount (% and $ amount):
Adjusted gross investment commitment:
Participants:
Repo Advance Rate:
Net CT investment commitment:
Net CT investment funded at closing:
Net CT investment unfunded commitment:
Accrued interest acquired ($):
II.	Rate/Term/Fees/Guarantees/Reserves
Interest rate (floating/fixed):
LIBOR in place at CT funding date:
LIBOR Floor:
Amount of LIBOR Floor:
Interest due date:
Interest rate re-set date:
Interest Accrual Period:
1st Interest Payment Due Date:
Rate if fixed:

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Index if floating:

Rounding factor for index:

Spread if floating:

Calculation basis:

Pay/accrual:

Contingent interest:

Amortization:

Stub Interest (days):

Stub Interest ($):

Lock Box:

Servicing Fee:

Special Servicing Fee:

Trustee Servicing Fee:

Initial term:

Maturity date:

Origination/Commitment Fee:

Due Diligence Deposit:

Application Fee:

Additional Interest (Exit):

Extension Term:

Extended Maturity date:

Additional Interest (Extension):

Prepayment/Defeasance:

Reserves:

Initial Tax Escrow:
Required Repairs Reserve:
Liquidity Reserve:

Tax escrows:

Insurance escrows:

Total Reserves:

Payment Guarantee (amount):

Guarantor:

Guaranty Collateral:

Lock-Out/Call Protection:

Financial Reporting Requirements:

Monthly Statements:

Quarterly Statements:

Annual Statements:

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Annual Budget:
III.	Seller/Repo Financing
Firm:
Advance Rate:
Cost of Financing:
Contact:
IV.	Senior / Junior Financing
First Mortgage Loan:
Senior Mezzanine Loan:
Junior Mezzanine Loan:
V.	Summary of Participation Rights:
1)
VI.	Hedging Information
Senior Loan Interest Rate Cap:
Date of Agreement:
Notional Amount:
Strike Prices:
Cost:
Beneficiary:
Counterparty:
Placement Agent:
Senior Mezzanine Loan Interest Rate Cap:
Date of Agreement:
Notional Amount:
Strike Prices:
Cost:

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Beneficiary:
Counterparty:
Placement Agent:
Junior Mezzanine Loan Interest Rate Cap:
Date of Agreement:
Notional Amount:
Strike Prices:
Cost:
Beneficiary:
Counterparty:
Placement Agent:
VII.	Non-Reimbursable Transaction Expenses
	Legal Fees
	Meals
	Travel/Airfare
	Insurance Review
	Total

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EXHIBIT X

TRANSACTION PROCEDURE

Preliminary Approval of New Asset Which is an Eligible Asset.

(a)           Seller may, from time to time, submit to Buyer a Preliminary Due Diligence Package for Buyer’s review and approval in order to enter into a Transaction with respect to any New Asset that Seller proposes to be included as an Eligible Asset under this Agreement.

(b)           Seller shall, with respect to each Eligible Asset, provide Buyer with such additional information and materials as are in the possession of, or reasonably accessible by, Seller as will enable Buyer to satisfy itself, in its sole discretion, that the statements set forth in Exhibit VI and/or Exhibit VII, as applicable, are correct.

(c)           Buyer shall have the right to request additional diligence materials and deliveries that Buyer shall specify on a Supplemental Due Diligence List.  Within five (5) Business Days after Buyer’s receipt of the Preliminary Due Diligence Package, Buyer shall either (i) notify Seller of the Purchase Price and the Market Value for the New Asset, subject to documentation satisfactory to Buyer, (ii) request additional diligence materials or (iii) deny, in Buyer’s sole and absolute discretion, Seller’s request for a Transaction.  Within five (5) Business Days after receipt of all additional diligence materials, Buyer shall either approve or deny the proposal to include such Eligible Asset.

Final Approval of New Asset which is an Eligible Asset.  Upon Buyer’s notification to Seller of the Purchase Price and the Market Value for any New Asset which is an Eligible Asset, Seller shall, if Seller desires to enter into a Transaction with respect to such New Asset, satisfy the conditions set forth below (in addition to satisfying the conditions precedent to obtaining each advance, as set forth in Section 2(b) of this Agreement) as a condition precedent to Buyer’s approval of such New Asset as an Eligible Asset, all in a manner reasonably satisfactory to Buyer and subject to documentation satisfactory to Buyer:

(a)           Delivery of Purchased Asset Documents.  Seller shall deliver to Buyer:  (i) with respect to a New Asset that is a Pre-Existing Asset, each of the Purchased Asset Documents, except Purchased Asset Documents that Seller expressly and specifically disclosed in Seller’s Preliminary Due Diligence Package were not in Seller’s possession; and (ii) with respect to a New Asset that is an Originated Asset, each of the Purchased Asset Documents.

(b)           Environmental and Engineering.  Buyer shall have received a satisfactory “Phase 1” (and, if necessary, a satisfactory “Phase 2”) environmental report, an asbestos survey, if applicable, and an engineering report, each in form reasonably satisfactory to Buyer, by an engineer or environmental consultant reasonably approved by Buyer.

(c)           Appraisal.  Buyer shall have received either an appraisal approved by Buyer (or a Draft Appraisal, if Buyer approves such Draft Appraisal in lieu of a final appraisal), each by an MAI appraiser.  If Buyer receives only a Draft Appraisal prior to

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entering into a Transaction, Seller shall deliver an appraisal approved by Buyer by an MAI appraiser on or before thirty (30) days after the Purchase Date.

(d)           Insurance.  Buyer shall have received certificates or other evidence of insurance demonstrating insurance coverage in respect of the Property of types, in amounts, with insurers and otherwise in compliance with the terms, provisions and conditions set forth in the Purchased Asset Documents.  Such certificates or other evidence shall indicate that Seller will be named as an additional insured under liability policies as its interest may appear and shall contain a loss payee endorsement under casualty policies in favor of Seller with respect to the policies required to be maintained under the Purchased Asset Documents.

(e)           Survey.  Buyer shall have received all surveys of the Property that are in Seller’s possession.

(f)            Lien Search Reports.  Buyer or Buyer’s counsel shall have received, as reasonably requested by Buyer, satisfactory reports of UCC, tax lien, judgment and litigation searches and title updates conducted by search firms and/or title companies acceptable to Buyer with respect to the Eligible Asset, Property, Seller and Mortgagor, such searches to be conducted in each location Buyer shall designate.

(g)           Opinions of Counsel.  Buyer shall have received copies of all legal opinions in Seller’s possession with respect to the Eligible Asset which shall be in form and substance satisfactory to Buyer.

(h)           Additional Real Estate Matters.  Seller shall have delivered to Buyer to the extent in Seller’s possession such other real estate related certificates and documentation as may have been requested by Buyer, such as: (i) certificates of occupancy issued by the appropriate Governmental Authority and either letters certifying that the Property is in compliance with all applicable zoning laws issued by the appropriate Governmental Authority of evidence that the related Title Policy includes a zoning endorsement and (ii) copies of all leases in effect at the Property and estoppel certificates that were required in the origination of the applicable loan from any ground lessor and from any tenants .

(i)            Other Documents.  Buyer shall have received such other documents as Buyer or its counsel shall reasonably deem necessary.

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EXHIBIT XI

OWNERSHIP CHART FOR EACH SELLER

[TO COME]

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EXHIBIT XII

FORM OF OPINION OF COUNSEL TO SELLERS

1.             Each Seller is duly organized and validly existing as a corporation in good standing under the laws of the state of its incorporation and has power and authority to enter into and perform its obligations under this Agreement and the Custodial Agreement.  Each Seller is duly qualified to do business and is in good standing in each jurisdiction in which the character of the business transacted by it requires such qualification and in which the failure so to qualify would have a material adverse effect on the business, properties, assets or condition (financial or other) of each Seller and its subsidiaries, considered as a whole.

2.             This Agreement and the Custodial Agreement have each been duly authorized, executed and delivered by each Seller, and each constitutes a valid and legally binding obligation of each Seller enforceable against such Seller in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors’ rights generally and to general equity principles.

3.             No consent, approval, authorization or order of any state or federal court or government agency or body is required to be obtained by either Seller for the consummation of the transactions contemplated by this Agreement or the Custodial Agreement.

4.             Theconsummation of any of the transactions contemplated by this Agreement and the Custodial Agreement will not conflict with, result in a breach of, or constitute a default under the articles of incorporation or bylaws of either Seller or the terms of any indenture or other agreement or instrument known to us to which either Seller is party or bound, or any order known to such counsel to be applicable to either Seller or any regulations applicable to either Seller, of any state or federal court, regulatory body, administrative agency, governmental body or arbitrator having jurisdiction over either Seller.

5.             There is no pending or threatened action, suit or proceeding before any court or governmental agency, authority or body or any arbitrator involving either Seller or relating to the transaction contemplated by this Agreement or the Custodial Agreement which, if adversely determined, would have a material adverse effect on either Seller.

6.             Buyer has a perfected security interest in the Purchased Assets.

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EXHIBIT XIII

FORM OF BAILEE AGREEMENT

[Capital Trust, Inc.]
[CT BSI Funding Corp.]
410 Park Avenue
14^th Floor
New York, New York 10022

                        , 20    

Paul, Hastings, Janofsky & Walker LLP

75 East 55th Street

New York, New York 10022

Re: Bailee Agreement (the “Bailee Agreement”) in connection with the sale under a Amended and Restated Master Repurchase Agreement by Capital Trust, Inc. and CT BSI Funding Corp. (each a “Seller”) to Bear, Stearns International Limited (the “Buyer”)                                                                                                                          

Ladies and Gentlemen:

In consideration of the mutual promises set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller, Buyer and Paul, Hastings, Janofsky & Walker LLP (the “Bailee”) hereby agree as follows:

1.             Seller shall deliver to the Bailee in connection with any Purchased Assets delivered to the Bailee hereunder an Identification Certificate in the form of Attachment 1 attached hereto to which shall be attached a Purchased Asset Schedule identifying which Purchased Assets are being delivered to the Bailee hereunder.  Such Purchased Asset Schedule shall contain the following fields of information with respect to the Underlying Assets:  (a) the loan identifying number; (b) the Mortgagor’s name; (c) the street address, city, state and zip code for the applicable real property; (d) the original balance; and (e) the current principal balance if different from the original balance and such other information as Seller and Buyer shall require.

2.             On or prior to the date indicated on the Custodial Delivery delivered by Seller (the “Purchase Date”), Seller shall have delivered to the Bailee, as bailee for hire, the original documents set forth on Schedule A attached hereto (collectively, the “Purchased Asset File”) for each of the Purchased Assets (each a “Purchased Asset” and collectively, the “Purchased Assets”) listed in Exhibit A to Attachment 1 attached hereto (the “Purchased Asset Schedule”).

3.             The Bailee shall issue and deliver to Buyer and the Custodian on or prior to the Purchase Date by facsimile (a) in the name of Buyer, an initial trust receipt and certification in the form of Attachment 2 attached hereto (the “Trust Receipt”) which Trust Receipt shall state

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that the Bailee has received the documents comprising the Purchased Asset File as set forth in the Custodial Delivery (as defined in that certain Custodial Agreement dated as of December 22, 2005, among Seller, Buyer and Custodian (as defined in Section 5 below), in addition to such other documents required to be delivered to Buyer and/or Custodian pursuant to the Amended and Restated Master Repurchase Agreement dated as of February 15, 2006, among Seller and Buyer (the “Amended and Restated Master Repurchase Agreement”).

4.             On the applicable Purchase Date, in the event that Buyer fails to purchase any New Asset from Seller that is identified in the related Custodial Delivery- Certificate, Buyer shall deliver by facsimile to the Bailee at (212) 230-7830 to the attention of Robert J. Grados, Esq., an authorization (the “Facsimile Authorization”) to release the Purchased Asset Files with respect to the Purchased Assets identified therein to Seller.  Upon receipt of such Facsimile Authorization, the Bailee shall release the Purchased Asset Files to Seller in accordance with  Seller’s instructions.

5.             Following the Purchase Date, the Bailee shall forward the Purchased Asset Files to Deutsche Bank Trust Company Americas, 1761 East St. Andrew Place, Santa Ana, California 92705, Attention: Mortgage Custody-QT031C (the “Custodian”) by insured overnight courier for receipt by the Custodian no later than 1:00 p.m. on the third Business Day following the applicable Purchase Date (the “Delivery Date”).

6.             From and after the applicable Purchase Date until the time of receipt of the Facsimile Authorization or the applicable Delivery Date, as applicable, the Bailee (a) shall maintain continuous custody and control of the related Purchased Asset Files as bailee for  Buyer and (b) is holding the related Purchased Assets as sole and exclusive bailee for Buyer unless and until otherwise instructed in writing by Buyer.

7.             Seller agrees to indemnify and hold the Bailee and its partners, directors, officers, agents and employees harmless against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever, including reasonable attorney’s fees, that may be imposed on, incurred by, or asserted against it or them in any way relating to or arising out of this Bailee Agreement or any action taken or not taken by it or them hereunder unless such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements (other than special, indirect, punitive or consequential damages, which shall in no event be paid by the Bailee) were imposed on, incurred by or asserted against the Bailee because of the breach by the Bailee of its obligations hereunder, which breach was caused by negligence, lack of good faith or willful misconduct on the part of the Bailee or any of its partners, directors, officers, agents or employees.  The foregoing indemnification shall survive any resignation or removal of the Bailee or the termination or assignment of this Bailee Agreement.

8.             (a)  In the event that the Bailee fails to produce a certificate representing a Participation Interest or a Mortgage Note, Mezzanine Note, assignment of a Purchased Asset or any other document related to a Purchased Asset that was in its possession within ten (10) business days after required or requested by Seller or Buyer (a “Delivery Failure”), the Bailee shall indemnify Seller or Buyer in accordance with the succeeding paragraph of this Section 8.

XIII-2

(b)           The Bailee agrees to indemnify and hold Buyer and Seller, and their respective affiliates and designees harmless against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever, including reasonable attorney’s fees, that may be imposed on, incurred by, or asserted against it or them in any way relating to or arising out of a Custodial Delivery Failure or the Bailee’s negligence, lack of good faith or willful misconduct.  The foregoing indemnification shall survive any termination or assignment of this Bailee Agreement.

9.             Seller hereby represents, warrants and covenants that the Bailee is not an affiliate of or otherwise controlled by Seller.  Notwithstanding the foregoing, the parties hereby acknowledge that the Bailee hereunder may act as Counsel to Seller in connection with a proposed loan and Paul, Hastings, Janofsky & Walker LLP, if acting as Bailee, has represented Seller in connection with negotiation, execution and delivery of the Amended and Restated Master Repurchase Agreement.

10.           In connection with a pledge of the Purchased Assets as collateral for an obligation of Buyer, Buyer may pledge its interest in the corresponding Purchased Asset Files held by the Bailee for the benefit of Buyer from time to time by delivering written notice to the Bailee that Buyer has pledged its interest in the identified Purchased Assets and Purchased Asset Files, together with the identity of the party to whom the Purchased Assets have been pledged (such party, the “Pledgee”).  Upon receipt of such notice from Buyer, the Bailee shall mark its records to reflect the pledge of the Purchased Assets by Buyer to the Pledgee.  The Bailee’s records shall reflect the pledge of the Purchased Assets by Buyer to the Pledgee until such time as the Bailee receives written instructions from Buyer that the Purchased Assets are no longer pledged by Buyer to the Pledgee, at which time the Bailee shall change its records to reflect the release of the pledge of the Purchased Assets and that the Bailee is holding the Purchased Assets as custodian for, and for the benefit of, Buyer.

11.           From time to time, subject to the acceptance and approval of Buyer, Seller may request pursuant to a request substantially in the form of Annex 6 to the Custodial Agreement the delivery by the Custodian to the Bailee of some or all of the Purchased Asset File for the purposes set forth in such request.  Upon receipt of the Purchased Asset File or such portions thereof, Bailee shall hold the same as sole and exclusive bailee for Buyer until such time as the Purchased Asset File, or such portions thereof, are redelivered to the Custodian or to such other Persons, as otherwise directed by Buyer, subject in either case to the provisions set forth herein governing standards of care and indemnification and except as otherwise provided by any document specifically amending, supplementing or modifying the terms hereof which is executed and delivered by all parties hereto in connection with such delivery of the Purchased Asset File, or such portions thereof, to Bailee.  Notwithstanding anything to the contrary contained in this Section 11, Bailee shall have the right to deliver such Purchased Asset File, or portions thereof, to Buyer upon five (5) days’ written notice to Buyer.

12.           The agreement set forth in this Bailee Agreement may not be modified, amended or altered, except by written instrument, executed by all of the parties hereto.

13.           This Bailee Agreement may not be assigned by Seller or the Bailee without the prior written consent of Buyer.

XIII-3

14.           For the purpose of facilitating the execution of this Bailee Agreement as herein provided and for other purposes, this Bailee Agreement may be executed simultaneously in any number of counterparts, each of which counterparts shall be deemed to be an original, and such counterparts shall constitute and be one and the same instrument.

15.           This Bailee Agreement shall be construed in accordance with the laws of the State of New York, and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws.

16.           Capitalized terms used herein and defined herein shall have the meanings ascribed to them in the Amended and Restated Master Repurchase Agreement.

[signatures begin on next page]

XIII-4

	Very truly yours,
	[CAPITIAL TRUST, INC.]
	[CT BSI FUNDING CORP.]
	By:
	Name:
	Title:
ACCEPTED AND AGREED:
PAUL, HASTINGS, JANOFSKY & WALKER LLP,
Bailee
By:
Name:  Robert J. Grados
ACCEPTED AND AGREED:
BEAR, STEARNS INTERNATIONAL LIMITED
By:
Name:
Title:

XIII-5

Schedule A

[List of Documents in the Purchased Asset File]

XIII-6

Attachment 1

IDENTIFICATION CERTIFICATE

On this          day of                      , 2006, the undersigned corporation (the “Seller”), under that certain Bailee Agreement of even date herewith (the “Bailee Agreement”), among Seller, Paul, Hastings, Janofsky & Walker LLP (the “Bailee”), and Bear, Stearns International Limited, as Buyer, does hereby instruct the Bailee to hold, in its capacity as Bailee, the Purchased Asset Files with respect to the Purchased Assets listed on Exhibit A hereto, which Purchased Assets shall be subject to the terms of the Bailee Agreement as of the date hereof.

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

IN WITNESS WHEREOF, Seller has caused this Identification Certificate to be executed and delivered by its duly authorized officer as of the day and year first above written.

[CAPITAL TRUST, INC.]

[CT BSI FUNDING CORP.]

Seller

By:

Name:

Title:

XIII-7

Exhibit A to Attachment 1

PURCHASED ASSET SCHEDULE

XIII-8

Attachment 2

FORM OF TRUST RECEIPT

                           , 200  

Bear, Stearns International Limited

383 Madison Avenue

New York, New York 10179

Re: Bailee Agreement, dated as of                            , 2006 (the “Bailee Agreement”) among Capital Trust, Inc. and CT BSI Funding Corp. (the “Seller”), Bear, Stearns International Limited (the “Buyer”) and Paul, Hastings, Janofsky & Walker LLP (the “Bailee”)

Ladies and Gentlemen:

In accordance with the provisions of Paragraph 3 of the above-referenced Bailee Agreement, the undersigned, as the Bailee, hereby certifies that as to each Purchased Asset described in the Purchased Asset Schedule (Exhibit A to Attachment 1), a copy of which is attached hereto, it has reviewed the Purchased Asset File and has determined that (1) all documents listed in Schedule A attached to the Bailee Agreement are in its possession and (ii) such documents have been reviewed by it and appear regular on their face and relate to such Purchased Asset, and (iii) based on its examination, the foregoing documents on their face satisfy the requirements set forth in Paragraph 2 of the Bailee Agreement.

The Bailee hereby confirms that it is holding each such Purchased Asset File as agent and bailee for the exclusive use and benefit of  Buyer pursuant to the terms of the Bailee Agreement.

All initially capitalized terms used herein shall have the meanings ascribed to them in the above-referenced Bailee Agreement.

PAUL, HASTINGS, JANOFSKY &
WALKER LLP, BAILEE

By:

Name: Robert J. Grados, Esq.

XIII-9

SCHEDULE 1-A

Form of UCC Financing Statement

Debtor:	Secured Party:
[Capital Trust, Inc.]	Bear, Stearns International Limited
[CT BSI Funding Corp.]	383 Madison Avenue
410 Park Avenue, 14th Floor	New York, New York 10179
New York, New York 10022

ATTACHMENT A TO UCC FINANCING STATEMENT

This filing is for protective purposes only with respect to the Purchased Assets in case the sale of any Purchased Asset under the Repurchase Agreement is re-characterized as a grant of a security interest in any such Purchased Asset.  Capitalized terms used herein and not otherwise defined shall have the meanings assigned in the Repurchase Agreement (defined below).

The collateral covered by this financing statement is all of the Debtor’s right, title and interest in, to and under the following property, whether now owned or existing, hereafter acquired or arising, or in which the Debtor now or hereafter has any rights, and wheresoever located (the “Collateral”):

(a)           all of the Purchased Assets including those identified in Schedule I hereto, all Income from such Purchased Assets and all proceeds of all of the foregoing, and

(b)           all Hedging Transactions relating to Purchased Assets entered into by Seller and all proceeds thereof.

The following terms shall have the following meanings.  Such definition shall be equally applicable to the singular and plural forms of the terms defined.

“Buyer” means Secured Party.

“Custodian” means Deutsche Bank Trust Company Americas or any successor Custodian appointed by Buyer.

“Eligible Assets” means any of the following types of loans listed below:

(i)            Participation Interests in Whole Loans, B Notes or Mezzanine Loans that are performing (i.e., current and not in monetary or material non-monetary default such that remedies can be exercised by any Person) commercial mortgage loans secured by first liens on multifamily and commercial real property with respect to which the ratio of loan to value as determined by Buyer, in the exercise of its commercially reasonable judgment, for the real property securing directly such loan (including for purposes of this calculation, such loan and

1-A-1

any loan senior to or pari passu with such loan and secured, directly or indirectly, by the related property) does not exceed the percentage stated in the Confirmation.

(ii)           any other investment presented to and approved by Buyer in its sole discretion which does not conform to the criteria set forth in clause (i) above and which Buyer elects in its sole discretion to purchase.

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

“Income” means, with respect to any Purchased Asset at any time, any principal (including any principal prepayments) thereof and all interest, dividends or other distributions thereon and with respect to any associated Hedging Transaction, all proceeds thereof.

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

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

“Purchased Asset File” shall mean the documents specified as the “Purchased Asset File” in Section 6(b) of the Repurchase Agreement, together with any additional documents and information required to be delivered to Buyer or its designee (including the Custodian) pursuant to the Repurchase Agreement.

“Purchased Assets” means (i) with respect to any Transaction, the Eligible Assets sold by Seller to Buyer in such Transaction until such Eligible Assets are repurchased by Seller pursuant to this Agreement and (ii) with respect to the Transactions in general, all Eligible Assets sold by Seller to Buyer and any Additional Assets delivered by Seller to Buyer pursuant to Section 3(a) of the Repurchase Agreement until (x) such Eligible Assets are repurchased by Seller pursuant to the Repurchase Agreement or (y) such Additional Assets are re-delivered to Seller by Buyer pursuant to Section 3 of the Repurchase Agreement.

“Repurchase Agreement” means that certain Amended and Restated Master Repurchase Agreement dated as of February 15, 2006, between Bear, Stearns International Limited and Capital Trust, Inc., and CT BSI Funding Corp., a Delaware Corporation (each a “Seller” with joint and several liability for the obligations of the other Seller), (together such other annexes and schedules attached thereto) as the same may be amended, restated or otherwise modified from time to time.

1-A-2

“Seller” means Debtor.

SCHEDULE 1

Participation Interest, dated        issued to                in the amount of $                 , in that certain Mortgage Loan [(in the original principal amount of $                     )], dated as of          , made by                    to                      under and pursuant to that certain Loan Agreement dated as of                    between                  and                    and secured by that certain property located in                   , [as such Participation Interest was assigned by                     to Capital Trust, Inc. pursuant to that certain Assignment and Assumption Agreement dated as of                     ].

1-A-3

SCHEDULE 1-B

Form of UCC Financing Statement Amendment

Debtor:	Secured Party:
[Capital Trust, Inc.]	Bear, Stearns International Limited
[CT BSI Funding Corp.]	383 Madison Avenue
410 Park Avenue, 14th Floor	New York, New York 10179
New York, New York 10022

ATTACHMENT A TO UCC FINANCING STATEMENT AMENDMENT

This filing is for protective purposes only with respect to the Purchased Assets in case the sale of any Purchased Asset under the Repurchase Agreement is re-characterized as a grant of a security interest in any such Purchased Asset.  Capitalized terms used herein and not otherwise defined shall have the meanings assigned in the Repurchase Agreement (defined below).

The collateral covered by this financing statement is all of the Debtor’s right, title and interest in, to and under the following property, whether now owned or existing, hereafter acquired or arising, or in which the Debtor now or hereafter has any rights, and wheresoever located (the “Collateral”):

(a)           all of the Purchased Assets including those identified in Schedule I hereto, all Income from such Purchased Assets and all proceeds of all of the foregoing, and

(b)           all Hedging Transactions relating to Purchased Assets entered into by Seller and all proceeds thereof.

The following terms shall have the following meanings.  Such definition shall be equally applicable to the singular and plural forms of the terms defined.

“Buyer” means Secured Party.

“Custodian” means Deutsche Bank Trust Company Americas or any successor Custodian appointed by Buyer.

“Eligible Assets” means any of the following types of loans listed in (i) through (iv) below:

(i)            Participation Interests in Whole Loans, B Notes or Mezzanine Loans that are performing (i.e., current and not in monetary or material non-monetary default such that remedies can be exercised by any Person) commercial mortgage loans secured by first liens on multifamily and

1-B-1

commercial real property with respect to which the ratio of loan to value as determined by Buyer, in the exercise of its commercially reasonable judgment, for the real property securing directly such loan (including for purposes of this calculation, such loan and any loan senior to or pari passu with such loan and secured, directly or indirectly, by the related property) does not exceed the percentage stated in the Confirmation.

(ii)           any other investment presented to and approved by Buyer in its sole discretion which does not conform to the criteria set forth in clause (i) above and which Buyer elects in its sole discretion to purchase.

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

“Income” means, with respect to any Purchased Asset at any time, any principal (including any principal prepayments) thereof and all interest, dividends or other distributions thereon and with respect to any associated Hedging Transaction, all proceeds thereof.

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

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

“Purchased Asset File” shall mean the documents specified as the “Purchased Asset File” in Section 6(b) of the Repurchase Agreement, together with any additional documents and information required to be delivered to Buyer or its designee (including the Custodian) pursuant to the Repurchase Agreement.

“Purchased Assets” means (i) with respect to any Transaction, the Eligible Assets sold by Seller to Buyer in such Transaction until such Eligible Assets are repurchased by Seller pursuant to this Agreement and (ii) with respect to the Transactions in general, all Eligible Assets sold by Seller to Buyer and any Additional Assets delivered by Seller to Buyer pursuant to Section 3(a) of the Repurchase Agreement until (x) such Eligible Assets are repurchased by Seller pursuant to the Repurchase Agreement or (y) such Additional Assets are re-delivered to Seller by Buyer pursuant to Section 3 of the Repurchase Agreement.

“Repurchase Agreement” means that certain Amended and Restated Master Repurchase Agreement dated as of February 15, 2006, between Bear, Stearns International Limited and Capital Trust, Inc., and CT BSI Funding Corp., a Delaware Corporation (each a “Seller” with joint and several liability for the obligations of the other Seller), (together such other annexes and

1-B-2

schedules attached thereto) as the same may be amended, restated or otherwise modified from time to time.

“Seller” means Debtor.

SCHEDULE 1

Participation Interest, dated        issued to                in the amount of $                 , in that certain Mortgage Loan [(in the original principal amount of $                     )], dated as of          , made by                    to                      under and pursuant to that certain Loan Agreement dated as of                    between                  and                    and secured by that certain property located in                   , [as such Participation Interest was assigned by                     to Capital Trust, Inc. pursuant to that certain Assignment and Assumption Agreement dated as of                     ].

1-B-3

EX-10.32.B

Exhibit 10.32.b

Bear, Stearns International Limited
383 Madison Avenue
New York, New York   10179

February 15, 2006

Capital Trust, Inc.

and

CT BSI Funding Corp.

410 Park Avenue

New York, New York  10022

Re: Pricing Terms for Amended and Restated Master Repurchase Agreement, dated as of February 15, 2006, by and between Bear, Stearns International Limited, Capital Trust, Inc. and CT BSI Funding Corp.

Ladies and Gentlemen:

Reference is made to the Amended and Restated Master Repurchase Agreement, dated as of February 15, 2006 (the “Agreement”), by and between Bear, Stearns International Limited (“Buyer”), Capital Trust, Inc., and CT BSI Funding Corp. (each a “Seller” with joint and several liability for the obligations of the other Seller), as the same may be amended from time to time.  The purpose of this letter agreement (the “Letter Agreement”) is to set forth certain terms governing the circumstances under which the Buyer will enter into Transactions pursuant to the Agreement.  Capitalized terms used and not otherwise defined herein shall have the meanings set forth in the Agreement.

1.             Buyer’s Margin Ratio:  Unless otherwise agreed by the parties (which agreement shall be memorialized in writing in the related Confirmation), the Purchase Price on any Purchase Date prior to the Commitment Expiration Date shall be equal to the product of the Market Value of the Purchased Assets and the applicable Buyer’s Margin Ratio listed in the chart below.

2.             Purchase Fee:  The Purchase Fee shall be a one-time, up front amount, to be paid by Sellers on the initial Purchase Date, equal to the product of (i) the Maximum Committed Aggregate Purchase Price and (ii) [****] less any Purchase Fee paid under the Bear, Stearns Funding Repurchase Agreement.

3.             Pricing Rate:  The Pricing Rate with respect to each Transaction shall be one month LIBOR plus the spread listed in the chart below (unless otherwise agreed by the parties, which agreement shall be memorialized in writing in the related Confirmation):

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

Buyer’s Margin Ratio and Pricing Rate Spread for CDO I and CDO II Assets

	CDO I Assets	CDO II Assets
Buyers Margin Ratio	[****]	[****]
Pricing Rate Spread  (LIBOR plus number of basis points)	[****]	[****]

Buyer’s Margin Ratio and Pricing Rate Spread for Assets other than CDO I and CDO II Assets

Combined Property/ Underlying Assets Loan to Value Ratio		[****]	[****]	[****]	[****]	[****]	[****]	[****]	[****]
Mezzanine Loans, Junior Participations & B Notes
	Buyer’s Margin Ratio	[****]	[****]	[****]	[****]	[****]	[****]	[****]	[****]
	Pricing Rate Spread (LIBOR plus number of basis points)	[****]	[****]	[****]	[****]	[****]	[****]	[****]	[****]

All loan to value ratios are determined by a third-party appraiser mutually acceptable to Buyer and Sellers.  If an Eligible Asset is a hotel, the Buyer’s Margin Ratio and the Pricing Rate may change as agreed to by the parties.

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

4.             Sellers must enter into Transactions with respect to at least three (3) Eligible Assets within six (6) months of the initial Purchase Date (the “Required Transactions”) in order to maintain the Buyer’s Margin Ratios set forth above.  Buyer shall have the right in its sole discretion to reduce the applicable Buyer’s Margin Ratios by ten percent (10%) in the event that Sellers enter into Transactions with respect to one (1) or two (2) Eligible Assets.

 5.            If Buyer exercises its right to reduce the Buyer’s Margin Ratio as provided in paragraph 3 above within six (6) months prior to the Commitment Expiration Date and a Seller elects to effect an Early Repurchase Date after Buyer has exercised such right, then no Exit Fee shall be due or payable with respect to such Early Repurchase Date.

The terms of this Letter Agreement shall supersede all prior Letter Agreements between the parties.  The terms and provisions set forth in this Letter Agreement shall terminate upon the termination of the Agreement.  Any agreement by Buyer to extend the term of the Agreement shall not thereby extend any of the terms and provisions set forth herein with respect to any Transactions entered into on or after any renewal of the Agreement, unless expressly agreed to by Buyer.

This Letter Agreement may be executed in any number of counterparts, each of which counterparts shall be deemed to be an original, and all such counterparts shall constitute one and the same instrument.

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

In the event of any inconsistency between the terms and provisions contained herein and the Agreement, the terms and provisions of this Letter Agreement shall govern.

BEAR, STEARNS INTERNATIONAL LIMITED
By:	/s/ David S. Marren
	Name:  David S. Marren
	Title:  Authorized Signatory

Acknowledged and Agreed:

CAPITAL TRUST, INC.

By:	/s/ John R. Klopp
	Name : John R. Klopp
	Title:  President and CEO

CT BSI FUNDING CORP.

By:	/s/ John R. Klopp
	Name:  John R. Klopp
	Title:  President and CEO

EX-10.37

Exhibit 10.37

AMENDED AND RESTATED
FUND II INVESTMENT MANAGEMENT AGREEMENT

Dated as of April 9, 2001

ARTICLE I		RETENTION; SERVICES AND POWERS OF INVESTMENT MANAGER	2
1.1	Retention of Investment Manager		2
1.2	Services to be Performed by Investment Manager		2
1.3	Presentation, Negotiation and Closing of Investment Opportunities		3
1.4	Key Personnel		5
1.5	Miscellaneous		5
ARTICLE II		COMPENSATION OF THE INVESTMENT MANAGER; FEES AND EXPENSES	5
2.1	Investment Manager Compensation		5
2.2	Investment Manager Expenses		6
2.3	Fund Expenses		6
ARTICLE III		EXCULPATION AND INDEMNIFICATION	7
3.1	Exculpation and Indemnification		7
ARTICLE IV		MISCELLANEOUS	9
4.1	Duration and Termination		9
4.2	Status of Investment Manager as Independent Contractor		10
4.3	Notices		10
4.4	Governing Law		12
4.5	Severability		12
4.6	Entire Agreement		12
4.7	Binding on Successors		12
4.8	Headings		12
4.9	Waiver		12
4.10	Amendment		12
4.11	No Third-Party Rights		12
4.12	Counterparts		12

AMENDED AND RESTATED
FUND II INVESTMENT MANAGEMENT AGREEMENT

This AMENDED AND RESTATED INVESTMENT MANAGEMENT AGREEMENT is entered into as of April 9, 2001 (this “Agreement”), by and among CT Investment Management Co. LLC, a Delaware limited liability company (the “Investment Manager”), CT MP II LLC, a Delaware limited liability company (the “General Partner”), and, solely with respect to Sections 1.3(e) and 2.3 and Articles III and IV hereof,  CT Mezzanine Partners II LP, a Delaware limited partnership (the “Fund”), and amends and restates the Investment Management Agreement, entered into as of March 8, 2000 (the “Original Agreement”), by and among the Investment Manager, the General Partner and the Fund.  All definitions not expressly provided herein shall be those set forth in the Limited Partnership Agreement of the Fund, as the same may be amended from time to time (the “Fund Partnership Agreement”), and the Venture Agreement (as defined below).

PRELIMINARY STATEMENT

A.The General Partner is the general partner of the Fund.  Pursuant to the general partner management agreement, as the same may be amended from time to time (the “General Partner Management Agreement”), by and between the General Partner and the Fund, the Fund will pay a fund management fee to the General Partner (the “Fund Management Fee”) in consideration of certain fund management services to be provided by the General Partner to the Fund and any Vehicles.

B.Pursuant to the Original Agreement, the General Partner retained the Investment Manager to provide certain investment management services, subject to the supervision and direction of the General Partner’s management committee (the “Management Committee”), as provided in the Fund Partnership Agreement.

C.The parties hereto wish to amend and restate the Original Agreement.

D.Capital Trust, Inc., a Maryland corporation (“CT”), CT-F1, LLC, a Delaware limited liability company (“CT-F1”), CT-F2-GP, LLC, a Delaware limited liability company (“CT-F2-GP”), CT-F2-LP, LLC, a Delaware limited liability company (“CT-F2-LP”) and the Investment Manager (collectively, the “CT Parties”) and Travelers Limited Real Estate Mezzanine Investments I, LLC, a Delaware limited liability company (“Limited REMI I”), Travelers General Real Estate Mezzanine Investments II, LLC, a Delaware limited liability company (“General REMI II”), Travelers Limited Real Estate Mezzanine Investments II, LLC, a Delaware limited liability company (“Limited REMI II”) (collectively, the “CIG Parties”) are parties to an amended and restated  venture agreement, dated as of                           , 2001, as the same may be amended from time to time (the “Venture Agreement”).

NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, the Investment Manager, the General Partner (in its individual capacity and not as the general partner of the Fund) and the Fund agree as follows:

ARTICLE I

RETENTION; SERVICES AND POWERS
OF INVESTMENT MANAGER

1.1Retention of Investment Manager.  The General Partner hereby appoints the Investment Manager (subject to the following provisions of this Agreement) as the exclusive investment manager of the Fund on behalf of the General Partner and to provide the services to the General Partner described in Section 1.2 of this Agreement.

1.2Services to be Performed by Investment Manager.  The Investment Manager shall be responsible for the day-to-day management of the investments of the Fund, subject to the supervision and direction of and any approval required by the Management Committee.  Services to be rendered by the Investment Manager to the General Partner shall include the following:

(a)The Investment Manager shall identify, evaluate and negotiate investment opportunities (“Investment Opportunities”) for presentation to the General Partner on behalf of the Fund in accordance with and subject to the restrictions and limitations contained in Section 1.3 hereof.

(b)The Investment Manager shall make investment recommendations to the General Partner relating to the making of Investments.

(c)The Investment Manager shall monitor Investments on a day-to-day basis, including arranging for the accounting, budgeting, safekeeping and administration of Investments.

(d)The Investment Manager shall, on behalf of the General Partner, develop and administer the Fund’s and any Vehicle’s financial and accounting reporting functions, treasury and cash or management functions and internal control and audit functions.

(e)The Investment Manager shall work together with the Management Committee to submit to the Limited Partners of the Fund the following reports which, in the case of the items described in clauses (i)(A) and (B) and (ii)(A), (B) and (C) below, shall be prepared in accordance with GAAP:

(i)within sixty (60) days after the end of each fiscal quarter, unless such quarter is the last fiscal quarter, an unaudited report setting forth as of the end of such fiscal quarter:

(A)a balance sheet of the Fund;

(B)an income statement of the Fund for such fiscal quarter; and

(C)a status report of the Fund’s Investments and activities during such fiscal quarter, including summary descriptions

2

of Investments made and disposed of by the Fund during such fiscal quarter.

(ii)within ninety (90) days after the end of each Partnership Year (as defined in the Fund Partnership Agreement), an audited report setting forth as of the end of such Partnership Year:

(A)a balance sheet of the Fund;

(B)an income statement of the Fund for such Partnership Year;

(C)a statement of each Partner’s Capital Account (as defined in the Fund Partnership Agreement); and

(D)a status report of the Fund’s Investments and activities during such year, including summary descriptions of Investments made and disposed of by the Fund during such year.

(iii)An unaudited quarterly report on operations which will include an income statement, a balance sheet, a statement of cash flows, and statement of the Fund’s equity.  The report will present the income statement and statement of cash flows on both a quarterly basis and a year-to-date basis.  The report also will compare actual operations to those projected in the Annual Operating Budget.  The report will be delivered to members of the Management Committee within 30 business days after the last day of each month.

(iv)Annual audited financial statements certified to be in accordance with GAAP within 60 days of the fiscal year end.

(v)Any other reports the General Partner or the Investment Manager are required to provide to the General Partner, the Fund or its Limited Partners pursuant to the Fund Partnership Agreement.

(f)The Investment Manager shall obtain, at the expense of the General Partner, director and officer/manager liability insurance, and other liability insurance and business insurance customary for businesses like that of the Investment Manager.  The liability  insurance coverages shall provide for full tail coverage (on an occurrence basis during the term of the Fund) for a minimum of three years following the date of the dissolution of the Fund.

1.3Presentation, Negotiation and Closing of Investment Opportunities.  During the period beginning on the date hereof and ending on the date of the expiration of the Investment Period, the Investment Manager shall take the following actions with respect to each Investment Opportunity; provided, however, that the Investment Manager may take all or some of the following actions solely with respect to Follow-on Investments after the expiration of the Investment Period:

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(a)Originations.  The Investment Manager shall use its best efforts to originate, and present to the General Partner on behalf of the Fund, Investment Opportunities.

(b)Investment Opportunity Reports.  For each Investment Opportunity, the Investment Manager will prepare and deliver to the General Partner a report regarding such Investment Opportunity, substantially in the form of the sample report attached as Exhibit A hereto (an “Investment Opportunity Report”).

(c)Fund Commitments.  For each Investment Opportunity that the Investment Manager presents to the General Partner, the Investment Manager shall, upon not less than three business days prior written notice to each member of the Management Committee, schedule a meeting between the Investment Manager and such members regarding such Investment Opportunity (an “Investment Opportunity Meeting”). Within two business days prior to each Investment Opportunity Meeting, the Investment Manager shall deliver to each such member a copy of the Investment Opportunity Report and each other report regarding the related Investment Opportunity.  Following an Investment Opportunity Meeting, the General Partner shall notify the Investment Manager of its determination to either cause the Fund, either directly or through a Vehicle, to acquire an Investment in such Investment Opportunity or cause the Fund to decline to acquire an Investment in such Investment Opportunity.  In the event that the General Partner has approved the acquisition by the Fund of an Investment in an Investment Opportunity, the General Partner shall deliver to the Investment Manager a written commitment for the Fund to acquire such Investment, in a form acceptable to the General Partner and the Investment Manager, which commitment shall state the terms and conditions upon which the General Partner has committed to cause the Fund to acquire such Investment (a “Fund Commitment”).  Each Fund Commitment shall require that the proposed borrower related to the applicable Investment Opportunity certify that such proposed borrower is not an affiliate of Capital Trust, Inc. or Citigroup Inc. (a “Non-Affiliate Certification”).  The General Partner shall be deemed to have declined to cause the Fund to acquire an Investment in an Investment Opportunity if the General Partner fails to promptly notify the Investment Manager following an Investment Opportunity  Meeting of the General Partner’s determination to cause the Fund to either acquire an Investment in an Investment Opportunity or decline to acquire such an Investment.

(d)Investment Manager Commitments.  Upon its receipt of a Fund Commitment, the Investment Manager may issue its own funding commitment, on the same terms and conditions as such Fund Commitment, to the related proposed borrower (an “Investment Manager Commitment”).  The Investment Manager shall obtain an executed Investment Manager Commitment and Non-Affiliate Certification from such borrower.

(e)Closings.  The Investment Manager shall close each Investment Opportunity for which all of the conditions of the related Investment Manager Commitment and Fund Commitment have been satisfied by utilizing documentation acceptable to the General Partner (the “Documents”).  The  Investment Manager may, in its reasonable discretion, but in no event contrary to the terms of the related Fund Commitment,  negotiate with a proposed borrower regarding the terms of the Documents and make modifications to such Documents provided that such Documents as so modified do not materially differ from the form of the

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Documents approved in the Fund Commitment.  In connection with each such closing, the Investment Manager may retain counsel of its own choice.

(f)Indemnification.  In accordance with the terms of Section 3.1(b) hereof, and provided that the Investment Manager is in material compliance with the provisions of Sections 1.3(d) and (e) hereof, the Fund shall indemnify, defend and hold the Investment Manager harmless against any Damages (as defined in Section 3.1(a)) that any Indemnified Party (as defined in Section 3.1(a)) may suffer in the event that the Fund does not acquire an Investment in an Investment Opportunity (i) for which the Fund has issued a Fund Commitment, (ii) for which the Investment Manager has issued an Investment Manager  Commitment, and (iii) for which all of the closing conditions in such Fund Commitment and Investment Manager Commitment  have been satisfied.

1.4Key Personnel.  The Investment Manager shall cause at least one ‘Key Individual’ and one ‘Senior Manager’ (as from time to time designated by the Investment Manager and reasonably acceptable to General REMI II) to devote a substantial portion of their time and energy to the performance of the Investment Manager’s duties under this Agreement.  The Investment Manager has initially designated John R. Klopp as a Key Individual and each of Stephen D. Plavin and Edward L. Shugrue as a Senior Manager and General REMI II hereby accepts each such designation.

1.5Miscellaneous.  To the extent that the performance of the duties set forth in this Agreement places any affirmative regulatory obligations upon the Investment Manager, the Investment Manager shall not be deemed to have accepted such duties unless and until it complies with any and all applicable laws and regulations.  The Investment Manager, in its performance of its duties hereunder, shall act in conformity with the instructions and directions of the General Partner and the Management Committee and comply with and conform to the requirements of all applicable federal and state laws, regulations and rulings.

ARTICLE II

COMPENSATION OF THE INVESTMENT MANAGER; FEES AND EXPENSES

2.1Investment Manager Compensation.  As compensation for its services hereunder, the General Partner shall pay to the Investment Manager a management fee which shall be equal to the Investment Management Fee in accordance with Section 2.11 of the Venture Agreement.  The Investment Management Fee shall accrue and be payable quarterly in advance in the manner and at the times set forth in Section 2.11 of the Venture Agreement (which is incorporated herein by reference). Within 90 days of the end of each calendar year, the General Partner and the Investment Manager shall jointly calculate and determine the aggregate Investment Management Fee that accrued to the Investment Manager for such year.  As provided in the Venture Agreement, to the extent the amount of Investment Management Fee payments actually received by the Investment Manager during such year exceeded the calculated amount, such excess shall be applied to the Investment Management Fee payments to be made to the Investment Manager in the next quarter(s) until recouped; provided, however, that if upon termination of this Agreement any portion of such excess amount remains unpaid, the Investment Manager shall pay the General Partner such remaining excess amount in full as promptly as practicable after such

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termination.  As provided in the Venture Agreement, to the extent the calculated amount exceeds the amount of Investment Management Fee payments actually received by the Investment Manager, the General Partner shall pay the Investment Manager the difference between such amounts.  The General Partner shall fund the payment of the Investment Management Fee from funds obtained on account of the Fund Management Fee (as well as from its General Partner Incentive Amount as contemplated by the Limited Partnership Agreement) received from the Fund as promptly as practicable after the calculation of such excess amount. In the event that the Fund or any Vehicle acquires or pursues an Investment in which the related borrower with respect to such Investment pays any transaction fees which are directly related to the activities or operations of the Fund and any Vehicles, including origination, acquisition, disposition, financing, break-up or other similar fees, and any such fees are received by the General Partner, the Investment Manager or any Affiliate of the General Partner or the Investment Manager,  the General Partner shall apply such fees in the following manner: (a) first, to reimburse the General Partner and the Investment Manager for any Non-Consummated Investment Expenses (as defined in Section 2.2 hereof) incurred by such parties and not otherwise reimbursed, (b) second, to reimburse the General Partner and the Investment Manager for any Operating Expenses (as defined in Section 2.3 hereof) incurred by such parties and not otherwise reimbursed and (c) third, to pay or prepay the Investment Management Fee payable hereunder.

2.2Investment Manager Expenses.  The Investment Manager shall bear the following ordinary day-to-day expenses incidental to the performance by the Investment Manager of its obligations hereunder:  (i) all costs and expenses of the office space, facilities, utility service, supplies and necessary administrative and clerical functions connected with the Investment Manager’s operations, (ii) all costs and expenses incurred in developing, negotiating, structuring or otherwise dealing with proposed Investments which are not consummated by the Fund, including, without limitation, any investment banking, engineering, appraisal, environmental, travel, legal and accounting expenses and other fees and out-of-pocket costs related thereto (all such expenses, collectively, the “Non-Consummated Investment Expenses”), and (iii) compensation of all employees who are engaged in the operation or management of the Investment Manager’s business (collectively, “Administrative Expenses”).

2.3Fund Expenses.  Without limiting the provisions of Section 2.2 above, the Investment Manager shall not bear nor be charged with any costs or expenses of the Fund’s or any Vehicle’s activities and operations, all of which shall be borne by or otherwise charged to the Fund and such Vehicles, including costs and expenses arising from activities and operations prior to the date of this Agreement and including, without limitation, to the extent directly related to the Fund, any Vehicles and their Investments: (i) all costs and expenses, incurred in developing, negotiating, structuring, acquiring, financing, disposing, or otherwise dealing with consummated Investments, including, without limitation, any investment banking, engineering, appraisal, environmental, travel, legal and accounting expenses and other fees and out-of-pocket costs related thereto, and the costs of rendering financial assistance to or arranging for financing for any assets or businesses constituting Investments or for working capital or other Partnership purposes; (ii) all costs and expenses, if any, incurred in monitoring Investments, including, without limitation, any engineering, environmental, travel, third-party payment processing, legal and accounting expenses and other fees and out-of-pocket costs related thereto; (iii) all costs and expenses, if any, incurred in disposing of or otherwise dealing with Investments, including, without limitation, any investment banking, engineering, appraisal, environmental, travel, legal

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and accounting expenses and other fees and out-of-pocket costs related thereto, and the costs of rendering financial assistance to or arranging for financing for any assets or businesses constituting Investments; (iv) taxes of the Fund and any Vehicles, fees of auditors, counsel and other advisors of the Fund and any Vehicles, insurance costs of the Fund and any Vehicles and costs related to litigation and threatened litigation involving the Fund and any Vehicles; (v) expenses associated with third party accountants, attorneys and tax advisors with respect to the Fund and any Vehicles and their activities, including the preparation and auditing of financial reports and statements and other similar matters, and costs associated with the distribution of financial and other reports and capital call notices to the Partners in the Fund and costs associated with Fund meetings and any meetings of shareholders, partners, members or directors of any Vehicles; (vi) brokerage commissions and other investment costs incurred by or on behalf of the Fund and any Vehicles and paid to third parties; (vii) all costs and expenses associated with  obtaining and maintaining insurance for the Fund and its assets, other than the costs and expenses of the insurance contemplated by Section 1.2(f) hereof; (viii) fees incurred in connection with the maintenance of bank or custodian accounts; (ix) all expenses incurred in connection with the registration of the Fund’s and any Vehicles’ securities under applicable securities laws or regulations; and (x) all expenses of the Fund and any Vehicles that are not normally recurring operating expenses (all such expenses, collectively, the “Operating Expenses”).  To the extent that any Operating Expenses are paid by the General Partner or the Investment Manager, the General Partner and the Investment Manager, in accordance with the provisions of Section 2.1 hereof, may apply the fees described in such Section towards the reimbursement of such Operating Expenses and, to the extent not so reimbursed, such Operating Expenses shall be reimbursed by the Fund or any Vehicle; provided, however, that the Fund and any Vehicles shall be obligated to reimburse the Investment Manager for Operating Expenses only to the extent that such Operating Expenses are incurred on behalf of the Fund or any Vehicle.  The amount of Operating Expenses to be borne by the Fund or any Vehicle is not subject to any maximum amount.

ARTICLE III

EXCULPATION AND INDEMNIFICATION

3.1Exculpation and Indemnification.  (a)  Neither the Investment Manager nor any of its partners, affiliates, directors, officers, employees, shareholders, members and other agents (each, an “Indemnified Party”) shall be liable to the General Partner, the Fund, any Vehicle or to the Partners of the Fund for monetary damages for any losses, claims, damages or liabilities (“Damages”) arising from any act performed or omitted by such parties arising out of or in connection with the performance by Investment Manager of its services under this Agreement or the Fund’s or any Vehicle’s business or affairs, including, without limitation, all activities of the type or character disclosed in the Fund’s confidential private placement memorandum, as it may have been supplemented or amended (such disclosure being incorporated herein by reference), except to the extent that any such Damages are primarily attributable to the gross negligence or willful misconduct of such Indemnified Party.

(b)(1)The Fund shall, to the fullest extent permitted by applicable law, indemnify, defend and hold harmless the Indemnified Parties against any Damages to which the Indemnified Party may become subject in connection with any matter arising

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out of or in connection with the performance by Investment Manager of its services under this Agreement or the Fund’s business or affairs, except, with respect to any Indemnified Party to the extent that any such Damages are primarily attributable to the gross negligence or willful misconduct of such Indemnified Party.  If the Indemnified Party becomes involved in any capacity in any action, proceeding or investigation in connection with any matter arising out of or in connection with the performance by Investment Manager of its services under this Agreement or the Fund’s business or affairs, the Fund shall reimburse the Indemnified Party for its reasonable legal and other expenses (including the cost of any investigation and preparation) as they are incurred in connection therewith; provided that the Indemnified Party shall promptly repay to the Fund the amount of any such reimbursed expenses paid to it if it shall ultimately be finally determined that the Indemnified Party was not entitled to be indemnified by the Fund in connection with such action, proceeding or investigation.  If for any reason (other than by reason of the exclusions from indemnification hereinabove set forth) the foregoing indemnification is unavailable to the Indemnified Party, or insufficient to hold it harmless, then the Fund shall contribute to the amount paid or payable by the Indemnified Party as a result of such loss, claim, damage, liability or expense in such proportion as is appropriate to reflect the relative benefits received by the Fund on the one hand and the Indemnified Party on the other hand or, if such allocation is not permitted by applicable law, to reflect not only the relative benefits referred to above but also any other relevant equitable considerations.

(2)The provisions of this Section 3.1(b) shall survive for a period of three years from the date of dissolution of the Fund; provided that if at the end of such period there are any actions, proceedings or investigations then pending, the Indemnified Party shall notify the General Partner and the General Partner shall so notify the Fund and the Partners of the Fund at such time (which notice shall include a brief description of each such action, proceeding or investigation and the liabilities asserted therein) and the provisions of this Section 3.1(b) shall survive with respect to each such action, proceeding or investigation set forth in such notice (or any related action, proceeding or investigation based upon the same or similar claim) until the date that such action, proceeding or investigation is finally resolved; and provided, further, that the obligations of the Fund under this Section 3.1(b) shall be satisfied solely out of Fund assets, subject to the right of the liquidator of the Fund to establish reserves, pursuant to the Fund Partnership Agreement for contingent obligations under this Section 3.1(b).

(c)No member of the General Partner or Partner of the Fund shall have any obligation to the Fund or any other Partner of the Fund to bring or join in any action in defense of an Indemnified Party pursuant to Section 3.1 (a) or (b).  Nothing contained in this Section 3.1 shall be construed as any waiver of insurance claims or recoveries by the Fund or an Indemnified Party.

(d)The remedies of an Indemnified Party under this Article III shall be non-exclusive and, without duplication, each such Indemnified Party may pursue any other remedy provided in law or equity.

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(e)The provisions of this Article III shall inure to the benefit of the Indemnified Parties, and any successors, assigns, heirs and personal representatives of such Indemnified Parties.

(f)The Fund covenants and agrees to call for Capital Contributions from its Partners, to the extent permitted in the Fund Partnership Agreement, to satisfy the Fund’s obligations under this Article III.

ARTICLE IV

MISCELLANEOUS

4.1Duration and Termination.  If (a) any of the following events shall occur (each an “Investment Manager Removal Event”): (i) a Bankruptcy or an event specified in Section 17-402(a)(8) of the Act occurs with respect to the Investment Manager; (ii) the Investment Manager is grossly negligent or commits willful misconduct in the performance of its material duties under this Agreement, resulting in material damages to the General Partner and/or the Fund; (iii) the Investment Manager commits an act of fraud involving the General Partner and/or the Fund (which results in material damages to the General Partner and/or the Fund), or intentionally misappropriates significant funds of the General Partner and/or the Fund; (iv) the termination or liquidation of the Fund; (v) the Investment Manager materially breaches this Agreement and such breach is not remedied in all material respects within 30 days after the Investment Manager’s receipt of written notice from General REMI II; (vi) upon the occurrence of an Event of Default as a result of a Default by CT-F2-GP (as such terms are defined in Section 11.1 of the Limited Liability Company Agreement of CT MP II LLC (the “GP Agreement”)) and the election by General REMI II to pursue a remedy pursuant to Section 11.2 of the GP Agreement; and (vii) upon the occurrence of an event of default as a result of a default by CT-F2-LP under the Fund Partnership Agreement where such default is not remedied in all material respects within the cure period provided in the Fund Partnership Agreement and (b) General REMI II, on behalf of CT MP II LLC, elects to pursue a remedy as provided by the Fund Partnership Agreement; then General REMI II may deliver a written notice to the Investment Manager and the General Partner (the “Investment Manager Removal Notice”) stating that the Investment Manager shall be removed as Investment Manager under this Agreement and setting forth a description of the relevant Investment Manager Removal Event(s).  The Investment Manager shall be deemed to be removed on the date of the Investment Manager Removal Notice or, if such removal is pursuant to clause (iv), upon the end of the liquidation of the Fund.  Upon the removal of the Investment Manager pursuant to this Section, General REMI II shall automatically succeed the Investment Manager as the interim investment manager to the Fund (the “Interim Successor Manager”) on the same terms and conditions contained herein (other than Section 1.4 hereof) and shall, together with its designees (as determined by General REMI II in its discretion), perform the services of the Investment Manager as provided herein.  Within ninety (90) days after the date of the removal of the Investment Manager in accordance with the terms hereof, the Interim Successor Manager shall propose to the Partners of the Fund a permanent successor manager (which may be the Interim Successor Manager) to succeed the Interim Investment Manager as the investment manager to the Fund.  The affirmative vote of the holders of a majority of the Interests in the Fund (the Interests of the General Partner and its Affiliates in the Fund shall not be counted for the purposes of performing this calculation) shall

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be required to appoint any proposed permanent successor manager as the permanent successor investment manager to the Fund (the “Permanent Successor Manager”).  In the event that the successor manager proposed by the Interim Successor Manager to the Partners of the Fund is not so appointed by such holders, then the Interim Successor Manager shall propose other successor managers to the Partners of the Fund until one such proposed successor manager is so appointed by such holders.

Without limiting the foregoing, this Agreement shall terminate upon the removal of the General Partner as general partner of the Fund pursuant to the Fund Partnership Agreement.

Any dispute which arises under this Agreement shall be resolved pursuant to Section 4.2 of the Venture Agreement.

4.2Status of Investment Manager as Independent Contractor.  The Investment Manager shall, for all purposes herein, be deemed to be an independent contractor of the General Partner and shall, unless otherwise authorized by the General Partner from time to time, have no authority to bind, act for or represent the General Partner or the Fund in any way or otherwise be deemed an agent of the General Partner or the Fund. The Investment Manager may provide services similar to the services contemplated herein or otherwise to parties other than the General Partner or the Fund and may transact any other business with any such third parties on such terms as the Investment Manager determines in its sole discretion.

4.3Notices.  Any notices required hereunder shall be in writing and shall be deemed given when delivered in person or by courier or when sent by first-class registered or certified mail or by national prepaid overnight delivery service to the parties at such addresses as any party may from time to time specify by notice.

If to the General Partner, at:

CT MP II LLC

c/o CT-F2-GP, LLC

c/o Capital Trust, Inc.

410 Park Avenue, 14th Floor

New York, NY 10022

Attn:  Edward L. Shugrue III

And

CT MP II LLC

c/o Travelers General Real Estate

Mezzanine Investments II LLC

205 Columbus Boulevard, 9PB

Hartford, CT  06183-2030

Attn:  Duane Nelson, Esq.

Real Estate Investment Number:  12833

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with a copy to:

Paul, Hastings, Janofsky & Walker LLP

399 Park Avenue

New York, NY 10022

Attn:  Thomas E. Kruger, Esq.

And

Loeb & Loeb LLP

345 Park Avenue

New York, NY  10154

Attn:  Stanley M. Johnson, Esq.

If to the Fund, at:

CT Mezzanine Partners II LP

c/o Travelers General Real Estate

   Mezzanine Investments II, LLC

205 Columbus Boulevard, 9PB

Hartford, CT  06183-2030

Attn:  Duane Nelson, Esq.

Real Estate Investment Number:  12833

with a copy to:

Loeb & Loeb LLP

345 Park Avenue

New York, NY  10154

Attn:  Stanley M. Johnson, Esq.

If to the Investment Manager, at:

CT Investment Management Co. LLC

c/o Capital Trust, Inc.

410 Park Avenue, 14th Floor

New York, NY 10022

Attn:  Edward L. Shugrue III

with a copy to:

Paul, Hastings, Janofsky & Walker LLP

399 Park Avenue

New York, NY 10022

Attn:  Thomas E. Kruger, Esq.

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4.4Governing Law.  This Agreement shall be governed, construed, administered and regulated in all respects under the laws of the State of New York (without regard to the principles thereof regarding conflicts of laws) to the extent such laws are not preempted or superseded by the laws of the United States.

4.5Severability. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall be held to be contrary to any express provision of law or contrary to policy of express law, though not expressly prohibited, or to be against public policy, or shall for any reason whatsoever be held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement.

4.6Entire Agreement.  This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof, and supersedes any prior agreement or understanding among the parties hereto with respect to the subject matter hereof.

4.7Binding on Successors.  This Agreement shall be binding upon the Fund, the General Partner, the Investment Manager and their respective successors and assigns.  However, no assignment of this Agreement shall be made without the prior written consent of the Fund.

4.8Headings.  The headings used in this Agreement are inserted for reference purposes only and shall not be deemed to limit or affect in any way the meaning or interpretation of any of the terms or provisions herein.

4.9Waiver.  Any failure of any party to comply with any obligation or agreement herein may be waived in writing by the other party but such waiver or failure to insist upon strict compliance with such obligation or agreement shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.

4.10Amendment.  This Agreement may be amended, modified, or supplemented only by written agreement of the parties hereto.

4.11No Third-Party Rights.  Nothing in this Agreement shall be deemed to create any right in any person not a party hereto (other than the permitted successors and assigns of a party hereto) and this Agreement shall not be construed in any respect to be a contract in whole or in part for the benefit of any third party (except as aforesaid).

4.12Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute but one instrument.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, this Agreement is hereby executed as of the date first hereinabove written.

CT INVESTMENT MANAGEMENT CO. LLC			CT MP II LLC
			By:	/s/ Michael Watson
By:	Capital Trust, Inc., as sole Member		Name:	Michael Watson
			Title:	Vice President
	By:	/s/ Edward L. Shugrue, III
		Name:    Edward L. Shugrue, III	CT MEZZANINE PARTNERS II L.P.
		Title:      CFO
			By:	CT MP II LLC, as General Partner
				By:	/s/ Michael Watson
				Name:	Michael Watson
				Title:	Vice President

Exhibit A

Sample Investment Opportunity Report

[Attached]

EX-14.1

Exhibit 14.1

CAPITAL TRUST, INC.

Code of Business Conduct and Ethics
January 2006

Introduction

Capital Trust, Inc., CT Investment Management Co. LLC and their subsidiaries and affiliates (collectively, the “Company”) has adopted the Code of Business Conduct and Ethics (the “Code”), explained below to summarize basic guiding principles and standards of conduct to guide all employees, officers, members of the Board of Directors (“Directors”) of the Company and its subsidiaries and controlled affiliates in meeting the Company’s goal to achieve the highest business and personal ethical standards and to comply with the laws and regulations that apply to the Company’s business. This Code covers a wide range of business practices and procedures, but it does not address every applicable law or respond to every ethical question or concern that may arise.  All of the Company’s employees, Directors, and officers must conduct themselves accordingly in every aspect of the Company’s business and seek to avoid even the appearance of wrongdoing or improper behavior.  the Company’s paradigm has been, and will continue to be, to advance the highest standards of ethical conduct. We expect the Company’s agents, consultants, contractors, suppliers, and representatives to be guided by the principles and standards set forth in this Code.

If employees have questions regarding any of the goals, principles, or standards discussed or policies and procedures referred to in this Code or are in doubt about the best course of action to take in a particular situation, they should contact the Company’s Chief Executive Officer (“CEO”), Chief Financial Officer (the “CFO”), and Chief Operating Officer (collectively with the CEO and CFO the “Executive Officers”) or follow the guidelines set forth in Section 16, below.

Every Director, officer, and employee has a duty to adhere to this Code and those who violate the standards in this Code will be subject to disciplinary action that may include suspension or dismissal and/or the reporting of violative conduct to appropriate regulatory and criminal authorities.  If employees are involved in a situation which they believe may violate or lead to a violation of this Code, follow the guidelines described in Section 16, below

We are committed to continuously reviewing and updating the Company’s policies and procedures and thus, this Code is subject to modification by the Company.  This Code supercedes all other such codes, policies, procedures, instructions, practices, rules, or written or verbal representations concerning the subject matter of this Code to the extent they are inconsistent.

Employees must sign the acknowledgment form attached hereto as Exhibit A and return the form to the CFO indicating that they have received, read, understand, and agree to comply with this Code. The Company will retain the signed acknowledgment in their personnel file.  Each year, as part of the annual review process, the Company will require all employees to sign an acknowledgment indicating their continued understanding of and compliance with the Code.  In addition, the Company may periodically hold and require employees to participate in seminars, training meetings and similar activities related to reinforcing understanding of this Code and its applicability to the Company’s business or make its Executive Officers or attorneys available to discuss the Code.

1.             Compliance with Laws, Rules and Regulations

Obeying the law, both in letter and in spirit, is the foundation on which this Company’s ethical standards are built.  All employees, Directors and officers must respect and obey the laws of the cities, states and countries in which we operate and the rules and regulations applicable to the Company’s business.  Although not all employees are expected to know the details of these laws, rules and regulations, it is important to know enough to determine when to seek advice from supervisors, managers or other appropriate personnel who should consult with an Executive Officer as necessary or appropriate. Compliance with the law does not obviate the need to act with the highest honest and ethical standards.

To promote compliance with laws, rules, regulations and the policies of the Company, including insider trading rules, other securities laws, and anti-discrimination and anti-harassment laws and policies, the

Company has established various compliance policies and procedures and, where appropriate, may conduct information and training sessions make its Executive Officers or attorneys available to discuss the Code.

2.             Conflicts of Interest

A “conflict of interest” exists when a person’s personal private interest interferes in any way - or even appears to interfere in any way - with the interests of the Company.  A conflict situation can arise when an employee, officer or Director takes actions or has interests in connection with or as a result of a material transaction or relationship that may make it difficult for him or her or others to perform work or make decisions objectively and effectively in the Company’s interest.  Conflicts of interest may also arise when an employee, officer or Director, or members of his or her family, receives improper personal benefits as a result of his or her position in the Company.  Conflicts of interest, unless approved in accordance with this Code, as applicable, are strictly prohibited policy.  Examples include the following:

(a)           Employment/Outside Employment

In consideration of their employment with the Company, employees are expected to devote their full attention to the business interests of the Company.  Employees are prohibited from engaging in any activity that interferes with their performance or responsibilities to the Company or is otherwise in conflict with or prejudicial to the Company.  the Company’s policies prohibit any employee from accepting simultaneous employment with a client, credit source, supplier, or competitor, or from taking part in any activity that enhances or supports a competitor’s position.  If employees have any questions regarding this requirement, they should contact an Executive Officer.

(b)           Outside Directorships

It is a conflict of interest to serve as a director of any company that competes with the Company.  Employees may not serve as a director of another company without first obtaining the approval of the Company’s Chief Executive Officer (the “CEO”). Directors are required to review with the Board of Directors other proposed directorships to confirm that accepting such directorship is consistent with the Company’s Corporate Governance Guidelines.

(c)           Investments in Clients and Competitors

If employees are considering investing in a client or competitor, great care must be taken to ensure that these investments do not compromise their responsibilities to the Company.  Many factors should be considered in determining whether a conflict exists, including the size and nature of the investment; an employee’s ability to influence the Company’s decisions; their access to confidential information of the Company or of the other company; and the nature of the relationship between the Company and the other company.  All investments in a client or competitor must be approved in advance by the CFO and to the extent any such investment pre-dates an employee’s employment or service with the Company, must be disclosed to the CFO.

(d)           Related Parties

Generally, employees should avoid conducting business or engaging in a transaction on behalf of the Company with a family member or significant other, or with a company or firm with which employees or a family member or significant other is a significant owner or associated or employed in a significant role or position.  “Family members” include any person related by blood, adoption or marriage, including grandparents, aunts, uncles, nieces, nephews, cousins, stepchildren, stepparents, and in-laws.  “Significant others” include cohabitants, domestic partners, and persons with whom an employee has (or reasonably expects to have) a consensual romantic, sexual, intimate or dating relationship.

The Audit Committee must review and approve in advance all material related party transactions or business or professional relationships.  Further, all instances involving such potential related party transactions or business or professional relationships must be reported to an Executive Officer who will assess the materiality of the transaction or relationship and elevate the matter to the Audit Committee as appropriate.  Employees must not enter into, develop or continue any such material transaction or relationship without obtaining such prior Audit Committee approval.  The Company must report all material related party transactions and business or professional relationships under applicable accounting rules and the Securities and Exchange Commission’s (the “SEC”) rules and regulations. Any dealings with a related party must be conducted in such a way as to avoid preferential treatment and assure that the terms obtained by the Company are no less favorable than could be obtained from unrelated parties on an arm’s-length basis.

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Conflicts of interest or the material nature of a transaction or relationship may not always be clear-cut; if questions arise, employees should consult with an Executive Officer before entering into, developing or continuing a transaction that could reasonably be expected to give rise to a conflict of interest.

(e)           Other Situations

Because other conflicts of interest may arise, it would be impractical to attempt to list all possible situations.  Any employee, officer or Director who becomes aware of a conflict of interest or a potential conflict of interest should bring it to the attention of a supervisor, manager or other appropriate personnel or consult the guidelines described in Section 16, below.

3.             Insider Trading

Employees, officers and Directors who have access to confidential information are not permitted to use or share that information for stock trading purposes or for any other purpose except the conduct of the Company’s business. All non-public information about the Company should be considered confidential information.  To use non-public information about the Company or any other company for personal financial benefit or to “tip” others who might make an investment decision on the basis of this information is not only unethical but also illegal.  Employees should refer to the Company’s Insider Trading Policy for a full explanation of their obligations.  The purpose of such policy is to inform employees of their legal responsibilities, to make clear that the misuse of sensitive information is contrary to Company policies, and to set forth procedures with respect to trading in the securities of the Company, and other companies.

4.             Public Disclosure

The Company is committed to providing full, fair, accurate, timely, and understandable disclosure in the periodic reports and other information it files with or submits to the SEC and in other public communications, such as press releases, earnings conference calls and industry conferences, made by the Company.  In meeting such standards for disclosure, the Company’s executive officers and Directors shall at all times strive to comply with the Company’s disclosure obligations and, as necessary, appropriately consider and balance the need or desirability for confidentiality with respect to non-public negotiations or other business developments.  The Company’s CEO and CFO are responsible for establishing effective disclosure controls and procedures and internal controls for financial reporting within the meaning of applicable SEC rules and regulations.  The Company expects the CEO and CFO to take a leadership role in implementing such controls and procedures and to position the Company to comply with its disclosure obligations and otherwise meet the foregoing standards for public disclosure.

No employee, officer or Director should interfere with, hinder or obstruct the Company’s efforts to meet the standards for public disclosure set forth above.

5.             Corporate Opportunities

Employees, officers and Directors are prohibited from exploiting for their own personal gain opportunities that are discovered through the use of corporate property, information, or position unless the opportunity is fully disclosed to the Board and the Board declines to pursue such opportunity.  No employee, officer, or Director may use corporate property, information, or position for improper personal gain, and no employee may compete with the Company directly or indirectly.  Employees, officers and Directors owe a duty to the Company to advance its legitimate interest when the opportunity to do so arises.

6.             Competition and Fair Dealing

We seek to outperform the Company’s competition fairly and honestly.  We seek competitive advantages through superior performance, never through unethical or illegal business practices. Stealing proprietary information, possessing trade secret information that was obtained without the owner’s consent, or inducing such disclosures by past or present employees of other companies is prohibited.  Each employee, Director, and officer should endeavor to respect the rights of and deal fairly with the Company’s customers, suppliers, consultants, competitors, and employees.  No employee, Director, or officer should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any other intentional unfair-dealing practice.

The purpose of business entertainment and gifts in a commercial setting is to create goodwill and sound working relationships, not to gain unfair advantage with customers. No gift or entertainment should ever be

3

offered, given, provided or accepted by any Company employee, officer, Director, family member of any of the foregoing or agent unless it:

•is not a cash gift;

•is consistent with customary business practices;

•is not excessive in value (all gifts in excess of $250 must be approved by an Executive Officer);

•cannot be construed as a bribe or payoff and does not create an appearance of impropriety; and

•complies with the Company’s policy on gifts and gratuities and does not violate any laws, rules, or regulations.

If employees are not sure whether a gift or proposed gift is appropriate, please discuss the matter with an Executive Officer.

7.             Discrimination and Harassment

The diversity of the Company’s employees is a tremendous asset.  It is the Company’s policy to provide equal employment opportunity for all applicants and employees. The Company does not unlawfully discriminate on the basis of race, color, religion, sex (including pregnancy, childbirth, or related medical conditions), sexual orientation, national origin, age, disability, marital status, veteran status, or any other basis prohibited under federal, state or local law. In addition, the Company is committed to providing a workplace free of unlawful harassment.  This includes not only sexual harassment, but also harassment on any of the bases set forth above.  The Company strongly disapproves of and will not tolerate harassment of employees by managers, supervisors, co-workers or non-employees.  Similarly, the Company will not tolerate harassment by its employees of non-employees with whom Company employees have a business, service, or professional relationship.  For more information about the Company’s policies against discrimination and harassment, please refer to the Company’s Employee Handbook.

All of the Company’s employees deserve a positive work environment where they will be respected and we are committed to providing an environment that supports honesty, integrity, respect, trust and responsibility. All of the Company’s employees should contribute to the creation and maintenance of such an environment and the Company’s executive officers and management and supervisory personnel should take a leadership role in achieving a work environment that meets the Company’s diversity standards and is free from the fear of retribution.

8.             Health and Safety

The Company strives to provide each employee with a safe and healthful work environment.  Each employee has a responsibility for maintaining a safe and healthy workplace for all employees by following safety and health rules and practices and reporting accidents, injuries and unsafe equipment, practices or conditions.

The Company will not tolerate violence and threatening behavior by or toward its employees.  Further, employees should report to work in condition to perform their duties, free from the influence of illegal drugs or alcohol.  The Company strictly prohibits the use of illegal drugs in the workplace.

Employees should consult their Employee Handbook for additional information about the Company’s policies concerning the matters discussed in this Section.

9.             Record-Keeping

The purpose of this policy is to set forth and convey the Company’s requirements in managing records, including all recorded information regardless of medium or characteristics. Records include paper documents, CDs, computer hard disks, email, floppy disks, microfiche, microfilm, or all other media.  The Company requires honest and accurate recording and reporting of information in order to make responsible business decisions.

Many employees, officers, and Directors regularly use business expense accounts, which they must document and record accurately.  If employees are not sure whether a certain expense is legitimate, the should

4

ask their supervisor or an Executive Officer.  Please refer to the Company’s Personal Expense Policy contained in the Employee Handbook for further information regarding business expenses.

The Company’s responsibilities to its shareholders and the investing public require that all of the Company’s books, records, accounts and financial statements must be maintained in reasonable detail, must appropriately reflect the Company’s transactions and must conform both to applicable legal requirements and to the Company’s system of internal controls and generally accepted accounting practices and principles.  No one should rationalize or even consider misrepresenting facts or falsifying records.  Unrecorded or “off the books” funds or assets should not be maintained unless permitted by applicable law or regulation.

Business records and communications often become public, and we should avoid exaggeration, derogatory remarks, guesswork, or inappropriate characterizations of people and companies that can be misunderstood.  This applies equally to e-mail, internal memos, and formal reports.  Employees should always be retain or destroy records according to the employee’s department’s practices.  No record or document shall be destroyed which is the subject of a subpoena or other legal process or if there is a reasonable belief that litigation proceedings or government investigative proceedings are likely to occur and it is anticipated that such record or document is relevant to such proceedings.  The Company expects all employees to comply with all federal, state and industry-specific record retention rules and requirements.

10.           Confidentiality

Employees, Directors and officers must maintain the confidentiality of confidential and proprietary information entrusted to them by the Company or its clients or business partners, except when disclosure is authorized by the CEO or CFO or required by laws or regulations.  At the commencement of employment, all employees are required to review and to execute a Confidentiality Agreement that provides the specific details of employees’ confidentiality obligations.  “Confidential Information” includes, but is not limited to information and materials describing or relating to the business and financial affairs of the Company and its present or former officers, Directors, employees, clients and business partners such as trade secrets, patents, trademarks and copyrights, business, marketing and service plans, designs, databases, records, personnel information, client and prospective client lists and any unpublished financial data and reports. Unauthorized use or distribution of this information violates Company policy and subjects employees to disciple, up to and including termination of employment.  In addition, unauthorized disclosure may unlawful and could result in civil or even criminal penalties.  The obligation to preserve confidential information continues even after employment ends.

The Company and its employees, agents, consultants and contractors must cooperate with appropriate government inquiries and investigations.  In this context, however, it is important to protect the legal rights of the Company with respect to its confidential information.  All government inquiries and requests for information, documents or investigative interviews (whether in person, by phone, email or written correspondence) must be referred to the CEO, who will be responsible for coordinating a response.  Employees may not disclose any financial information without the prior approval of an Executive Officer.

11.           Protection and Proper Use of Company Assets

All employees, Directors, and officers should endeavor to protect the Company’s property, electronic communications systems, information resources, facilities and equipment and ensure their efficient use. Theft, carelessness, and waste have a direct impact on the Company’s profitability.  Any suspected incident of fraud or theft should be immediately reported for investigation pursuant to Section 16, below.  Company assets should not be used for non-Company business, although we recognize that incidental personal use may be permitted without adversely affecting the interests of the Company.  Personal use of company assets must always be in accordance with Company policy.  Employees should consult their supervisor for appropriate guidance and permission.

The Company maintains a comprehensive policy concerning access to and use of the Company’s computer hardware, software, date files, and other technology.  Employees are required to review the Company’s Information Technology Policy, a copy of which is attached to the Employee Handbook, and comply with its terms.

12.           Payments to Government Personnel

The U.S. Foreign Corrupt Practices Act prohibits giving anything of value, directly or indirectly, to officials of foreign governments or foreign political candidates in order to obtain or retain business. It is strictly prohibited to make illegal payments to government officials of any country.

5

In addition, there are a number of federal and state laws and regulations regarding business gratuities that may be accepted by U.S. or state government personnel.  The promise, offer or delivery to an official or employee of the U.S. government or a state government of a gift, favor or other gratuity in violation of these rules would not only violate Company policy but could also be a criminal offense.  Local governments, as well as foreign governments, may have similar rules.  Employees must consult with an Executive Officer prior to making any such gifts.

13.           Waivers of the Code of Business Conduct and Ethics

Any waiver of any provision of this Code for executive officers or Directors must be approved by the Audit Committee and will be promptly disclosed as required by applicable securities law or stock exchange regulation.  With regard to employees who are not executive officers, waivers must be approved by the CEO.

14.           Reporting any Illegal or Unethical Behavior; No Retaliation

It is an employee’s obligation and ethical responsibility to help enforce this Code, and to that end, employees should promptly report violations of this Code in accordance with the guidelines set forth in Section 16, below. Employees, Directors and officers are encouraged to talk to supervisors, managers, or other appropriate personnel about observed or suspected illegal, improper, or unethical behavior and when in doubt about the best course of action in a particular situation. Employees should know that reprisal, threats, retribution, or retaliation against any person who has in good faith reported a violation or a suspected violation of law, this Code or other Company policies, or against any person who is assisting in any investigation or process with respect to such a violation, is both a violation of Company policy and is prohibited by a variety of state and federal civil and criminal laws, including the Sarbanes-Oxley Act of 2002.  Accordingly, it is the policy of the Company not to allow retaliation for reports of wrongdoing or misconduct by others made in good faith by employees.  Employees, Directors and officers are expected to cooperate in internal investigations of wrongdoing or misconduct.

15.           Accounting Complaints

The Company’s policy is to comply with all applicable financial reporting and accounting regulations. If any Director, officer, or employee of the Company has unresolved concerns or complaints regarding questionable accounting, internal control or auditing matters of the Company, then he or she is encouraged to submit those concerns or complaints in accordance with the Company’s Complaint Procedures for Accounting and Auditing Matters.

16.           Compliance Procedures

We must all work to ensure prompt and consistent action against violations of this Code.  However, in some situations it is difficult to know right from wrong.  Since we cannot anticipate every situation that will arise, employees should keep in mind the following steps as employees consider a particular problem or concern.

(a)           Employees should make sure they have all the facts. In order to reach the right solutions, we must be as fully informed as possible.

(b)           Employee should ask: What specifically am I being asked to do or ignore? Does it seem illegal, unethical or improper?  This will enable employees to focus on the specific question they are faced with, and the alternatives they have.  Employees should use their judgment and common sense; if something seems unethical or improper, it may very well be.

(c)           Clarify employees’ responsibilities and roles. In most situations, there is shared responsibility.  Are an employee’s colleagues informed?  It may help to get others involved and discuss their concerns.

(d)           Employees should report violations of this Code to or otherwise discuss their concerns in this regard with their supervisor.  In many cases, an employee’s supervisor will be more knowledgeable about the question or concern, and will appreciate being brought into the decision-making process.  Remember that it is their supervisor’s responsibility to help solve problems.  Supervisors are obligated to report violations of this Code to an Executive Officer.

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(e)           In the case where it may not be appropriate to report a violation to or discuss their concerns with their supervisor, or where employees do not feel comfortable approaching their supervisor to report a violation or discuss their concerns, employees may report the violation or discuss their concerns with an Executive Officer.  If employees prefer to report violations or their concerns in writing on an anonymous basis, they should address their concerns to the Company’s internal audit firm at the following address: Capital Trust, Inc. Ethics Compliance c/o Berdon LLP, 360 Madison Avenue, New York, NY 10017, Attention: Rita Pierre.

(f)            Reports of violations of this Code or other complaints made to the persons referenced above will be reviewed by the CEO or his designee, who shall either (i) conduct an investigation of the facts and circumstances as appropriate and report his conclusions and remedial actions taken, if any, to the Audit Committee or (ii) report the alleged violation or other complaint to the Audit Committee for further direction.

(g)           Your communications of violations or concerns will be kept confidential to the extent feasible and appropriate, and except as required by law.

(h)           All reports of violations of the Code will be promptly investigated and addressed. If employees are not satisfied with the response, they may contact the Audit Committee.

(i)            Always ask first, act later: If employees are unsure of what to do in any situation, they should seek guidance before they act.

17.           Compliance Required

The matters covered in this Code are of the utmost importance to the Company, its shareholders and its business partners, and are essential to the Company’s ability to conduct its business in accordance with its stated values.  We expect all of the Company’s Directors, officers, employees, agents, contractors, consultants and representatives to adhere to these rules in carrying out their duties for the Company.

Any individual whose actions are found to violate these policies or any other policies of the Company will be subject to disciplinary action, up to and including immediate termination of employment or business relationship.  Where the Company has suffered a loss, it may pursue its legal remedies against the individuals or entities responsible.

18.           Administration

No code, including this one, can cover all situations.  Similarly, exceptional circumstances may occur which do not fit neatly within the guidelines of this Code or where strict application of this Code may not produce a fair result.  Overall administration of this Code including its interpretation and amendment is under the authority of the Audit Committee of the Board.

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EXHIBIT A

ACKNOWLEDGMENT OF RECEIPT OF CODE OF BUSINESS CONDUCT AND ETHICS

I have received and read the Company’s Code of Business Conduct and Ethics (the “Code”). I understand the standards and policies contained in the Code and understand that there may be additional policies or laws specific to my position as an employee, officer or Director of the Company.  I further agree to comply with the Code.

If I have questions concerning the meaning or application of the Code, any Company policies, or the legal and regulatory requirements applicable to my position, I know I can consult my supervisor, the Company’s Chief Executive Officer, Chief Financial Officer, or Chief Operating Officer, knowing that my questions or reports to these sources will be maintained in confidence to extent practicable.

Employee Name

Signature

Date

Please sign and return this form to the Company’s CFO.

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EX-21.1

Exhibit 21.1

ENTITY	JURISDICTION OF INCORPORATION	D/B/A JURISDICTION
Victor Capital Group, L.P.	Delaware
VIC, Inc.	Delaware	Vic NY
Capital Trust RE CDO 2004-1 Corp.	Delaware
Capital Trust RE CDO 2004-1 LTD	Cayman Islands
Capital Trust RE CDO Depositor, Corp.	Delaware
CT RE CDO 2004-1 Sub, LLC	Delaware
CT LF Funding Corp.	Delaware
CT BSI Funding Corp.	Delaware
CT-F2-GP, LLC	Delaware
CT-F2-LP, LLC	Delaware
CT Investment Management Co., LLC	Delaware
CT RE CDO 2005-1 Corp.	Delaware
Capital Trust RE CDO 2005-1 LTD	Cayman Islands
CT RE CDO 2005-1 Sub, LLC	Delaware
CT CDO III, LLC	Delaware
CT CDO III LTD.	Cayman Islands
CT CDO III Corp.	Delaware

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements on Forms S-3 (Nos. 333-103662, 333-106970 and 333-111261) and in the related Prospectuses and on Forms S-8 (Nos. 333-39743, 333-72725 and 333-120145) pertaining to (i) the Second Amended and Restated 1997 Long Term Incentive Stock Plan, Amended and Restated 1997 Non-Employee Director Stock Plan (ii) the 1998 Employee Stock Purchase Plan, 1998 Non-Employee Stock Purchase Plan, and Stock Purchase Loan Plan and the (iii) Amended and Restated 2004 Long-Term Incentive Plan of Capital Trust, Inc. and Subsidiaries of our reports dated March 9, 2006, with respect to the consolidated financial statements and schedule of the Capital Trust, Inc. and Subsidiaries, Capital Trust, Inc. and Subsidiaries management’s assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over financial reporting of Capital Trust, Inc. and Subsidiaries, included in this Annual Report (Form 10-K) for the year ended December 31, 2005.

/s/ Ernst & Young LLP

New York, New York

March 9, 2006

EX-31.1

Exhibit 31.1

CERTIFICATION
PURSUANT TO 17 CFR 240.13a-14
PROMULGATED UNDER
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, John R. Klopp, certify that:

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

2.Based on my knowledge, this annual 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 annual report;

3.Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report;

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

(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual 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 annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

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

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

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

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

Date: March 9, 2006

/s/ John R. Klopp

John R. Klopp

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION
PURSUANT TO 17 CFR 240.13a-14
PROMULGATED UNDER
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Geoffrey G. Jervis, certify that:

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

2.Based on my knowledge, this annual 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 annual report;

3.Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report;

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

(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual 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 annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

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

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

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

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

Date: March 9, 2006

/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 Annual Report of Capital Trust, Inc. (the “Company”) on Form 10-K for the period ending December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John R. Klopp, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

 /s/ John R. Klopp

John R. Klopp

Chief Executive Officer

March 9, 2006

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 Annual Report of Capital Trust, Inc. (the “Company”) on Form 10-K for the period ending December 31, 2005 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

March 9, 2006