8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 4, 2009

CAPITAL TRUST, INC.

(Exact name of registrant as specified in its charter)

Maryland	1-14788	94-6181186
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS 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

N/A

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition

On August 4, 2009, Capital Trust, Inc. (the “Company”) issued a press release reporting the financial results for its fiscal quarter ended June 30, 2009. A copy of the press release is attached to this Current Report on Form 8-K (“Current Report”) as Exhibit 99.1 and is incorporated herein solely for purposes of this Item 2.02 disclosure.

On August 5, 2009, the Company held a conference call to discuss the financial results of the Company for its fiscal quarter ended June 30, 2009. A copy of the transcript of the call is attached to this Current Report as Exhibit 99.2 and is incorporated herein solely for purposes of this Item 2.02 disclosure. The transcript has been selectively edited to facilitate the understanding of the information communicated during the conference call.

The information in this Current Report, including the exhibits attached hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of such section. The information in this Current Report, including the exhibits, shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended or the Exchange Act, regardless of any incorporation by reference language in any such filing.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits

Exhibit Number	Description
99.1	Press Release dated August 4, 2009
99.2	Transcript from second quarter earnings conference call held on August 5, 2009

SIGNATURES

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

CAPITAL TRUST, INC.
By:	/s/ Geoffrey G. Jervis
	Name:	Geoffrey G. Jervis
	Title:	Chief Financial Officer

Date: August 10, 2009

Exhibit Index

Exhibit Number	Description
99.1	Press Release dated August 4, 2009
99.2	Transcript from second quarter earnings conference call held on August 5, 2009

EX-99.1

Exhibit 99.1

Contact:	Douglas Armer
	(212) 655-0220

Capital Trust Reports Second Quarter 2009 Results

NEW YORK, NY — August 4, 2009 — Capital Trust, Inc. (NYSE: CT) today reported results for the quarter ended June 30, 2009.

• Operating Results:

• Reported a net loss of $6.4 million or $0.29 per share for the period.

• Second quarter net loss was driven primarily by $12.6 million in loan loss provisions and asset impairments, and the write-off of $2.2 million of goodwill.

• Portfolio Performance:

• At quarter end, the Company’s loan portfolio consisted of 65 assets with an aggregate net book value of $1.6 billion. During the second quarter, performance-related activity included:

• Four loans with an aggregate outstanding principal balance of $70.8 million became non-performing (all of which had previously been reserved against or were on the Company’s watch list).

• $7.7 million of provisions for loan losses were recorded on four loans.

• Five loans with an aggregate outstanding principal balance of $156.8 million were added to the watch list.

• The Company’s securities portfolio was comprised of 77 securities with an aggregate net book value of $826.6 million at quarter end. During the second quarter, performance-related activity included:

• $4.0 million of other-than-temporary impairments were recorded on one security.

• Loan Originations/Repayments/Dispositions:

• During the quarter, the Company originated $13.9 million of new investments for its investment management vehicles and did not originate any new balance sheet investments.

Page 1 of 9

• Fundings pursuant to previously existing loan commitments totaled $1.5 million, and full and partial repayments during the second quarter totaled $37.5 million.

• The Company sold one loan that had been classified as held-for-sale for its $18 million carrying value.

• Post quarter end, the Company liquidated its one REO asset for net proceeds of $7.1 million.

• Debt Restructuring:

• During the quarter, the Company settled its last remaining single asset secured recourse obligation, terminating an $18.0 million borrowing by transferring the collateral to the lender in full satisfaction of the Company’s debt. The collateral loan had previously been classified as held-for-sale.

• During the quarter, the Company exchanged the remaining $21.9 million of trust preferred securities not included in the previously announced restructuring in March. In exchange for the trust preferred securities, the Company issued $25.2 million of new junior subordinated notes on the same terms as those issued to the holders of the trust preferred securities exchanged in March, thereby completing the restructuring of all of its trust preferred securities.

• At quarter end, the Company had reduced the aggregate outstanding principal balance under its three remaining repurchase agreements by $76.9 million from their pre-restructuring total. To date, the Company has repaid 63% of the amount necessary to achieve the one-year maturity extension of its repurchase obligations and senior credit facility in March 2010.

Balance Sheet

Total assets were $2.5 billion at June 30, 2009. The Company’s Interest Earning Assets are summarized below:

Interest Earning Assets

• Interest earning assets totaled $2.5 billion at June 30, 2009 and had a weighted average yield of 4.6%.

• $1.6 billion (67%) of the portfolio was comprised of loan investments with a weighted average yield of 3.6%.

• $827 million (33%) of the portfolio was comprised of securities investments with a weighted average yield of 6.6%.

In total, the Company’s portfolio at June 30, 2009 included 10 loans with an aggregate outstanding principal balance of $174.8 million that were non-performing. Total provisions of $121.4 million have been taken against the 10 non-performing loans and one performing loan. The Company does not accrue interest on loans against which it has provisions unless collected.

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As of June 30, 2009, 18 loans with a book balance of $525.7 million were categorized as watch list loans. Watch list loans are performing loans (with no provisions) that the Company aggressively monitors and manages to mitigate the risk of potential future non-performance.

In the securities portfolio, seven bonds with an aggregate gross book value of $40.6 million carry credit impairments totaling $14.3 million. Beginning in the second quarter of 2009, the Company began reporting securities that are characterized as watch list securities, which include most of the other-than-temporarily impaired securities and others which the Company actively monitors for potential losses to its position. As of June 30, 2009, 30 securities with an aggregate book value of $243.5 million were identified as watch list securities.

At June 30, 2009, the Company had two equity investments in unconsolidated subsidiaries with an aggregate book value of $2.5 million, both co-investments in funds sponsored and managed by the Company.

Interest Bearing Liabilities

On March 16, 2009, the Company entered into a restructuring of substantially all its non-CDO liabilities. Terms of the debt restructuring are detailed in the Form 10-Q filed with the SEC.

The Company’s Interest Bearing Liabilities totaled $1.9 billion at June 30, 2009 and were comprised of collateralized debt obligations ($1.1 billion, 60.1% of total), repurchase obligations ($502.5 million, 27.0%), borrowings under a senior credit facility ($99.7 million, 5.4%) and junior subordinated notes ($126.1 million, 6.7%). During the second quarter, the Company reduced its repurchase obligations by $40.5 million (7.4%) compared to the balance at the end of the prior quarter. At quarter end, the Company’s $1.9 billion of Interest Bearing Liabilities carried a weighted average cash coupon of 1.90% and a weighted average all-in cost of 3.62%.

During the first quarter of 2009, certain of the Company’s CMBS collateral interests in each of its four CDOs were classified as impaired interests due to rating agency downgrades and resulted in a breach of the CDO II overcollateralization test. During the second quarter, additional ratings downgrades on securities combined with the non-performance of loan collateral resulted in a breach of the CDO I overcollateralization test and further breaches of CDO II tests. These breaches have caused the redirection of CDO I and CDO II cash flow that would otherwise have been paid to the Company. Furthermore, during the second quarter of 2009, downgrades of certain securities in CDO IV resulted in the re-classification of interest proceeds from those securities as principal proceeds inside the CDO and therefore a significant diminution of cash flow. As of quarter end, the Company currently receives collateral management fees from all four of its CDO’s but cash payments from only one (CDO III).

Page 3 of 9

Other Items

At June 30, 2009, the Company’s GAAP shareholders’ equity was $332.0 million. Based on 22.3 million shares outstanding (fully diluted basis) at quarter end, book value per share was $14.85.

In light of the credit reserve activity at the Company, it is not expected that the Company will have taxable income for 2009 and, therefore, will likely not be required to pay a dividend under REIT rules. Furthermore, any dividend payment is subject to the terms of the debt restructuring and would be payable, to the maximum extent possible, in stock (in lieu of cash).

Current and prospective sources of liquidity as of June 30, 2009 include unrestricted cash ($19.5 million), net operating income, as well as principal payments and asset disposition proceeds. Prospective uses of liquidity include operating expenses, unfunded loan commitments ($13.5 million), capital commitments to the Company’s managed funds ($19.2 million) and debt repayments. At June 30, 2009, the Company’s debt-to-equity ratio (defined as the ratio of total Interest Bearing Liabilities to book equity) was 5.7-to-1.

Investment Management

All of the Company’s investment management activities are conducted through its wholly-owned, taxable, investment management subsidiary, CT Investment Management Co., LLC (“CTIMCO”). At June 30, 2009, CTIMCO managed five private equity funds and one separate account with total investments of $1.1 billion and undeployed equity commitments of approximately $918 million. Three of these funds and the separate account have ended their investment periods and are liquidating in the ordinary course of business. The other funds, CT Opportunity Partners I (“CTOPI”) and CT High Grade Partners II (“High Grade II”), are currently investing and capitalized with $540 million and $667 million of total equity commitments, respectively. Capital Trust, Inc. has committed to invest $25 million as a limited partner in CTOPI, of which $6 million has already been funded and $19 million remains undrawn. The Company does not have a co-investment in High Grade II. During the quarter, the Company extended the investment period for High Grade II for an additional 12 months to May 2010. Revenues from third party investment management fees totaled $2.9 million in the second quarter of 2009. In addition to managing its parent, Capital Trust, Inc., and its third party private equity mandates, CTIMCO is the collateral manager for all four of the Company’s CDOs and two additional CDOs in which the Company is an investor. CTIMCO also is the named special servicer on $1.1 billion of loans and has the right to be named special servicer on an additional $800.0 million of loans.

Page 4 of 9

Operating Results Comparison

Comparison of Results of Operations: Three Months Ended June 30, 2009 vs. June 30, 2008

(in thousands, except per share data)

	2009			2008			$ Change			% Change
Income from loans and other investments:
Interest and related income	$	30,575		$	49,030			($18,455	)		(37.6	%)
Less: Interest and related expenses		20,244			32,799			(12,555	)		(38.3	%)
Income from loans and other investments, net		10,331			16,231			(5,900	)		(36.4	%)
Other revenues:
Management fees from affiliates		2,929			4,154			(1,225	)		(29.5	%)
Servicing fees		155			44			111			252.3	%
Other interest income		8			638			(630	)		(98.7	%)
Total other revenues		3,092			4,836			(1,744	)		(36.1	%)
Other expenses:
General and administrative		4,503			6,208			(1,705	)		(27.5	%)
Depreciation and amortization		7			22			(15	)		(68.2	%)
Total other expenses		4,510			6,230			(1,720	)		(27.6	%)
Total other-than-temporary impairments on securities		(4,000	)		—			(4,000	)		N/A
Impairment of goodwill		(2,235	)		—			(2,235	)		N/A
Impairment on real estate held-for-sale		(899	)		—			(899	)		N/A
Net impairments recognized in earnings		(7,134	)		—			(7,134	)		N/A
Provision for loan losses		(7,730	)		(56,000	)		48,270			(86.2	%)
Gain on extinguishment of debt		—			6,000			(6,000	)		(100.0	%)
Gain on sale of investments		—			374			(374	)		(100.0	%)
(Loss)/income from equity investments		(445	)		69			(514	)		N/A
Loss before income taxes		(6,396	)		(34,720	)		28,324			(81.6	%)
Income tax provision		—			98			(98	)		(100.0	%)
Net loss		($6,396	)		($34,818	)	$	28,422			(81.6	%)
Net loss per share — diluted		($0.29	)		($1.59	)	$	1.30			(81.8	%)
Dividend per share	$	—		$	0.80			($0.80	)		(100.0	%)
Average LIBOR		0.37	%		2.59	%		(2.22	%)		(85.8	%)

Income from loans and other investments, net

A decline in total Interest Earning Assets (down $517 million or 17% from June 30, 2008 to June 30, 2009) and an 86% decrease in average LIBOR contributed to a $18.5 million, or 38%, decrease in interest income between the second quarter of 2008 and the second quarter of 2009. Lower LIBOR and a decrease in leverage of $338.0 million, or 15%, from June 30, 2008 to June 30, 2009 resulted in a $12.6 million, or 38%, decrease in interest expense for the period. On a net basis, net interest income decreased by $5.9 million, or 36%.

Page 5 of 9

Management fees

Base management fees from the investment management business decreased $1.2 million, or 30%, during the second quarter of 2009 compared with the second quarter of 2008. The decrease was attributed primarily to receipt of a $1.0 million non-recurring fee in the second quarter of 2008 from CTOPI, which represented a catch-up fee from new investors that committed capital at the final closing. The decrease was partially offset by new fee income from High Grade II.

Servicing fees

Servicing fees increased $111,000 in the second quarter of 2009 compared with the second quarter of 2008, primarily due to a one-time special servicing fee received by CTIMCO in 2009.

General and administrative expenses

General and administrative expenses include personnel costs, operating expenses and professional fees. Total general and administrative expenses decreased $1.7 million, or 28%, between the second quarter of 2008 and the second quarter of 2009. The decrease in 2009 was a result of lower personnel costs and lower professional fees.

Net impairments recognized in earnings

During the second quarter of 2009, the Company recorded an other-than-temporary impairment of $899,000 on its single REO asset. The Company also recorded a $2.2 million impairment of goodwill related to its June 2007 acquisition of a healthcare loan origination platform. Based on the Company’s assessment of its current business, as it relates to the previously acquired healthcare origination platform, goodwill related to that transaction at June 30, 2009 is fully impaired. During the second quarter, the Company also recorded $4.0 million of other-than-temporary impairments on one security due to the adverse change in expected cash flows related to that security. No other-than-temporary impairments were recorded during the second quarter of 2008.

Provision for credit losses

During the second quarter of 2009, the Company recorded an aggregate of $7.7 million in provisions for credit losses against four loans. During the second quarter of 2008, the Company recorded a $50.0 million provision for loan losses against a single loan. Also during the second quarter of 2008, the Company recorded a $6.0 million charge on a loan that was written off. The $6.0 million liability collateralized by the loan was forgiven by the creditor as described below.

Gain on Extinguishment of Debt

No gains on the extinguishment of debt were recorded in the second quarter of 2009. During the second quarter of 2008, $6.0 million of debt forgiveness by a creditor was recorded as a gain on extinguishment of debt.

Gain on Sale of Investments

The Company did not record any gains on sale of investments in the second quarter of 2009. During the second quarter of 2008, the Company recorded a gain of $374,000 on the sale of one CMBS investment with a face value of $7.7 million that as of December 31, 2007 was designated and accounted for on an available-for-sale basis.

Page 6 of 9

(Loss)/income from equity investments

The loss from equity investments during the second quarter of 2009 resulted from the Company’s share of losses at CTOPI and Fund III. The Company’s share of losses from CTOPI was $435,000, primarily due to fair value adjustments on the underlying investments. The income from equity investments in the second quarter of 2008 resulted primarily from the Company’s share of operating income/(loss) at Fund III and CTOPI.

Income tax benefit

During the second quarter of 2009, the Company did not record an income tax provision. In the second quarter of 2008, CTIMCO recorded operating income before income taxes of $1.1 million, which, when combined with GAAP to tax differences and changes in valuation allowances, resulted in an income tax provision of $98,000.

Dividends

The Company did not pay a dividend in the second quarter of 2009. In the second quarter of 2008, the Company paid a dividend of $0.80 per share.

******

The Company will conduct a management conference call at 10:00 a.m. Eastern Time on Wednesday, August 5, 2009 to discuss second quarter 2009 results. Interested parties can access the call toll free by dialing (800) 862-9098 or (785) 424-1051 for international participants. The conference ID is “CAPITAL.” A recorded replay will be available from noon on Wednesday, August 5, 2009 through midnight on Wednesday, August 19, 2009. The replay call number is (800) 283-8183 or (402) 220-0867 for international callers.

Forward-Looking Statements

This news release contains certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, including statements relating to future financial results and business prospects. The forward-looking statements contained in this news release are subject to certain risks and uncertainties including, but not limited to, the success of the Company’s debt restructuring and its ability to meet the amortization required thereby, the continued credit performance of the Company’s loan and CMBS investments, the asset/liability mix, the effectiveness of the Company’s hedging strategy and the rate of repayment of the Company’s portfolio assets, as well as other risks indicated from time to time in the Company’s Form 10-K and Form 10-Q filings with the Securities and Exchange Commission. The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events or circumstances.

About Capital Trust

Capital Trust, Inc. is a real estate finance and investment management company that specializes in credit sensitive structured financial products. To date, the Company’s investment programs have focused primarily on loans and securities backed by commercial real estate assets, and the Company has executed its business both as a balance sheet investor and as an investment manager. Capital Trust is a real estate investment trust traded on the New York Stock Exchange under the symbol “CT.” The Company is headquartered in New York City.

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Capital Trust, Inc. and Subsidiaries
Consolidated Balance Sheets
June 30, 2009 and December 31, 2008
(in thousands except per share data)

	June 30,			December 31,
	2009			2008
	(unaudited)
Assets
Cash and cash equivalents	$	19,533		$	45,382
Restricted cash		155			18,821
Securities held-to-maturity		826,552			852,211
Loans receivable, net		1,644,775			1,790,234
Loans held-for-sale, net		12,000			92,175
Real estate held-for-sale		7,100			9,897
Equity investments in unconsolidated subsidiaries		2,487			2,383
Accrued interest receivable		5,088			6,351
Interest rate hedge assets		75			—
Deferred income taxes		1,706			1,706
Prepaid expenses and other assets		8,625			18,369
Total assets		2,528,096			2,837,529
Liabilities & Shareholders’ Equity
Liabilities:
Accounts payable and accrued expenses	$	7,784		$	11,478
Repurchase obligations		502,456			699,054
Collateralized debt obligations		1,133,664			1,156,035
Senior credit facility		99,698			100,000
Junior subordinated notes		126,085			128,875
Participations sold		292,554			292,669
Interest rate hedge liabilities		33,898			47,974
Total liabilities		2,196,139			2,436,085
Shareholders’ equity:
Class A common stock $0.01 par value 100,000 shares authorized, 21,754 and 21,740 shares issued and outstanding as of June 30, 2009 and December 31, 2008, respectively (“class A common stock”)		218			217
Restricted class A common stock $0.01 par value, 299 and 331 shares issued and outstanding as of June 30, 2009 and December 31, 2008, respectively (“restricted class A common stock” and together with class A common stock, “common stock”)		3			3
Additional paid-in capital		559,411			557,435
Accumulated other comprehensive loss		(35,175	)		(41,009	)
Accumulated deficit		(192,500	)		(115,202	)
Total shareholders’ equity		331,957			401,444
Total liabilities and shareholders’ equity	$	2,528,096		$	2,837,529

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Capital Trust, Inc. and Subsidiaries
Consolidated Statements of Operations
Three and Six Months Ended June 30, 2009 and 2008
(in thousands, except share and per share data)
(unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2009			2008			2009			2008
Income from loans and other investments:
Interest and related income	$	30,575		$	49,030		$	63,814		$	105,585
Less: Interest and related expenses		20,244			32,799			41,512			70,743
Income from loans and other investments, net		10,331			16,231			22,302			34,842
Other revenues:
Management fees from affiliates		2,929			4,154			5,809			6,350
Servicing fees		155			44			1,334			222
Other interest income		8			638			136			825
Total other revenues		3,092			4,836			7,279			7,397
Other expenses:
General and administrative		4,503			6,208			12,959			13,108
Depreciation and amortization		7			22			14			127
Total other expenses		4,510			6,230			12,973			13,235
Total other-than-temporary impairments on securities		(4,000	)		—			(18,646	)		—
Portion of other-than-temporary impairments on securities recognized in other comprehensive income		—			—			5,624			—
Impairment of goodwill		(2,235	)		—			(2,235	)		—
Impairment on real estate held-for-sale		(899	)		—			(2,233	)		—
Net impairments recognized in earnings		(7,134	)		—			(17,490	)		—
Provision for loan losses		(7,730	)		(56,000	)		(66,493	)		(56,000	)
Valuation allowance on loans held-for-sale		—			—			(10,363	)		—
Gain on extinguishment of debt		—			6,000			—			6,000
Gain on sale of investments		—			374			—			374
(Loss)/income from equity investments		(445	)		69			(2,211	)		76
Loss before income taxes		(6,396	)		(34,720	)		(79,949	)		(20,546	)
Income tax provision/(benefit)		—			98			(408	)		(501	)
Net loss	$	(6,396	)	$	(34,818	)	$	(79,541	)	$	(20,045	)
Per share information:
Net loss per share of common stock:
Basic	$	(0.29	)	$	(1.59	)	$	(3.56	)	$	(1.01	)
Diluted	$	(0.29	)	$	(1.59	)	$	(3.56	)	$	(1.01	)
Weighted average shares of common stock outstanding:
Basic		22,368,539			21,915,175			22,327,895			19,928,912
Diluted		22,368,539			21,915,175			22,327,895			19,928,912
Dividends declared per share of common stock	$	—		$	0.80		$	—		$	1.60

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EX-99.2

Exhibit 99.2

Capital Trust Q2’ 09 Earnings Call
August 5, 2009
10:00 AM ET

Operator:	Hello and welcome to the Capital Trust Second Quarter 2009 Results conference call. Before we begin, please be advised that the forward-looking statements contained in this news release are subject to certain risks and uncertainties including, but not limited to, the success of the company’s debt restructuring and its ability to meet the amortization required thereby, the continued credit performance of the company’s loan and CMBS investments, the asset/liability mix, the effectiveness of the company’s hedging stategy, and the rate of repayment of the company’s portfolio assets as well as other risks indicated from time to time in the company’s Form 10-K and Form 10-Q filings with the Securities and Exchange Commission. The company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events or circumstances. There will be a Q&A session following the conclusion of presentation. At that time, I will provide instructions for submitting a question to management. I will now turn the program over to John Klopp, CEO of Capital Trust. Please go ahead, sir.
John Klopp:	Good morning everyone. Thank you for joining us and for your continued interest in Capital Trust. With me today are the members of CT’s senior management team, including Steve Plavin (our Chief Operating Officer), Geoff Jervis (our Chief Financial Officer) and Tom Ruffing (our Chief Credit Officer and Head of Asset Management).
	Last night we reported our results for the second quarter and filed our 10-Q. Geoff will run you through the detailed numbers in just a moment, but the bottom line is a GAAP loss of $6.4 million or 29¢ per share, driven primarily by $12.6 million of additional loan provisions and asset impairments that we felt were warranted given our view of the markets.
	During a period when the sun finally appeared to peak through the clouds of recession in many other sectors, the forecast for commercial real estate

remained dark and stormy. With the securitized market still totally shut down and traditional portfolio lenders largely on the sidelines due to their own credit problems and capital shortfalls, debt financing for commercial real estate of almost any flavor is hard to come by (and expensive when you find it). At the same time, many equity investors have also stepped to the sidelines, due to either crippling losses on existing assets or the simple lack of visibility on valuations and future cash flows. Not surprisingly, the result of this capital vacuum is a virtual standoff between buyers and sellers, with total transaction volume down 95% in the second quarter to $4.8 billion versus the peak of $133 billion in Q2’07. Values are clearly still falling — Moody’s commercial property index declined 7.5% in May, 8.6% in April and is now off 35% from its peak in October 2007. However, price discovery is difficult when “forced sales” provide the only benchmarks.

Lagging the rest of the economy, commercial real estate fundamentals continue to deteriorate, with cash flows for every property type under increasing pressure. With nightly leases, hotels were the first to feel the full impact of the economic downturn, but apartments, retail and office properties are not far behind. Commercial mortgage defaults are rapidly rising, with total delinquencies in CMBS expected to reach 7% by year end. Potential problems are even greater at the commercial banks, where CRE loans represent over 25% of total assets (and much higher at the smaller, regional banks) and concentrations of construction and development loans are widespread. In aggregate, a staggering $1.8 trillion of commercial real estate debt is scheduled to reach final maturity by 2013 — at a time when the CMBS market is closed, portfolio lenders have pulled back, underwriting standards have tightened significantly, property values are down, and cash flows continue to decline.

We believe that this “perfect storm” will create both pain and pleasure: continuing pain for legacy portfolios and unprecedented new opportunities for experienced debt platforms with fresh capital to invest. At CT, we are

	fighting each and every day to preserve value in our existing portfolios while at the same time searching to find value in the misfortunes of others. In times like these, real hard-core workout experience can make all the difference and I continue to marvel at the job that Steve Plavin, Tom Ruffing in particular, and their entire asset management staff are doing. In the first quarter, we successfully restructured or eliminated over $880 million of recourse debt on our balance sheet, providing us precious time to collect our assets. In Q2, we worked our assets hard, paid down an additional $58 million of repo debt, and increased our liquidity, with unrestricted cash today standing at $29 million. We know that more problems lie ahead, but remain confident that our experience, infrastructure and ferocious dedication are equal to the task. In our funds management business, we have over $900 million of committed and undrawn capital, positioning CT Investment Management Co. and our partners to profit from the historic opportunities that we believe will emerge over the next several years. Here again, our platform, comprised of a seasoned team of 33 full time professionals and a market presence built over a dozen years of working together, is uniquely capable of meeting the challenge. With that, I’ll turn it over to Geoff to go through the second quarter numbers.
Geoffrey Jervis:	Thank you John and good morning everyone. Last night we reported results for the second quarter, recording a loss of $6.4 million or 29 cents per share.
	The net loss for the quarter was primarily the result of reserves and impairments against our loan and securities portfolios. Specifically, we recorded credit loss provisions of $7.7 million against four loans, credit related impairments of $4 million on one security and a valuation impairment of $899,000 on our one REO asset. In addition, we wrote off $2.2 million of goodwill. Net of these one time items, net income would have been $8.5 million or 38 cents per share. Other drivers of the quarter’s net income were,
	•    lower net interest margin, primarily due to lower LIBOR and lower asset balances

•    a $445,000 loss from equity investments, as we picked up changes, primarily non cash, in the equity accounts at two of our private equity funds in which we have co-investments,

•    all of which was offset partially by lower interest expense as we continued to deleverage, lower personnel costs and higher fee income from CTIMCO

Looking at the investment management business...our wholly owned subsidiary, CT Investment Management Co., or CTIMCO, posted another strong quarter with total third party revenues of $3.1 million ($4.3 million when including intercompany fees). In addition to managing its parent, Capital Trust, Inc., CTIMCO currently manages 6 third party private equity vehicles, two of which, CT Opportunity Partners I and CT High Grade Partners II, are currently investing and have over $900 million of dry powder. CTIMCO also earns revenue as a CDO collateral manager, managing 6 CDOs, our 4 balance sheet CDOs and two other CDOs in which the Company has an investment. In addition, CTIMCO is a rated special servicer and is the named special servicer on $1.1 billion of loans and has the ability to be named on an additional $800 million of loans.

Over to the balance sheet,

•    Cash at quarter end was $19.5 million, up $1.3 million from March 31st. Despite the operating results and net repayments during the quarter, the net increase in cash was minimal due to the redirection of cash flow at 3 of our 4 CDOs, the cash flow sweep under our repos and the new amortization under our restructured senior credit facility.

•    At quarter end, our Securities portfolio was comprised of 77 securities with a total book value of $827 million. Quarterly activity included $4 million of full and partial repayments and an impairment of $4 million. In total, we have 7 securities in the portfolio that have been impaired with total credit impairments of $14.3 million.

•    Over to loans, our $1.6 billion portfolio, comprised of 65 loans, shrank by 3% or $43 million during the quarter, primarily as a result of full and partial repayments of $38 million plus the quarter’s reserve activity. The Company’s loan watch list, comprised of performing loans of concern that do not carry any credit reserves, included 18 loans with book balances of $526 million, up from Q1 as we added 5 new loans with balances of $157 million during the period.

•    In the loans held for sale account, we sold one of the two loans during the period for its $18 million carrying value. The remaining loan is carried at $12 million and has a $5.6 million unfunded commitment. We expect to sell this loan back to the borrower during 2009 at its carrying value.

•    Equity investments in unconsolidated subsidiaries reflects our co-investments in certain of our investment management funds. The account is comprised of a small remaining position in CT Mezzanine Partners III, and our position in CT Opportunity Partners I, in which we have a $25 million commitment of which we have funded $5.8 million to date. Differences between our fundings and the carrying value of this account are primarily due to the pick up under the equity method of fair value adjustments.

•    On the liability side, we continued to reduce borrowings under our repurchase agreements with total outstanding balances at quarter end of $503 million, down $58 million from March 31st and almost $200 million since December 31st. The quarter’s activity included extinguishing the $18 million Lehman Brothers facility, leaving us with only three remaining repurchase lenders, JP Morgan, Morgan Stanley and Citigroup. As we discussed in detail last quarter, we restructured our agreements with these lenders to give us time to deleverage the balance sheet and collect our assets. The restructuring is based upon a multi-year plan comprised of three one year periods. In March of 2010, assuming no other defaults, we will qualify for the first one year extension if we reduce the outstanding amounts owed to these lenders by

     20% each. As of quarter end, we have reduced the Citigroup facility by more than the required amount and have made significant progress towards achieving the same with JP Morgan and Morgan Stanley, having repaid $46 million and $11 million, respectively.

•    Our CDO balances remained roughly flat, experiencing slight reductions due to amortization. From an operational standpoint, bond downgrades and loan non performance have caused 3 of our 4 CDOs to redirect cash flow away from the classes that we own in order to hyperamortize the senior most securities in these structures.

•    Our senior credit facility was also part of the March restructuring. From quarter to quarter, the outstanding balance of this facility decreased slightly due to a new amortization provision, offset by a new interest accrual feature in addition to the cash interest payments that we make. This facility was restructured in order to be co-terminus with the repurchase agreements, extending as those facilities extend.

•    Our junior subordinated debentures, the majority of which we restructured in Q1, are now completely restructured as we successfully negotiated a similar exchange with the remaining holders. The current face balance of the junior subordinated debentures is $144 million and these debentures carry an interest rate of 1% through 2012, reverting back to their prior coupon schedule until maturity in 2036.

•    Interest rate hedges, a contingent liability, decreased by $10.5 million from quarter to quarter with the change in value picked up as an increase to equity.

•    Finally, our shareholders equity account ended the quarter at $332 million, an increase of $5 million as interest rate hedge valuation changes offset the loss for the quarter. At March 31st, on a diluted basis, book value per share was $14.85.

Our liquidity position at quarter end was comprised exclusively of our cash position of $19.5 million. Subsequent to quarter end, we sold our only REO asset, an unencumbered asset, for its $7.1 million carrying value, helping to

	increase our cash balance to its current level of $29 million. While we have sufficient liquidity for our near term needs, going forward, the impact of amortization on our CDOs, repurchase agreements and our senior credit facility will create significant drag on our ability to generate surplus net cash flow from operations.
	As we look forward,
	•    We will continue to aggressively manage our assets, dedicating all the necessary time and resources to maximize collection on our portfolio...and, from an accounting standpoint, recognizing additional reserves as warranted
	•    we will focus on meeting the extension targets under our repurchase agreements, having already met the paydown qualifications under the Citigroup agreement and having made significant progress towards those qualifications with JP Morgan and Morgan Stanley...on this front...we are ahead of schedule and
	•    we will closely monitor liquidity, mindful of the impact of the direction of significant cash flow to amortize our secured and unsecured liabilities.
	With that, I will turn it back to John.
John Klopp:	Okay, I think let’s open it up for questions. Please, Megan.
Operator:	At this time, if you would like to ask a question, please press the *and 1 on your touchtone phone. That’s * and 1 to ask a question. Please keep in mind that you may remove yourself from the question queue at any time by pressing the # key. Once again, to ask a quesiton, please press the * and 1 on your touchtone phone. Our first question will come from the side of Ken Saville from LPL Financial. Your line is open.

Ken Saville:	Good morning, gentlemen. Thanks for you time. In all the numbers that were being read off, I was trying to find what’s the exposure on the repurchase agreements that Capital Trust would have to refund? And I’m sure those are spread over periods of time but can you...?
Geoffrey Jervis:	The total amount of the remaining repurchase agreements is just over $500 million – $503 million.
Ken Saville:	There’s $900 million of basically dry powder, is that what I heard John Klopp say?
John Klopp:	Yes, sir. That dry powder, so to speak, constitutes committed but undrawn equity in two of our managed funds. One is called CT Opportunity Partners, the other is called CT High Grade II. They are essentially managed funds that are subsidiaries. CT Investment Management Company is the sponsor and manager of them. They have different strategies, but they are actively in their investment period. So it’s distinct from the balance sheet of the parent company but part of our investment management business.
Ken Saville:	Alright. So that money is committed to grow in those two managed funds, then.
John Klopp:	Correct.
Ken Saville:	Okay. Alright, thank you very much.
John Klopp:	Thank you.
Operator:	Once again, if you would like to ask a quesiton, please press the * and 1 on your touchtone phone. That’s * and 1 to ask a quesiton. It appears that we have no further questions at this time.

John Klopp:	Then thank you all again for joining us. We’ll see you next quarter.
Operator:	This does conclude today’s teleconference. You may disconnect at any time. Thank you for joining and have a wonderful day.

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