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

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2006
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	(I.R.S. Employer Identification No.)
incorporation or organization)
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,	New York Stock Exchange
$0.01 par value (“class A common stock”)

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 x

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 x

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 x   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.  x

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  x 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 $390,665,948 as of June 30, 2006 (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 February 20, 2007 there were 17,451,183 outstanding shares of class A common stock. The class A common stock is listed on the New York Stock Exchange (trading symbol “CT”).

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		1
Item 1.	Business	1
Item 1A.	Risk Factors	8
Item 1B.	Unresolved Staff Comments	24
Item 2.	Properties	24
Item 3.	Legal Proceedings	24
Item 4.	Submission of Matters to a Vote of Security Holders	24
PART II		25
Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	25
Item 6.	Selected Financial Data	27
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	28
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	47
Item 8.	Financial Statements and Supplementary Data	48
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	48
Item 9A.	Controls and Procedures	49
Item 9B.	Other Information	49
PART III		49
Item 10.	Directors, Executive Officers and Corporate Governance	49
Item 11.	Executive Compensation	50
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	50
Item 13.	Certain Relationships and Related Transactions, and Director Independence	50
Item 14.	Principal Accounting Fees and Services	50
PART IV		50
Item 15.	Exhibits, Financial Statement Schedules	50
Signatures		57
Index to Consolidated Financial Statements		F-1

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PART I

Item 1.Business

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

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 and securities backed by commercial real estate assets. We invest for our own account directly on our balance sheet and for third parties through a series of investment management vehicles. From the commencement of our finance business in 1997 through December 31, 2006, we have completed over $8.0 billion of investments in the commercial real estate debt arena.   We conduct our operations as a real estate investment trust, or REIT, for federal income tax purposes and we are headquartered in New York City.

Operating Segments

Segment revenue and profit information is presented in Note 18 to the Consolidated Financial Statements.

Developments during Fiscal Year 2006

During the year ended December 31, 2006, we originated $2.1 billion (including $237.4 million of unfunded commitments) of new loans, securities and related investments in 96 separate transactions, representing a record year of investment activity for the Company. Of this total, we closed $1.8 billion directly for our balance sheet and $300 million for funds and accounts managed by us, which we refer to as investment management vehicles.

Driven by these originations, our balance sheet portfolio of interest earning assets (defined as loans, commercial mortgage backed securities, or CMBS, and total return swaps, or TRS) grew from $1.5 billion (122 separate investments) at year end 2005 to $2.6 billion (159 separate investments) at year end 2006. Throughout the year, our portfolios performed well, experiencing no losses. At year end, we held 80 loans with an aggregate book value of $1.8 billion and an average last dollar loan to value of 70%. Our CMBS portfolio was comprised of 77 bonds with an aggregate book value of $811.0 million and a weighted average rating of BB+. At year end, we had two TRS positions with an aggregate book value of $1.8 million referencing $40.0 million of real estate debt. In addition to interest earning assets, our balance sheet assets include our equity investments in unconsolidated subsidiaries, primarily comprised of our co-investments in CT Mezzanine Partners II, LP and CT Mezzanine Partners III, Inc. and our investment in Bracor Investimentos Imobiliarios Ltda. All of our investments were performing at year end with the exception of one mortgage loan with an original principal balance of $8.0 million, which has been in default since 2000.

In 2006, we launched our international initiative, making a founding equity investment in Bracor Investimentos Imobiliarios Ltda., or Bracor, a newly formed net lease commercial real estate company located and operating in Brazil. Our total commitment to Bracor is $15.0 million, and $5.8 million of that commitment had been drawn at year end 2006. Bracor is owned 24% by us, 47% by Equity International, or EI, and 29% by third parties. Our chairman, Sam Zell, is also the chairman of EI and has an ownership position in EI.

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On the capital raising front, we raised $566 million of new balance sheet capital in 2006 through the following transactions:

·In February 2006, we privately placed $50 million of trust preferred securities through a wholly-owned subsidiary, CT Preferred Trust I. The trust preferred securities have a 30-year term, maturing in April 2036, are redeemable at par on or after April 30, 2011 and pay distributions at a fixed rate of 7.45% per annum for the first ten years ending April 2016, and thereafter, at a floating rate of three month LIBOR plus 2.65%. Trust preferred securities are recorded as junior subordinated debentures on our balance sheet and the all in effective cost of these liabilities, including the amortization of fees and expenses, is 7.53%.

·In March 2006, we completed our fourth collateralized debt obligation, or CDO, which we refer to as CDO IV, issuing and selling to third party investors $429.4 million of notes rated AAA through BBB- and retaining all of the below investment grade securities, as well as the equity in the CDO issuers. A static pool CDO, CDO IV is collateralized by a portfolio of $488.6 million (face value) of CMBS and other commercial real estate debt. We have the option to call the entire financing beginning in March 2011. At issuance the CDO IV liabilities had a cash cost to us of 5.52% and, including the amortization of fees and expenses, an all in effective cost of 5.64%.

·In November 2006, we issued 2,000,000 shares of class A common stock in a public offering underwritten by Bear Stearns & Co. Inc. Gross proceeds were $43.48 per share and total net proceeds to the Company were $86.6 million.

Finally, in 2006 we expanded our investment management business and raised two new investment management vehicles, CT Large Loan 2006, Inc., a private equity fund we refer to as CT Large Loan, and CT High Grade MezzanineSM, a separate account which we refer to as CT High Grade. These two new managed vehicles represent a repositioning of our investment management business to create targeted vehicles which complement the investment strategy of our balance sheet. CT Large Loan, for example, is mandated to invest only in certain large transactions that exceed our balance sheet’s maximum concentration limits, generally $50 million. In such cases, we invest with CT Large Loan in these $50+ million transactions on a pari passu basis. CT High Grade, on the other hand, has a mandate to invest primarily in senior (or high grade) commercial real estate mezzanine loans with rates of return lower than the minimum hurdle rates targeted for our balance sheet. Both of these new vehicles are specifically designed to leverage our platform, allowing us to earn fees for investing third party capital primarily side by side or senior to our balance sheet.

·CT Large Loan closed in May 2006 with total equity commitments of $325 million from eight third party investors. The fund employs leverage (not to exceed 2:1 debt to equity) and we earn management fees of 0.75% per annum of invested assets (capped at 1.5% on invested equity).

·CT High Grade closed in November 2006, with a single, related party investor committing $250 million. This separate account is not designed to utilize leverage and we earn management fees of 0.25% per annum of invested assets.

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Platform

Our platform consists of 29 full time professionals with extensive real estate credit, capital markets and structured finance expertise. Our senior management team has, on average, over 20 years of industry experience. Founded in 1997, our business has been built on long-standing relationships with borrowers, brokers and our origination partners. This 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 capitalization; 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 design a customized structure for each investment that provides us with the necessary credit, yield and protective structural features while meeting the varying, and often complex, needs of our clients. We believe our demonstrated ability to structure creative 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.

Efficient capitalization is the third integral element of our platform. We utilize multiple sources of debt and equity products to capitalize our balance sheet and investment management business. We use leverage to increase returns on equity and portfolio diversification, and work diligently to manage the increased risks associated with such leverage. We control financial risk by actively managing our capital structure, seeking to minimize our recourse and mark-to-market exposure and to match the duration and interest rate index of our assets and liabilities (in some cases, utilizing hedging instruments). Our objective is to maximize our return on equity while managing the risk inherent in a leveraged investment strategy. As such, we always seek to maintain adequate liquidity to defend the balance sheet against capital market and real estate market volatility. To achieve our objectives, we pursue innovative debt financing alternatives, such as CDOs, to finance our 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 our collateral and enforcing our rights as necessary. We are a rated/approved Special Servicer by all three rating agencies, allowing us to exercise a substantial level of control in certain structured transactions such as CMBS.

By adhering to these four key elements that define our platform, from July 1997 through December 31, 2006, we have originated over $8.0 billion of investments, both directly and on behalf of our managed investment vehicles, and have limited the loss experience of our portfolios to less than 1.0%.

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Business Model

As depicted below, our business model is designed to produce a unique mix of net interest margin 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 each investment 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.

Currently, we are investing capital for our own account, as well as on behalf of CT Large Loan and CT High Grade. Both of these entities are designed to complement the activities of our balance sheet. At year end 2006, in addition to our active investment management mandates, we manage two other vehicles, CT Mezzanine Partners II, LP and CT Mezzanine Partners III, Inc., which we refer to as Fund II and Fund III, respectively. Fund II and Fund III have both completed their investment periods and are now liquidating in the ordinary course.

We operate our business to qualify as a REIT for federal income tax purposes. Our primary reason for operating as a REIT 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., LLC, which is subject to federal, state and city income tax.

Investment Strategies

Since 1997, our investment programs have focused on various strategies designed to take advantage of opportunities that have developed in the commercial real estate finance sector. These opportunities have been created largely by the evolution and growing importance of securitization in the commercial real estate debt capital markets. With approximately $2.8 trillion outstanding as of September 30, 2006, U.S. commercial real estate debt is a large and dynamic market.

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Depending on our assessment of relative value, our real estate investments may take a variety of forms including, but not limited to:

·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 may finance stabilized properties, may be bridge loans to finance property owners that require interim funding or may be construction loans. Our mortgage loans range in duration and typically require a balloon payment of principal at maturity. These loans may include parri passu participations in mortgage loans. We may also originate and fund first mortgage loans in which we intend to sell the senior tranche, thereby creating what we refer to as a subordinate mortgage interest.

·Subordinate Mortgage Interests—Sometimes known as B Notes, these are loans evidenced by a junior participation in a first mortgage, with the senior participation known as an A Note. Although a subordinate mortgage interest 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. Subordinate mortgage interests 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 subordinate mortgage interest is subordinated to the A Note by virtue of a contractual arrangement between the A Note lender and the subordinate mortgage interest lender. In some cases, there may be multiple senior and/or junior interests to our interest in a single mortgage loan.

·Mezzanine Loans—These include both property and corporate mezzanine loans. Property mezzanine loans 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 first mortgage borrower. It is not secured by a mortgage on the property, but by a pledge of the 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. Corporate mezzanine loans, on the other hand, 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, 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.

·CMBS—These are securities collateralized by pools of individual first mortgage loans. Cash flows from the underlying mortgages are aggregated and allocated to the different classes of securities in accordance with their seniority, typically ranging from the AAA rated through the unrated, first loss tranche. Administration and servicing of the pool is performed by a trustee and servicers, who act on behalf of all security holders in accordance with contractual agreements. Our investments generally represent the subordinated tranches in these pools ranging from the BBB rated through the unrated class. When practical, 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.

·Synthetics—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 typically take the form of either a total return swap or a credit default swap. In addition to the performance of the reference obligation, synthetics carry the additional risk of the performance of the counterparty.

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2006 was a record year for our company in terms of origination volume, with $2.1 billion of total commitments made for our balance sheet and our investment management vehicles. The charts below illustrate the diversification of the assets we originated in 2006.

Investment Type

Property Type

Geographic Location

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 debt investments for our balance sheet;

·we will expand our investment management business through additional offerings of subsequent investment management 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. In our investment activities, we compete for opportunities with numerous public and private investment vehicles, including financial institutions, specialty finance companies, mortgage banks, pension funds, opportunity funds, hedge funds, REITs and

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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, more resources and other advantages over us. These competitors may be willing to accept lower returns on their investments or to compromise underwriting standards and, as a result, our origination volume and profit margins could be adversely affected. In our investment management business, we compete with other investment management companies in attracting third party capital for our vehicles and many of our competitors are well established, possessing substantially greater financial, marketing and other resources.

Government Regulation

Our activities in the United States, 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. Furthermore, our international activities are also subject to local regulations.

Employees

As of December 31, 2006, we had 29 full-time employees. Our staff is employed under a co-employment agreement with a third party human resources firm, Ambrose Employer Group, LLC. In addition, our chief executive officer, chief operating officer, chief financial officer and chief credit officer are employed under employment contracts. None of our employees are covered by a collective bargaining agreement and management considers the relationship with our employees to be good. In addition to our staff in New York, we contract for the services of an additional 15 dedicated professionals employed by a real estate underwriting outsource services firm in Chennai, India.

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 and our board of directors, 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 http://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 them 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, 2006, our 2006 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, business plans, business and investment strategies and portfolio management and the performance of our investments and our investment management business. 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 and foreign jurisdictions wherein we invest;

·the level and volatility of prevailing interest rates and credit spreads;

·adverse changes in the real estate and real estate capital markets;

·the deterioration of performance and thereby credit quality of property securing our investments, borrowers and, in general, the risks associated with the ownership and operation of real estate that may cause cash flow deterioration to us and potentially principal losses on our investments;

·a compression of the yield on our investments and the cost of our liabilities, as well as the level of leverage available to us;

·adverse developments in the availability of desirable loan and investment opportunities whether they be due to competition, regulation or otherwise;

·events, contemplated or otherwise, such as natural disasters including hurricanes and earthquakes, acts of war and/or terrorism (such as the events of September 11, 2001) and others that may cause unanticipated and uninsured performance declines and/or losses to us or the owners and operators of the real estate securing our investment;

·the cost of operating our platform,  including, but not limited to, the cost of operating a real estate investment platform and the cost of operating as a publicly traded company;

·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; Internal Revenue Service, the New York Stock Exchange, and other authorities that we are subject to, as well as their counterparts in any foreign jurisdictions where we might to business; and

·the risk factors set forth below.

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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 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, in large part, the commercial property owner’s ability to operate the property so that it produces cash flows necessary 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 building structures;

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

·adverse changes in governmental rules and fiscal policies, civil unrest, acts of God, including earthquakes, hurricanes and other natural disasters, 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 historical expertise may not perform as well as our current portfolio of real estate related investments.

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

Our subordinated investments involve the risks attendant to investments consisting of subordinated loan and similar 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. Our interests, and those of the senior lenders and other interested parties may not be aligned.

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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 investment management vehicles through the use of leverage at interest rates that are lower than the interest rates earned on our investments. We generally obtain leverage through the issuance of collateralized debt obligations, or CDOs, 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 collateralize our indebtedness. Our failure to obtain and/or maintain leverage at desired levels, or to obtain leverage on attractive terms, would have a material adverse effect on our performance or that of our investment management vehicles. Moreover, we are dependent upon a few lenders to provide financing under repurchase agreements for our origination or acquisition of loans and investments and there can be no assurance that these agreements will be renewed or extended at expiration. Our ability to obtain financing through CDOs is subject to conditions in the debt capital markets which are impacted by factors beyond our control that may at times be adverse and reduce the level of investor demand for such securities.

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 risk for us and our investment management vehicles. For example, leveraging magnifies changes in our net worth. We and our investment management vehicles will leverage assets only when there is an expectation that leverage provide a benefit, such as enhancing 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 repurchase agreements and some other agreements are secured by our investments, which are subject to being marked to market by our credit providers, the borrowings available to us may decline if the market value of our investments decline. Moreover, we cannot assure you that we will be able to meet mark-to-market capital calls or debt service obligations in general and, to the extent such obligations are not met, there is a risk of loss of some or all of our investments through foreclosure or a financial loss if we or they are required to liquidate assets, the impact of which could be magnified if such a liquidation is at a commercially inopportune time.

Some of our leverage and contingent obligations are guaranteed by us.

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

We are subject to terms under our secured and unsecured credit agreements that may impose restrictions on our operation of the business.

Under our secured and unsecured credit agreements, such as our repurchase agreements and derivative agreements, we have made certain representations, warranties and affirmative and negative covenants that may restrict our ability to operate while still utilizing those sources of credit. Such representations, warranties and covenants include but are not limited to restrictions on corporate guarantees, the maintenance of certain financial ratios, including our ratio of debt to equity capital and our debt service coverage ratio, as well as the maintenance of a minimum net worth, restrictions against a change of control of our company and limitations on alternative sources of capital.

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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 investment management vehicles’ returns, will be affected by the level and volatility of interest rates, conditions in the financial markets, general economic conditions, the market and demand for credit sensitive investment opportunities, and 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, if we are not successful in investing for our investment management vehicles, the potential revenues we earn from management fees and co-investment returns will be reduced. We may expend significant time and resources in identifying and pursuing targeted investments, some of which may not be consummated.

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

Our business is highly competitive and significantly more competition has entered our market over the past few years. Competition may cause us to accept economic or structural features in our investments that we would not have otherwise accepted and it may cause us to search for investments in markets outside of our traditional product expertise. We compete for attractive investments with traditional lending sources, such as insurance companies and banks, as well as other REITs, specialty finance companies and private equity vehicles with similar investment objectives, which may make it more difficult for us to consummate our target investments. Many of our competitors have greater financial resources and lower costs of capital than 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 both “floating” interest rates and fixed interest rates. Floating rate investments earn interest at rates that adjust from time to time (typically monthly) based upon an index (typically LIBOR), allowing this portion of our portfolio to be insulated from changes in value due specifically to changes in rates. Fixed interest rate investments, however, do not have adjusting interest rates and, as prevailing interest rates change, the relative value of the fixed cash flows from these investments will cause potentially significant changes in value. Depending on market conditions, fixed rate assets may become a greater portion of our new loan originations. We 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 investment management vehicles 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 investment management vehicles against the foregoing risks. In addition, cash flow hedges which are not perfectly correlated (and appropriately designated/documented as such) with a variable rate financing will impact our reported income as gains, and losses on the ineffective portion of such hedges will be recorded.

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

We attempt to structure our leverage such that we minimize the difference between the term of our investments and the leverage we use to finance such an investment. In the event that our leverage is shorter term than the financed investment, we may not be able to extend or find appropriate replacement leverage and that would have an adverse impact on our liquidity and our returns. In the event that our leverage is longer term than the financed investment, we may not be able to repay such leverage or replace the financed investment with an optimal substitute or at all, which will negatively impact our desired leveraged returns.

We attempt to structure our leverage such that we minimize the difference between the index of our investments and the index of our leverage—financing floating rate investments with floating rate leverage and fixed rate investments with fixed rate leverage. If such a product is not available to us from our lenders on reasonable terms, we may use hedging instruments to effectively create such a match. For example, in the case of fixed rate investments, we may finance such an investment with floating rate leverage, but effectively convert all or a portion of the attendant leverage to fixed rate using hedging strategies.

Our attempts to mitigate such risk are subject to factors outside of our control, such as the availability to us of favorable financing and hedging options, which is subject to a variety of factors, of which duration and term matching are only two such factors.

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 and some are highly illiquid. Such illiquidity may limit our ability to vary our portfolio or our investment management vehicles’ portfolios of investments in response to changes in economic and other conditions. Illiquidity may result from the absence of an established market for investments as well as the legal or contractual restrictions on their resale. In addition, illiquidity may result from the decline in value of a property securing these investments. We cannot 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 investment management vehicles’ investments under-collateralized or not collateralized at all, which could impair the liquidity and value, as well as our return on such investments.

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

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

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

·acquire only a participation in an underlying investment;

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

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

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

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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 upon, 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.

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.

We may not be able to acquire suitable investments for a CDO issuance, or we may not be able to issue CDOs 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 through the issuance of CDOs. During the period that we are acquiring these investments, we intend to finance our purchases through repurchase agreements. We use these repurchase agreements to finance our acquisition of investments until we have accumulated a sufficient quantity of investments, at which time we may refinance them through a securitization, such as a CDO issuance. 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 CDO issuance. In addition, conditions in the debt capital markets may make the issuance of CDOs less attractive to us even when we do have a sufficient pool of collateral. If we are unable to issue a CDO 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 CDOs with reinvestment periods.

Some of our CDOs have periods where principal proceeds received from assets securing the CDO 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 CDO documentation and by rating agencies may determine the success of our CDO investments. Our potential inability to find suitable investments may cause, among other things, lower returns, interest deficiencies, hyper-amortization of the senior CDO liabilities and may cause us to reduce the life of our CDOs and accelerate the amortization of certain fees and expenses.

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

The terms of CDOs 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. Generally, CDO terms 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 retained subordinated classes 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 CDOs. We cannot assure you that the performance tests will be satisfied. With respect to future CDOs we may issue, we cannot 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 CDO financings will increase.

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

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

The commercial mortgage and mezzanine loans we originate or acquire and the commercial mortgage loans underlying the 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 and similar investments are subject to losses.

In general, losses on an asset securing a mortgage loan included in a securitization will be borne first by the equity holder of the property, 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 (and in some cases we are invested in the junior most classes of securitizations), we may not be able to recover all of our investment in the securities we purchase. In addition, if the underlying mortgage portfolio has been overvalued by the originator, or if the values subsequently decline and, as a result, less collateral is available to satisfy interest and principal payments due on the related mortgage backed securities, the securities in which we invest may incur significant losses.

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

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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.

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, 2001 created significant uncertainty regarding the ability of real estate owners of high profile assets to obtain insurance coverage protecting against terrorist attacks at commercially reasonable rates, if at all. 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 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 such 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.

We are subject to risks related to our international investments and the amount and percentage of our operations and investments outside the United States may increase significantly over time.

We make investments in foreign countries. Investing in foreign countries involves certain additional risks that may not exist when investing in the United States. The risks involved in foreign investments include:

·exposure to local economic conditions, local interest rates, foreign exchange restrictions and restrictions on the withdrawal of foreign investment and earnings, investment restrictions or requirements, expropriations of property and changes in foreign taxation structures;

·potential adverse changes in the diplomatic relations of foreign countries with the United States and government policies against investments by foreigners;

·changes in foreign regulations;

·hostility from local populations, potential instability of foreign governments and risks of insurrections, terrorist attacks, war or other military action;

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·fluctuations in foreign currency exchange rates;

·changes in social, political, legal, taxation and other conditions affecting our international investment;

·logistical barriers to our timely receiving the financial information relating to our international investments that may need to be included in our periodic reporting obligations as a public company; and

·lack of uniform accounting standards (including availability of information in accordance with U.S. generally accepted accounting principles).

Unfavorable legal, regulatory, economic or political changes such as those described above could adversely affect our financial condition and results of operations.

There are increased risks involved with construction lending activities.

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

Some of our investments and investment opportunities are in synthetic form.

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

Risks Related to Our Investment Management Business

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

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

·create incentives for our management and professional staff to the task of developing and operating the investment management business; and

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

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

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

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

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

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

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

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 by us to 2009. The employment agreement with our chief financial officer, Geoffrey G. Jervis, expires on December 31, 2009, unless further extended by us to 2010. The employment agreement with our chief credit officer, Thomas C. Ruffing, expires on December 31, 2008. 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 management vehicles and us.

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

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

We rely on an exclusion from registration as an investment company afforded by Section 3(c)(5)(C) of the Investment Company Act of 1940. Under this exclusion, 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 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 exclusion 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 and these investments present additional risks to us, and these risks are compounded by our inexperience with such investments. We continue to analyze our investments and may acquire other pools of whole loan residential mortgage backed securities when and if required for compliance purposes.

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

If our portfolio does not comply with the requirements of the exclusion 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 an adverse effect on our investments if we are forced to dispose of or acquire assets in an unfavorable market and may adversely affect our stock price.

If it were established that we were an unregistered investment company, there would be a risk that we would be subject to monetary penalties and injunctive relief in an action brought by the SEC, that we would be unable to enforce contracts with third parties 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 and limitations on corporate leverage that would have a material adverse impact on our investment returns.

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.

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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 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. As of December 31, 2006, these shareholders collectively own and control 2,773,508 shares of our class A common stock representing approximately 15.6% of our outstanding class A common stock.

W. R. Berkley Corporation, or WRBC, owns 2,000,000 shares of our class A common stock which represents 11.5% of our outstanding class A common stock. An officer of WRBC serves on our board of directors and, therefore, has the power to significantly influence our affairs. Through its significant ownership of our class A common stock, WRBC may have the ability to influence matters submitted for shareholder approval. The influence exerted by WRBC over our affairs might not be consistent with the interests of some or all of our other shareholders.

The concentration of ownership in our officers or directors or shareholders associated with them may have the effect of delaying or preventing a change in control of our company, including transactions in which you might otherwise receive a premium for your class A common stock, and might negatively affect the market price of our class A common stock.

Some provisions of our charter and bylaws 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

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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 WRBC, 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:

·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 WRBC 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 by our directors who are our employees, and may be redeemed by us. “Control shares” are voting shares which, if aggregated with all other shares owned or voted by the acquiror, would entitle the acquiror 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.

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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 acquiror 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 acquiror 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, including WRBC, 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 and to increase the shareholder vote required to remove a director. Such an election would significantly restrict the ability of third parties to wage a proxy fight for control of our board of directors as a means of advancing a takeover offer. If an acquiror 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, in addition to other risk factors mentioned in this section:

·the level of institutional interest in us;

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

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

·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 could 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.

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Risks Related to our REIT Status and Certain Other Tax Items

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

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

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

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

We 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.

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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 continue to operate so as to qualify as a REIT under the Internal Revenue Code. However, qualification as a REIT involves the application of highly technical and complex Internal Revenue Code provisions for which only a limited number of judicial or administrative interpretations exist. 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 would 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.

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

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

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

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

In order to qualify as a REIT, we must also ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified REIT real estate assets. The remainder of our investments in securities cannot include more than 10% of the outstanding voting securities of any one issuer or 10% of the total value of the outstanding securities of any one issuer unless we and such issuer jointly elect to be treated as a “taxable REIT subsidiary” under the Internal Revenue Code. The total value of all of our investments in taxable REIT subsidiaries cannot exceed 20% of the value of our total assets. In addition, no more than 5% of the value of our assets can consist of the securities of any one issuer. 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.

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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.

We utilize “taxable mortgage pools” to finance  our investments.

Certain securitizations, such as our CDOs, are considered taxable mortgage pools, or TMPs, for federal income tax purposes. TMPs are generally subject to an unavoidable federal tax on the portion of their income deemed to be excess inclusion income, or EII. As a REIT, we are exempt from taxation at the corporate level on such EII as long as we own 100% of the equity interests in the securitization (as defined for tax purposes). Notwithstanding the foregoing, we will be subject to taxation at the corporate level on any EII allocated to certain shareholders treated as disqualified organizations under applicable tax rules (generally tax-exempt entities, including federal, state, and foreign governmental entities).

In certain instances, we have either pledged our equity interests in these TMPs as collateral under our repurchase agreements or have contributed these interests to other TMPs—in both cases subjecting the pools to the potential loss of their tax exempt status in the event that we were forced to sell our interests or our interests were foreclosed  upon  by a third party that was not afforded the same exemption as us.

Despite our general corporate level exemption from taxation on EII, our shareholders (other than disqualified organizations, described above) are subject to taxation on the EII that we earn. The Internal Revenue Service has not given clear guidance as to the appropriate method for the calculation of EII and, absent such clear guidance, we have calculated EII based upon what we believe to be a reasonable method. Our estimation of EII is disclosed in our year end financial statements. In addition, pursuant to recently issued guidance from the Internal Revenue Service, we are required to allocate EII to our shareholders in proportion to dividends paid and to inform our shareholders of the amount and character of the EII allocated to them. Given the lack of guidance concerning calculation of EII, there can be no assurances that we have calculated excess inclusion income in a manner satisfactory to the Internal Revenue Service.

Item 1B.Unresolved Staff Comments

None.

Item 2.Properties

Our principal executive and administrative offices are located in approximately 12,000 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.

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 2006.

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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, or NYSE, 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
2006
Fourth Quarter	$	50.62	$	39.70		$	1.40	(1)
Third Quarter	42.97		33.89			0.75
Second Quarter	35.62		29.69			0.70
First Quarter	34.32		29.60			0.60
2005
Fourth Quarter	$	32.30	$	28.87		$	0.80	(2)
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

(1)Comprised of a regular quarterly dividend of $0.75 per share and a special dividend of $0.65 per share.

(2)Comprised of a regular quarterly dividend of $0.60 per share and a special dividend of $0.20 per share.

The last reported sale price of the class A common stock on February 20, 2007 as reported on the NYSE composite transaction tape was $52.64. As of February 20, 2007, there were 403 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 6,189 as of February 20, 2007.

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, which we refer to as regular dividends and we seek to set our recurring dividend at a level that we believe is comfortably sustainable. If necessary for REIT qualification purposes, we may need to distribute any taxable income remaining after giving effect to 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 separate dividend distributed prior thereto. We refer to these dividends as special dividends.

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 2005 and 2006 are ordinary income. In accordance with Internal Revenue Service guidance, we are required to report the amount of excess inclusion income earned by the Company. In 2006, we calculated excess inclusion income to be $924,000 or 1.7% of our total distributions.

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We did not repurchase any of our common stock during the year ended December 31, 2006.

Equity Compensation Plan Information

The following table summarizes information, as of December 31, 2006, relating to our equity compensation plans pursuant to which shares of our common stock or other equity securities may be granted from time to time.

Plan category	(a) Number of securities to be issued upon exercise of outstanding options		(b) Weighted average exercise price of outstanding options			(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders		400,125		$	21.18		1,334,345
Equity compensation plans not approved by security holders		N/A		N/A			N/A
Total		400,125		$	21.18		1,334,345

Notes:

(1)The number of securities remaining for future issuance in 2006 consists of 1,196,707 shares issuable under our amended and restated 2004 long-term incentive plan, second amended and restated 1997 long-term incentive stock plan and our amended and restated 1997 non-employee director stock plan, all of which were approved by our shareholders. Awards under the plans may include restricted stock, unrestricted stock, stock options, stock units, stock appreciation rights, performance shares, performance units, deferred share units or other equity-based awards, as the board of directors may determine.

(2)We have no equity compensation plans not approved by security holders.

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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 ended 2002 through 2006.

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.

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 commencing in 2003. As a result, our income tax expense and net income after tax for 2003 and subsequent years 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,
	2006			2005			2004			2003		2002
	(in thousands, except for per share data)
STATEMENT OF OPERATIONS DATA:
REVENUES:
Interest and investment income	$	176,758		$	86,753		$	46,639		$	38,577	$	47,655
Management and advisory fees	4,407			13,124			7,863			8,020		12,330
Gain on sale of investments	—			4,951			300			—		—
Total revenues	181,165			104,828			54,802			46,597		59,985
OPERATING EXPENSES:
Interest expense	104,607			37,229			20,141			19,575		34,184
General and administrative expenses	23,075			21,939			15,229			13,320		13,996
Depreciation and amortization	3,049			1,114			1,100			1,057		992
Net unrealized (gain)/loss on derivative securities and corresponding hedged risk on CMBS	—			—			—			—		(21,134		)
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		)
Total operating expenses	130,731			60,282			35,684			33,952		52,040
Income/(loss) from equity investments	898			(222		)	2,407			1,526		(2,534		)
Income before income tax expense	51,332			44,324			21,525			14,171		5,411
Income tax expense/(benefit)	(2,735		)	213			(451		)	646		15,149
Net income/(loss) allocable to common stock:	$	54,067		$	44,111		$	21,976		$	13,525	$	(9,738	)
PER SHARE INFORMATION:
Net income/(loss) per share of common stock:
Basic	$	3.43		$	2.91		$	2.17		$	2.27	$	(1.62	)
Diluted	$	3.40		$	2.88		$	2.14		$	2.23	$	(1.62	)
Dividends declared per share of common stock	$	3.45		$	2.45		$	1.85		$	1.80	—
Weighted average shares of common stock outstanding:
Basic	15,755			15,181			10,141			5,947		6,009
Diluted	15,923			15,336			10,277			10,288		6,009

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	Years ended December 31,
	2006		2005		2004		2003		2002
BALANCE SHEET DATA:
Total assets	$	2,648,564	$	1,557,642	$	877,766	$	399,926	$	387,759
Total liabilities	2,222,292		1,218,792		561,269		303,909		303,703
Shareholders’ equity	426,272		338,850		316,497		96,017		84,056

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

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

Introduction

Our business model is designed to produce a mix of net interest margin from our balance sheet investments and fee income plus co-investment income from our investment management operations—with our primary goals being the generation of stable net income and dividend growth. In managing our operations, we focus on originating investments, managing our portfolios and capitalizing our businesses.

Originations

We allocate investment opportunities between our balance sheet and investment management vehicles based upon our assessment of risk and return profiles, the availability and cost of capital, and applicable regulatory restrictions associated with each opportunity. The combination of balance sheet and investment management capabilities allows us to maximize the scope of opportunities upon which we can capitalize. The table below summarizes our gross originations and the allocation of opportunities between our balance sheet and the investment management business for the past two years.

Gross Originations(1)

	Years ended December 31,
	2006		2005
	(in thousands)
Balance sheet	$	1,816,269	$	1,070,932
Investment management	302,964		432,821
Total originations	$	2,119,233	$	1,503,753

(1)Includes total commitments both funded and unfunded.

Total gross originations in 2006 increased by $615.5 million (41%) compared to 2005, driven by an increase of $745.3 million in balance sheet originations, partially offset by a $129.9 million reduction in investment management originations. We believe that our success in originating assets is due to:  (i) our network of relationships, transacting with 23 institutional counterparties and increasing our direct originations in 2006, (ii) the general increase in transaction volume in the real estate and real estate debt markets, as evidenced by record issuance in 2006 of $206 billion of U.S. CMBS, and (iii) the continued improvement in the cost and structure of our liabilities, which allows us to generate attractive returns on equity while investing in a broader cross section of the market. The change in the ratio of balance sheet originations to investment management originations, from roughly 2.5:1 in 2005 to roughly 6:1 in 2006 was due to the expiration of the investment periods of Fund II and Fund III in 2003 and 2005, respectively, and the timing of our launch of subsequent investment management products after mid-year 2006. In 2006, we formed CT Large Loan and CT High Grade and anticipate a higher volume of complementary investment management originations going forward.

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On our balance sheet, our investments include CMBS, loans receivable, or Loans, and total return swaps which we collectively refer to as our Interest Earning Assets. Originations of Interest Earning Assets for our balance sheet for the past two years are detailed in the table below:

Balance Sheet Originations

	Years ended December 31,
	2006									2005
	Originations(1)			Yield(2)			LTV / Rating			Originations(1)			Yield(2)			LTV / Rating
	(in thousands)
CMBS		$	394,703		6.45	%		BBB-			$	269,132		6.33	%		BB-
Loans		1,417,428			9.19	%		72.1	%		797,800			7.50	%		66.6	%
Total return swaps		4,138			19.55	%		N/A			4,000			18.14	%		N/A
Total/Weighted Average		$	1,816,269		8.62	%					$	1,070,932		7.25	%

(1)Gross originations that include total commitments both funded and unfunded.

(2)Floating rate originations assume LIBOR at December 31, 2006 and 2005 of 5.32% and 4.39%, respectively.

The table below shows our Interest Earning Assets at year end 2006 and 2005. In any year, the ending balance of Interest Earning Assets will be impacted not only by new originations, but also by repayments, sales and losses. As the table below shows, we grew Interest Earning Assets by $1.1 billion, or 73%, from 2005 to 2006.

Interest Earning Assets

	Years ended December 31,
	2006								2005
	Book Value		Yield(1)			LTV / Rating			Book Value		Yield(1)			LTV / Rating
	(in thousands)
CMBS	$	810,970		7.17	%		BB+		$	487,970		7.57	%		BB-
Loans(2)	1,751,898			8.96	%		70.4	%	987,103			8.13	%		67.1	%
Total return swaps	1,815			20.55	%		N/A		4,000			18.14	%		N/A
Total/Weighted Average	$	2,564,683		8.40	%				$	1,479,073		7.97	%

(1)Floating rate Interest Earning Assets assume LIBOR at December 31, 2006 and 2005 of 5.32% and 4.39%, respectively.

(2)Does not include one non-performing loan.

Some of our originations are not fully funded at closing, creating an obligation for us to make future fundings, which we refer to as Unfunded Commitments. Typically, Unfunded Commitments are part of construction or transitional loans and, as the proportion of such loans has increased in our portfolio, so has the amount of our Unfunded Commitments. At year end 2006, our gross Unfunded Commitments were $237.4 million and, net of in place financing commitments from our lenders, our net Unfunded Commitments were $47.4 million. At year end 2005, we did not have any Unfunded Commitments.

Whenever we originate new Interest Earning Assets, we focus on the credit profile and expected yield of these investments in determining our exposure to risk, as well as our potential returns. A major trend in our industry over the past several years has been increased competition. From our inception in 1997 until today, the number of investors with whom we compete has increased dramatically. Increased competition

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has reduced the yields on potential investment opportunities and has led to the lowering of credit standards by many market participants. These trends have made it more difficult for us to identify investments with appropriate risk adjusted returns.

In addition to our investments in Interest Earning Assets, we previously made equity co-investments in two private equity funds that we manage, CT Mezzanine Partners II LP, or Fund II, and CT Mezzanine Partners III, Inc., or Fund III. In 2006 we made a new investment in a Brazilian net lease commercial real estate company, Bracor Investimentos Imobiliarios Ltda., or Bracor, that we helped found. The table below details the carrying value of those investments, as well as their capitalized costs.

Equity Investments

	Years ended December 31,
	2006				2005
	(in thousands)
Fund II		$	1,208			$	1,970
Fund III		2,929				7,754
Bracor		5,675				—
Capitalized costs		1,673		(1)		4,577		(2)
Total		$	11,485			$	14,301

(1)Includes $1.3 million, $368 million and $41,000 associated with Fund II, Fund III and Bracor, respectively.

(2)Includes $2.0 million, $521,000 and $2.0 million associated with Fund II, Fund III and our prior investment management venture with joint venture partner, respectively.

Asset Management

We actively manage our balance sheet portfolio and the assets held by our investment management vehicles. While our investments are primarily in the form of debt, which generally means that we have limited influence over the operations of the collateral securing our portfolios, we are aggressive in exercising the rights afforded to us as a lender. These rights can include collateral-level budget approval, lease approvals, loan covenant enforcement, escrow/reserve management/collection, collateral release approvals and other rights that we may negotiate. The chart below details balance sheet Interest Earning Assets loss experience and the percentage of non performing investments at the end of the past two years.

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Portfolio Performance

	Years ended December 31,
	2006			2005
	(in thousands)
Interest Earning Assets	$	2,564,683		$	1,479,073
Losses
$ Value	$	0		$	0
Percentage	0.0		%	0.0		%
Non-performing loans(1)
$ Value	$	2,638		$	3,039
Percentage	0.1		%	0.2		%

(1)At year end 2006 and 2005, our non-performing loans were comprised of one defaulted first mortgage with an original principal balance of $8.0 million.

Commencing in 2005, we put in place a proprietary risk rating system to assess and track the risk of each of our loans. There was no material change to the weighted average risk rating of the portfolio between 2006 and 2005. 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 in 2005 or 2006.

We actively manage our CMBS investments using a combination of quantitative tools and loan/property level analysis in order to monitor the performance of the securities and their collateral versus our original expectations. Securities are analyzed on a monthly basis for delinquency, transfers to special servicing, and changes to the servicer’s watchlist population. Realized loan losses are tracked on a monthly basis and compared to our original loss expectations. On a periodic basis, individual loans of concern are also re-underwritten. Updated collateral loss projections are then compared to our original loss expectations to determine how each investment is performing. Based on our review of the portfolio, we concluded that no impairments were warranted in 2005 or 2006.

The ratings performance of our CMBS portfolio over the past two years is detailed below:

CMBS Rating Activity(1)

	Years ended December 31,
	2006		2005
Upgrades		67		23
Downgrades		3		2

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

Capitalization

Our balance sheet investment activities are capital intensive and the availability and cost of capital is a critical component of our business. We capitalize our business with a combination of debt and equity. Our debt sources, which we refer to as Interest Bearing Liabilities, currently include CDOs, repurchase agreements and junior subordinated debentures (which we also refer to as trust preferred securities). Our equity capital is currently comprised entirely of common equity. The chart below shows our capitalization mix for the past two years:

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Capital Structure

	Years ended December 31,
	2006			2005
	(in thousands)
Collateralized debt obligations	$	1,212,500		$	823,744
Repurchase obligations	704,444			369,751
Junior subordinated debentures	51,550			—
Total Interest Bearing Liabilities	$	1,968,494		$	1,193,495
Cost of debt(1)	6.15		%	5.35		%
Shareholders’ Equity	$	426,272		$	338,850
Ratio of Interest Bearing Liabilities to Shareholders’ Equity	4.6:1			3.5:1

(1)Floating rate liabilities assume LIBOR at December 31, 2006 and 2005 of 5.32% and 4.39%, respectively.

We use leverage to enhance our returns on equity, attempting to:  (i) maximize the differential between the yield of our Interest Earning Assets and the cost of our Interest Bearing Liabilities, and (ii) optimize the amount of leverage employed. The use of leverage, however, adds risk to our business, magnifying our shareholders’ exposure to asset level risk by subordinating our equity interests to our debt capital providers. The level of leverage we utilize is based upon the risk associated with our assets, as well as the structure of our liabilities. In general, we will apply greater amounts of leverage to lower risk assets and vice versa. In addition, structural features of our leverage, such as recourse, mark-to-market and duration, factor into the amounts of leverage we are comfortable applying to our assets. Our recourse sources of financing generally require financial covenants, including restrictions on corporate guarantees, the maintenance of certain financial ratios (such as specified debt to equity and debt service coverage ratios) as well as the maintenance of a minimum net worth. A summary of selected structural features of our debt for the past two years is detailed in the table below:

Interest Bearing Liabilities

	Years ended December 31,
	2006			2005
Weighted average maturity(1)		4.0 yrs			4.7 yrs
% Recourse		36.9	%		31.7	%
% Mark-to-market		35.8	%		31.0	%

(1)Based upon balances as of December 31, 2006 and 2005.

The most prominent trend in our Interest Bearing Liabilities is the increased use of CDOs to finance our portfolio. Prior to June 2004, CDO technology had not evolved to the point of being an attractive financing alternative for us. With innovations such as cash flow based CDOs (as opposed to market value CDOs) and reinvestment features, however, the CDO has generally become the lowest cost and most optimally structured financing tool available to us. Our CDOs are non-recourse, non-mark-to-market, index matched financings that generally carry a lower cost of debt and allow for higher levels of leverage than our other financing sources. We expect to continue to utilize CDOs to finance both our balance sheet and our investment management businesses going forward. During 2006, we issued one new CDO, CDO IV, and continued contributing assets to our previously issued reinvesting CDOs, which have reinvestment periods extending through July 2008 for CDO I and April 2010 for CDO II. Our CDO liabilities as of the year end for 2006 and 2005 are described below.

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Collateralized Debt Obligations

				Years ended December 31,
				2006					2005
	Issuance Date		Type	Book Value		All in Cost			Book Value			All in Cost
				(in thousands)
CDO I		7/20/04	Reinvesting	$	252,778		6.39	%		$	252,778		5.43	%
CDO II		3/15/05	Reinvesting	298,913			6.04	%		298,913			5.10	%
CDO III		8/04/05	Static	266,754			5.25	%		272,053			5.25	%
CDO IV		3/15/06	Static	394,055			5.81	%		—			—
Total				$	1,212,500		5.86	%		$	823,744		5.25	%

(1)Floating rate CDO liabilities assume LIBOR at December 31, 2006 and 2005 of 5.32% and 4.39%, respectively.

We continue to use repurchase obligation financing to provide a revolving component to our liability structure. Our repurchase agreements provide stand alone financing for certain assets and interim, or warehouse financing for assets that we plan to contribute to our CDOs. Our repurchase agreements have improved in terms of availability, advance rates and pricing due in part to the advent of the CDO market, as well as the continued development of the secondary market for real estate debt. At any point in time, the amounts and the cost of our repurchase borrowings are based upon the assets being financed—higher risk assets will attract lower levels of leverage at higher costs and vice versa. The table below summarizes our repurchase agreement liabilities as of year end 2006 and 2005.

Repurchase Agreements

	Years ended December 31,
	2006			2005
	($ in thousands)
Repurchase commitments	$	1,200,000		$	775,000
Counterparties	7			6
Outstanding repurchase borrowings	$	704,444		$	369,751
All in cost	L + 1.21		%	L + 1.18		%

The final component of our debt capital structure is junior subordinated debentures or trust preferred securities. Trust preferred securities represent long term, subordinated, unsecured financing and generally carry limited operational covenants. In February 2006, we sold $50 million of trust preferred securities through a subsidiary, CT Preferred Trust I. The trust preferred securities have a 30-year term, maturing in 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 all in cost of the trust preferred securities is 7.53%.

Our capital raising activities included common equity in 2006. In November, we issued 2,000,000 shares of class A common stock in a public offering underwritten by Bear Stearns & Co. Inc. Gross proceeds were $43.48 per share and total net proceeds were $86.6 million. We did not issue equity in 2005. The chart below summarizes the activity in our shareholder’s equity for the past two years.

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Shareholder’s Equity

	Years ended December 31,
	2006		2005
Book value (in thousands)	$	426,272	$	338,850
Shares
Class A common stock	16,932,892		14,869,733
Restricted stock	480,967		403,714
Stock units	73,848		57,289
Options(1)	230,399		129,291
Total	17,718,106		15,460,027
Book value per share	$	24.06	$	21.92

(1)Dilutive shares issuable upon the exercise of outstanding options.

At December 31, 2006, we had 666,339 shares remaining authorized for open market repurchase of our class A common stock pursuant to authorization by the board in 2000. We did not repurchase any of our common stock during the year ended December 31, 2006, and currently, we are not actively pursuing open market purchases.

Interest Rate Exposure

We endeavor to manage a book of assets and liabilities that are matched with respect to interest rates, financing floating rate assets with floating rate liabilities and fixed rate assets with fixed rate liabilities. In some cases, we finance fixed rate assets with floating rate liabilities and, in those cases, we generally use interest rate derivatives, such as swaps, to effectively convert the floating rate debt to fixed rate debt. In such instances, the equity we have invested in fixed rate assets is not typically swapped, leaving a portion of our equity capital exposed to changes in value of the fixed rate assets due to interest rate fluctuations.  The balance of our assets earn interest at floating rates and are financed with floating rate liabilities, leaving a portion of our equity capital exposed to cash flow variability from fluctuations in rates. Generally, these assets and liabilities earn interest at rates indexed to one month LIBOR. The table below details our interest rate exposure as of the years ended 2006 and 2005:

Interest Rate Exposure

	Years ended December 31,
	2006			2005
	(in thousands)
Value Exposure to Interest Rates(1)
Fixed rate assets	$	1,000,942		$	588,818
Fixed rate liabilities	(331,434		)	(269,594		)
Interest rate swaps	(560,240		)	(183,693		)
Net fixed rate exposure	$	109,268		$	135,531
Weighted average maturity (assets)	8.2 yrs			9.8 yrs
Weighted average coupon (assets)	7.18		%	7.45		%
Cash Flow Exposure to Interest Rates(1)
Floating rate assets(2)	$	1,606,969		$	934,808
Floating rate debt less cash	(1,816,476		)	(895,204		)
Interest rate swaps	560,240			183,693
Net floating rate exposure	$	350,733		$	223,297
Net income impact from 100 bps change in LIBOR	$	3,507		$	2,233

(1)All values are in terms of face or notional amounts.

(2)Does not include one non-performing loan.

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Other Balance Sheet Items

From time to time we originate loans for our balance sheet and sell a participation in these loans (senior, junior or pari passu) to third parties or to our investment management vehicles. In accordance with GAAP, we record these sold participations as assets (as if we owned the participation we sold) and record a matching amount as a liability under the account Participations Sold. In addition, we record interest earned on these participations sold as interest income with a matching amount recorded as interest expense. On a net basis, these participations sold have no impact to our shareholder’s equity or our net income. At year end 2006, we had $209.4 million of participations sold, which accrued interest at a rate of LIBOR plus 3.54% (or 8.86%). We had no participations sold at year end 2005.

Investment Management

In addition to our balance sheet investment activities, we act as an investment manager for third parties. The purpose of our investment management business is to leverage our platform, generating fee revenue from investing third party capital. Our third party investment management mandates are designed to be complementary to our balance sheet programs and are built around opportunities that we do not pursue directly on balance sheet due to their scale/concentration, risk/return profile and/or regulatory constraints. In some instances, we co-invest in our investment management vehicles (as described below). At year end 2006, we managed three private equity funds and one separate account through our wholly-owned, taxable, investment management subsidiary, CT Investment Management Co., LLC, or CTIMCO.

Investment Management Mandates

											Incentive Management Fee(1)
	Type	Total Equity Commitments (in millions)			Co- Investment%			Base Management Fee			Company      %			Employee      %(2)
Fund II	Fund		$	845		5.88	%		1.29% (Equity)			76	%		24	%
Fund III	Fund		425			4.71	%		1.42% (Equity)			57	%		43	%
CT Large Loan	Fund		325			0	%		0.75% (Assets)	(3)		N/A			N/A
CT High Grade	Sep. Acct.		250			0	%		0.25% (Assets)			N/A			N/A

(1)Both Fund II and Fund III earn incentive management fees of 20% of profit after a 10% preferred return on capital and a 100% return of capital, subject to a catch up.

(2)Portions of the Fund II and Fund III incentive management fees received by us have been allocated to employees.

(3)Capped at 1.5% of equity.

Two of these funds, Fund II and Fund III, were co-sponsored vehicles with a joint venture partner. We have a co-investment in each of these vehicles and we split incentive management fees with our partner—our partner receives 50% and 37.5%, respectively, of Fund II and Fund III incentive management fees. The third fund, CT Large Loan, and our separate account, CT High Grade, both established in 2006, are exclusively sponsored by us and we do not co-invest in these vehicles. The table below describes the status of our investment management vehicles as of year end 2006 and 2005.

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Investment Management Snapshot

	Years ended December 31,
	2006		2005
	(in thousands)
Fund II
Assets	$	31,533	$	63,106
Equity	11,303		23,670
Incentive fee collected(1)	1,652		8,033
Incentive fees projected(2)	958		2,007
Status(3)	Liquidating		Liquidating
Fund III
Assets	$	194,818	$	463,750
Equity	50,223		156,511
Incentive fee collected(1)	—		—
Incentive fees projected(2)	7,511		5,378
Status(3)	Liquidating		Liquidating
CT Large Loan
Assets	$	157,262	$	—
Equity	91,416		—
Status(4)	Investing		—
CT High Grade
Assets	$	64,929	$	—
Equity	64,929		—
Status(4)	Investing		—

(1)Represents the total gross incentive fees collected by CTIMCO during the year, not adjusted for employee allocations.

(2)Assumes assets were sold and liabilities were settled on January 1, 2007 and 2006 at the recorded book value, and the fund’s equity and income were distributed for the years ended 2006 and 2005, respectively.

(3)Fund II and Fund III investment periods ended in April 2003 and June 2005, respectively.

(4)CT Large Loan and CT High Grade investment periods expire in June 2007 and November 2007, respectively.

We expect to continue to grow our investment management business, sponsoring additional investment vehicles consistent with the theme of developing mandates that are complementary to our balance sheet activities.

Taxes

We have made an election, and subsequently qualified, 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 and may be subject to additional penalties. 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.

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At December 31, 2006 and 2005, 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, 2006 and 2005. We also have taxable REIT subsidiaries which are subject to tax at regular corporate rates, such as CTIMCO, our investment management subsidiary. During the year ended December 31, 2006, we recorded an income tax benefit of $2.7 million resulting from losses generated by CTIMCO. During the year ended December 31, 2005 we recorded $213,000 of income tax expense for income that was attributable to CTIMCO.

Dividends

Our policy is to set our regular quarterly dividend at a level commensurate with the recurring income generated by our business. At the same time, in order to take full advantage of the dividends paid deduction of a REIT, we endeavor to pay out 100% of taxable income. In the event that taxable income exceeds our regular dividend pay out rate, we will make additional distributions in the form of special dividends.

See Part II, Item 5 for details on dividend taxation.

Results of Operations

Comparison of Results of Operations: Year Ended December 31, 2006 to Year End December 31, 2005

	2006			2005			$ Change			% Change
	(in thousands, except for per share data)
Income from loans and other investments:
Interest and related income	$	175,404		$	86,200		$	89,204			103.5	%
Interest and related expenses	(104,607		)	(37,229		)	(67,378		)		181.0	%
Income from loans and other investments, net	70,797			48,971			21,826				44.6	%
Other revenues:
Management and advisory fees	2,650			5,091			(2,441		)		(47.9	)%
Incentive management fees	1,652			8,033			(6,381		)		(79.4	)%
Gain on sale of investments	—			4,951			(4,951		)		(100.0	)%
Other	1,459			553			906				163.8	%
Total other revenues	5,761			18,628			(12,867		)		(69.1	)%
Other expenses:
General and administrative	23,075			21,939			1,136				5.2	%
Depreciation and amortization	3,049			1,114			1,935				173.7	%
Total other expenses	26,124			23,053			3,071				13.3	%
Income/(loss) from equity investments	898			(222		)	1,120				504.5	%
Income tax expense/(benefit)	(2,735		)	213			(2,948		)		(1,384.0	)%
Net income	$	54,067		$	44,111		$	9,956			22.6	%
Net income per share	$	3.40		$	2.88		$	0.52			18.1	%
Dividends per share	$	3.45		$	2.45		$	1.00			40.8	%
Average LIBOR	5.10		%	3.39		%	1.71		%		50.4	%

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Income from loans and other investments

Growth in Interest Earning Assets, along with a 1.71% increase in average LIBOR, drove a 104% increase in interest income between 2005 and 2006. These same factors, combined with generally higher levels of leverage, created a 181% increase in interest expense for the same period. On a net basis, net interest margin increased by 45%, which is the primary driver of net income growth from 2005 to 2006.

Management and advisory fees

Base management fees from our investment management business decreased as both Fund II and Fund III continued to wind down. Base management fees from CT Large Loan and CT High Grade offset the reduction only in part, due to the generally lower level of fees that these vehicles generate and the timing of their launch after mid-year 2006.

Incentive management fees

Fund II continued to pay incentive management fees in 2006, albeit at substantially lower levels than 2005 when we received our initial payment of incentive management fees from Fund II. In 2005, we received $8.0 million of incentive fees, composed primarily of a catch up payment for incentive management fees earned but not paid from the inception of Fund II in 2001 through 2005. With the catch up phase completed in 2005, 2006 payments reflected only incentive fees actually earned in that year.

Gain on sale of investments

In 2006, we did not sell any securities or investments. During 2005, we sold our investment in Global Realty Outsourcing, Inc., a real estate outsourcing firm for which we were a founding shareholder, for a gain of $5.0 million.

General and administrative expenses

General and administrative expenses include salary and benefits for our employees, operating expenses and professional fees. Total general and administrative expenses increased 5% between 2006 and 2005, a lower growth rate than would be expected given the business activity in 2006. The change between 2006 and 2005 can be explained in part by one time expense items in 2005. These items include (i) the payment of approximately $2.0 million of Fund II incentive management fees to employees in 2005, while only $398,000 was paid in 2006, and (ii) the incurrence of $757,000 of costs in 2005 associated with a potential corporate combination, an abandoned fund management venture and increased expenses under our contract with Global Realty Outsourcing, Inc. These impacts were offset by increases in professional fees between 2005 and 2006 of roughly $800,000.

Depreciation and amortization

Depreciation and amortization increased by $1.9 million between 2005 and 2006 due primarily to $1.8 million of expenses incurred in 2006 associated with the effective termination of our investment management venture with a joint venture partner.

Income/(loss) from equity investments

Income from equity investments was predominantly derived from our co-investment in Fund III during 2006, offset by start up operating losses at Bracor. In 2006, the Bracor investment generated a net loss of $132,000, representing our share of operating losses (plus de minimus currency adjustments) for the period from Bracor’s inception through September 30, 2006 (we report Bracor’s operating results on a one fiscal quarter lag). In 2005, income from equity investments was negative, based primarily upon our co-

38

investment at Fund II, where the fund expensed $16 million of incentive management fees ($8.0 million paid to CTIMCO) and generated an operating loss for the year. In conjunction with the payment of Fund II incentive management fees to CTIMCO in 2005, we expensed $1.2 million of costs that we had previously capitalized associated with Fund II.

Income taxes

We did not pay any taxes at the REIT level in either 2006 or 2005. However, CTIMCO, our investment management subsidiary, is a taxable REIT subsidiary and subject to taxes on its earnings. In 2006, CTIMCO recorded an operating loss before income taxes of $6.7 million, which resulted in an income tax benefit of $2.7 million. In 2005, based in large part upon the receipt of $8.0 million of Fund II incentive compensation, CTIMCO recorded a tax provision of $213,000.

Net income

Net income grew by $10.0 million or 23% from 2005 to 2006, based in large part upon the increased net interest income generated by a higher level of Interest Earning Assets. On a diluted per share basis, net income was $2.88 and $3.40 in 2005 and 2006, respectively, representing an increase of 18%.

Dividends

Our regular dividends for 2006 and 2005 were $2.80 per share and $2.25 per share, respectively, representing growth of 25% in recurring income from our operations. In both 2006 and 2005, we also paid a special dividend, $0.65 per share and $0.20 per share, respectively. Total dividends per share increased by $1.00, or 41%, from 2005 to 2006.

Comparison of Results of Operations: Year Ended December 31, 2005 to Year End December 31, 2004

	2005			2004			$ Change			% Change
	(in thousands, except for per share data)
Income from loans and other investments:
Interest and related income	$	86,200		$	46,561		$	39,639			85.1	%
Interest and related expenses	(37,229		)	(20,141		)	(17,088		)		84.8	%
Income from loans and other investments, net	48,971			26,420			22,551				85.4	%
Other revenues:
Management and advisory fees	5,091			7,853			(2,762		)		(35.2	)%
Incentive management fees	8,033			—			8,033				NA
Gain on sale of investments	4,951			300			4,651				1,550.3	%
Other	553			88			465				528.4	%
Other revenues	18,628			8,241			10,387				126.0	%
Other expenses:
General and administrative	21,939			15,229			6,710				44.1	%
Depreciation and amortization	1,114			1,100			14				1.3	%
Other	—			(786		)	786				NA
Other expenses	23,053			15,543			7,510				48.3	%
Income/(loss) from equity investments	(222		)	2,407			(2,629		)		109.2	%
Income tax expense/(benefit)	213			(451		)	664				(147.2	)%
Net income	$	44,111		$	21,976		$	22,135			100.7	%
Net income per share	$	2.88		$	2.14		$	0.74			34.6	%
Dividends per share	$	2.45		$	1.85		$	0.60			32.4	%
Average LIBOR	3.39		%	1.50		%	1.89		%		125.8	%

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Income from loans and other investments

Growth in Interest Earning Assets and Interest Bearing Liabilities, as well as a 1.89% increase in LIBOR, drove an 85% increase in interest income and an 85% increase in interest expense from 2004 to 2005. On a net basis, net interest margin increased 85%, the primary driver of net income growth from 2004 to 2005.

Management and advisory fees

Base management fees from our investment management business decreased as Fund III ended its investment period and both Fund II and Fund III ended the year with lower levels of assets as their portfolios continued to liquidate.

Incentive management fees

Fund II made its first payment of incentive management fees in 2005, and we received a payment of $8.0 million for the period, which was composed primarily of a catch up payment for incentive management fees earned but not paid from the inception of Fund II in 2001 through 2005. Prior to 2005, we had not received any incentive management fee payments from our investment management business.

Gain on sale of investments

During 2005, we sold our investment on Global Realty Outsourcing, Inc., a real estate outsourcing firm that we founded, for a gain of $5.0 million. In 2004, we sold a small portfolio of residential mortgage backed securities that we had acquired for compliance reasons for a gain of $300,000.

General and administrative expenses

General and administrative expenses include salary and benefits for our employees, operating expenses and professional fees. General and administrative expenses increased 44% from 2004 to 2005, an increase of $6.7 million. This increase was due, in large part, to the payment in 2005 to employees of 25% of the incentive management fees received by us from Fund II. The gross receipt of these fees was $8.0 million and employees were distributed $2.0 million. In addition, in 2005, we experienced 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 combination, $282,000 of expenses from the abandonment of a proposed fund and additional expenses related to the services provided under our contract with Global Realty Outsourcing, Inc.

Income/(loss) from equity investments

In 2005, income from equity investments was negative, based primarily upon our co-investment at Fund II, where the fund expensed $16 million of incentive management fees ($8.0 million paid to CTIMCO) and generated an operating loss for the year. In conjunction with the payment of incentive management fees to CTIMCO at Fund II, we expensed $1.2 million of Fund II costs that we had previously capitalized. In 2004, both Fund II and Fund III recorded operating profits.

Income taxes

We did not pay any taxes at the REIT level in either 2005 or 2004. However, CTIMCO, our investment management subsidiary, is a taxable REIT subsidiary and subject to taxes on its earnings. In 2005, based in large part upon the receipt of $8.0 million of Fund II incentive compensation, CTIMCO recorded an income tax expense of $213,000. In 2004, expenses exceeded revenues at CTIMCO and CTIMCO posted an income tax benefit of $451,000.

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Net income

Net income grew by $22.1 million or 100% from 2004 to 2005. Increases in net income were primarily driven by increases in net interest income, incentive management fees and gain on sale of investments, offset by higher general and administrative costs and, to a lesser extent, taxes. On a diluted per share basis, net income was $2.88 and $2.14 in 2005 and 2004, respectively, representing growth of 35%.

Dividends

Our regular dividends for 2005 and 2004 were $2.25 per share and $1.85 per share, respectively, representing growth of 22% in recurring income from our operations. In 2005, we paid a special dividend, $0.20 per share. Total dividends per share increased by $0.60, or 32%, from 2004 to 2005.

Liquidity and Capital Resources

We expect we will continue to 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 to enhance our return on equity. At December 31, 2006, we had $26.1 million in cash, $1.7 million in restricted cash and $81.2 million of immediately available liquidity from our repurchase agreements ($74.1 million from master repurchase agreements and $7.1 million from asset specific repurchase agreements). Our primary sources of liquidity during 2007 are expected to be cash on hand, cash generated from operations, principal and interest payments received on loans and investments, additional borrowings under our repurchase agreements, and funds raised through CDO issuances, stock offerings, junior subordinated debenture issuances and other capital raising activities. We believe these sources of capital will be adequate to meet both short term and long term cash requirements.

We experienced a net increase in cash of $1.2 million for the year ended December 31, 2006, compared to a net increase of $391,000 for the year ended December 31, 2005. Cash provided by operating activities during the year ended December 31, 2006 was $64.8 million, compared to cash provided by operating activities of $50.8 million during the same period of 2005. The change was primarily due to increased net interest income due to our increased investment originations. For the year ended December 31, 2006, cash used in investing activities was $1.2 billion, compared to $663.0 million during the same period in 2005. The change was primarily due to our increased investment originations. For the year ended December 31, 2006, cash provided by financing activities was $1.1 billion, compared to $612.6 million during the same period in 2005. The change was primarily due to our increased investment originations.

At December 31, 2006, we had outstanding borrowings under our CDOs of $1.2 billion and outstanding repurchase obligations totaling $704.4 million. The terms of these agreements are described in Note 7 of the consolidated financial statements. At December 31, 2006, we had pledged assets that enable us to borrow an additional $81.2 million and had unpledged assets of $21.5 million, which when pledged will generate approximately $16.4 million of additional liquidity.  We had $495.6 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 CDOs. CDOs generally have higher borrowing advance rates than corresponding repurchase obligations. At December 31, 2006, we had additional liquidity of $1.7 million in our CDO’s in the form of restricted cash.

In November 2006, we issued 2,000,000 shares of Class A Common Stock in a public offering underwritten by Bear Stearns & Co. Inc. Gross proceeds were $43.48 per share and total net proceeds were $86.6 million. We expect to continue to utilize stock offerings as a form of liquidity in the future when appropriate.

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The following table sets forth information about certain of our contractual obligations as of December 31, 2006:

Contractual Obligations

	Payment due by period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(in thousands)
Long-Term Debt Obligations
Repurchase obligations	$	704,444	$	293,565	$	389,629	$	21,250	$	—
Collateralized debt obligations	1,210,340		30,231		332,075		384,329		463,705
Junior subordinated debentures	51,550		—		—		—		51,550
Total long-term debt obligations	1,966,334		323,796		721,704		405,579		515,255
Unfunded Commitments
Loans(1)	233,208		169,449		59,774		3,520		465
Total return swaps	4,185		4,185		—		—		—
Equity investments	9,195		9,195		—		—		—
Total Unfunded Commitments	246,588		182,829		59,774		3,520		465
Operating Lease Obligations	1,463		975		488		—		—
Total(2)	$	2,214,385	$	507,600	$	781,966	$	409,099	$	515,720

(1)Our unfunded loan commitments net of in place financing as of December 31, 2006 was $43.2 million.

(2)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.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Our accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements. Actual results could differ from these estimates. During 2006, 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:

Principles of Consolidation

The accompanying consolidated financial statements include, on a consolidated basis, our accounts, the accounts of our wholly-owned subsidiaries and our interests in variable interest entities in which we are the primary beneficiary. All significant intercompany balances and transactions have been eliminated in consolidation. Our interest in CT Preferred Trust I is accounted for using the equity method and its assets and liabilities are not consolidated into our financial statements due to our determination that CT Preferred Trust I is a variable interest entity in which we are not the primary beneficiary under Financial Accounting Standards Board, or FASB, Interpretation No. 46, or FIN 46. We account for our co-investment interests in two of the private equity funds we have co-sponsored and continue to manage, CT

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Mezzanine Partners II LP and CT Mezzanine Partners III, Inc., or Fund II and Fund III, respectively, under the equity method of accounting. We also account for our investment in Bracor Investimentos Imobiliarios Ltda., or Bracor, under the equity method of accounting. As such, we report a percentage of the earnings of Fund II, Fund III and Bracor equal to our ownership percentage on a single line item in the consolidated statement of operations as income from equity investments.

Revenue Recognition

Interest income from our loans receivable is recognized over the life of the investment using the effective interest method and is recorded on the accrual basis. Fees, premiums, discounts and direct costs in connection with these investments are deferred until the loan is advanced and are then recognized over the term of the loan as an adjustment to yield. Fees on commitments that expire unused are recognized at expiration. For loans where we have unfunded commitments, we amortize the appropriate items on a straight line basis. 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 special servicing and asset management services are recognized as services are rendered. We account for incentive fees we can potentially earn from our investment management business 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.

Commercial Mortgage Backed Securities (“CMBS”)

We classify our CMBS investments pursuant to FASB Statement of Financial Accounting Standards No. 115, or FAS 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. Held to maturity investments are stated at cost plus the amortization of any premiums or discounts and any premiums or discounts are amortized through the consolidated statements of income using the level yield method. Other than in the instance of impairment, these held to maturity investments are shown in our financial statements at their adjusted values pursuant to the methodology described above.

We may also invest in CMBS 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.

Income on these securities is recognized based upon a number of assumptions that are subject to uncertainties and contingencies. Examples include, among other things, the rate and timing of principal payments, including prepayments, repurchases, defaults and liquidations, the pass-through or coupon rate and interest rates. Additional factors that may affect 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 impacted by, among other things, the general condition of the real estate market, including competition for tenants and their related credit quality, and changes in market rental rates. These uncertainties and contingencies are difficult to predict and are subject to future events that may alter the assumptions.

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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”, or EITF 99-20. Under EITF 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 upon 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 down the impaired security to its fair value, through a charge to earnings. 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.

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, 2006 we believe there has not been any adverse change in cash flows since December 31, 2004, therefore we did not recognize any additional 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.

From time to time we purchase 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 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.

Loans Receivable and Provision for Loan Losses

We purchase and originate commercial real estate debt and related instruments, or 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 on the part of management is required in determining the 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 loan. Each Loan in our portfolio is evaluated at least quarterly using our loan risk rating system which considers loan-to-value, debt yield, cash flow stability, exit plan, loan sponsorship, loan structure and other factors deemed necessary by management to assess the likelihood of delinquency or default. If we believe that there is a potential for delinquency or default, a

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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.

Repurchase Obligations

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 statements of income. There is a position under consideration by standard setters, based upon a technical interpretation of FAS 140, that these transactions will not qualify as a purchase by us. We believe, consistent with industry practice, that we are accounting for these transactions in an appropriate manner; however, if these investments do not qualify as a purchase under FAS 140, we would be required to present the net investment (asset balance less the repurchase obligation balance) on our balance sheet together with an embedded derivative with the corresponding change in fair value of the derivative being recorded in the consolidated statements of income. 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. Income from these arrangements would be presented on a net basis. 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, 2006 we had entered into twenty one such transactions, with a book value of the associated assets of $546.0 million financed with repurchase obligations of $395.8 million. Adoption of the aforementioned treatment would result in a reduction in total assets and liabilities on our consolidated balance sheet of $395.8 million and $118.2 million at December 31, 2006 and December 31, 2005, respectively.

Accounting for Stock-Based Compensation

We comply with the provisions of the FASB Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation”, or FAS 123. FAS 123 encourages the adoption of a new fair-value based accounting method for employee stock-based compensation plans. FAS 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, or ABP 25 must make pro forma disclosures as if they adopted the cost recognition requirements under FAS 123.

Through December 31, 2003, we accounted for stock-based compensation under ABP No. 25. During the fourth quarter of 2004, we elected to adopt the fair value recognition provisions of FAS 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 FAS 123 effective January 1, 2004.

As of January 1, 2006, we adopted FASB Statement of Financial Accounting Standards No. 123(R). We have elected to utilize the modified prospective method, and there was no material impact from this adoption. Compensation expense for the time vesting of grants is recognized on the accelerated attribution method under FASB Interpretation No. 28, and compensation expense for performance vesting is recognized on a straight-line basis. As of year end 2006, unvested share based compensation consisted of 480,967 shares of restricted stock with an unamortized value of $7.5 million. Subject to vesting provisions, these costs will be recognized as compensation expense over the next few years.

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Interest Rate Derivative Financial Instruments

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

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 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 which are accounted for in accordance with FASB Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes”, or FAS 109). Many of these requirements, however, are highly technical and complex. If we were to fail to meet these requirements, we may be subject to federal income tax on current and past income and may be subject to penalties.

Our taxable REIT subsidiaries have recorded deferred tax assets to the extent that we reasonably believe that we will be able to generate future taxable income in order to realize these assets.

New Accounting Pronouncements

In March 2006 the FASB issued Statement of Financial Accounting Standard No. 156 “Accounting for Servicing of Financial Assets—an amendment of FASB Statement No. 140”, or FAS 156. FAS 156 requires: (1) an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract under certain conditions, (2) all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable, and (3) permits an entity to choose either the amortization method  or the fair value measurement method for subsequent measurement of each class of separately recognized servicing assets and servicing liabilities. FAS 156 is effective January 1, 2007 for the company. We do not believe that adoption of FAS 156 will have a material impact on our future financial results.

In February 2006 the FASB issued Statement of Financial Accounting Standard No. 155 “Accounting for Certain Hybrid Financial Instruments—an amendment of FASB Statements No. 133 and 140”, or FAS 155. FAS 155: (1) permits fair value re-measurement  for any hybrid financial instrument that contains an embedded derivative that would otherwise require bifurcation, (2) clarifies which interest-only strips and principal-only strips are not subject to the requirements of Statement No. 133, (3) establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an imbedded derivative requiring bifurcation, (4) clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives, and (5) amends Statement No. 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest in other than

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another derivative financial instrument. FAS 155 is effective  January 1, 2007 for the company. We are currently evaluating the effect FAS 155 will have on our future financial results.

In June of 2006 the FASB issued Financial Interpretation No. 48, or FIN 48. This interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FAS 109. This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. This interpretation is effective January 1, 2007 for the company. We are currently evaluating the effect FIN 48 will have on our future financial results.

On December 16, 2004, the FASB issued Statement of Financial Accounting Standards No. 123(R), ‘‘Share-Based Payment’’, or FAS 123(R) which is a revision of FAS 123 and supersedes APB 25. FAS 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. FAS 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 FAS 123. As we have adopted FAS 123 effective January 1, 2004, we do not believe that adoption of FAS 123(R) will have a material impact on our future financial results.

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 co-investments in our investment management vehicles, are also subject to credit risk. The ultimate performance and value of our loans and investments depends primarily upon the performance of the properties that serve as our collateral specifically, their ability to produce cash flows adequate to pay interest and principal due to us. To monitor this risk, our asset management team constantly monitors performance of the collateral and enforces our rights as necessary.

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The following table provides information about our financial instruments that are sensitive to changes in interest rates at December 31, 2006. For financial assets and debt obligations, the table presents cash flows (in certain cases, face adjusted for expected losses) 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
	2007			2008			2009			2010			2011			Thereafter				Total			Fair Value
	(dollars in thousands)
Assets:
CMBS
Fixed Rate	$	15,515		$	49,068		$	7,784		$	17,638		$	75,462			$	578,526		$	743,993			$	722,300
Average interest rate	6.68		%	6.68		%	6.69		%	6.68		%	6.64		%		6.45		%	6.49		%
Variable Rate	$	34,703		$	26,894		$	22,831		—			—				$	1,584		$	86,012			$	84,787
Average interest rate	7.27		%	7.30		%	7.73		%	—			—				7.80		%	7.41		%
Loans receivable
Fixed Rate	$	16,155		$	61,432		$	22,967		$	1,997		$	24,864			$	108,920		$	236,335			$	241,005
Average interest rate	8.69		%	8.30		%	7.88		%	7.79		%	7.73		%		7.36		%	7.79		%
Variable Rate	$	341,554		$	793,630		$	148,523		$	45,381		$	40,143			$	152,548		$	1,521,779			$	1,520,972
Average interest rate	8.79		%	8.64		%	9.60		%	9.81		%	9.55		%		8.84		%	8.85		%
Total Return Swap
Variable Rate	$	1,815		—			—			—			—				—			$	1,815			$	1,815
Average interest rate	20.55		%	—			—			—			—				—			20.55		%
Interest rate swaps
Notional amounts	$	40,534		$	41,518		$	49,894		$	14,280		$	56,653			$	357,361		$	560,240			$	877
Average fixed pay rate	4.73		%	5.08		%	4.77		%	5.04		%	4.74		%		5.04		%	4.97		%
Average variable receive rate	5.35		%	5.35		%	5.35		%	5.35		%	5.35		%		5.35		%	5.35		%
Liabilities:
Repurchase obligations
Variable Rate	$	293,565		$	337,068		$	52,561		$	21,250		—				—			$	704,444			$	704,444
Average interest rate	6.17		%	6.46		%	6.55		%	6.32		%	—				—			6.34		%
CDOs
Fixed Rate	$	5,976		$	5,030		$	4,396		$	2,603		$	38,609			$	223,270		$	279,884			$	260,156
Average interest rate	5.37		%	5.65		%	5.69		%	5.28		%	5.10		%		5.33		%	5.31		%
Variable Rate	$	24,255		$	121,226		$	201,423		$	151,803		$	191,314			$	240,435		$	930,456			$	930,456
Average interest rate	5.69		%	5.67		%	5.94		%	5.72		%	5.91		%		5.78		%	5.81		%
Junior Subordinated Debentures
Fixed Rate	—			—			—			—			—				$	51,550		$	51,550			$	52,431
Average interest rate	—			—			—			—			—				7.45		%	7.45		%

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-48. 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 19 to the consolidated financial statements.

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

None.

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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.

Attestation Report of Registered Public Accounting Firm

Management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2006 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which appears on page F-2, and 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, 2006 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Item 9B.Other Information

On November 9, 2006, we commenced our CT High Grade MezzanineSM investment management initiative and entered into three separate account agreements with affiliates of W. R. Berkley Corporation, or WRBC, for an aggregate of $250 million. Pursuant to these agreements, we invest, on a discretionary basis, capital on behalf of WRBC in low risk commercial real estate mortgages, mezzanine loans and participations therein. WRBC beneficially owns approximately 11.5% of our outstanding class A common stock as of February 28, 2007 and a member of our board of directors is an employee of WRBC. The separate accounts are entirely funded with committed capital from WRBC and are managed by a subsidiary of our wholly-owned investment management subsidiary, CT Investment Management Co. LLC, or CTIMCO.  Each separate account has a one-year investment period with extension provisions. CTIMCO will earn a management fee equal to 0.25% per annum on invested assets.

PART III

Item 10.Directors, Executive Officers and Corporate Governance

The information required by Items 401, 405, 406 and 407(c)(3), (d)(4) and (d)(5) of Regulation S-K is incorporated herein by reference to the Company’s definitive proxy statement to be filed not later than April 30, 2007 with the Securities and Exchange Commission pursuant to Regulation 14A under the Exchange Act.

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Item 11.Executive Compensation

The information required by Item 402 and paragraph (e)(4) and (e)(5) of Item 407 of Regulation S-K is incorporated herein by reference to the Company’s definitive proxy statement to be filed not later than April 30, 2007 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, 2007 with the Securities and Exchange Commission pursuant to Regulation 14A under the Exchange Act.

Item 13.Certain Relationships and Related Transactions, and Director Independence

The information required by Items 404 and 407(a) of Regulation S-K is incorporated herein by reference to the Company’s definitive proxy statement to be filed not later than April 30, 2007 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, 2007 with the Securities and Exchange Commission pursuant to Regulation 14A under the Exchange Act.

PART IV

Item 15.Exhibits, Financial Statement Schedules

(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

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EXHIBIT INDEX

Exhibit Number	Description
3.1.a	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).
3.1.b	Certificate of Notice (filed as Exhibit 3.1 to Capital Trust, Inc.’s Current Report on Form 8-K (File No. 1-14788) filed on February 27, 2007 and incorporated herein by reference).
3.2	Second Amended and Restated By-Laws of Capital Trust, Inc. (filed as Exhibit 3.2 to Capital Trust, Inc.’s Current Report on Form 8-K (File No. 1-4788) filed on February 27, 2007 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).
+ 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).

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+ 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 (filed as Exhibit 10.19 to Capital Trust, Inc.’s Annual Report on Form 10-K (File No. 1-14788) filed on March 10, 2006 and incorporated herein by reference).
+ 10.20	Employment Agreement, dated as of September 29, 2006, by and among Capital Trust, Inc., CT Investment Management Co., LLC and Geoffrey G. Jervis (filed as Exhibit 10.3 to Capital Trust, Inc.’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on October 30, 2006 and incorporated herein by reference).
+ 10.21	Employment Agreement, dated as of August 4, 2006, by and among Capital Trust, Inc., CT Investment Management Co., LLC and Thomas C. Ruffing (filed as Exhibit 10.2 to Capital Trust, Inc.’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on August 8, 2006 and incorporated herein by reference).
+10.22	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).

52

+ 10.23	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).
+ 10.24	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).
10.25	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).
10.26.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).
10.26.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).
10.27	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).
10.28.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).
10.28.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).
10.29.a	Amended and Restated Master Repurchase Agreement, dated as of August  15, 2006, by and between Goldman Sachs Mortgage Company and Capital Trust, Inc. (filed as Exhibit 10.1.a to Capital Trust, Inc.’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on October 30, 2006 and incorporated herein by reference).
10.29.b	Annex I to Amended and Restated Master Repurchase Agreement, dated as of August 15, 2006, by and between Goldman Sachs Mortgage Company and Capital Trust, Inc. (filed as Exhibit 10.1.b to Capital Trust, Inc.’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on October 30, 2006 and incorporated herein by reference).

53

10.29.c	Letter, dated as of August 15, 2006, by and between Goldman Sachs Mortgage Company and Capital Trust, Inc. (filed as Exhibit 10.1.c to Capital Trust, Inc.’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on October 30, 2006 and incorporated herein by reference).
10.30	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).
10.31.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).
10.31.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).
10.31.c	Confirmation, dated as of March 20, 2006, by and between CT LF Funding Corp. and Liquid Funding, Ltd (filed as Exhibit 10.7 to Capital Trust, Inc.’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on May 4, 2006 and incorporated herein by reference).
10.32	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).
10.33.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. (filed as Exhibit 10.31.a to Capital Trust, Inc.’s Annual Report on Form 10-K (File No. 1-14788) filed on March 10, 2006 and incorporated herein by reference).
10.33.b	Letter agreement, dated as of February 15, 2006, by and among Bear, Stearns Funding, Inc., Capital Trust, Inc. and CT BSI Funding Corp. (filed as Exhibit 10.31.b to Capital Trust, Inc.’s Annual Report on Form 10-K (File No. 1-14788) filed on March 10, 2006 and incorporated herein by reference).
10.34.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. (filed as Exhibit 10.32.a to Capital Trust, Inc.’s Annual Report on Form 10-K (File No. 1-14788) filed on March 10, 2006 and incorporated herein by reference).
10.34.b	Letter agreement, dated as of February 15, 2006, by and among Bear, Stearns International Limited, Capital Trust, Inc. and CT BSI Funding Corp. (filed as Exhibit 10.32.b to Capital Trust, Inc.’s Annual Report on Form 10-K (File No. 1-14788) filed on March 10, 2006 and incorporated herein by reference).
• 10.35	Master Repurchase Agreement, dated as of November 1, 2006, by and between Capital Trust, Inc. and JPMorgan Chase Bank, N.A.

54

10.36	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).
10.37	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).
10.38	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).
10.39	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).
10.40	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 (filed as Exhibit 10.37 to Capital Trust, Inc.’s Annual Report on Form 10-K (File No. 1-14788) filed on March 10, 2006 and incorporated herein by reference).
10.41	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).
10.42	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).
10.43	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).
10.44	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).
10.45	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).

55

10.46	Junior Subordinate Indenture, dated February 10, 2006, by and between Capital Trust, Inc. and JP Morgan Chase Bank, N.A. (filed as Exhibit 10.1 to Capital Trust, Inc.’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on May 4, 2006 and incorporated herein by reference).
10.47	Amended and Restated Trust Agreement, dated February 10, 2006, by and among Capital Trust, Inc., JP Morgan Chase Bank, N.A., Chase Bank USA, N.A. and the Administrative Trustees 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 4, 2006 and incorporated herein by reference).
• 10.48	Investment Management Agreement, dated as of November 9, 2006, by and between Berkley Insurance Company and CT High Grade Mezzanine Manager, LLC.
• 10.49	Investment Management Agreement, dated as of November 9, 2006, by and between Berkley Regional Insurance Company and CT High Grade Mezzanine Manager, LLC.
• 10.50	Investment Management Agreement, dated as of November 9, 2006, by and between Admiral Insurance Company and CT High Grade Mezzanine Manager, LLC.
• +10.51	Summary of Non-Employee Director Compensation
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.

56

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.

February 28, 2007	/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.

February 28, 2007	/s/ Samuel Zell
Date	Samuel Zell
	Chairman of the Board of Directors
February 28, 2007	/s/ John R. Klopp
Date	John R. Klopp
	Chief Executive Officer and Director
February 28, 2007	/s/ Geoffrey G. Jervis
Date	Geoffrey G. Jervis
	Chief Financial Officer
February 28, 2007	/s/ Thomas E. Dobrowski
Date	Thomas E. Dobrowski, Director
February 28, 2007	/s/ Martin L. Edelman
Date	Martin L. Edelman, Director
February 28, 2007	/s/ Craig M. Hatkoff
Date	Craig M. Hatkoff, Director
February 28, 2007	/s/ Edward S. Hyman
Date	Henry N. Nassau, Director
February 28, 2007	/s/ Henry N. Nassau
Date	Henry N. Nassau, Director
February 28, 2007	/s/ Joshua A. Polan
Date	Joshua A. Polan, Director
February 28, 2007	/s/ Lynne B. Sagalyn
Date	Lynne B. Sagalyn, Director

57

Index to Consolidated Financial Statements and Schedules

Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting	F-2
Management’s Report of Internal Control over Financial Reporting	F-3
Management’s Responsibility for Financial Statements	F-4
Report of Independent Registered Public Accounting Firm	F-5
Audited Financial Statements
Consolidated Balance Sheets as of December 31, 2006 and 2005	F-6
Consolidated Statements of Operations for the years ended December 31, 2006, 2005 and 2004	F-7
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2006, 2005 and 2004	F-8
Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004	F-9
Notes to Consolidated Financial Statements	F-10
Schedule IV—Mortgage Loans on Real Estate	S-1

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.

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, 2006, 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, 2006, 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, 2006, based on the 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, 2006 and 2005, and the related consolidated statements of operations, shareholders’ equity, and cash flow for each of the three years in the period ended December 31, 2006 of the Company and our report dated February 26, 2007 expressed an unqualified opinion thereon.

	/s/ Ernst & Young LLP
New York, NY
February 26 , 2007

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, 2006. 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, 2006 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, 2006 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, 2006 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which appears herein.

Dated:  February 28, 2007

John R. Klopp	Geoffrey G. Jervis
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:  February 28, 2007

John R. Klopp	Geoffrey G. Jervis
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.

We have audited the accompanying consolidated balance sheets of Capital Trust, Inc. and Subsidiaries (the “Company”) as of December 31, 2006 and 2005, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2006. Our audits also included the financial statement schedule listed in the Index to Consolidated Financial Statements and Schedules. These financial statements 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, 2006 and 2005, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2006, 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 consolidated financial statements in 2006 the Company adopted Statement of Financial Accounting Standards No. 123 (Revised 2004), Share Based Payments.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness the Company’s internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2007 expressed an unqualified opinion thereon.

	/s/ Ernst & Young LLP
New York, New York
February 26, 2007

F-5

Capital Trust, Inc. and Subsidiaries
Consolidated Balance Sheets
December 31, 2006 and 2005
(in thousands, except per share data)

	2006			2005
Assets
Cash and cash equivalents	$	26,142		$	24,974
Restricted cash	1,707			1,264
Commercial mortgage backed securities	810,970			487,970
Loans receivable	1,754,536			990,142
Total return swaps	1,815			4,000
Equity investment in unconsolidated subsidiaries	11,485			14,301
Deposits and other receivables	3,128			5,679
Accrued interest receivable	14,888			9,437
Interest rate hedge assets	2,565			2,385
Deferred income taxes	3,609			3,979
Prepaid and other assets	17,719			13,511
Total assets	$	2,648,564		$	1,557,642
Liabilities and Shareholders’ Equity
Liabilities:
Accounts payable and accrued expenses	$	38,061		$	24,957
Repurchase obligations	704,444			369,751
Collateralized debt obligations (“CDOs”)	1,212,500			823,744
Participations sold	209,425			—
Junior subordinated debentures	51,550			—
Interest rate hedge liabilities	1,688			113
Deferred origination fees and other revenue	4,624			227
Total liabilities	2,222,292			1,218,792
Shareholders’ equity:
Class A common stock, $0.01 par value, 100,000 shares authorized, 16,933 and 14,870 shares issued and outstanding at December 31, 2006 and 2005, respectively (“class A common stock”)	169			149
Restricted class A common stock, $0.01 par value, 481 and 404 shares issued and outstanding at December 31, 2006 and 2005, respectively (“restricted class A common stock” and together with class A common stock, “common stock”)	5			4
Additional paid-in capital	417,641			326,299
Accumulated other comprehensive gain	12,717			14,879
Accumulated deficit	(4,260		)	(2,481		)
Total shareholders’ equity	426,272			338,850
Total liabilities and shareholders’ equity	$	2,648,564		$	1,557,642

See accompanying notes to consolidated financial statements.

F-6

Capital Trust, Inc. and Subsidiaries
Consolidated Statements of Operations
For the Years Ended December 31, 2006, 2005 and 2004
(in thousands, except per share data)

	2006			2005			2004
Income from loans and other investments:
Interest and related income	$	175,404		$	86,200		$	46,561
Less:Interest and related expenses	104,607			37,229			13,724
Less:Interest and related expenses on step up convertible junior subordinated debentures	—			—			6,417
Income from loans and other investments, net	70,797			48,971			26,420
Other revenues:
Management and advisory fees	2,650			5,091			7,853
Incentive management fees	1,652			8,033			—
Gain on sales of investments	—			4,951			300
Special servicing fees	105			—			10
Other interest income	1,354			553			78
Total other revenues	5,761			18,628			8,241
Other expenses:
General and administrative	23,075			21,939			15,229
Depreciation and amortization	3,049			1,114			1,100
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	26,124			23,053			15,543
Income/(loss) from equity investments	898			(222		)	2,407
Income before income taxes	51,332			44,324			21,525
Income tax expense/(benefit)	(2,735		)	213			(451		)
Net income	$	54,067		$	44,111		$	21,976
Per share information:
Net earnings per share of common stock
Basic	$	3.43		$	2.91		$	2.17
Diluted	$	3.40		$	2.88		$	2.14
Dividends declared per share of common stock	$	3.45		$	2.45		$	1.85
Weighted average shares of common stock outstanding
Basic	15,754,655			15,181,476			10,141,380
Diluted	15,923,397			15,335,914			10,276,886

See accompanying notes to consolidated financial statements.

F-7

Capital Trust, Inc. and Subsidiaries
Consolidated Statements of Shareholders’ Equity
For the Years Ended December 31, 2006, 2005 and 2004
(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, 2003			$	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
Net income	$	54,067		—	—	—		—	—		54,067		54,067
Unrealized loss on derivative financial instruments	(1,401		)	—	—	—		—	(1,401	)	—		(1,401	)
Unrealized loss on available for sale security	(54		)	—	—	—		—	(54	)	—		(54	)
Amortization of unrealized gain on securities	(1,640		)	—	—	—		—	(1,640	)	—		(1,640	)
Currency translation adjustments	2			—	—	—		—	2		—		2
Deferred gain on settlement of swap, net of amortization	—			—	—	—		—	931		—		931
Shares of class A common stock issued in public offering	—			20	—	86,589		—	—		—		86,609
Sale of shares of class A common stock under stock option agreement	—			—	—	662		—	—		—		662
Reimbursement of offering expenses	—			—	—	124		—	—		—		124
Restricted class A common stock earned	—			—	—	4,013		—	—		—		4,013
Restricted class A common stock forfeited upon resignation of holder	—			—	—	(45	)	—	—		—		(45	)
Issuance of restricted stock	—			—	1	(1	)	—	—		—		—
Dividends declared on class A common stock	—			—	—	—		—	—		(55,846	)	(55,846	)

Balance at December 31, 2006 $ 50,974 $ 169 $ 5 $ 417,641 $ — $ 12,717 $ (4,260 ) $ 426,272

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, 2006, 2005 and 2004
(in thousands)

	2006			2005			2004
Cash flows from operating activities:
Net income	$	54,067		$	44,111		$	21,976
Adjustments to reconcile net income to net cash provided by operating activities:
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	3,145			1,114			1,100
Loss/(income) from equity investments in Funds	(898		)	222			(2,407		)
Distributions from equity investments in Funds	1,373			1,704			2,407
Net gain on sales of CMBS and available for sale securities	—			—			(300		)
Restricted class A common stock earned, net	4,013			2,545			1,342
Amortization of premiums and accretion of discounts on loans, investments and CMBS, net	(2,029		)	(3,842		)	(1,327		)
Amortization of deferred gain on interest rate hedges	(255		)	(437		)	—
Accretion of discounts and fees on convertible trust preferred securities, net	—			—			276
Stock based compensation	(45		)	—			71
Changes in assets and liabilities:
Deposits and other receivables	2,568			4,603			63
Accrued interest receivable	(5,451		)	(5,408		)	(806		)
Deferred income taxes	370			1,644			(2,254		)
Prepaid and other assets	2,623			2,238			2,482
Deferred origination fees and other revenue	4,397			(608		)	(2,371		)
Accounts payable and accrued expenses	946			2,876			2,521
Net cash provided by operating activities	64,824			50,762			21,987
Cash flows from investing activities:
Principal collections on and proceeds from sales of available for sale securities	—			—			19,561
Purchases of commercial mortgage backed securities	(392,732		)	(245,175		)	(59,550		)
Principal collections on and proceeds from sale of CMBS	69,375			14,339			5,048
Origination and purchase of loans receivable	(1,423,917		)	(790,997		)	(489,480		)
Principal collections on loans receivable	582,519			359,383			106,422
Equity investments	(5,845		)	(4,660		)	(8,460		)
Return of capital	5,240			8,812			8,075
Purchase of total return swap	(4,138		)	(4,000		)	—
Proceeds from total return swaps	6,323			—			—
Purchases of equipment and leasehold improvements, net	—			(23		)	(119		)
Increase in restricted cash	(443		)	(653		)	(611		)
Net cash used in investing activities	(1,163,618		)	(662,974		)	(419,114		)
Cash flows from financing activities:
Proceeds from repurchase obligations	1,508,970			713,474			189,882
Repayment of repurchase obligations	(1,174,277		)	(568,814		)	(111,685		)
Proceeds from credit facilities	—			104,704			246,852
Repayment of credit facilities	—			(169,880		)	(220,544		)
Issuance of junior subordinated debentures	51,550			—			—
Purchase of common equity in CT Preferred Trust I	(1,550		)	—			—
Repayment of term redeemable securities contract	—			—			(11,651		)
Proceeds from issuance of collateralized debt obligations	429,398			571,087			252,778
Repayment of collateralized debt obligations	(40,643		)	—			—
Proceeds from participations sold	287,102			—			—
Settlement of interest rate hedges	1,186			1,410			—
Payment of deferred financing costs	(5,483		)	(8,704		)	(6,140		)
Sale of shares of class A common stock under stock option agreement	662			1,571			815
Dividends paid on class A common stock	(43,686		)	(32,493		)	(15,474		)
Proceeds from exercise of warrants for shares of class A common stock	—			—			8,541
Proceeds from sale of shares of class A common stock	86,609			—			79,598
Reimbursement of offering expenses	124			248			—
Net cash provided by financing activities	1,099,962			612,603			412,972
Net increase in cash and cash equivalents	1,168			391			15,845
Cash and cash equivalents at beginning of year	24,974			24,583			8,738
Cash and cash equivalents at end of year	$	26,142		$	24,974		$	24,583

See accompanying notes to consolidated financial statements.

F-9

Capital Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2006, 2005 and 2004

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 commercial real estate assets. We invest for our own account directly on our balance sheet and for third parties through a series of investment management vehicles. From the commencement of our finance business in 1997 through December 31, 2006, we have completed over $8.0 billion of investments in the commercial real estate debt arena. We conduct our operations as a real estate investment trust, or REIT, for federal income tax purposes and we are headquartered in New York City.

2. Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include, on a consolidated basis, our accounts, the accounts of our wholly-owned subsidiaries and our interests in variable interest entities in which we are the primary beneficiary. All significant intercompany balances and transactions have been eliminated in consolidation. Our interest in CT Preferred Trust I is accounted for using the equity method and its assets and liabilities are not consolidated into our financial statements due to our determination that CT Preferred Trust I is a variable interest entity in which we are not the primary beneficiary under Financial Accounting Standards Board, or FASB, Interpretation No. 46, or FIN 46. We account for our co-investment interests in two of the private equity funds we have co-sponsored and continue to manage, CT Mezzanine Partners II LP and CT Mezzanine Partners III, Inc., or Fund II and Fund III, respectively, under the equity method of accounting. We also account for our investment in Bracor Investimentos Imobiliarios Ltda., or Bracor, under the equity method of accounting. As such, we report a percentage of the earnings of Fund II, Fund III and Bracor equal to our ownership percentage on a single line item in the consolidated statement of operations as income from equity investments.

Revenue Recognition

Interest income from our loans receivable is recognized over the life of the investment using the effective interest method and is recorded on the accrual basis. Fees, premiums, discounts and direct costs in connection with these investments are deferred until the loan is advanced and are then recognized over the term of the loan as an adjustment to yield. Fees on commitments that expire unused are recognized at expiration. For loans where we have unfunded commitments, we amortize the appropriate items on a straight line basis. 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 special servicing and asset management services are recognized as services are rendered. We account for incentive fees we can potentially earn from our investment management business in

F-10

Capital Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

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.

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, 2006 and 2005, a majority of the cash and cash equivalents consisted of overnight investments in commercial paper. As of, and for the years ended, December 31, 2006 and 2005, we had bank balances in excess of federally insured amounts. We have not experienced any losses on our demand deposits, commercial paper or money market investments.

Restricted Cash

Restricted cash is comprised of $1.7 million that is on deposit with the trustee for our CDOs and is expected to be used to pay contractual interest and principal and to purchase replacement collateral for our reinvesting CDOs during their respective reinvestment periods.

Commercial Mortgage backed Securities (“CMBS”)

We classify our CMBS investments pursuant to FASB Statement of Financial Accounting Standards No. 115, or FAS 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. Held to maturity investments are stated at cost plus the amortization of any premiums or discounts and any premiums or discounts are amortized through the consolidated statements of income using the level yield method. Other than in the instance of impairment, these held to maturity investments are shown in our financial statements at their adjusted values pursuant to the methodology described above.

We may also invest in CMBS 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.

Income on these securities is recognized based upon a number of assumptions that are subject to uncertainties and contingencies. Examples include, among other things, the rate and timing of principal payments, including prepayments, repurchases, defaults and liquidations, the pass-through or coupon rate and interest rates. Additional factors that may affect 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 impacted by, among other things, the general condition of the real estate market, including competition for tenants and their related credit quality, and changes in market rental rates. These uncertainties and contingencies are difficult to predict and are subject to future events that may alter the assumptions.

F-11

Capital Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

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”, or EITF 99-20. Under EITF 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 upon 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 down the impaired security to its fair value, through a charge to earnings. 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.

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, 2006 we believe there has not been any adverse change in cash flows since December 31, 2004, therefore we did not recognize any additional 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.

From time to time we purchase 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 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.

Loans Receivable and Reserve for Possible Credit Losses

We purchase and originate commercial real estate debt and related instruments, or 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,

F-12

Capital Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

significant judgment on the part of management is required in determining the 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 loan. Each Loan in our portfolio is evaluated at least quarterly using our loan risk rating system which considers loan-to-value, debt yield, cash flow stability, exit plan, loan sponsorship, loan structure and other factors deemed necessary by management 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 to determine the size of the reserve. Actual losses, if any, could ultimately differ from these estimates.

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.

Repurchase Obligations

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 statements of income. There is a position under consideration by standard setters, based upon a technical interpretation of FAS 140, that these transactions will not qualify as a purchase by us. We believe, consistent with industry practice, that we are accounting for these transactions in an appropriate manner; however, if these investments do not qualify as a purchase under FAS 140, we would be required to present the net investment (asset balance less the repurchase obligation balance) on our balance sheet together with an embedded derivative with the corresponding change in fair value of the derivative being recorded in the consolidated statements of income. 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. Income from these arrangements would be presented on a net basis. 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, 2006 we had entered into twenty one such transactions, with a book value of the associated assets of $546.0 million financed with repurchase obligations of $395.8 million. Adoption of the aforementioned treatment would result in a reduction in total assets and liabilities on our consolidated balance sheet of $395.8 million and $118.2 million at December 31, 2006 and December 31, 2005, respectively.

Interest Rate Derivative Financial Instruments

In the normal course of business, we use interest rate derivative financial instruments to manage, or hedge, cash flow variability caused by interest rate fluctuations. Specifically, we currently use interest rate swaps to effectively convert variable rate liabilities, that are financing fixed rate assets, to fixed rate liabilities. The differential to be paid or received on these agreements is recognized on the accrual basis as

F-13

Capital Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

an adjustment to the interest expense related to the attendant liability. The swap agreements are generally accounted for on a held to maturity basis, and, in cases where they are terminated early, any gain or loss is generally amortized over the remaining life of the hedged item. These swap agreements must be effective in reducing the variability of cash flows of the hedged items in order to qualify for the aforementioned hedge accounting treatment. Changes in value of effective cash flow hedges are reflected in our financial statements through accumulated other comprehensive income/(loss) and do not affect our net income. To the extent a derivative does not qualify for hedge accounting, and is deemed a non-hedge derivative, the changes in its value are included in net income.

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 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 which are accounted for in accordance with FASB Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes”, or FAS 109). Many of these requirements, however, are highly technical and complex. If we were to fail to meet these requirements, we may be subject to federal, state and local income tax on current and past income, and we may also be subject to penalties.

Accounting for Stock-Based Compensation

We comply with the provisions of the FASB Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation”, or FAS 123. FAS 123 encourages the adoption of a new fair-value based accounting method for employee stock-based compensation plans. FAS 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, or ABP 25 must make pro forma disclosures as if they adopted the cost recognition requirements under FAS 123.

Through December 31, 2003, we accounted for stock-based compensation under ABP No. 25. During the fourth quarter of 2004, we elected to adopt the fair value recognition provisions of FAS 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 FAS 123 effective January 1, 2004.

As of January 1, 2006, we adopted FASB Statement of Financial Accounting Standards No. 123(R). We have elected the modified prospective method, and there was no material impact from this adoption. Compensation expense for the time vesting compoment of grants is recognized on the accelerated attribution method under FASB Interpretation No. 28. Compensation expense for performance vesting is recognized on a straight-line basis.

F-14

Capital Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

Comprehensive Income

We comply with the provisions of the FASB Statement of Financial Accounting Standards No. 130, “Reporting Comprehensive Income”, or FAS 130, in reporting comprehensive income and its components in the full set of general-purpose financial statements. Total comprehensive income was $51.0 million, $54.2 million and $59.7 million, for the years ended December 31, 2006, 2005 and 2004, respectively. The primary component of comprehensive income other than net income was the unrealized gain/(loss) on derivative financial instruments and CMBS. At December 31, 2006, accumulated other comprehensive income is $12.7 million, comprised of unrealized gains on CMBS of $9.9 million, unrealized gains on cash flow swaps of $873,000 and  $1.9 million of deferred realized gains on the settlement of cash flow swaps.

Earnings per Share of Common Stock

Earnings per share of common stock are presented based on the requirements of the FASB Statement of Accounting Standards No. 128, or FAS 128. Basic EPS is computed based on the income applicable to common stock and stock units divided by weighted average number of shares of common stock and stock units outstanding during the period. Diluted EPS is based on the net earnings applicable to common stock and stock units, divided by weighted average number of shares of common stock and stock units and potentially 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 2005 and 2004 consolidated financial statements to conform to the 2006 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 our co-investments in investment management vehicles and our investment in Bracor) and the financing thereof.

The Investment Management segment includes the activities related to investment management services provided by CT Investment Management Co., LLC, or CTIMCO, and its subsidiaries. CTIMCO is a taxable REIT subsidiary and is our special servicer and the investment manager of Capital Trust, Inc., and all of our investment management vehicles.

F-15

Capital Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

New Accounting Pronouncements

In March 2006 the FASB issued Statement of Financial Accounting Standard No. 156 “Accounting for Servicing of Financial Assets—an amendment of FASB Statement No. 140”, or FAS 156. FAS 156 requires: (1) an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract under certain conditions, (2) all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable, and (3) permits an entity to choose either the amortization method  or the fair value measurement method for subsequent measurement of each class of separately recognized servicing assets and servicing liabilities. FAS 156 is effective January 1, 2007 for the company. We do not believe that adoption of FAS 156 will have a material impact on our future financial results.

In February 2006 the FASB issued Statement of Financial Accounting Standard No. 155 “Accounting for Certain Hybrid Financial Instruments—an amendment of FASB Statements No. 133 and 140”, or FAS 155. FAS 155: (1) permits fair value re-measurement  for any hybrid financial instrument that contains an embedded derivative that would otherwise require bifurcation, (2) clarifies which interest-only strips and principal-only strips are not subject to the requirements of Statement No. 133, (3) establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an imbedded derivative requiring bifurcation, (4) clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives, and (5) amends Statement No. 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest in other than another derivative financial instrument. FAS 155 is effective January 1, 2007 for the company. We are currently evaluating the effect FAS 155 will have on our future financial results.

In June of 2006 the FASB issued Financial Interpretation No. 48, or FIN 48. This interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FAS 109. This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. This interpretation is effective January 1, 2007 for the company. We are currently evaluating the effect FIN 48 will have on our future financial results.

On December 16, 2004, the FASB issued Statement of Financial Accounting Standards No. 123(R), ‘‘Share-Based Payment’’, or FAS 123(R) which is a revision of FAS 123 and supersedes APB 25. FAS 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. FAS 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 FAS 123. As we have adopted FAS 123 effective January 1, 2004, we do not believe that adoption of FAS 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

Activity relating to our commercial mortgage backed securities, or CMBS, for the year ended December 31, 2006 was as follows ($ values in thousands):

									Weighted Average
Asset Type	Face Value		Book Value		Number of Securities		Number of Issues		Rating(1)		Coupon(2)			Yield(2)			Maturity (Years)(3)
December 31, 2005
Floating Rate	$	106,666	$	105,032		11		9		BBB-		6.89	%		6.99	%		2.3
Fixed Rate	419,885		382,938			34		21		B+		6.97	%		7.72	%		10.1
Total/Average	526,551		487,970			45		30		BB-		6.95	%		7.57	%		8.4
Originations
Floating Rate	33,448		33,451			5		3		BB+		6.96	%		6.96	%		2.7
Fixed Rate	361,255		359,280			34		29		BBB-		6.10	%		6.40	%		7.7
Total/Average	394,703		392,731			39		32		BBB-		6.17	%		6.45	%		7.3
Repayments & Other(4)
Floating Rate	54,102		53,676			5		3		N/A		N/A			N/A			N/A
Fixed Rate	16,533		16,055			2		2		N/A		N/A			N/A			N/A
Total/Average	70,635		69,731			7		5		N/A		N/A			N/A			N/A
December 31, 2006
Floating Rate	86,012		84,807			11		9		BBB-		7.42	%		7.51	%		2.0
Fixed Rate	764,607		726,163			66		48		BB+		6.68	%		7.13	%		8.5
Total/Average	$	850,619	$	810,970		77		57		BB+		6.75	%		7.17	%		7.8

(1)Rating is the lowest rating from Fitch Ratings, Standard & Poor’s and/or Moody’s Investors Service and the weighted average is calculated using the Fitch Ratings methodology.

(2)Calculations based on LIBOR of 5.32% as of December 31, 2006 and LIBOR of 4.39% as of December 31, 2005.

(3)Represents the maturity of the investment assuming all extension options are executed.

(4)Includes full repayments, sales, partial repayments, mark-to-market adjustments, and the impact of premium and discount amortization and losses, if any. The figures shown in “Number of Securities” and “Number of Issues” represent only the full repayments/sales, if any.

F-17

Capital Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

3.Commercial Mortgage Backed Securities (Continued)

The charts below detail the ratings, vintage, property type and geographic distribution of the collateral securing our CMBS at year end 2006 ($ values in thousands).

Rating

	Book Value			Percentage
BBB		$	355,925		44	%
BB		195,188			24
A		98,480			12
AAA		65,123			8
AA		36,105			5
B		33,351			4
D		24,310			3
CCC		2,488			0
Total		$	810,970		100	%

Vintage

	Book Value			Percentage
1998		$	311,824		38	%
2004		107,324			13
1997		84,423			10
2005		69,471			9
2006		60,821			8
2000		40,499			5
1996		38,698			5
Other		97,910			12
Total		$	810,970		100	%

Property Type

	Book Value			Percentage
Retail		$	230,238		28	%
Office		175,729			22
Hotel		147,375			18
Multifamily		131,742			16
Other		113,064			14
Mixed Use		12,822			2
Total		$	810,970		100	%

F-18

Capital Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

3.Commercial Mortgage Backed Securities (Continued)

Geographic Location

	Book Value			Percentage
Southwest		$	279,347		34	%
Northeast		223,856			28
Southeast		176,125			22
Midwest		99,409			12
Northwest		25,615			3
Other		6,618			1
Total		$	810,970		100	%

We acquire rated and unrated subordinated investments in CMBS. As detailed in Note 2, on August 4, 2005, pursuant to the provisions of FAS 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.

While we typically account for our CMBS investments on a held to maturity basis, under certain circumstances we will account for CMBS on an available for sale basis. At December 31, 2006 and 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 fixed rate of 7.87%. As of December 31, 2006 and 2005, the security was carried at its fair market value of $10.5 million and $10.7 million, respectively. The investment matures in February 2010.

Quarterly, we reevaluate our CMBS portfolio to determine if there has been an other than temporary impairment based upon our assessment of future cash flow receipts. For the years ended December 31, 2006 and December 31, 2005, we believe that there has not been any adverse change in cash flows for our CMBS portfolio and, therefore, did not recognize any other than temporary impairments. 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 consolidated statements of income. 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.

Certain of our CMBS investments are carried at values in excess of their market values. This difference can be caused by, among other things, changes in interest rates, changes in credit spreads, and/or realized/unrealized losses. At year end, 2006, 51 CMBS investments with an aggregate carrying value of $493.9 were carried at values in excess of their market values. Market value for these CMBS investments was $482.5 at year end 2006.

4.   Loans Receivable

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

·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 may finance stabilized properties, may be bridge loans to finance property owners that require interim funding or may be construction loans. Our mortgage loans range in duration and typically require a balloon payment of principal at maturity. These loans may include parri passu participations in mortgage loans. We may also

F-19

Capital Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

4.Loans Receivable (Continued)

originate and fund first mortgage loans in which we intend to sell the senior tranche, thereby creating what we refer to as a subordinate mortgage interest.

·Subordinate Mortgage Interests—Sometimes known as B Notes, these are loans evidenced by a junior participation in a first mortgage, with the senior participation known as an A Note. Although a subordinate mortgage interest 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. Subordinate mortgage interests 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 subordinate mortgage interest is subordinated to the A Note by virtue of a contractual arrangement between the A Note lender and the subordinate mortgage interest lender. In some cases, there may be multiple senior and/or junior interests to our interest in a single mortgage loan.

·Mezzanine Loans—These include both property and corporate mezzanine loans. Property mezzanine loans 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 first mortgage borrower. It is not secured by a mortgage on the property, but by a pledge of the 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. Corporate mezzanine loans, on the other hand, 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, 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.

F-20

Capital Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

4.Loans Receivable (Continued)

Activity relating to our loans receivable for the year ended December 31, 2006 was as follows ($ values in thousands):

									Weighted Average(1)
Asset Type	Face Value(1)			Book Value(1)			Investments(1)		Coupon(2)			Yield(2)			Maturity (Years)(3)
December 31, 2005
Floating rate
Mortgage loans		$	66,471		$	66,471		3		6.90	%		6.85	%		2.8
Subordinate mortgage interests		527,497			526,435			51		7.75	%		7.82	%		3.7
Mezzanine loans		230,174			229,998			14		8.56	%		8.59	%		3.5
Total/Average		824,142			822,904			68		7.91	%		7.96	%		3.6
Fixed rate
Mortgage loans		—			—			—		—			—			—
Subordinate mortgage interests		49,390			48,435			4		7.78	%		8.15	%		16.9
Mezzanine loans		119,543			115,764			4		9.00	%		9.54	%		5.9
Total/Average		168,933			164,199			8		8.65	%		9.13	%		9.2
Total/Average—December 31, 2005		993,075			987,103			76		8.01	%		8.13	%		4.5
Originations(4)
Floating rate
Mortgage loans		234,438			234,438			14		7.91	%		8.54	%		4.0
Subordinate mortgage interests		494,794			494,382			14		8.33	%		8.46	%		4.1
Mezzanine loans		624,537			624,496			15		9.11	%		10.02	%		4.4
Total/Average		1,353,769			1,353,316			43		8.62	%		9.19	%		4.2
Fixed rate
Mortgage loans		—			—			—		—			—			—
Subordinate mortgage interests		—			—			—		—			—			—
Mezzanine loans		68,445			70,601			7		9.48	%		9.11	%		5.0
Total/Average		68,445			70,601			7		9.48	%		9.11	%		5.0
Total/Average		1,422,214			1,423,917			50		8.66	%		9.19	%		4.3
Repayments & Other(5)
Floating rate
Mortgage loans		66,490			66,490			3		N/A			N/A			N/A
Subordinate mortgage interests		359,625			359,318			37		N/A			N/A			N/A
Mezzanine loans		232,655			232,617			6		N/A			N/A			N/A
Total/Average		658,770			658,425			46		N/A			N/A			N/A
Fixed rate
Mortgage loans		—			—			—		N/A			N/A			N/A
Subordinate mortgage interests		215			83			—		N/A			N/A			N/A
Mezzanine loans		828			614			—		N/A			N/A			N/A
Total/Average		1,043			697			—		N/A			N/A			N/A
Total/Average		659,813			659,122			46		N/A			N/A			N/A
December 31, 2006
Floating rate
Mortgage loans		234,419			234,419			14		7.85	%		8.47	%		4.0
Subordinate mortgage interests		662,666			661,499			28		8.29	%		8.37	%		3.9
Mezzanine loans		622,056			621,877			23		9.57	%		9.76	%		4.3
Total/Average		1,519,141			1,517,795			65		8.75	%		8.96	%		4.1
Fixed rate
Mortgage loans		—			—			—		—			—			—
Subordinate mortgage interests		49,175			48,352			4		7.78	%		7.85	%		16.0
Mezzanine loans		187,160			185,751			11		9.07	%		9.25	%		4.9
Total/Average		236,335			234,103			15		8.80	%		8.96	%		7.2
Total/Average - December 31, 2006		$	1,755,476		$	1,751,898		80		8.75	%		8.96	%		4.5

F-21

Capital Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

4.Loans Receivable (Continued)

(1)Does not include one non-performing loan with a face value of $8,000 and a book value of $2,638 and $3,039 on December 31, 2006 and December 31, 2005, respectively.

(2)Calculations based on LIBOR of 5.32% as of December 31, 2006 and LIBOR of 4.39% as of December 31, 2005.

(3)Represents the maturity of the investment assuming all extension options are executed.

(4)Includes additional fundings on prior period originations. The figures shown in “Investments” represents the actual number of originations during the period.

(5)Includes full repayments, sale, partial repayments and the impact of premium and discount amortization and losses, if any. The figures shown in “Investments” represents the full repayments/sales, if any.

Property Type

	Book Value		Percentage
Office	$	562,048		32	%
Hotel	447,721			26	%
Retail	295,435			17	%
Multifamily	211,156			12	%
Other	153,130			9	%
Mixed Use	85,046			4	%
Total	$	1,754,536		100	%

Geographic Location

	Book Value		Percentage
Diversified	$	599,786		34	%
Southwest	399,755			23	%
Northeast	381,839			22	%
Southeast	294,729			17	%
Midwest	46,468			3	%
Northwest	31,959			1	%
Total	$	1,754,536		100	%

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. Since 2002 we have received $1.4 million in cash collections, which reduced the carrying value of the loan to $2.6 million. In accordance with our policy for revenue recognition, income recognition has been suspended on this loan and for the years ended December 31, 2006, 2005 and 2004, $1.2 million, $1.1 million, and $930,000 respectively, of potential interest income has not been recorded.

In some instances, we have a further obligation to fund additional amounts under our loan arrangements, or Unfunded Commitments. At December 31, 2006, we had 11 such Unfunded Commitments for a total future funding obligation of $237.4 million.

F-22

Capital Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

4.Loans Receivable (Continued)

There are no loans to a single borrower or to related groups of borrowers that exceed ten percent of total assets. Approximately 20% and 14% of all performing loans are secured by properties in New York and California, respectively

In connection with the aforementioned loans, at December 31, 2006 and 2005, we have deferred origination fees, net of direct costs of $4.6 million and $101,000, respectively, which are being amortized into income over the life of the loan. At December 31, 2006, there were no exit fees receivable recorded. At December 31 2005, we had exit fees receivable of $113,000. 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, loan 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 of $6.7 million was recaptured. We concluded that a reserve for possible credit losses was not warranted for the years ended December 31, 2006 and 2005.

5.Total Return Swaps

Total return swaps are derivative contracts in which one party agrees to make payments that replicate the total return of a defined underlying asset, typically in return for another party agreeing to bear the risk of performance of the defined underlying asset. Under our current total return swaps, we bear the risk of performance of the underlying asset and receive payments from our counterparty as compensation. In effect, these total return swaps allow us to receive the leveraged economic benefits of asset ownership without our acquiring, or our counterparty selling, the actual underlying asset. Our total return swaps reference commercial real estate loans and contain a put provision whereby our counterparty has the right to require us to buy the entire reference loan at its par value under certain reference loan performance scenarios. The put obligation imbedded in these arrangements constitutes a recourse obligation for us to perform under the terms of the contract.

Activity relating to our total return swaps for the year ended December 31, 2006 was as follows ($ values in thousands):

												Weighted Average
	Fair Market Value (Book Value)			Cash Collateral			Reference/Loan Participation			Number of Investments		Yield(1)			Maturity (Years)(3)
December 31, 2005		$	4,000		$	4,000		$	20,000		1		18.14	%		0.6
Originations(2)		4,138			4,138			40,000			2		19.55	%		1.9
Repayments		6,323			6,323			20,000			1		N/A			N/A
December 31, 2006(2)		$	1,815		$	1,815		$	40,000		2		20.55	%		1.4

(1)Calculations based on LIBOR of 5.32% as of December 31, 2006 and LIBOR of 4.39% as of December 31, 2005.

F-23

Capital Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

5.Total Return Swaps (Continued)

(2)One total return swap currently has no outstanding balance and a $3.0 million Unfunded Commitment exists.

(3)Maturity (years) based on initial maturity date of the commitments.

The total return swaps are treated as non-hedge derivatives for accounting purposes and, as such, changes in their market value are recorded through the consolidated statement of operations. At December 31, 2006 and December 31, 2005, our total return swaps were valued at par and no such consolidated statement of income impact was recorded.

6.Equity Investment in Unconsolidated Subsidiaries

Pursuant to a venture agreement with a joint venture partner, or the Venture Agreement, entered into in 2000 and subsequently amended in 2003, we have co-sponsored two private equity funds:  CT Mezzanine Partners II LP and CT Mezzanine Partners III, Inc., or Fund II and Fund III. We are an investor in the funds and our wholly-owned subsidiary, CTIMCO, serves as the investment manager to the funds. Both funds have concluded their respective investment periods and are liquidating in the ordinary course. In connection with entering into the Venture Agreement and the formation of the funds, we capitalized certain costs. These costs are being amortized over the expected life of each fund with respect to each of the funds. During the second quarter of 2006, management concluded that it no longer intends to co-sponsor private equity funds pursuant to the Venture Agreement. Accordingly, the costs related to the Venture Agreement were accelerated and fully amortized during the quarter ended June 30, 2006. Included in depreciation and amortization for the year ended December 31, 2006, was $1.8 million of the accelerated amortization of these costs.

In September of 2006, we made a founding investment in Bracor Investimentos Imobiliarios Ltda., or Bracor, a newly formed net lease commercial real estate company located and operating in Brazil. Our total commitment is $15.0 million and at December 31, 2006, we had funded $5.8 million. Bracor is owned 24% by us, 47% by Equity International, or EI, and 29% by third parties. Our Chairman, Sam Zell, is the Chairman of EI and has an ownership position in EI. Bracor’s operations will be conducted in local currency (Brazilian Reais) and changes in the USD/Reais exchange rate will impact the carrying value of our investment. At December 31, 2006, the currency valuation adjustment for our investment was $2,000 and was recorded as an adjustment to accumulated other comprehensive income/(loss) in shareholders’ equity. Our share of profits and losses from Bracor will be reported one quarter subsequent to the period earned by Bracor.

F-24

Capital Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

6.Equity Investment in Unconsolidated Subsidiaries (Continued)

Activity relating to our equity investment in unconsolidated subsidiaries for the year ended December 31, 2006 was as follows ($ values in thousands):

	Venture Agrmt.			Fund II			Fund II GP(1)				Fund III			Bracor			Total
Equity Investment
Beginning Balance	$	—		$	1,278			$	692		$	7,754		$	—		$	9,724
Equity investment	—			—				—			—			5,805			5,805
Company portion of income (loss)	—			279				(119		)	959			(132		)	987
Currency translation adjustments	—			—				—			—			2			2
Amortization of capitalized costs	—			(93		)		—			—			—			(93		)
Distributions from funds	—			(829		)		—			(5,784		)	—			(6,613		)
Ending Balance	—			635				573			2,929			5,675			9,812
Capitalized Costs
Beginning Balance	2,020			2,036				—			521			—			4,577
Capitalization of costs	—			—				—			—			41			41
Amortization of capitalized costs	(2,020		)	(772		)		—			(153		)	—			(2,945		)
Ending Balance	—			1,264				—			368			41			1,673
Total
Beginning Balance	2,020			3,314				692			8,275			—			14,301
Equity investment(2)	—			—				—			—			5,805			5,805
Company portion of fund income (loss)	—			279				(119		)	959			(132		)	987
Currency translation adjustments	—			—				—			—			2			2
Capitalization of costs	—			—				—			—			41			41
Amortization of capitalized costs	(2,020		)	(865		)		—			(153		)	—			(3,038		)
Distributions from funds	—			(829		)		—			(5,784		)	—			(6,613		)
Ending Balance	$	—		$	1,899			$	573		$	3,297		$	5,716		$	11,485

(1)$384,000 of the equity investment consists of capitalized costs at Fund II GP which are being amortized over the expected life of the fund.

(2)Includes $258,000 of additional basis that represents a difference between our share of net assets at Bracor and our carrying value.

F-25

Capital Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

6.Equity Investment in Unconsolidated Subsidiaries (Continued)

Activity relating to our equity investment in unconsolidated subsidiaries for the year ended December 31, 2005 was as follows ($ values in thousands):

	Venture Agrmt.			Fund II			Fund II GP(1)			Fund III			Bracor			Total
Equity Investment
Beginning Balance	$	—		$	3,059		$	2,431		$	10,311			$	—	$	15,801
Equity investment	—			—			—			4,660				—		4,660
Company portion of income	—			(673		)	(1,253		)	1,704				—		(222		)
Distributions from funds	—			(1,108		)	(486		)	(8,921		)		—		(10,515		)
Ending Balance	—			1,278			692			7,754				—		9,724
Capitalized Costs
Beginning Balance	2,487			2,414			—			674				—		5,575
Amortization of capitalized costs	(467		)	(378		)	—			(153		)		—		(998		)
Ending Balance	2,020			2,036			—			521				—		4,577
Total
Beginning Balance	2,487			5,473			2,431			10,985				—		21,376
Equity investment	—			—			—			4,660				—		4,660
Company portion of fund income	—			(673		)	(1,253		)	1,704				—		(222		)
Amortization of capitalized costs	(467		)	(378		)	—			(153		)		—		(998		)
Distributions from funds	—			(1,108		)	(486		)	(8,921		)		—		(10,515		)
Ending Balance	$	2,020		$	3,314		$	692		$	8,275			$	—	$	14,301

(1)$520,000 of the equity investment consists of capitalized costs at Fund II GP which are being amortized over the expected life of the Fund.

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 years ended December 31, 2006 and 2005, we received $1.7 million and $8.0 million in incentive compensation, respectively.

F-26

Capital Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

7.   Debt

At December 31, 2006 and 2005 we had $2.0 billion and $1.2 billion of total debt outstanding, respectively. The balances of each category of debt and their respective all in effective cost, including the amortization of fees and expenses were as follows ($ values in thousands):

	December 31, 2006										December 31, 2005
	Face Value		Book Value		Coupon(1)			All in Cost			Face Value		Book Value		Coupon(1)			All in Cost
Repurchase Obligations	$	704,444	$	704,444		6.34	%		6.53	%	$	369,751	$	369,751		5.33	%		5.57	%
Collateralized debt obligations
CDO I (Floating)	252,778		252,778			5.94	%		6.39	%	252,778		252,778			5.01	%		5.43	%
CDO II (Floating)	298,913		298,913			5.81	%		6.04	%	298,913		298,913			4.88	%		5.10	%
CDO III (Fixed)	264,594		266,754			5.22	%		5.25	%	269,594		272,053			5.22	%		5.25	%
CDO IV(Floating)(2)	394,055		394,055			5.74	%		5.81	%	—		—			—			—
Total CDOs	1,210,340		1,212,500			5.69	%		5.86	%	821,285		823,744			5.03	%		5.25	%
Junior subordinated debentures	51,550		51,550			7.45	%		7.53	%	—		—			—			—
Total	$	1,966,334	$	1,968,494		5.97	%		6.15	%	$	1,191,036	$	1,193,495		5.12	%		5.35	%

(1)Calculations based on LIBOR of 5.32% as of December 31, 2006 and LIBOR of 4.39% as of December 31, 2005.

(2)Comprised of $378.8 million of floating rate notes sold and $15.3 million of fixed rate notes sold.

The annual face value maturities of our debt are as follows (in millions):

	2007		2008		2009		2010		2011		Thereafter			Total
Repurchase obligations	$	293.5	$	337.0	$	52.6	$	21.3	$	—		$	—	$	704.4
CDOs	30.2		126.3		205.8		154.4		229.9			463.7		1,210.3
Junior subordinated debentures												51.6		51.6
Total debt	$	323.7	$	463.3	$	258.4	$	175.7	$	229.9		$	515.3	$	1,966.3

Repurchase Obligations

At December 31, 2006, we were a party to nine master repurchase agreements with seven counterparties that provide total commitments of $1.2 billion. At December 31, 2006, we borrowed $704.4 million under these agreements and had the ability to borrow an additional $74.1 million without pledging additional collateral.

In February 2002, we entered into a master repurchase agreement with Liquid Funding, LTD., an affiliate of Bear Stearns & Co. Inc. The agreement provided for a maximum aggregate purchase price of $150.0 million had an initial term of one year, which expired in February 2003. We have extended the agreement four times, and its current maturity is March 2007. In February 2003, we increased the amount of the 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, 2006, we had incurred borrowings under the agreement of $23.7 million.

F-27

Capital Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

7.Debt (Continued)

In May 2003, we entered into a master repurchase agreement with Goldman Sachs & Co. and Commerzbank. The agreement provided for a maximum aggregate purchase price of $50.0 million and 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. In June of 2006, we further amended the agreement extending its term to June 2009, increasing its size to $150 million and removing Commerzbank as a party to the agreement. The agreement is designed to provide us with recourse financing for our general investment activity. Under the agreement, advance rates are up to 88.0% and cash costs of funds range between LIBOR plus 0.60% and LIBOR plus 2.00%. At December 31, 2006, we had incurred borrowings under the agreement of $52.6 million and had the ability to borrow an additional $24.6 million against the assets collateralizing the agreement.

In August 2004, we entered into an additional master repurchase agreement with Goldman Sachs & Co. The agreement provides for a maximum aggregate purchase price of $50.0 million and 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, 2006, we had incurred borrowings under the agreement of $48.1 million and had the ability to borrow an additional $1.9 million against the assets collateralizing the agreement.

In March 2005, we entered into a master repurchase agreement with Bank of America. The agreement provided for a maximum aggregate purchase price of $150.0 million and 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, 2006, we had incurred borrowings under the agreement of $21.3 million.

In July 2005, we entered into a master repurchase agreement with Morgan Stanley. The agreement provided for a maximum aggregate purchase price of $75 million and 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 provided 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 92.0% and cash costs of funds range from LIBOR plus 0.40% to LIBOR plus 2.00%. At December 31, 2006, we had incurred borrowings under the agreement of $170.0 million and had the ability to borrow an additional $22.9 million against the assets collateralizing the agreement.

In July 2005, we entered into an additional master repurchase agreement with Morgan Stanley. The agreement provides for a maximum aggregate purchase price of $75 million and 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, 2006, we had incurred borrowings under the agreement of $47.9 million.

In August 2005, we entered into a master repurchase agreement with Bear Stearns & Co. Inc. The agreement provided for a maximum aggregate purchase price of $75 million and has an initial term of

F-28

Capital Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

7.Debt (Continued)

three years, expiring in August 2008. In December 2005, we entered into a related master 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  In February 2006, we amended and restated our master repurchase agreements with Bear Stearns increasing the combined commitment by $75 million to $200 million. 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 agreements, 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, 2006, we had incurred borrowings under the agreements of $119.2 million and had the ability to borrow an additional $24.7 million against the assets collateralizing the agreement.

In March 2006, we entered into a loan-specific repurchase obligation representing borrowings of $6.0 million with Lehman Brothers. The obligation is non-recourse, has a term of one year and the advance rate is 60.0% with a cash cost of LIBOR plus 2.50%

In November 2006, we entered into entered into a master repurchase agreement with JPMorgan Chase Bank, N.A. The agreement provides for a maximum aggregate purchase price of $250 million and for a rolling one-year term not to exceed three years. 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 92.0% and cash costs of funds range from LIBOR plus 0.30% to LIBOR plus 1.90%. At December 31, 2006, we had incurred borrowings under the agreement of $191.4 million.

We were also a party to eight asset specific repurchase obligations, outside of the agreements described above, with certain of the counterparties listed above. All of these repurchase obligations financed securities investments. The term of these agreements are generally one year or less and advance rates are up to 75.0% with cash costs ranging from LIBOR plus 0.45% to LIBOR plus 1.50%. These one-off repurchase obligations represent borrowings of $24.4 million which we could increase by $7.1 million without posting additional collateral or entering into new agreements.

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).

Collateralized Debt Obligations

At December 31, 2006, we had collateralized debt obligations, or CDOs, outstanding from four separate issuances with a total face value of $1.2 billion. Our existing CDOs are financing vehicles for our assets and, as such, are consolidated on our balance sheet at $1.2 billion, representing the amortized sales price of the securities sold to third parties. In total, our two floating rate reinvesting CDOs provide us with $551.7 million of debt financing at a cash cost of LIBOR plus 0.55% (5.87% at December 31, 2006) and an all in effective interest rate (including the amortization of issuance costs) of LIBOR plus 0.88% (6.20% at December 31, 2006). Our two fixed rate static CDOs provide us with $658.6 million of financing with a cash cost of 5.53% and an all in effective interest rate of 5.58% at December 31, 2006. On a combined

F-29

Capital Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

7.Debt (Continued)

basis, our CDOs provide us with $1.2 billion of non-recourse, non-mark-to-market, index matched financing at a weighted average cash cost of 0.37% over the applicable index (5.69% at December 31, 2006) and a weighted average all in cost of 0.54% over the applicable index (5.86% at December 31, 2006).

In July 2004 we issued our first CDO, which we refer to as CDO I, issuing and selling to third party 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% (5.94% at December 31, 2006) and including the amortization of fees and expenses, an all in effective rate of LIBOR plus 1.07% (6.39% at December 31, 2006).

In March 2005 we issued our second CDO, which we refer to as CDO II, issuing and selling to third party 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% (5.81% at December 31, 2006) and including the amortization of fees and expenses, an all in effective rate of LIBOR plus 0.72% (6.04% at December 31, 2006).

In August 2005, we issued our third CDO, which we call CDO III, issuing and selling to third party 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 5.22% and including the amortization of fees and expenses, an all in effective rate of 5.25% at December 31, 2006.

In March 2006, we issued our fourth CDO, which we refer to as CDO IV, issuing and selling to third party investors $429.4 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 IV was initially collateralized by a pool of $488.6 million (face value) of CMBS and other commercial real estate debt. The securitization is a static pool CDO, and as such it provides for the amortization of the CDO notes rather than reinvestment with principal proceeds from collateral repayments. The total collateral pool is now $404.7 million and total outstanding liabilities are $394.1 million. In terms of original balance, $16.7 million of the notes sold are fixed rate notes and $412.7 million are floating rate. The structure includes an amortizing interest rate swap which effectively converts the floating rate payments to a fixed rate payment. We have the option to call the entire financing beginning in March 2011. As a financing, CDO IV has a cash cost of 5.74% and including the amortization of fees and expenses, the all in effective cost is 5.81% at December 31, 2006.

F-30

Capital Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

7.   Debt (Continued)

Junior Subordinated Debentures

In February 2006, our consolidated statutory trust, CT Preferred Trust I, issued $50.0 million of trust preferred securities to a private investor and we issued to the trust $51.6 million principal amount of junior subordinated debentures. The trust preferred securities represent an undivided beneficial interest in the assets of the trust that consist solely of our junior subordinated debentures. The trust preferred securities have a 30-year term, maturing in 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%, which correspond to the interest rate payable on the junior subordinated debentures. The all in cost of the junior subordinated debentures is 7.53%.

Our interest in CT Preferred Trust I is accounted for using the equity method and the assets and liabilities are not consolidated into our financial statements due to our determination that CT Preferred Trust I is a variable interest entity under FIN 46 and that we are not the primary beneficiary of the entity. Interest on the junior subordinated debentures is included in interest expense on our consolidated statements of income while the junior subordinated notes are presented as a separate item in our consolidated balance sheet.

8.   Participations Sold

Participations sold represent interests in loans that we originated and subsequently sold to third parties. We present these sold interests as secured borrowings in conformity with GAAP on the basis that these arrangements do not qualify as sales under FAS 140. At December 31, 2006, we had four such participations sold with a total book balance of $209.4 million at a weighted average yield of LIBOR plus 3.54% (8.86% at December 31, 2006). The income earned on the loans is recorded as interest income and an identical amount is recorded as interest expense on the consolidated statements of income.

9.   Derivative Financial Instruments

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

During the year ended December 31, 2006, we entered into eleven new cash flow hedge agreements with a total current notional balance of $426.5 million. Additionally, during the twelve months ended December 31, 2006, we received $1.2 million from counterparties in settlement of seven interest rate swaps. 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.

F-31

Capital Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

9.Derivative Financial Instruments (Continued)

The following table summarizes the notional and fair values of our derivative financial instruments as of December 31, 2006. 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 risk ($ values in thousands):

Hedge	Type	Notional Value			Interest Rate			Maturity		Fair Value
Swap	Cash Flow Hedge		$	334,338		5.10	%		2015		$	(528	)
Swap	Cash Flow Hedge		74,044			4.58	%		2014		1,477
Swap	Cash Flow Hedge		18,979			3.95	%		2011		768
Swap	Cash Flow Hedge		18,369			5.14	%		2014		(168		)
Swap	Cash Flow Hedge		16,894			4.83	%		2014		177
Swap	Cash Flow Hedge		16,377			5.52	%		2018		(617		)
Swap	Cash Flow Hedge		15,259			5.05	%		2016		(23		)
Swap	Cash Flow Hedge		12,310			5.02	%		2009		(14		)
Swap	Cash Flow Hedge		8,007			4.77	%		2011		47
Swap	Cash Flow Hedge		7,410			5.31	%		2011		(113		)
Swap	Cash Flow Hedge		7,062			5.11	%		2016		(46		)
Swap	Cash Flow Hedge		6,328			4.78	%		2007		26
Swap	Cash Flow Hedge		5,355			3.12	%		2007		53
Swap	Cash Flow Hedge		5,104			5.18	%		2016		(59		)
Swap	Cash Flow Hedge		4,134			4.76	%		2007		18
Swap	Cash Flow Hedge		4,075			5.02	%		2009		(5		)
Swap	Cash Flow Hedge		3,325			5.45	%		2015		(101		)
Swap	Cash Flow Hedge		2,870			5.08	%		2011		(15		)
Total/Weighted Average			$	560,240		4.97	%		2014		$	877

As of December 31, 2006, the derivative financial instruments were reported at their fair value of $2.6 million as interest rate hedge assets and $1.7 million as interest rate hedge liabilities. Income and expense associated with these instruments is recorded as interest expense on the company’s consolidated statements of income. The amount of hedge ineffectiveness was not material during any of the periods presented.

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

F-32

Capital Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

10.Shareholders’ Equity (Continued)

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.

Common Stock Transactions

On May 11, 2004, we closed on the initial tranche of a direct public offering to designated controlled affiliates of W. R. Berkley Corporation, or WRBC. 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 WRBC 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 and 2006, we received $248,000 and $124,000, respectively from 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 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.

On November 13, 2006, we issued 2,000,000 shares of class A common stock in a public offering underwritten by Bear Stearns & Co. Inc. Gross proceeds from the offering were $43.48 per share and total net proceeds were $86.6 million.

Dividends

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 2005 and 2006 are ordinary income.

We did not repurchase any of our common stock during the year ended December 31, 2006.

F-33

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, 2006 and 2005 (in thousands, except share and per share data):

	Year ended December 31, 2006							Year ended December 31, 2005
	Net Income			Shares	Per Share Amount			Net Income			Shares	Per Share Amount
Basic EPS:
Net earnings allocable to common stock		$	54,067	15,754,655		$	3.43		$	44,111	15,181,476		$	2.91
Effect of Dilutive Securities: Options outstanding for the Purchase of common stock		—		168,742					—		154,438
Diluted EPS:
Net earnings per share of common stock and assumed conversions		$	54,067	15,923,397		$	3.40		$	44,111	15,335,914		$	2.88

The following table sets forth the calculation of Basic and Diluted EPS for the year ended December 31, 2004 (in thousands, except share and per share data):

	Year ended December 31, 2004
	Net Income			Shares	Per Share Amount
Basic EPS:
Net earnings allocable to common stock		$	21,976	10,141,380		$	2.17
Effect of Dilutive Securities:
Options outstanding for the purchase of common stock		—		135,506
Diluted EPS:
Net earnings per share of common stock and assumed conversions		$	21,976	10,276,886		$	2.14

11.   General and Administrative Expenses

General and administrative expenses for the years ended December 31, 2006, 2005 and 2004 consisted of (in thousands):

	2006		2005		2004
Salaries and benefits	$	11,450	$	10,084	$	8,299
Employee promote compensation	398		1,999		—
Employee stock based compensation	3,961		2,545		1,414
Professional services	4,362		3,512		2,233
Other	2,904		3,799		3,283
Total	$	23,075	$	21,939	$	15,229

F-34

Capital Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

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 except for the operations of our taxable REIT subsidiary, CTIMCO. 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, 2006 and 2005, we were in compliance with all REIT requirements.

The REIT has federal net operating loss carryforwards as of December 31, 2006 of approximately $3.8 million. Such net operating loss carryforwards expire through 2011. 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, 2006 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.

As we are operating in a manner to meet the qualifications to be taxed as a REIT for federal income tax purposes during the 2006 tax year, we do not expect we will be liable for income taxes or for taxes on “built-in gain” on our assets at the federal and state level in future years, other than on our taxable REIT subsidiaries. The amounts for 2006 and 2005 relate only to differences related to taxable earnings of our taxable REIT subsidiaries.

Our taxable REIT subsidiaries’ provision for income taxes was comprised as follows:

	Years ended December 31,
	2006				2005
Current provision:
Federal		$	(2,966	)		$	213
State		(139		)		—
Total current provision		(3,105		)		213
Deferred provision
Federal		1,747				—
State		(1,377		)		—
Total deferred provision		370				—
Total provision		$	(2,735	)		$	213

F-35

Capital Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

12.   Income Taxes (Continued)

The taxable REIT subsidiaries’ effective income tax rate as a percentage of pretax income or loss differed from the U.S. federal statutory rate as follows:

	Years ended December 31,
	2006			2005
U.S. Federal statutory rate		35.0	%		35.0	%
State and local income taxes, net of federal tax benefit		11.1	%		11.1	%
Valuation allowance		(5.3	)%		158.7	%
Effective income tax rate		40.8	%		204.8	%

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.

The components of the provision (benefit) for deferred taxes were as follows:

	Years ended December 31,
	2006			2005
Fund II incentive management fee	$	1,796		$	2,578
Unearned compensation expense for book purposes not recognized for tax	(1,347		)	(1,192		)
NOL carryforwards State and City	(1,377		)	—
NOL carryforwards Federal	(744		)	—
Other	73			(10		)
Valuation allowance	1,969			(1,376		)
Total deferred provision	$	370		$	—

The significant components of deferred tax assets and liabilities were as follows:

	Years ended December 31,
	2006			2005
Fund II incentive management fee	$	414		$	2,210
Unearned compensation expense for book purposes not recognized for tax	3,049			1,703
NOL carryforwards State and City	1,377			—
NOL carryforwards Federal	744
Other	146			218
Deferred tax asset	5,730			4,131
Valuation allowance	(2,121		)	(152		)
Net deferred tax asset	$	3,609		$	3,979

The taxable REIT subsidiaries have Federal and State and City net operating loss carryforwards as of December 31, 2006 of approximately $2.1 million and $8.1 million, respectively, which expire through 2026.

F-36

Capital Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

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, 2006, 2005 and 2004, was $118,000, $104,000 and $99,000, respectively.

Equity Incentive Plans

We had three benefit plans in effect at December 31, 2006:  (1) the second amended and restated 1997 long-term incentive stock plan, or 1997 Employee Plan, (2) the amended and restated 1997 non-employee director stock plan, or 1997 Director Plan, and (3) the amended and restated 2004 long-term incentive plan, or 2004 Employee Plan. Activity under these three plans for the year ended December 31, 2006 is summarized in the chart below in share and share equivalents:

	1997 Employee Plan			1997 Director Plan			2004 Employee Plan			Total
Options(1)
Beginning Balance		352,960			85,002			—		437,962
Granted 2006		—			—			—		—
Exercised 2006		(29,503	)		(8,334	)		—		(37,837	)
Canceled 2006		—			—			—		—
Ending Balance		323,457			76,668			—		400,125
Restricted Stock(2)
Beginning Balance		—			—			405,790		405,790
Granted 2006		—			—			119,504		119,504
Vested 2006		—			—			(27,398	)	(27,398	)
Forfeited 2006		—			—			(16,929	)	(16,929	)
Ending Balance		—			—			480,967		480,967
Stock Units(3)
Beginning Balance		—			62,384			—		62,384
Granted 2006		—			11,464			—		11,464
Converted 2006		—			—			—		—
Ending Balance		—			73,848			—		73,848
Total Outstanding Shares		323,457			150,516			480,967		954,940

(1)All options are fully vested as of December 31, 2006.

(2)Comprised of both performance based awards that vest upon the attainment of certain common equity return thresholds and time based awards that vest based upon an employee’s continued employment on vesting dates.

(3)Stock units are given to certain members of our board of directors in lieu of cash compensation for services and in lieu of dividends earned on previously granted stock units.

F-37

Capital Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

13.Employee Benefit Plans (Continued)

The following table summarizes the outstanding options as of December 31, 2006:

Exercise Price per Share	Options Outstanding				Weighted Average Exercise Price per Share						Weighted Average Remaining Life
	1997 Employee Plan		1997 Director Plan		1997 Employee Plan			1997 Director Plan			1997 Employee Plan		1997 Director Plan
$10.00 - $15.00		55,939		—		$	13.34		$	—		3.95		—
$15.00 - $20.00		180,850		8,334		16.75			18.00			3.58		0.54
$20.00 - $25.00		—		—		—			—			—		—
$25.00 - $30.00		86,668		68,334		28.85			30.00			1.29		1.08
Total/Weighted Average		323,457		76,668		$	19.40		$	28.70		3.03		1.02

In addition to the equity interests detailed above, we have granted percentage interests in the incentive compensation received by us from the Funds. At December 31, 2006, we had granted, net of forfeitures, 24% and 43% of the Fund II and Fund III incentive compensation received by us, respectively.

1997 Employee Plan

Our 1997 Employee 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 762,667 shares of class A common stock may be issued during the fiscal year 2007 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, 2006. 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.

Our 1997 Employee 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.

F-38

Capital Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

13.Employee Benefit Plans (Continued)

The following table summarizes the activity under our 1997 Employee Plan for the years ended December 31, 2006, 2005 and 2004:

	Options Outstanding			Exercise Price per Share		Weighted Average Exercise Price per Share
Outstanding at January 1, 2004		517,468		$	12.375-$30.00		$	19.09
Granted		—		—			—
Exercised		(56,079	)	$	12.375-$18.00		14.52
Canceled		(2,391	)	$	15.000-$15.90		15.48
Outstanding at December 31, 2004		458,998		$	12.375-$30.00		19.67
Granted		—		—			—
Exercised		(83,815	)	$	12.375-$30.00		18.75
Canceled		(22,223	)	$30.00			30.00
Outstanding at December 31, 2005		352,960		$	12.375-$30.00		19.23
Granted		—		—			—
Exercised		(29,503	)	$	12.375-$18.00		17.37
Canceled		—		—			—
Outstanding at December 31, 2006		323,457		$	12.375-$30.00		$	19.40

At December 31, 2006, 2005 and 2004, options to purchase 323,457 shares, 352,960 shares and 428,995 shares, respectively, were exercisable. At December 31, 2006, the outstanding options have various remaining contractual lives ranging from 0.54 to 5.09 years with a weighted average life of 3.03 years.

1997 Director Plan

Our 1997 Director Plan permits the grant of nonqualified stock option, restricted stock, stock appreciation right, performance unit, performance stock and stock unit awards. A maximum of 762,667 shares of class A common stock may be issued during the fiscal year 2007 pursuant to awards under our 1997 Director Plan and our 1997 Employee Plan, in addition to the shares subject to awards outstanding under the two plans at December 31, 2006.

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.

F-39

Capital Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

13.   Employee Benefit Plans (Continued)

Restricted stock may be granted under our 1997 Director 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 our 1997 Director Plan for the years ended December 31, 2006, 2005 and 2004:

	Options Outstanding			Exercise Price per Share		Weighted Average Exercise Price per Share
Outstanding at January 1, 2004		85,002		$	18.00-30.00		$	27.65
Granted		—		—			—
Exercised		—		—			—
Cancelled		—		—			—
Outstanding at December 31, 2004		85,002		$	18.00-30.00		27.65
Granted		—		—			—
Exercised		—		—			—
Cancelled		—		—			—
Outstanding at December 31, 2005		85,002		$	18.00-30.00		27.65
Granted		—		—			—
Exercised		(8,334	)	$18.00			18.00
Cancelled		—		—			—
Outstanding at December 31, 2006		76,668		$	18.00-30.00		$	28.70

At December 31, 2006, 2005 and 2004, all of the options outstanding were exercisable. At December 31, 2006, the outstanding options have a remaining contractual life of 0.54 years to 1.08 years with a weighted average life of 1.02 years. 8,334 of the options are priced at $18.00 and the remaining 68,334 are priced at $30.00.

2004 Employee Plan

Our 2004 Employee 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 Employee 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.

F-40

Capital Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

13.Employee Benefit Plans (Continued)

Restricted stock may be granted under the 2004 Employee 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. To date, grants have been valued at the market price on the date of grant.

As of year end 2006, unvested share based compensation consisted of 480,967 shares of restricted stock with an unamortized value of $7.5 million. Subject to vesting provisions, these costs will be recognized as compensation expense over the next few years.

The 2004 Employee 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.

A maximum of 571,678 shares of class A common stock may be issued during the fiscal year 2007 pursuant to awards under the 2004 Employee Plan in addition to the shares subject to awards outstanding at December 31, 2006.

14.   Fair Values of Financial Instruments

The FASB Statement of Financial Accounting Standards No. 107, “Disclosures about Fair Value of Financial Instruments”, or FAS 107, 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. FAS 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 the Company.

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 obtained 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.

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

F-41

Capital Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

14.Fair Values of Financial Instruments (Continued)

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

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.

Junior subordinated debentures: These instruments bear interest at fixed rates. The fair value was obtained by calculating the present value based on current market interest rates.

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

	December 31, 2006						December 31, 2005
	Carrying Amount		Face Value		Fair Value		Carrying Amount		Face Value		Fair Value
Financial assets:
CMBS	$	810,970	$	850,619	$	807,087	$	487,970	$	494,474	$	488,352
Loans receivable	1,754,536		1,758,114		1,761,977		990,142		996,113		998,670
Financial liabilities:
CDOs	1,212,500		1,210,340		1,190,612		823,744		821,285		819,406
Junior Sub. Debentures	51,500		51,500		52,431		—		—		—

15.   Supplemental Disclosures for Consolidated Statements of Cash Flows

Interest paid on our outstanding debt for 2006, 2005 and 2004 was $102.0 million, $34.3 million and $19.0 million, respectively. Income taxes recovered (paid) by us in 2006, 2005 and 2004 were $583,000, ($7,000) and ($2.4 million), respectively. Non-cash investing and financing activity of $77.7 million during 2006 resulted from paydowns on the loans we classify as participations sold.

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 and 2004, we incurred expenses of $50,000 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, 2006, 2005 and 2004, we incurred $45,000, $49,000 and $49,000, respectively, of expenses in connection with these services.

We pay Global Realty Outsourcing, Inc., a company in which we previously had an equity investment and upon which our 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 and 2004, we incurred $557,000 and $568,000, respectively, of expenses

F-42

Capital Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

16.Transactions with Related Parties (Continued)

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 were indebted to Global Realty Outsourcing, Inc. for $57,400 which is included in accounts payable and accrued expenses.

In September 2006, we made a founding investment in Bracor Investimentos Imobiliarios Ltda., or Bracor, a newly formed net lease commercial real estate company located and operating in Brazil. Our total commitment is $15.0 million and at December 31, 2006, we had funded $5.8 million. Bracor is owned 24% by us, 47% by Equity International, or EI, and 29% by third parties. Our Chairman, Sam Zell, is the Chairman of EI and has an ownership position in EI. Bracor’s operations will be conducted in local currency (Brazilian Reais) and changes in the USD/Reais exchange rate will impact the carrying value of our investment. At December 31, 2006, the currency valuation adjustment for our investment was $2,000 and was recorded as an adjustment to accumulated other comprehensive income/(loss) in shareholders’ equity. Our share of profits and losses from Bracor will be reported one quarter subsequent to the period earned by Bracor.

On November 9, 2006, we commenced our CT High Grade MezzanineSM investment management initiative and entered into three separate account agreements with affiliates of W. R. Berkley Corporation, or WRBC, for an aggregate of $250 million. Pursuant to these agreements, we invest, on a discretionary basis, capital on behalf of WRBC in low risk commercial real estate mortgages, mezzanine loans and participations therein. WRBC beneficially owns approximately 11.5% of our outstanding class A common stock as of February 28, 2007 and a member of our board of directors is an employee of WRBC. The separate accounts are entirely funded with committed capital from WRBC and are managed by a subsidiary of our wholly-owned investment management subsidiary, CT Investment Management Co. LLC, or CTIMCO.  Each separate account has a one-year investment period with extension provisions. CTIMCO will earn a management fee equal to 0.25% per annum on invested assets.

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.

17.   Commitments and Contingencies

Leases

We lease premises and equipment under operating leases with various expiration dates. Minimum annual rental payments at December 31, 2006 are as follows (in thousands):

Years ending December 31,
2007	$975
2008	488
	$1,463

Rent expense for office space and equipment amounted to $990,000, $959,000 and $903,000 for the years ended December 31, 2006, 2005 and 2004, respectively.

F-43

Capital Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

17.Commitments and Contingencies (Continued)

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, 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 agreement, Mr. Plavin was granted an award of 90,000 restricted shares, 50% of which vest over time in eight equal quarterly increments commencing on March 31, 2007 and 50% of which are 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-44

Capital Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

17.   Commitments and Contingencies (Continued)

Effective August 4, 2006, we entered into an employment agreement, with Thomas C. Ruffing, pursuant to which Mr. Ruffing will serve as our chief credit officer and head of asset management through December 31, 2008 (subject to earlier termination under certain circumstances). Mr. Ruffing previously served as a managing director. Under the agreement, Mr. Ruffing will receive a base salary at an annual rate of $250,000, subject to possible increases by our board of directors. Pursuant to the agreement, Mr. Ruffing, will receive for each year commencing with 2006, a cash bonus in an amount determined by our board of directors, but in no event less than $250,000 per year. Pursuant to the agreement, Mr. Ruffing was granted an award of 19,510 restricted shares, 50% of which vest over time in two equal installments on December 31, 2007 and December 31, 2008 and 50% of which are issued as a performance compensation award and will vest on December 31, 2008 if the total shareholder return, measured for the term of the agreement, is at least 13% per annum. As of the effective date, Mr. Ruffing 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.

Effective September 29, 2006, we entered into an employment agreement with Geoffrey G. Jervis, pursuant to which Mr. Jervis will serve as our chief financial officer through December 31, 2009 (subject to earlier termination under certain circumstances). Under the agreement, Mr. Jervis will receive a base salary at an annual rate of $350,000, subject to possible increase by our board of directors. Pursuant to the agreement, Mr. Jervis will receive a cash bonus in the amount of $650,000 for calendar year 2006, payable no later than March 15, 2007. Pursuant to the agreement, Mr. Jervis was granted an award of 50,000 restricted shares, 50% of which vest over time in eight equal quarterly installments commencing on March 31, 2008 and 50% of which are issued as a performance compensation award and will vest on December 31, 2009 if the total shareholder return, measured for the term of the agreement, is at least 13% per annum. 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.

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.

F-45

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, 2006, respectively (in thousands):

	Balance Sheet Investment			Investment Management				Inter-Segment Activities				Total
Income from loans and other investments:
Interest and related income		$	175,404		$	—			$	—		$	175,404
Less: Interest and related expenses		104,607			—				—			104,607
Income from loans and other investments, net		70,797			—				—			70,797
Other revenues:
Management and advisory fees		—			10,387				(7,737		)	2,650
Incentive management fees		—			1,652				—			1,652
Special servicing fees		40			65				—			105
Other interest income		1,426			43				(115		)	1,354
Total other revenues		1,466			12,147				(7,852		)	5,761
Other expenses:
General and administrative		12,458			18,354				(7,737		)	23,075
Other interest expense		—			115				(115		)	—
Depreciation and amortization		2,792			257				—			3,049
Total other expenses		15,250			18,726				(7,852		)	26,124
Income/(loss) from equity investments in Funds		1,016			(118		)		—			898
Income before income taxes		58,029			(6,697		)		—			51,332
Income tax benefit		—			(2,735		)		—			(2,735		)
Net income		$	58,029		$	(3,962	)		$	—		$	54,067
Total Assets		$	2,649,866		$	4,720			$	(6,022	)	$	2,648,564

All revenues were generated from external sources within the United States. The Investment Management segment earned fees of $7.7 million for management of the Balance Sheet Investment segment and $115,000 for inter-segment interest for the year ended December 31, 2006, respectively, which is reflected as offsetting adjustments to other revenues and other expenses in the Inter-Segment Activities column in the tables above.

F-46

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, 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		—			11,020				(5,929		)	5,091
Incentive management fees		—			8,033				—			8,033
Gain on sale of investments		4,951			—				—			4,951
Other interest income		471			90				(8		)	553
Total other revenues		5,422			19,143				(5,937		)	18,628
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/(loss) from equity investments		1,031			(1,253		)		—			(222		)
Income before income taxes		44,220			104				—			44,324
Provision for income taxes		—			213				—			213
Net income (loss) allocable to class A common stock		$	44,220		$	(109	)		$	—		$	44,111
Total Assets		$	1,558,372		$	10,396			$	(11,126	)	$	1,557,642

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 Balance Sheet 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-47

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, 2006, 2005 and 2004 (in thousands except per share data):

	March 31			June 30		September 30			December 31
2006
Revenues		$	32,919	$	47,453		$	47,527		$	54,164
Net income		$	10,949	$	14,192		$	13,437		$	15,489
Net income per share of common stock:
Basic		$	0.72	$	0.93		$	0.88		$	0.92
Diluted		$	0.71	$	0.91		$	0.86		$	0.91
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

Basic and diluted earnings per share are computed independently for each of the periods. Accordingly, the sum of the quarterly earnings per share amounts may not agree to the total for the year.

20.Subsequent Event

On January 10, 2007, the final outstanding asset of Fund II repaid. Following the repayment, CTIMCO has begun the process of winding up the operations of Fund II and expects to complete the process in the first half of 2007.

F-48

Capital Trust, Inc. and Subsidiaries
Schedule IV—Mortgage Loans on Real Estate
As of December 31, 2006
(Dollars in thousands)

	Interest	Final		Periodic	Face		Carrying
	Description/	Payment		Maturity	Payment		Prior		Amount of		Amount of
Type of Loan/Borrower	Location	Rates		Date	Terms (1)		Liens(2)		Loans(3)		Loans
Mortgage Loans:
All other mortgage loans individually less than 3%							$	118,191	$	237,057	$	237,057
Total mortgage loans							118,191		237,057		237,057
Mezzanine Loans:
Borrower A	Healthcare/ Various	LIBOR + 5.85	%	5/9/2011		I/O	1,226,700		86,700		86,700
Borrower B	Multifamily/ Retail/ New York, NY	LIBOR + 3.50	%	12/14/2012		P&I(4)	488,068		77,547		77,547
All other mezzanine loans individually less than 3%							17,856,996		644,969		643,381
Total mezzanine loans							19,571,764		809,216		807,628
Subordinate Mortgage Interests:
Borrower C	Retail/ Sunrise, FL	LIBOR + 4.30	%	1/9/2010		IO	475,000		150,000		150,000
Borrower D	Multifamily/ Various	LIBOR + 2.45	%	10/11/2009		IO	844,500		56,300		56,300
All other Subordinate Mortgage Interests individually less than 3%							2,861,533		505,541		503,551
Total Subordinate Mortgage Interests							4,181,033		711,841		709,851
Total loans							$	23,870,988	$	1,758,114	$	1,754,536

Explanatory Notes:

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

(2)Represents only third party liens.

(3)Does not include Unfunded Commitments.

(4)P&I to be paid only after prior lien is fully repaid.

S-1

EX-10.35

Exhibit 10.35

$250,000,000

MASTER REPURCHASE AGREEMENT

Dated as of November 1, 2006

among

CAPITAL TRUST, INC.

as Seller,

and

JPMORGAN CHASE BANK, N.A.,

as Buyer

TABLE OF CONTENTS

		Page
ARTICLE 1.	APPLICABILITY	1
ARTICLE 2.	DEFINITIONS	1
ARTICLE 3.	INITIATION; CONFIRMATION; TERMINATION; FEES; REDUCTION OF FACILITY AMOUNT	21
ARTICLE 4.	MARGIN MAINTENANCE	30
ARTICLE 5.	INCOME PAYMENTS AND PRINCIPAL PAYMENTS	31
ARTICLE 6.	SECURITY INTEREST	34
ARTICLE 7.	PAYMENT, TRANSFER AND CUSTODY	36
ARTICLE 8.	SALE, TRANSFER, HYPOTHECATION OR PLEDGE OF PURCHASED ASSETS	43
ARTICLE 9.	RESERVED	43
ARTICLE 10.	REPRESENTATIONS AND WARRANTIES	43
ARTICLE 11.	NEGATIVE COVENANTS OF SELLER	51
ARTICLE 12.	AFFIRMATIVE COVENANTS OF SELLER	52
ARTICLE 13	EVENTS OF DEFAULT; REMEDIES	56
ARTICLE 14.	SINGLE AGREEMENT	61
ARTICLE 15.	RECORDING OF COMMUNICATIONS	61
ARTICLE 16.	NOTICES AND OTHER COMMUNICATIONS	62
ARTICLE 17.	ENTIRE AGREEMENT; SEVERABILITY	62

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ARTICLE 18.	NON-ASSIGNABILITY	62
ARTICLE 19.	GOVERNING LAW	63
ARTICLE 20.	NO WAIVERS, ETC	63
ARTICLE 21.	USE OF EMPLOYEE PLAN ASSETS	63
ARTICLE 22.	INTENT	64
ARTICLE 23.	DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS	65
ARTICLE 24.	CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL	65
ARTICLE 25.	NO RELIANCE	66
ARTICLE 26.	INDEMNITY	67
ARTICLE 27.	DUE DILIGENCE	68
ARTICLE 28.	SERVICING	68
ARTICLE 29.	MISCELLANEOUS	69

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ANNEXES, EXHIBITS AND SCHEDULES

ANNEX I	Names and Addresses for Communications between Parties
SCHEDULE I	Advance Rates and Applicable Pricing Rates
EXHIBIT I	Form of Confirmation
EXHIBIT II	Authorized Representatives of Seller
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 Assets
EXHIBIT VII	Asset Information
EXHIBIT VIII	Advance Procedure
EXHIBIT IX	Excluded Transferees
EXHIBIT X	Form of Bailee Letter
EXHIBIT XI	[Reserved]
EXHIBIT XII	Form of Margin Deficit Notice
EXHIBIT XIII	UCC Filing Jurisdictions
EXHIBIT XIV	[Reserved]
EXHIBIT XV	Additional Eligible Collateral
EXHIBIT XVI	Form of Servicer Notice
EXHIBIT XVII	Form of Release Letter
EXHIBIT XVIII	[Reserved]
EXHIBIT XIX	Covenant Compliance Certificate
EXHIBIT XX	Control Agreement
EXHIBIT XXI	Form of Custodial Agreement

iii

MASTER REPURCHASE AGREEMENT

MASTER REPURCHASE AGREEMENT, dated as of November 1, 2006, by and among CAPITAL TRUST, INC., a Maryland corporation (the “Seller” with respect to the Eligible Assets that it sells to Buyer) and JPMORGAN CHASE BANK, N.A., a banking association organized under the laws of the United States (the “Buyer”).

ARTICLE 1.
APPLICABILITY

From time to time the parties hereto may enter into transactions in which Seller and Buyer agree to the transfer from Seller to Buyer all of its rights, title and interest to certain Eligible Assets (as defined herein) or other assets and, in each case, the other related Purchased Items (as defined herein) (collectively, the “Assets”) against the transfer of funds by Buyer to Seller, with a simultaneous agreement by Buyer to transfer back to Seller such Assets at a date certain or on demand, against the transfer of funds by Seller to Buyer.  Each such transaction shall be referred to herein as a “Transaction” and, unless otherwise agreed in writing, shall be governed by this Agreement, including any supplemental terms or conditions contained in any exhibits identified herein as applicable hereunder.  Each individual transfer of an Eligible Asset shall constitute a distinct Transaction.

ARTICLE 2.
DEFINITIONS

“Accelerated Repurchase Date” shall have the meaning specified in Article 13(b)(i) of this Agreement.

“Accepted Servicing Practices” shall mean with respect to any applicable Purchased Asset, those mortgage servicing practices of prudent mortgage lending institutions that service mortgage and/or mezzanine loans of the same type as such Purchased Asset in the state where the related underlying real estate directly or indirectly securing or supporting such Purchased Asset is located.

“Acceptable Attorney” means an attorney-at-law that has delivered at Seller’s request a Bailee Letter, with the exception of an attorney whom Buyer has notified Seller is not satisfactory to Buyer.

“Act of Insolvency” shall mean, with respect to any Person, (i) the filing of a petition, commencing, or authorizing the commencement of any case or proceeding under any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law relating to the protection of creditors, or suffering any such petition or proceeding to be commenced by another which is consented to, not timely contested or results in entry of an order for relief; (ii) the seeking or consenting to the appointment of a receiver, trustee, custodian or similar official for such Person or any substantial part of the property of such Person; (iii) the appointment of a receiver, conservator, or manager for such Person by any governmental agency or authority having the jurisdiction to do so; (iv) the making of a general assignment for the benefit of

creditors; (v) the admission by such Person of its inability to pay its debts or discharge its obligations as they become due or mature; or (vi) that any Governmental Authority or agency or any person, agency or entity acting or purporting to act under Governmental Authority shall have taken any action to condemn, seize or appropriate, or to assume custody or control of, all or any substantial part of the property of such Person, or shall have taken any action to displace the management of such Person or to curtail its authority in the conduct of the business of such Person.

“Additional Eligible Collateral” shall mean any of the items indicated on Exhibit XV hereto.

“Advance Rate” shall mean, with respect to each Transaction and any Pricing Rate Period, the initial Advance Rate selected by Seller for such Transaction as shown in the related Confirmation, unless otherwise agreed to by Buyer and Seller,.

“Affiliate” shall mean, when used with respect to any specified Person, (i) 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, or (ii) any “affiliate” of such Person, as such term is defined in the Bankruptcy Code.

“Affiliated Hedge Counterparty” shall mean JPMorgan Chase Bank, N.A., or any Affiliate thereof, in its capacity as a party to any Hedging Transaction with Seller.

“Agreement” shall mean this Master Repurchase Agreement, dated as of November 1, 2006 by and among Capital Trust, Inc. and JPMorgan Chase Bank, N.A., as such agreement may be modified or supplemented from time to time.

“Alternative Rate” shall have the meaning specified in Article 3(h) of this Agreement.

“Alternative Rate 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 the Alternative Rate.

“Applicable Spread” shall mean, with respect to a Transaction involving a Purchased Asset in any Asset Type Grouping:

(i)       so long as no Event of Default shall have occurred and be continuing, the incremental per annum rate (expressed as a number of “basis points”, each basis point being equivalent to 1/100 of 1%) specified in Schedule I attached to this Agreement as being the “Applicable Spread” for Purchased Assets in such Asset Type Grouping for the applicable loan-to-value ratio shown on Schedule I or Rating Agency ratings, as applicable, or such lower rate as may be determined by Buyer in its sole discretion, in the event that the Advance Rate applicable to any Purchased Asset is less than the related Maximum Advance Rate, in each case as determined by the Buyer on each Pricing Rate Determination Date in accordance with Article 3(d), and

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(ii)      after the occurrence and during the continuance of an Event of Default, the applicable incremental per annum rate described in clause (i) of this definition, plus 400 basis points (4.0%).

“Asset Information” shall mean, with respect to each Purchased Asset, the information set forth in Exhibit VII attached hereto.

“Asset Type Grouping” shall mean, with respect to the Eligible Assets, any of the types of Eligible Assets listed in Schedule I attached to this Agreement.

“Assets” shall have the meaning specified in Article 1.

“B-Note” means the original promissory note, if any, that was executed and delivered in connection with the subordinate portion of a Senior Mortgage Loan.

“Bailee Letter” means a letter from an Acceptable Attorney or from a Title Company, in the form attached to this Agreement as Exhibit X, wherein such Acceptable Attorney or Title Company in possession of a Purchased Asset File (i) acknowledges receipt of such Purchased Asset File, (ii) confirms that such Acceptable Attorney, Title Company, or other Person acceptable to Buyer is holding the same as bailee of Buyer under such letter and (iii) agrees that such Acceptable Attorney or Title Company shall deliver such Purchased Asset File to the Custodian by not later than the third (3rd) Business Day following the Purchase Date for the related Purchased Asset.

“Bankruptcy Code” shall mean The United States Bankruptcy Code of 1978, as amended from time to time.

“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.  Notwithstanding the foregoing sentence, when used with respect to the determination of LIBOR, “Business Day” shall only be a day on which commercial banks are open for international business (including dealings in U.S. Dollar deposits) in London, England.

“Buyer” shall mean JPMorgan Chase Bank, N.A., or any successor.

“Buyer’s Margin Amount” shall mean with respect to any Transaction and any Purchased Asset on any date, the Maximum Advance Rate available for such Purchased Asset, multiplied by the Market Value of such Purchased Asset as of the date of determination.

“Capitalized Lease Obligations” shall mean obligations under a lease that are required to be capitalized for financial reporting purposes in accordance with GAAP.  The amount of a Capitalized Lease Obligation is the capitalized amount of such obligation as would be required to be reflected on the balance sheet prepared in accordance with GAAP of the applicable Person as of the applicable date.

“Cash Management Account” shall mean a segregated interest bearing account, in the name of Buyer, established at the Depository pursuant to the Control Agreement.

3

“CF Sweep Event” shall mean a determination by Buyer, in accordance with Article 4 of this Agreement, that a Margin Deficit exists.

“Closing Date” shall mean November 1, 2006.

“CMBS” shall mean pass-through certificates representing beneficial ownership interests in one or more first lien mortgage loans secured by commercial and/or multifamily properties, regardless of rating.

“Code” shall mean the Internal Revenue Code of 1986, as amended.

“Collateral” shall have the meaning specified in Article 6 of this 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.

“Confirmation” shall have the meaning specified in Article 3(b) of this Agreement.

“Control Agreement” shall mean that certain Depository Agreement, dated as of the date hereof, among Buyer, Seller and the Depository, in the form attached hereto as Exhibit XX.

“Covenant Compliance Certificate” shall have the meaning specified in Article 3(b)(ix) hereof.

“CRE CDO” shall mean commercial real estate collateralized debt obligations.

“Custodial Agreement” shall mean the Custodial Agreement, dated as of the date hereof, by and among the Custodian, Seller and Buyer, the form of which is attached hereto as Exhibit XXI.

“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 Article 7 of this Agreement, a form of which is attached hereto as Exhibit IV.

“Custodian” shall mean LaSalle Bank, National Association, or any successor Custodian appointed by Buyer with the consent of Seller.

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

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

“Defaulted Mortgage Asset” shall mean any loan (a) that is sixty (60) days or more delinquent in the payment of principal, interest, fees or other amounts payable under the terms of the related loan documents, (b) as to which an Act of Insolvency shall have occurred with respect

4

to the Borrower or (c) as to which a material non-monetary event of default shall have occurred under any document included in the Purchased Asset File for such Purchased Asset.

“Delinquent Mortgage Asset” shall mean a loan that is thirty (30) or more days, but less than sixty (60) days, delinquent in the payment of principal, interest, fees or other amounts payable under the terms of the related loan documents.

“Depository” shall mean PNC Bank, National Association, or any successor Depository appointed by Buyer with the prior written consent of Seller (such consent to not be unreasonably withheld or delayed).

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

“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 Article 3(e) of this Agreement.

“EBITDA” shall mean, for any period, the sum, without duplication, for such period of (a) Net Income of Seller for such period, (b) the sum of provisions for such period for income taxes, interest expense, and depreciation and amortization expense used in determining such Net Income, (c) amounts deducted in accordance with GAAP in respect of other non cash expenses in determining such Net Income and (d) the amount of any aggregate net loss (or minus the amount of any gain) during such period arising from the sale, exchange or other disposition of capital assets (determined in accordance with GAAP) by Seller, excluding any reporting implications of Financial Interpretations No. 45 and 46 and FASB 150.

“EBITDA to Fixed Charge Ratio” shall mean, determined as of any date of determination, the ratio of (x) EBITDA during the twelve (12) month period ending on the date of determination to (y) the Fixed Charges due and owing during the twelve (12) month period ending on the date of determination.

“Eligible Assets” shall mean any of the following types of assets or loans (i) that are acceptable to Buyer in its sole and absolute discretion, exercised in good faith (ii) with respect to which there is not a Material Breach with respect to the representations and warranties set forth in this Agreement (including the exhibits hereto) and (iii) that are secured directly or indirectly by a property that is a multifamily, retail, office, warehouse and hospitality property (or any other property type acceptable to Buyer in its sole discretion, exercised in good faith) and is located in the United States of America, its territories or possessions (or elsewhere, in the sole discretion of Buyer):

(i)           Senior Mortgage Loans;

(ii)          B-Notes/Junior Interests;

(iii)         Mezzanine Loans;

5

(iv)    CMBS;

(v)     CRE CDO rated BB-/Ba3 or higher, or, if issued by Seller or an Affiliate of Seller, rated BBB/Baa3 or higher;

(vi)    any Additional Eligible Collateral transferred to Buyer in connection with a Margin Deficit; and

(vii)   any other asset types or classifications that are mutually acceptable to Buyer and Seller, subject to mutual agreement on all necessary and appropriate modifications to this Agreement and each of the Transaction Documents, as determined by Buyer in its sole and absolute discretion.

Notwithstanding anything to the contrary contained in this Agreement, the following shall not be Eligible Assets for purposes of this Agreement: (i) Non-performing loans; (ii) loans that are Defaulted Mortgage Assets or Delinquent Mortgage Assets; or (iii) assets secured directly or indirectly by loans described in the preceding clauses (i) or (ii), other than CMBS or CRE CDO.

“Eligible Loans” shall mean any Senior Mortgage Loans, B-Notes/Junior Interests or Mezzanine Loans that are also Eligible Assets.

“Environmental Law” shall mean any federal, state, foreign or local statute, law, rule, regulation, ordinance, code, guideline, written policy and rule of common law now or hereafter in effect and in each case as amended, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, relating to the environment, employee health and safety or Hazardous Materials, including, without limitation, CERCLA; RCRA; the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq.; the Clean Air Act, 42 U.S.C. § 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. § 3803 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. § 2701 et seq.; the Emergency Planning and the Community Right-to-Know Act of 1986, 42 U.S.C. § 11001 et seq.; the Hazardous Material Transportation Act, 49 U.S.C. § 1801 et seq. and the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq.; and any state and local or foreign counterparts or equivalents, in each case as amended from time to time.

“Environmental Site Assessment” shall have the meaning specified in paragraph 30 of the section of Exhibit VI dealing with Eligible Loans.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated thereunder.  Article 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” shall mean any corporation or trade or business that is a member of any group of organizations (i) described in Article 414(b) or (c) of the Code of which Seller is a member and (ii) solely for purposes of potential liability under Article 302(c)(11) of ERISA and Article 412(c)(11) of the Code and the lien created under Article 302(f) of ERISA and

6

Article 412(n) of the Code, described in Article 414(m) or (o) of the Code of which Seller is a member.

“Event of Default” shall have the meaning specified in Article 13 of this Agreement.

“Extension Period” shall have the meaning specified in Article 3(l) of this Agreement.

“Extension Structuring Fee” shall have the meaning set forth in Article 3(l) of this Agreement.

“Facility Amount” shall mean $250,000,000, or such lesser amount as determined by Seller in accordance with Article 3(m).

“Federal Funds Rate” shall mean, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for the day of such transactions received by Buyer from three federal funds brokers of recognized standing selected by it.

“Filings” shall have the meaning specified in Article 6(d) of this Agreement.

“Financing Lease” shall mean any lease of property, real or personal, the obligations of the lessee in respect of which are required in accordance with GAAP to be capitalized on a balance sheet of the lessee.

“Fixed Charges” shall mean, for any period, the sum, without duplication, of (a) Interest Expense, (b) provisions for cash income taxes made and (c) scheduled payments made on account of principal on Indebtedness.

“Foreclosed Loan” shall mean an Eligible Loan with respect to which the Underlying Mortgaged Property has been foreclosed upon by Seller or, in the case of Junior Interest, by the Servicer of the Underlying Mortgage Loan.

“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 (including any supra-national bodies such as the  European Union or the European Central Bank).

“Hedge-Required Asset” shall mean any Eligible Asset that is a fixed rate Eligible Asset.

“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

7

agreement or similar arrangements providing for protection against fluctuations in interest rates or the exchange of nominal interest obligations, entered into by any Affiliated Hedge Counterparty or Qualified Hedge Counterparty with Seller, either generally or under specific contingencies that is required by Buyer, or otherwise pursuant to this Agreement, to hedge a Hedge-Required Asset, or that Seller has elected to pledge or transfer to Buyer pursuant to this Agreement.

“Income” shall mean, with respect to any Purchased Asset at any time, (x) any collections of principal, interest, dividends, receipts or other distributions or collections, (y) all net sale proceeds received by Seller or any Affiliate of Seller in connection with a sale or liquidation of such Purchased Asset and (z) all payments actually received by Buyer on account of Hedging Transactions.

“Indebtedness” shall mean, for any Person,  (a) obligations created, issued or incurred by such Person for borrowed money (whether by loan, the issuance and sale of debt securities or the sale of property to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such property from such Person); (b) obligations of such Person to pay the deferred purchase or acquisition price of property or services, other than trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business so long as such trade accounts payable are payable within ninety (90) days of the date the respective goods are delivered or the respective services are rendered; (c) Indebtedness of others secured by a lien on the property of such Person, whether or not the respective Indebtedness so secured has been assumed by such Person; (d) obligations (contingent or otherwise) of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for account of such Person; (e) obligations of such Person under repurchase agreements, sale/buy-back agreements or like arrangements; (f) Indebtedness of others guaranteed by such Person; (g) all obligations of such Person incurred in connection with the acquisition or carrying of fixed assets by such Person; (h) Indebtedness of general partnerships of which such Person is secondarily or contingently liable (other than by endorsement of instruments in the course of collection), whether by reason of any agreement to acquire such indebtedness to supply or advance sums or otherwise; (i) Capitalized Lease Obligations of such Person; (j) all net liabilities or obligations under any interest rate, interest rate swap, interest rate cap, interest rate floor, interest rate collar, or other hedging instrument or agreement; and (k) all obligations of such Person under Finance Leases.

“Indemnified Amounts” and “Indemnified Parties” shall have the meaning specified in Article 26 of this Agreement.

“Internal Revenue Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder.

“Interest Expense” shall mean, for any period, the total of all interest expense with respect to all outstanding Indebtedness including, without limitation, all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing and net costs under all Hedge Transactions with respect to interest rates to the extent such net costs are allocable to such period in accordance with GAAP.

8

“Junior Certificate” shall mean the original participation certificate, if any, that was executed and delivered in connection with a Junior Interest that is a junior participation.

“Junior Interest” shall mean a performing junior participation interest in a stabilized or transitional senior commercial, multifamily fixed or floating rate mortgage loan secured by a first lien on multifamily and commercial properties or a subordinate portion of a Senior Mortgage Loan evidenced by a Junior Certificate.

“Leverage” shall mean, for any Person, the aggregate amount of indebtedness for money borrowed (included purchase money mortgage loans) outstanding at any time, both secured and unsecured.

“LIBOR” shall mean the rate per annum calculated as set forth below:

(i)       On each Pricing Rate Determination Date, LIBOR for the next Pricing Rate Period will be the rate for deposits in United States dollars for a one-month period that appears on Telerate Page 3750 as of 11:00 a.m., London time, on such date; or

(ii)      On any Pricing Rate Determination Date on which no such rate appears on Telerate Page 3750 as described above, LIBOR for the next Pricing Rate Period will be determined on the basis of the arithmetic mean of the rates at which deposits in United States dollars are offered by the Reference Banks at approximately 11:00 a.m., London time, on such date to prime banks in the London interbank market for a one-month period.

All percentages resulting from any calculations or determinations referred to in this definition will be rounded upwards, if necessary, to the nearest multiple of 1/100 of 1% and all U.S. dollar amounts used in or resulting from such calculations will be rounded to the nearest cent (with one-half cent or more being rounding upwards).

“LIBO Rate” shall mean, with respect to any Pricing Rate Period pertaining to a Transaction, a rate per annum determined for such Pricing Rate Period in accordance with the following formula (rounded upward to the nearest 1/100th of 1%):

LIBOR

1 — Reserve Requirement

“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 the LIBO Rate.

“Lien” shall mean any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any financing lease having substantially the same economic effect as any of the foregoing),

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and the filing of any financing statement under the UCC or comparable law of any jurisdiction in respect of any of the foregoing.

“Margin Deadline” has the meaning specified in Article 4(a).

“Margin Deficit” shall have the meaning specified in Article 4(a).

“Market Value” shall mean, with respect to any Purchased Asset as of any relevant date, the market value for such Purchased Asset on such date as determined by Buyer in its sole and absolute discretion, exercised in good faith.  The Market Value shall, at Buyer’s option, be deemed to be zero with respect to each Purchased Asset (i) in respect of which there is a Material Breach of a representation and warranty set forth in Article 10(b)(x)(D) of this Agreement that has not been cured by Seller, if a cure is permitted in accordance with the terms of this Agreement, or such Material Breach is waived in writing by Buyer (assuming that each representation and warranty is made or remade as of each date that the Market Value is determined), (ii) subject to Article 7(c), in respect of which the complete Purchased Asset File has not been delivered to the Custodian in accordance with the terms of the Custodial Agreement, (iii) that has been released from the possession of the Custodian under the Custodial Agreement to Seller for a period in excess of twenty (20) calendar days, (iv) upon the occurrence of any Act of Insolvency with respect to any co-participant or any other Person having an interest in such Purchased Asset or any related Underlying Mortgaged Property that is senior to, or pari passu with, in right of payment or priority the rights of Buyer in such Purchased Asset, and (v) that is determined by Buyer not to be an Eligible Asset.

The Market Value of each Purchased Asset may be determined by Buyer, in its sole discretion, on each Business Day during the term of this Agreement.

“Material Adverse Effect” shall mean a material adverse effect on (a) the financial condition or prospects of Seller, (b) the ability of Seller to perform its obligations under any of the Transaction Documents, (c) the validity or enforceability of any of the Transaction Documents, or (d) the rights and remedies of Buyer under any of the Transaction Documents.

“Material Breach” shall mean, with respect to any Purchased Asset, a breach of a representation or warranty applicable to such Purchased Asset that results in a determination by Buyer in its sole and absolute discretion, exercised in good faith, that the Market Value of the related Purchased Asset has decreased by an amount greater than 25% of its then current Market Value as a result of the existence of such breach.

“Materials of Environmental Concern” shall mean any toxic mold, any petroleum (including, without limitation, crude oil or any fraction thereof) or petroleum products (including, without limitation, gasoline) or any hazardous or toxic substances, materials or wastes, defined as such in or regulated under any Environmental Law, including, without limitation, asbestos, polychlorinated biphenyls, and urea-formaldehyde insulation.

“Maturity Date” shall mean November 1, 2007, or such later date as may be in effect pursuant to Article 3(l) hereof.  Notwithstanding anything to the contrary in Article 3(l) hereof, the Maturity Date shall not be any date beyond November 1, 2009.

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“Maximum Advance Rate” shall mean, with respect to each Purchased Asset, the “Advance Rate” specified for the applicable Asset Type Grouping in Schedule I attached to this Agreement for the applicable loan-to-value ratio shown in Schedule I or Rating Agency rating, as applicable, or as otherwise agreed to by Seller and Buyer, as determined by Buyer in the Confirmation.

“Mezzanine Loan” shall mean a performing loan (or a participation therein) primarily secured by a pledge of full or partial equity ownership interests in one or more entities that own directly or indirectly multifamily or commercial properties that serve as collateral for Senior Mortgage Loans.

“Mezzanine Note” shall mean the original promissory note that was executed and delivered in connection with a particular Mezzanine Loan.

“Minimum Transfer Amount” shall mean, with respect to Seller, $250,000; provided, however, that if a Default or an Event of Default has occurred and is continuing hereunder, the Minimum Transfer Amount shall be U.S. $0.

“Moody’s” shall mean Moody’s Investors Service, Inc.

“Mortgage” shall mean a mortgage, deed of trust, deed to secure debt or other instrument, creating a valid and enforceable first Lien on or a first priority ownership interest in an estate in fee simple in real property and 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, including any A-Note, B-Note or Junior Certificate that is a Purchased Asset.

“Mortgagor” shall mean the obligor on a Mortgage Note and the grantor of the related Mortgage, or the obligor on a Mezzanine Note or Junior Interest.

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

“Net Assets” shall mean, for any Person, total assets (other than intangibles) at cost, before deducting depreciation, reserves for bad debts or other non-cash reserves, less total liabilities.

“Net Income” shall mean, with respect to any Person for any period, the net income of such Person for such period as determined in accordance with GAAP.

“Net Operating Income” shall mean, with respect to any Underlying Mortgaged Property, for any period, the actual net operating income (including, but not limited to, any net income from Hedging Transactions) calculated in accordance with customary Commercial Mortgage Securities Association (CMSA) criteria for commercial mortgaged properties.

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“New Asset” shall mean an Eligible Asset that a Seller proposes to be included as a Purchased Item.

“Originated Asset” shall mean any Eligible Asset originated by a Seller.

“Permitted Liens” shall have the meaning specified in Article 11(e) hereof.

“Person” shall mean an individual, corporation, limited liability company, business trust, partnership, joint tenant or tenant-in-common, trust, joint stock company, joint venture, unincorporated organization, or any other entity of whatever nature, or a Governmental Authority.

“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 Article 302 of ERISA or Article 412 of the Code, other than a Multiemployer Plan.

“Plan Party” shall have the meaning set forth in Article 21(a) of this Agreement.

“Pre-Existing Asset” shall mean any Eligible Asset that 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 all material underwriting risks, all Underwriting Issues and all other characteristics of the proposed transaction that a reasonable buyer would consider material, together with the following due diligence information relating to the New Asset to be provided by Seller to Buyer and Buyer’s counsel pursuant to this Agreement:

(i)       With respect to each Eligible Asset that consists of an Eligible Loan:

(i)       the Asset Information and, if available, maps and photos;

(ii)      Seller’s internal credit memoranda used for approval and underwriting;

(iii)     current rent roll and roll over schedule, if applicable;

(iv)    cash flow pro-forma, plus historical information, if available;

(v)     copies of appraisal, environmental, engineering and any other third-party reports provided that, if same are not available to Seller at the time of Seller’s submission of the Preliminary Due Diligence Package to Buyer, Seller shall deliver such items to Buyer promptly upon Seller’s receipt of such items;

(vi)    description of the underlying real estate directly or indirectly securing or supporting such Purchased Asset and the ownership structure of the

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borrower and the sponsor (including, without limitation, the board of directors, if applicable) and, to the extent that real property does not secure such Eligible Loan, the related collateral securing such Eligible Loan, if any;

(vii)   indicative debt service coverage ratios;

(viii)  indicative loan-to-value ratio;

(ix)     term sheet outlining the transaction generally;

(x)      Seller’s relationship with the Mortgagor, if any, and Mortgagor’s financial statements; and

(xi)     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;

(xii)    analyses and/or reports with respect to such other matters concerning the New Asset as Buyer may approve in its sole discretion;

(xiii)   documents evidencing such New Asset, or current drafts thereof, including, without limitation, underlying debt and security documents, guaranties, the underlying borrower’s organizational documents, warrant agreements, and loan and collateral pledge agreements, as applicable, provided that, if same are not available to Seller at the time of Seller’s submission of the Preliminary Due Diligence Package to Buyer, Seller shall deliver such items to Buyer promptly upon Seller’s receipt of such items;

(xiv)   in the case of Subordinate Eligible Assets, all information described in this definition that would otherwise be provided for the Underlying Mortgage Loan if it were an Eligible Asset, and in addition, all documentation evidencing such Subordinate Eligible Asset; and

(xv)    any exceptions to the representations and warranties set forth in Exhibit VI to this Agreement.

(ii)      With respect to each Eligible Asset that consists of CMBS:

(i)       the related prospectus or offering circular;

(ii)      all structural and collateral term sheets and all other computational or other similar materials provided to Seller in connection with its acquisition of such CMBS;

(iii)     all distribution date statements issued in respect thereof during the immediately preceding 12 months (or, if less, since the date such CMBS was issued);

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(iv)    all monthly CMSA reporting packages issued in respect of such CMBS during the immediately preceding 12 months (or, if less, since the date such CMBS was issued);

(v)     all Rating Agency pre-sale reports;

(vi)    all asset summaries and any other due diligence materials, including, without limitation, reports prepared by third parties, provided to Seller in connection with its acquisition of such CMBS; and

(vii)   the related pooling and servicing agreement.

With respect to each Eligible Asset that consists of an CRE CDO:

(i)       the related prospectus or offering circular;

(ii)      all remittance statements or other reports issued in respect thereof during the immediately preceding 12 months (or, if less, since the date such CRE CDO was issued);

(iii)     any information or reports provided to Seller in connection with its acquisition or ownership of the CRE CDO asset;

(iv)    the related indenture;

(v)     the most recent annual and quarterly 1934 Act reports filed with respect to the related issuer, if applicable;

(vi)    all structural and collateral term sheets and all other computational or other similar materials provided to Seller in connection with its acquisition of such CRE CDO asset;

(vii)   all distribution date statements issued in respect thereof during the immediately preceding 12 months (or, if less, since the date such CRE CDO was issued);

(viii)  all monthly CMSA reporting packages issued in respect of such CRE CDO during the immediately preceding 12 months (or, if less, since the date such CRE CDO was issued);

(ix)     all Rating Agency pre-sale reports; and

(x)      all asset summaries and any other due diligence materials, including, without limitation, reports prepared by third parties, provided to Seller in connection with its acquisition of such CRE CDO.

“Pre-Purchase Due Diligence” shall have the meaning set forth in Article 3(b)(i) hereof.

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“Pre-Purchase Legal Fees”  shall mean all of the reasonable and necessary out of pocket legal fees, costs and expenses incurred by Buyer in connection with the Pre-Purchase Due Diligence associated with Buyer’s decision as to whether or not to enter into a particular Transaction.

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

“Pricing Rate” shall mean, for any Pricing Rate Period, an annual rate equal to the sum of (i) the LIBO Rate and (ii) the relevant Applicable Spread, in each case, for the applicable Pricing Rate Period for the related Purchased Asset. The Pricing Rate shall be subject to adjustment and/or conversion as provided in the Transaction Documents.

“Pricing Rate Determination Date” shall mean with respect to any Pricing Rate Period with respect to any Transaction, the second (2nd) Business Day preceding the first day of such Pricing Rate Period.

“Pricing Rate Period” shall mean, with respect to any Transaction (a) in the case of the first Pricing Rate Period, the period commencing on and including the Purchase Date for such Transaction and ending on and excluding the following Remittance Date, and (b) in the case of any subsequent Pricing Rate Period, the period commencing on and including such Remittance Date and ending on and excluding the following Remittance Date; provided, however, that in no event shall any Pricing Rate Period for a Purchased Asset end subsequent to the Repurchase Date for such Purchased Asset.

“Principal Payment” shall mean, with respect to any Purchased Asset, any payment or prepayment received by the Depository in respect thereof.

“Purchase Date” shall mean, with respect to any Purchased Asset, the date on which Buyer purchases such Purchased Asset from Seller hereunder.

“Purchase Price” shall mean, with respect to any Purchased Asset, the price at which such Purchased Asset is transferred by Seller to Buyer on the applicable Purchase Date, adjusted after the Purchase Date as set forth below.  The Purchase Price as of the Purchase Date for any Purchased Asset shall be an amount (expressed in dollars) equal to the product obtained by multiplying (i) the Market Value of such Purchased Asset (or the par amount of such Purchased Asset, if lower than Market Value) by (ii) the “Advance Rate” for such Purchased Asset, as set forth in Schedule I attached to this Agreement; provided, that notwithstanding the foregoing, Seller may request that the Purchase Price set forth in a Confirmation be determined by applying a percentage lower than the Advance Rate set forth in Schedule I attached to this Agreement and, in such event, such lower percentage shall be deemed the “Advance Rate” for purposes of this Agreement.  The Purchase Price of any Purchased Asset shall be (x) increased at Seller’s request

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by any additional amount advanced by Buyer to Seller with respect to such Purchased Asset and (y) decreased by (i) the portion of any Principal Payments on such Purchased Asset that are applied pursuant to Article 5 hereof to reduce such Purchase Price and (ii) any other amounts paid to Buyer by Seller to reduce such Purchase Price.

“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 Article 7(b), together with any additional documents and information required to be delivered to Buyer or its designee (including the Custodian) pursuant to this Agreement; provided that to the extent that Buyer waives, including pursuant to Article 7(c), receipt of any document in connection with the purchase of an Eligible Asset (but not if Buyer merely agrees to accept delivery of such document after the Purchase Date), such document shall not be a required component of the Purchased Asset File until such time as the Buyer determines in good faith that such document is necessary or appropriate for the servicing of the applicable Purchased Asset.

“Purchased Asset” shall mean (i) with respect to any Transaction, the Eligible Asset sold by Seller to Buyer in such Transaction and (ii) with respect to the Transactions in general, all Eligible Assets sold by Seller to Buyer and any Additional Eligible Collateral delivered by Seller to Buyer pursuant to Article 4(a) of this Agreement (other than Eligible Assets or Additional Eligible Collateral that have been repurchased by Seller).

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

“Purchased Items” shall have the meaning specified in Article 6(a) of this Agreement.

“Qualified Hedge Counterparty” shall mean, with respect to any Hedging Transaction, any entity, other than an Affiliated Hedge Counterparty, that (a) qualifies as an “eligible contract participant” as such term is defined in the Commodity Exchange Act (as amended by the Commodity Futures Modernization Act of 2000), (b) the long-term debt of which is rated no less than “A+” by Standard & Poor’s Ratings Group, a division of the McGraw-Hill Companies, and “A1” by Moody’s Investor Services, Inc and (c) is reasonably acceptable to Buyer; provided, that with respect to clause (c), if Buyer has approved an entity as a counterparty, it may not thereafter deem such counterparty unacceptable with respect to any previously outstanding Transaction unless clause (a) or clause (b) applies.

“Rating Agency” shall mean any of Fitch Inc., Moody’s Investor Services, Inc. and Standard & Poor’s Ratings Group, a division of the McGraw-Hill Companies.

“Reference Banks” shall mean banks each of which shall (i) be a leading bank engaged in transactions in Eurodollar deposits in the international Eurocurrency market and (ii) have an established place of business in London.  Initially, the Reference Banks shall be JPMorgan Chase Bank, Barclays Bank, Plc and Deutsche Bank AG.  If any such Reference Bank should be unwilling or unable to act as such or if Buyer shall terminate the appointment of any such Reference Bank or if any of the Reference Banks should be removed from the Reuters Monitor

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Money Rates Service or in any other way fail to meet the qualifications of a Reference Bank, Buyer, in its sole discretion exercised in good faith, may designate alternative banks meeting the criteria specified in clauses (i) and (ii) above.

“Release Letter” shall mean a letter substantially in the form of Exhibit XVII hereto (or such other form as may be acceptable to Buyer).

“Relevant System” shall mean (a) The Depository Trust Company in New York, New York, or (b) such other clearing organization or book-entry system as is designated in writing by Buyer.

“REMIC” shall mean a real estate mortgage investment conduit, within the meaning of Section 860D(a) of the Internal Revenue Code.

“Remittance Date” shall mean the twentieth (20th) calendar day of each month, or the immediately following Business Day, if such calendar day shall not be a Business Day, or such other day as is mutually agreed to by Seller and Buyer.

“REO Property” shall mean real property acquired by Seller, including a mortgaged property acquired through foreclosure of an Eligible Asset or by deed in lieu of such foreclosure.

“Repurchase Date” means the earliest to occur of (i) the Termination Date, (ii) the date set forth in the applicable Confirmation, or (iii) the Accelerated Repurchase Date.

“Repurchase Price” shall mean, with respect to any Eligible Asset as of any Repurchase Date or any date on which the Repurchase Price is required to be determined hereunder, the price at which such Eligible Asset is to be transferred from Buyer to Seller; such price will be determined in each case as the sum of the (i) Purchase Price of such Eligible Asset, (ii) the accrued but unpaid Price Differential with respect to such Eligible Asset as of the date of such determination (other than, with respect to calculations in connection with the determination of a Margin Deficit, accrued but unpaid Price Differential for the current Pricing Rate Period), (iii) any other amounts due and owing to Buyer and its Affiliates pursuant to the terms of this Agreement as of such date, (iv) any amounts that would be payable to (a positive amount) a Qualified Hedge Counterparty under any related Hedging Transaction, if such Hedging Transaction were terminated on the date of determination; and (v) any amounts that would be payable to (a positive amount) or by (a negative amount) an Affiliated Hedge Counterparty under any related Hedging Transaction, if such Hedging Transaction were terminated on the date of determination; provided, that with respect to any determination of Repurchase Price that is made in connection with the actual repurchase by Seller of any Purchased Asset (and not in connection with any calculation of Margin Deficit or other determination that is made during the course of a Transaction and that is not related to such a repurchase), (x) the Repurchase Price for such Purchased Asset shall take into account amounts payable to (a positive amount) or by (a negative amount) an Affiliated Hedge Counterparty under any related Hedging Transaction only (i) as long as no Default or Event of Default shall have occurred and be continuing, (ii) to the extent such amounts are actually then due and payable under the related Hedging Transaction with an Affiliated Hedge Counterparty and (iii) to the extent that Seller shall have provided the applicable Affiliated Hedge Counterparty with written instructions that any amounts payable to

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Seller by such Affiliated Hedge Counterparty under the related Hedging Transaction shall instead be paid by such Affiliated Hedge Counterparty directly to Buyer and (y) no amounts relating to a Hedging Transaction with a Qualified Hedge Counterparty shall be taken into account.

“Requested Exceptions Report” shall have the meaning assigned thereto in Article 3(b)(vi).

“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.

“Reserve Requirement” shall mean, with respect to any Pricing Rate Period, the aggregate (without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect during such Pricing Rate Period (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve System or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of such Board of Governors) maintained by Buyer.

“Responsible Officer” shall mean any executive officer of Seller.

“Seller” shall mean the entity identified as “Seller” in the Recitals hereto and (ii) such other seller as may be approved by Buyer from time to time.

“Senior Mortgage Loans”  shall mean performing senior commercial or multifamily fixed or floating rate mortgage loans, A-notes or senior or pari passu participation interests in those mortgage loans, in each case secured by first liens on multifamily or commercial properties.

“Servicer” shall mean Midland Loan Services, Inc.

“Servicer Notice” shall mean a notice substantially in the form of Exhibit XVI hereto, as amended, supplemented or otherwise modified from time to time.

“Servicing Agreement” shall have the meaning specified in Article 28(b).

“Servicing Records” shall have the meaning specified in Article 28(b).

“Structuring Fee” shall have the meaning specified in Article 3(a)(xi) of this Agreement.

“Subordinate Eligible Assets” shall mean Eligible Assets described in items (ii) and (iii) of the definition of Eligible Assets.

“Subsidiary” shall mean, as to any Person, a corporation, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation,

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partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person.  Unless otherwise qualified, all references to a “Subsidiary” or to “Subsidiaries” in this Agreement shall refer to a Subsidiary or Subsidiaries of Seller.

“Supplemental Due Diligence List” shall mean, with respect to any New Asset, information or deliveries concerning the New Asset that Buyer shall request in addition to the Preliminary Due Diligence Package, including, without limitation, a credit approval memorandum representing the final terms of the underlying transaction, a final loan-to-value ratio computation and a final debt service coverage ratio computation for such proposed New Asset.

“Survey” shall mean a certified ALTA/ACSM (or applicable state standards for the state in which the collateral is located) survey of the underlying real estate directly or indirectly securing or supporting such Purchased Asset prepared by a registered independent surveyor or engineer and in form and content satisfactory to Buyer and the company issuing the Title Policy for such Property.

“Target Price” shall mean, with respect to any Purchased Asset as of any date, the amount (expressed in dollars) obtained by multiplying (i) the Market Value of such Purchased Asset as of such date by (ii) the then-applicable Maximum Advance Rate for such Purchased Asset.

“Telerate Page 3750” shall mean the display page currently so designated on the Dow Jones Telerate Service (or such other page as may replace that page on that service for the purpose of displaying comparable rates or prices).

“Termination Date” means, with respect to any Transaction, the earlier of (a) 364 days from the date of such Transaction, or if such Transaction is extended, the date to which it is extended; (b) any Early Repurchase Date for such Transaction; (c) the Maturity Date, or (d) the date of the occurrence of an Event of Default.

“Termination Date Extension Conditions” shall have the meaning specified in Article 3(f) of this Agreement.

“Title Company” shall mean a nationally-recognized title insurance company acceptable to Buyer.

“Title Policy” shall have the meaning specified in paragraph 9 of the section of Exhibit VI dealing with Eligible Loans.

“Total Indebtedness” shall mean, for any period, the aggregate Indebtedness of Seller and its consolidated Subsidiaries during such period (including, without limitation, off-balance sheet Indebtedness), less the amount of any nonspecific balance sheet reserves maintained in accordance with GAAP, provided that the calculation of Total Indebtedness will exclude (i) amounts of liabilities resulting from the sale of participation interests classified as participations sold on the liabilities side of Seller’s balance sheet, (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.

“Total Non-Securitized Indebtedness” shall mean, for any period, the aggregate Indebtedness of Seller and its consolidated Subsidiaries during such period (including, without limitation, off-balance sheet Indebtedness), less the amount of any nonspecific balance sheet reserves maintained in accordance with GAAP, provided that the calculation of Total Indebtedness will exclude (i) amounts of liabilities resulting from the sale of participation interests classified as participations sold on the liabilities side of Seller’s balance sheet, (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.

“Transaction” shall mean a Transaction, as specified in Article 1 of this Agreement.

“Transaction Documents” shall mean, collectively, this Agreement, any applicable Annexes to this Agreement, the Custodial Agreement, the Servicing Agreement, the Control Agreement, all Hedging Transactions and all Confirmations and assignment documentation 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 that are the property of and held by Custodian for the benefit of Buyer (or any other holder of such trust receipt) or a bailment arrangement with counsel or other third party acceptable to Buyer in its sole discretion.

“UCC” shall have the meaning specified in Article 6(d) of this Agreement.

“Underlying Mortgage Loan” shall mean, with respect to any B-Note, Junior Interest, Mezzanine Loan, CMBS or CRE CDO, a mortgage loan made in respect of the related Underlying Mortgaged Property.

“Underlying Mortgaged Property” shall mean, in the case of:

(a)           a Senior Mortgage Loan, the Mortgaged Property securing such Senior Mortgage Loan, as appropriate;

(b)           a Junior Interest, the Mortgaged Property securing such Junior Interest, or the Mortgaged Property securing the Mortgage Loan in which such Junior Interest represents a junior participation, as applicable;

(c)           a Mezzanine Loan, the Mortgaged Property that is owned by the Person the equity of which is pledged as collateral security for such Mezzanine Loan;

(d)           a CMBS, the Mortgaged Property securing the mortgage loans related to such security;

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(e)           a CRE CDO, the Mortgaged Property securing the mortgage loans related to such security.

“Underwriting Issues” shall mean, with respect to any Purchased Asset 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 reasonable inquiries and the exercise of 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 reasonable institutional mortgage buyer in determining whether to originate or acquire the Purchased Asset in question.

All references to articles, schedules and exhibits are to articles, schedules and exhibits in or to this Agreement unless otherwise specified.  The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.  All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles.  References to “good faith” in this Agreement shall mean “good faith” as defined in Section 1-201(19) of the UCC as in effect in the State of New York as of the date of the Agreement.

ARTICLE 3.
INITIATION; CONFIRMATION; TERMINATION; FEES; REDUCTION OF
FACILITY AMOUNT

Buyer’s agreement to enter into the initial Transaction hereunder is subject to the satisfaction, immediately prior to or concurrently with the making of such Transaction, of the condition precedent that Buyer shall have received from Seller payment of an amount equal to all fees and expenses payable hereunder, and all of the following documents, each of which shall be satisfactory in form and substance to Buyer and its counsel:

(a)           The following Transaction Documents, as well as certain other documents, delivered to Buyer:

(i)            this Agreement, duly completed and executed by each of the parties hereto;

(ii)           a Custodial Agreement, duly executed and delivered by each of the parties thereto;

(iii)          a Control Agreement, duly completed and executed by each of the parties thereto;

(iv)          any and all consents and waivers applicable to Seller or to the Purchased Assets;

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(v)           UCC Financing Statements for filing in each of the UCC Filing Jurisdictions described on Exhibit XIII hereto, each naming Seller as “Debtor” and Buyer as “Secured Party” and describing as “Collateral” all of the items set forth in the definition of Collateral and Purchased Items in this Agreement, together with any other documents necessary or requested by Buyer to perfect the security interests granted by Seller in favor of Buyer under this Agreement or any other Transaction Document;

(vi)          any documents relating to any Hedging Transactions;

(vii)         an opinion or opinions of outside counsel to Seller, reasonably acceptable to Buyer;

(viii)        good standing certificates and certified copies of the charters and by-laws (or equivalent documents) of Seller and of all corporate or other authority for Seller with respect to the execution, delivery and performance of the Transaction Documents and each other document to be delivered by Seller from time to time in connection herewith (and Buyer may conclusively rely on such certificate until it receives notice in writing from Seller to the contrary);

(ix)           with respect to any Eligible Asset to be purchased hereunder on the related Purchase Date that is not serviced by Seller, Seller shall have provided to Buyer a copy of the related Servicing Agreement, certified as a true, correct and complete copy of the original, together with a Servicer Notice, fully executed by Seller and Servicer;

(x)            Buyer shall have received payment from Seller of an amount equal to the amount of actual costs and expenses, including, without limitation, the reasonable fees and expenses of counsel to Buyer, incurred by Buyer in connection with the development, preparation and execution of this Agreement, the other Transaction Documents and any other documents prepared in connection herewith or therewith;

(xi)           Buyer shall have received payment from Seller, as consideration for Buyer’s agreement to enter into this Agreement, an up-front structuring fee in an amount equal [****] (calculated as [****] basis points [****] multiplied by the Facility Amount), such amount to be paid to Buyer in U.S. Dollars, in immediately available funds, without deduction, set-off or counterclaim (the “Structuring Fee”); and

(xii)          all such other and further documents, documentation and legal opinions as Buyer in its discretion shall reasonably require.

(b)           Buyer’s agreement to enter into each Transaction (including the initial Transaction) is subject to the satisfaction of the following further conditions precedent, both immediately prior to entering into such Transaction and also after giving effect to the consummation thereof and the intended use of the proceeds of the sale:

**** Material omitted pursuant to a request for confidential treatment under Rule 24b-2 of the Exchange Act of 1934.  Material filed separately with the Securities and Exchange Commission.

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(i)            The sum of (A) the unpaid Repurchase Price for all prior outstanding Transactions, (B) the requested Purchase Price for the pending Transaction and (C) all available and unfunded Advances under all prior outstanding Transactions shall not exceed an amount equal to the Facility Amount.

(ii)           Seller shall give Buyer written notice of each Transaction (including the initial Transaction), together with a signed, written confirmation in the form of Exhibit I attached hereto prior to each Transaction (a “Confirmation”).  Each Confirmation shall describe the Purchased Assets, shall identify Buyer and Seller, shall be executed by both Buyer and Seller (provided that, in instances where funds are being wired to an account other than 230-254-632 at JPMorgan Chase Bank, N.A., the Confirmation shall be signed by two (2) authorized signatories of Seller); provided, however, that Buyer shall not be liable to Seller if it inadvertently acts on a Confirmation that has not been signed by two (2) such authorized signatories, and shall set forth:

(A)          the Purchase Date;

(B)           the Purchase Price for the Purchased Asset included in the Transaction;

(C)           the Repurchase Date;

(D)          any additional terms or conditions not inconsistent with this Agreement; and

(E)           the requested Advance Rate and the related Maximum Advance Rate.

(iii)          Buyer shall have the right to review the Eligible Assets Seller proposes to sell to Buyer in any Transaction and to conduct its own due diligence investigation of such Eligible Assets as Buyer determines (“Pre-Purchase Due Diligence”).  Buyer shall be entitled to make a determination, in the exercise of its sole discretion, that, in the case of a Transaction, it shall or shall not purchase any or all of the assets proposed to be sold to Buyer by Seller.  On the Purchase Date for the Transaction that shall be not less than one (1) Business Day following the final approval of an Eligible Asset by Buyer in accordance with Exhibit VIII hereto, the Purchased Assets shall be transferred to Buyer or the Custodian against the transfer of the Purchase Price to an account of Seller.  Buyer shall inform Seller of its determination with respect to any such proposed Transaction solely in accordance with Exhibit VIII attached hereto.  Upon the approval by Buyer of a particular proposed Transaction, Buyer shall deliver to Seller a signed copy of the related Confirmation described in clause (i) above, on or before the scheduled date of the underlying proposed Transaction. Prior to the approval of each proposed Transaction by Buyer:

(A)          Buyer shall have (i) determined, in its sole and absolute discretion, that the asset proposed to be sold to Buyer by Seller in such Transaction is an Eligible Asset and (ii) obtained internal credit approval, to be granted or denied in Buyer’s sole and absolute discretion, for the inclusion of such Eligible Asset as a

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Purchased Asset in a Transaction, without regard for any prior credit decisions by Buyer or any Affiliate of Buyer, and with the understanding that Buyer shall have the absolute right to change any or all of its internal underwriting criteria at any time, without notice of any kind to Seller;

(B)           Buyer shall have determined the Pricing Rate applicable to the Transaction (including the Applicable Spread) in accordance with Schedule I hereto or as otherwise agreed by Buyer and Seller;

(C)           no Default or Event of Default shall have occurred and be continuing under this Agreement or any other Transaction Document and no event shall have occurred which has, or would reasonably be expected to have, a Material Adverse Effect;

(D)          Seller shall have delivered to Buyer a list of all exceptions to the representations and warranties relating to the Purchased Asset and any other eligibility criteria for such Purchased Asset (the “Requested Exceptions Report”);

(E)           Buyer shall have waived all exceptions in the Requested Exceptions Report;

(F)           both immediately prior to the requested Transaction and also after giving effect thereto and to the intended use thereof,  (i)  the representations and warranties made by Seller in Article 10, as applicable, (other than the representations and warranties set forth in Article 10(b)(x)(D) shall be true, correct and complete on and as of such Purchase Date in all material respects with the same force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date) and  (ii) no Material Breach shall have occurred and be continuing with respect to the representations and warranties set forth in Article 10(b)(x)(D);

(G)           subject to Buyer’s right to perform one or more due diligence reviews pursuant to Article 27, Buyer shall have completed its due diligence review of the Purchased Asset File, and such other documents, records, agreements, instruments, mortgaged properties or information relating to such Purchased Asset as Buyer in its sole discretion deems appropriate to review and such review shall be satisfactory to Buyer in its sole discretion and Buyer has consented in writing to the Eligible Asset becoming a Purchased Asset; provided, that if Buyer’s diligence review of the Purchased Asset File requires the delivery of a mortgage file or the equivalent, Seller shall have the benefit of such delayed delivery provisions as are customary in pooling and servicing agreements (e.g., while a promissory note (or analogous document directly evidencing the obligation) must be delivered as a condition of closing, an ancillary document or estoppels may be delivered within a reasonable time frame thereafter);

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(H)          with respect to any Eligible Asset to be purchased hereunder on the related Purchase Date which is not serviced by Seller or an Affiliate thereof, Seller shall have provided to Buyer a copy of the related Servicing Agreement, certified as a true, correct and complete copy of the original, together with a Servicer Notice, fully executed by Seller and Servicer;

(I)            Seller shall have paid to Buyer all legal fees and expenses and the reasonable costs and expenses incurred by Buyer in connection with the entering into of any Transaction hereunder, including, without limitation, costs associated with due diligence, recording or other administrative expenses necessary or incidental to the execution of any Transaction hereunder, which amounts, at Buyer’s option, may be withheld from the sale proceeds of any Transaction hereunder;

(J)            Buyer shall have determined, in its sole and absolute discretion, that no Margin Deficit shall exist, either immediately prior to or after giving effect to the requested Transaction;

(K)          Buyer shall have received from Custodian on each Purchase Date an Asset Schedule and Exception Report (as defined in the Custodial Agreement) with respect to each Purchased Asset, dated the Purchase Date, duly completed and with exceptions acceptable to Buyer in its sole discretion in respect of Eligible Assets to be purchased hereunder on such Business Day;

(L)           Buyer shall have received from Seller a Release Letter covering each Eligible Asset to be sold to Buyer;

(M)         Buyer shall not have reasonably determined that the introduction of, or a change in, any Requirement of Law or in the interpretation or administration of any Requirement of Law applicable to Buyer has made it unlawful, and no Governmental Authority shall have asserted that it is unlawful, for Buyer to enter into Transactions;

(N)          the Repurchase Date for such Transaction is not later than the Maturity Date;

(O)          Seller shall have taken such other action as Buyer shall have reasonably requested in order to transfer the Purchased Assets pursuant to this Agreement and to perfect all security interests granted under this Agreement or any other Transaction Document in favor of Buyer with respect to the Purchased Assets;

(P)           with respect to any Eligible Asset to be purchased hereunder, if such Eligible Asset was acquired by Seller, Seller shall have disclosed to Buyer the acquisition cost of such Eligible Asset (including therein reasonable supporting documentation required by Buyer, if any);

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(Q)          Buyer shall have received all such other and further documents, documentation and legal opinions (including, without limitation, opinions regarding the perfection of Buyer’s security interests) as Buyer in its reasonable discretion shall reasonably require;

(R)           Buyer shall have received a copy of any documents relating to any Hedging Transaction, and Seller shall have pledged and assigned to Buyer, pursuant to Article 6 hereunder, all of Seller’s rights under each Hedging Transaction included within a Purchased Asset, if any;

(S)           no “Termination Event”, “Event of Default”, “Potential Event of Default” or any similar event by Seller, however denominated, shall have occurred and be continuing under any Hedging Transaction; and

(T)           the counterparty to Seller in any Hedging Transaction shall be an Affiliated Hedge Counterparty or a Qualified Hedge Counterparty, and, in the case of a Qualified Hedge Counterparty, in the event that such counterparty no longer qualifies as a Qualified Hedging Counterparty, then, at the election of Buyer, Seller shall ensure that such counterparty posts Additional Eligible Collateral in an amount satisfactory to Buyer under all its Hedging Transactions with Seller, or Seller shall immediately terminate the Hedging Transactions with such counterparty and enter into new Hedging Transactions with a Qualified Hedge Counterparty.

(c)           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 the Pricing Rate Determination Date for all of the next succeeding Pricing Rate Periods for such Transaction.  Buyer or its agent shall determine in accordance with the terms of this Agreement the Pricing Rate on each Pricing Rate Determination Date for the related Pricing Rate Period taking into account any changes in the applicable loan-to-value ratio shown on Schedule I or Rating Agency ratings, as applicable, determined to be applicable to such Transaction in the Buyer’s sole and absolute discretion, exercised in good faith, and notify Seller of such rate for such period each such Pricing Rate Determination Date; provided, however, that the Buyer shall have no affirmative obligation to determine whether there has been any change in the related terms or quality of the Purchased Asset to cause any change in the related loan-to-value ratio or Rating Agency ratings.

(d)           Each Confirmation, together with this Agreement, shall be conclusive evidence of the terms of the Transaction(s) covered thereby.  In the event of any conflict between the terms of such Confirmation and the terms of this Agreement, other than with respect to the Advance Rate or the applicable Price Differential set forth in the related Confirmation, this Agreement shall prevail.

(e)           Buyer shall not be permitted to terminate a Transaction on demand unless an Event of Default has occurred and is continuing.

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(f)            Seller shall be entitled to terminate a Transaction on demand and repurchase the Purchased Asset subject to a Transaction on any Business Day prior to the Repurchase Date (an “Early Repurchase Date”); provided, however, that:

(i)            Seller notifies Buyer in writing of its intent to terminate such Transaction and repurchase such Purchased Assets no later than one (1) Business Day prior to such Early Repurchase Date,

(ii)           on such Early Repurchase Date, Seller pays to Buyer an amount equal to the sum of the Repurchase Price for the applicable Purchased Asset and any other amounts payable under this Agreement (including, without limitation, Article 3(i) of this Agreement) with respect to such Purchased Asset against transfer to Seller or its agent of such Purchased Assets and any related Hedging Transactions;

(iii)          on such Early Repurchase Date, in addition to the amounts set forth in subclause (ii) above, Seller pays to Buyer, on account of a Purchased Asset then subject to a Transaction, an amount sufficient to reduce the Purchase Price for such Purchased Asset to an amount equal to the Target Price for such Purchased Asset.

Such notice shall set forth the Early Repurchase Date and shall identify with particularity the Purchased Asset to be repurchased on such Early Repurchase Date.

(g)           On the Termination Date for any Transaction, termination of the Transaction will be effected by transfer to Seller or its agent of the Purchased Assets being repurchased and any Income in respect thereof received by Buyer (and not previously credited or transferred to, or applied to the obligations of, Seller pursuant to Article 5 of this Agreement) against the simultaneous transfer of the Repurchase Price to an account of Buyer.  Notwithstanding the foregoing, provided that all of the extension conditions listed in clauses (i) through (iv) of this Article 3(g) (collectively, the “Termination Date Extension Conditions”) shall have been satisfied, Seller may request to extend such Termination Date by no more than 364 days from the date of such extension request by giving written notice to Buyer of such request.  Any failure by Buyer to deliver to Seller an objection in writing within thirty (30) days of such request shall be deemed to be Buyer’s consent to extend such Termination Date.  Notwithstanding the foregoing, in no event shall the Termination Date be extended beyond the Maturity Date.  For purposes of the preceding sentence, the Termination Date Extension Conditions shall be deemed to have been satisfied if:

(i)            Seller shall have given Buyer written notice, not less than thirty (30) days prior but no more than one hundred and eighty (180) days prior to the originally scheduled Termination Date, of Seller’s desire to extend the Termination Date; provided, that if Seller fails to give such notice, Seller shall be deemed to have notified Buyer of its desire to extend the Termination Date;

(ii)           no Material Adverse Effect, Margin Deficit, Default or Event of Default under this Agreement shall have occurred and be continuing as of the date notice is given under subclause (i) above or as of the originally scheduled Termination Date and no “Termination Event,” “Event of Default” or “Potential Event of Default” or any similar

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event by Seller, however denominated, shall have occurred and be continuing under any Hedging Transaction;

(iii)          all representations and warranties (other than the representations or warranties set forth in Article 10(b)(x)(D)) shall be true, correct, complete and accurate in all material respects and there are no Material Breaches of the representations or warranties set forth in Article 10(b)(x)(D)); and

(iv)          on the originally scheduled Termination Date, Seller pays to Buyer, on account of each Purchased Asset, an amount sufficient to reduce the Repurchase Price for each Purchased Asset to an amount equal to the applicable Advance Rate used to calculate the Purchase Price of such Purchased Asset multiplied by the Market Value for each such Purchased Asset then subject to a Transaction.

(h)           If prior to the first day of any Pricing Rate Period with respect to any Transaction, (i) Buyer shall have determined in the exercise of its reasonable business judgment (which determination shall be conclusive and binding upon Seller) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the LIBO Rate for such Pricing Rate Period, or (ii) the LIBO Rate determined or to be determined for such Pricing Rate Period will not adequately and fairly reflect the cost to Buyer (as determined and certified by Buyer) of making or maintaining Transactions during such Pricing Rate Period, Buyer shall give telecopy or telephonic notice thereof to Seller as soon as practicable thereafter.  If such notice is given, the Pricing Rate with respect to such Transaction for such Pricing Rate Period, and for any subsequent Pricing Rate Periods until such notice has been withdrawn by Buyer, shall be a per annum rate equal to the Federal Funds Rate plus the Applicable Spread (the “Alternative Rate”).

(i)            Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for Buyer to enter into or maintain Transactions as contemplated by the Transaction Documents, (a) the commitment of Buyer hereunder to enter into new Transactions and to continue Transactions as such shall forthwith be canceled, and (b) the Transactions then outstanding shall be converted automatically to Alternative Rate Transactions on the last day of the then current Pricing Rate Period or within such earlier period as may be required by law.

(j)            Upon demand by Buyer, Seller shall indemnify Buyer and hold Buyer harmless from any loss, cost or expense (including, without limitation, attorneys’ fees and disbursements) that Buyer may sustain or incur as a consequence of (i) Buyer’s enforcement of the terms of any of the Transaction Documents, (ii) any actions taken to perfect or continue any lien created under any Transaction Documents, and/or (iii) Buyer entering into any of the Transaction Documents or owning any asset that is the subject of any of the Transaction Documents.  A certificate as to such costs, losses, damages and expenses, setting forth the calculations therefor shall be submitted promptly by Buyer to Seller and shall be prima facie evidence of the information set forth therein.

(k)           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

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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 income taxes and any changes in the rate of tax on Buyer’s overall net income);

(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 that is not otherwise included in the determination of the LIBO Rate hereunder; or

(iii)          shall impose on Buyer any other condition;

and the result of any of the foregoing is to increase the cost to Buyer, by an amount that Buyer deems, in the exercise of its reasonable business judgment, 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.  If Buyer becomes entitled to claim any additional amounts pursuant to this Article 3(k), it shall, within ten (10) Business Days of such event, notify Seller of the event by reason of which it has become so entitled.  Such notification as to the calculation of any additional amounts payable pursuant to this subsection shall be submitted by Buyer to Seller and shall be prima facie evidence of such additional amounts.  This covenant shall survive the termination of this Agreement and the repurchase by Seller of any or all of the Purchased Assets.

(l)            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, in the exercise of its reasonable business judgment, 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.  Such notification as to the calculation of any additional amounts payable pursuant to this subsection shall be submitted by Buyer to Seller and shall be prima facie evidence of such additional amounts.  This covenant shall survive the termination of this Agreement and the repurchase by Seller of any or all of the Purchased Assets.

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(m)          Upon written request of Seller delivered to Buyer at least forty-five (45 ) days, but in no event earlier than one-hundred and twenty (120) days, prior to the then current Maturity Date, and so long as no Margin Deficit, Default or Event of Default and no event which has a Material Adverse Effect shall have occurred and be continuing on the then current Maturity Date, Buyer may in its sole discretion agree to extend the Maturity Date, for a period not to exceed 364 additional days (the “Extension Period”) by giving notice to Seller of such extension and of the new Maturity Date determined by Buyer; provided, that any failure by Buyer to deliver such notice of extension to Seller within thirty (30) days from the date first received by Buyer shall be deemed to be Buyer’s determination not to extend the Maturity Date.  In no event shall the Maturity Date be extended for more than two (2) Extension Periods.  Notwithstanding any other provision of this Article 3(m) or otherwise herein, neither Buyer nor any of its Affiliates shall be under any obligation to extend the original Maturity Date, as the same may have been extended pursuant to this Article 3(m) hereof, or increase the Facility Amount.  In addition, no such Maturity Date extension shall take effect unless and until Buyer shall have received payment from Seller, as consideration for Buyer’s agreement to extend the then-current Maturity Date, of an extension structuring fee in an amount equal to sixteen and one-half (16.5) basis points (0.165%) multiplied by the then-current Facility Amount (the “Extension Structuring Fee”), such amount to be paid to Buyer in U.S. Dollars, in immediately available funds, without deduction, set-off or counterclaim.

(n)           The Facility Amount may be permanently reduced from time to time at the election of Seller by an amount (the “Reduction Amount”) determined by Seller upon thirty (30) days advance written notice to the Buyer; provided, that (i) any such reduction shall be in increments of $50,000,000, (ii) no Default or Event of Default shall have occurred, be continuing, or exist immediately after giving effect to any such reduction, and (iii) no Margin Deficit shall exist before or immediately after giving effect to any such reduction (and to any payments made contemporaneously therewith).  In the event of such a reduction, Buyer shall promptly remit to Seller an amount equal to the product of (x) the Structuring Fee and/or the Extension Structuring Fee, as appropriate, (y) the ratio of (A) the number of days remaining until the immediately succeeding Maturity Date over (B) 364, and (z) the Reduction Amount.

ARTICLE 4.
MARGIN MAINTENANCE

(a)           If at any time the Buyer’s Margin Amount for all Purchased Assets is less than the Repurchase Price for all Purchased Assets (a “Margin Deficit”), then Buyer may by notice to Seller in the form of Exhibit XII (a “Margin Deficit Notice”) require Seller to, at Seller’s option, no later than three (3) Business Days following the receipt of a Margin Deficit Notice (the “Margin Deadline”) to the extent such Margin Deficit equals or exceeds the Minimum Transfer Amount, (i) transfer to Buyer for no additional consideration (by transfer to Buyer or its designee (including the Custodian) Additional Eligible Collateral, (ii) repurchase some or all of the Purchased Assets at their respective Repurchase Prices, (iii) make a payment (subject to the requirements with respect to termination set forth in Article 3 hereof) in reduction of the Purchase Price, or (iv) choose any combination of the foregoing, such that, after giving effect to such transfers, repurchases and payments, Buyer’s Margin Amount for each Purchased Asset,

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considered individually, shall be equal to or greater than the Repurchase Price for such Purchased Asset.

(b)           The failure of Buyer, on any one or more occasions, to exercise its rights hereunder, shall not change or alter the terms and conditions to which this Agreement is subject or limit the right of Buyer to do so at a later date.  Seller and Buyer each agree that a failure or delay by Buyer to exercise its rights hereunder shall not limit or waive Buyer’s rights under this Agreement or otherwise existing by law or in any way create additional rights for Seller.

ARTICLE 5.
INCOME PAYMENTS AND PRINCIPAL PAYMENTS

(a)           The Cash Management Account shall be established at the Depository pursuant to the Control Agreement concurrently with the execution and delivery of this Agreement by Seller and Buyer.  Buyer shall have sole dominion and control over the Cash Management Account, which shall be subject to the Control Agreement.  All Income in respect of the Purchased Assets and any payments made to Seller in respect of associated Hedging Transactions, as well as any interest received from the reinvestment of such Income, shall be deposited directly into the Cash Management Account and shall be remitted by the Depository in accordance with the applicable provisions of Articles 5(b), 5(c), 5(d), 5(e), 5(f), and 5(g) of this Agreement.

(b)           With respect to Purchased Assets, each Mortgagor, issuer of a participation, servicer and trustee with respect to the Purchased Asset or borrower under a Purchased Asset shall have previously received from Seller an irrevocable direction letter, instructing, as applicable, the Mortgagor, issuer of a participation, servicer or trustee with respect to the Purchased Asset or borrower to pay all amounts payable under the related Purchased Asset to Servicer pursuant to the Servicing Agreement, for immediate deposit by Servicer into the Cash Management Account pursuant to the Servicing Agreement.  If a Mortgagor, issuer of a participation, servicer or trustee with respect to the Purchased Asset or borrower forwards any Income with respect to a Purchased Asset to Seller or any Affiliate of Seller rather than directly to Servicer, Seller shall, or shall cause such Affiliate to, (i) deliver an additional irrevocable direction letter to the applicable Mortgagor, issuer of a participation, servicer or trustee with respect to the Purchased Asset or borrower and make other best efforts to cause such Mortgagor, issuer of a participation, servicer or trustee with respect to the Purchased Asset or borrower to forward such amounts directly to Servicer and (ii) immediately deposit in the Cash Management Account any such amounts.

(c)           So long as no Event of Default or CF Sweep Event with respect to any Purchased Asset shall have occurred and be continuing, all Income received by the Depository in respect of the Purchased Assets (other than scheduled or unscheduled Principal Payments and net sale proceeds) and the associated Hedging Transactions during each Collection Period shall be applied by the Depository on the related Remittance Date in the following order of priority:

(i)            first, pro rata, (i) to Buyer, an amount equal to the Price Differential that has accrued and is outstanding as of such Remittance Date and (ii) to any Affiliated Hedge Counterparty, any amount then due and payable to an Affiliated Hedge Counterparty under any Hedging Transaction related to a Purchased Asset;

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(ii)           second, to Buyer, an amount equal to any other amounts due and owing to Buyer or its Affiliates under any Transaction Document; and

(iii)          third, to Seller, the remainder, if any.

(d)           So long as no Event of Default or CF Sweep Event shall have occurred and be continuing, any unscheduled Principal Payments and any Principal Payment due on the maturity date of a Purchased Asset shall be applied by the Depository on the Business Day next following the Business Day on which such funds are deposited in the Cash Management Account in the following order of priority:

(i)            first, pro rata, to Buyer, until the Purchase Price for such Purchased Asset has been reduced to the Target Price for such Purchased Asset as of the date of such payment (as determined by Buyer after giving effect to such Principal Payment and application of net sales proceeds, if applicable) and, solely with respect to any Hedging Transaction with an Affiliated Hedge Counterparty related to such Purchased Asset, an amount equal to any accrued and unpaid breakage costs under such Hedging Transaction related to such Purchased Asset;

(ii)           second, to Buyer, until the related Purchase Price for any other Purchased Asset as to which the Repurchase Price exceeds the Target Price (for this purpose, making such payment in the order of those Purchased Assets with the largest to smallest excess of Repurchase Price over Target Price), until the aggregate Repurchase Price for all of such Purchased Assets has been reduced to the aggregate Target Price for all of the Purchased Assets, respectively as of the date of such payment (as determined by Buyer after giving effect to such Principal Payment and application of net sale proceeds, if applicable);

(iii)          third, to make payment to Buyer of any other amounts due and owing to Buyer or its Affiliates under any Transaction Document; and

(iv)          fourth, to Seller, the remainder of such Principal Payments or net sale proceeds, if applicable.

(e)           So long as no Event of Default or CF Sweep Event shall have occurred and be continuing, any scheduled Principal Payments and any net sale proceeds in excess of the related Repurchase Price in respect of any Purchased Assets that is a portion of the Income received by the Depository during each Collection Period shall be applied by the Depository on the Remittance Date in the following order of priority:

(i)            first, pro rata, to Buyer, until the Purchase Price for such Purchased Asset has been reduced to the Target Price for such Purchased Asset as of the date of such payment (as determined by Buyer after giving effect to such Principal Payment and application of net sales proceeds, if applicable) and, solely with respect to any Hedging Transaction with an Affiliated Hedge Counterparty related to such Purchased Asset, an amount equal to any accrued and unpaid breakage costs under such Hedging Transaction related to such Purchased Asset;

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(ii)           second, to Buyer, until the related Purchase Price for any other Purchased Asset as to which the Repurchase Price exceeds the Target Price (for this purpose, making such payment in the order of those Purchased Assets with the largest to smallest excess of Repurchase Price over Target Price), until the aggregate Repurchase Price for all of such Purchased Assets has been reduced to the aggregate Target Price for all of the Purchased Assets, respectively as of the date of such payment (as determined by Buyer after giving effect to such Principal Payment and application of net sale proceeds, if applicable);

(iii)          third, to make payment to Buyer of any other amounts due and owing to Buyer or its Affiliates under any Transaction Document; and

(iv)          fourth, to Seller, the remainder of such Principal Payments or net sale proceeds, if applicable.

(f)            If Buyer shall have determined that a CF Sweep Event shall have occurred, but no Event of Default shall have occurred and be continuing, all Income (excluding Principal Payments and any net sale proceeds in excess of the related Repurchase Price) received by the Depository in respect of the Purchased Assets and the associated Hedging Transactions shall be applied by the Depository on the related Remittance Date in the following order of priority:

(i)            first, pro rata, (i) to Buyer, an amount equal to the Price Differential that has accrued and is outstanding in respect of all of the Purchased Assets as of such Business Day and (ii) to any Affiliated Hedge Counterparty, any amounts then due and payable to such Affiliated Hedge Counterparty under any Hedging Transaction related to such Purchased Asset;

(ii)           second, to Buyer, an amount equal to the Repurchase Price of each Purchased Asset until the Repurchase Price for such Purchased Asset has been reduced to the Target Price for such Purchased Asset as of the date of such payment (as determined by Buyer after giving effect to such Principal Payment and application of net sale proceeds, if any);

(iii)          third, to Buyer, an amount equal to any other amounts due and owing to Buyer or its Affiliates under any Transaction Document; and

(iv)          fourth, to Seller, any remainder.

(g)           Upon the occurrence and continuance of a CF Sweep Event, but no Event of Default shall have occurred and be continuing, all Principal Payments and any net sale proceeds in excess of the related Repurchase Price received by the Depository in respect of the Purchased Assets and the associated Hedging Transactions shall be applied by the Depository on the related Remittance Date in the following order of priority:

(i)            first, pro rata, to Buyer, an amount equal to the Price Differential that has accreted and is outstanding in respect of all of the Purchased Assets as of such Business Day and any amounts then due and payable to an Affiliated Hedge Counterparty under any Hedging Transaction related to such Purchased Asset;

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(ii)           second, to Buyer, on account of the Repurchase Price of each Purchased Asset until the Repurchase Price for such Purchased Asset has been reduced to the Target Price for such Purchased Asset as of the date of such payment (as determined by Buyer after giving effect to such Principal Payment and application of net sale proceeds, if any);

(iii)          third, to Buyer, an amount equal to any other amounts due and owing to Buyer or its Affiliates under any Transaction Document; and

(iv)          fourth, to remit to Seller any remainder.

(h)           If an Event of Default shall have occurred and be continuing, 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 Cash Management Account in the following order of priority:

(i)            first, pro rata, (i) to Buyer, an amount equal to the Price Differential that has accrued and is outstanding in respect of all of the Purchased Assets as of such Business Day and (ii) to any Affiliated Hedge Counterparty, any amounts then due and payable to an Affiliated Hedge Counterparty under any Hedging Transaction related to such Purchased Asset;

(ii)           second, to Buyer on account of the Repurchase Price of the Purchased Assets until the Repurchase Price for all of the Purchased Assets has been reduced to zero;

(iii)          third, to Buyer , an amount equal to any other amounts due and owing to Buyer or its Affiliates under any Transaction Document; and

(iv)          fourth, to remit to Seller any remainder.

ARTICLE 6.
SECURITY INTEREST

(a)           Buyer and Seller intend that the Transactions hereunder be sales to Buyer of the Purchased Assets and not loans from Buyer to Seller secured by the Purchased Assets.  However, in order to preserve Buyer’s rights under this Agreement in the event that a court or other forum re-characterizes the Transactions hereunder as loans and as security for the performance by Seller of all of Seller’s obligations to Buyer under the Transaction Documents and the Transactions entered into hereunder, or in the event that a transfer of a Purchased Asset is otherwise ineffective to effect an outright transfer of such Purchased Asset to Buyer, Seller hereby assigns, pledges and grants a security interest in all of its right, title and interest in, to and under the Purchased Items (as defined below) to Buyer to secure the payment of the Repurchase Price on all Transactions to which it is a party and all other amounts owing by it to Buyer hereunder, including, without limitation, amounts owing pursuant to Article 26, and under the other Transaction Documents, including any obligations of Seller under any Hedging Transaction entered into with any Affiliated Hedge Counterparty (including, without limitation,

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all amounts anticipated to be paid to Buyer by an Affiliated Hedge Counterparty as provided for in the definition of Repurchase Price) (collectively, the “Repurchase Obligations”).  Seller agrees to mark its computer records and tapes to evidence the interests granted to Buyer hereunder.  All of Seller’s right, title and interest in, to and under each of the following items of property, whether now owned or hereafter acquired, now existing or hereafter created and wherever located, is hereinafter referred to as the “Purchased Items”:

(i)            the Purchased Assets and all “securities accounts” (as defined in Article 8-501(a) of the UCC) to which any or all of the Purchased Assets are credited;

(ii)           any and all Additional Eligible Collateral transferred to Buyer in accordance with Article 4(a);

(iii)          the Purchased Asset Documents, Servicing Agreements, Servicing Records, insurance relating to the Purchased Assets, and collection and escrow accounts and letters of credit relating to the Purchased Assets;

(iv)          all “general intangibles”, “accounts”, “chattel paper”, “investment property”, “instruments” and “deposit accounts”, each as defined in the UCC, relating to or constituting any and all of the foregoing; and

(v)           all replacements, substitutions or distributions on or proceeds, payments, Income and profits of, and records (but excluding any financial models or other proprietary information) and files relating to any and all of any of the foregoing.

(b)           Without limiting Article 6(a) hereto, to secure payment of the Repurchase Obligations owing to Buyer, Seller hereby grants to Buyer a security interest in all of Seller’s right, title and interest in, to and under each of the following items of property, whether now owned or hereafter acquired, now existing or hereafter created and wherever located, hereinafter referred to as the “Collateral”:

(i)            the Cash Management Account and all monies from time to time on deposit in the Cash Management Account;

(ii)           the Purchased Items;

(iii)          any and all Additional Eligible Collateral transferred to Buyer in accordance with Article 4(a);

(iv)          any and all replacements, substitutions, distributions on, income relating to or proceeds of any and all of the foregoing; and

(v)           Seller’s right under each Hedging Transaction, if any, relating to the Purchased Assets to secure the Repurchase Obligations.

(c)           Buyer agrees to act as agent for and on behalf of the Affiliated Hedge Counterparties with respect to the security interest granted hereby to secure the obligations owing to the Affiliated Hedge Counterparties under any Hedging Transactions, including,

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without limitation, with respect to the Purchased Assets and the Purchased Asset Files held by the Custodian pursuant to the Custodial Agreement.

(d)           Buyer’s security interest in the Collateral and Purchased Items shall terminate only upon termination of Seller’s obligations under this Agreement, all Hedging Transactions and the documents delivered in connection herewith and therewith.  Upon such termination, Buyer shall deliver to Seller such UCC termination statements and other release documents as may be commercially reasonable and return the Purchased Assets to Seller and reconvey the Purchased Items to Seller and release its security interest in the Collateral.  For purposes of the grant of the security interest pursuant to this Article 6, this Agreement shall be deemed to constitute a security agreement under the New York Uniform Commercial Code (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 the State of New York.  In furtherance of the foregoing, (a) Buyer, at Seller’s sole cost and expense, shall cause to be filed in such locations as may be necessary to perfect and maintain perfection and priority of the security interest granted hereby, UCC financing statements and continuation statements (collectively, the “Filings”), and shall forward copies of such Filings to Seller upon completion thereof, and (b) Seller shall from time to time take such further actions as may be requested by Buyer to maintain and continue the perfection and priority of the security interest granted hereby (including marking its records and files to evidence the interests granted to Buyer hereunder).

ARTICLE 7.
PAYMENT, TRANSFER AND CUSTODY

(a)           On the Purchase Date for each Transaction, ownership of the Purchased Asset shall be transferred to Buyer or its designee (including the Custodian) against the simultaneous transfer of the Purchase Price to an account of Seller specified in the Confirmation relating to such Transaction.

(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, provided, that notwithstanding the foregoing, upon request of Seller, Buyer in its sole but good faith discretion may elect to permit Seller to make such delivery by not later than the third (3rd) Business Day after the related Purchase Date, so long as Seller causes an Acceptable Attorney, Title Company or other Person acceptable to Buyer to deliver to Buyer and the Custodian a Bailee Letter on or prior to such Purchase Date.  Subject to Article 7(c), 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 the following original documents (collectively, the “Purchased Asset File”), pertaining to each of the Purchased Assets identified in the Custodial Delivery delivered therewith, together with any other documentation in respect of such Purchased Asset requested by Buyer, in Buyer’s sole but good faith discretion:

With respect to each Purchased Asset that is a Senior Mortgage Loan (to the extent that Seller is the holder of the senior participation and is the custodian of the related loan documents):

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(i)The original Mortgage Note (and if applicable, one or more allonges) 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 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 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]”).

(ii)An original of any guarantee executed in connection with the Mortgage Note (if any).

(iii)The original 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 underlying real estate directly or indirectly securing or supporting such Purchased Asset is located.

(iv)The originals 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 underlying real estate directly or indirectly securing or supporting such Purchased Asset is located.

(v)The original Assignment of Mortgage in blank for each Purchased Asset, in form and substance acceptable for recording and otherwise acceptable to Buyer and signed in the name of the Last Endorsee (in the event that the Purchased 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 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)The originals 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 underlying real estate directly or indirectly securing or supporting such Purchased Asset is located.

(vii)The original 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.

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(viii)The original of any security agreement, chattel mortgage or equivalent document executed in connection with the Purchased Asset.

(ix)The original 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 and that such original has been submitted for recordation in the appropriate governmental recording office of the jurisdiction where the underlying real estate directly or indirectly securing or supporting such Purchased Asset is located.

(x)The originals 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 that such financing statements have been sent for filing, and UCC assignments, which UCC assignments shall be in form and substance acceptable for filing.

(xii)An environmental indemnity agreement (if any).

(xiii)An omnibus assignment in blank (if any).

(xiv)A disbursement letter from the Mortgagor to the original mortgagee (if any).

(xv)Mortgagor’s certificate or title affidavit (if any).

(xvi)A survey of the underlying real estate directly or indirectly securing or supporting such Purchased Asset (if any) as accepted by the title company for issuance of the Title Policy.

(xvii)A copy of the Mortgagor’s opinion of counsel (if any).

(xviii)An assignment of permits, contracts and agreements (if any).

With respect to each Purchased Asset that is a Mezzanine Loan:

(i)The original Mezzanine Note (and if applicable, one or more allonges) 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)The original of the loan agreement and the guarantee, if any, executed in connection with the Purchased Asset.

(iii)The original intercreditor or loan coordination agreement, if any, executed in connection with the Purchased Asset.

(iv)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)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 real property.

(vii)The assignment of Purchased Asset sufficient to transfer to Buyer all of Seller’s rights, title and interest in and to the Purchased 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 that such financing statements have been sent for filing, and UCC assignments, which UCC assignments shall be in form and substance acceptable for filing.

(x)The original certificates representing the pledged equity interests (if any).

(xi)Stock powers (or their equivalent) relating to each pledged equity interest, executed in blank, if an original stock certificate (or its equivalent) is provided.

(xii)Assignment of any agreements among equity interest holders or other material contracts.

(xiii)If no original stock certificate (or its equivalent) is provided, evidence (which may be an officer’s certificate confirming such circumstances) that the pledged ownership interests have been transferred to, or otherwise made subject to a first priority security interest in favor of, Seller.

With respect to each Purchased Asset that is a Junior Interest:

(i)with respect to a B-Note, the original Mortgage Note and guarantee, if any, described in the second paragraph of this Article 7(b), and with respect to a B-Note

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or a junior participation interest, to the extent applicable, a copy of all of the documents described in clauses (iii), (iv), (vii), (viii), (ix), (x), (xi), (xii), (xiii), (xiv), (xv), (xvi), (xvii) and (xviii) of the second paragraph of this Article 7(b) with respect to a Purchased Asset;

(ii)with respect to a junior participation, the original participation certificate, if any, together with the original of any participation agreement, intercreditor agreement and/or servicing agreement executed in connection with the Purchased Asset; and

(iii)the assignment of Purchased Asset, in blank, sufficient to transfer to Buyer all of Seller’s rights, title and interest in and to the Purchased Asset.

With respect to each Purchased Asset that is a CMBS:

(i)With respect to (A) any CMBS that is in physical form, the original certificate, bond or other physical form of such CMBS, which shall (1) be endorsed (either on the face thereof or pursuant to a separate allonge) by the most recent endorsee prior to Seller, without recourse, to the order of Seller and further reflect a complete, unbroken chain of endorsement from the originator to Seller and (2) be accompanied by a separate allonge pursuant to which Seller has endorsed such certificate, without recourse, in blank, or, (B) with respect to any CMBS registered with DTC, evidence of re-registration to the securities intermediary in Buyer’s name, denoting same with a “repo” code;

(ii)to the extent in Seller’s possession or reasonably obtainable by Seller, true and correct copies of the pooling and servicing agreement or indenture and all other material documents (including, without limitation, opinions of counsel) or agreements related to the creation or issuance of the CMBS or otherwise affecting the rights (including, without limitation, the security interests) of any holder thereof;

(iii)to the extent in Seller’s possession, as applicable, true and correct copies of any assignment, assumption, modification, consolidation or extension made prior to the Purchase Date in respect of any document or agreement referred to in clause (ii) above, in each case, if the document or agreement being assigned, assumed, modified, consolidated or extended is recordable, with evidence of recording thereon (unless the particular item has not been returned from the applicable recording office);

(iv)as applicable, an original assignment of each agreement referred to in clause (iii) above, in recordable form if the agreement being assigned is a recordable document, executed in blank by Seller;

(v)with respect to any CMBS that is in physical form, a blank endorsement which, when properly completed and delivered, is sufficient to cause Buyer to become the registered holder of the CMBS; and

(vi)any other documents that Buyer may reasonably request Seller to deliver to Custodian from time to time with respect to any CMBS.

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With respect to each Purchased Asset that is a CRE CDO:

(i)With respect to any (A) CRE CDO that is in physical form, the original certificate, bond or other physical form of such CRE CDO, which shall (1) be endorsed (either on the face thereof or pursuant to a separate allonge) by the most recent endorsee prior to Seller, without recourse, to the order of Seller and further reflect a complete, unbroken chain of endorsement from the originator to Seller and (2) be accompanied by a separate allonge pursuant to which Seller has endorsed such certificate, without recourse, in blank, or, (B) with respect to any CRE CDO registered with DTC, evidence of re-registration to the securities intermediary in Buyer’s name denoting same with a “repo” code;

(ii)to the extent in Seller’s possession or obtainable by Seller, true and correct copies of the indenture and all other material documents (including, without limitation, opinions of counsel) or agreements related to the creation or issuance of the CRE CDO or otherwise affecting the rights (including, without limitation, the security interests) of any holder thereof;

(iii)to the extent in Seller’s possession, as applicable, true and correct copies of any assignment, assumption, modification, consolidation or extension made prior to the Purchase Date in respect of any document or agreement referred to in clause (ii) above, in each case, if the document or agreement being assigned, assumed, modified, consolidated or extended is recordable, with evidence of recording thereon (unless the particular item has not been returned from the applicable recording office);

(iv)as applicable, an original assignment of each agreement referred to in clause (iii) above, in recordable form if the agreement being assigned is a recordable document, executed in blank by Seller;

(v)with respect to any CRE CDO that is in physical form, a blank endorsement which, when properly completed and delivered, is sufficient to cause Buyer to become the registered holder of the CRE CDO; and

(vi)any other documents that Buyer may reasonably request Seller to deliver to Custodian from time to time with respect to any CRE CDO.

With respect to each Purchased Asset that is of the type described in clause (viii) of the definition of Eligible Asset:  any of the documentation referred to above in this Article 7(b) or other documentation with respect to such Eligible Asset that is determined by Buyer to be necessary to effectuate the sale, transfer, conveyance and assignment of such Eligible Asset.

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 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 that 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

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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 Assets 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 to (i) complete and record each Assignment of Mortgage, (ii) complete the endorsement of each Mortgage Note or Mezzanine Note, (iii) take any action (including exercising voting and/or consent rights) with respect to CMBS, Junior Interests, or intercreditor or participation agreements, and (iv) take such other steps as may be necessary or desirable to enforce Buyer’s rights against, under or with respect to such Purchased Assets and the related Purchased Asset Files and the Servicing Records.  Buyer shall deposit the Purchased Asset Files representing the Purchased Assets, or direct that the Purchased Asset Files be deposited directly, with the Custodian.  The Purchased Asset Files shall be maintained in accordance with the Custodial Agreement.  Any Purchased Asset 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 Asset File and the originals of the Purchased Asset File not delivered to Buyer or its designee.  The possession of the Purchased Asset File by Seller or its designee is at the will of Buyer for the sole purpose of servicing the related Purchased Asset, 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 Asset to Buyer.  Seller or its designee (including the Custodian) 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, is in connection with a repurchase of any Purchased Asset by Seller or as otherwise required by law.

(c)Unless an Event of Default shall have occurred and be continuing, Seller shall exercise all voting and corporate rights with respect to the Purchased Assets in accordance with Seller’s written instructions; provided, however, that Seller shall provide Buyer with prior written notice of each such action that may have a material adverse effect on any Purchased Asset.  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 any servicer, Buyer may transfer any or all of such servicing to an entity satisfactory to Buyer).

(d)Notwithstanding the provisions of Article 7(b) above requiring the execution of the Custodial Delivery and corresponding delivery of the Purchased Asset File to the Custodian on or prior to the related Purchase Date, with respect to each Transaction involving a Purchased Asset that is identified in the related Confirmation as a “Table Funded” Transaction, 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 to the Custodian by facsimile on or before the related Purchase Date for the Transaction (A) the promissory note(s), original stock certificate or participation certificate in favor of Seller evidencing the making of the Purchased Asset, with Seller’s endorsement of such instrument to Buyer, (B) such other components of the Purchased

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Asset File as Buyer may require on a case by case basis with respect to the particular Transaction, and (C) 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 (ii) not later than the third (3rd) Business Day following the Purchase Date, deliver to Buyer the Custodial Delivery and to the Custodian the entire Purchased Asset File.

ARTICLE 8.

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, subject, however, to the terms of this Agreement.  Nothing in this Agreement or any other Transaction Document shall preclude Buyer from engaging in repurchase 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 Article 3 of this Agreement or of Buyer’s obligation to credit or pay Income to, or apply Income to the obligations of, Seller pursuant to Article 5 hereof.

(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 an Affiliate of Seller.

ARTICLE 9.

RESERVED

ARTICLE 10.

REPRESENTATIONS AND WARRANTIES

(a)Each of Buyer and Seller represent and warrant to the other that (i) it is duly authorized to execute and deliver this Agreement, to enter into 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 the form of an annex hereto or otherwise, 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 or rule applicable to it or its organizational documents or any agreement by which it is bound or by which any of its assets are affected.  On the Purchase Date for any Transaction, Buyer and Seller shall each be deemed to repeat all the foregoing representations made by it.

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(b)In addition to the representations and warranties in subsection (a) above, Seller represents and warrants to Buyer as of the date of this Agreement and will be deemed to represent and warrant to Buyer as of the Purchase Date for the purchase of any Purchased Assets by Buyer from Seller and any Transaction thereunder and covenants that at all times while this Agreement and any Transaction thereunder is in effect, unless otherwise stated herein:

(i)Organization.  Seller is duly organized, validly existing and in good standing under the laws and regulations of the state of Seller’s incorporation and is duly licensed, qualified, and in good standing in every state where such licensing or qualification is necessary for the transaction of Seller’s business, except where failure to so qualify could not be reasonably likely to have a Material Adverse Effect.  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 or will be duly executed and delivered by Seller, for good and valuable consideration.  The Transaction Documents constitute the legal, valid and binding obligations of 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)Ability to Perform.  Seller does not believe, nor does it have any reason or cause to believe, that it cannot perform each and every covenant contained in the Transaction Documents applicable to it to which it is a party.

(iv)Non-Contravention.  Neither the execution and delivery of the Transaction Documents, nor consummation by Seller of the transactions contemplated by the Transaction Documents (or any of them), nor compliance by 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 organizational documents of Seller, (ii) any contractual obligation to which Seller is now a party or the rights under which have been assigned to Seller or the obligations under which have been assumed by Seller or to which the assets of Seller are subject or constitute a default thereunder, or result thereunder in the creation or imposition of any lien upon any of the assets of Seller, other than pursuant to the Transaction Documents, (iii) any judgment or order, writ, injunction, decree or demand of any court applicable to Seller, or (iv) any applicable Requirement of Law, in the case of clauses (ii)-(iv) above, to the extent that such conflict or breach would have a Material Adverse Effect upon Seller’s ability to perform its obligations hereunder.

(v)Litigation; Requirements of Law.  As of the date hereof and as of the Purchase Date for any Transaction hereunder, there is no action, suit, proceeding, investigation, or arbitration pending or, to the best knowledge of Seller, threatened against Seller or any of its assets, nor is there any action, suit, proceeding, investigation, or arbitration pending or threatened against Seller that may result in any Material

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Adverse Effect.  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.

(vi)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.

(vii)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 Article 8-102(a)(1) 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.  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 the Buyer a valid security interest in all rights, title and interest of Seller in, to and under the Purchased Assets and the Buyer shall have a valid, perfected first priority security interest in the Purchased Assets (and without limitation on the foregoing, the Buyer, as entitlement holder, shall have a “security entitlement” to the Purchased Assets).

(viii)No Decline in Market Value; No Defaults.  No Event of Default has occurred or exists under or with respect to the Transaction Documents and Seller is not aware of any post-Transaction facts or circumstances that are reasonably likely to cause or have caused the Market Value of any Purchased Asset to decline in value.

(ix)Authorized Representatives.  The duly authorized representatives of Seller are listed on, and true signatures of such authorized representatives are set forth on, Exhibit II attached to this Agreement.

(x)Representations and Warranties Regarding Purchased Assets; Delivery of Purchased Asset File.

(A)As of the date hereof, Seller has not assigned, pledged, or otherwise conveyed or encumbered any Purchased Asset to any other Person, and immediately prior to the sale of such Purchased Asset to Buyer, Seller was the sole owner of such Purchased Asset and had good and marketable title thereto, free and clear of all liens, in each case except for (1) liens to be released simultaneously with the sale to Buyer hereunder and (2) liens granted by Seller in favor of the counterparty to any Hedging Transaction, solely to the extent such liens are expressly subordinate to the rights and interests of Buyer hereunder.

(B)The provisions of this Agreement and the related Confirmation are effective to either constitute a sale of Purchased Items to Buyer or to create in

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favor of Buyer a legal, valid and enforceable security interest in all right, title and interest of Seller in, to and under the Purchased Items.

(C)Upon receipt by the Custodian of each Mortgage Note, Mezzanine Loan note, B-Note or Junior Interest certificate, endorsed in blank by a duly authorized officer of Seller, either a purchase shall have been completed by Buyer of such Mezzanine Loan note, B-Note or Junior Interest certificate, as applicable, or Buyer shall have a valid and fully perfected first priority security interest in all right, title and interest of Seller in the Purchased Items described therein.

(D)Each of the representations and warranties made in respect of the Purchased Assets pursuant to Exhibit VI are true, complete and correct, except to the extent disclosed in a Requested Exceptions Report.

(E)Upon the filing of financing statements on Form UCC-1 naming Buyer as “Secured Party”, Seller as “Debtor” and describing the Purchased Items, in the jurisdiction and recording office listed on Exhibit XIII attached hereto, the security interests granted hereunder in that portion of the Purchased Items which can be perfected by filing under the Uniform Commercial Code will constitute fully perfected security interests under the Uniform Commercial Code in all right, title and interest of Seller in, to and under such Purchased Items.

(F)Upon execution and delivery of the Control Agreement, Buyer shall either be the owner of, or have a valid and fully perfected first priority security interest in, the “investment property” and all “deposit accounts” (each as defined in the Uniform Commercial Code) comprising Purchased Items or any after-acquired property related to such Purchased Items.  Except to the extent disclosed in a Requested Exceptions Report, 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 the originals of which have been delivered to the Custodian.

(xi)Adequate Capitalization; No Fraudulent Transfer.  Seller has, as of such Purchase Date, adequate capital for the normal obligations foreseeable in a business of its size and character and in light of its contemplated business operations.  Seller is generally able to pay, and as of the date hereof is paying, its debts as they come due.  Seller has not become, or is presently, financially insolvent nor will Seller be made insolvent by virtue of 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.  Seller has not entered into any Transaction Document or any Transaction pursuant thereto in contemplation of insolvency or with intent to hinder, delay or defraud any creditor.

(xii)No Conflicts or Consents.  Neither the execution and delivery of this Agreement and the other Transaction Documents by Seller, nor the consummation of any of the transactions by it herein or therein contemplated, nor compliance with the terms and provisions hereof or with the terms and provisions thereof, will contravene or conflict with or result in the creation or imposition of (or the obligation to create or impose) any

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lien upon any of the property or assets of Seller pursuant to the terms of any indenture, mortgage, deed of trust, or other agreement or instrument to which Seller is a party or by which Seller may be bound, or to which Seller may be subject, other than liens created pursuant to the Transaction Documents.  No consent, approval, authorization, or order of any third party is required in connection with the execution and delivery by Seller of the Transaction Documents to which it is a party or to consummate the transactions contemplated hereby or thereby which has not already been obtained.

(xiii)Governmental Approvals.  No order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by, any Governmental Authority is required to authorize, or is required in connection with, (i) the execution, delivery and performance of any Transaction Document to which Seller is or will be a party, (ii) the legality, validity, binding effect or enforceability of any such Transaction Document against Seller or (iii) the consummation of the transactions contemplated by this Agreement (other than the filing of certain financing statements in respect of certain security interests).

(xiv)Organizational Documents.  Seller has delivered to Buyer certified copies of its organization documents, together with all amendments thereto, if any.

(xv)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, (ii) no agreements on the part of Seller to issue, sell or distribute the Purchased Assets, and (iii) no obligations on the part of Seller (contingent or otherwise) to purchase, redeem or otherwise acquire any securities or any interest therein.

(xvi)Federal Regulations.  Seller is not required to register as an “investment company,” or a company “controlled by an investment company,” within the meaning of the Investment Company Act of 1940, as amended.  Seller is not 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.

(xvii)Taxes.  Seller has filed or caused to be filed all tax returns that, 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 except for any such taxes as (A) 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 or (B) are de minimis in amount; no tax liens have been filed against any of Seller’s assets and, no claims are being asserted with respect to any such taxes, fees or other charges.

(xviii)Judgments/Bankruptcy.  Except as disclosed in writing to Buyer, there are no judgments against Seller unsatisfied of record or docketed in any court located in the

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United States of America and no Act of Insolvency has ever occurred with respect to Seller.

(xix)Solvency.  Neither the Transaction Documents nor any Transaction thereunder are entered into in contemplation of insolvency or with intent to hinder, delay or defraud any of Seller’s creditors.  The transfer of the Purchased Assets subject hereto and the obligation to repurchase such Purchased Assets is not undertaken with the intent to hinder, delay or defraud any of Seller’s creditors.  As of the Repurchase Date, Seller is not insolvent within the meaning of 11 U.S.C. Section 101(32) or any successor provision thereof and the transfer and sale of the Purchased Assets pursuant hereto and the obligation to repurchase such Purchased Asset (i) will not cause the liabilities of Seller to exceed the assets of Seller, (ii) will not result in Seller having unreasonably small capital, and (iii) will not result in debts that would be beyond Seller’s ability to pay as the same mature.  No petition in bankruptcy has been filed against Seller in the last ten (10) years, and Seller has not in the last ten (10) years made an assignment for the benefit of creditors or taken advantage of any debtors relief laws.  Seller has only entered into agreements on terms that would be considered arm’s length and otherwise on terms consistent with other similar agreements with other similarly situated entities.

(xx)Use of Proceeds; Margin Regulations.  All proceeds of each Transaction shall be used by Seller for purposes permitted under Seller’s governing documents, provided that no part of the proceeds of any Transaction will be used by Seller to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock.  Neither the entering into of any Transaction nor the use of any proceeds thereof will violate, or be inconsistent with, any provision of Regulation T, U or X of the Board of Governors of the Federal Reserve System.

(xxi)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 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.

(xxii)Financial Information.  All financial data concerning Seller and the Purchased Assets that has been delivered by or on behalf of Seller to Buyer is true, complete and correct in all material respects.  All financial data concerning Seller has been prepared fairly in accordance with GAAP.  All financial data concerning the Purchased Assets has been prepared in accordance with standard industry practices.  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 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.

(xxiii)Hedging Transactions.  To the actual knowledge of Seller, as of the Purchase Date for any Purchased Asset that is subject to a Hedging Transaction, each such Hedging Transaction is in full force and effect in accordance with its terms, each

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counterparty thereto is an Affiliated Hedge Counterparty or a Qualified Hedge Counterparty, and no “Termination Event”, “Event of Default”, “Potential Event of Default” or any similar event, however denominated, has occurred and is continuing with respect thereto.

(xxiv)Servicing Agreements.  Seller has delivered to Buyer all Servicing Agreements pertaining to the Purchased Assets and to the actual knowledge of Seller, as of the date of this Agreement and as of the Purchase Date for the purchase of any Purchased Assets subject to a Servicing Agreement, each such Servicing Agreement is in full force and effect in accordance with its terms and no default or event of default exists thereunder.

(xxv)No Reliance.  Seller has made its own independent decisions to enter into the Transaction Documents and each Transaction and as to whether such Transaction is appropriate and proper for it based upon its own judgment and upon advice from such advisors (including without limitation, legal counsel and accountants) as it has deemed necessary.  Seller is not relying upon any advice from Buyer as to any aspect of the Transactions, including without limitation, the legal, accounting or tax treatment of such Transactions.

(xxvi)Patriot Act.  Seller is in compliance, in all material respects, with the (i) the Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any other applicable enabling legislation or executive order relating thereto, and (ii) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot Act of 2001).  No part of the proceeds of any Transaction will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.

(xxvii)  Environmental Matters.

(a)No properties owned or leased by Seller and no properties formerly owned or leased by Seller, its predecessors, or any former Subsidiaries or predecessors thereof (the “Properties”), contain, or have previously contained, any Materials of Environmental Concern in amounts or concentrations which constitute or constituted a violation of, or reasonably could be expected to give rise to liability under, Environmental Laws;

(b)Seller is in compliance with all applicable Environmental Laws, and there is no violation of any Environmental Laws which reasonably would be expected to interfere with the continued operations of Seller;

(c)Seller has not received any notice of violation, alleged violation, non-compliance, liability or potential liability under any Environmental

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Law, nor does Seller have knowledge that any such notice will be received or is being threatened;

(d)Materials of Environmental Concern have not been transported or disposed by Seller in violation of, or in a manner or to a location which reasonably would be expected to give rise to liability under, any applicable Environmental Law, nor has Seller generated, treated, stored or disposed of at, on or under any of the Properties in violation of, or in a manner that reasonably would be expected to give rise to liability under, any applicable Environmental Law;

(e)No judicial proceedings or governmental or administrative action is pending, or, to the knowledge of Seller, threatened, under any Environmental Law which Seller is or will be named as a party, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements arising out of judicial proceedings or governmental or administrative actions, outstanding under any Environmental Law to which Seller is a party;

(f)There has been no release or threat of release of Materials of Environmental Concern in violation of or in amounts or in a manner that reasonably would be expected to give rise to liability under any Environmental Law for which Seller may become liable; and

(g)Each of the representations and warranties set forth in the preceding clauses (A) through (F) is true and correct with respect to each parcel of real property owned or operated by Seller.

(xxviii)Insider.  Seller is not an “executive officer,” “director,” or “person who directly or indirectly or acting through or in concert with one or more persons owns, controls, or has the power to vote more than 10% of any class of voting securities” (as those terms are defined in 12 U.S.C. § 375(b) or in regulations promulgated pursuant thereto) of Buyer, of a bank holding company of which Buyer is a Subsidiary, or of any Subsidiary, of a bank holding company of which Buyer is a Subsidiary, of any bank at which Buyer maintains a correspondent account or of any lender which maintains a correspondent account with Buyer

(xxix)Office of Foreign Assets Control.  Seller is not a person (i) whose property or interest in property is blocked or subject to blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), (ii) who engages in any dealings or transactions prohibited by Section 2 of such executive order, or to the best of Seller’s knowledge,  is otherwise associated with any such person in any manner in violation of Section 2 of such executive order, or (iii) on the current list of Specially Designated Nationals and Blocked Persons or subject to the limitations or prohibitions under any other U.S. Department of Treasury’s Office of Foreign Assets Control regulation or executive order.

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(xxx)        Notice Address; Jurisdiction of Organization.  On the date of this Agreement, Seller’s address for notices is as specified on Annex I.  Seller’s jurisdiction of organization is Maryland.  The location where Seller keeps its books and records, including all computer tapes and records relating to the Collateral and Purchased Items, is its notice address.  Seller may change its address for notices and for the location of its books and records by giving Buyer written notice of such change.

ARTICLE 11.
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 that would directly or indirectly impair or adversely affect Buyer’s title to the Purchased Assets;

(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 any of them) with any Person other than Buyer;

(c)           modify in any material adverse respect any Servicing Agreements;

(d)           create, incur or permit to exist any lien, encumbrance or security interest in or on any of the Purchased Assets, the other Collateral or Purchased Items, other than the security interest granted by Seller pursuant to Article 6 of this Agreement;

(e)           enter into any transaction of merger or consolidation or amalgamation, that is likely to have a material adverse effect on the creditworthiness or financial condition of Seller, or liquidate, wind up or dissolve itself (or suffer any liquidation, winding up or dissolution), sell all or substantially all of its assets without the consent of Buyer in its sole and absolute discretion;

(f)            consent or assent to any material amendment or supplement to, or termination of, any note, loan agreement, mortgage or guarantee relating to the Purchased Assets or other material agreement or instrument relating to the Purchased Assets other than in accordance with Article 28;

(g)           acquire or maintain any right or interest in any Purchased Asset or Underlying Mortgaged Property that is senior to or pari passu with the rights and interests of Buyer therein under this Agreement and the other Transaction Documents unless such right or interest becomes a Purchased Asset hereunder ;

(h)           use any part of the proceeds of any Transaction hereunder for any purpose which violates, or would be inconsistent with, the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System;

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(i)            permit Seller’s EBITDA to Fixed Charge Ratio as of the last day of any fiscal quarter to be less than 1.20:1;

(j)            permit Seller’s ratio of Total Indebtedness to Tangible Net Worth at any time to be greater than 10.00:1.00;

(k)           permit Seller’s ratio of Total Non-Securitized  Indebtedness to Tangible Net Worth at any time to be greater than 5.00:1.00; or

(l)            enter into any Hedging Transaction with respect to any Purchased Asset with any entity that is not an Affiliated Hedging Counterparty or a Qualified Hedging Counterparty.

ARTICLE 12.
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 Article 12 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 Article 10.

(c)           Seller (1) shall defend the right, title and interest of Buyer in and to the Collateral and Purchased Items 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 reasonable 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 cause the special servicer rating of the special servicer with respect to all mortgage loans underlying Purchased Assets other than Seller itself to be no lower than “average” by Standard & Poor’s Ratings Group to the extent Seller controls or is entitled to control the selection of the special servicer.  In the event the special servicer rating with respect to any Person acting as special servicer for any mortgage loans underlying Purchased Assets other than Seller itself shall be below “average” by Standard & Poor’s Rating Group, or if an Act of Insolvency occurs with respect to Seller, Buyer shall be entitled to transfer special servicing with respect to all Purchased Assets to an entity satisfactory to Buyer, to the extent Seller controls or is entitled to control the selection of the special servicer.

(f)            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 Seller pursuant to the Purchased Asset Documents; (ii) any notice of

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transfer of servicing under the Purchased Asset Documents and (iii) any other information with respect to the Purchased Assets that may be requested by Buyer from time to time.

(g)           Seller will permit Buyer or its designated representative to inspect Seller’s records with respect to the Collateral and the Purchased Items 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.  Buyer shall act in a commercially reasonable manner in requesting and conducting any inspection relating to the conduct and operation of Seller’s business.

(h)           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 a Purchased Asset, 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 in trust for Buyer, segregated from other funds of Seller, as additional collateral security for the Transactions.

(i)            At any time from time to time upon the reasonable 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 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 UCC financing statements as Buyer may request).  If any amount payable under or in connection with any of the Collateral or Purchased Items shall be or become evidenced by any promissory note, other instrument or chattel paper, such note, instrument or chattel paper shall be immediately delivered to Buyer, duly endorsed in a manner satisfactory to Buyer, to be itself held as a Purchased Item and/or Collateral, as applicable, pursuant to this Agreement, and the documents delivered in connection herewith.

(j)            Seller shall provide, or to cause to be provided, to Buyer the following financial and reporting information:

(i)            Within sixty (60) days after the last day of each of the first three fiscal quarters in any fiscal year, consolidated unaudited financial statements of Seller presented fairly in accordance with GAAP including a statement of operations and a statement of changes in cash flows for such quarter and statement of net assets as of the end of such quarter, and certified as being true and correct by an officer’s certificate;

(ii)           Promptly after the end of each month, to the extent provided by the applicable servicer, with respect to Eligible Assets that are Eligible Loans, any and all certified financial statements and rent rolls received from an applicable Eligible Loan borrower;

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(iii)          Within one-hundred and twenty (120) days after the last day of its fiscal year, Seller’s consolidated audited financial statements, prepared by a nationally recognized independent certified public accounting firm and presented fairly in accordance with GAAP including a statement of operations and a statement of changes in cash flows for such quarter and statement of net assets as of the end of such quarter in a similar manner as presented in the AICPA Audit and Accounting Guide, “Audits of Investment Companies”, and (y) the audited statements of income and statements of changes in cash flow for such year and balance sheets as of the end of such year of Seller accompanied by an unqualified report of the nationally recognized independent certified public accounting firm that prepared them;

(iv)          Promptly after receipt of same, but, in any event, within 20 days after the last day of each calendar quarter in any fiscal year, any and all property level financial information with respect to the Purchased Assets that is in the possession of Seller including, without limitation, rent rolls and income statements for the immediately preceding quarter and, when available, for the preceding year;

(v)           Within sixty (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;

(vi)          Within fifteen (15) days after the last day of each month, a certificate substantially in the form attached hereto as Exhibit XIX to this Agreement (the “Covenant Compliance Certificate”), from a Responsible Officer of Seller, delivered no later than one Business Day prior to the date of such Transaction, (i) stating that as of the date of such certificate, Seller is not aware of any facts, or pending developments, that have caused, or may in the future cause, the Market Value of any Purchased Asset to decline at any time within the reasonably foreseeable future; (ii) stating that, as of the date of such certificate and since the date of the certificate most recently delivered pursuant to Article 12(j), Seller has observed or performed all of its covenants and other agreements in all material respects, and satisfied in all material respects, every condition, contained in this Agreement and the related documents to be observed, performed or satisfied by it; (iii) stating that as of the date of such certificate such Responsible Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate; (iv) stating that (A) other than as set forth in clause (B) below, as of the date of such certificate the representations and warranties made by Seller in Article 10 are true, correct and complete in all material respects with the same force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date), and (B) with respect to the representations and warranties set forth in Article 10(b)(x)(D) of this Agreement, no Material Breach has occurred; (v) stating that as of the date of such certificate no “Termination Event”, “Event of Default”, “Potential Event of Default” or any similar event by Seller, however denominated, has occurred and is continuing under any Hedging Transaction; and (vii) showing in detail the calculations supporting such Responsible Officer’s certification of the applicable Seller’s compliance with the financial requirements of Article 11;

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(vii)         With respect to each Eligible Asset that is a CMBS or a Junior Interest, as soon as available but in any event not later than ten (10) days after receipt thereof, the related monthly securitization report;

(viii)        Within fifteen (15) days after each month end, a listing of any changes in all Hedging Transactions, Qualified Hedge Counterparties and the material terms of each Hedging Transaction; and

(ix)           Within fifteen (15) days after each month end, a monthly reporting package substantially in the form of Exhibit III attached hereto.

(k)           Seller shall make a representative available to Buyer every month for attendance at a telephone conference, the date of which to be mutually agreed upon by Buyer and Seller, regarding the status of each Purchased Asset, Seller’s compliance with the requirements of Articles 11 and 12, and any other matters relating to the Transaction Documents or Transactions that Buyer wishes to discuss with Seller.

(l)            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 necessary to preserve and maintain in full force and effect its legal existence, and all licenses material to its business.

(m)          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 fairly in accordance with GAAP, in a similar manner as presented in the AICPA Audit and Accounting Guide, “Audits of Investment Companies,” and set aside on its books from its earnings for each fiscal year all such proper reserves in accordance with GAAP.

(n)           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 Collateral that, in each case, in any manner would create any lien or charge upon the Collateral, other than any such taxes that 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.

(o)           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.

(p)           Seller will maintain records with respect to the Collateral and Purchased Items and the conduct and operation of its business with no less a degree of prudence than if the Collateral and Purchased Items were held by Seller for its own account and will furnish Buyer, upon reasonable request by Buyer or its designated representative, with reasonable information

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obtainable by Seller with respect to the Collateral and Purchased Items and the conduct and operation of its business.

(q)           Seller shall provide Buyer with reasonable access to operating statements, the occupancy status and other property level information with respect to the underlying real estate directly or indirectly securing or supporting such Purchased Assets that either is in Seller’s possession or is available to Seller, plus any such additional reports as Buyer may reasonably request.

(r)            Seller shall enter into Hedging Transactions with respect to each of the Hedge-Required Assets to the extent necessary to hedge interest rate risk associated with the Purchase Price on such Hedge-Required Assets, in a manner reasonably acceptable to Buyer, to the extent that such Hedging Transactions will not give rise to non-qualifying REIT income under section 856 of the Code.

(s)           Seller shall take all such steps as the Buyer deems necessary to perfect the security interest granted pursuant to Article 6 in the Hedging Transactions, shall take such action as shall be necessary or advisable to preserve and protect Seller’s interest under all such Hedging Transactions (including, without limitation, requiring the posting of any required Additional Eligible Collateral thereunder, and hereby authorizes Buyer to take any such action that Seller fails to take after demand therefor by Buyer.  Seller shall provide the Custodian with copies of all documentation relating to Hedging Transactions with Qualified Hedge Counterparties promptly after entering into same.  All Hedging Transactions, if any, entered into by Seller with Buyer or any of its Affiliates in respect of any Purchased Asset shall be terminated contemporaneously with the repurchase of such Purchased Asset on the Repurchase Date therefor.

ARTICLE 13.
EVENTS OF DEFAULT; REMEDIES

(a)           Each of the following events shall constitute an “Event of Default” under this Agreement:

(i)            Seller shall fail to repurchase Purchased Assets upon the applicable Repurchase Date;

(ii)           Buyer shall fail to receive on any Remittance Date the accreted value of the 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) (except that such failure shall not be an Event of Default by Seller if sufficient Income, including Principal Payments which would otherwise be remitted to Seller pursuant to Article 5 of this Agreement, is on deposit in the Cash Management Account and the Depository fails to remit such funds to Buyer);

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(iii)          Seller shall fail to cure any Margin Deficit, to the extent such Margin Deficit equals or exceeds the Minimum Transfer Amount, in accordance with Article 4 of this Agreement;

(iv)          Seller shall fail to make any payment not otherwise addressed under this Article 13(a) owing to Buyer that has become due, whether by acceleration or otherwise under the terms of this Agreement, which failure is not remedied within five (5) Business Days;

(v)           Seller shall default in the observance or performance of any agreement contained in Article 11 of this Agreement and, solely with respect to Article 11(d), such default shall not be cured within ten (10) Business Days after notice by Buyer to Seller;

(vi)          an Act of Insolvency occurs with respect to Seller;

(vii)         Seller shall admit to any Person its inability to, or its intention not to, perform any of its obligations hereunder;

(viii)        the Custodial Agreement, the Control Agreement or any other Transaction Document or a replacement therefor acceptable to Buyer shall for whatever reason be terminated or cease to be in full force and effect, or the enforceability thereof shall be contested by Seller;

(ix)           Seller shall be in default under (i) any Indebtedness of Seller, as appropriate, which default (1) involves the failure to pay a matured obligation in excess of $5,000,000, or (2) permits the acceleration of the maturity of obligations by any other party to or beneficiary with respect to such Indebtedness, if the aggregate amount of the Indebtedness in respect of which such default or defaults shall have occurred is at least $5,000,000; or (ii) any other material contract to which Seller is a party which default (1) involves the failure to pay a matured obligation, or (2) permits the acceleration of the maturity of obligations by any other party to or beneficiary of such contract if the aggregate amount of such obligations is $5,000,000;

(x)            (i) Seller or an ERISA Affiliate shall engage in any “prohibited transaction” (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan that is not exempt from such Sections of ERISA and the Code, (ii) any material “accumulated funding deficiency” (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of Seller or any ERISA Affiliate, (iii) a Reportable Event (as referenced in Section 4043(b)(3) of ERISA) shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of Buyer, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Plan shall terminate for purposes of Title IV of ERISA, (v) Seller or any ERISA Affiliate shall, or in the reasonable opinion of Buyer is likely to, incur any liability in connection with a withdrawal from, or the insolvency or reorganization of, a Multiemployer Plan or (vi) any

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other event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could reasonably be expected to have a Material Adverse Effect;

(xi)           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, and such condition is not cured by Seller within five (5) Business Days after notice thereof from Buyer to Seller, or (B) if a Transaction is recharacterized as a secured financing, and the Transaction Documents with respect to any Transaction shall for any reason cease to create and maintain a valid first priority security interest in favor of Buyer in any of the Purchased Assets and such condition is not cured by Seller within five (5) Business Days after notice thereof from Buyer to Seller;

(xii)          an “Event of Default,” “Termination Event,” “Potential Event of Default” or other default or breach, however denominated, occurs under any Hedging Transaction on the part of Seller, or the counterparty to Seller on any such Hedging Transaction with a Qualified Hedge Counterparty ceases to be a Qualified Hedge Counterparty, that is otherwise not cured within any applicable cure period thereunder or, if no cure period exists thereunder, which is not cured by Seller within five (5) Business Days after notice thereof from an Affiliated Hedge Counterparty or Qualified Hedge Counterparty to Seller;

(xiii)         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 Seller, which suspension has a Material Adverse Effect in the determination of Buyer and that is not cured by Seller, within fifteen (15) Business Days after notice thereof from Buyer to Seller;

(xiv)        any condition shall exist that constitutes a Material Adverse Effect in Buyer’s sole discretion exercised in good faith that is not cured by Seller, within seven (7) Business Days after notice thereof from Buyer to Seller;

(xv)         (A) any representation made by Seller to Buyer shall have been incorrect or untrue in any material respect when made or repeated or deemed to have been made or repeated (other than the representations and warranties of Seller set forth in Article 10(b)(x), (other than Article 10(b)(x)(D)), Article 10(b)(xxi) or Article 10(b)(xxii) of this Agreement, and (B) any Material Breach shall have occurred with respect to the representations and warranties set forth in Article 10(b)(x)(D), which shall not be considered an Event of Default if incorrect or untrue in any material respect, provided Seller terminates the related Transaction, as applicable, and repurchases the related Purchased Assets on an Early Repurchase Date no later than three (3) Business Days after receiving notice of such incorrect or untrue representation; unless Seller shall have made any such representation with knowledge that it was materially incorrect or untrue at the time made;

(xvi)        a final non-appealable judgment by any competent court in the United States of America for the payment of money in an amount greater than $5,000,000 shall

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have been rendered against Seller, and remained undischarged or unpaid for a period of sixty (60) days, during which period execution of such judgment is not effectively stayed by bonding over or other means acceptable to Buyer; and

(xvii)       if Seller shall breach or fail to perform any of the terms, covenants, obligations or conditions of this Agreement, other than as specifically otherwise referred to in this definition of “Event of Default”, and such breach or failure to perform is not remedied within the earlier of thirty (30) days after (a) delivery of notice thereof to Seller by Buyer, or (b) actual knowledge on the part of Seller of such breach or failure to perform; provided that, if Buyer determines, in its sole discretion, that any such breach is capable of being cured and Seller is diligently and continuously pursuing such a cure in good faith but is not able to do so on a timely basis, Seller shall have an additional period of time, not to exceed thirty (30) additional days, within which to complete such cure.

(b)           After the occurrence and during the continuance of an Event of Default, Seller hereby appoints Buyer as attorney-in-fact of Seller for the purpose 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.  If an Event of Default shall occur and be continuing with respect to Seller, the following rights and remedies shall be available to Buyer:

(i)            At the option of Buyer, exercised by written notice to 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 Seller), the Repurchase Date for each Transaction hereunder 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 Article 13(b)(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 Repurchase Price with respect to each Transaction (determined as of the Accelerated Repurchase Date) shall be increased by the aggregate amount obtained by daily application of, on a 360 day per year basis for the actual number of days during the period from and including the Accelerated Repurchase Date to but excluding the date of payment of the Repurchase Price (as so increased), (x) the Pricing Rate for such Transaction multiplied by (y) the Repurchase Price for such Transaction (decreased by (I) any amounts actually remitted to Buyer by the Depository or Seller from time to time pursuant to Article 5 of this Agreement and applied to such Repurchase Price, and (II) any amounts applied to the Repurchase Price pursuant to Article 13(b)(iii) of this Agreement); and

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(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)          Upon the occurrence of an Event of Default with respect to Seller, Buyer may (A) immediately sell, at a public or private sale in a commercially reasonable manner and at such price or prices as Buyer may deem satisfactory any or all of the Purchased Assets, and/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.  The proceeds of any disposition of Purchased Assets effected pursuant to this Article 13(b)(iii) shall be applied, (u) first, to the costs and expenses incurred by Buyer in connection with Seller’s default; (v) second, to consequential damages, including, but not limited to, costs of cover and/or Hedging Transactions, if any; (w) third, to the Repurchase Price; (x) fourth, to any other outstanding obligation of Seller to Buyer; and (y) fifth, to return any excess to Seller.

(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.

(v)           Seller shall be liable to Buyer for (A) the amount of all actual out-of-pocket 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 (B) all costs incurred by Buyer in connection with Hedging Transactions in the event that Seller, from and after an Event of Default, takes any action to impede or otherwise affect Buyer’s remedies under this Agreement.

(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 (where relevant), 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 of the State of New York, 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

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Purchased Assets against all of Seller’s obligations to Buyer under this Agreement, without prejudice to Buyer’s right to recover any deficiency.

(vii)         Subject to the notice and cure periods set forth herein, 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 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 that 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, to the extent permitted by law, 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.

ARTICLE 14.
SINGLE AGREEMENT

Buyer and Seller acknowledge that, and have entered hereinto 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.

ARTICLE 15.
RECORDING OF COMMUNICATIONS

EACH OF BUYER AND SELLER SHALL HAVE THE RIGHT (BUT NOT THE OBLIGATION) FROM TIME TO TIME TO MAKE OR CAUSE TO BE MADE TAPE RECORDINGS OF COMMUNICATIONS BETWEEN ITS EMPLOYEES, IF ANY, AND THOSE OF THE OTHER PARTY WITH RESPECT TO TRANSACTIONS; PROVIDED, HOWEVER, THAT SUCH RIGHT TO RECORD COMMUNICATIONS SHALL BE LIMITED TO COMMUNICATIONS OF EMPLOYEES TAKING PLACE ON THE TRADING FLOOR OF THE APPLICABLE PARTY.  EACH OF BUYER AND SELLER HEREBY CONSENTS TO THE ADMISSIBILITY OF SUCH TAPE

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RECORDINGS IN ANY COURT, ARBITRATION, OR OTHER PROCEEDINGS, AND AGREES THAT A DULY AUTHENTICATED TRANSCRIPT OF SUCH A TAPE RECORDING SHALL BE DEEMED TO BE A WRITING CONCLUSIVELY EVIDENCING THE PARTIES’ AGREEMENT.

ARTICLE 16.
NOTICES AND OTHER COMMUNICATIONS

Unless otherwise provided in this Agreement, 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 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 delivery or (d) by telecopier (with answerback acknowledged) provided that such telecopied notice must also be delivered by one of the means set forth in (a), (b) or (c) above, to the address specified in Annex I hereto 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 Article.  A notice shall be deemed to have been given: (w) in the case of hand delivery, at the time of delivery, (x) in the case of registered or certified mail, when delivered or the first attempted delivery on a Business Day, (y) in the case of expedited prepaid delivery upon the first attempted delivery on a Business Day, or (z) in the case of telecopier, upon receipt of answerback confirmation, provided that such telecopied notice was also delivered as required in this Article.  A party receiving a notice that does not comply with the technical requirements for notice under this Article may elect to waive any deficiencies and treat the notice as having been properly given.

ARTICLE 17.
ENTIRE AGREEMENT; SEVERABILITY

This Agreement shall supersede any existing agreements between the parties containing general terms and conditions for repurchase transactions.  Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.

ARTICLE 18.
NON-ASSIGNABILITY

(a)           Subject to Article 18(b) below, Seller may not assign any of its rights or obligations under this Agreement without the prior written consent of Buyer not to be unreasonably withheld or delayed and any attempt by Seller to assign any of its rights or obligations under this Agreement without the prior written consent of Buyer shall be null and void.  Buyer may upon notice to Seller and without consent of Seller, sell to one or more banks, financial institutions or other entities (“Participants”) participating interests in any Transaction, its interest in the Purchased Assets, or any other interest of Buyer under this Agreement.  Buyer may, at any time and from time to time, assign to any Person (an “Assignee” and together with

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Participants, each a “Transferee” and collectively, the “Transferees”) all or any part of its rights its interest in the Purchased Assets, or any other interest of Buyer under this Agreement, except that, prior to an Event of Default, no such Transferee shall be one of the Prohibited Transferees set forth on Exhibit IX hereto.  Seller agrees to cooperate with Buyer in connection with any such assignment, transfer or sale of participating interest and to enter into such restatements of, and amendments, supplements and other modifications to, this Agreement in order to give effect to such assignment, transfer or sale.

(b)           Title to all Purchased Assets and Purchased Items shall pass to Buyer and Buyer shall have free and unrestricted use of all Purchased Assets.  Nothing in this Agreement shall preclude Buyer from engaging in repurchase transactions with the Purchased Assets and Purchased Items or otherwise selling, pledging, repledging, transferring, hypothecating, or rehypothecating the Purchased Assets and Purchased Items, all on terms that Buyer may determine in its sole discretion; provided, however, that Buyer shall (i) provide Seller with the name of each such third-party involved in any such transaction and (ii) transfer the Purchased Assets to Seller on the applicable Repurchase Date free and clear of any pledge, lien, security interest, encumbrance, charge or other adverse claim on any of the Purchased Assets and (iii) credit income and principal to Seller in accordance with Article 5 hereof.  Nothing contained in this agreement shall obligate Buyer to segregate any Purchased Assets or Purchased Items transferred to Buyer by Seller.

ARTICLE 19.
GOVERNING LAW

THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

ARTICLE 20.
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 Articles 4(a) or 4(b) hereof will not constitute a waiver of any right to do so at a later date.

ARTICLE 21.
USE OF EMPLOYEE PLAN ASSETS

(a)           If assets of an employee benefit plan subject to any provision of 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

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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 subparagraph (a) of this Article, 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 Article, Seller shall be deemed (i) 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 that Seller has not disclosed to Buyer, and (ii) to agree to provide Buyer with future audited and unaudited statements of its financial condition as they are issued, so long as it is Seller in any outstanding Transaction involving a Plan Party.

ARTICLE 22.
INTENT

(a)           The parties recognize that each Transaction is a “repurchase agreement” as that term is defined in Section 101(47) of Title 11 of the United States Code, as amended (except insofar as the type of Assets subject to such Transaction or the term of such Transaction would render such definition inapplicable), and a “securities contract” as that term is defined in Section 741 of Title 11 of the United States Code, as amended (except insofar as the type of assets subject to such Transaction would render such definition inapplicable).

(b)           It is understood that either party’s right to liquidate Assets delivered to it in connection with Transactions hereunder or to exercise any other remedies pursuant to Article 13 hereof is a contractual right to liquidate such Transaction as described in Sections 555, 559 and 561 of Title 11 of the United States Code, as amended.

(c)           The parties agree and acknowledge that if a party hereto is an “insured depository institution,” as such term is defined in the Federal Deposit Insurance Act, as amended (“FDIA”), then each Transaction hereunder is a “qualified financial contract,” as that term is defined in the FDIA and any rules, orders or policy statements thereunder (except insofar as the type of assets subject to such Transaction would render such definition inapplicable).

(d)           It is understood that this Agreement constitutes a “netting contract” as defined in and subject to Title IV of the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) and each payment entitlement and payment obligation under any Transaction hereunder shall constitute a “covered contractual payment entitlement” or “covered contractual payment obligation”, respectively, as defined in and subject to FDICIA (except insofar as one or both of the parties is not a “financial institution” as that term is defined in FDICIA).

(e)           It is understood that this Agreement constitutes a “master netting agreement” as defined in Section 101(38A) of Title 11 of the United States Code, as amended, and as used in Section 561 of Title 11 of the United States Code, as amended.

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(f)            It is the intention of the parties that, for U.S. Federal, state and local income and franchise tax purposes and for accounting purposes, each Transaction constitute a financing, and that Seller be (except to the extent that Buyer shall have exercised its remedies following an Event of Default) the owner of the Purchased Assets for such purposes.  Unless prohibited by applicable law, Seller and Buyer agree to treat the Transactions as described in the preceding sentence on any and all filings with any U.S. Federal, state, or local taxing authority.

ARTICLE 23.
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.

ARTICLE 24.
CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL

(a)           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.

(b)           To the extent that either party has or hereafter may acquire any immunity (sovereign or otherwise) from any legal action, suit or proceeding, from jurisdiction of any court or from set off or any legal process (whether service or notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) with respect to itself or any of its property, such party hereby irrevocably waives and agrees not to plead or claim such immunity in respect of any action brought to enforce its obligations under this Agreement or relating in any way to this Agreement or any Transaction under this Agreement.

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(c)           The parties hereby irrevocably waive, to the fullest extent it 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 of copies of such process to them at their respective address specified herein.  The parties hereby agree 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 Article 24 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.

ARTICLE 25.
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; and

(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, guarantee or representation whatsoever as to the merits (either

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legal, regulatory, tax, business, investment, financial accounting or otherwise) of the Transaction Documents or any Transaction thereunder.

ARTICLE 26.
INDEMNITY

Seller hereby agrees to indemnify the Buyer, the Buyer’s designee, Buyer’s Affiliates and each of its officers, directors, employees and agents (“Indemnified Parties”) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, taxes (including stamp, excise, sales or other taxes that may be payable or determined to be payable with respect to any of the Purchased Assets, Purchased Items or Collateral or in connection with any of the transactions contemplated by this Agreement and the documents delivered in connection herewith and for relying on the receipt by Buyer from Seller of any written instrument received hereunder that on its face purports to be genuine, other than income, withholding or other taxes of the Buyer), fees, costs, expenses (including reasonable attorneys fees and disbursements) or disbursements (all of the foregoing, collectively “Indemnified Amounts”) that 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 hereunder 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 losses resulting from the gross negligence or willful misconduct of Buyer or any other 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, provided that Seller shall not be liable for losses resulting from the gross negligence or willful misconduct of Buyer or any other Indemnified Party .  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 actual, out-of-pocket expense (including reasonable attorneys’ fees), 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.  Seller also agrees to reimburse Buyer as and when billed by Buyer for all Buyer’s reasonable costs and out-of-pocket expenses incurred in connection with Buyer’s due diligence reviews with respect to the Purchased Assets (including, without limitation, those incurred pursuant to Article 27 and Article 3(b)(xiii) (including, without limitation, all Pre-Purchase Legal Expenses, even if the underlying prospective Transaction for which they were incurred does not take place for any reason) and the enforcement or the preservation of Buyer’s rights under this Agreement, any Transaction Documents or 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.

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ARTICLE 27.
DUE DILIGENCE

Seller acknowledges that Buyer has the right to perform continuing due diligence reviews with respect to the Purchased 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 in the possession or under the control of Seller, any other servicer or subservicer and/or the Custodian.  Seller agrees to reimburse Buyer for any and all reasonable out-of-pocket costs and expenses incurred by Buyer with respect to the Purchased Assets during the term of this Agreement, which shall be paid by Seller to Buyer within (10) days after receipt of an invoice therefor.  Seller also shall make available to Buyer a knowledgeable financial or accounting officer for the purpose of answering questions respecting the Purchased Asset Files and the Purchased 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.  Buyer may underwrite such Purchased Assets itself or engage a third party underwriter to perform such underwriting.  Seller agrees to 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 in the possession, or under the control, of Seller.  Seller further agrees that Seller shall reimburse Buyer for any and all reasonable attorney’s fees, costs and expenses incurred by Buyer in connection with diligence on Eligible Assets and Purchased Assets.

ARTICLE 28.
SERVICING

(a)           Notwithstanding the purchase and sale of the Purchased Assets hereby, Seller, Servicer or a third party servicer reasonably approved by Buyer shall service the Purchased Assets that are Eligible Loans (such Purchased Assets, “Serviced Assets”) for the benefit of Buyer and, if Buyer shall exercise its rights to pledge or hypothecate the Serviced Assets prior to the Repurchase Date pursuant to Article 8, for the benefit of Buyer’s assigns.  Seller shall service or cause Servicer to service the Serviced Assets at Seller’s sole cost and for the benefit of Buyer in accordance with Accepted Servicing Practices approved by Buyer in the exercise of its reasonable business judgment and maintained by other prudent mortgage or mezzanine lenders with respect to mortgage and/or mezzanine loans similar to the Serviced Assets, provided, however, that the obligations of Seller to service any of the Serviced Assets shall cease, at Buyer’s option, upon the earliest of (i) an Event of Default, or (ii) the transfer of servicing approved by Seller and Buyer, which Seller’s consent shall not be unreasonably withheld.  Notwithstanding the foregoing, neither Seller nor Servicer shall take any material action or effect any modification or amendment to any Purchased Asset without first having given prior notice

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thereof to Buyer in each such instance and receiving the prior written consent of Buyer, which consent shall  not be unreasonably withheld or delayed.

(b)           Seller agrees that Buyer is the owner of all servicing records, including but not limited to any and all servicing agreements and pooling and servicing agreements (including, without limitation any “Interim Servicing Agreement” with Servicer) (collectively, 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 (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 relating to the Purchased Assets and all Servicing Records to secure the obligation of Seller or its designee to service in conformity with this Article 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)           Upon the occurrence and during the continuance of an Event of Default, Buyer may, in its sole discretion, (i) sell its right to the Purchased Assets on a servicing released basis or (ii) terminate Seller, Servicer or any sub-servicer of the Purchased Assets with or without cause, in each case without payment of any termination fee.

(d)           Seller shall not employ sub-servicers to service the Purchased Assets without the prior written approval of Buyer, which shall not be unreasonably withheld.  If the Purchased Assets are serviced by a sub-servicer, Seller shall irrevocably assign all rights, title and interest (if any) in the Servicing Agreements in the Purchased Assets to Buyer.

(e)           Seller shall cause Servicer or 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 Cash Management Account, and so long as a Purchased Asset is subject to a Transaction, following notice from Buyer to Seller of an Event of Default under this Agreement, Servicer shall take no action under this Agreement with regard to such Purchased Asset other than as specifically directed by Buyer.

(f)            The payment of servicing fees shall be subordinate to payment of amounts outstanding under any Transaction and this Agreement.

ARTICLE 29.
MISCELLANEOUS

(a)           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, to the extent this Agreement is determined to create a security interest, Buyer shall have all rights and remedies of a secured party under the UCC.

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(b)           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.

(c)           The headings in the Transaction Documents are for convenience of reference only and shall not affect the interpretation or construction of the Transaction Documents.

(d)           Without limiting the rights and remedies of Buyer under the Transaction Documents, Seller shall pay Buyer’s reasonable actual 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, whether or not such Transaction Document (or amendment thereto) or Transaction is ultimately consummated.  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 Collateral or Purchased Items and for the custody, care or preservation of the Collateral or Purchased Items (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 Cash Management Account and registering the Collateral and Purchased Items in the name of Buyer or its nominee.  All such expenses shall be recourse obligations of Seller to Buyer under this Agreement.

(e)           In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of such rights, Seller hereby grants to Buyer and its Affiliates a right of offset, to secure repayment of all amounts owing to Buyer or its Affiliates by Seller under the Transaction Documents, upon any and all monies, securities, collateral or other property of Seller and the proceeds therefrom, now or hereafter held or received by Buyer or its Affiliates or any entity under the control of Buyer or its Affiliates and its respective successors and assigns (including, without limitation, branches and agencies of Buyer, wherever located), for the account of Seller, whether for safekeeping, custody, pledge, transmission, collection, or otherwise, and also upon any and all deposits (general or specified) and credits of Seller at any time existing.  Buyer and its Affiliates are hereby authorized at any time and from time to time upon the occurrence and during the continuance of an Event of Default, without notice to Seller, to offset, appropriate, apply and enforce such right of offset against any and all items hereinabove referred to against any amounts owing to Buyer or its Affiliates by Seller under the Transaction Documents, irrespective of whether Buyer or its Affiliates shall have made any demand hereunder and although such amounts, or any of them, shall be contingent or unmatured and regardless of any other collateral securing such amounts.  Seller shall be deemed directly indebted to Buyer and its Affiliates in the full amount of all amounts owing to Buyer and its Affiliates by Seller under the Transaction Documents, and Buyer and its Affiliates shall be entitled to exercise the rights of offset provided for above.  ANY AND ALL RIGHTS TO REQUIRE BUYER OR ITS AFFILIATES TO EXERCISE THEIR RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL OR PURCHASED ITEMS THAT

70

SECURE THE AMOUNTS OWING TO BUYER OR ITS AFFILIATES BY SELLER UNDER THE TRANSACTION DOCUMENTS, PRIOR TO EXERCISING THEIR RIGHT OF OFFSET WITH RESPECT TO SUCH MONIES, SECURITIES, COLLATERAL, DEPOSITS, CREDITS OR OTHER PROPERTY OF SELLER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED BY SELLER.

(f)            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.

(g)           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.

(h)           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.

(i)            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.

(j)            Wherever pursuant to this Agreement, Buyer exercises any right given to it to consent or not consent, or to approve or disapprove, or any arrangement or term is to be satisfactory to, Buyer in its sole discretion, Buyer shall decide to consent or not consent, or to approve or disapprove or to decide that arrangements or terms are satisfactory or not satisfactory, in its sole and absolute discretion and such decision by Buyer shall be final and conclusive.

(k)           Each Affiliated Hedge Counterparty is an intended third party beneficiary of this Agreement and the parties hereto agree that this Agreement shall not be amended or otherwise modified without the written consent of each Affiliated Hedge Counterparty, such consent not to be unreasonably withheld.

[REMAINDER OF PAGE LEFT BLANK]

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IN WITNESS WHEREOF, the parties have executed this Agreement as a deed as of the day first written above.

BUYER:

JPMORGAN CHASE BANK, N.A., a national
banking association

By:	/s/ Kunal K. Singh
	Name:  Kunal K. Singh
	Title:  Vice President

SELLER:

CAPITAL TRUST, INC., a Maryland corporation

By:	/s/ Geoffrey G. Jervis
	Name:  Geoffrey G. Jervis
	Title:  Chief Financial Officer

ANNEXES, EXHIBITS AND SCHEDULES

ANNEX I	Names and Addresses for Communications between Parties
SCHEDULE I	Advance Rates and Applicable Pricing Rates
EXHIBIT I	Form of Confirmation
EXHIBIT II	Authorized Representatives of Seller
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 Assets
EXHIBIT VII	Asset Information
EXHIBIT VIII	Advance Procedure
EXHIBIT IX	Excluded Transferees
EXHIBIT X	Form of Bailee Letter
EXHIBIT XI	[Reserved]
EXHIBIT XII	Form of Margin Deficit Notice
EXHIBIT XIII	UCC Filing Jurisdictions
EXHIBIT XIV	[Reserved]
EXHIBIT XV	Additional Eligible Collateral
EXHIBIT XVI	Form of Servicer Notice
EXHIBIT XVII	Form of Release Letter
EXHIBIT XVIII	[Reserved]
EXHIBIT XIX	Covenant Compliance Certificate

ANNEX I
Names and Addresses for Communications Between Parties

Buyer:
	JPMORGAN CHASE BANK, N.A.
	270 Park Avenue, 7th Floor
	New York, New York 10017-2014
	Attention:	Ms. Nancy S Alto
	Telephone:	(212) 834-9271
	Telecopy:	(212) 834-6565
With copies to:
	JPMORGAN CHASE BANK, N.A.
	270 Park Avenue, 10th Floor
	New York, New York 10017-2014
	Attention:	Kunal K. Singh
	Telephone:	(212) 834-5467
	Telecopy:	(212) 834-6593
and
	Cadwalader Wickersham & Taft LLP
	227 West Trade Street
	Charlotte, North Carolina 28202
	Attention:	Stuart N. Goldstein, Esq.
	Telephone:	(704) 348-5258
	Telecopy:	(704) 348-5200
Sellers:
	CAPITAL TRUST, INC.
	410 Park Avenue
	New York, New York 10022
	Attn: Geoffrey G. Jervis
	Phone: (212) 655-0247
	Fax: (212) 655-0044
With copies to:
	Paul, Hastings, Janofsky & Walker LLP
	75 E. 55th Street
	New York, New York 10022
	Attention:	Robert J. Grados, Esq.
	Telephone:	(212) 318-6923
	Telecopy:	(212) 230-7830

SCHEDULE I

Advance Rates and Applicable Spreads

CMBS (Fixed/Floating)

Rating	Advance Rate %	Pricing (L+) BPS
BBB	[****]	[****]
BBB	[****]	[****]
BBB-	[****]	[****]
BBB-	[****]	[****]
BB+	[****]	[****]
BB+	[****]	[****]
BB	[****]	[****]
BB	[****]	[****]
BB-	[****]	[****]
BB-	[****]	[****]
B+	[****]	[****]
B+	[****]	[****]
B	[****]	[****]
B-	[****]	[****]
NR	[****]	[****]

CRE CDO

Rating	Advance Rate %	Pricing (L+) BPS
A+	[****]	[****]
A	[****]	[****]
A-	[****]	[****]
BBB+	[****]	[****]
BBB	[****]	[****]
BBB-	[****]	[****]
BB+	[****]	[****]
BB	[****]	[****]
BB-	[****]	[****]

Senior Mortgage Loans (>7% NOI Debt Yield)(2)

Loan-to-Value (1)	Advance Rate%	Pricing (L+) BPS
Less than 80%	[****]	[****]

Senior Mortgage Loans (<7% NOI Debt Yield) (2)

Loan-to-Value (1)	Advance Rate%	Pricing (L+) BPS
Less than 80%	[****]	[****]

**** Material omitted pursuant to a request for confidential treatment under Rule 24b-2 of the Exchange Act of 1934.  Material filed separately with the Securities and Exchange Commission.

Mezzanine & B-Note Loans(3)

Loan-to-Value (1)	Advance Rate %	Pricing (L+) BPS
<50%	[****]	[****]
50%-55%	[****]	[****]
56%-60%	[****]	[****]
61%-70%	[****]	[****]
61%-70%	[****]	[****]
61%-70%	[****]	[****]
71%-75%	[****]	[****]
71%-75%	[****]	[****]
71%-75%	[****]	[****]
76%-80%	[****]	[****]
76%-80%	[****]	[****]
76%-80%	[****]	[****]
81%-85%	[****]	[****]
81%-85%	[****]	[****]
81%-85%	[****]	[****]
86%-90%	[****]	[****]
86%-90%	[****]	[****]
86%-90%	[****]	[****]

(1)JPMCB Loan-to-Value.

(2)Senior Mortgage Loans are generally meant to apply to loans secured by stabilized, income-producing properties.  Senior Mortgage Loans on highly transitional properties or mortgages secured by construction properties or development land will be handled on a case-by-case basis.

(3)[****]

**** Material omitted pursuant to a request for confidential treatment under Rule 24b-2 of the Exchange Act of 1934.  Material filed separately with the Securities and Exchange Commission.

EXHIBIT I

CONFIRMATION STATEMENT
JPMORGAN CHASE BANK, N.A.

Ladies and Gentlemen:

Capital Trust, Inc., is pleased to deliver our written CONFIRMATION of our agreement to enter into the Transaction pursuant to which JPMorgan Chase Bank, N.A. shall purchase from us the Purchased Assets identified on the attached Schedule 1 pursuant to the Master Repurchase Agreement, dated as of November 1, 2006 (the “Agreement”), between JPMorgan Chase Bank, N.A. (the “Buyer”) and Capital Trust, Inc. (the “Seller”) on the following terms.  Capitalized terms used herein without definition have the meanings given in the Agreement.

Purchase Date:	, 200
Purchased Assets:	[                   Name]: As identified on attached Schedule 1
Aggregate Principal Amount of Purchased Assets:	[$            ]
Repurchase Date:
Purchase Price:	[$            ]
Change in Purchase Price	[$            ]
Pricing Rate:	one month LIBOR plus%
Pricing Rate at Max. Advance Rate:
Requested Advance Rate:
Maximum Advance Rate:
Governing Agreements:	As identified on attached Schedule 1
Requested Wire Amount:
Requested Fund Date:
Transmission Date/Time:
Type of Funding:	[Table/Non-table]
Wiring Instructions:
Name and address for communications:	Buyer:	JPMorgan Chase Bank, N.A.
		270 Park Avenue, 7th Floor
		New York, New York 10017-2014
		Attention:	Ms. Nancy S. Alto
		Telephone:	(212) 834-9271
		Telecopy:	(212) 834-6565

With a copy to	JPMorgan Chase Bank, N.A.
	270 Park Avenue, 10th Floor
	New York, New York 10017-2014
	Attention:	Mr. Kunal K. Singh
	Telephone:	(212) 834-5467
	Telecopy:	(212) 834-6593
Seller:	CAPITAL TRUST, INC.
	410 Park Avenue
	Attn: Geoffrey G. Jervis
	New York, New York 10022
	Phone: (212) 655-0247
	Fax:  (212) 655-0044

		CAPITAL TRUST, INC.
		By:
			Name:
			Title:
AGREED AND ACKNOWLEDGED:
JPMORGAN CHASE BANK, N.A.
By:
	Name:
	Title:

Schedule 1 to Confirmation Statement

Purchased Assets:

Aggregate Principal Amount:

EXHIBIT II

AUTHORIZED REPRESENTATIVES OF SELLER

Name Specimen Signature

EXHIBIT III

MONTHLY REPORTING PACKAGE

[SAMPLE TO BE ATTACHED]

·Monthly Reporting Package shall include, inter alia, the following:

·Listing of all Eligible Assets reflecting payment status.

·Listing of all interest rate hedging positions outlining compliance with interest rate hedging requirements.

·Any and all financial statements and rent rolls, to the extent that the Eligible Asset borrower is obligated to provide same.

·Servicing tape and surveillance summary with respect to each Eligible Asset conforming to CMSA standards.

·Trustee remittance reports.

·Summary of any material changes in the financial or other condition(s) of each Eligible Asset.

·All other relevant or required documents.

EXHIBIT IV

FORM OF CUSTODIAL DELIVERY

On this                   of                  , 200       , Capital Trust, Inc., a Maryland corporation, as Seller (“Seller”) under that certain Master Repurchase Agreement, dated as of November 1, 2006 (the “Repurchase Agreement”) between JPMorgan Chase Bank, N.A. (“Buyer”) and Seller, does hereby deliver to LaSalle Bank National Association (“Custodian”), as custodian under that certain Custodial Agreement, dated as of November 1, 2006 (the “Custodial Agreement”), among Buyer, Custodian and Seller, 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 Article 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.

CAPITAL TRUST, INC.
By:
	Name:
	Title:

Purchased Asset Schedule to Custodial Delivery

Purchased Assets

EXHIBIT V

FORM OF POWER OF ATTORNEY

“Know All Men by These Presents, that Capital Trust, Inc., a Maryland corporation (“Seller”), does hereby appoint JPMorgan Chase Bank, N.A. (“Buyer”), its attorney-in-fact to act in Seller’s name, place and stead in any way that Seller could do with respect to (i) the completion of the endorsements of the Mortgage Notes and the Mezzanine Notes and the Assignments of Mortgages, (ii) the recordation of the Assignments of Mortgages and (iii) the enforcement of Seller’s rights under the Purchased Assets purchased by Buyer pursuant to the Master Repurchase Agreement dated as of November 1, 2006 (the “Repurchase Agreement”), among Buyer and Seller, 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.

IN WITNESS WHEREOF Seller has caused this Power of Attorney to be executed as a deed this [    ] day of November, 2006.

CAPITAL TRUST, INC.
By:
	Name:
	Title:

EXHIBIT VI

REPRESENTATIONS AND WARRANTIES
REGARDING EACH INDIVIDUAL PURCHASED ASSET
THAT IS A WHOLE MORTGAGE LOAN, A-NOTE OR
SENIOR PARTICIPATION INTEREST

(a)           As applicable, each Purchased Asset is either a whole loan and not a participation interest in a whole loan, a senior participation interest in a whole loan, or an A-note interest in a whole loan.  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.

(b)           No Purchased Asset is 30 days or more delinquent in payment of principal and interest (without giving effect to any applicable grace period) and no Purchased Asset has been 30 days or more (without giving effect to any applicable grace period in the related Mortgage Note) past due.

(c)           Except with respect to the ARD Loans, which provide that the rate at which interest accrues thereon increases after the Anticipated Repayment Date, the Purchased Assets (exclusive of any default interest, late charges or prepayment premiums) are fixed rate mortgage loans or floating rate mortgage loans with terms to maturity, at origination or as of the most recent modification, as set forth in the Purchased Asset Schedule.

(d)           The information pertaining to each Purchased Asset set forth on the Purchased Asset Schedule is true and correct in all material respects as of the Purchase Date.

(e)           At the time of the assignment of the Purchased Assets to Buyer, Seller had good and marketable title to and was the sole owner and holder of, each Purchased Asset, free and clear of any pledge, lien, encumbrance or security interest and such assignment validly and effectively transfers and conveys all legal and beneficial ownership of the Purchased Assets to Buyer free and clear of any pledge, lien, encumbrance or security interest, subject to the rights and obligations of Seller pursuant to the Agreement.

(f)            In respect of each Purchased Asset, (A) the related Mortgagor is an entity organized under the laws of a state of the United States of America, the District of Columbia or the Commonwealth of Puerto Rico and (B) the Mortgagor is not a debtor in any bankruptcy, receivership, conservatorship, reorganization, insolvency, moratorium or similar proceeding.

(g)           Each Purchased Asset is secured by (or in the case of a Participation, the Underlying Mortgage Loan is secured by) a Mortgage that establishes and creates a valid and subsisting first priority lien on the related underlying real estate directly or indirectly securing or supporting such Purchased

Asset, or leasehold interest therein, comprising real estate (the “Mortgaged Property”), free and clear of any liens, claims, encumbrances, participation interests, pledges, charges or security interests subject only to Permitted Encumbrances.  Such Mortgage, together with any separate security agreement, UCC Financing Statement or similar agreement, if any, establishes and creates a first priority security interest in favor of Seller in all personal property owned by the Mortgagor that is used in, and is reasonably necessary to, the operation of the related Mortgaged Property and, to the extent a security interest may be created therein and perfected by the filing of a UCC Financing Statement under the Uniform Commercial Code as in effect in the relevant jurisdiction, the proceeds arising from the Mortgaged Property and other collateral securing such Purchased Asset, subject only to Permitted Encumbrances.  There exists with respect to such Mortgaged Property an assignment of leases and rents provision, either as part of the related Mortgage or as a separate document or instrument, which establishes and creates a first priority security interest in and to leases and rents arising in respect of the related Mortgaged Property subject only to Permitted Encumbrances.  No person other than the related Mortgagor and the mortgagee owns any interest in any payments due under the related leases.  The related Mortgage or such assignment of leases and rents provision provides for the appointment of a receiver for rents or allows the holder of the related Mortgage to enter into possession of the related Mortgaged Property to collect rent or provides for rents to be paid directly to the holder of the related Mortgage in the event of a default beyond applicable notice and grace periods, if any, under the related Purchased Asset Documents.  As of the origination date, there are no mechanics’ or other similar liens or claims that have been filed for work, labor or materials affecting the related Mortgaged Property that are or may be prior or equal to the lien of the Mortgage, except those that are insured against pursuant to the applicable Title Insurance Policy (as defined below). As of the Purchase Date, there are no mechanics’ or other similar liens or claims that have been filed for work, labor or materials affecting the related Mortgaged Property that are or may be prior or equal in priority to the lien of the Mortgage, except those that are insured against pursuant to the applicable Title Policy (as defined below).  No (a) Mortgaged Property secures any mortgage loan not represented on the Purchased Asset Schedule, (b) Purchased Asset is cross-defaulted with any other mortgage loan, other than a Mortgage Loan listed on the Purchased Asset Schedule, or (c) Purchased Asset is secured by property that is not a Mortgaged Property.

(h)           The related Mortgagor under each Purchased Asset has good and indefeasible fee simple or, with respect to those Purchased Assets described in clause (cc) hereof, leasehold title to the related Mortgaged Property comprising real estate subject to any Permitted Encumbrances.

(i)            Seller has received an American Land Title Association (ALTA) lender’s title insurance policy or a comparable form of lender’s title insurance policy (or escrow instructions binding on the Title Insurer (as defined below) and irrevocably obligating the Title Insurer to issue such title insurance policy, a title policy commitment or pro-forma “marked up” at the closing of the related

Purchased Asset and countersigned by the Title Insurer or its authorized agent) as adopted in the applicable jurisdiction (the “Title Policy”), which was issued by a nationally recognized title insurance company (the “Title Insurer”) qualified to do business in the jurisdiction where the applicable Mortgaged Property is located, covering the portion of each Mortgaged Property comprised of real estate and insuring that the related Mortgage is a valid first lien in the original principal amount of the related Purchased Asset on the Mortgagor’s fee simple interest (or, if applicable, leasehold interest) in such Mortgaged Property comprised of real estate subject only to Permitted Encumbrances.  Such Title Policy was issued in connection with the origination of the related Purchased Asset. No claims have been made under such Title Policy.  Such Title Policy is in full force and effect and all premiums thereon have been paid and will provide that the insured includes the owner of the Purchased Asset and its successors and/or assigns. No holder of the related Mortgage has done, by act or omission, anything that would, and Seller has no actual knowledge of any other circumstance that would, impair the coverage under such Title Policy.

(j)            The related Assignment of Mortgage and the related assignment of the Assignment of Leases and Rents executed in connection with each Mortgage, if any, have been recorded in the applicable jurisdiction (or, if not recorded, have been submitted for recording or are in recordable form) and constitute the legal, valid and binding assignment of such Mortgage and the related assignment of leases and rents from Seller to Buyer.  The endorsement of the related Mortgage Note by Seller constitutes the legal, valid, binding and enforceable (except as such enforcement may be limited by anti-deficiency laws or bankruptcy, receivership, conservatorship, reorganization, insolvency, moratorium 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)) assignment of such Mortgage Note, and together with such Assignment of Mortgage and the related assignment of assignment of leases and rents, legally and validly conveys all right, title and interest in such Purchased Asset and (except in the case of an A Note or a Participation) the Purchased Asset Documents to Buyer.

(k)           The Purchased Asset Documents for each Purchased Asset (or in the case of a Participation, the Underlying Mortgage Loan) provide that such Purchased Asset (or Underlying Mortgage Loan) is non-recourse except that the related Mortgagor and at least one individual or entity shall be fully liable for actual losses, liabilities, costs and damages arising from at least the following acts of the related Mortgagor and/or its principals: (i) fraud or material misrepresentation, (ii) misapplication or misappropriation of rents, insurance proceeds or condemnation awards, (iii) any act of actual waste, and (iv) any breach of the environmental covenants contained in the related Purchased Asset Documents.

(l)            The Purchased Asset Documents for each Purchased Asset contain enforceable provisions such as to render the rights and remedies of the holder

thereof adequate for the practical realization against the Mortgaged Property of the principal benefits of the security intended to be provided thereby, including realization by judicial or, if applicable, non judicial foreclosure, and there is no exemption available to the related Mortgagor that would interfere with such right of foreclosure except (i) any statutory right of redemption or (ii) any limitation arising under anti deficiency laws or by bankruptcy, receivership, conservatorship, reorganization, insolvency, moratorium 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).

(m)          Each of the related Mortgage Notes and Mortgages are the legal, valid and binding obligations of the related Mortgagor named on the Purchased Asset Schedule and each of the other related Purchased Asset Documents is the legal, valid and binding obligation of the parties thereto (subject to any non recourse provisions therein), enforceable in accordance with its terms, except as such enforcement may be limited by anti deficiency laws or bankruptcy, receivership, conservatorship, reorganization, insolvency, moratorium 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 except that certain provisions of such Purchased Asset Documents are or may be unenforceable in whole or in part under applicable state or federal laws, but the inclusion of such provisions does not render any of the Purchased Asset Documents invalid as a whole, and such Purchased Asset Documents taken as a whole are enforceable to the extent necessary and customary for the practical realization of the principal rights and benefits afforded thereby.

(n)           The terms of the Purchased Assets or the related Purchased Asset Documents, (including, in the case of a Participation, the documents evidencing the Underlying Mortgage Loan) have not been altered, impaired, modified or waived in any material respect, except prior to the Purchase Date by written instrument duly submitted for recordation, to the extent required, and as specifically set forth by a document in the related Purchased Asset File.

(o)           With respect to each Mortgage that is a deed of trust, a trustee, duly qualified under applicable law to serve as such, currently so serves and is named in the deed of trust or has been substituted in accordance with applicable law, and no fees or expenses are or will become payable to the trustee under the deed of trust, except in connection with a trustee’s sale after default by the Mortgagor other than de minimis fees paid in connection with the release of the related Mortgaged Property or related security for such Purchased Asset following payment of such Purchased Asset in full.

(p)           No Purchased Asset has been satisfied, canceled, subordinated, released or rescinded, in whole or in part, and the related Mortgagor has not been

released, in whole or in part, from its obligations under any related Purchased Asset Document.

(q)           Except with respect to the enforceability of any provisions requiring the payment of default interest, late fees, additional interest, prepayment premiums or yield maintenance charges, neither the Purchased Asset nor any of the related Purchased Asset Documents is subject to any right of rescission, set-off, abatement, diminution, valid counterclaim or defense, including the defense of usury, nor will the operation of any of the terms of any such Purchased Asset Documents, or the exercise (in compliance with procedures permitted under applicable law) of any right thereunder, render any Purchased Asset Documents subject to any right of rescission, set-off, abatement, diminution, valid counterclaim or defense, including the defense of usury (subject to anti-deficiency or one form of action laws and to bankruptcy, receivership, conservatorship, reorganization, insolvency, moratorium or other similar laws affecting the enforcement of creditor’s rights generally and by general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law)), and no such right of rescission, set-off, abatement, diminution, valid counterclaim or defense has been asserted with respect thereto.  None of the Purchased Asset Documents provides for a release of a portion of the Mortgaged Property from the lien of the Mortgage except upon payment or defeasance in full of all obligations under the Mortgage, provided that, notwithstanding the foregoing, certain of the Purchased Assets may allow partial release (a) upon payment or defeasance of an allocated loan amount which may be formula based, but in no event less than 125% of the allocated loan amount, or (b) in the event the portion of the Mortgaged Property being released was not given any material value in connection with the underwriting or appraisal of the related Purchased Asset.

(r)            As of the Purchase Date, there is no payment default, giving effect to any applicable notice and/or grace period, and there is no other material default under any of the related Purchased Asset Documents, giving effect to any applicable notice and/or grace period; no such material default or breach has been waived by Seller or on its behalf or, by Seller’s predecessors in interest with respect to the Purchased Assets; and no event has occurred that, with the passing of time or giving of notice would constitute a material default or breach under the related Purchased Asset Documents.  No Purchased Asset has been accelerated and no foreclosure or power of sale proceeding has been initiated in respect of the related Mortgage.  Seller has not waived any material claims against the related Mortgagor under any non-recourse exceptions contained in the Mortgage Note.

(s)           The principal amount of the Purchased Asset stated on the Purchased Asset Schedule has been fully disbursed as of the Purchase Date (except for certain amounts that were fully disbursed by the mortgagee, but escrowed pursuant to the terms of the related Purchased Asset Documents) and there are no future advances required to be made by the mortgagee under any of the related Purchased Asset Documents.  Any requirements under the related

Purchased Asset Documents regarding the completion of any on-site or off-site improvements and to disbursements of any escrow funds therefor have been or are being complied with or such escrow funds are still being held.  The value of the Mortgaged Property relative to the value reflected in the most recent appraisal thereof is not materially impaired by any improvements that have not been completed.  Seller has not, nor, have any of its agents or predecessors in interest with respect to the Purchased Assets, in respect of such Purchased Asset, directly or indirectly, advanced funds or induced, solicited or knowingly received any advance of funds by a party other than the Mortgagor other than (a) interest accruing on such Purchased Asset from the date of such disbursement of such Purchased Asset to the date which preceded by thirty (30) days the first payment date under the related Mortgage Note and (b) application and commitment fees, escrow funds, points and reimbursements for fees and expenses, incurred in connection with the origination and funding of the Purchased Asset.

(t)            No Purchased Asset has capitalized interest included in its principal balance, or provides for any shared appreciation rights or other equity participation therein and no contingent or additional interest contingent on cash flow or, except for ARD Loans, negative amortization accrues or is due thereon.

(u)           Each Purchased Asset identified in the Purchased Asset Schedule as an ARD Loan substantially fully amortizes over its stated term, which term is at least 60 months after the related Anticipated Repayment Date.  Each ARD Loan has an Anticipated Repayment Date not less than seven years following the origination of such Purchased Asset.  If the related Mortgagor elects not to prepay its ARD Loan in full on or prior to the Anticipated Repayment Date pursuant to the existing terms of the Purchased Asset or a unilateral option (as defined in Treasury Regulations under Article 1001 of the Code) in the Purchased Asset exercisable during the term of the Mortgage Loan, (i) the Purchased Asset’s interest rate will step up to an interest rate per annum as specified in the related Purchased Asset Documents; provided, however, that payment of such Excess Interest shall be deferred until the principal of such ARD Loan has been paid in full; (ii) all or a substantial portion of the Excess Cash Flow collected after the Anticipated Repayment Date shall be applied towards the prepayment of such ARD Loan and once the principal balance of an ARD Loan has been reduced to zero all Excess Cash Flow will be applied to the payment of accrued Excess Interest; and (iii) if the property manager for the related Mortgaged Property can be removed by or at the direction of the mortgagee on the basis of a debt service coverage test, the subject debt service coverage ratio shall be calculated without taking account of any increase in the related Mortgage Interest Rate on such Purchased Asset’s Anticipated Repayment Date.  No ARD Loan provides that the property manager for the related Mortgaged Property can be removed by or at the direction of the mortgagee solely because of the passage of the related Anticipated Repayment Date.

(v)           Each Purchased Asset identified in the Purchased Asset Schedule as an ARD Loan with a hard lockbox requires that tenants at the related

Mortgaged Property shall (and each Purchased Asset identified in the Purchased Asset Schedule as an ARD Loan with a springing lockbox requires that tenants at the related Mortgaged Property shall, upon the occurrence of a specified trigger event, including, but not limited to, the occurrence of the related Anticipated Repayment Date) make rent payments into a lockbox controlled by the holder of the Purchased Asset and to which the holder of the Purchased Asset has a first perfected security interest; provided however, with respect to each ARD Loan that is secured by a multi-family property with a hard lockbox, or with respect to each ARD Loan that is secured by a multi-family property with a springing lockbox, upon the occurrence of a specified trigger event, including, but not limited to, the occurrence of the related Anticipated Repayment Date, tenants either pay rents to a lockbox controlled by the holder of the Mortgage Loan or deposit rents with the property manager who will then deposit the rents into a lockbox controlled by the holder of the Purchased Asset.

(w)          The terms of the Purchased Asset Documents evidencing such Purchased Asset comply in all material respects with all applicable local, state and federal laws, and regulations and Seller has complied with all material requirements pertaining to the origination, funding and servicing of the Purchased Assets, including but not limited to, usury and any and all other material requirements of any federal, state or local law to the extent non-compliance would have a Material Adverse Effect on the Purchased Asset.

(x)            The related Mortgaged Property is, in all material respects, in compliance with, and is used and occupied in accordance with, all restrictive covenants of record applicable to such Mortgaged Property and applicable zoning laws and all inspections, licenses, permits and certificates of occupancy required by law, ordinance or regulation to be made or issued with regard to the Mortgaged Property have been obtained and are in full force and effect, except to the extent (a) any material non-compliance with applicable zoning laws is insured by an ALTA lender’s title insurance policy (or binding commitment therefor), or the equivalent as adopted in the applicable jurisdiction, or a law and ordinance insurance policy, or (b) the failure to obtain or maintain such inspections, licenses, permits or certificates of occupancy does not materially impair or materially and adversely affect the use and/or operation of the Mortgaged Property as it was used and operated as of the date of origination of the Purchased Asset or the rights of a holder of the related Purchased Asset.

(y)           All (a) taxes, water charges, sewer rents, assessments or other similar outstanding governmental charges and governmental assessments that became due and owing prior to the Purchase Date in respect of the related Mortgaged Property (excluding any related personal property), and that if left unpaid, would be, or might become, a lien on such Mortgaged Property having priority over the related Mortgage and (b) insurance premiums or ground rents that became due and owing prior to the Purchase Date in respect of the related Mortgaged Property (excluding any related personal property), have been paid, or if any such items are disputed, an escrow of funds in an amount sufficient

(together with escrow payments required to be made prior to delinquency) to cover such taxes and assessments and any late charges due in connection therewith has been established.  As of the date of origination, the related Mortgaged Property consisted of one or more separate and complete tax parcels.  For purposes of this representation and warranty, the items identified herein shall not be considered due and owing until the date on which interest or penalties would be first payable thereon.

(z)            None of the improvements that were included for the purpose of determining the appraised value of the related Mortgaged Property at the time of the origination of such Purchased Asset lies outside the boundaries and building restriction lines of such Mortgaged Property, except to the extent that they are legally nonconforming as contemplated by the representation in clause (48) below, and no improvements on adjoining properties encroach upon such Mortgaged Property, with the exception in each case of (a) immaterial encroachments that do not materially adversely affect the security intended to be provided by the related Mortgage or the use, enjoyment, value or marketability of such Mortgaged Property or (b) encroachments affirmatively covered by the related Title Policy.  With respect to each Purchased Asset, the property legally described in the survey, if any, obtained for the related Mortgaged Property for purposes of the origination thereof is the same as the property legally described in the Mortgage.

(aa)         As of the date of the applicable engineering report (which was performed within 12 months prior to the Purchase Date) related to the Mortgaged Property and, as of the Purchase Date, the related Mortgaged Property is either (i) in good repair, free and clear of any damage that would materially adversely affect the value of such Mortgaged Property as security for such Purchased Asset or the use and operation of the Mortgaged Property as it was being used or operated as of the origination date or (ii) escrows in an amount consistent with the standard utilized by Seller with respect to similar loans it holds for its own account have been established, which escrows will in all events be not less than 100% of the estimated cost of the required repairs.  The Mortgaged Property has not been damaged by fire, wind or other casualty or physical condition (including, without limitation, any soil erosion or subsidence or geological condition), which damage has not either been fully repaired or fully insured, or for which escrows in an amount consistent with the standard utilized by Seller with respect to loans it holds for its own account have not been established.

(bb)         There are no proceedings pending or threatened, for the partial or total condemnation of the relevant Mortgaged Property.

(cc)         The Purchased Assets that are identified as being secured in whole or in part by a leasehold estate (a “Ground Lease”) (except with respect to any Purchased Asset also secured by the related fee interest in the Mortgaged Property), satisfy the following conditions:

I.such Ground Lease or a memorandum thereof has been or will be duly recorded; such Ground Lease, or other agreement received by the originator of the Purchased Asset from the ground lessor, provides that the interest of the lessee thereunder may be encumbered by the related Mortgage and does not restrict the use of the related Mortgaged Property by such lessee, its successors or assigns, in a manner that would materially and adversely affect the security provided by the Mortgage; as of the date of origination of the Purchased Asset (or in the case of a Participation, the Underlying Mortgage Loan), there was no material change of record in the terms of such Ground Lease with the exception of written instruments that are part of the related Purchased Asset File and there has been no material change in the terms of such Ground Lease since the recordation of the related Purchased Asset, with the exception of written instruments that are part of the related Purchased Asset File;

II.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 and such Ground Lease is, and shall remain, prior to any mortgage or other lien upon the related fee interest unless a nondisturbance agreement is obtained from the holder of any mortgage on the fee interest that is assignable to or for the benefit of the related lessee and the related mortgagee;

III.such Ground Lease provides that upon foreclosure of the related Mortgage or assignment of the Mortgagor’s interest in such Ground Lease in lieu thereof, the mortgagee under such Mortgage is entitled to become the owner of such interest upon notice to, but without the consent of, the lessor thereunder and, in the event that such mortgagee becomes the owner of such interest, such interest is further assignable by such mortgagee and its successors and assigns upon notice to such lessor, but without a need to obtain the consent of such lessor;

IV.such Ground Lease is in full force and effect and no default of tenant or ground lessor was in existence at origination, or is currently in existence under such Ground Lease, nor at origination was, or is there any condition that, but for the passage of time or the giving of notice, would result in a default under the terms of such Ground Lease; either such Ground Lease or a separate agreement contains the ground lessor’s covenant that it shall not amend, modify, cancel or terminate such Ground Lease without the prior written consent of the mortgagee under such Mortgage and any amendment, modification, cancellation or termination of the Ground Lease without the prior written consent of the related

mortgagee, or its successors or assigns is not binding on such mortgagee, or its successor or assigns;

V.such Ground Lease or other agreement requires the lessor thereunder to give written notice of any material default by the lessee to the mortgagee under the related Mortgage, provided that such mortgagee has provided the lessor with notice of its lien in accordance with the provisions of such Ground Lease; and such Ground Lease or other agreement provides that no such notice of default and no termination of the Ground Lease in connection with such notice of default shall be effective against such mortgagee unless such notice of default has been given to such mortgagee and any related Ground Lease contains the ground lessor’s covenant that it will give to the related mortgagee, or its successors or assigns, any notices it sends to the Mortgagor;

VI.either (i) the related ground lessor has subordinated its interest in the related Mortgaged Property to the interest of the holder of the Purchased Asset (or in the case of a Participation, the Underlying Mortgage Loan) or (ii) such Ground Lease or other agreement provides that (A) the mortgagee under the related Mortgage is permitted a reasonable opportunity to cure any default under such Ground Lease that is curable, including reasonable time to gain possession of the interest of the lessee under the Ground Lease, after the receipt of notice of any such default before the lessor thereunder may terminate such Ground Lease; (B) in the case of any such default that is not curable by such mortgagee, or in the event of the bankruptcy or insolvency of the lessee under such Ground Lease, such mortgagee has the right, following termination of the existing Ground Lease or rejection thereof by a bankruptcy trustee or similar party, to enter into a new ground lease with the lessor on substantially the same terms as the existing Ground Lease; and (C) all rights of the Mortgagor under such Ground Lease may be exercised by or on behalf of such mortgagee under the related Mortgage upon foreclosure or assignment in lieu of foreclosure;

VII.such Ground Lease has an original term (or an original term plus one or more optional renewal terms that under all circumstances may be exercised, and will be enforceable, by the mortgagee or its assignee) that extends not less than 20 years beyond the stated maturity date of the related Purchased Asset (or in the case of a Participation, of the Underlying Mortgage Loan);

VIII.under the terms of such Ground Lease and the related Mortgage, taken together, any related insurance proceeds will be applied either to the repair or restoration of all or part of the related

Mortgaged Property, with the mortgagee under such Mortgage or a financially responsible institution acting as trustee appointed by it, or consented to by it, or by the lessor 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 institutional lender), or to the payment in whole or in part of the outstanding principal balance of such Purchased Asset together with any accrued and unpaid interest thereon; and

IX.such Ground Lease does not impose any restrictions on subletting that would be viewed as commercially unreasonable by Seller; such Ground Lease contains a covenant (or applicable laws provide) that the lessor thereunder is not permitted, in the absence of an uncured default, to disturb the possession, interest or quiet enjoyment of any lessee in the relevant portion of such Mortgaged Property subject to such Ground Lease for any reason, or in any manner, which would materially adversely affect the security provided by the related Mortgage.

(dd)         An Environmental Site Assessment relating to each Mortgaged Property and prepared no earlier than 12 months prior to the Purchase Date was obtained and reviewed by Seller in connection with the origination of such Purchased Asset and a copy is included in the Purchased Asset File.

(ee)         There are no adverse circumstances or conditions with respect to or affecting the Mortgaged Property that would constitute or result in a material violation of any applicable federal, state or local environmental laws, rules and regulations (collectively, “Environmental Laws”), other than with respect to a Mortgaged Property (i) for which environmental insurance is maintained, or (ii) that would require (x) any expenditure less than or equal to 5% of  the outstanding principal balance of the Mortgage Loan to achieve or maintain compliance in all material respects with any Environmental Laws or (y) any expenditure greater than 5% of the outstanding principal balance of such Purchased Asset to achieve or maintain compliance in all material respects with any Environmental Laws for which, in connection with this clause (y), adequate sums, but in no event less than 125% of the estimated cost as set forth in the Environmental Site Assessment, were reserved in connection with the origination of the Purchased Asset and for which the related Mortgagor has covenanted to perform, or (iii) as to which the related Mortgagor or one of its affiliates is currently taking or required to take such actions, if any, with respect to such conditions or circumstances as have been recommended by the Environmental Site Assessment or required by the applicable Governmental Authority, or (iv) as to which another responsible party not related to the Mortgagor with assets reasonably estimated by Seller at the time of origination to be sufficient to effect all necessary or required remediation identified in a notice or other action from the applicable Governmental Authority

is currently taking or required to take such actions, if any, with respect to such regulatory authority’s order or directive, or (v) as to which the conditions or circumstances identified in the Environmental Site Assessment were investigated further and based upon such additional investigation, an environmental consultant recommended no further investigation or remediation, or (vi) as to which a party with financial resources reasonably estimated to be adequate to cure the condition or circumstance that would give rise to such material violation provided a guarantee or indemnity to the related Mortgagor or to the mortgagee to cover the costs of any required investigation, testing, monitoring or remediation, or (vii) as to which the related Mortgagor or other responsible party obtained a “No Further Action” letter or other evidence reasonably acceptable to a prudent commercial mortgage lender that applicable federal, state, or local Governmental Authorities had no current intention of taking any action, and are not requiring any action, in respect of such condition or circumstance, or (viii) that would not require substantial cleanup, remedial action or other extraordinary response under any Environmental Laws reasonably estimated to cost in excess of 5% of the outstanding principal balance of such Purchased Asset;

(ff)           Except for any hazardous materials being handled in accordance with applicable Environmental Laws, (A) there exists either (i) environmental insurance with respect to such Mortgaged Property or (ii) an amount in an escrow account pledged as security for such Purchased Asset under the relevant Purchased Asset Documents equal to no less than 125% of the amount estimated in such Environmental Site Assessment as sufficient to pay the cost of such remediation or other action in accordance with such Environmental Site Assessment or (B) one of the statements set forth in clause (A)(ii) above is true, (i) such Mortgaged Property is not being used for the treatment or disposal of hazardous materials; (ii) no hazardous materials are being used or stored or generated for off-site disposal or otherwise present at such Mortgaged Property other than hazardous materials of such types and in such quantities as are customarily used or stored or generated for off-site disposal or otherwise present in or at properties of the relevant property type; and (iii) such Mortgaged Property is not subject to any environmental hazard (including, without limitation, any situation involving hazardous materials) that under the Environmental Laws would have to be eliminated before the sale of, or that could otherwise reasonably be expected to adversely affect in more than a de minimis manner the value or marketability of, such Mortgaged Property.

(gg)         The related Mortgage or other Purchased Asset Documents contain covenants on the part of the related Mortgagor requiring its compliance with any present or future federal, state and local Environmental Laws and regulations in connection with the Mortgaged Property.  The related Mortgagor (or an affiliate thereof) has agreed to indemnify, defend and hold Seller, and its successors and assigns (or in the case of a Participation, the lender of record), harmless from and against any and all losses, liabilities, damages, penalties, fines, expenses and claims of whatever kind or nature (including attorneys’ fees and costs) imposed upon or incurred by or asserted against any such party resulting from a breach of

the environmental representations, warranties or covenants given by the related Mortgagor in connection with such Purchased Asset.

(hh)         For each of the Purchased Assets that is covered by environmental insurance, each environmental insurance policy is in an amount equal to 125% of the outstanding principal balance of the related Purchased Asset and has a term ending no sooner than the date that is five years after the maturity date (or, in the case of an ARD Loan, the final maturity date) of the related Purchased Asset.  All environmental assessments or updates that were in the possession of Seller and that relate to a Mortgaged Property as being insured by an environmental insurance policy have been delivered to or disclosed to the environmental insurance carrier issuing such policy prior to the issuance of such policy.

(ii)           As of the date of origination of the related Purchased Asset, and, as of the Purchase Date, the Mortgaged Property is covered by insurance policies providing the coverage described below and the Purchased Asset Documents permit the mortgagee to require the coverage described below.  All premiums with respect to the insurance policies insuring each Mortgaged Property have been paid in a timely manner or escrowed to the extent required by the Purchased Asset Documents, and Seller has not received any notice of cancellation or termination.  The relevant Purchased Asset File contains the insurance policy required for such Purchased Asset or a certificate of insurance for such insurance policy.  Each Mortgage requires that the related Mortgaged Property and all improvements thereon be covered by insurance policies providing (a) coverage in the amount of the lesser of full replacement cost of such Mortgaged Property and the outstanding principal balance of the related Purchased Asset (subject to customary deductibles) for fire and extended perils included within the classification “All Risk of Physical Loss” in an amount sufficient to prevent the Mortgagor from being deemed a co-insurer and to provide coverage on a full replacement cost basis of such Mortgaged Property (in some cases exclusive of foundations and footings) with an agreed amount endorsement to avoid application of any coinsurance provision; such policies contain a standard mortgagee clause naming mortgagee and its successor in interest as additional insureds or loss payee, as applicable; (b) business interruption or rental loss insurance in an amount at least equal to (i) 12 months of operations or (ii) in some cases all rents and other amounts customarily insured under this type of insurance of the Mortgaged Property; (c) flood insurance (if any portion of the improvements on the Mortgaged Property is located in an area identified by the Federal Emergency Management Agency (“FEMA”), with respect to certain Purchased Assets and the Secretary of Housing and Urban Development with respect to other Mortgage Loans, as having special flood hazards) in an amount not less than amounts prescribed by FEMA; (d) workers’ compensation, if required by law; (e) comprehensive general liability insurance in an amount equal to not less than $1,000,000; all such insurance policies contain clauses providing they are not terminable and may not be terminated without thirty (30) days prior written notice to the mortgagee (except where applicable law requires a shorter period or except for nonpayment of premiums, in which case not less than ten

(10) days prior written notice to the mortgagee is required).  In addition, each Mortgage permits the related mortgagee to make premium payments to prevent the cancellation thereof and shall entitle such mortgagee to reimbursement therefor.  Any insurance proceeds in respect of a casualty, loss or taking will be applied either to the repair or restoration of all or part of the related Mortgaged Property or the payment of the outstanding principal balance of the related Purchased Asset together with any accrued interest thereon.  The related Mortgaged Property is insured by an insurance policy, issued by an insurer meeting the requirements of such Purchased Asset (or in the case of a Participation, of the Underlying Mortgage Loan) and having a claims-paying or financial strength rating of at least A:X from A.M. Best Company or “A” (or the equivalent) from Standard & Poor’s Rating Services, Fitch, Inc. or Moody’s Investor Services, Inc.  An architectural or engineering consultant has performed an analysis of each of the Mortgaged Properties located in seismic zones 3 or 4 in order to evaluate the structural and seismic condition of such property, for the sole purpose of assessing the probable maximum loss (“PML”) for the Mortgaged Property in the event of an earthquake.  In such instance, the PML was based on a return period of not less than 100 years, an exposure period of 50 years and a 10% probability of exceedence.  If the resulting report concluded that the PML would exceed 20% of the amount of the replacement costs of the improvements, earthquake insurance on such Mortgaged Property was obtained by an insurer rated at least A:X by A.M. Best Company or “A” (or the equivalent) from Standard & Poor’s Rating Services, Fitch, Inc. or Moody’s Investor Services, Inc.  The insurer issuing each of the foregoing insurance policies is qualified to write insurance in the jurisdiction where the related Mortgaged Property is located.

(jj)           All amounts required to be deposited by each Mortgagor at origination under the related Purchased Asset Documents have been deposited at origination and there are no deficiencies with regard thereto.

(kk)         Whether or not a Purchased Asset was originated by Seller, with respect to each Purchased Asset originated by Seller and each Purchased Asset originated by any Person other than Seller, as of the date of origination of the related Purchased Asset, and, with respect to each Purchased Asset originated by Seller and any subsequent holder of the Purchased Asset, as of the Purchase Date, there are no actions, suits, arbitrations or governmental investigations or proceedings by or before any court or other Governmental Authority or agency now pending against or affecting the Mortgagor under any Purchased Asset or any of the Mortgaged Properties that, if determined against such Mortgagor or such Mortgaged Property, would materially and adversely affect the value of such Mortgaged Property, the security intended to be provided with respect to the related Purchased Asset, or the ability of such Mortgagor and/or the current use of such Mortgaged Property to generate net cash flow to pay principal, interest and other amounts due under the related Purchased Asset; and there are no such actions, suits or proceedings threatened against such Mortgagor.

(ll)           Each Purchased Asset complied at origination, in all material respects, with all of the terms, conditions and requirements of Seller’s underwriting standards applicable to such Purchased Asset and since origination, the Purchased Asset has been serviced in all material respects in a legal manner in conformance with Seller’s servicing standards.

(mm)       The originator of the Purchased Asset or Seller has inspected or caused to be inspected each related Mortgaged Property within the 12 months prior to the Purchase Date.

(nn)         The Purchased Asset Documents require the Mortgagor to provide the holder of the Purchased Asset with at least annual operating statements, financial statements and except for Purchased Assets for which the related Mortgaged Property is leased to a single tenant, rent rolls.

(oo)         All escrow deposits and payments required by the terms of each Purchased Asset are in the possession, or under the control of Seller (or in the case of a Participation, the servicer of the related Mortgage Loan), and all amounts required to be deposited by the applicable Mortgagor under the related Purchased Asset Documents have been deposited, and there are no deficiencies with regard thereto (subject to any applicable notice and cure period).  All of Seller’s interest in such escrows and deposits will be conveyed by Seller to Buyer hereunder.

(pp)         Each Mortgagor with respect to a Purchased Asset (and, for each Accommodation Loan, each Mortgagee thereunder) is an entity whose organizational documents or related Purchased Asset Documents provide that it is, and at least so long as the Purchased Asset is outstanding will continue to be, a Single Purpose Entity.  For this purpose, “Single Purpose Entity” shall mean a Person, other than an individual, whose organizational documents provide that it shall engage solely in the business of owning and operating the Mortgaged Property and that does not engage in any business unrelated to such property and the financing thereof, does not have any assets other than those related to its interest in the Mortgaged Property or the financing thereof or any indebtedness other than as permitted by the related Mortgage or other Purchased Asset Documents, and the organizational documents of which require that it have its own separate books and records and its own accounts, in each case that are separate and apart from the books and records and accounts of any other Person, except as permitted by the related Mortgage or other Purchased Asset Documents.

(qq)         Each of the Purchased Assets contain a “due on sale” clause, which provides for the acceleration of the payment of the unpaid principal balance of the Purchased Asset (or in the case of an A Note or a Participation, of the related Mortgage Loan) if, without the prior written consent of the holder of the Purchased Asset (or in the case of an A Note or a Participation, of the holder of title to the Underlying Mortgage Loan), the property subject to the Mortgage, or any controlling interest therein, is directly or indirectly transferred or sold (except that it may provide for transfers by devise, descent or operation of law upon the death of a member, manager, general partner or shareholder of a Mortgagor and that it may provide for assignments subject to the Purchased Asset holder’s approval of transferee, transfers to affiliates, transfers to family members for estate planning purposes, transfers among existing members, partners or shareholders in Mortgagors or transfers of passive interests so long as the key principals or general partner retains control).  The Purchased Asset Documents contain a “due on encumbrance” clause, which provides for the acceleration of the payment of the unpaid principal balance of the Purchased Asset if the property subject to the Mortgage or any controlling interest in the Mortgagor is further pledged or encumbered, unless the prior written consent of the holder of the Purchased Asset is obtained (except

that it may provide for assignments subject to the Purchased Asset holder’s approval of transferee, transfers to affiliates or transfers of passive interests so long as the key principals or general partner retains control).  The Mortgage requires the Mortgagor to pay all reasonable fees and expenses associated with securing the consent or approval of the holder of the Mortgage for a waiver of a “due on sale” or “due on encumbrance” clause or a defeasance provision.  As of the Purchase Date, Seller holds no preferred equity interest in any Mortgagor and Seller holds no mezzanine debt related to such Mortgaged Property.

(rr)           Each Purchased Asset containing provisions for defeasance of mortgage collateral requires either (a) the prior written consent of, and compliance with the conditions set by, the holder of the Purchased Asset to any defeasance, or (b)(i) the replacement collateral consist of U.S. “government securities,” within the meaning of Treasury Regulations Article 1.860 G-2(a)(8)(i), in an amount sufficient to make all scheduled payments under the Mortgage Note when due (up to the maturity date for the related Purchased Asset, the Anticipated Repayment Date for ARD Loans or the date on which the Mortgagor may prepay the related Purchased Asset without payment of any prepayment penalty); (ii) the loan may be assumed by a Single Purpose Entity approved by the holder of the Purchased Asset; (iii) counsel provide an opinion that the trustee has a perfected security interest in such collateral prior to any other claim or interest; and (iv) such other documents and certifications as the mortgagee may reasonably require, which may include, without limitation, (A) a certification that the purpose of the defeasance is to facilitate the disposition of the mortgaged real property or any other customary commercial transaction and not to be part of an arrangement to collateralize a REMIC offering with obligations that are not real estate mortgages and (B) a certification from an independent certified public accountant that the collateral is sufficient to make all scheduled payments under the Mortgage Note when due.  Each Purchased Asset containing provisions for defeasance provides that, in addition to any cost associated with defeasance, the related Mortgagor shall pay, as of the date the mortgage collateral is defeased, all scheduled and accrued interest and principal due as well as an amount sufficient to defease in full the Purchased Asset.  In addition, if the related Purchased Asset permits defeasance, then the Mortgage Loan documents provide that the related Mortgagor shall (x) pay all reasonable

fees associated with the defeasance of the Purchased Asset and all other reasonable expenses associated with the defeasance, or (y) provide all opinions required under the related Purchased Asset Documents, including a REMIC opinion, and any applicable rating agency letters confirming that no downgrade or qualification shall occur as a result of the defeasance.

(ss)         In the event that a Purchased Asset is secured by more than one Mortgaged Property, then, in connection with a release of less than all of such Mortgaged Properties, a Mortgaged Property may not be released as collateral for the related Purchased Asset unless, in connection with such release, an amount equal to not less than 125% of the Allocated Loan Amount for such Mortgaged Property is prepaid or, in the case of a defeasance, an amount equal to 125% of the Allocated Loan Amount is defeased through the deposit of replacement collateral (as contemplated in clause (34) hereof) sufficient to make all scheduled payments with respect to such defeased amount, or such release is otherwise in accordance with the terms of the Purchased Asset Documents.

(tt)           Each Mortgaged Property is owned in fee by the related Mortgagor, with the exception of (i) Mortgaged Properties that are secured in whole or in a part by a Ground Lease and (ii) out-parcels, and is used and occupied for commercial or multifamily residential purposes in accordance with applicable law.

(uu)         Any material non-conformity with applicable zoning laws constitutes a legal non-conforming use or structure that, in the event of casualty or destruction, may be restored or repaired to the full extent of the use or structure at the time of such casualty, or for which law and ordinance insurance coverage has been obtained in amounts consistent with the standards utilized by Seller.

(vv)         Neither Seller nor any affiliate thereof has any obligation to make any capital contributions to the related Mortgagor under the Purchased Asset.  The Purchased Asset was not originated for the sole purpose of financing the construction of incomplete improvements on the related Mortgaged Property.

(ww)       The following statements are true with respect to the related Mortgaged Property: (a) the Mortgaged Property is located on or adjacent to a dedicated road or has access to an irrevocable easement permitting ingress and egress and (b) the Mortgaged Property is served by public or private utilities, water and sewer (or septic facilities) and otherwise appropriate for the use in which the Mortgaged Property is currently being utilized.

(xx)          None of the Purchased Asset Documents contain any provision that expressly excuses the related borrower from obtaining and maintaining insurance coverage for acts of terrorism and, in circumstances where terrorism insurance is not expressly required, the mortgagee is not prohibited from requesting that the related borrower maintain such insurance, in each case, to the extent such insurance coverage is generally available for like properties in such

jurisdictions at commercially reasonable rates. Each Mortgaged Property is insured by an “all-risk” casualty insurance policy that does not contain an express exclusion for (or, alternatively, is covered by a separate policy that insures against property damage resulting from) acts of terrorism.

(yy)         An appraisal of the related Mortgaged Property was conducted in connection with the origination of such Purchased Asset (or in the case of a Participation, the date of origination of the Underlying Mortgage Loan), and such appraisal satisfied the guidelines in Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, in either case as in effect on the date such Purchased Asset (or in the case of a Participation, the Underlying Mortgage Loan) was originated.

Defined Terms

As used in this Exhibit:

The term “Allocated Loan Amount” shall mean, for each Mortgaged Property, the portion of principal of the related Purchased Asset allocated to such Mortgaged Property for certain purposes (including determining the release prices of properties, if permitted) under such Purchased Asset as set forth in the related loan documents.  There can be no assurance, and it is unlikely, that the Allocated Loan Amounts represent the current values of individual Mortgaged Properties, the price at which an individual Mortgaged Property could be sold in the future to a willing buyer or the replacement cost of the Mortgaged Properties.

The term “Anticipated Repayment Date” shall mean, with respect to any Purchased Asset that is indicated on the Purchased Asset Schedule as having a Revised Rate, the date upon which such Purchased Asset commences accruing interest at such Revised Rate.

The term “Assignment of Leases” shall have the meaning specified in paragraph 10 of this Exhibit VI.

The term “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, subject to the terms, covenants and provisions of this Agreement.

The term “ARD Loan” shall mean any Purchased Asset that provides that if the unamortized principal balance thereof is not repaid on its Anticipated Repayment Date, such Purchased Asset will accrue Excess Interest at the rate specified in the related Mortgage Note and the Mortgagor is required to apply excess monthly cash flow generated by the related Mortgaged Property to the repayment of the outstanding principal balance on such Purchased Asset.

The term “Due Date” shall mean the day of the month set forth in the related Mortgage Note on which each monthly payment of interest and/or principal thereon is scheduled to be first due.

The term “Environmental Site Assessment” shall mean a Phase I environmental report meeting the requirements of the American Society for Testing and Materials, and, if in accordance with customary industry standards a reasonable lender would require it, a Phase II environmental report, each prepared by a licensed third party professional experienced in environmental matters.

The term “Excess Cash Flow” shall mean the cash flow from the Mortgaged Property securing an ARD Loan after payments of interest (at the Mortgage Interest Rate) and principal (based on the amortization schedule), and (a) required payments for the tax and insurance fund and ground lease escrows fund, (b) required payments for the monthly debt service escrows, if any, (c) payments to any other required escrow funds and (d) payment of operating expenses pursuant to the terms of an annual budget approved by the servicer and discretionary (lender approved) capital expenditures.

The term “Excess Interest” shall mean any accrued and deferred interest on an ARD Loan in accordance with the following terms.  Commencing on the respective Anticipated Repayment Date each ARD Loan (pursuant to its existing terms or a unilateral option, as defined in Treasury Regulations under Article 1001 of the Code, in the Purchased Assets exercisable during the term of the Purchased Asset) generally will bear interest at a fixed rate (the “Revised Rate”) per annum equal to the Mortgage Interest Rate plus a percentage specified in the related Mortgage Loan Documents.  Until the principal balance of each such Purchased Asset has been reduced to zero (pursuant to its existing terms or a unilateral option, as defined in Treasury Regulations under Article 1001 of the Code, in the Purchased Assets exercisable during the term of the Mortgage Loan), such Purchased Asset will only be required to pay interest at the Mortgage Interest Rate and the interest accrued at the excess of the related Revised Rate over the related Mortgage Interest Rate will be deferred (such accrued and deferred interest and interest thereon, if any, is “Excess Interest”).

The term “Mortgage Interest Rate” shall mean the fixed rate, or the formula applicable to determine the floating rate, of interest per annum that each Purchased Asset bears as of the Purchase Date.

The term “Permitted Encumbrances” shall mean:

I.the lien of current real property taxes, water charges, sewer rents and assessments not yet delinquent or accruing interest or penalties;

II.covenants, conditions and restrictions, rights of way, easements and other matters of public record acceptable to mortgage lending institutions generally and referred to in the related mortgagee’s title insurance policy;

III.other matters to which like properties are commonly subject and which are acceptable to mortgage lending institutions generally, and

IV.the rights of tenants, as tenants only, whether under ground leases or space leases at the Mortgaged Property

that together do not materially and adversely affect the related Mortgagor’s ability to timely make payments on the related Purchased Asset, which do not materially interfere with the benefits of the security intended to be provided by the related Mortgage or the use, for the use currently being made, the operation as currently being operated, enjoyment, value or marketability of such Mortgaged Property, provided, however, that, for the avoidance of doubt, Permitted Encumbrances shall exclude all pari passu, second, junior and subordinated mortgages but shall not exclude mortgages that secure Purchased Assets that are cross-collateralized with other Purchased Assets.

The term “Revised Rate” shall mean, with respect to those Purchased Assets on the Purchased Asset Schedule indicated as having a revised rate, the increased interest rate after the Anticipated Repayment Date (in the absence of a default) for each applicable Purchased Asset, as calculated and as set forth in the related Purchased Asset.

REPRESENTATIONS AND WARRANTIES
REGARDING EACH INDIVIDUAL PURCHASED ASSET
THAT IS A JUNIOR INTEREST
IN A PERFORMING COMMERCIAL
MORTGAGE LOAN SECURED BY A FIRST LIEN ON
A MULTIFAMILY OR COMMERCIAL PROPERTY

(a)           The representations and warranties set forth in this Exhibit VI regarding the senior mortgage loan from which the Purchased Asset is derived shall be deemed incorporated herein in respect of such senior mortgage loan, provided, however, that, in the event that such senior mortgage loan was not originated by Seller or an Affiliate of Seller, Seller shall be deemed to be making the representations set forth in this Exhibit VI with respect to such senior mortgage loan to the best of Seller’s knowledge.

(b)           The information set forth in the Purchased Asset Schedule is complete, true and correct in all material respects.

(c)           There exists no material default, breach, violation or event of acceleration (and no event that, 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 Asset, in any such case to the extent the same materially and adversely affects the value of the Purchased Asset and the related underlying real property.

(d)           Except with respect to the enforceability of any provisions requiring the payment of default interest, late fees, additional interest, prepayment premiums or yield maintenance charges, neither the Purchased Asset nor any of the related Purchased Asset Documents is subject to any right of rescission, set-off, abatement, diminution, valid counterclaim or defense, including the defense of usury, nor will the operation of any of the terms of any such Purchased Asset Documents, or the exercise (in compliance with procedures permitted under applicable law) of any right thereunder, render any Purchased Asset Documents subject to any right of rescission, set-off, abatement, diminution, valid counterclaim or defense, including the defense of usury (subject to anti-deficiency or one form of action laws and to bankruptcy, receivership, conservatorship, reorganization, insolvency, moratorium or other similar laws affecting the enforcement of creditor’s rights generally and by general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law)), and no such right of rescission, set-off, abatement, diminution, valid counterclaim or defense has been asserted with respect thereto.

(e)           The Purchased Asset Documents have been duly and properly executed by the originator of the Purchased Asset, 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 Purchased Asset is not usurious.

(f)            The terms of the related Purchased Asset Documents have not been impaired, waived, altered or modified in any material respect (other than by a written instrument that is included in the related Purchased Asset File).

(g)           The assignment of the Purchased Asset constitutes the legal, valid and binding assignment of such Purchased Asset from Seller to or for the benefit of Buyer 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).

(h)           All representations and warranties in the Purchased Asset Documents and in the underlying documents for the performing commercial mortgage loan secured by a first lien on a multifamily or commercial property to which such Purchased Asset relates are true and correct in all material respects.

(i)            The servicing and collection practices used by Seller for the Purchased Asset have complied with applicable law in all material respects and are consistent with those employed by prudent servicers of comparable Purchased Assets.

(j)            Seller is not a debtor in any state or federal bankruptcy or insolvency proceeding.

(k)           As of the Purchase Date, there is no payment default, giving effect to any applicable notice and/or grace period, and there is no other material default under any of the related Purchased Asset Documents, giving effect to any applicable notice and/or grace period; no such material default or breach has been waived by Seller or on its behalf or by Seller’s predecessors in interest with respect to the Purchased Assets; and no event has occurred that, with the passing of time or giving of notice would constitute a material default or breach; provided, however, that the representations and warranties set forth in this sentence do not cover any default, breach, violation or event of acceleration that specifically pertains to or arises out of any subject matter otherwise covered by any other representation or warranty made by Seller in this Exhibit VI.  No Purchased Asset has been accelerated and no foreclosure or power of sale proceeding has been initiated in respect of the related Mortgage.  Seller has not waived any material claims against the related Mortgagor under any non-recourse exceptions contained in the Mortgage Note.

(l)            No Purchased Asset has been satisfied, canceled, subordinated (except to the senior mortgage loan from which the Purchased Asset is derived), released or rescinded, in whole or in part, and the related Mortgagor has not been released, in whole or in part, from its obligations under any related Purchased Asset Document.

REPRESENTATIONS AND WARRANTIES
REGARDING EACH INDIVIDUAL PURCHASED ASSET
THAT IS A CMBS

(a)           The CMBS consists of pass-through certificates representing beneficial ownership interests in one or more REMICs consisting of one or more first lien mortgage loans secured by commercial and/or multifamily properties.

(b)           Immediately prior to the sale, transfer and assignment to Buyer thereof, Seller had good and marketable title to, and was the sole owner and holder of, such CMBS, and Seller is transferring such CMBS free and clear of any and all liens, pledges, encumbrances, charges, security interests or any other ownership interests of any nature encumbering such CMBS.

(c)           Seller has full right, power and authority to sell and assign such CMBS and such CMBS has not been cancelled, satisfied or rescinded in whole or part nor has any instrument been executed that would effect a cancellation, satisfaction or rescission thereof.

(d)           Other than consents and approvals obtained as of the related Purchase Date or those already granted in the related documents governing such CMBS, no consent or approval by any Person is required in connection with Buyer’s acquisition of such CMBS, for Buyer’s exercise of any rights or remedies in respect of such CMBS or for Buyer’s sale or other disposition of such CMBS.  No third party holds any “right of first refusal”, “right of first negotiation”, “right of first offer”, purchase option, or other similar rights of any kind, and no other impediment exists to any such transfer or exercise of rights or remedies.

(e)           Upon consummation of the purchase contemplated to occur in respect of such CMBS on the Purchase Date therefor, Seller will have validly and effectively conveyed to Buyer all legal and beneficial interest in and to such CMBS free and clear of any and all liens, pledges, encumbrances, charges, security interests or any other ownership interests of any nature.

(f)            The CMBS is a physical security in registered form, or is in book-entry form and held through the facilities of (a) The Depository Trust Corporation in New York, New York, or (b) another clearing organization or book-entry system reasonably acceptable to Buyer.

(g)           With respect to any CMBS that is a physical security, Seller has delivered to Buyer or its designee such physical security, along with any and all certificates and assignments necessary to transfer such security under the issuing documents of such CMBS.

(h)           With respect to any CMBS registered with DTC or another clearing organization, Seller has delivered to Buyer or its designee evidence of re-registration to the securities intermediary in Buyer’s name on behalf of Buyer.

(i)            All information contained in the related Purchased Asset File (or as otherwise provided to Buyer) in respect of such CMBS is accurate and complete in all material respects.

(j)            As of the date of its issuance, such CMBS complied in all material respects with, or was exempt from, all requirements of federal, state or local law relating to the issuance thereof including, without limitation, any registration requirements of the Securities Act of 1933, as amended.

(k)           Except as included in the Purchased Asset File, there is no document that by its terms modifies or affects the rights and obligations of the holder of such CMBS, the terms of the related pooling and servicing agreement or any other agreement relating to the CMBS, and, since issuance, there has been no material change or waiver to any term or provision of any such document, instrument or agreement.

(l)            There is no (i) monetary default, breach or violation of any pooling and servicing agreement or other document governing or pertaining to such CMBS, (ii) material non-monetary default, breach or violation of any such agreement or other document or other document governing or pertaining to such CMBS, or (iii) event that, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration under such documents and agreements.

(m)          No consent, approval, authorization or order of, or registration or filing with, or notice to, any court or governmental agency or body having jurisdiction or regulatory authority over Seller is required for any transfer or assignment of such CMBS.

(n)           Except as included in the Purchased Asset File, (i) no interest shortfalls have occurred and no realized losses have been applied to any CMBS or otherwise incurred with respect to any mortgage loan related to such CMBS nor any class of CMBS issued under the same governing documents as any CMBS, and (ii) Seller has no knowledge of any circumstances that could have a Material Adverse Effect on the CMBS.

(o)           With respect to CMBS backed by a single mortgaged asset, there are no circumstances or conditions with respect to the CMBS, the Underlying Mortgaged Property or the related Mortgagor’s credit standing that can reasonably be expected to have a Material Adverse Effect on the CMBS.

(p)           Seller has not received written notice of any outstanding liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind for which the holder of such CMBS is or may become obligated.

(q)           There is no material inaccuracy in any servicer report or trustee report delivered to it (and, in turn, delivered pursuant to the terms of this Agreement) in connection with such CMBS.

(r)            No servicer of the CMBS has made any advances, directly or indirectly, with respect to the CMBS or to any mortgage loan relating to such CMBS.

REPRESENTATIONS AND WARRANTIES
REGARDING EACH INDIVIDUAL PURCHASED ASSET
THAT IS A CRE CDO

(a)           Immediately prior to the sale, transfer and assignment to Buyer thereof, Seller had good and marketable title to, and was the sole owner and holder of, such CRE CDO, and Seller is transferring such CRE CDO free and clear of any and all liens, pledges, encumbrances, charges, security interests or any other ownership interests of any nature encumbering such CRE CDO.

(b)           Seller has full right, power and authority to sell and assign such CRE CDO and such CRE CDO has not been cancelled, satisfied or rescinded in whole or part nor has any instrument been executed that would effect a cancellation, satisfaction or rescission thereof.

(c)           Other than consents and approvals obtained as of the related Purchase Date or those already granted in the related documents governing such CRE CDO, no consent or approval by any Person is required in connection with Buyer’s acquisition of such CRE CDO, for Buyer’s exercise of any rights or remedies in respect of such CRE CDO or for Buyer’s sale or other disposition of such CRE CDO.  No third party holds any “right of first refusal”, “right of first negotiation”, “right of first offer”, purchase option, or other similar rights of any kind, and no other impediment exists to any such transfer or exercise of rights or remedies.

(d)           Upon consummation of the purchase contemplated to occur in respect of such CRE CDO on the Purchase Date therefor, Seller will have validly and effectively conveyed to Buyer all legal and beneficial interest in and to such CRE CDO free and clear of any and all liens, pledges, encumbrances, charges, security interests or any other ownership interests of any nature.

(e)           The CRE CDO is a physical security in registered form, or is in book-entry form and held through the facilities of (a) The Depository Trust Corporation in New York, New York, or (b) another clearing organization or book-entry system reasonably acceptable to Buyer.

(f)            With respect to any CRE CDO that is a physical security, Seller has delivered to Buyer or its designee such physical security, along with any and all certificates and assignments necessary to transfer such security under the issuing documents of such CRE CDO.

(g)           With respect to any CRE CDO registered with DTC or another clearing organization, Seller has delivered to Buyer or its designee evidence of re-registration to the securities intermediary in Buyer’s name on behalf of Buyer.

(h)           All information contained in the related Purchased Asset File (or as otherwise provided to Buyer) in respect of such CRE CDO is accurate and complete in all material respects.

(i)            To the knowledge of Seller, as of the date of its issuance, such CRE CDO complied in all material respects with, or was exempt from, all requirements of federal, state or local law relating to the issuance thereof including, without limitation, any registration requirements of the Securities Act of 1933, as amended.

(j)            Except as included in the Purchased Asset File, there is no document that by its terms modifies or affects the rights and obligations of the holder of such CRE CDO, the terms of the related pooling and servicing agreement or any other agreement relating to the CRE CDO, and, since issuance, there has been no material change or waiver to any term or provision of any such document, instrument or agreement.

(k)           There is no (i) monetary default, breach or violation exists with respect to any pooling and servicing agreement, indenture, or other document governing or pertaining to such CRE CDO, (ii) material non-monetary default, breach or violation exists with respect to any such agreement, indenture, or other document governing or pertaining to such CRE CDO, or (iii) event that, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration under such documents and agreements.

(l)            No consent, approval, authorization or order of, or registration or filing with, or notice to, any court or governmental agency or body having jurisdiction or regulatory authority over Seller is required for any transfer or assignment of such CRE CDO.

(m)          Except as included in the Purchased Asset File, (i) no interest shortfalls have occurred and no realized losses have been applied to any CRE CDO or otherwise incurred with respect to any mortgage loan related to such CRE CDO nor any class of CRE CDO issued under the same governing documents as any CRE CDO, and (ii) Seller has no knowledge of any circumstances that could have a Material Adverse Effect on the CRE CDO.

(n)           Seller has not received written notice of any outstanding liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind for which the holder of such CRE CDO is or may become obligated.

(o)           There is no material inaccuracy in any servicer report or trustee report delivered to it (and, in turn, delivered pursuant to the terms of this Agreement) in connection with such CRE CDO.

(p)           No fraudulent acts were committed by Seller in connection with its acquisition of such CRE CDO.

(q)           No servicer of the CRE CDO has made any advances, directly or indirectly, with respect to the CRE CDO or to any mortgage loan relating to such CRE CDO.

REPRESENTATIONS AND WARRANTIES

RE: PURCHASED ASSETS CONSISTING OF MEZZANINE LOANS

(a)The Mezzanine Loan is a performing mezzanine loan secured by a pledge of all of the Capital Stock of a Mortgagor that owns income producing commercial real estate.

(b)As of the Purchase Date, such Mezzanine Loan complies in all material respects with, or is exempt from, all requirements of federal, state or local law relating to such Mezzanine Loan.

(c)Immediately prior to the sale, transfer and assignment to Buyer thereof, Seller had good and marketable title to, and was the sole owner and holder of, such Mezzanine Loan, and Seller is transferring such Mezzanine Loan free and clear of any and all liens, pledges, encumbrances, charges, security interests or any other ownership interests of any nature encumbering such Mezzanine Loan.  Upon consummation of the purchase contemplated to occur in respect of such Mezzanine Loan on the Purchase Date therefor, Seller will have validly and effectively conveyed to Buyer all legal and beneficial interest in and to such Mezzanine Loan free and clear of any pledge, lien, encumbrance or security interest.

(d)No fraudulent acts were committed by Seller in connection with its acquisition or origination of such Mezzanine Loan nor were any fraudulent acts committed by any Person in connection with the origination of such Mezzanine Loan.

(e)All information contained in the related Underwriting Package (or as otherwise provided to Buyer) in respect of such Mezzanine Loan is accurate and complete in all material respects.

(f)Except as included in the Underwriting Package, Seller is not a party to any document, instrument or agreement, and there is no document, that by its terms modifies or affects the rights and obligations of any holder of such Mezzanine Loan and Seller has not consented to any material change or waiver to any term or provision of any such document, instrument or agreement and no such change or waiver exists.

(g)Such Mezzanine Loan is presently outstanding, the proceeds thereof have been fully and properly disbursed and, except for amounts held in escrow by Seller, there is no requirement for any future advances thereunder.

(h)Seller has full right, power and authority to sell and assign such Mezzanine Loan and such Mezzanine Loan or any related Mezzanine Note has not been cancelled, satisfied or rescinded in whole or part nor has any instrument been executed that would effect a cancellation, satisfaction or rescission thereof.

(i)Other than consents and approvals obtained as of the related Purchase Date or those already granted in the documentation governing such Mezzanine Loan (the “Mezzanine Loan Documents”), no consent or approval by any Person is required in connection with Seller’s sale and/or Buyer’s acquisition of such Mezzanine Loan, for Buyer’s exercise of any rights or remedies in respect of such Mezzanine Loan or for Buyer’s sale, pledge or other

disposition of such Mezzanine Loan.  No third party holds any “right of first refusal”, “right of first negotiation”, “right of first offer”, purchase option, or other similar rights of any kind, and no other impediment exists to any such transfer or exercise of rights or remedies.

(j)The Mezzanine Collateral is secured by a pledge of equity ownership interests in the related borrower under the Underlying Mortgage Loan or a direct or indirect owner of the related borrower and the security interest created thereby has been fully perfected in favor of Seller as Mezzanine Lender.

(k)The Underlying Property Owner has been duly organized and is validly existing and in good standing under the laws of its jurisdiction of organization, with requisite power and authority to own its assets and to transact the business in which it is now engaged, the sole purpose of the Underlying Property Owner under its organizational documents is to own, finance, sell or otherwise manage the Properties and to engage in any and all activities related or incidental thereto, and the Mortgaged Properties constitute the sole assets of the Underlying Property Owner.

(l)The Underlying Property Owner has good and marketable title to the Underlying Mortgaged Property, no claims under the title policies insuring the Underlying Property Owner’s title to the Properties have been made, and the Underlying Property Owner has not received any written notice regarding any material violation of any easement, restrictive covenant or similar instrument affecting the Underlying Mortgaged Property.

(m)The representations and warranties made by the borrower (the “Mezzanine Borrower”) in the Mezzanine Loan Documents were true and correct in all material respects as of the date such representations and warranties were stated to be true therein, and there has been no adverse change with respect to the Mezzanine Loan, the Mezzanine Borrower, the Underlying Mortgaged Property or the Underlying Property Owner that would render any such representation or warranty not true or correct in any material respect as of the Purchase Date.

(n)The Mezzanine Loan Documents provide for the acceleration of the payment of the unpaid principal balance of the Mezzanine Loan if (i) the related borrower voluntarily transfers or encumbers all or any portion of any related Mezzanine Collateral, or (ii) any direct or indirect interest in the related borrower is voluntarily transferred or assigned, other than, in each case, as permitted under the terms and conditions of the related loan documents.

(o)Pursuant to the terms of the Mezzanine Loan Documents: (a) no material terms of any related Mortgage may be waived, canceled, subordinated or modified in any material respect and no material portion of such Mortgage or the Underlying Mortgaged Property may be released without the consent of the holder of the Mezzanine Loan; (b) no material action may be taken by the Underlying Property Owner with respect to the Underlying Mortgaged Property without the consent of the holder of the Mezzanine Loan; (c) the holder of the Mezzanine Loan is entitled to approve the budget of the Underlying Property Owner as it relates to the Underlying Mortgaged Property; and (d) the holder of the Mezzanine Loan’s consent is required prior to the Underlying Property Owner incurring any additional indebtedness.

(p)There is no (i) monetary default, breach or violation with respect to such Mezzanine Loan, the Underlying Mortgage Loan or any other obligation of the owner of the Underlying Mortgaged Property (the “Underlying Property Owner”), (ii) material non-monetary default, breach or violation with respect to such Mezzanine Loan, the Underlying Mortgage Loan or any other obligation of the Underlying Property Owner or (iii) event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration.

(q)No default or event of default has occurred under any agreement pertaining to any lien or other interest that ranks pari passu with or senior to the interests of the holder of such Mezzanine Loan or with respect to any Underlying Mortgage Loan or other indebtedness in respect of the related Underlying Mortgaged Property and there is no provision in any agreement related to any such lien, interest or loan which would provide for any increase in the principal amount of any such lien, other interest or loan.

(r)Seller’s security interest in the Mezzanine Loan is covered by a UCC-9 insurance policy (the “UCC-9 Policy”) in the maximum principal amount of the Mezzanine Loan insuring that the related pledge is a valid first priority lien on the collateral pledged in respect of such Mezzanine Loan (the “Mezzanine Collateral”), subject only to the exceptions stated therein (or a pro forma title policy or marked up title insurance commitment on which the required premium has been paid exists which evidences that such UCC-9 Policy will be issued), such UCC-9 Policy (or, if it has yet to be issued, the coverage to be provided thereby) is in full force and effect, no material claims have been made thereunder and no claims have been paid thereunder, Seller has not done, by act or omission, anything that would materially impair the coverage under the UCC-9 Policy and as of the Purchase Date, the UCC-9 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.

(s)The Mezzanine Loan, and each party involved in the origination of the Mezzanine Loan, complied as of the date of origination with, or was exempt from, applicable state or federal laws, regulations and other requirements pertaining to usury.

(t)Seller has delivered to Buyer or its designee the original promissory note made in respect of such Mezzanine Loan, together with an original assignment thereof executed by Seller in blank.

(u)Seller has not received any written notice that the Mezzanine Loan may be subject to reduction or disallowance for any reason, including without limitation, any setoff, right of recoupment, defense, counterclaim or impairment of any kind.

(v)Seller has no obligation to make loans to, make guarantees on behalf of, or otherwise extend credit to, or make any of the foregoing for the benefit of, the Mezzanine Borrower or any other person under or in connection with the Mezzanine Loan.

(w)The servicing and collection practices used by the servicer of the Mezzanine Loan, and the origination practices of the related originator, have been in all respects legal, proper and prudent and have met customary industry standards by prudent institutional

commercial mezzanine lenders and mezzanine loan servicers except to the extent that, in connection with its origination, such standards were modified as reflected in the documentation delivered to Buyer.

(x)If applicable, the ground lessor consented to and acknowledged that (i) the Mezzanine Loan is permitted / approved, (ii) any foreclosure of the Mezzanine Loan and related change in ownership of the ground lessee will not require the consent of the ground lessor or constitute a default under the ground lease, (iii) copies of default notices would be sent to Mezzanine Lender and (iv) it would accept cure from Mezzanine Lender on behalf of the ground lessee.

(y)To the extent the Buyer was granted a security interest with respect to the Mezzanine Loan, such interest (i) was given for due consideration, (ii) has attached, (iii) is perfected, (iv) is a first priority Lien, and (v) has been appropriately assigned to the Buyer by the Underlying Property Owner.

(z)No consent, approval, authorization or order of, or registration or filing with, or notice to, any court or governmental agency or body having jurisdiction or regulatory authority is required for any transfer or assignment by the holder of such Mezzanine Loan.

(aa)Seller has not received written notice of any outstanding liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind for which the holder of such Mezzanine Loan is or may become obligated.

(bb)Seller has not advanced funds, or knowingly received any advance of funds from a party other than the borrower relating to such Mezzanine Loan, directly or indirectly, for the payment of any amount required by such Mezzanine Loan.

(cc)All real estate taxes and governmental assessments, or installments thereof, which would be a lien on any related Underlying Mortgaged Property and that prior to the Purchase Date for the related Purchased Asset have become delinquent in respect of such Underlying Mortgaged Property have been paid, or an escrow of funds in an amount sufficient to cover such payments has been established.  For purposes of this representation and warranty, real estate taxes and governmental assessments and installments thereof shall not be considered delinquent until the earlier of (a) the date on which interest and/or penalties would first be payable thereon and (b) the date on which enforcement action is entitled to be taken by the related taxing authority.

(dd)As of the Purchase Date for the related Purchased Asset, each related Underlying Mortgaged Property was free and clear of any material damage (other than deferred maintenance for which escrows were established at origination) that would affect materially and adversely the value of such Underlying Mortgaged Property as security for the related Underlying Mortgage Loan and there was no proceeding pending or, based solely upon the delivery of written notice thereof from the appropriate condemning authority, threatened for the total or partial condemnation of such Underlying Mortgaged Property.

(ee)As of the Purchase Date of the Mezzanine Loan, all insurance coverage required under the Mezzanine Loan Documents and/or any Mortgage Loan related to the Underlying Mortgaged Property, which insurance covered such risks as were customarily acceptable to prudent commercial and multifamily mortgage lending institutions lending on the security of property comparable to the related Underlying Mortgaged Property in the jurisdiction in which such Underlying Mortgaged Property is located, and with respect to a fire and extended perils insurance policy, is in an amount (subject to a customary deductible) at least equal to the lesser of (i) the replacement cost of improvements located on such Underlying Mortgaged Property, or (ii) the outstanding principal balance of the Underlying Mortgage Loan, and in any event, the amount necessary to prevent operation of any co-insurance provisions; and, except if such Underlying Mortgaged Property is operated as a mobile home park, is also covered by business interruption or rental loss insurance, in an amount at least equal to 12 months of operations of the related Underlying Mortgaged Property, all of which was in full force and effect with respect to each related Underlying Mortgaged Property; and, as of the Purchase Date for the related Purchased Asset, all insurance coverage required under the Mezzanine Loan Documents and/or any Underlying Mortgage Loan related to the Underlying Mortgaged Property, which insurance covers such risks and is in such amounts as are customarily acceptable to prudent commercial and multifamily mortgage lending institutions lending on the security of property comparable to the related Underlying Mortgaged Property in the jurisdiction in which such Underlying Mortgaged Property is located, is in full force and effect with respect to each related Underlying Mortgaged Property; all premiums due and payable through the Purchase Date for the related Purchased Asset have been paid; and no notice of termination or cancellation with respect to any such insurance policy has been received by Seller; and except for certain amounts not greater than amounts which would be considered prudent by an institutional commercial and/or multifamily mortgage lender with respect to a similar mortgage loan and which are set forth in the Mezzanine Loan Documents and/or any Underlying Mortgage Loan related to the Underlying Mortgaged Property, any insurance proceeds in respect of a casualty loss, will be applied either (i) to the repair or restoration of all or part of the related Underlying Mortgaged Property or (ii) the reduction of the outstanding principal balance of the Underlying Mortgage Loan, subject in either case to requirements with respect to leases at the related Underlying Mortgaged Property and to other exceptions customarily provided for by prudent institutional lenders for similar loans.  The Underlying Mortgaged Property is also covered by comprehensive general liability insurance against claims for personal and bodily injury, death or property damage occurring on, in or about the related Underlying Mortgaged Property, in an amount customarily required by prudent institutional lenders.  An architectural or engineering consultant has performed an analysis of the Underlying Mortgaged Properties located in seismic zone 3 or 4 in order to evaluate the structural and seismic condition of such property, for the sole purpose of assessing the probable maximum loss (“PML”) for the Underlying Mortgaged Property in the event of an earthquake.  In such instance, the PML was based on a 475 year lookback with a 10% probability of exceedance in a 50 year period.  If the resulting report concluded that the PML would exceed 20% of the amount of the replacement costs of the improvements, earthquake insurance on such Underlying Mortgaged Property was obtained by an insurer rated at least A-:V by A.M. Best Company or “BBB-” (or the equivalent) from S&P and Fitch or “Baa3” (or the equivalent) from Moody’s.  If the Underlying Mortgaged Property is located in Florida or within 25 miles of the coast of Texas, Louisiana, Mississippi, Alabama, Georgia, North Carolina or South Carolina such Underlying Mortgaged Property is insured by

windstorm insurance in an amount at least equal to the lesser of (i) the outstanding principal balance of such Underlying Mortgage Loan and (ii) 100% of the full insurable value, or 100% of the replacement cost, of the improvements located on the related Underlying Mortgaged Property.

(ff)The insurance policies contain a standard Mortgagee clause naming the Mortgagee, its successors and assigns as loss payee, in the case of a property insurance policy, and additional insured in the case of a liability insurance policy and provide that they are not terminable without 30 days prior written notice to the Mortgagee (or, with respect to non-payment, 10 days prior written notice to the Mortgagee) or such lesser period as prescribed by applicable law.  Each Mortgage requires that the Mortgagor maintain insurance as described above or permits the Mortgagee to require insurance as described above, and permits the Mortgagee to purchase such insurance at the Mortgagor’s expense if Mortgagor fails to do so.

(gg)There is no material and adverse environmental condition or circumstance affecting the Underlying Mortgaged Property; there is no material violation of any applicable Environmental Law with respect to the Underlying Mortgaged Property; neither Seller nor the Underlying Property Owner has taken any actions which would cause the Underlying Mortgaged Property not to be in compliance with all applicable Environmental Laws; the Underlying Mortgage Loan documents require the borrower to comply with all Environmental Laws; and each Mortgagor has agreed to indemnify the Mortgagee for any losses resulting from any material, adverse environmental condition or failure of the Mortgagor to abide by such Environmental Laws or has provided environmental insurance.

(hh)No borrower under the Mezzanine Loan nor any Mortgagor under any Underlying Mortgage Loan is a debtor in any state or federal bankruptcy or insolvency proceeding.

(ii)Each related Underlying Mortgaged Property was inspected by or on behalf of the related originator or an affiliate during the 12 month period prior to the related origination date.

(jj)There are no material violations of any applicable zoning ordinances, building codes and land laws applicable to the Underlying Mortgaged Property or the use and occupancy thereof which (i) are not insured by an ALTA lender’s title insurance policy (or a binding commitment therefor), or its equivalent as adopted in the applicable jurisdiction, or a law and ordinance insurance policy or (ii) would have a material adverse effect on the value, operation or net operating income of the Underlying Mortgaged Property.  The Mezzanine Loan Documents and the Underlying Mortgage Loan documents require the Underlying Mortgaged Property to comply with all applicable laws and ordinances.

(kk)None of the material improvements which were included for the purposes of determining the appraised value of any related Underlying Mortgaged Property at the time of the origination of the Mezzanine Loan or any related Underlying Mortgage Loan lies outside of the boundaries and building restriction lines of such property (except Underlying Mortgaged Properties which are legal non-conforming uses), to an extent which would have a material adverse affect on the value of the Underlying Mortgaged Property or the related Mortgagor’s use

and operation of such Underlying Mortgaged Property (unless affirmatively covered by title insurance) and no improvements on adjoining properties encroached upon such Underlying Mortgaged Property to any material and adverse extent (unless affirmatively covered by title insurance).

(ll)As of the Purchase Date for the related Purchased Asset, there was no pending action, suit or proceeding, or governmental investigation of which Seller, the Mezzanine Borrower or the Underlying Property Owner has received notice, against the Mortgagor or the related Underlying Mortgaged Property the adverse outcome of which could reasonably be expected to materially and adversely affect the Mezzanine Loan or the Underlying Mortgage Loan.

(mm)The improvements located on the Underlying Mortgaged Property are either not located in a federally designated special flood hazard area or, if so located, the Mortgagor is required to maintain or the Mortgagee maintains, flood insurance with respect to such improvements and such policy is in full force and effect in an amount no less than the lesser of (i) the original principal balance of the Underlying Mortgage Loan, (ii) the value of such improvements on the related Underlying Mortgaged Property located in such flood hazard area or (iii) the maximum allowed under the related federal flood insurance program.

(nn)Except for Mortgagors under Underlying Mortgage Loans the Underlying Mortgaged Property with respect to which includes a Ground Lease, the related Mortgagor (or its affiliate) has title in the fee simple interest in each related Underlying Mortgaged Property.

(oo)The related Underlying Mortgaged Property is not encumbered, and none of the Mezzanine Loan Documents or any Underlying Mortgage Loan documents permits the related Underlying Mortgaged Property to be encumbered subsequent to the Purchase Date of the related Purchased Asset without the prior written consent of the holder thereof, by any lien securing the payment of money junior to or of equal priority with, or superior to, the lien of the related Mortgage (other than Title Exceptions, taxes, assessments and contested mechanics and materialmens liens that become payable after such Purchase Date).

(pp)Each related Underlying Mortgaged Property constitutes one or more complete separate tax lots (or the related Mortgagor has covenanted to obtain separate tax lots and a Person has indemnified the Mortgagee for any loss suffered in connection therewith or an escrow of funds in an amount sufficient to pay taxes resulting from a breach thereof has been established) or is subject to an endorsement under the related title insurance policy.

(qq)An appraisal of the related Underlying Mortgaged Property was conducted in connection with the origination of the Underlying Mortgage Loan; and such appraisal satisfied either (A) the requirements of the “Uniform Standards of Professional Appraisal Practice” as adopted by the Appraisal Standards Board of the Appraisal Foundation, or (B) the guidelines in Title XI of the Financial Institutions Reform, Recovery and Enforcement Act or 1989, in either case as in effect on the date such Underlying Mortgage Loan was originated.

(rr)The related Underlying Mortgaged Property is served by public utilities, water and sewer (or septic facilities) and otherwise appropriate for the use in which the Underlying Mortgaged Property is currently being utilized.

(ss)With respect to each related Underlying Mortgaged Property consisting of a Ground Lease, Seller represents and warrants the following with respect to the related Ground Lease:

I.Such Ground Lease or a memorandum thereof has been or will be duly recorded no later than 30 days after the Purchase Date of the related Purchased Asset and such Ground Lease permits the interest of the lessee thereunder to be encumbered by the related Mortgage or, if consent of the lessor thereunder is required, it has been obtained prior to the Purchase Date.

II.Upon the foreclosure of the Underlying Mortgage Loan (or acceptance of a deed in lieu thereof), the Mortgagor’s interest in such Ground Lease is assignable to the Mortgagee under the leasehold estate and its assigns without the consent of the lessor thereunder (or, if any such consent is required, it has been obtained prior to the Purchase Date).

III.Such Ground Lease may not be amended, modified, canceled or terminated without the prior written consent of the Mortgagee and any such action without such consent is not binding on the Mortgagee, its successors or assigns, except termination or cancellation if (i) an event of default occurs under the Ground Lease, (ii) notice thereof is provided to the Mortgagee and (iii) such default is curable by the Mortgagee as provided in the Ground Lease but remains uncured beyond the applicable cure period.

IV.Such Ground Lease is in full force and effect, there is no material default under such Ground Lease, and there is no event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a material default under such Ground Lease.

V.The Ground Lease or ancillary agreement between the lessor and the lessee requires the lessor to give notice of any default by the lessee to the Mortgagee.  The Ground Lease or ancillary agreement further provides that no notice given is effective against the Mortgagee unless a copy has been given to the Mortgagee in a manner described in the Ground Lease or ancillary agreement.

VI.The Ground Lease (i) is not subject to any liens or encumbrances superior to, or of equal priority with, the Mortgage, subject, however, to only the Title Exceptions or (ii) is subject to a subordination, non-disturbance and attornment agreement to which the Mortgagee on the lessor’s fee interest in the Underlying Mortgaged Property is subject.

VII.A Mortgagee is permitted a reasonable opportunity (including, where necessary, sufficient time to gain possession of the interest of the lessee under the Ground Lease) to cure any curable default under such Ground Lease before the lessor thereunder may terminate such Ground Lease.

VIII.Such Ground Lease has an original term (together with  any extension options, whether or not currently exercised, set forth therein all of which can be exercised by the

Mortgagee if the Mortgagee acquires the lessee’s rights under the Ground Lease) that extends not less than 20 years beyond the stated maturity date.

IX.Under the terms of such Ground Lease, any estoppel or consent letter received by the Mortgagee from the lessor, and the related Mortgage, taken together, any related insurance proceeds or condemnation award (other than in respect of a total or substantially total loss or taking) will be applied either to the repair or restoration of all or part of the related Underlying Mortgaged Property, with the Mortgagee or a trustee appointed by it having the right to hold and disburse such proceeds as repair or restoration progresses, or to the payment or defeasance of the outstanding principal balance of the Underlying Mortgage Loan, together with any accrued interest (except in cases where a different allocation would not be viewed as commercially unreasonable by any commercial mortgage lender, taking into account the relative duration of the Ground Lease and the related Mortgage and the ratio of the market value of the related Underlying Mortgaged Property to the outstanding principal balance of such Underlying Mortgage Loan).

X.The Ground Lease does not impose any restrictions on subletting that would be viewed as commercially unreasonable by a prudent commercial lender.

XI.The ground lessor under such Ground Lease is required to enter into a new lease upon termination of the Ground Lease for any reason, including the rejection of the Ground Lease in bankruptcy.

REPRESENTATIONS AND WARRANTIES
RE: PURCHASED ASSETS CONSISTING
OF MEZZANINE PARTICIPATIONS

(a)           The Mezzanine Participation is a senior participation interest in a Mezzanine Loan.

(b)           As of the Purchase Date, the Mezzanine Participation complies in all material respects with, or is exempt from, all requirements of federal, state or local law relating to the Mezzanine Participation.

(c)           Immediately prior to the sale, transfer and assignment to Buyer thereof, Seller had good and marketable title to, and was the sole owner and holder of, the Mezzanine Participation, and Seller is transferring the Mezzanine Participation free and clear of any and all liens, pledges, encumbrances, charges, security interests or any other ownership interests of any nature encumbering the Mezzanine Participation.  Upon consummation of the purchase contemplated to occur in respect of the Mezzanine Participation on the Purchase Date therefor, Seller will have validly and effectively conveyed to Buyer all legal and beneficial interest in and to the Mezzanine Participation free and clear of any pledge, lien, encumbrance or security interest.

(d)           No fraudulent acts were committed by Seller in connection with its acquisition or origination of the Mezzanine Participation nor were any fraudulent acts committed by any Person in connection with the origination of the Mezzanine Participation.

(e)           All information contained in the related Underwriting Package (or as otherwise provided to Buyer) in respect of the Mezzanine Participation is accurate and complete in all material respects.

(f)            Seller has full right, power and authority to sell and assign the Mezzanine Participation and the Mezzanine Participation has not been cancelled, satisfied or rescinded in whole or part nor has any instrument been executed that would effect a cancellation, satisfaction or rescission thereof.

(g)           Other than consents and approvals obtained as of the related Purchase Date, no consent or approval by any Person is required in connection with Seller’s sale and/or Buyer’s acquisition of the Mezzanine Participation, for Buyer’s exercise of any rights or remedies in respect of the Mezzanine Participation or for Buyer’s sale, pledge or other disposition of the Mezzanine Participation.  No third party holds any “right of first refusal”, “right of first negotiation”, “right of first offer”, purchase option, or other similar rights of any kind, and no other impediment exists to any such transfer or exercise of rights or remedies.

(h)           No consent, approval, authorization or order of, or registration or filing with, or notice to, any court or governmental agency or body having jurisdiction or regulatory authority is required for any transfer or assignment by the holder of the Mezzanine Participation.

(i)            Seller has delivered to Buyer or its designee the original promissory note, certificate or other similar indicia of ownership of the Mezzanine Participation, however denominated, together with an original assignment thereof, executed by Seller in blank, or, with respect to a participation interest, reissued in Buyer’s name (or such other name as designated by the Buyer).

(j)            No (i) monetary default, breach or violation exists with respect to any agreement or other document governing or pertaining to the Mezzanine Participation, (ii) material non-monetary default, breach or violation exists with respect to the Mezzanine Participation, or (iii) event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration.

(k)           The Mezzanine Participation has not been and shall not be deemed to be a Security within the meaning of the Securities Act of 1933, as amended or the Securities Exchange Act of 1934, as amended.

(l)            Seller has not received written notice of any outstanding liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind for which the holder of the Mezzanine Participation is or may become obligated.

(m)          No issuer of the Mezzanine Participation is a debtor in any state or federal bankruptcy or insolvency proceeding.

(n)           With respect to the Mezzanine Participation, except as set forth in the related documents delivered to Buyer, the terms of the related documents have not been waived, modified, altered, satisfied, impaired, canceled, subordinated or rescinded in any manner which materially interferes with the security intended to be provided by such documents and no such waiver, modification, alteration, satisfaction, impairment, cancellation, subordination or recission has occurred since the date upon which the due diligence file related to the Mezzanine Participation was delivered to Buyer or its designee.

(o)           With respect to the related Mezzanine Loan, the related Mezzanine Loan documents require the Mezzanine Borrower to provide the Mezzanine Lender with certain financial information at the times required under the related Mezzanine Loan documents.

(p)           The Mezzanine Loan is secured by a pledge of equity ownership interests in the related borrower under the Underlying Mortgage Loan or a direct or indirect owner of the related borrower.

(q)           As of the Purchase Date, the related Mezzanine Loan complies in all material respects with, or is exempt from, all requirements of federal, state or local law relating to the related Mezzanine Loan.

(r)            All information contained in the related Underwriting Package (or as otherwise provided to Buyer) in respect of the related Mezzanine Loan is accurate and complete in all material respects.

(s)           Except as included in the Underwriting Package, Seller is not a party to any document, instrument or agreement, and there is no document, that by its terms modifies or affects the rights and obligations of any holder of the Mezzanine Participation or the related Mezzanine Loan and Seller has not consented to any material change or waiver to any term or provision of any such document, instrument or agreement and no such change or waiver exists.

(t)            The related Mezzanine Loan is presently outstanding, the proceeds thereof have been fully and properly disbursed and, except for amounts held in escrow, there is no requirement for any future advances thereunder.

(u)           The Underlying Property Owner has been duly organized and is validly existing and in good standing under the laws of its jurisdiction of organization, with requisite power and authority to own its assets and to transact the business in which it is now engaged, the sole purpose of the Underlying Property Owner under its organizational documents is to own, finance, sell or otherwise manage the Properties and to engage in any and all activities related or incidental thereto, and the Mortgaged Properties constitute the sole assets of the Underlying Property Owner.

(v)           The Underlying Property Owner has good and marketable title to the Underlying Mortgaged Property, no claims under the title policies insuring the Underlying Property Owner’s title to the Properties have been made, and the Underlying Property Owner has not received any written notice regarding any material violation of any easement, restrictive covenant or similar instrument affecting the Underlying Mortgaged Property.

(w)          The representations and warranties made by the borrower (the “Mezzanine Borrower”) in the Mezzanine Loan Documents were true and correct in all material respects as of the date such representations and warranties were stated to be true therein, and there has been no adverse change with respect to the Mezzanine Loan, the Mezzanine Borrower, the Underlying Mortgaged Property or the Underlying Property Owner that would render any such representation or warranty not true or correct in any material respect as of the Purchase Date.

(x)            The Mezzanine Loan Documents provide for the acceleration of the payment of the unpaid principal balance of the Mezzanine Loan if (i) the related borrower voluntarily transfers or encumbers all or any portion of any related Mezzanine Collateral, or (ii) any direct or indirect interest in the related borrower is voluntarily transferred or assigned, other than, in each case, as permitted under the terms and conditions of the related loan documents.

(y)           Pursuant to the terms of the Mezzanine Loan Documents: (a) no material terms of any related Mortgage may be waived, canceled, subordinated or modified in any material respect and no material portion of such Mortgage or the Underlying Mortgaged Property may be released without the consent of the holder of the Mezzanine Loan; (b) no material action may be taken by the Underlying Property Owner with respect to the Underlying Mortgaged Property without the consent of the holder of the Mezzanine Loan; (c) the holder of the Mezzanine Loan is entitled to approve the budget of the Underlying Property Owner as it relates to the Underlying Mortgaged Property; and (d) the holder of the Mezzanine Loan’s consent is required prior to the Underlying Property Owner incurring any additional indebtedness.

(z)            There is no (i) monetary default, breach or violation with respect to such Mezzanine Loan, the Underlying Mortgage Loan or any other obligation of the owner of the Underlying Mortgaged Property (the “Underlying Property Owner”), (ii) material non-monetary default, breach or violation with respect to such Mezzanine Loan, the Underlying Mortgage Loan or any other obligation of the Underlying Property Owner or (iii) event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration.

(aa)         No default or event of default has occurred under any agreement pertaining to any lien or other interest that ranks pari passu with or senior to the interests of the Mezzanine Participation or the holder of the related Mezzanine Loan or with respect to any Underlying Mortgage Loan or other indebtedness in respect of the related Underlying Mortgaged Property and there is no provision in any agreement related to any such lien, interest or loan which would provide for any increase in the principal amount of any such lien, other interest or loan.

(bb)         Seller’s security interest in the Mezzanine Loan is covered by a UCC-9 insurance policy (the “UCC-9 Policy”) in the maximum principal amount of the Mezzanine Loan insuring that the related pledge is a valid first priority lien on the collateral pledged in respect of such Mezzanine Loan (the “Mezzanine Collateral”), subject only to the exceptions stated therein (or a pro forma title policy or marked up title insurance commitment on which the required premium has been paid exists which evidences that such UCC-9 Policy will be issued), such UCC-9 Policy (or, if it has yet to be issued, the coverage to be provided thereby) is in full force and effect, no material claims have been made thereunder and no claims have been paid thereunder, Seller has not done, by act or omission, anything that would materially impair the coverage under the UCC-9 Policy and as of the Purchase Date, the UCC-9 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.

(cc)         The Mezzanine Loan, and each party involved in the origination of the Mezzanine Loan, complied as of the date of origination with, or was exempt from, applicable state or federal laws, regulations and other requirements pertaining to usury.

(dd)         Seller has not received any written notice that the Mezzanine Loan may be subject to reduction or disallowance for any reason, including without limitation, any setoff, right of recoupment, defense, counterclaim or impairment of any kind.

(ee)         Seller has no obligation to make loans to, make guarantees on behalf of, or otherwise extend credit to, or make any of the foregoing for the benefit of, the Mezzanine Borrower or any other person under or in connection with the Mezzanine Loan.

(ff)           The servicing and collection practices used by the servicer of the Mezzanine Loan, and the origination practices of the related originator, have been in all respects legal, proper and prudent and have met customary industry standards by prudent institutional commercial mezzanine lenders and mezzanine loan servicers except to the extent that, in connection with its origination, such standards were modified as reflected in the documentation delivered to Buyer.

(gg)         If applicable, the ground lessor consented to and acknowledged that (i) the Mezzanine Loan is permitted / approved, (ii) any foreclosure of the Mezzanine Loan and related change in ownership of the ground lessee will not require the consent of the ground lessor or constitute a default under the ground lease, (iii) copies of default notices would be sent to Mezzanine Lender and (iv) it would accept cure from Mezzanine Lender on behalf of the ground lessee.

(hh)         To the extent the Buyer was granted a security interest with respect to the Mezzanine Loan, such interest (i) was given for due consideration, (ii) has attached, (iii) is perfected, (iv) is a first priority Lien, and (v) has been appropriately assigned to the Buyer by the Underlying Property Owner.

(ii)           Seller has not received written notice of any outstanding liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind for which the holder of such Mezzanine Loan is or may become obligated.

(jj)           Seller has not advanced funds, or knowingly received any advance of funds from a party other than the borrower relating to such Mezzanine Loan, directly or indirectly, for the payment of any amount required by such Mezzanine Loan.

(kk)         All real estate taxes and governmental assessments, or installments thereof, which would be a lien on any related Underlying Mortgaged Property and that prior to the Purchase Date for the related Purchased Asset have become delinquent in respect of such Underlying Mortgaged Property have been paid, or an escrow of funds in an amount sufficient to cover such payments has been established.  For purposes of this representation and warranty, real estate taxes and governmental assessments and installments thereof shall not be considered delinquent until the earlier of (a) the date on which interest and/or penalties would first be payable thereon and (b) the date on which enforcement action is entitled to be taken by the related taxing authority.

(ll)           As of the Purchase Date for the related Purchased Asset, each related Underlying Mortgaged Property was free and clear of any material damage (other than deferred maintenance for which escrows were established at origination) that would affect materially and adversely the value of such Underlying Mortgaged Property as security for the related Underlying Mortgage Loan and there was no proceeding pending or, based solely upon the delivery of written notice thereof from the appropriate condemning authority, threatened for the total or partial condemnation of such Underlying Mortgaged Property.

(mm)       As of the date of origination of the Mezzanine Loan, all insurance coverage required under the Mezzanine Loan Documents and/or any Mortgage Loan related to the Underlying Mortgaged Property, which insurance covered such risks as were customarily acceptable to prudent commercial and multifamily mortgage lending institutions lending on the security of property comparable to the related Underlying Mortgaged Property in the jurisdiction in which such Underlying Mortgaged Property is located, and with respect to a fire and extended perils insurance policy, is in an amount (subject to a customary deductible) at least equal to the lesser of (i) the replacement cost of improvements located on such Underlying Mortgaged

Property, or (ii) the outstanding principal balance of the Underlying Mortgage Loan, and in any event, the amount necessary to prevent operation of any co-insurance provisions; and, except if such Underlying Mortgaged Property is operated as a mobile home park, is also covered by business interruption or rental loss insurance, in an amount at least equal to 12 months of operations of the related Underlying Mortgaged Property, all of which was in full force and effect with respect to each related Underlying Mortgaged Property; and, as of the Purchase Date for the related Purchased Asset, all insurance coverage required under the Mezzanine Loan Documents and/or any Underlying Mortgage Loan related to the Underlying Mortgaged Property, which insurance covers such risks and is in such amounts as are customarily acceptable to prudent commercial and multifamily mortgage lending institutions lending on the security of property comparable to the related Underlying Mortgaged Property in the jurisdiction in which such Underlying Mortgaged Property is located, is in full force and effect with respect to each related Underlying Mortgaged Property; all premiums due and payable through the Purchase Date for the related Purchased Asset have been paid; and no notice of termination or cancellation with respect to any such insurance policy has been received by Seller; and except for certain amounts not greater than amounts which would be considered prudent by an institutional commercial and/or multifamily mortgage lender with respect to a similar mortgage loan and which are set forth in the Mezzanine Loan Documents and/or any Underlying Mortgage Loan related to the Underlying Mortgaged Property, any insurance proceeds in respect of a casualty loss, will be applied either (i) to the repair or restoration of all or part of the related Underlying Mortgaged Property or (ii) the reduction of the outstanding principal balance of the Underlying Mortgage Loan, subject in either case to requirements with respect to leases at the related Underlying Mortgaged Property and to other exceptions customarily provided for by prudent institutional lenders for similar loans.  The Underlying Mortgaged Property is also covered by comprehensive general liability insurance against claims for personal and bodily injury, death or property damage occurring on, in or about the related Underlying Mortgaged Property, in an amount customarily required by prudent institutional lenders.  An architectural or engineering consultant has performed an analysis of the Underlying Mortgaged Properties located in seismic zone 3 or 4 in order to evaluate the structural and seismic condition of such property, for the sole purpose of assessing the probable maximum loss (“PML”) for the Underlying Mortgaged Property in the event of an earthquake.  In such instance, the PML was based on a 475 year lookback with a 10% probability of exceedance in a 50 year period.  If the resulting report concluded that the PML would exceed 20% of the amount of the replacement costs of the improvements, earthquake insurance on such Underlying Mortgaged Property was obtained by an insurer rated at least A-:V by A.M. Best Company or “BBB-” (or the equivalent) from S&P and Fitch or “Baa3” (or the equivalent) from Moody’s.  If the Underlying Mortgaged Property is located in Florida or within 25 miles of the coast of Texas, Louisiana, Mississippi, Alabama, Georgia, North Carolina or South Carolina such Underlying Mortgaged Property is insured by windstorm insurance in an amount at least equal to the lesser of (i) the outstanding principal balance of such Underlying Mortgage Loan and (ii) 100% of the full insurable value, or 100% of the replacement cost, of the improvements located on the related Underlying Mortgaged Property.

(nn)         The insurance policies contain a standard Mortgagee clause naming the Mortgagee, its successors and assigns as loss payee, in the case of a property insurance policy, and additional insured in the case of a liability insurance policy and provide that they are not terminable without 30 days prior written notice to the Mortgagee (or, with respect to non-

payment, 10 days prior written notice to the Mortgagee) or such lesser period as prescribed by applicable law.  Each Mortgage requires that the Mortgagor maintain insurance as described above or permits the Mortgagee to require insurance as described above, and permits the Mortgagee to purchase such insurance at the Mortgagor’s expense if Mortgagor fails to do so.

(oo)         There is no material and adverse environmental condition or circumstance affecting the Underlying Mortgaged Property; there is no material violation of any applicable Environmental Law with respect to the Underlying Mortgaged Property; neither Seller nor the Underlying Property Owner has taken any actions which would cause the Underlying Mortgaged Property not to be in compliance with all applicable Environmental Laws; the Underlying Mortgage Loan documents require the borrower to comply with all Environmental Laws; and each Mortgagor has agreed to indemnify the Mortgagee for any losses resulting from any material, adverse environmental condition or failure of the Mortgagor to abide by such Environmental Laws or has provided environmental insurance.

(pp)         No borrower under the Mezzanine Loan nor any Mortgagor under any Underlying Mortgage Loan is a debtor in any state or federal bankruptcy or insolvency proceeding.

(qq)         Each related Underlying Mortgaged Property was inspected by or on behalf of the related originator or an affiliate during the 12 month period prior to the related origination date.

(rr)           There are no material violations of any applicable zoning ordinances, building codes and land laws applicable to the Underlying Mortgaged Property or the use and occupancy thereof which (i) are not insured by an ALTA lender’s title insurance policy (or a binding commitment therefor), or its equivalent as adopted in the applicable jurisdiction, or a law and ordinance insurance policy or (ii) would have a material adverse effect on the value, operation or net operating income of the Underlying Mortgaged Property.  The Mezzanine Loan Documents and the Underlying Mortgage Loan documents require the Underlying Mortgaged Property to comply with all applicable laws and ordinances.

(ss)         None of the material improvements which were included for the purposes of determining the appraised value of any related Underlying Mortgaged Property at the time of the origination of the Mezzanine Loan or any related Underlying Mortgage Loan lies outside of the boundaries and building restriction lines of such property (except Underlying Mortgaged Properties which are legal non-conforming uses), to an extent which would have a material adverse affect on the value of the Underlying Mortgaged Property or the related Mortgagor’s use and operation of such Underlying Mortgaged Property (unless affirmatively covered by title insurance) and no improvements on adjoining properties encroached upon such Underlying Mortgaged Property to any material and adverse extent (unless affirmatively covered by title insurance).

(tt)           As of the Purchase Date for the related Purchased Asset, there was no pending action, suit or proceeding, or governmental investigation of which Seller, the Mezzanine Borrower or the Underlying Property Owner has received notice, against the Mortgagor or the related Underlying Mortgaged Property the adverse outcome of which could reasonably be

expected to materially and adversely affect the Mezzanine Loan or the Underlying Mortgage Loan.

(uu)         The improvements located on the Underlying Mortgaged Property are either not located in a federally designated special flood hazard area or, if so located, the Mortgagor is required to maintain or the Mortgagee maintains, flood insurance with respect to such improvements and such policy is in full force and effect in an amount no less than the lesser of (i) the original principal balance of the Underlying Mortgage Loan, (ii) the value of such improvements on the related Underlying Mortgaged Property located in such flood hazard area or (iii) the maximum allowed under the related federal flood insurance program.

(vv)         With respect to each related Underlying Mortgage Loan, except for Mortgagors under Underlying Mortgage Loans, the Underlying Mortgaged Property with respect to which includes a Ground Lease, the related lessor (or its affiliate) has title in the fee simple interest in each related Underlying Mortgaged Property.

(ww)       The related Underlying Mortgaged Property is not encumbered, and none of the Mezzanine Loan Documents or any Underlying Mortgage Loan documents permits the related Underlying Mortgaged Property to be encumbered subsequent to the Purchase Date of the related Purchased Asset without the prior written consent of the holder thereof, by any lien securing the payment of money junior to or of equal priority with, or superior to, the lien of the related Mortgage (other than Title Exceptions, taxes, assessments and contested mechanics and materialmens liens that become payable after such Purchase Date).

(xx)          Each related Underlying Mortgaged Property constitutes one or more complete separate tax lots (or the related Mortgagor has covenanted to obtain separate tax lots and a Person has indemnified the Mortgagee for any loss suffered in connection therewith or an escrow of funds in an amount sufficient to pay taxes resulting from a breach thereof has been established) or is subject to an endorsement under the related title insurance policy.

(yy)         An appraisal of the related Underlying Mortgaged Property was conducted in connection with the origination of the Underlying Mortgage Loan; and such appraisal satisfied either (A) the requirements of the “Uniform Standards of Professional Appraisal Practice” as adopted by the Appraisal Standards Board of the Appraisal Foundation, or (B) the guidelines in Title XI of the Financial Institutions Reform, Recovery and Enforcement Act or 1989, in either case as in effect on the date such Underlying Mortgage Loan was originated.

(zz)          The related Underlying Mortgaged Property is served by public utilities, water and sewer (or septic facilities) and otherwise appropriate for the use in which the Underlying Mortgaged Property is currently being utilized.

(aaa)       With respect to each related Underlying Mortgaged Property consisting of a Ground Lease, Seller represents and warrants the following with respect to the related Ground Lease:

I.        Such Ground Lease or a memorandum thereof has been or will be duly recorded no later than 30 days after the Purchase Date of the related Purchased Asset and such Ground

Lease permits the interest of the lessee thereunder to be encumbered by the related Mortgage or, if consent of the lessor thereunder is required, it has been obtained prior to the Purchase Date.

II.       Upon the foreclosure of the Underlying Mortgage Loan (or acceptance of a deed in lieu thereof), the Mortgagor’s interest in such Ground Lease is assignable to the Mortgagee under the leasehold estate and its assigns without the consent of the lessor thereunder (or, if any such consent is required, it has been obtained prior to the Purchase Date).

III.     Such Ground Lease may not be amended, modified, canceled or terminated without the prior written consent of the Mortgagee and any such action without such consent is not binding on the Mortgagee, its successors or assigns, except termination or cancellation if (i) an event of default occurs under the Ground Lease, (ii) notice thereof is provided to the Mortgagee and (iii) such default is curable by the Mortgagee as provided in the Ground Lease but remains uncured beyond the applicable cure period.

IV.     Such Ground Lease is in full force and effect, there is no material default under such Ground Lease, and there is no event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a material default under such Ground Lease.

V.       The Ground Lease or ancillary agreement between the lessor and the lessee requires the lessor to give notice of any default by the lessee to the Mortgagee.  The Ground Lease or ancillary agreement further provides that no notice given is effective against the Mortgagee unless a copy has been given to the Mortgagee in a manner described in the Ground Lease or ancillary agreement.

VI.     The Ground Lease (i) is not subject to any liens or encumbrances superior to, or of equal priority with, the Mortgage, subject, however, to only the Title Exceptions or (ii) is subject to a subordination, non-disturbance and attornment agreement to which the Mortgagee on the lessor’s fee interest in the Underlying Mortgaged Property is subject.

VII.    A Mortgagee is permitted a reasonable opportunity (including, where necessary, sufficient time to gain possession of the interest of the lessee under the Ground Lease) to cure any curable default under such Ground Lease before the lessor thereunder may terminate such Ground Lease.

VIII.   Such Ground Lease has an original term (together with  any extension options, whether or not currently exercised, set forth therein all of which can be exercised by the Mortgagee if the Mortgagee acquires the lessee’s rights under the Ground Lease) that extends not less than 20 years beyond the stated maturity date.

IX.     Under the terms of such Ground Lease, any estoppel or consent letter received by the Mortgagee from the lessor, and the related Mortgage, taken together, any related insurance proceeds or condemnation award (other than in respect of a total or substantially total loss or taking) will be applied either to the repair or restoration of all or part of the related Underlying Mortgaged Property, with the Mortgagee or a trustee appointed by it having the right to hold and disburse such proceeds as repair or restoration progresses, or to the payment or defeasance of the outstanding principal balance of the Underlying Mortgage Loan, together with any accrued

interest (except in cases where a different allocation would not be viewed as commercially unreasonable by any commercial mortgage lender, taking into account the relative duration of the Ground Lease and the related Mortgage and the ratio of the market value of the related Underlying Mortgaged Property to the outstanding principal balance of such Underlying Mortgage Loan).

X.      The Ground Lease does not impose any restrictions on subletting that would be viewed as commercially unreasonable by a prudent commercial lender

XI.     The ground lessor under such Ground Lease is required to enter into a new lease upon termination of the Ground Lease for any reason, including the rejection of the Ground Lease in bankruptcy.

EXHIBIT VII

ASSET INFORMATION

Loan ID #:

Borrower Name:

Borrower Address:

Borrower City:

Borrower State:

Borrower Zip Code:

Recourse?

Guaranteed?

Related Borrower Name(s):

Original Principal Balance:

Note Date:

Loan Date:

Loan Type (e.g. fixed/arm):

Current Principal Balance:

Current Interest Rate (per annum):

Paid to date:

Annual P&I:

Next Payment due date:

Index (complete whether fixed or arm):

Gross Spread/Margin (complete whether fixed or arm):

Life Cap:

Life Floor:

Periodic Cap:

Periodic Floor:

Rounding Factor:

Lookback (in days):

Interest Calculation Method (e.g., Actual/360):

Interest rate adjustment frequency:

P&I payment frequency:

First P&I payment due:

First interest rate adjustment date:

First payment adjustment date:

Next interest rate adjustment date:

Next payment adjustment date:

Conversion Date:

Converted Interest Rate Index:

Converted Interest Rate Spread:

Maturity date:

Loan term:

Amortization term:

Hyper-Amortization Flag:

Hyper-Amortization Term:

Hyper-Amortization Rate Increase:

Balloon Amount:

Balloon LTV:

Prepayment Penalty Flag:

Prepayment Penalty Text:

Lockout Period:

Lien Position:

Fee/Leasehold:

Ground Lease Expiration Date:

CTL (Yes/No):

CTL Rating (Moody’s):

CTL Rating (Duff):

CTL Rating (S&P):

CTL Rating (Fitch):

Lease Guarantor:

CTL Lease Type (NNN, NN, Bondable):

Property Name:

Property Address:

Property City:

Property Zip Code:

Property Type (General):

Property Type (Specific):

Cross-collateralized (Yes/No)*

Property Size:

Year built:

Year renovated:

Actual Average Occupancy:

Occupancy Rent Roll Date:

Underwritten Average Occupancy:

Largest Tenant:

Largest Tenant SF:

Largest Tenant Lease Expiration:

2nd Largest Tenant:

2nd Largest Tenant SF:

2nd Largest Tenant Lease Expiration:

3rd Largest Tenant:

3rd Largest Tenant SF:

3rd Largest Tenant Lease Expiration:

Underwritten Average Rental Rate/ADR:

Underwritten Vacancy/Credit Loss:

Underwritten Other Income:

Underwritten Total Revenues:

Underwritten Replacement Reserves:

*      If yes, give property information on each property covered and in aggregate as appropriate. Loan ID’s should be denoted with a suffix letter to signify loans/collateral.

Underwritten Management Fees:

Underwritten Franchise Fees:

Underwritten Total Expenses:

Underwritten Leasing Commissions:

Underwritten Tenant Improvement Costs:

Underwritten NOI:

Underwritten NCF:

Underwritten Debt Service Constant:

Underwritten DSCR at NOI:

Underwritten DSCR at NCF:

Underwritten NOI Period End Date:

Hotel Franchise:

Hotel Franchise Expiration Date:

Appraiser Name:

Appraised Value:

Appraisal Date:

Appraisal Cap Rate:

Appraisal Discount Rate:

Underwritten LTV:

Environmental Report Preparer:

Environmental Report Date:

Environmental Report Issues:

Architectural and Engineering Report Preparer:

Architectural and Engineering Report Date:

Deferred Maintenance Amount:

Ongoing Replacement Reserve Requirement per A&E Report:

Immediate Repairs Escrow % (e.g. [      ]%):

Replacement Reserve Annual Deposit:

Replacement Reserve Balance:

Tenant Improvement/Leasing Commission Annual Deposits:

Tenant Improvement/Leasing Commission Balance:

Taxes paid through date:

Monthly Tax Escrow:

Tax Escrow Balance:

Insurance paid through date:

Monthly Insurance Escrow:

Insurance Escrow Balance:

Reserve/Escrow Balance as of Date:

Probable Maximum Loss %:

Covered by Earthquake Insurance (Yes/No):

Number of times 30 days late in last 12 months:

Number of times 60 days late in last 12 months:

Number of times 90 days late in last 12 months:

Servicing Fee:

Notes:

EXHIBIT VIII

ADVANCE PROCEDURES

(a)           Submission of Preliminary Due Diligence Package.

(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 Eligible Asset that Seller proposes to be included as a Purchased Asset under the Agreement, including any Requested Exception Report; provided that Buyer shall not be under any obligation to enter into any Transaction.

(B)           Upon Buyer’s receipt of a complete Preliminary Due Diligence Package, Buyer, within five (5) Business Days, shall have the right to request, in Buyer’s sole and absolute discretion, additional diligence materials and deliveries that Buyer shall specify on a Supplemental Due Diligence List.  Upon Buyer’s receipt of all of the Diligence Materials or Buyer’s waiver thereof, Buyer shall promptly, but in any event within five(5) Business Days and only following receipt of internal credit approval, shall either (i) notify Seller of the Purchase Price and the Market Value for the Eligible Asset or (ii) deny, in Buyer’s sole and absolute discretion, Seller’s request for a Transaction.  Buyer’s failure to respond to Seller within five (5) Business Days following receipt of all Diligence Materials or Buyer’s written waiver thereof shall be deemed to be a denial of Seller’s request for an Advance, unless Buyer and Seller have agreed otherwise in writing.  Nothing in this Exhibit VIII or elsewhere in this Agreement shall, or be deemed to, prohibit Buyer from determining in its sole discretion exercised in good faith the adequacy, correctness and appropriateness of, or from disapproving, any and all financial and other underwriting data required to be supplied by Seller under this Agreement.

(b)           Final Approval of an Eligible Asset.  Upon Buyer’s notification to Seller of the Purchase Price and the Market Value for any Eligible Loan, 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 with respect to each Transaction, as set forth in Article 3(b) of this Agreement) as a condition precedent to Buyer’s approval of such Eligible Asset as a Purchased Item, all in a manner, and pursuant to documentation, satisfactory in all respects to Buyer (and its counsel) in its sole, but good faith, discretion:

(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 New Asset that is an Originated Asset, each of the Purchased Asset Documents.

(B)           Environmental and Engineering.  Buyer shall have received a “Phase 1” (and, if requested by Buyer, “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), 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 underlying real estate directly or indirectly securing or supporting such Purchased Asset 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 (or, as to Subordinate Eligible Assets, the lead lender on the whole loan in which Seller is a participant or holder of a note or has an equity interest in the Mortgagor, as applicable), will be named as an additional insured as its interest may appear and shall contain a loss payee endorsement in favor of such additional insured with respect to the policies required to be maintained under the Purchased Asset Documents.

(E)           Survey.  Buyer shall have received all surveys of the underlying real estate directly or indirectly securing or supporting such Purchased Asset 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 reasonably acceptable to Buyer with respect to the Eligible Loan, underlying real estate directly or indirectly securing or supporting such Eligible Loan, Seller and Mortgagor, such searches to be conducted in each location Buyer shall reasonably designate.

(G)           Title Insurance Policy.

(1)With respect to a Senior Mortgage Loan, Seller shall have delivered to Buyer (1) an unconditional commitment to issue a Title Policy in favor of Buyer and Buyer’s successors and/or assigns with respect to Buyer’s interest in the related real property and insuring the assignment of the Eligible Asset to Buyer, with an

amount of insurance that shall be not less than the maximum principal amount of the Eligible Asset (taking into account the proposed Advance) or (2) an endorsement or confirmatory letter from the title insurance company that issued the existing title insurance policy, in favor of Buyer and Buyer’s successors and/or assigns, that amends the existing title insurance policy by stating that the amount of the insurance is not less than the maximum principal amount of the Eligible Asset (taking into account the proposed Advance).

(2)Seller shall have delivered to Buyer a copy of an unconditional commitment to issue a Title Policy or an existing title insurance policy with respect to any Subordinate Eligible Asset that is evidenced by a Mortgage Note, in an amount not less than the amount of such Mortgage Note and all superior notes or (2) with respect to any Subordinate Eligible Asset that is not evidenced by a Mortgage Note, in an amount not less than the amount of the related indebtedness and all superior notes or participations.

(3)With respect to any CMBS or CRE CDO, Seller shall have delivered to Buyer such evidence as Buyer on a case-by-case basis, in its good faith discretion, shall require of the ownership of the real property underlying such item of Collateral including, without limitation, a copy of a Title Policy dated a date, and issued by a title insurer, in each case acceptable to Buyer in its reasonable discretion, showing that title is vested in the related Mortgagor or in an entity in whom such Mortgagor holds a beneficial interest.

(H)          Assignment Documents.  Seller shall have executed and delivered to Buyer, in form and substance reasonably satisfactory to Buyer and its counsel, all applicable assignment documents assigning to Buyer the proposed Eligible Asset (and in any Hedging Transactions held by Seller with respect thereto) that shall be subject to no liens except as expressly permitted by Buyer.  Each of the assignment documents shall contain such representations and warranties in writing concerning the proposed Eligible Asset and such other terms as shall be satisfactory to Buyer in its sole discretion.

(I)            Opinions of Counsel.  Buyer shall have received an opinion to Seller and its successors and assigns from counsel to the underlying obligor on the underlying loan transaction, as applicable, as to enforceability of the loan documents governing such transaction and such other matters as Buyer shall require (including, without limitation, opinions as to due formation, authority, choice of law and perfection of security interests).

(J)            Additional Real Estate Matters.  To the extent obtained by Seller from the Mortgagor or the underlying obligor relating to any Eligible Asset at the origination of the Eligible Asset, Seller shall have delivered to Buyer such other real estate related certificates and documentation as may have been requested by Buyer, such as (i)

certificates of occupancy and letters certifying that the property is in compliance with all applicable zoning laws, each issued by the appropriate Governmental Authority and (ii) abstracts of all leases in effect at the real property relating to such Eligible Asset.

(K)          Subordinate Eligible Assets.  In the case of Subordinate Eligible Assets, in addition to the delivery of the items in clauses (g), (h) and (i), Buyer shall have received all documentation specified in clauses (a) through (f) and (j) as if the underlying mortgage loan were the direct New Asset but solely to the extent Seller possesses such documentation or has access to such documentation because it was provided to the related lead lender and made available to Seller and, in addition, all documents evidencing the Subordinate Eligible Asset, including, but not limited to, an original Mortgage Note, participation certificate, if applicable, and the related participation and/or intercreditor agreement.

(L)           Other Documents.  Buyer shall have received such other documents as Buyer or its counsel shall reasonably deem necessary.

Seller shall deliver the items set forth in clauses (a) through (l) above to Buyer and its counsel from time to time promptly upon receipt of same by Seller or its counsel.

(c)           Eligible Asset Approval or Disapproval.  Within five (5) Business Days following the date upon which Seller has tendered performance of the conditions enumerated in clauses (a) through (l) of subsection III above, or has delivered such items or documents fully executed, if applicable, in final form, and provided that Buyer and/or Buyer’s counsel, in the sole discretion of Buyer exercised in good faith, has had sufficient time to perform a diligence review of such materials,  Buyer shall either (i) if the documents with respect to the proposed Eligible Asset are not satisfactory in form and substance to Buyer, notify Seller in writing that Buyer has not approved the proposed Eligible Asset as a Purchased Asset or (ii) notify Seller in writing that Buyer has approved the proposed Eligible Asset as a Purchased Asset.  Buyer’s failure to respond to Seller within such five (5) Business Day period shall be deemed to be a denial of Seller’s request that Buyer approve the proposed Eligible Loan, unless Buyer and Seller have agreed otherwise in writing.

EXHIBIT IX

Excluded Transferees

Five Mile Capital

Newcastle

RAIT investment trust

CBF (CBRE REIT)

Capital Source

KFN (KKR REIT)

iStar Financial;

Anthracite Carbon Fund, together with any successor funds, to the extent such funds are in the same business as their predecessor fund;

DB Realty Mezzanine Investment Fund I LLC and DB Realty Mezzanine Investment Fund II LLC, together with any successor funds, to the extent such funds are in the same business as their predecessor fund;

Brascan;

Guggenheim Structured Real Estate Operating Company, LLC;

SL Green/Gramercy Capital;

Arbor Commercial Mortgage LLC;

CW Capital;

Fortress/Draw Bridge;

NorthStar Realty Finance Corporation;

JE Roberts; and

Whitehall (and each such entity’s Affiliates).

EXHIBIT X

FORM OF BAILEE LETTER

, 20

Re:Bailee Agreement (the “Bailee Agreement”) in connection with the pledge by Capital Trust, Inc. (the “Seller”) to JPMorgan Chase Bank, N.A. (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 [    ] (the “Bailee”) hereby agree as follows:

(a)           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:  (a) the loan identifying number; (b) the Purchased Asset 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.

(b)           On or prior to the date indicated on the Custodial Identification Certificate delivered by Seller (the “Funding 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”).

(c)           The Bailee shall issue and deliver to Buyer and LaSalle Bank National Association (the “Custodian”) on or prior to the Funding Date by facsimile (a) in the name of Buyer, an initial trust receipt and certification in the form of Attachment 2 attached hereto (the “Bailee’s Trust Receipt and Certification”) which Bailee’s Trust Receipt and Certification shall state that the Bailee has received the documents comprising the Purchased Asset File as set forth in the Custodial Identification Certificate (as defined in that certain Custodial Agreement dated as of November 1, 2006, among Seller, Buyer and Custodian (as defined in Article 5 below), in addition to such other documents required to be delivered to Buyer and/or Custodian pursuant to the Master

Repurchase Agreement dated as of November 1, 2006, between Seller and Buyer (the “Repurchase Agreement”).

(d)           On the applicable Funding Date, in the event that Buyer fails to purchase from Seller the Purchased Assets identified in the related Custodial Identification Certificate, Buyer shall deliver by facsimile to the Bailee at [    ] to the attention of [    ], 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.

(e)           Following the Funding Date, the Bailee shall forward the Purchased Asset Files to the Custodian at 2571 Busse Road, Dock 49, Elk Grove Village, Illinois 60007 by insured overnight courier for receipt by the Custodian no later than 1:00 p.m. on the third Business Day following the applicable Funding Date (the “Delivery Date”).

(f)            From and after the applicable Funding 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.

(g)           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.

(h)           In the event that the Bailee fails to produce a Mortgage Note, assignment of collateral 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 Article 8.

(i)            Seller agrees to indemnify and hold Buyer and its 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.

(j)            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 transaction and [    ], if acting as Bailee, has represented Seller in connection with negotiation, execution and delivery of the Repurchase Agreement.

(k)           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.

(l)            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.

(m)          This Bailee Agreement may not be assigned by Seller or the Bailee without the prior written consent of Buyer.

(n)           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.

(o)           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.

(p)           Capitalized terms used herein and defined herein shall have the meanings ascribed to them in the Repurchase Agreement.

Very truly yours,

CAPITAL TRUST, INC.

		By:
			Name:
			Title:
ACCEPTED AND AGREED:
[BAILEE]
By:
	Name:
ACCEPTED AND AGREED:
JPMORGAN CHASE BANK, N.A.,
Buyer
By:
	Name:
	Title:

Schedule A

[List of Purchased Asset Documents]

Attachment 1

IDENTIFICATION CERTIFICATE

On this       day of                 , 200  , CAPITAL TRUST, INC. (the “Seller”), under that certain Bailee Agreement of even date herewith (the “Bailee Agreement”), among Seller, [    ] (the “Bailee”), and JPMORGAN CHASE BANK, N.A., 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.

By:

Name:

Title:

Exhibit A to Attachment 1

PURCHASED ASSET SCHEDULE

Attachment 2

FORM OF BAILEE’S TRUST RECEIPT AND CERTIFICATION

                , 200  

JPMORGAN CHASE BANK, N.A.
270 Park Avenue, 7th Floor
New York, New York 10017-2014
Attention:              Ms. Nancy S. Alto
Telephone:            (212) 834-9271
Telecopy:              (212) 834-6565

Re:Bailee Agreement, dated as of             , 200_ (the “Bailee Agreement”) among Capital Trust, Inc. (the “Seller”), JPMorgan Chase Bank, N.A. (the “Buyer”) and [    ] (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 (i) 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.

[   ], BAILEE

By:

Name:

Title:

EXHIBIT XI

[RESERVED]

EXHIBIT XII

FORM OF MARGIN DEFICIT NOTICE

[DATE]/[TIME]

VIA ELECTRONIC TRANSMISSION

CAPITAL TRUST, INC.
410 Park Avenue

New York, New York 10022
Attn: Geoffrey G. Jervis

Re:Master Repurchase Agreement, dated as of November 1, 2006 (as amended, restated, supplemented, or otherwise modified and in effect from time to time, the “Master Repurchase Agreement”; capitalized terms used but not otherwise defined herein shall have the meanings assigned thereto in the Master Repurchase Agreement) by and among JPMorgan Chase Bank, N.A. (“Buyer”) and Capital Trust, Inc., a Maryland corporation(“Seller”).

Pursuant to Article 4(a) of the Master Repurchase Agreement, Buyer hereby notifies Seller of the existence of a Margin Deficit as of the date hereof as follows:

[Repurchase Price for specific Purchased Asset:	$
Asset Value of such Purchased Asset:	$
MARGIN DEFICIT:	$	]
[Aggregate Repurchase Price of all Purchased Assets:	$
Maximum Amount:	$
MARGIN DEFICIT:	$	]

SELLER IS REQUIRED TO CURE THE MARGIN DEFICIT SPECIFIED ABOVE IN ACCORDANCE WITH THE MASTER REPURCHASE AGREEMENT AND WITHIN THE TIME PERIOD SPECIFIED ARTICLE 4(a) THEREOF.

	JPMORGAN CHASE BANK, N.A.
By:
	Name:
	Title:

EXHIBIT XIII

UCC FILING JURISDICTIONS

Maryland

EXHIBIT XIV

[Reserved]

EXHIBIT XV

ADDITIONAL ELIGIBLE COLLATERAL

	ADDITIONAL ELIGIBLE COLLATERAL	REMAINING MATURITY FROM THE VALUATION DATE	VALUATION PERCENTAGE
(1)	US-CASH	Not applicable	100%
(2)	US-TBILL, US-TNOTE, US-TBOND,	Less than 1 year	99%
	US-TIPS	Between 1 and 5 years	98%
		Between 5 and 10 years	97%
		Between 10 and 30 years	95%
(3)	US-STRIP	All maturities	90%
(4)	US-GNMA, US-FNMA,	Less than 1 year	99%
	US-FHLMC, US-NCAD,	Between 1 and 5 years	97%
	US-NCADN	Between 5 and 10 years	96%
		Between 10 and 30 years	94%
(5)	US-GNMAMBS, US-FNMAMBS, US-FHLMCMBS	Not applicable	94%

Definitions. As used in this Exhibit XV, the following definitions are specified below:

US-CASH - United States of America Dollar (USD) Cash.  The lawful currency of the United States of America.

US-TBILL - US Treasury Bills.  Negotiable debt obligations issued pursuant to USC Title 31, Chapter 31, Section 3104 by the Department of the Treasury backed by the credit of the United States of America, having a maturity at issuance of no greater than 1 year.

US-TNOTE - US Treasury Notes.  Negotiable debt obligations issued pursuant to USC Title 31, Chapter 31, Section 3103 by the Department of the Treasury backed by the credit of the United States of America, having a maturity at issuance of at least 1 year but less than 10 years.

US-TBOND - US Treasury Bonds.  Negotiable debt obligations issued pursuant to USC Title 31, Chapter 31, Section 3102 by the Department of the Treasury backed by the credit of the United States of America.

US-TIPS - US Treasury Inflation Protected Issues (TIPS).  Securities issued by the Department of the Treasury backed by the credit of the United States of America where the principal is changed based on changes of the consumer price index.

US-STRIP - US Treasury Strips.  Securities issued by the Department of the Treasury backed by the credit of the United States of America that represent either interest components or principal components stripped from underlying US treasury obligations under the program of the Department of the Treasury called “Separate Trading of Registered Interest and Principal Securities”.

US-GNMA - Callable Agency Debt of the Government National Mortgage Association (“GNMA”).  Fixed-rate, callable, non-amortizing U.S. Dollar denominated debt securities; in book entry form issued by GNMA the full and timely payment of principal and interest of which is guaranteed by the U.S. Government.

US-FNMA - Callable Agency Debt of the  Federal National Mortgage Association (“FNMA”).  Fixed-rate, callable, non-amortizing U.S. Dollar denominated senior debt securities in book entry form issued by FNMA.

US-FHLMC - Callable Agency Debt of the Federal Home Loan Mortgage Corporation (“FHLMC”).  Fixed-rate, callable, non-amortizing U.S. Dollar denominated senior debt securities in book entry form issued by FHLMC.

US-NCAD - Non-Callable Agency Debt of Various Issuers.  Fixed-rate, non-callable, non-amortizing U.S. Dollar denominated senior debt securities of fixed maturity in book entry form issued by GNMA, FNMA or FHLMC.

US-NCADN - Non-Callable Agency Discount Notes of Various Issuers.  Non-callable U.S. Dollar denominated discount notes sold at a discount from their principal amount payable at maturity with an original maturity of 360 days or less in book entry form and issued by GNMA, FNMA or FHLMC.

US-GNMAMBS - Government National Mortgage Association Certificates - Mortgage Backed Securities.  Single-class fully modified pass-through certificates (GNMA Certificates) in book-entry form backed by single-family residential mortgage loans, the full and timely payment of principal and interest of which is guaranteed by the Government National Mortgage Association (excluding REMIC) or other multi-class pass-through certificates, collateralized mortgage obligations, pass-through certificates backed by adjustable rate mortgages, securities paying interest or principal only and derivatives and similar derivatives securities).

US-FNMAMBS - Federal National Mortgage Association Certificates - Mortgage Backed Securities.  Single-class fully modified pass-through certificates (FNMA Certificates) in book-entry form backed by single-family residential mortgage loans, the full and timely payment of principal and interest of which is guaranteed by the Federal National Mortgage Association (excluding REMIC) or other multi-class pass-through certificates, collateralized mortgage obligations, pass-through certificates backed by adjustable rate mortgages, securities paying interest or principal only and derivatives and similar derivatives securities).

US-FHLMCMBS - Federal Home Loan Mortgage Corporation Certificates - Mortgage Backed Securities.  Single-class mortgage participation certificates (FHLMC Certificates) in book-entry form backed by single-family residential mortgage loans, the full and timely payment of principal and interest of which is guaranteed by the Federal Home Loan Mortgage Corporation (excluding REMIC) or other multi-class pass-through certificates, collateralized mortgage obligations, pass through certificates backed by adjustable rate mortgages, securities paying interest or principal only and derivatives and similar derivatives securities).

EXHIBIT XVI

FORM OF SERVICER NOTICE

[DATE]

[SERVICER], as Special Servicer
[ADDRESS]
Attention:                         

Re:Master Repurchase Agreement, dated as of November 1, 2006 by and between JPMorgan Chase Bank, N.A. (“Buyer”) and Capital Trust, Inc. (“Seller”) (as amended, restated, supplemented, or otherwise modified and in effect from time to time, the “Master Repurchase Agreement”); (capitalized terms used but not otherwise defined herein shall have the meanings assigned thereto in the Master Repurchase Agreement).

Ladies and Gentlemen:

[SERVICER] (the “Servicer”) is servicing certain mortgage assets for Seller pursuant to one or more Servicing Agreements between Servicer and Seller (the “Purchased Assets”).  Pursuant to the Master Repurchase Agreement, Servicer is hereby notified that Seller has granted a security interest to Buyer in the Purchased Assets which are serviced by Servicer.

Servicer shall segregate all amounts collected on account of the Purchased Assets sold to Buyer under the Master Repurchase Agreement, hold them in trust for the sole and exclusive benefit of Buyer, and remit such collections to the following account which has been established at PNC Bank, National Association, ABA# 043-000-096, Account # 102-396-8633, (the “Cash Management Account”).  Servicer acknowledges that the Cash Management Account is held for the benefit of Buyer pursuant to the Depository Agreement, dated as of November 1, 2006, by and between Seller, Buyer, Midland Loan Services, Inc. and PNC Bank, National Association.  Upon receipt of a notice of Event of Default from Buyer, Servicer shall follow the instructions of Buyer with respect to the Purchased Assets, and shall deliver to Buyer any information with respect to the Purchased Assets reasonably requested by Buyer.

Servicer hereby agrees that, notwithstanding any provision to the contrary in any Servicing Agreement which exists between Servicer and Seller in respect of any Purchased Asset, (i) Servicer is servicing the Purchased Assets for the joint benefit of Seller and Buyer, (ii)  Buyer is expressly intended to be a third-party beneficiary under each Servicing Agreement and (iii) Buyer may, at any time, terminate any such Servicing Agreement immediately upon the delivery of written notice thereof to Servicer and/or in any event transfer servicing to Buyer’s designee, at no cost or expense to Buyer, it being agreed that Seller will pay any and all fees

required to terminate any Servicing Agreement and to effectuate the transfer of servicing to the designee of Buyer.

Notwithstanding any contrary information or direction which may be delivered to Servicer by Seller, Servicer may conclusively rely on any information, direction or notice of an Event of Default delivered by Buyer, and Seller shall indemnify and hold Servicer harmless for any and all claims asserted against Servicer for any actions taken in good faith by Servicer in connection with the delivery of such information or notice of Event of Default.

No provision of this letter may be amended, countermanded or otherwise modified without the prior written consent of Buyer.  Buyer is an intended third party beneficiary of this letter.

Please acknowledge receipt and your agreement to the terms of this instruction letter by signing in the signature block below and forwarding an executed copy to Buyer promptly upon receipt.  Any notices to Buyer should be delivered to the following address: 270 Park Avenue, 7th Floor, New York, NY 10017-2014  Attn: Nancy S. Alto, Telephone: (212) 834-9271, Fax:  (212) 834-6565.

		Very truly yours,
		[SERVICER]
		By:
			Name:
			Title:
ACKNOWLEDGED AND AGREED TO:
CAPITAL TRUST, INC.
By:
	Name:
	Title:

EXHIBIT XVII

FORM OF RELEASE LETTER

[Date]

JPMorgan Chase Bank, N.A.
270 Park Avenue, 7th Floor
New York, New York 100017-2014

Attention:              Ms. Nancy S. Alto

Re:          Master Repurchase Agreement, dated as of November 1, 2006 by and between JPMorgan Chase Bank, N.A. (“Buyer”) and Capital Trust, Inc. (“Seller”) (as amended, restated, supplemented, or otherwise modified and in effect from time to time, the “Master Repurchase Agreement”); (capitalized terms used but not otherwise defined herein shall have the meanings assigned thereto in the Master Repurchase Agreement).

Ladies and Gentlemen:

With respect to the Purchased Assets described in the attached Schedule A (the “Purchased Assets”) (a) we hereby certify to you that the Purchased Assets are not subject to a lien of any third party, and (b) we hereby release all right, interest or claim of any kind other than any rights under the Master Repurchase Agreement with respect to such Purchased Assets, such release to be effective automatically without further action by any party upon payment by Buyer of the amount of the Purchase Price contemplated under the Master Repurchase Agreement (calculated in accordance with the terms thereof) in accordance with the wiring instructions set forth in the Master Repurchase Agreement.

Very truly yours,

CAPITAL TRUST, INC.

By:
	Title:
	Name:

Schedule A

[List of Purchased Asset Documents]

EXHIBIT XVIII

[RESERVED]

EXHIBIT XIX

FORM OF COVENANT COMPLIANCE CERTIFICATE

[    ] [  ], 200[  ]

JPMorgan Chase Bank, N.A.
270 Park Avenue, 7th Floor
New York, New York 10017-2014
Attention:  Kunal K. Singh

This Compliance Certificate is furnished pursuant to that certain Master Repurchase Agreement, dated as of November 1, 2006 (as amended, restated, supplemented, or otherwise modified and in effect from time to time, the “Master Repurchase Agreement”) by and among JPMorgan Chase Bank, N.A. (“Buyer”) and Capital Trust, Inc. (“Seller”).  Unless otherwise defined herein, capitalized terms used in this Compliance Certificate have the respective meanings ascribed thereto in the Master Repurchase Agreement.

THE UNDERSIGNED HEREBY CERTIFIES THAT:

1.I am a duly elected Responsible Officer of Seller.

2.All of the financial statements, calculations and other information set forth in this Compliance Certificate, including, without limitation, in any exhibit or other attachment hereto, are true, complete and correct as of the date hereof.

3.I have reviewed the terms of the Master Repurchase Agreement and I have made, or have caused to be made under my supervision, a detailed review of the transactions and financial condition of Seller during the accounting period covered by the financial statements attached (or most recently delivered to Buyer if none are attached).

4.I am not  aware of any facts, or pending developments that have caused, or may in the future cause the Market Value of any Purchased Asset to decline at any time within the reasonably foreseeable future.

5.As of the date hereof, and since the date of the certificate most recently delivered pursuant to Article 12(j) of the Master Repurchase Agreement, Seller has observed or performed all of its covenants and other agreements in all material respects, and satisfied in all material respects, every condition, contained in the Master Repurchase Agreement and the related documents to be observed, performed or satisfied by it.

6.The examinations described in Paragraph 3 above did not disclose, and I have no knowledge of, the existence of any condition or event which constitutes an Event of Default or Default during or at the end of the accounting period covered by the attached financial statements or as of the date of this Compliance Certificate (including after giving effect to any pending Transactions requested to be entered into), except as set forth below.

7.(A) As of the date hereof, other than as set forth in clause (B) below, the representations and warranties made by Seller in Article 10 of the Master Repurchase Agreement are true, correct and complete in all material respects with the same force and effect as if made on and as of the date hereof, and (B) with respect to the representations and warranties set forth in Article 10(b)(x)(D) of the Master Repurchase Agreement, no Material Breach has occurred.

8.No condition or event that constitutes a “Termination Event”, “Event of Default”, “Potential Event of Default” or any similar event by Seller, however denominated, has occurred or is continuing under any Hedging Transaction.

9.Attached as Exhibit 2 hereto is a description of all interests of Affiliates of each Seller in any Underlying Mortgaged Property (including without limitation, any lien, encumbrance or other debt or equity position or other interest in the Underlying Mortgaged Property that is senior or junior to, or pari passu with, a Mortgage Asset in right of payment or priority).

10.Attached as Exhibit 3 hereto are the financial statements required to be delivered pursuant to Article 12 of the Master Repurchase Agreement (or, if none are required to be delivered as of the date of this Compliance Certificate, the financial statements most recently delivered pursuant to Article 12 of the Master Repurchase Agreement), which financial statements, to the best of my knowledge after due inquiry, fairly and accurately present in all material respects, the financial condition and operations of Seller as of the date or with respect to the period therein specified, determined in accordance with the requirements set forth in Article 12.

11.Attached as Exhibit 4 hereto are the calculations demonstrating compliance with the financial covenants set forth in Article 11 of the Master Repurchase Agreement.

To the best of my knowledge, Seller has, during the period since the delivery of the immediately preceding Compliance Certificate, observed or performed all of its covenants and other agreements in all material respects, and satisfied in all material respects every condition, contained in the Master Repurchase Agreement and the related documents to be observed, performed or satisfied by it, and I have no knowledge of the occurrence during such period, or present existence, of any condition or event which constitutes an Event of Default or Default (including after giving effect to any pending Transactions requested to be entered into), except as set forth below.

Described below are the exceptions, if any, to paragraph 10, listing, in detail, the nature of the condition or event, the period during which it has existed and the action which the Parent

or any Seller has taken, is taking, or proposes to take with respect to each such condition or event:

The foregoing certifications, together with the financial statements, updates, reports, materials, calculations and other information set forth in any exhibit or other attachment hereto, or otherwise covered by this Compliance Certificate, are made and delivered this       [    ] day of [                ], 200[    ].

Name:

Title:

EX-10.48

Exhibit 10.48

INVESTMENT MANAGEMENT AGREEMENT

This AGREEMENT is entered into on November 9, 2006 (this “Agreement”), between Berkley Insurance Company, a Delaware insurance company (“the Investor”), and CT High Grade Mezzanine Manager, LLC, a Delaware limited liability company (the “the Manager” and, together with the Investor, each a “Party”).

WHEREAS, the Investor desires to retain the Manager to acquire, sell, and otherwise manage certain commercial real estate debt and related investments of the Investor in a separate account (each, an “Account”) in the manner and on the terms set forth herein;

NOW THEREFORE, in consideration of the mutual promises and agreements herein contained and other good and valuable consideration, the receipt of which is hereby acknowledged, it is agreed by and between the parties hereto as follows:

1.Services, Investment Discretion.

(a)           The Manager will source, underwrite, negotiate, close, manage and, in accordance with Section 1(b), sell and/or liquidate on behalf of the Investor commercial real estate debt and related investments (“Investments”).  At origination, such Investments shall meet the investment criteria as listed in Exhibit A hereto (the “Investment Criteria”) or as mutually agreed upon in writing by the Manager and the Investor.

(b)           Following origination or acquisition of an Investment, the Investor  shall have the authority and power to direct the Manager to sell or liquidate any such Investment whereupon the Manager shall dispose of such Investment in accordance with the Investor’s direction.

(c)           Subject to Sections 1(a) and (b), the Investor hereby grants the Manager full and exclusive discretion as to all decisions regarding the Investments made on behalf of the Investor in accordance with Section 1(a) hereof.

2.Commitments, Capital Calls.

(a)           Subject to the terms and conditions set forth in this Section 2, the Investor agrees to make available for investment up to $85million (the Investor’s “Commitment”), such Commitment to be (i) reduced by the amount of outstanding and committed Investments in the Account (on a cost basis) and (ii) increased by any principal repayments with respect to the Investor’s Investments during the Commitment Period (as defined below).

(b)           The “Commitment Period” shall be a period beginning on the date hereof and ending on the first anniversary of the date hereof at which time the Commitment Period shall be automatically extended until the 45th day after the date that either the Investor,

on the one hand, or the Manager, on the other hand, delivers written notice to the other Party hereto of its election to terminate the Commitment Period unless (i) either the Investor, on the one hand, or the Manager, on the other hand, provides 30 day prior notice of its election to terminate the Commitment Period as of such first anniversary date or (ii) the Investor, on the one hand, or the Manager, on the other hand, elects to terminate the Agreement.

(c)           During the Commitment Period, the Investor shall meet capital calls made to the Investor by depositing cash into a bank account (the Investor’s “Capital Call Account”) from time to time when called by the Manager pursuant to a written notice in accordance with Section 16(c) in the form of Exhibit B hereto (a “Funding Notice”).  The Investor will be required to fund into its Capital Call Account the amount set forth in a Funding Notice on the date specified in such Funding Notice, which date shall not be earlier than three Business Days after the date that such Funding Notice was delivered to the Investor.  For purposes of this Agreement, “Business Day” shall mean any day of the week other than Saturdays, Sundays and days on which federally chartered banks in the State of New York are not open for business.

(d)           The Manager agrees that capital calls shall be made no earlier than is reasonably necessary to fund the Investments at the scheduled closing on the transaction. Subsequent to the Investor’s deposit of cash into the Capital Call Account, in the event that the Manager becomes aware of a material delay in the closing of the Investment with respect to which such cash was deposited, or the Manager determines that such closing will not occur, the Manager will provide written notice thereof to the Investor, whereupon the Investor may withdraw such cash from the Capital Call Account (provided that such amount will be added back to the Investor’s uncalled Commitment).

(e)           Notwithstanding the foregoing, the Manager may require that the  Investor deposit cash into its Capital Call Account following the Commitment Period in order to fund the acquisition of any Investment which, prior to the termination of the Commitment Period, the Manager, on behalf of the Investor, entered into a binding commitment or letter of intent to acquire or in order to meet unfunded commitments for outstanding Investments of the Investor.

(f)            The aggregate amount which the Investor will be required to fund into its Capital Call Account shall not exceed its Commitment.

(g)           On or about the date hereof, the Manager is entering into investment management agreements substantially in the form of this Agreement (together with this Agreement, the “Berkley Agreements”) with each of the entities identified on Schedule A hereto (together, the “Berkley Entities”).  Investments will be acquired on behalf of the Investor and the other Berkley Entities in a serial manner, i.e. the first Investment closed under the Berkley Agreements will be acquired on behalf of the first Berkley Entity listed on Schedule A, the second Investment closed under the Berkley Agreements will be acquired on behalf of the second Berkley Entity listed on Schedule A, the third Investment closed under the Berkley Agreements will be acquired on behalf of the third Investor listed on Schedule A, the fourth Investment closed under the Berkley Agreements will be acquired on behalf of the first Berkley Entity listed on Schedule A and so on.

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3.Agent and Attorney-in-Fact.

To enable the Manager to exercise fully its discretion and authority as provided in this Agreement, the Investor does hereby constitute and appoint the Manager, and any officer of the Manager acting on its behalf from time to time, as the Investor’s true and lawful representative and attorney-in-fact, in its name, place and stead to make, execute, sign, deliver and file any agreements, contracts, instruments, certificates or documents authorized by the Manager in accordance with its authority under Section 1.  This power of attorney is deemed to be coupled with an interest.

4.Servicing and Custody.

(a)           The Investor and the Manager agree to enter into a servicing agreement with Midland Investment Services, Inc. (“Midland”), in the form of Exhibit E hereto,  pursuant to which Midland will be retained, at the Investor’s cost, to perform customary servicing with respect to the Investor’s Investments, including (i) the receipt of payments with respect to each of the Investor’s Investment from the applicable primary servicer and distribution of such payments to the Investor and (ii) the production of monthly servicing reports which will be subject to review by the Manager.

(b)           The Manager may cause each of the Investor’s Investments (and documents relating thereto) to be held, at the Investor’s cost, by the Manager or by a custodian agreed to by the Manager and the Investor, subject to insurance laws and regulations governing the Investor.  The Investor agrees to enter into a custodial agreement (providing for market terms) with such custodian.

(c)           The Manager agrees that it will maintain all records, memoranda, instructions or authorizations relating to the acquisition or disposition of the Investor’s Investments authorized hereunder on behalf of the Investor in accordance with the Manager’s document retention standards and practices.  All documents maintained by Manager with respect to the foregoing shall (i) be open at all times to inspection and audit by the Investor or its authorized representatives; (ii) be delivered to the Investor upon demand; and (iii) be and remain the property of the Investor. The Manager will provide copies of documents retained in accordance with the foregoing at the Investor’s cost.

(d)           The Manager shall, at the request of the Investor and at the Investor’s cost, assist and provide operational support in connection with the audit of any documents with respect to the services provided under this Agreement undertaken by the Investor’s internal auditors, certified public accountants or the insurance department or commissioner of any state, or upon the request of any governmental agency.

(e)           The Manager shall provide, upon the Investor’s request and at the Investor’s cost, copies any records which are necessary to file any report required by any federal, state, or local government or agency.

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5.Management, Termination and Liquidation Fees.

(a)           During the Commitment Period, the Investor shall pay to the Manager an annual management fee (the “Management Fee”) equal to 0.25% of the aggregate amount of the Investor’s Investments (on a cost basis, less any principal repayments and realized losses thereon and less the amount of any such Investment withdrawn from the Account pursuant to the last sentence of Section 10 hereof).  The Management Fee payable by the Investor will be payable in advance on a quarterly basis based upon the Investments of the Investor outstanding as of the first day of such quarter and the Investments of the Investor acquired during the quarter on a pro rated basis.  The payment of Management Fees by the Investor shall not serve to reduce the Investor’s outstanding unfunded Commitment.

(b)           If the Investor shall terminate the Commitment Period pursuant to Section 2(b)(i), the Investor shall continue to pay Management Fees to the Manager in accordance with Section 5(a) until the Investor’s Investments have been satisfied or liquidated in accordance with their terms.

(c)           If the Investor shall terminate the Agreement pursuant to Section 2(b)(ii), the Investor shall pay the Manager a termination fee equal to 0.25% of the aggregate amount of the Investor’s Investments as of the effective date of such termination (on a cost basis, less any principal repayments and realized losses thereon and less the amount of any such Investment withdrawn from the Account pursuant to the last sentence of Section 10 hereof), which fee shall be payable within three Business Days of such termination.  Notwithstanding the foregoing, if the Investor shall (i) terminate the Agreement pursuant to Section 2(b)(ii) and (ii) direct the disposition of any of the Investor’s Investments pursuant to Section 1(b), then the Investor shall (x) pay the liquidation fee set forth in Section 5(d) with respect to each such Investment which the Investor has directed should be disposed of and (y) pay the termination fee set forth in this Section 5(c) with respect to each other Investment.

(d)           If the Investor shall direct the disposition of any of the Investor’s Investments pursuant to Section 1(b), the Investor shall pay the Manager a liquidation fee equal to 0.25% of the aggregate Disposition Amount (as defined herein) of the Investment(s) directed to be disposed by the Investor, which fee shall be payable within three Business Days of such disposition.  For the purposes hereof, with respect to any Investment, “Disposition Amount” means the greater of (i) the cost of such Investment, less any principal repayments and realized losses thereon and less the amount of any such Investment withdrawn from the Account pursuant to the last sentence of Section 10 hereof and (ii) the amount received in connection with the disposition of such Investment.

(e)           Upon termination of the Agreement, the Manager shall no longer have the right to Management Fees other than Management Fees which have accrued but are unpaid as of the date of termination of this Agreement.

6.Expenses.

(a)           The Investor, on the one hand, and the Manager, on the other hand, shall bear and be responsible for the payment of all out of pocket expenses related to the

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preparation of this Agreement and the organization of the Account (including the Manager’s legal fees and expenses) on 50/50 even basis.  Thereafter, the Investor and the Manager shall each bear their respective costs and expense related to any amendment or modification of this Agreement.

(b)           The Investor shall bear and be responsible for the payment of all reasonable, out of pocket costs and expenses related to the Account’s activities and operations, including all investment, reinvestment, holding, management and disposition of the Investor’s Investments, and including, but not limited to the following: (i) all out-of-pocket costs and expenses incurred in developing, negotiating and structuring Investments allocated to the Investor in accordance with Section 2(g) hereof, whether consummated or not consummated, and acquiring, disposing of or otherwise dealing with such Investments, including, without limitation, any investment banking, engineering, appraisal, environmental, travel, legal and accounting expenses, any deposits and commitment fees and other fees and out-of-pocket costs related thereto, provided that in such cases where the Manager or an affiliate of the Manager and the Investor both participate in the same transaction, expenses will be shared on pro rata basis; (ii) all costs and expenses, if any, incurred in monitoring the Investor’s Investments, including, without limitation, any engineering, environmental, third-party payment processing, travel, legal, servicing, custodial and accounting expenses and other fees and out-of-pocket costs related thereto, provided that in such cases where the Manager or an affiliate of the Manager and the Investor both have an interest in the same asset, expenses will be shared on pro rata basis; (iii) taxes of the Investor; (iv) costs related to litigation and threatened litigation involving the Account and Investments; (v) expenses associated with third party accountants, attorneys and tax advisors with respect to the Account and its activities, including the preparation of reports and statements and other similar matters, and costs associated with the distribution of reports to the Investor; (vi) origination fees or commissions and other investment costs incurred by or on behalf of the Account and paid to third parties; (vii) all costs and expenses associated with indemnifying the Covered Persons whom the Investor has agreed to indemnify (except to the extent that any such costs or expenses have otherwise been reimbursed pursuant to Section 11(b) hereof); (viii) fees incurred in connection with the maintenance of bank or custodian accounts on behalf of the Investor; and (ix) all expenses of the Account that are not normally recurring operating expenses (collectively, “Investment Expenses”); provided further that the Manager agrees that it will not incur any costs and expenses in connection with the origination of any Investment if such costs and expenses would reduce the weighted average Net Spread (as defined herein) [****]; and provided further that the Manager agrees that it will not incur any costs and expenses covered by clauses (i) and (ix) of this Section 6(b) unless they reflect prevailing market rates.  For purposes hereof, “Net Spread” means (A) the gross spread of all Investments originated for all Berkley Entities (measured as of the date of origination or acquisition of any Investment) pursuant to the Berkley Agreements less (B) the sum of all Management Fees, servicing fees and Transaction Expenses (as defined herein) paid or incurred under all Berkley Agreements.  For purposes hereof, “Transaction Expenses” means all out-of-pocket costs and expenses incurred in developing, negotiating and structuring Investments and acquiring, disposing of or otherwise dealing with Investments pursuant to all Berkley Agreements.  In calculating Net Spread, Transaction Expenses will be amortized over a period of two years.

**** Material omitted pursuant to a request for confidential treatment under Rule 24b-2 of the Exchange Act of 1934.  Material filed separately with the Securities and Exchange Commission.

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(c)           Any Investment Expenses paid by the Manager on behalf of the Account (i.e., out of Manager’s funds and not out of Account funds and other Investments) shall be reimbursed by the Investor promptly upon the Manager’s written request therefore.  The reimbursement of any Investment Expenses by the Investor shall not serve to reduce the Investor’s outstanding unfunded Commitment hereunder.  Upon the Investor’s request, the Manager shall promptly provide to the Investor documentation of the Investment Expenses.

(d)           The Manager shall bear the following ordinary day-to-day expenses incidental to the performance of its services hereunder:  (i) all costs and expenses relating to office space, facilities, utility service, supplies and necessary administrative and clerical functions in connection with the Manager’s operations and (ii) compensation of and provision of benefits to all employees of the Manager and its affiliates who are engaged in the operation or management of the Manager’s business.

7.Reports.

The Manager shall prepare and deliver to the Investor, within 60 days following each calendar quarter, a quarterly statement regarding the Account, each which quarterly report shall include the information described in Exhibit C hereto.  The Manager shall prepare and deliver to the Investor, within 15 days following the date of acquisition of each Investment on behalf of the Investor, a closing package with respect to such Investment, which shall include the information contained in the then-standard closing package prepared in connection with similar investments acquired by Capital Trust, Inc. (with conforming changes thereto to reflect that the holder of such Investment is the Investor).  Attached as Exhibit D hereto is the standard Capital Trust, Inc. closing package as of the date hereof.

8.Representations and Warranties.

(a)           The Investor represents, warrants and covenants to the Manager as follows:

(i)            The Investor has the requisite legal capacity and authority to execute, deliver and perform its obligations under this Agreement.  The person whose signature is affixed to this Agreement on behalf of the Investor has full power and authority to execute this Agreement on the Investor’s behalf.

(ii)           This Agreement has been duly authorized, executed and delivered by the Investor and is the legal, valid and binding agreement of the Investor, enforceable against the Investor in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, fraudulent conveyance and other similar laws and principles of equity affecting creditors’ rights and remedies generally.

(iii)          The Investor’s execution of this Agreement and the performance of its obligations hereunder do not conflict with, or violate any provisions of, the governing documents of the Investor or any obligations by which the Investor is bound, whether arising by contract, operation of law or otherwise.

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(iv)          The Investor recognizes that the Investments involve certain risks and it has taken full cognizance of and understands all of the investment considerations relating thereto.  The Investor has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the Investments and making informed decisions with respect thereto.  The Investor is able to bear the substantial economic risks related to its Investments for an indefinite period of time, has no need for liquidity in its Investments, and, at the present time, can afford a complete loss of its Investments.  The Investor is relying on its own business expertise and sophistication (and that of its advisors) and has performed its own investigation and evaluation of the tax considerations and regulatory matters associated with its Investments.  The Investor has carefully reviewed and fully understands the types of charges, fees and expenses which will be assessed against the Account.  The Investor further acknowledges that, while the Manager will act as an investment advisor to the Investor pursuant to the terms of this Agreement, none of the Manager or any of its affiliates will guarantee that the Investor’s investment purposes and objectives will be achieved.  The Investor is aware that the investment strategies that may be used by the Manager may result in a significant risk of loss and no one can guarantee profits or freedom from loss in such investments and that in some cases it may be necessary for the Investor to advance additional funds in order to protect its Investments.  The Investor is aware that past performance results achieved by funds or accounts supervised and/or managed by the Manager may not be indicative of the performance results of the Account.  The Investor is aware that the Manager is not registered as an investment adviser with the Securities and Exchange Commission under the Investment Advisors Act of 1940, as amended.

(b)           The Manager represents, warrants and covenants to the Investor as follows:

(i)            The Manager has the requisite legal capacity and authority to execute, deliver and perform its obligations under this Agreement.  The person whose signature is affixed to this Agreement on behalf of the Manager has full power and authority to execute this Agreement on the Manager’s behalf.

(ii)           This Agreement has been duly authorized, executed and delivered by the Manager and is the legal, valid and binding agreement of the Manager, enforceable against the Manager in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, fraudulent conveyance and other similar laws and principles of equity affecting creditors’ rights and remedies generally.

(iii)          The Manager’s execution of this Agreement and the performance of its obligations hereunder do not conflict with, or violate any provisions of, the governing documents of the Manager or any obligations by which the Manager is bound, whether arising by contract, operation of law or otherwise.

9.Confidentiality.

Except as required by law, (a) the Manager agrees to maintain in strict confidence all information regarding the Investor and its affiliates that is furnished to the Manager by the Investor or its affiliates or representatives in connection with this Agreement or the transactions

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contemplated herein and (b) the Investor agrees to maintain in strict confidence all investment advice and information furnished to the Investor by the Manager or its affiliates or its representatives in connection with this Agreement or the transactions contemplated herein or otherwise obtained through its access to information concerning the Account, including the details of any Investment, in each case, unless required to do so by applicable law, rule or regulation.  Notwithstanding the foregoing, the Investor consents to the use and disclosure by the Manager of the Manager’s entrance into this Agreement, investment experience and performance with respect to the Account, without disclosing the identity of the Investor or its affiliates in connection with such investment experience or performance information (unless prior consent to identity disclosure is obtained from the Investor in writing), and the Manager consents to the Investor’s disclosure of such investment experience and performance information (as well as of the identity of the Manager), but the Investor shall not disclose any information concerning the details of any Investment, unless required to do so by applicable law, rule or regulation.

10.Right to Engage in Other Activities.

The Investor acknowledges and understands that the Manager engages in an investment advisory business apart from managing the Account, including acting as the manager for it’s parent company’s balance sheet investment activity and other affiliated entities.  This will create conflicts of interest with respect to the amount of the Manager’s time devoted to managing the Account and the allocation of investment opportunities among accounts (including the Account) managed by the Manager.  The Manager will attempt to resolve all such conflicts in a manner that is generally fair to all of its clients.  The Investor confirms that the Manager may give advice and take action with respect to any of its other clients (including the other Berkley Entities) that may differ from advice given to, or the timing or nature of action taken with respect to, the Investor.  Nothing in this Agreement shall be deemed to limit the Manager or its affiliates from sourcing, underwriting, negotiating, closing, managing and selling or otherwise liquidating investment opportunities for its own or its affiliates’ accounts; provided, however, that without the prior written consent of the applicable Investor, the Manager agrees that it will not knowingly cause or permit the Account to sell any Investments to the Manager or any of its affiliates and provided further, that the Manager shall promptly notify the applicable Investor in writing if the Manager or any of its affiliates holds or sells an investment which is secured by the same underlying collateral which serves as collateral securing any of the Investor’s Investments.  In addition, if the Account holds any Investment with respect to which the Manager or any of its affiliates holds an investment which is secured by the same underlying collateral and a default occurs with respect to either the Investor’s Investment or the Manager’s investment, the Manager shall notify the Investor of such default in writing promptly upon obtaining knowledge of such default, and the Investor may, in its discretion, withdraw such Investment from the Account.  Nothing in this Agreement shall be deemed to obligate the Manager to acquire for the Investor any investment that the Manager or its, affiliates, officers, partners, members or employees may acquire for its or their own accounts or for the accounts of any other client, if, in the absolute discretion of the Manager, it is not practical or desirable to acquire a participation in such investment for the Investor.

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11.Standard of Liability; Exculpation; Indemnification; Insurance.

(a)           The Manager assumes no responsibility under this Agreement other than to render the services called for hereunder with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of a like character.  The Investor and the Manager agree that the Manager will not be liable to the Investor for any loss, claim, demand, damage, liability, cost or expense, including reasonable attorneys’ fees and expenses (each a “Loss”) incurred by the Investor that arises out of or is in any way connected with any recommendation or other act or failure to act of the Manager under this Agreement, including, but not limited to, any error in judgment with respect to the Account, so long as such recommendation or other act or failure to act does not arise from the Manager’s bad faith, negligence, fraudulent or willful misconduct or breach of this Agreement.  Under no circumstances will the Manager be liable or responsible for any Loss incurred by reason of any act or omission of any custodian, servicer, broker or dealer, whether appointed by the Investor or chosen with reasonable care by the Manager.  With respect to Losses that arise out of or are in any way connected with any recommendation or other act or failure to act of the Manager under this Agreement, including, but not limited to, any error in judgment with respect to the Account, which arise from the Manager’s negligence (but not from the Manager’s bad faith, gross negligence, fraudulent or willful misconduct or intentional breach of this Agreement) under no circumstances will the Manager be liable or responsible for such Losses to the extent that they exceed the aggregate amount of Management Fees received by the Manager pursuant to this Agreement.

(b)           The Investor agrees to indemnify and hold harmless the Manager and its respective members, partners, shareholders, directors, officers, and employees (each, a “Covered Person”), from and against any Loss to which any Covered Person may become subject (including in connection with the defense or settlement of claims and in connection with any administrative proceedings), insofar as such Loss (or action in respect thereof) arises out of or relates to any act or omission performed or omitted by the any Covered Person arising out of or in connection with this Agreement, the Investor’s Investments and the Account; provided that no Covered Person shall be entitled to be indemnified hereunder for any Losses that are finally judicially determined to have resulted primarily from (i) the bad faith, gross negligence or  fraudulent or willful misconduct of a Covered Person or the Manager’s breach of this Agreement (in the case of any Losses in respect of any action or claim brought by any policy holders or shareholders of the Investor) or (ii) the bad faith, negligence or fraudulent or willful misconduct of a Covered Person or the Manager’s breach of this Agreement (in the case of all other Losses); and provided, further, that in the case of a claim involving an Investment in which the Manager and the Investor both participate in the transaction, the indemnity shall be provided on a pro rata basis between the Manager, on the one hand, and the Investor, on the other hand.  If any Covered Person becomes involved in any capacity in any action, proceeding or investigation in connection with any matter with respect to which such Covered Person may seek to be indemnified hereunder, then the Investor shall reimburse such Covered Person for its reasonable legal and other out of pocket expenses (including the cost of any investigation and preparation) as they are incurred in connection therewith; provided that if such Loss is finally judicially determined to have resulted primarily from any of the events described in clause (i) or (ii) above, a Covered Person shall repay to the Investor all amounts which the Investor advanced to such

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Covered Person pursuant to this Section; and provided, further, that any Covered Person seeking indemnification under this Section (other than the Manager) shall (at the time that such Covered Person seeks such indemnification) execute an undertaking to repay to the Investor the amounts advanced to such Covered Person hereunder if such Loss is finally judicially determined to have resulted primarily from any of the events described in clause (i) or (ii) above.  The indemnities in this Section 11 are in addition to any liability that any indemnifying party may otherwise have and will extend, upon the same terms and conditions, to each person, if any, who controls any indemnified party within the meaning of the Securities Act of 1933 Act, as amended.  If for any reason (other than by reason of the exclusions from indemnification set forth above) the foregoing indemnification is unavailable to any Covered Person, or insufficient to hold it harmless, then the Investor shall, to the fullest extent permitted by law, contribute to the amount paid or payable by such Covered Person as a result of such loss, claim, damage, liability or expense in such proportion as is appropriate to reflect the relative benefits received, as applicable, by the Investor, on the one hand, and such Covered Person, 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.  Notwithstanding anything herein to the contrary, the Investor shall only indemnify a Covered Person for such Covered Person’s out of pocket expenses which are reasonable and appropriate to the exposure being indemnified.

(c)           The Manager shall maintain, with financially sound and reputable insurers, insurance in such amounts and against such risks as are customarily maintained by reputable companies under similar circumstances.

12.Term and Termination.

(a)           This Agreement, unless sooner terminated upon the occurrence of any of the events listed below, shall terminate on the earlier to occur of (i) the termination of this Agreement pursuant to Section 2(b)(ii) and (ii) the date of the liquidation of the last Investment held in the Account following the termination of the Commitment Period pursuant to Section 2(b)(i).

(b)           The Investor may terminate this Agreement by written notice to the Manager immediately, upon the bankruptcy, liquidation or dissolution of the Manager or in the event that the Manager materially breaches this Agreement and such breach is not cured within 30 days of receipt by the Manager of the Investor written notice of such breach.

(c)           The Manager may terminate this Agreement by written notice to the Investor immediately, upon the bankruptcy, liquidation, or dissolution of the Investor or in the event that the Investor materially breaches this Agreement, including, but not limited to, its obligation to fund the Account, and such breach is not cured within 30 days of receipt by the Investor of the Manager’s written notice of such breach.

(d)           Notwithstanding any provision hereof to the contrary, in the event that either Party hereto alleges that the other Party has been grossly negligent or committed fraudulent or willful misconduct with respect to this Agreement or the transactions contemplated hereunder, the alleging Party shall give written notice thereof to the other Party, whereupon this

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Agreement shall be suspended until the resolution of such allegation in accordance with the provisions of Section 15 hereof.  During any such suspension, (i) the Investor shall not be required to make any payments required to be made under Section 5 hereof to the Manager and (ii) the Manager shall not be required to perform any services on behalf of the Investor or with respect to the Account or any Investment; provided that any such suspension will not have any effect on the Investor’s and the Manager’s respective rights and obligations (including the Investor’s obligation to meet capital calls) with respect to any Investment which, prior to the suspension of this Agreement, the Manager, on behalf of the Investor, entered into a binding commitment or letter of intent to acquire or in order to meet unfunded commitments for outstanding Investments of the Investor.

(e)           Except as otherwise provided herein, during the term of this Agreement, the Investor may not, without the Manager’s prior written consent, withdraw funds or any Investments from the Account.

(f)            Sections 2, 6 (to the extent of any unpaid costs and expenses), 9, 11, 12(e), 13, 14(b) and 16 shall survive the termination of this Agreement.

13.Anti-Money Laundering.

The Investor represents, warrants and agrees that:  (a) the Investor desires to open the Account for legitimate, valid and legal business and/or personal reasons and not with any intent or purpose to violate any applicable law or regulation; (b) to the Investor’s knowledge, the funds used to open the Account are derived from legitimate and legal sources, and neither such funds nor the Account (or any proceeds thereof) will be used by the Investor or, to the Investor’s knowledge, by any person associated with the Investor, to finance any terrorist or other illegitimate, illegal or criminal activity; (c) the Investor  has in place, and will maintain during the term of this Agreement, an appropriate anti-money laundering program that complies in all material respects with all applicable laws and regulations including, without limitation, the “USA PATRIOT ACT,” and that is reasonably designed to detect and report any activity that raises suspicion of money laundering activities, and the Investor has obtained all appropriate and necessary background information respecting its officers and beneficial owners to enable the Investor to comply with all applicable laws, rules and regulations respecting money laundering activities; and (d) the Manager may request, and the Investor will provide, such information as may be necessary for the Manager to comply with applicable legal or regulatory requirements, including, without limitation, anti-money laundering requirements, and that notwithstanding any other provision of this Agreement the Manager may disclose information respecting the Investor to governmental and/or regulatory or self-regulatory authorities to the extent required by applicable law or regulation and may file reports with such authorities as may be required by applicable law or regulation.  If required by applicable law, regulation, or interpretation thereof, the Manager may suspend any and all activity with respect to the Account pending the Manager’s receipt of instructions regarding the Account from the appropriate governmental or regulatory authority.

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14.ERISA.

(a)           The Investor represents and warrants that (i) it or its parent corporation (direct or indirect) is an insurance company regulated by at least one state and is investing assets held only in its general account or, if it is a wholly-owned subsidiary of an insurance company, it is investing assets contributed, directly or indirectly, only from the general account of its parent corporation and (ii) none of its general account assets or the general account assets of its direct or indirect parent corporation include assets of an employee benefit plan subject to Part 4 of Title 1 of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”).  The Investor covenants that, if the assets invested by the Investor constitute assets of such plans in the future, the Investor will notify the Manager immediately. In such a case, notwithstanding Section 12 hereof, the Manager may immediately terminate this Agreement.

(b)           The Investor shall indemnify the Manager for any and all claims, liabilities, losses, costs, demands and expenses (including, without limitation, reasonable attorney’s fees and disbursements and all other amounts paid in preparation, investigation, defense, mitigation or settlement of any claim, in each case, as such expenses are incurred and paid) occasioned by the “plan assets status” of the Investor or the Account, including, without limitation, arising out of any prohibited transactions within the meaning of Section 406 of ERISA or 4975 of the Code that may result during any period in which assets of the Account constitute plan assets.

15.Arbitration.

(a)           Any dispute arising out of or relating in any manner to this Agreement or to the breach, termination, enforcement, interpretation or validity of this Agreement, including the determination of the scope or applicability of this agreement to arbitrate (each a “Dispute”) shall be resolved in accordance with the procedures specified in this Section 15, except that any action brought to obtain injunctive relief shall be brought in any court of competent jurisdiction.  The procedures described in this Section 15 shall be the sole and exclusive procedures for the resolution of any Disputes.

(b)           Any Dispute shall be settled by final and binding arbitration in New York City, New York before JAMS, or its successor, pursuant to the United States Arbitration Act, 9 U.S.C. Sec. 1 et seq., by filing a written demand for arbitration with JAMS, with a copy to the other Party.  The arbitration will be conducted in accordance with the provisions of JAMS’ Comprehensive Arbitration Rules and Procedures in effect at the time of filing of the demand for arbitration; provided that the Parties agree that each Party to the Dispute shall have discovery to the same extent as provided under the Federal Rules of Civil Procedure.

(c)           When a Dispute has been submitted for arbitration, within 14 days of such submission, the Investors and the Manager will cooperate with one another and with JAMS in (i) selecting one arbitrator from their panel of neutrals and (ii) scheduling the arbitration proceedings.

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(d)           This agreement to arbitrate shall be specifically enforceable against the Parties by any court of competent jurisdiction, and may be challenged only upon the grounds provided in Section 10 to the United States Arbitration Act, 9 U.S.C. Sec. 10.  Application also may be made to such court to confirm, modify or vacate any decision or award of the arbitrator, for an order of enforcement and for any other remedies which may be necessary to effectuate such decision or award.  The Parties hereby consent to the jurisdiction of the arbitrator and of such court and waive any objection to the jurisdiction of such arbitrator and such court.

(e)           As a part of any arbitration award, in the discretion of the arbitrator, any Party may be awarded the reimbursement of its costs and expenses (including reasonable attorneys’ fees) of investigating, preparing and pursuing its arbitration claim.  No punitive damages may be awarded in the arbitration.

16.Miscellaneous.

(a)           No Party may assign any of its rights or obligations under this Agreement without the prior written consent of the other Parties.  This Agreement may not be amended or modified except by written instrument duly executed by each of the Parties hereto.

(b)           THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO NEW YORK CONFLICTS OF LAWS PRINCIPLES.  THE PARTIES HEREBY IRREVOCABLY WAIVE ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM AGAINST ANY PARTY RELATING IN ANY WAY TO THIS AGREEMENT OR THE OPERATION OF THE ACCOUNT.

(c)           All communications under this Agreement must be in writing and will be deemed to have been properly given (i) immediately if delivered by hand, (ii) immediately if delivered by facsimile, confirmation of transmission received, (iii) three days after sent by certified mail, return receipt requested or (iv) one Business Day after being deposited for next-day delivery with Federal Express or another nationally recognized overnight delivery service, all charges or postage prepaid, in each such case properly addressed to the Party to receive such notice at that Party’s address indicated below, or at any other address that any Party may designate by notice to the other Parties.

Address for notices to the Manager:

CT High Grade Mezzanine Manager, LLC
c/o Capital Trust, Inc.
410 Park Avenue
New York, New York 10022
Fax:  212-655-0244
Attention:  Geoffrey Jervis

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with a copy to:

Paul Hastings Janofsky & Walker, LLP
75 East 55th Street
New York, NY 10022
Fax: 212-319-4090
Attention: Michael L. Zuppone

Addresses for notices to the Investor:

Berkley Insurance Company
c/o W.R. Berkley Corporation
475 Steamboat Road
Greenwich, CT  06830
Fax:  203-769-4096
Attention:  James Shiel

with a copy to:

W.R. Berkley Corporation
475 Steamboat Road
Greenwich, CT  06830
Fax:  203-769-4097
Attention:  General Counsel

(d)           The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any and all other provisions hereof.

(e)           This Agreement is the entire agreement of the Parties and supersedes all prior or contemporaneous written or oral negotiations, correspondence, agreements and understandings, regarding the subject matter hereof.

(f)            This Agreement may be executed by facsimile and in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

(g)           Nothing in this Agreement shall be deemed to create any right in any Person not a party hereto (other than each Covered Person and the permitted successors and assigns of the parties 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).

[Signature Page Follows]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their duly authorized officers, on the date first written above.

CT HIGH GRADE MEZZANINE MANAGER, LLC
By:	/s/ Geoffrey G. Jervis
	Name: Geoffrey G. Jervis
	Title: Chief Financial Officer
BERKLEY INSURANCE COMPANY
By:	/s/ Eugene G. Ballard
	Name:Eugene G. Ballard
	Title: Senior Vice President

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Schedule A

Schedule of Berkley Entities

1.             Berkley Insurance Company

2.             Berkley Regional Insurance Company

3.             Admiral Insurance Company

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Exhibit A

Investment Criteria and Constraints

1.Investments are limited to first mortgage loans or mezzanine loans or interests in mortgage loans

2.Fair market value of the underlying real estate to be determined by a qualified appraiser at the time of origination or acquisition

3.$30 million maximum/$15 million minimum individual investment size.

4.67% maximum last dollar Investment-to-value.

5.Minimum credit spread of [****].

6.Floating rate.

7.Maximum term 5 years.

8.$125 million maximum total exposure (across the accounts established in connection with all Berkley Agreements) to single property type (i.e. hotel, retail, residential, industrial).

9.Investments limited to United States and U.S. territories.  $125 million maximum total exposure (across the accounts established in connection with all Berkley Agreements), on a cost basis, to any single State.  $100 million maximum total exposure (across the accounts established in connection with all Berkley Agreements), on a cost basis, to New York City, New York.  No investments in the State of Florida.

10.           Each mezzanine real estate loan must comply with SSAP 83, as evidenced by a completed SSAP 83 Questionnaire, in the form of Exhibit F hereto, which the Manager shall complete with respect to the applicable Investment and deliver with the applicable Funding Notice.

**** Material omitted pursuant to a request for confidential treatment under Rule 24b-2 of the Exchange Act of 1934.  Material filed separately with the Securities and Exchange Commission.

Exhibit B

Form of Funding Notice

From:		CT High Grade Mezzanine Manager, LLC
410 Park Avenue
New York, New York 10022
To:	Berkley Insurance Company
c/o W.R. Berkley Corporation
475 Steamboat Road
Greenwich, CT 06830
Fax:	203-769-4096
Attention: James Shiel

Re:Capital call pursuant to Section 2 of the Management Agreement,
dated November 9, 2006, between Berkley Insurance Company and CT Investment Management Co, LLC

Funding Notice Date:
Funding Date:
Commitment Amount:	$
Amount Funded to Date:
Current Funding Request:
Remaining Unfunded Commitment:
Recent Appraised Value:
Compliance with Investment Criteria
Investment Size:
Last dollar Investment to value:
Credit spread over appropriate index:
Floating rate (yes/no):
Index:
Term:
Property Type/Total Exposure to Property Type:
Location of Investment (State)/Total Exposure to this State:

NOTE: To the extent that any deviation from the Investment Criteria is set forth above, the Manager must obtain the prior written consent of the applicable Investor before the origination or acquisition of the Investment.

Exhibit C

Outline of Quarterly Report

1.The Manager Letter

2.Servicer Report

3.(a)           Commitment Summary

(b)Management Fee Summary

(c)Investment Expense Summary

(d)Portfolio Data Summary

(e)Compliance Report

(f)Related Party Report

(g)Individual Asset Write-ups

4.Copies of all Correspondence during the Covered Period

Exhibit D

Form of Closing Package

Exhibit E

Form of Servicing Agreement

Exhibit F

Form of SSAP 83 Questionnaire

EX-10.49

Exhibit 10.49

INVESTMENT MANAGEMENT AGREEMENT

This AGREEMENT is entered into on November 9, 2006 (this “Agreement”), between Berkley Regional Insurance Company, a Delaware insurance company (“the Investor”), and CT High Grade Mezzanine Manager, LLC, a Delaware limited liability company (the “the Manager” and, together with the Investor, each a “Party”).

WHEREAS, the Investor desires to retain the Manager to acquire, sell, and otherwise manage certain commercial real estate debt and related investments of the Investor in a separate account (each, an “Account”) in the manner and on the terms set forth herein;

NOW THEREFORE, in consideration of the mutual promises and agreements herein contained and other good and valuable consideration, the receipt of which is hereby acknowledged, it is agreed by and between the parties hereto as follows:

1.Services, Investment Discretion.

(a)The Manager will source, underwrite, negotiate, close, manage and, in accordance with Section 1(b), sell and/or liquidate on behalf of the Investor commercial real estate debt and related investments (“Investments”).  At origination, such Investments shall meet the investment criteria as listed in Exhibit A hereto (the “Investment Criteria”) or as mutually agreed upon in writing by the Manager and the Investor.

(b)Following origination or acquisition of an Investment, the Investor shall have the authority and power to direct the Manager to sell or liquidate any such Investment whereupon the Manager shall dispose of such Investment in accordance with the Investor’s direction.

(c)Subject to Sections 1(a) and (b), the Investor hereby grants the Manager full and exclusive discretion as to all decisions regarding the Investments made on behalf of the Investor in accordance with Section 1(a) hereof.

2.Commitments, Capital Calls.

(a)Subject to the terms and conditions set forth in this Section 2, the Investor agrees to make available for investment up to $85 million (the Investor’s “Commitment”), such Commitment to be (i) reduced by the amount of outstanding and committed Investments in the Account (on a cost basis) and (ii) increased by any principal repayments with respect to the Investor’s Investments during the Commitment Period (as defined below).

(b)The “Commitment Period” shall be a period beginning on the date hereof and ending on the first anniversary of the date hereof at which time the Commitment Period shall be automatically extended until the 45th day after the date that either the Investor, on the one hand, or the Manager, on the other hand, delivers written notice to the other Party

hereto of its election to terminate the Commitment Period unless (i) either the Investor, on the one hand, or the Manager, on the other hand, provides 30 day prior notice of its election to terminate the Commitment Period as of such first anniversary date or (ii) the Investor, on the one hand, or the Manager, on the other hand, elects to terminate the Agreement.

(c)During the Commitment Period, the Investor shall meet capital calls made to the Investor by depositing cash into a bank account (the Investor’s “Capital Call Account”) from time to time when called by the Manager pursuant to a written notice in accordance with Section 16(c) in the form of Exhibit B hereto (a “Funding Notice”).  The Investor will be required to fund into its Capital Call Account the amount set forth in a Funding Notice on the date specified in such Funding Notice, which date shall not be earlier than three Business Days after the date that such Funding Notice was delivered to the Investor.  For purposes of this Agreement, “Business Day” shall mean any day of the week other than Saturdays, Sundays and days on which federally chartered banks in the State of New York are not open for business.

(d)The Manager agrees that capital calls shall be made no earlier than is reasonably necessary to fund the Investments at the scheduled closing on the transaction. Subsequent to the Investor’s deposit of cash into the Capital Call Account, in the event that the Manager becomes aware of a material delay in the closing of the Investment with respect to which such cash was deposited, or the Manager determines that such closing will not occur, the Manager will provide written notice thereof to the Investor, whereupon the Investor may withdraw such cash from the Capital Call Account (provided that such amount will be added back to the Investor’s uncalled Commitment).

(e)Notwithstanding the foregoing, the Manager may require that the  Investor deposit cash into its Capital Call Account following the Commitment Period in order to fund the acquisition of any Investment which, prior to the termination of the Commitment Period, the Manager, on behalf of the Investor, entered into a binding commitment or letter of intent to acquire or in order to meet unfunded commitments for outstanding Investments of the Investor.

(f)The aggregate amount which the Investor will be required to fund into its Capital Call Account shall not exceed its Commitment.

(g)On or about the date hereof, the Manager is entering into investment management agreements substantially in the form of this Agreement (together with this Agreement, the “Berkley Agreements”) with each of the entities identified on Schedule A hereto (together, the “Berkley Entities”).  Investments will be acquired on behalf of the Investor and the other Berkley Entities in a serial manner, i.e. the first Investment closed under the Berkley Agreements will be acquired on behalf of the first Berkley Entity listed on Schedule A, the second Investment closed under the Berkley Agreements will be acquired on behalf of the second Berkley Entity listed on Schedule A, the third Investment closed under the Berkley Agreements will be acquired on behalf of the third Investor listed on Schedule A, the fourth Investment closed under the Berkley Agreements will be acquired on behalf of the first Berkley Entity listed on Schedule A and so on.

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3.Agent and Attorney-in-Fact.

To enable the Manager to exercise fully its discretion and authority as provided in this Agreement, the Investor does hereby constitute and appoint the Manager, and any officer of the Manager acting on its behalf from time to time, as the Investor’s true and lawful representative and attorney-in-fact, in its name, place and stead to make, execute, sign, deliver and file any agreements, contracts, instruments, certificates or documents authorized by the Manager in accordance with its authority under Section 1.  This power of attorney is deemed to be coupled with an interest.

4.Servicing and Custody.

(a)The Investor and the Manager agree to enter into a servicing agreement with Midland Investment Services, Inc. (“Midland”), in the form of Exhibit E hereto, pursuant to which Midland will be retained, at the Investor’s cost, to perform customary servicing with respect to the Investor’s Investments, including (i) the receipt of payments with respect to each of the Investor’s Investment from the applicable primary servicer and distribution of such payments to the Investor and (ii) the production of monthly servicing reports which will be subject to review by the Manager.

(b)The Manager may cause each of the Investor’s Investments (and documents relating thereto) to be held, at the Investor’s cost, by the Manager or by a custodian agreed to by the Manager and the Investor, subject to insurance laws and regulations governing the Investor.  The Investor agrees to enter into a custodial agreement (providing for market terms) with such custodian.

(c)The Manager agrees that it will maintain all records, memoranda, instructions or authorizations relating to the acquisition or disposition of the Investor’s Investments authorized hereunder on behalf of the Investor in accordance with the Manager’s document retention standards and practices.  All documents maintained by Manager with respect to the foregoing shall (i) be open at all times to inspection and audit by the Investor or its authorized representatives; (ii) be delivered to the Investor upon demand; and (iii) be and remain the property of the Investor. The Manager will provide copies of documents retained in accordance with the foregoing at the Investor’s cost.

(d)The Manager shall, at the request of the Investor and at the Investor’s cost, assist and provide operational support in connection with the audit of any documents with respect to the services provided under this Agreement undertaken by the Investor’s internal auditors, certified public accountants or the insurance department or commissioner of any state, or upon the request of any governmental agency.

(e)The Manager shall provide, upon the Investor’s request and at the Investor’s cost, copies any records which are necessary to file any report required by any federal, state, or local government or agency.

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5.Management, Termination and Liquidation Fees.

(a)During the Commitment Period, the Investor shall pay to the Manager an annual management fee (the “Management Fee”) equal to 0.25% of the aggregate amount of the Investor’s Investments (on a cost basis, less any principal repayments and realized losses thereon and less the amount of any such Investment withdrawn from the Account pursuant to the last sentence of Section 10 hereof).  The Management Fee payable by the Investor will be payable in advance on a quarterly basis based upon the Investments of the Investor outstanding as of the first day of such quarter and the Investments of the Investor acquired during the quarter on a pro rated basis.  The payment of Management Fees by the Investor shall not serve to reduce the Investor’s outstanding unfunded Commitment.

(b)If the Investor shall terminate the Commitment Period pursuant to Section 2(b)(i), the Investor shall continue to pay Management Fees to the Manager in accordance with Section 5(a) until the Investor’s Investments have been satisfied or liquidated in accordance with their terms.

(c)If the Investor shall terminate the Agreement pursuant to Section 2(b)(ii), the Investor shall pay the Manager a termination fee equal to 0.25% of the aggregate amount of the Investor’s Investments as of the effective date of such termination (on a cost basis, less any principal repayments and realized losses thereon and less the amount of any such Investment withdrawn from the Account pursuant to the last sentence of Section 10 hereof), which fee shall be payable within three Business Days of such termination.  Notwithstanding the foregoing, if the Investor shall (i) terminate the Agreement pursuant to Section 2(b)(ii) and (ii) direct the disposition of any of the Investor’s Investments pursuant to Section 1(b), then the Investor shall (x) pay the liquidation fee set forth in Section 5(d) with respect to each such Investment which the Investor has directed should be disposed of and (y) pay the termination fee set forth in this Section 5(c) with respect to each other Investment.

(d)If the Investor shall direct the disposition of any of the Investor’s Investments pursuant to Section 1(b), the Investor shall pay the Manager a liquidation fee equal to 0.25% of the aggregate Disposition Amount (as defined herein) of the Investment(s) directed to be disposed by the Investor, which fee shall be payable within three Business Days of such disposition.  For the purposes hereof, with respect to any Investment, “Disposition Amount” means the greater of (i) the cost of such Investment, less any principal repayments and realized losses thereon and less the amount of any such Investment withdrawn from the Account pursuant to the last sentence of Section 10 hereof and (ii) the amount received in connection with the disposition of such Investment.

(e)Upon termination of the Agreement, the Manager shall no longer have the right to Management Fees other than Management Fees which have accrued but are unpaid as of the date of termination of this Agreement.

6.Expenses.

(a)The Investor, on the one hand, and the Manager, on the other hand, shall bear and be responsible for the payment of all out of pocket expenses related to the

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preparation of this Agreement and the organization of the Account (including the Manager’s legal fees and expenses) on 50/50 even basis.  Thereafter, the Investor and the Manager shall each bear their respective costs and expense related to any amendment or modification of this Agreement.

(b)The Investor shall bear and be responsible for the payment of all reasonable, out of pocket costs and expenses related to the Account’s activities and operations, including all investment, reinvestment, holding, management and disposition of the Investor’s Investments, and including, but not limited to the following: (i) all out-of-pocket costs and expenses incurred in developing, negotiating and structuring Investments allocated to the Investor in accordance with Section 2(g) hereof, whether consummated or not consummated, and acquiring, disposing of or otherwise dealing with such Investments, including, without limitation, any investment banking, engineering, appraisal, environmental, travel, legal and accounting expenses, any deposits and commitment fees and other fees and out-of-pocket costs related thereto, provided that in such cases where the Manager or an affiliate of the Manager and the Investor both participate in the same transaction, expenses will be shared on pro rata basis; (ii) all costs and expenses, if any, incurred in monitoring the Investor’s Investments, including, without limitation, any engineering, environmental, third-party payment processing, travel, legal, servicing, custodial and accounting expenses and other fees and out-of-pocket costs related thereto, provided that in such cases where the Manager or an affiliate of the Manager and the Investor both have an interest in the same asset, expenses will be shared on pro rata basis; (iii) taxes of the Investor; (iv) costs related to litigation and threatened litigation involving the Account and Investments; (v) expenses associated with third party accountants, attorneys and tax advisors with respect to the Account and its activities, including the preparation of reports and statements and other similar matters, and costs associated with the distribution of reports to the Investor; (vi) origination fees or commissions and other investment costs incurred by or on behalf of the Account and paid to third parties; (vii) all costs and expenses associated with indemnifying the Covered Persons whom the Investor has agreed to indemnify (except to the extent that any such costs or expenses have otherwise been reimbursed pursuant to Section 11(b) hereof); (viii) fees incurred in connection with the maintenance of bank or custodian accounts on behalf of the Investor; and (ix) all expenses of the Account that are not normally recurring operating expenses (collectively, “Investment Expenses”); provided further that the Manager agrees that it will not incur any costs and expenses in connection with the origination of any Investment if such costs and expenses would reduce the weighted average Net Spread (as defined herein) [****]; and provided further that the Manager agrees that it will not incur any costs and expenses covered by clauses (i) and (ix) of this Section 6(b) unless they reflect prevailing market rates.  For purposes hereof, “Net Spread” means (A) the gross spread of all Investments originated for all Berkley Entities (measured as of the date of origination or acquisition of any Investment) pursuant to the Berkley Agreements less (B) the sum of all Management Fees, servicing fees and Transaction Expenses (as defined herein) paid or incurred under all Berkley Agreements.  For purposes hereof, “Transaction Expenses” means all out-of-pocket costs and expenses incurred in developing, negotiating and structuring Investments and acquiring, disposing of or otherwise dealing with Investments pursuant to all Berkley Agreements.  In calculating Net Spread, Transaction Expenses will be amortized over a period of two years.

****Material omitted pursuant to a request for confidential treatment under Rule 24b-2 of the Exchange Act of 1934.  Material filed separately with the Securities and Exchange Commission.

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(c)Any Investment Expenses paid by the Manager on behalf of the Account (i.e., out of Manager’s funds and not out of Account funds and other Investments) shall be reimbursed by the Investor promptly upon the Manager’s written request therefore.  The reimbursement of any Investment Expenses by the Investor shall not serve to reduce the Investor’s outstanding unfunded Commitment hereunder.  Upon the Investor’s request, the Manager shall promptly provide to the Investor documentation of the Investment Expenses.

(d)The Manager shall bear the following ordinary day-to-day expenses incidental to the performance of its services hereunder:  (i) all costs and expenses relating to office space, facilities, utility service, supplies and necessary administrative and clerical functions in connection with the Manager’s operations and (ii) compensation of and provision of benefits to all employees of the Manager and its affiliates who are engaged in the operation or management of the Manager’s business.

7.Reports.

The Manager shall prepare and deliver to the Investor, within 60 days following each calendar quarter, a quarterly statement regarding the Account, each which quarterly report shall include the information described in Exhibit C hereto.  The Manager shall prepare and deliver to the Investor, within 15 days following the date of acquisition of each Investment on behalf of the Investor, a closing package with respect to such Investment, which shall include the information contained in the then-standard closing package prepared in connection with similar investments acquired by Capital Trust, Inc. (with conforming changes thereto to reflect that the holder of such Investment is the Investor).  Attached as Exhibit D hereto is the standard Capital Trust, Inc. closing package as of the date hereof.

8.Representations and Warranties.

(a)The Investor represents, warrants and covenants to the Manager as follows:

(i)The Investor has the requisite legal capacity and authority to execute, deliver and perform its obligations under this Agreement.  The person whose signature is affixed to this Agreement on behalf of the Investor has full power and authority to execute this Agreement on the Investor’s behalf.

(ii)This Agreement has been duly authorized, executed and delivered by the Investor and is the legal, valid and binding agreement of the Investor, enforceable against the Investor in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, fraudulent conveyance and other similar laws and principles of equity affecting creditors’ rights and remedies generally.

(iii)The Investor’s execution of this Agreement and the performance of its obligations hereunder do not conflict with, or violate any provisions of, the governing documents of the Investor or any obligations by which the Investor is bound, whether arising by contract, operation of law or otherwise.

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(iv)The Investor recognizes that the Investments involve certain risks and it has taken full cognizance of and understands all of the investment considerations relating thereto.  The Investor has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the Investments and making informed decisions with respect thereto.  The Investor is able to bear the substantial economic risks related to its Investments for an indefinite period of time, has no need for liquidity in its Investments, and, at the present time, can afford a complete loss of its Investments.  The Investor is relying on its own business expertise and sophistication (and that of its advisors) and has performed its own investigation and evaluation of the tax considerations and regulatory matters associated with its Investments.  The Investor has carefully reviewed and fully understands the types of charges, fees and expenses which will be assessed against the Account.  The Investor further acknowledges that, while the Manager will act as an investment advisor to the Investor pursuant to the terms of this Agreement, none of the Manager or any of its affiliates will guarantee that the Investor’s investment purposes and objectives will be achieved.  The Investor is aware that the investment strategies that may be used by the Manager may result in a significant risk of loss and no one can guarantee profits or freedom from loss in such investments and that in some cases it may be necessary for the Investor to advance additional funds in order to protect its Investments.  The Investor is aware that past performance results achieved by funds or accounts supervised and/or managed by the Manager may not be indicative of the performance results of the Account.  The Investor is aware that the Manager is not registered as an investment adviser with the Securities and Exchange Commission under the Investment Advisors Act of 1940, as amended.

(b)The Manager represents, warrants and covenants to the Investor as follows:

(i)The Manager has the requisite legal capacity and authority to execute, deliver and perform its obligations under this Agreement.  The person whose signature is affixed to this Agreement on behalf of the Manager has full power and authority to execute this Agreement on the Manager’s behalf.

(ii)This Agreement has been duly authorized, executed and delivered by the Manager and is the legal, valid and binding agreement of the Manager, enforceable against the Manager in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, fraudulent conveyance and other similar laws and principles of equity affecting creditors’ rights and remedies generally.

(iii)The Manager’s execution of this Agreement and the performance of its obligations hereunder do not conflict with, or violate any provisions of, the governing documents of the Manager or any obligations by which the Manager is bound, whether arising by contract, operation of law or otherwise.

9.Confidentiality.

Except as required by law, (a) the Manager agrees to maintain in strict confidence all information regarding the Investor and its affiliates that is furnished to the Manager by the Investor or its affiliates or representatives in connection with this Agreement or the transactions

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contemplated herein and (b) the Investor agrees to maintain in strict confidence all investment advice and information furnished to the Investor by the Manager or its affiliates or its representatives in connection with this Agreement or the transactions contemplated herein or otherwise obtained through its access to information concerning the Account, including the details of any Investment, in each case, unless required to do so by applicable law, rule or regulation.  Notwithstanding the foregoing, the Investor consents to the use and disclosure by the Manager of the Manager’s entrance into this Agreement, investment experience and performance with respect to the Account, without disclosing the identity of the Investor or its affiliates in connection with such investment experience or performance information (unless prior consent to identity disclosure is obtained from the Investor in writing), and the Manager consents to the Investor’s disclosure of such investment experience and performance information (as well as of the identity of the Manager), but the Investor shall not disclose any information concerning the details of any Investment, unless required to do so by applicable law, rule or regulation.

10.Right to Engage in Other Activities.

The Investor acknowledges and understands that the Manager engages in an investment advisory business apart from managing the Account, including acting as the manager for it’s parent company’s balance sheet investment activity and other affiliated entities.  This will create conflicts of interest with respect to the amount of the Manager’s time devoted to managing the Account and the allocation of investment opportunities among accounts (including the Account) managed by the Manager.  The Manager will attempt to resolve all such conflicts in a manner that is generally fair to all of its clients.  The Investor confirms that the Manager may give advice and take action with respect to any of its other clients (including the other Berkley Entities) that may differ from advice given to, or the timing or nature of action taken with respect to, the Investor.  Nothing in this Agreement shall be deemed to limit the Manager or its affiliates from sourcing, underwriting, negotiating, closing, managing and selling or otherwise liquidating investment opportunities for its own or its affiliates’ accounts; provided, however, that without the prior written consent of the applicable Investor, the Manager agrees that it will not knowingly cause or permit the Account to sell any Investments to the Manager or any of its affiliates and provided further, that the Manager shall promptly notify the applicable Investor in writing if the Manager or any of its affiliates holds or sells an investment which is secured by the same underlying collateral which serves as collateral securing any of the Investor’s Investments.  In addition, if the Account holds any Investment with respect to which the Manager or any of its affiliates holds an investment which is secured by the same underlying collateral and a default occurs with respect to either the Investor’s Investment or the Manager’s investment, the Manager shall notify the Investor of such default in writing promptly upon obtaining knowledge of such default, and the Investor may, in its discretion, withdraw such Investment from the Account.  Nothing in this Agreement shall be deemed to obligate the Manager to acquire for the Investor any investment that the Manager or its, affiliates, officers, partners, members or employees may acquire for its or their own accounts or for the accounts of any other client, if, in the absolute discretion of the Manager, it is not practical or desirable to acquire a participation in such investment for the Investor.

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11.Standard of Liability; Exculpation; Indemnification; Insurance.

(a)The Manager assumes no responsibility under this Agreement other than to render the services called for hereunder with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of a like character.  The Investor and the Manager agree that the Manager will not be liable to the Investor for any loss, claim, demand, damage, liability, cost or expense, including reasonable attorneys’ fees and expenses (each a “Loss”) incurred by the Investor that arises out of or is in any way connected with any recommendation or other act or failure to act of the Manager under this Agreement, including, but not limited to, any error in judgment with respect to the Account, so long as such recommendation or other act or failure to act does not arise from the Manager’s bad faith, negligence, fraudulent or willful misconduct or breach of this Agreement.  Under no circumstances will the Manager be liable or responsible for any Loss incurred by reason of any act or omission of any custodian, servicer, broker or dealer, whether appointed by the Investor or chosen with reasonable care by the Manager.  With respect to Losses that arise out of or are in any way connected with any recommendation or other act or failure to act of the Manager under this Agreement, including, but not limited to, any error in judgment with respect to the Account, which arise from the Manager’s negligence (but not from the Manager’s bad faith, gross negligence, fraudulent or willful misconduct or intentional breach of this Agreement) under no circumstances will the Manager be liable or responsible for such Losses to the extent that they exceed the aggregate amount of Management Fees received by the Manager pursuant to this Agreement.

(b)The Investor agrees to indemnify and hold harmless the Manager and its respective members, partners, shareholders, directors, officers, and employees (each, a “Covered Person”), from and against any Loss to which any Covered Person may become subject (including in connection with the defense or settlement of claims and in connection with any administrative proceedings), insofar as such Loss (or action in respect thereof) arises out of or relates to any act or omission performed or omitted by the any Covered Person arising out of or in connection with this Agreement, the Investor’s Investments and the Account; provided that no Covered Person shall be entitled to be indemnified hereunder for any Losses that are finally judicially determined to have resulted primarily from (i) the bad faith, gross negligence or  fraudulent or willful misconduct of a Covered Person or the Manager’s breach of this Agreement (in the case of any Losses in respect of any action or claim brought by any policy holders or shareholders of the Investor) or (ii) the bad faith, negligence or fraudulent or willful misconduct of a Covered Person or the Manager’s breach of this Agreement (in the case of all other Losses); and provided, further, that in the case of a claim involving an Investment in which the Manager and the Investor both participate in the transaction, the indemnity shall be provided on a pro rata basis between the Manager, on the one hand, and the Investor, on the other hand.  If any Covered Person becomes involved in any capacity in any action, proceeding or investigation in connection with any matter with respect to which such Covered Person may seek to be indemnified hereunder, then the Investor shall reimburse such Covered Person for its reasonable legal and other out of pocket expenses (including the cost of any investigation and preparation) as they are incurred in connection therewith; provided that if such Loss is finally judicially determined to have resulted primarily from any of the events described in clause (i) or (ii) above, a Covered Person shall repay to the Investor all amounts which the Investor advanced to such

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Covered Person pursuant to this Section; and provided, further, that any Covered Person seeking indemnification under this Section (other than the Manager) shall (at the time that such Covered Person seeks such indemnification) execute an undertaking to repay to the Investor the amounts advanced to such Covered Person hereunder if such Loss is finally judicially determined to have resulted primarily from any of the events described in clause (i) or (ii) above.  The indemnities in this Section 11 are in addition to any liability that any indemnifying party may otherwise have and will extend, upon the same terms and conditions, to each person, if any, who controls any indemnified party within the meaning of the Securities Act of 1933 Act, as amended.  If for any reason (other than by reason of the exclusions from indemnification set forth above) the foregoing indemnification is unavailable to any Covered Person, or insufficient to hold it harmless, then the Investor shall, to the fullest extent permitted by law, contribute to the amount paid or payable by such Covered Person as a result of such loss, claim, damage, liability or expense in such proportion as is appropriate to reflect the relative benefits received, as applicable, by the Investor, on the one hand, and such Covered Person, 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.  Notwithstanding anything herein to the contrary, the Investor shall only indemnify a Covered Person for such Covered Person’s out of pocket expenses which are reasonable and appropriate to the exposure being indemnified.

(c)The Manager shall maintain, with financially sound and reputable insurers, insurance in such amounts and against such risks as are customarily maintained by reputable companies under similar circumstances.

12.Term and Termination.

(a)This Agreement, unless sooner terminated upon the occurrence of any of the events listed below, shall terminate on the earlier to occur of (i) the termination of this Agreement pursuant to Section 2(b)(ii) and (ii) the date of the liquidation of the last Investment held in the Account following the termination of the Commitment Period pursuant to Section 2(b)(i).

(b)The Investor may terminate this Agreement by written notice to the Manager immediately, upon the bankruptcy, liquidation or dissolution of the Manager or in the event that the Manager materially breaches this Agreement and such breach is not cured within 30 days of receipt by the Manager of the Investor written notice of such breach.

(c)The Manager may terminate this Agreement by written notice to the Investor immediately, upon the bankruptcy, liquidation, or dissolution of the Investor or in the event that the Investor materially breaches this Agreement, including, but not limited to, its obligation to fund the Account, and such breach is not cured within 30 days of receipt by the Investor of the Manager’s written notice of such breach.

(d)Notwithstanding any provision hereof to the contrary, in the event that either Party hereto alleges that the other Party has been grossly negligent or committed fraudulent or willful misconduct with respect to this Agreement or the transactions contemplated hereunder, the alleging Party shall give written notice thereof to the other Party, whereupon this

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Agreement shall be suspended until the resolution of such allegation in accordance with the provisions of Section 15 hereof.  During any such suspension, (i) the Investor shall not be required to make any payments required to be made under Section 5 hereof to the Manager and (ii) the Manager shall not be required to perform any services on behalf of the Investor or with respect to the Account or any Investment; provided that any such suspension will not have any effect on the Investor’s and the Manager’s respective rights and obligations (including the Investor’s obligation to meet capital calls) with respect to any Investment which, prior to the suspension of this Agreement, the Manager, on behalf of the Investor, entered into a binding commitment or letter of intent to acquire or in order to meet unfunded commitments for outstanding Investments of the Investor.

(e)Except as otherwise provided herein, during the term of this Agreement, the Investor may not, without the Manager’s prior written consent, withdraw funds or any Investments from the Account.

(f)Sections 2, 6 (to the extent of any unpaid costs and expenses), 9, 11, 12(e), 13, 14(b) and 16 shall survive the termination of this Agreement.

13.Anti-Money Laundering.

The Investor represents, warrants and agrees that:  (a) the Investor desires to open the Account for legitimate, valid and legal business and/or personal reasons and not with any intent or purpose to violate any applicable law or regulation; (b) to the Investor’s knowledge, the funds used to open the Account are derived from legitimate and legal sources, and neither such funds nor the Account (or any proceeds thereof) will be used by the Investor or, to the Investor’s knowledge, by any person associated with the Investor, to finance any terrorist or other illegitimate, illegal or criminal activity; (c) the Investor  has in place, and will maintain during the term of this Agreement, an appropriate anti-money laundering program that complies in all material respects with all applicable laws and regulations including, without limitation, the “USA PATRIOT ACT,” and that is reasonably designed to detect and report any activity that raises suspicion of money laundering activities, and the Investor has obtained all appropriate and necessary background information respecting its officers and beneficial owners to enable the Investor to comply with all applicable laws, rules and regulations respecting money laundering activities; and (d) the Manager may request, and the Investor will provide, such information as may be necessary for the Manager to comply with applicable legal or regulatory requirements, including, without limitation, anti-money laundering requirements, and that notwithstanding any other provision of this Agreement the Manager may disclose information respecting the Investor to governmental and/or regulatory or self-regulatory authorities to the extent required by applicable law or regulation and may file reports with such authorities as may be required by applicable law or regulation.  If required by applicable law, regulation, or interpretation thereof, the Manager may suspend any and all activity with respect to the Account pending the Manager’s receipt of instructions regarding the Account from the appropriate governmental or regulatory authority.

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14.ERISA.

(a)           The Investor represents and warrants that (i) it or its parent corporation (direct or indirect) is an insurance company regulated by at least one state and is investing assets held only in its general account or, if it is a wholly-owned subsidiary of an insurance company, it is investing assets contributed, directly or indirectly, only from the general account of its parent corporation and (ii) none of its general account assets or the general account assets of its direct or indirect parent corporation include assets of an employee benefit plan subject to Part 4 of Title 1 of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”).  The Investor covenants that, if the assets invested by the Investor constitute assets of such plans in the future, the Investor will notify the Manager immediately. In such a case, notwithstanding Section 12 hereof, the Manager may immediately terminate this Agreement.

(b)           The Investor shall indemnify the Manager for any and all claims, liabilities, losses, costs, demands and expenses (including, without limitation, reasonable attorney’s fees and disbursements and all other amounts paid in preparation, investigation, defense, mitigation or settlement of any claim, in each case, as such expenses are incurred and paid) occasioned by the “plan assets status” of the Investor or the Account, including, without limitation, arising out of any prohibited transactions within the meaning of Section 406 of ERISA or 4975 of the Code that may result during any period in which assets of the Account constitute plan assets.

15.Arbitration.

(a)           Any dispute arising out of or relating in any manner to this Agreement or to the breach, termination, enforcement, interpretation or validity of this Agreement, including the determination of the scope or applicability of this agreement to arbitrate (each a “Dispute”) shall be resolved in accordance with the procedures specified in this Section 15, except that any action brought to obtain injunctive relief shall be brought in any court of competent jurisdiction.  The procedures described in this Section 15 shall be the sole and exclusive procedures for the resolution of any Disputes.

(b)           Any Dispute shall be settled by final and binding arbitration in New York City, New York before JAMS, or its successor, pursuant to the United States Arbitration Act, 9 U.S.C. Sec. 1 et seq., by filing a written demand for arbitration with JAMS, with a copy to the other Party.  The arbitration will be conducted in accordance with the provisions of JAMS’ Comprehensive Arbitration Rules and Procedures in effect at the time of filing of the demand for arbitration; provided that the Parties agree that each Party to the Dispute shall have discovery to the same extent as provided under the Federal Rules of Civil Procedure.

(c)           When a Dispute has been submitted for arbitration, within 14 days of such submission, the Investors and the Manager will cooperate with one another and with JAMS in (i) selecting one arbitrator from their panel of neutrals and (ii) scheduling the arbitration proceedings.

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(d)           This agreement to arbitrate shall be specifically enforceable against the Parties by any court of competent jurisdiction, and may be challenged only upon the grounds provided in Section 10 to the United States Arbitration Act, 9 U.S.C. Sec. 10.  Application also may be made to such court to confirm, modify or vacate any decision or award of the arbitrator, for an order of enforcement and for any other remedies which may be necessary to effectuate such decision or award.  The Parties hereby consent to the jurisdiction of the arbitrator and of such court and waive any objection to the jurisdiction of such arbitrator and such court.

(e)           As a part of any arbitration award, in the discretion of the arbitrator, any Party may be awarded the reimbursement of its costs and expenses (including reasonable attorneys’ fees) of investigating, preparing and pursuing its arbitration claim.  No punitive damages may be awarded in the arbitration.

16.Miscellaneous.

(a)           No Party may assign any of its rights or obligations under this Agreement without the prior written consent of the other Parties.  This Agreement may not be amended or modified except by written instrument duly executed by each of the Parties hereto.

(b)           THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO NEW YORK CONFLICTS OF LAWS PRINCIPLES.  THE PARTIES HEREBY IRREVOCABLY WAIVE ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM AGAINST ANY PARTY RELATING IN ANY WAY TO THIS AGREEMENT OR THE OPERATION OF THE ACCOUNT.

(c)           All communications under this Agreement must be in writing and will be deemed to have been properly given (i) immediately if delivered by hand, (ii) immediately if delivered by facsimile, confirmation of transmission received, (iii) three days after sent by certified mail, return receipt requested or (iv) one Business Day after being deposited for next-day delivery with Federal Express or another nationally recognized overnight delivery service, all charges or postage prepaid, in each such case properly addressed to the Party to receive such notice at that Party’s address indicated below, or at any other address that any Party may designate by notice to the other Parties.

Address for notices to the Manager:

CT High Grade Mezzanine Manager, LLC
c/o Capital Trust, Inc.
410 Park Avenue
New York, New York 10022
Fax:  212-655-0244
Attention:  Geoffrey Jervis

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with a copy to:

Paul Hastings Janofsky & Walker, LLP
75 East 55th Street
New York, NY 10022
Fax: 212-319-4090
Attention: Michael L. Zuppone

Addresses for notices to the Investor:

Berkley Regional Insurance Company
c/o W.R. Berkley Corporation

475 Steamboat Road

Greenwich, CT  06830
Fax:  203-769-4096
Attention:  James Shiel

with a copy to:

W.R. Berkley Corporation
475 Steamboat Road
Greenwich, CT  06830
Fax:  203-769-4097
Attention:  General Counsel

(d)           The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any and all other provisions hereof.

(e)           This Agreement is the entire agreement of the Parties and supersedes all prior or contemporaneous written or oral negotiations, correspondence, agreements and understandings, regarding the subject matter hereof.

(f)            This Agreement may be executed by facsimile and in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

(g)           Nothing in this Agreement shall be deemed to create any right in any Person not a party hereto (other than each Covered Person and the permitted successors and assigns of the parties 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).

[Signature Page Follows]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their duly authorized officers, on the date first written above.

CT HIGH GRADE MEZZANINE MANAGER, LLC
By:	/s/ Geoffrey G. Jervis
	Name: Geoffrey G. Jervis
	Title:  Chief Financial Officer
BERKLEY REGIONAL INSURANCE COMPANY
By:	/s/ Eugene G. Ballard
	Name: Eugene G. Ballard
	Title:  Senior Vice President

Schedule A

Schedule of Berkley Entities

1.             Berkley Insurance Company

2.             Berkley Regional Insurance Company

3.             Admiral Insurance Company

Exhibit A

Investment Criteria and Constraints

1.Investments are limited to first mortgage loans or mezzanine loans or interests in mortgage loans

2.Fair market value of the underlying real estate to be determined by a qualified appraiser at the time of origination or acquisition

3.$30 million maximum/$15 million minimum individual investment size.

4.67% maximum last dollar Investment-to-value.

5.Minimum credit spread of [****].

6.Floating rate.

7.Maximum term 5 years.

8.$125 million maximum total exposure (across the accounts established in connection with all Berkley Agreements) to single property type (i.e. hotel, retail, residential, industrial).

9.Investments limited to United States and U.S. territories.  $125 million maximum total exposure (across the accounts established in connection with all Berkley Agreements), on a cost basis, to any single State.  $100 million maximum total exposure (across the accounts established in connection with all Berkley Agreements), on a cost basis, to New York City, New York.  No investments in the State of Florida.

10.Each mezzanine real estate loan must comply with SSAP 83, as evidenced by a completed SSAP 83 Questionnaire, in the form of Exhibit F hereto, which the Manager shall complete with respect to the applicable Investment and deliver with the applicable Funding Notice.

**** Material omitted pursuant to a request for confidential treatment under Rule 24b-2 of the Exchange Act of 1934.  Material filed separately with the Securities and Exchange Commission.

Exhibit B

Form of Funding Notice

From:      CT High Grade Mezzanine Manager, LLC
410 Park Avenue
New York, New York 10022

To:  Berkley Regional Insurance Company
c/o W.R. Berkley Corporation
475 Steamboat Road
Greenwich, CT  06830
Fax:  203-769-4096
Attention:  James Shiel

Re:Capital call pursuant to Section 2 of the Management Agreement, dated November 9, 2006, between Berkley Regional Insurance Company and CT Investment Management Co, LLC

Funding Notice Date:
Funding Date:
Commitment Amount:	$
Amount Funded to Date:
Current Funding Request:
Remaining Unfunded Commitment:
Recent Appraised Value:
Compliance with Investment Criteria:
Investment Size:
Last dollar Investment to value:
Credit spread over appropriate index:
Floating rate (yes/no):
Index:
Term:
Property Type/Total Exposure to Property Type:
Location of Investment (State)/Total Exposure to this State:

NOTE: To the extent that any deviation from the Investment Criteria is set forth above, the Manager must obtain the prior written consent of the applicable Investor before the origination or acquisition of the Investment.

Exhibit C

Outline of Quarterly Report

1.The Manager Letter

2.Servicer Report

3.(a)           Commitment Summary

(b)Management Fee Summary

(c)Investment Expense Summary

(d)Portfolio Data Summary

(e)Compliance Report

(f)Related Party Report

(g)Individual Asset Write-ups

4.Copies of all Correspondence during the Covered Period

Exhibit D

Form of Closing Package

Exhibit E

Form of Servicing Agreement

Exhibit F

Form of SSAP 83 Questionnaire

EX-10.50

Exhibit 10.50

INVESTMENT MANAGEMENT AGREEMENT

This AGREEMENT is entered into on November 9, 2006 (this “Agreement”), between Admiral Insurance Company, a Delaware insurance company (“the Investor”), and CT High Grade Mezzanine Manager, LLC, a Delaware limited liability company (the “the Manager” and, together with the Investor, each a “Party”).

WHEREAS, the Investor desires to retain the Manager to acquire, sell, and otherwise manage certain commercial real estate debt and related investments of the Investor in a separate account (each, an “Account”) in the manner and on the terms set forth herein;

NOW THEREFORE, in consideration of the mutual promises and agreements herein contained and other good and valuable consideration, the receipt of which is hereby acknowledged, it is agreed by and between the parties hereto as follows:

1.Services, Investment Discretion.

(a)           The Manager will source, underwrite, negotiate, close, manage and, in accordance with Section 1(b), sell and/or liquidate on behalf of the Investor commercial real estate debt and related investments (“Investments”).  At origination, such Investments shall meet the investment criteria as listed in Exhibit A hereto (the “Investment Criteria”) or as mutually agreed upon in writing by the Manager and the Investor.

(b)           Following origination or acquisition of an Investment, the Investor  shall have the authority and power to direct the Manager to sell or liquidate any such Investment whereupon the Manager shall dispose of such Investment in accordance with the Investor’s direction.

(c)           Subject to Sections 1(a) and (b), the Investor hereby grants the Manager full and exclusive discretion as to all decisions regarding the Investments made on behalf of the Investor in accordance with Section 1(a) hereof.

2.Commitments, Capital Calls.

(a)           Subject to the terms and conditions set forth in this Section 2, the Investor agrees to make available for investment up to $80million (the Investor’s “Commitment”), such Commitment to be (i) reduced by the amount of outstanding and committed Investments in the Account (on a cost basis) and (ii) increased by any principal repayments with respect to the Investor’s Investments during the Commitment Period (as defined below).

(b)           The “Commitment Period” shall be a period beginning on the date hereof and ending on the first anniversary of the date hereof at which time the Commitment Period shall be automatically extended until the 45th day after the date that either the Investor,

on the one hand, or the Manager, on the other hand, delivers written notice to the other Party hereto of its election to terminate the Commitment Period unless (i) either the Investor, on the one hand, or the Manager, on the other hand, provides 30 day prior notice of its election to terminate the Commitment Period as of such first anniversary date or (ii) the Investor, on the one hand, or the Manager, on the other hand, elects to terminate the Agreement.

(c)           During the Commitment Period, the Investor shall meet capital calls made to the Investor by depositing cash into a bank account (the Investor’s “Capital Call Account”) from time to time when called by the Manager pursuant to a written notice in accordance with Section 16(c) in the form of Exhibit B hereto (a “Funding Notice”).  The Investor will be required to fund into its Capital Call Account the amount set forth in a Funding Notice on the date specified in such Funding Notice, which date shall not be earlier than three Business Days after the date that such Funding Notice was delivered to the Investor.  For purposes of this Agreement, “Business Day” shall mean any day of the week other than Saturdays, Sundays and days on which federally chartered banks in the State of New York are not open for business.

(d)           The Manager agrees that capital calls shall be made no earlier than is reasonably necessary to fund the Investments at the scheduled closing on the transaction. Subsequent to the Investor’s deposit of cash into the Capital Call Account, in the event that the Manager becomes aware of a material delay in the closing of the Investment with respect to which such cash was deposited, or the Manager determines that such closing will not occur, the Manager will provide written notice thereof to the Investor, whereupon the Investor may withdraw such cash from the Capital Call Account (provided that such amount will be added back to the Investor’s uncalled Commitment).

(e)           Notwithstanding the foregoing, the Manager may require that the  Investor deposit cash into its Capital Call Account following the Commitment Period in order to fund the acquisition of any Investment which, prior to the termination of the Commitment Period, the Manager, on behalf of the Investor, entered into a binding commitment or letter of intent to acquire or in order to meet unfunded commitments for outstanding Investments of the Investor.

(f)            The aggregate amount which the Investor will be required to fund into its Capital Call Account shall not exceed its Commitment.

(g)           On or about the date hereof, the Manager is entering into investment management agreements substantially in the form of this Agreement (together with this Agreement, the “Berkley Agreements”) with each of the entities identified on Schedule A hereto (together, the “Berkley Entities”).  Investments will be acquired on behalf of the Investor and the other Berkley Entities in a serial manner, i.e. the first Investment closed under the Berkley Agreements will be acquired on behalf of the first Berkley Entity listed on Schedule A, the second Investment closed under the Berkley Agreements will be acquired on behalf of the second Berkley Entity listed on Schedule A, the third Investment closed under the Berkley Agreements will be acquired on behalf of the third Investor listed on Schedule A, the fourth Investment closed under the Berkley Agreements will be acquired on behalf of the first Berkley Entity listed on Schedule A and so on.

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3.Agent and Attorney-in-Fact.

To enable the Manager to exercise fully its discretion and authority as provided in this Agreement, the Investor does hereby constitute and appoint the Manager, and any officer of the Manager acting on its behalf from time to time, as the Investor’s true and lawful representative and attorney-in-fact, in its name, place and stead to make, execute, sign, deliver and file any agreements, contracts, instruments, certificates or documents authorized by the Manager in accordance with its authority under Section 1.  This power of attorney is deemed to be coupled with an interest.

4.Servicing and Custody.

(a)           The Investor and the Manager agree to enter into a servicing agreement with Midland Investment Services, Inc. (“Midland”), in the form of Exhibit E hereto,  pursuant to which Midland will be retained, at the Investor’s cost, to perform customary servicing with respect to the Investor’s Investments, including (i) the receipt of payments with respect to each of the Investor’s Investment from the applicable primary servicer and distribution of such payments to the Investor and (ii) the production of monthly servicing reports which will be subject to review by the Manager.

(b)           The Manager may cause each of the Investor’s Investments (and documents relating thereto) to be held, at the Investor’s cost, by the Manager or by a custodian agreed to by the Manager and the Investor, subject to insurance laws and regulations governing the Investor.  The Investor agrees to enter into a custodial agreement (providing for market terms) with such custodian.

(c)           The Manager agrees that it will maintain all records, memoranda, instructions or authorizations relating to the acquisition or disposition of the Investor’s Investments authorized hereunder on behalf of the Investor in accordance with the Manager’s document retention standards and practices.  All documents maintained by Manager with respect to the foregoing shall (i) be open at all times to inspection and audit by the Investor or its authorized representatives; (ii) be delivered to the Investor upon demand; and (iii) be and remain the property of the Investor. The Manager will provide copies of documents retained in accordance with the foregoing at the Investor’s cost.

(d)           The Manager shall, at the request of the Investor and at the Investor’s cost, assist and provide operational support in connection with the audit of any documents with respect to the services provided under this Agreement undertaken by the Investor’s internal auditors, certified public accountants or the insurance department or commissioner of any state, or upon the request of any governmental agency.

(e)           The Manager shall provide, upon the Investor’s request and at the Investor’s cost, copies any records which are necessary to file any report required by any federal, state, or local government or agency.

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5.Management, Termination and Liquidation Fees.

(a)           During the Commitment Period, the Investor shall pay to the Manager an annual management fee (the “Management Fee”) equal to 0.25% of the aggregate amount of the Investor’s Investments (on a cost basis, less any principal repayments and realized losses thereon and less the amount of any such Investment withdrawn from the Account pursuant to the last sentence of Section 10 hereof).  The Management Fee payable by the Investor will be payable in advance on a quarterly basis based upon the Investments of the Investor outstanding as of the first day of such quarter and the Investments of the Investor acquired during the quarter on a pro rated basis.  The payment of Management Fees by the Investor shall not serve to reduce the Investor’s outstanding unfunded Commitment.

(b)           If the Investor shall terminate the Commitment Period pursuant to Section 2(b)(i), the Investor shall continue to pay Management Fees to the Manager in accordance with Section 5(a) until the Investor’s Investments have been satisfied or liquidated in accordance with their terms.

(c)           If the Investor shall terminate the Agreement pursuant to Section 2(b)(ii), the Investor shall pay the Manager a termination fee equal to 0.25% of the aggregate amount of the Investor’s Investments as of the effective date of such termination (on a cost basis, less any principal repayments and realized losses thereon and less the amount of any such Investment withdrawn from the Account pursuant to the last sentence of Section 10 hereof), which fee shall be payable within three Business Days of such termination.  Notwithstanding the foregoing, if the Investor shall (i) terminate the Agreement pursuant to Section 2(b)(ii) and (ii) direct the disposition of any of the Investor’s Investments pursuant to Section 1(b), then the Investor shall (x) pay the liquidation fee set forth in Section 5(d) with respect to each such Investment which the Investor has directed should be disposed of and (y) pay the termination fee set forth in this Section 5(c) with respect to each other Investment.

(d)           If the Investor shall direct the disposition of any of the Investor’s Investments pursuant to Section 1(b), the Investor shall pay the Manager a liquidation fee equal to 0.25% of the aggregate Disposition Amount (as defined herein) of the Investment(s) directed to be disposed by the Investor, which fee shall be payable within three Business Days of such disposition.  For the purposes hereof, with respect to any Investment, “Disposition Amount” means the greater of (i) the cost of such Investment, less any principal repayments and realized losses thereon and less the amount of any such Investment withdrawn from the Account pursuant to the last sentence of Section 10 hereof and (ii) the amount received in connection with the disposition of such Investment.

(e)           Upon termination of the Agreement, the Manager shall no longer have the right to Management Fees other than Management Fees which have accrued but are unpaid as of the date of termination of this Agreement.

6.Expenses.

(a)           The Investor, on the one hand, and the Manager, on the other hand, shall bear and be responsible for the payment of all out of pocket expenses related to the

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preparation of this Agreement and the organization of the Account (including the Manager’s legal fees and expenses) on 50/50 even basis.  Thereafter, the Investor and the Manager shall each bear their respective costs and expense related to any amendment or modification of this Agreement.

(b)           The Investor shall bear and be responsible for the payment of all reasonable, out of pocket costs and expenses related to the Account’s activities and operations, including all investment, reinvestment, holding, management and disposition of the Investor’s Investments, and including, but not limited to the following: (i) all out-of-pocket costs and expenses incurred in developing, negotiating and structuring Investments allocated to the Investor in accordance with Section 2(g) hereof, whether consummated or not consummated, and acquiring, disposing of or otherwise dealing with such Investments, including, without limitation, any investment banking, engineering, appraisal, environmental, travel, legal and accounting expenses, any deposits and commitment fees and other fees and out-of-pocket costs related thereto, provided that in such cases where the Manager or an affiliate of the Manager and the Investor both participate in the same transaction, expenses will be shared on pro rata basis; (ii) all costs and expenses, if any, incurred in monitoring the Investor’s Investments, including, without limitation, any engineering, environmental, third-party payment processing, travel, legal, servicing, custodial and accounting expenses and other fees and out-of-pocket costs related thereto, provided that in such cases where the Manager or an affiliate of the Manager and the Investor both have an interest in the same asset, expenses will be shared on pro rata basis; (iii) taxes of the Investor; (iv) costs related to litigation and threatened litigation involving the Account and Investments; (v) expenses associated with third party accountants, attorneys and tax advisors with respect to the Account and its activities, including the preparation of reports and statements and other similar matters, and costs associated with the distribution of reports to the Investor; (vi) origination fees or commissions and other investment costs incurred by or on behalf of the Account and paid to third parties; (vii) all costs and expenses associated with indemnifying the Covered Persons whom the Investor has agreed to indemnify (except to the extent that any such costs or expenses have otherwise been reimbursed pursuant to Section 11(b) hereof); (viii) fees incurred in connection with the maintenance of bank or custodian accounts on behalf of the Investor; and (ix) all expenses of the Account that are not normally recurring operating expenses (collectively, “Investment Expenses”); provided further that the Manager agrees that it will not incur any costs and expenses in connection with the origination of any Investment if such costs and expenses would reduce the weighted average Net Spread (as defined herein) [****]; and provided further that the Manager agrees that it will not incur any costs and expenses covered by clauses (i) and (ix) of this Section 6(b) unless they reflect prevailing market rates.  For purposes hereof, “Net Spread” means (A) the gross spread of all Investments originated for all Berkley Entities (measured as of the date of origination or acquisition of any Investment) pursuant to the Berkley Agreements less (B) the sum of all Management Fees, servicing fees and Transaction Expenses (as defined herein) paid or incurred under all Berkley Agreements.  For purposes hereof, “Transaction Expenses” means all out-of-pocket costs and expenses incurred in developing, negotiating and structuring Investments and acquiring, disposing of or otherwise dealing with Investments pursuant to all Berkley Agreements.  In calculating Net Spread, Transaction Expenses will be amortized over a period of two years.

**** Material omitted pursuant to a request for confidential treatment under Rule 24b-2 of the Exchange Act of 1934.  Material filed separately with the Securities and Exchange Commission.

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(c)           Any Investment Expenses paid by the Manager on behalf of the Account (i.e., out of Manager’s funds and not out of Account funds and other Investments) shall be reimbursed by the Investor promptly upon the Manager’s written request therefore.  The reimbursement of any Investment Expenses by the Investor shall not serve to reduce the Investor’s outstanding unfunded Commitment hereunder.  Upon the Investor’s request, the Manager shall promptly provide to the Investor documentation of the Investment Expenses.

(d)           The Manager shall bear the following ordinary day-to-day expenses incidental to the performance of its services hereunder:  (i) all costs and expenses relating to office space, facilities, utility service, supplies and necessary administrative and clerical functions in connection with the Manager’s operations and (ii) compensation of and provision of benefits to all employees of the Manager and its affiliates who are engaged in the operation or management of the Manager’s business.

7.Reports.

The Manager shall prepare and deliver to the Investor, within 60 days following each calendar quarter, a quarterly statement regarding the Account, each which quarterly report shall include the information described in Exhibit C hereto.  The Manager shall prepare and deliver to the Investor, within 15 days following the date of acquisition of each Investment on behalf of the Investor, a closing package with respect to such Investment, which shall include the information contained in the then-standard closing package prepared in connection with similar investments acquired by Capital Trust, Inc. (with conforming changes thereto to reflect that the holder of such Investment is the Investor).  Attached as Exhibit D hereto is the standard Capital Trust, Inc. closing package as of the date hereof.

8.Representations and Warranties.

(a)           The Investor represents, warrants and covenants to the Manager as follows:

(i)            The Investor has the requisite legal capacity and authority to execute, deliver and perform its obligations under this Agreement.  The person whose signature is affixed to this Agreement on behalf of the Investor has full power and authority to execute this Agreement on the Investor’s behalf.

(ii)           This Agreement has been duly authorized, executed and delivered by the Investor and is the legal, valid and binding agreement of the Investor, enforceable against the Investor in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, fraudulent conveyance and other similar laws and principles of equity affecting creditors’ rights and remedies generally.

(iii)          The Investor’s execution of this Agreement and the performance of its obligations hereunder do not conflict with, or violate any provisions of, the governing documents of the Investor or any obligations by which the Investor is bound, whether arising by contract, operation of law or otherwise.

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(iv)          The Investor recognizes that the Investments involve certain risks and it has taken full cognizance of and understands all of the investment considerations relating thereto.  The Investor has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the Investments and making informed decisions with respect thereto.  The Investor is able to bear the substantial economic risks related to its Investments for an indefinite period of time, has no need for liquidity in its Investments, and, at the present time, can afford a complete loss of its Investments.  The Investor is relying on its own business expertise and sophistication (and that of its advisors) and has performed its own investigation and evaluation of the tax considerations and regulatory matters associated with its Investments.  The Investor has carefully reviewed and fully understands the types of charges, fees and expenses which will be assessed against the Account.  The Investor further acknowledges that, while the Manager will act as an investment advisor to the Investor pursuant to the terms of this Agreement, none of the Manager or any of its affiliates will guarantee that the Investor’s investment purposes and objectives will be achieved.  The Investor is aware that the investment strategies that may be used by the Manager may result in a significant risk of loss and no one can guarantee profits or freedom from loss in such investments and that in some cases it may be necessary for the Investor to advance additional funds in order to protect its Investments.  The Investor is aware that past performance results achieved by funds or accounts supervised and/or managed by the Manager may not be indicative of the performance results of the Account.  The Investor is aware that the Manager is not registered as an investment adviser with the Securities and Exchange Commission under the Investment Advisors Act of 1940, as amended.

(b)           The Manager represents, warrants and covenants to the Investor as follows:

(i)            The Manager has the requisite legal capacity and authority to execute, deliver and perform its obligations under this Agreement.  The person whose signature is affixed to this Agreement on behalf of the Manager has full power and authority to execute this Agreement on the Manager’s behalf.

(ii)           This Agreement has been duly authorized, executed and delivered by the Manager and is the legal, valid and binding agreement of the Manager, enforceable against the Manager in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, fraudulent conveyance and other similar laws and principles of equity affecting creditors’ rights and remedies generally.

(iii)          The Manager’s execution of this Agreement and the performance of its obligations hereunder do not conflict with, or violate any provisions of, the governing documents of the Manager or any obligations by which the Manager is bound, whether arising by contract, operation of law or otherwise.

9.Confidentiality.

Except as required by law, (a) the Manager agrees to maintain in strict confidence all information regarding the Investor and its affiliates that is furnished to the Manager by the Investor or its affiliates or representatives in connection with this Agreement or the transactions

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contemplated herein and (b) the Investor agrees to maintain in strict confidence all investment advice and information furnished to the Investor by the Manager or its affiliates or its representatives in connection with this Agreement or the transactions contemplated herein or otherwise obtained through its access to information concerning the Account, including the details of any Investment, in each case, unless required to do so by applicable law, rule or regulation.  Notwithstanding the foregoing, the Investor consents to the use and disclosure by the Manager of the Manager’s entrance into this Agreement, investment experience and performance with respect to the Account, without disclosing the identity of the Investor or its affiliates in connection with such investment experience or performance information (unless prior consent to identity disclosure is obtained from the Investor in writing), and the Manager consents to the Investor’s disclosure of such investment experience and performance information (as well as of the identity of the Manager), but the Investor shall not disclose any information concerning the details of any Investment, unless required to do so by applicable law, rule or regulation.

10.Right to Engage in Other Activities.

The Investor acknowledges and understands that the Manager engages in an investment advisory business apart from managing the Account, including acting as the manager for it’s parent company’s balance sheet investment activity and other affiliated entities.  This will create conflicts of interest with respect to the amount of the Manager’s time devoted to managing the Account and the allocation of investment opportunities among accounts (including the Account) managed by the Manager.  The Manager will attempt to resolve all such conflicts in a manner that is generally fair to all of its clients.  The Investor confirms that the Manager may give advice and take action with respect to any of its other clients (including the other Berkley Entities) that may differ from advice given to, or the timing or nature of action taken with respect to, the Investor.  Nothing in this Agreement shall be deemed to limit the Manager or its affiliates from sourcing, underwriting, negotiating, closing, managing and selling or otherwise liquidating investment opportunities for its own or its affiliates’ accounts; provided, however, that without the prior written consent of the applicable Investor, the Manager agrees that it will not knowingly cause or permit the Account to sell any Investments to the Manager or any of its affiliates and provided further, that the Manager shall promptly notify the applicable Investor in writing if the Manager or any of its affiliates holds or sells an investment which is secured by the same underlying collateral which serves as collateral securing any of the Investor’s Investments.  In addition, if the Account holds any Investment with respect to which the Manager or any of its affiliates holds an investment which is secured by the same underlying collateral and a default occurs with respect to either the Investor’s Investment or the Manager’s investment, the Manager shall notify the Investor of such default in writing promptly upon obtaining knowledge of such default, and the Investor may, in its discretion, withdraw such Investment from the Account.  Nothing in this Agreement shall be deemed to obligate the Manager to acquire for the Investor any investment that the Manager or its, affiliates, officers, partners, members or employees may acquire for its or their own accounts or for the accounts of any other client, if, in the absolute discretion of the Manager, it is not practical or desirable to acquire a participation in such investment for the Investor.

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11.Standard of Liability; Exculpation; Indemnification; Insurance.

(a)           The Manager assumes no responsibility under this Agreement other than to render the services called for hereunder with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of a like character.  The Investor and the Manager agree that the Manager will not be liable to the Investor for any loss, claim, demand, damage, liability, cost or expense, including reasonable attorneys’ fees and expenses (each a “Loss”) incurred by the Investor that arises out of or is in any way connected with any recommendation or other act or failure to act of the Manager under this Agreement, including, but not limited to, any error in judgment with respect to the Account, so long as such recommendation or other act or failure to act does not arise from the Manager’s bad faith, negligence, fraudulent or willful misconduct or breach of this Agreement.  Under no circumstances will the Manager be liable or responsible for any Loss incurred by reason of any act or omission of any custodian, servicer, broker or dealer, whether appointed by the Investor or chosen with reasonable care by the Manager.  With respect to Losses that arise out of or are in any way connected with any recommendation or other act or failure to act of the Manager under this Agreement, including, but not limited to, any error in judgment with respect to the Account, which arise from the Manager’s negligence (but not from the Manager’s bad faith, gross negligence, fraudulent or willful misconduct or intentional breach of this Agreement) under no circumstances will the Manager be liable or responsible for such Losses to the extent that they exceed the aggregate amount of Management Fees received by the Manager pursuant to this Agreement.

(b)           The Investor agrees to indemnify and hold harmless the Manager and its respective members, partners, shareholders, directors, officers, and employees (each, a “Covered Person”), from and against any Loss to which any Covered Person may become subject (including in connection with the defense or settlement of claims and in connection with any administrative proceedings), insofar as such Loss (or action in respect thereof) arises out of or relates to any act or omission performed or omitted by the any Covered Person arising out of or in connection with this Agreement, the Investor’s Investments and the Account; provided that no Covered Person shall be entitled to be indemnified hereunder for any Losses that are finally judicially determined to have resulted primarily from (i) the bad faith, gross negligence or  fraudulent or willful misconduct of a Covered Person or the Manager’s breach of this Agreement (in the case of any Losses in respect of any action or claim brought by any policy holders or shareholders of the Investor) or (ii) the bad faith, negligence or fraudulent or willful misconduct of a Covered Person or the Manager’s breach of this Agreement (in the case of all other Losses); and provided, further, that in the case of a claim involving an Investment in which the Manager and the Investor both participate in the transaction, the indemnity shall be provided on a pro rata basis between the Manager, on the one hand, and the Investor, on the other hand.  If any Covered Person becomes involved in any capacity in any action, proceeding or investigation in connection with any matter with respect to which such Covered Person may seek to be indemnified hereunder, then the Investor shall reimburse such Covered Person for its reasonable legal and other out of pocket expenses (including the cost of any investigation and preparation) as they are incurred in connection therewith; provided that if such Loss is finally judicially determined to have resulted primarily from any of the events described in clause (i) or (ii) above, a Covered Person shall repay to the Investor all amounts which the Investor advanced to such

9

Covered Person pursuant to this Section; and provided, further, that any Covered Person seeking indemnification under this Section (other than the Manager) shall (at the time that such Covered Person seeks such indemnification) execute an undertaking to repay to the Investor the amounts advanced to such Covered Person hereunder if such Loss is finally judicially determined to have resulted primarily from any of the events described in clause (i) or (ii) above.  The indemnities in this Section 11 are in addition to any liability that any indemnifying party may otherwise have and will extend, upon the same terms and conditions, to each person, if any, who controls any indemnified party within the meaning of the Securities Act of 1933 Act, as amended.  If for any reason (other than by reason of the exclusions from indemnification set forth above) the foregoing indemnification is unavailable to any Covered Person, or insufficient to hold it harmless, then the Investor shall, to the fullest extent permitted by law, contribute to the amount paid or payable by such Covered Person as a result of such loss, claim, damage, liability or expense in such proportion as is appropriate to reflect the relative benefits received, as applicable, by the Investor, on the one hand, and such Covered Person, 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.  Notwithstanding anything herein to the contrary, the Investor shall only indemnify a Covered Person for such Covered Person’s out of pocket expenses which are reasonable and appropriate to the exposure being indemnified.

(c)           The Manager shall maintain, with financially sound and reputable insurers, insurance in such amounts and against such risks as are customarily maintained by reputable companies under similar circumstances.

12.Term and Termination.

(a)           This Agreement, unless sooner terminated upon the occurrence of any of the events listed below, shall terminate on the earlier to occur of (i) the termination of this Agreement pursuant to Section 2(b)(ii) and (ii) the date of the liquidation of the last Investment held in the Account following the termination of the Commitment Period pursuant to Section 2(b)(i).

(b)           The Investor may terminate this Agreement by written notice to the Manager immediately, upon the bankruptcy, liquidation or dissolution of the Manager or in the event that the Manager materially breaches this Agreement and such breach is not cured within 30 days of receipt by the Manager of the Investor written notice of such breach.

(c)           The Manager may terminate this Agreement by written notice to the Investor immediately, upon the bankruptcy, liquidation, or dissolution of the Investor or in the event that the Investor materially breaches this Agreement, including, but not limited to, its obligation to fund the Account, and such breach is not cured within 30 days of receipt by the Investor of the Manager’s written notice of such breach.

(d)           Notwithstanding any provision hereof to the contrary, in the event that either Party hereto alleges that the other Party has been grossly negligent or committed fraudulent or willful misconduct with respect to this Agreement or the transactions contemplated hereunder, the alleging Party shall give written notice thereof to the other Party, whereupon this

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Agreement shall be suspended until the resolution of such allegation in accordance with the provisions of Section 15 hereof.  During any such suspension, (i) the Investor shall not be required to make any payments required to be made under Section 5 hereof to the Manager and (ii) the Manager shall not be required to perform any services on behalf of the Investor or with respect to the Account or any Investment; provided that any such suspension will not have any effect on the Investor’s and the Manager’s respective rights and obligations (including the Investor’s obligation to meet capital calls) with respect to any Investment which, prior to the suspension of this Agreement, the Manager, on behalf of the Investor, entered into a binding commitment or letter of intent to acquire or in order to meet unfunded commitments for outstanding Investments of the Investor.

(e)           Except as otherwise provided herein, during the term of this Agreement, the Investor may not, without the Manager’s prior written consent, withdraw funds or any Investments from the Account.

(f)            Sections 2, 6 (to the extent of any unpaid costs and expenses), 9, 11, 12(e), 13, 14(b) and 16 shall survive the termination of this Agreement.

13.Anti-Money Laundering.

The Investor represents, warrants and agrees that:  (a) the Investor desires to open the Account for legitimate, valid and legal business and/or personal reasons and not with any intent or purpose to violate any applicable law or regulation; (b) to the Investor’s knowledge, the funds used to open the Account are derived from legitimate and legal sources, and neither such funds nor the Account (or any proceeds thereof) will be used by the Investor or, to the Investor’s knowledge, by any person associated with the Investor, to finance any terrorist or other illegitimate, illegal or criminal activity; (c) the Investor  has in place, and will maintain during the term of this Agreement, an appropriate anti-money laundering program that complies in all material respects with all applicable laws and regulations including, without limitation, the “USA PATRIOT ACT,” and that is reasonably designed to detect and report any activity that raises suspicion of money laundering activities, and the Investor has obtained all appropriate and necessary background information respecting its officers and beneficial owners to enable the Investor to comply with all applicable laws, rules and regulations respecting money laundering activities; and (d) the Manager may request, and the Investor will provide, such information as may be necessary for the Manager to comply with applicable legal or regulatory requirements, including, without limitation, anti-money laundering requirements, and that notwithstanding any other provision of this Agreement the Manager may disclose information respecting the Investor to governmental and/or regulatory or self-regulatory authorities to the extent required by applicable law or regulation and may file reports with such authorities as may be required by applicable law or regulation.  If required by applicable law, regulation, or interpretation thereof, the Manager may suspend any and all activity with respect to the Account pending the Manager’s receipt of instructions regarding the Account from the appropriate governmental or regulatory authority.

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14.ERISA.

(a)           The Investor represents and warrants that (i) it or its parent corporation (direct or indirect) is an insurance company regulated by at least one state and is investing assets held only in its general account or, if it is a wholly-owned subsidiary of an insurance company, it is investing assets contributed, directly or indirectly, only from the general account of its parent corporation and (ii) none of its general account assets or the general account assets of its direct or indirect parent corporation include assets of an employee benefit plan subject to Part 4 of Title 1 of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”).  The Investor covenants that, if the assets invested by the Investor constitute assets of such plans in the future, the Investor will notify the Manager immediately. In such a case, notwithstanding Section 12 hereof, the Manager may immediately terminate this Agreement.

(b)           The Investor shall indemnify the Manager for any and all claims, liabilities, losses, costs, demands and expenses (including, without limitation, reasonable attorney’s fees and disbursements and all other amounts paid in preparation, investigation, defense, mitigation or settlement of any claim, in each case, as such expenses are incurred and paid) occasioned by the “plan assets status” of the Investor or the Account, including, without limitation, arising out of any prohibited transactions within the meaning of Section 406 of ERISA or 4975 of the Code that may result during any period in which assets of the Account constitute plan assets.

15.Arbitration.

(a)           Any dispute arising out of or relating in any manner to this Agreement or to the breach, termination, enforcement, interpretation or validity of this Agreement, including the determination of the scope or applicability of this agreement to arbitrate (each a “Dispute”) shall be resolved in accordance with the procedures specified in this Section 15, except that any action brought to obtain injunctive relief shall be brought in any court of competent jurisdiction.  The procedures described in this Section 15 shall be the sole and exclusive procedures for the resolution of any Disputes.

(b)           Any Dispute shall be settled by final and binding arbitration in New York City, New York before JAMS, or its successor, pursuant to the United States Arbitration Act, 9 U.S.C. Sec. 1 et seq., by filing a written demand for arbitration with JAMS, with a copy to the other Party.  The arbitration will be conducted in accordance with the provisions of JAMS’ Comprehensive Arbitration Rules and Procedures in effect at the time of filing of the demand for arbitration; provided that the Parties agree that each Party to the Dispute shall have discovery to the same extent as provided under the Federal Rules of Civil Procedure.

(c)           When a Dispute has been submitted for arbitration, within 14 days of such submission, the Investors and the Manager will cooperate with one another and with JAMS in (i) selecting one arbitrator from their panel of neutrals and (ii) scheduling the arbitration proceedings.

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(d)           This agreement to arbitrate shall be specifically enforceable against the Parties by any court of competent jurisdiction, and may be challenged only upon the grounds provided in Section 10 to the United States Arbitration Act, 9 U.S.C. Sec. 10.  Application also may be made to such court to confirm, modify or vacate any decision or award of the arbitrator, for an order of enforcement and for any other remedies which may be necessary to effectuate such decision or award.  The Parties hereby consent to the jurisdiction of the arbitrator and of such court and waive any objection to the jurisdiction of such arbitrator and such court.

(e)           As a part of any arbitration award, in the discretion of the arbitrator, any Party may be awarded the reimbursement of its costs and expenses (including reasonable attorneys’ fees) of investigating, preparing and pursuing its arbitration claim.  No punitive damages may be awarded in the arbitration.

16.Miscellaneous.

(a)           No Party may assign any of its rights or obligations under this Agreement without the prior written consent of the other Parties.  This Agreement may not be amended or modified except by written instrument duly executed by each of the Parties hereto.

(b)           THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO NEW YORK CONFLICTS OF LAWS PRINCIPLES.  THE PARTIES HEREBY IRREVOCABLY WAIVE ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM AGAINST ANY PARTY RELATING IN ANY WAY TO THIS AGREEMENT OR THE OPERATION OF THE ACCOUNT.

(c)           All communications under this Agreement must be in writing and will be deemed to have been properly given (i) immediately if delivered by hand, (ii) immediately if delivered by facsimile, confirmation of transmission received, (iii) three days after sent by certified mail, return receipt requested or (iv) one Business Day after being deposited for next-day delivery with Federal Express or another nationally recognized overnight delivery service, all charges or postage prepaid, in each such case properly addressed to the Party to receive such notice at that Party’s address indicated below, or at any other address that any Party may designate by notice to the other Parties.

Address for notices to the Manager:

CT High Grade Mezzanine Manager, LLC

c/o Capital Trust, Inc.

410 Park Avenue

New York, New York 10022

Fax: 212-655-0244

Attention: Geoffrey Jervis

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with a copy to:

Paul Hastings Janofsky & Walker, LLP

75 East 55th Street

New York, NY 10022

Fax: 212-319-4090

Attention: Michael L. Zuppone

Addresses for notices to the Investor:

Admiral Insurance Company

c/o W.R. Berkley Corporation

475 Steamboat Road

Greenwich, CT 06830

Fax: 203-769-4096

Attention: James Shiel

with a copy to:

W.R. Berkley Corporation

475 Steamboat Road

Greenwich, CT 06830

Fax: 203-769-4097

Attention: General Counsel

(d)           The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any and all other provisions hereof.

(e)           This Agreement is the entire agreement of the Parties and supersedes all prior or contemporaneous written or oral negotiations, correspondence, agreements and understandings, regarding the subject matter hereof.

(f)            This Agreement may be executed by facsimile and in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

(g)           Nothing in this Agreement shall be deemed to create any right in any Person not a party hereto (other than each Covered Person and the permitted successors and assigns of the parties 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).

[Signature Page Follows]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their duly authorized officers, on the date first written above.

CT HIGH GRADE MEZZANINE MANAGER, LLC
By:	/s/ Geoffrey G. Jervis
	Name: Geoffrey G. Jervis
	Title: Chief Financial Officer
ADMIRAL INSURANCE COMPANY
By:	/s/ Scott R. Barraclough
	Name: Scott R. Barraclough
	Title: Senior Vice President

Schedule A

Schedule of Berkley Entities

1.	Berkley Insurance Company
2.	Berkley Regional Insurance Company
3.	Admiral Insurance Company

Exhibit A

Investment Criteria and Constraints

1.Investments are limited to first mortgage loans or mezzanine loans or interests in mortgage loans

2.Fair market value of the underlying real estate to be determined by a qualified appraiser at the time of origination or acquisition

3.$30 million maximum/$15 million minimum individual investment size.

4.67% maximum last dollar Investment-to-value.

5.Minimum credit spread of [****].

6.Floating rate.

7.Maximum term 5 years.

8.$125 million maximum total exposure (across the accounts established in connection with all Berkley Agreements) to single property type (i.e. hotel, retail, residential, industrial).

9.Investments limited to United States and U.S. territories.  $125 million maximum total exposure (across the accounts established in connection with all Berkley Agreements), on a cost basis, to any single State.  $100 million maximum total exposure (across the accounts established in connection with all Berkley Agreements), on a cost basis, to New York City, New York.  No investments in the State of Florida.

10.           Each mezzanine real estate loan must comply with SSAP 83, as evidenced by a completed SSAP 83 Questionnaire, in the form of Exhibit F hereto, which the Manager shall complete with respect to the applicable Investment and deliver with the applicable Funding Notice.

**** Material omitted pursuant to a request for confidential treatment under Rule 24b-2 of the Exchange Act of 1934.  Material filed separately with the Securities and Exchange Commission.

Exhibit B

Form of Funding Notice

From:      CT High Grade Mezzanine Manager, LLC
410 Park Avenue
New York, New York 10022

To:  Admiral Insurance Company
c/o W.R. Berkley Corporation
475 Steamboat Road
Greenwich, CT  06830
Fax:  203-769-4096
Attention:  James Shiel

Re:Capital call pursuant to Section 2 of the Management Agreement,
dated November 9, 2006, between Admiral Insurance Companyand CT Investment
Management Co, LLC

Funding Notice Date:
Funding Date:
Commitment Amount:	$
Amount Funded to Date:
Current Funding Request:
Remaining Unfunded Commitment:
Recent Appraised Value:
Compliance with Investment Criteria:

Investment Size:

Last dollar Investment to value:

Credit spread over appropriate index:

Floating rate (yes/no):

Index:

Term:

Property Type/Total Exposure to Property Type:

Location of Investment (State)/Total Exposure to this State:

NOTE: To the extent that any deviation from the Investment Criteria is set forth above, the Manager must obtain the prior written consent of the applicable Investor before the origination or acquisition of the Investment.

Exhibit C

Outline of Quarterly Report

1.The Manager Letter

2.Servicer Report

3.(a)           Commitment Summary

(b)Management Fee Summary

(c)Investment Expense Summary

(d)Portfolio Data Summary

(e)Compliance Report

(f)Related Party Report

(g)Individual Asset Write-ups

4.Copies of all Correspondence during the Covered Period

Exhibit D

Form of Closing Package

Exhibit E

Form of Servicing Agreement

Exhibit F

Form of SSAP 83 Questionnaire

EX-10.51

Exhibit 10.51

Summary of Non-Employee Director Compensation

On February 27, 2007, the board of directors (the “board”) of Capital Trust, Inc. (the “Company”) adopted a revised compensation arrangement for each non-employee director effective as of January 1, 2007.  The compensation arrangement provides for an annual retainer of $75,000 payable either in cash or deferred stock units pursuant to elections made by such directors under the Company’s incentive stock plans.

The Company reimburses directors for actual expenses incurred in the performance of their service as directors, including travel expenses incurred in attending board and committee meetings.

EX-14.1

Exhibit 14.1

Code of Business Conduct and Ethics

Introduction

Capital Trust, Inc., CT Investment Management Co. LLC and their subsidiaries and affiliates (collectively, the “Company”) have 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 (“CFO”), and Chief Operating Officer (collectively 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, they should 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

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policies, the Company has established various compliance policies and procedures and, where appropriate, may conduct information and training sessions and 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 CEO.  Directors are required to review with the 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, it must be disclosed to the CFO.  A listing of all such investment must be submitted (see Exhibit A) and updated by the employee when ownership positions change in these securities.

(d)Related Parties

Generally, employees should avoid conducting business or engaging in a transaction on behalf of the Company with an immediate family member or significant other, or with a company or firm with which an employee or his or her immediate family member or significant other is a significant owner or associated or employed in a significant role or position.  “Immediate family members” include any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law and any person (other than a tenant or employee) sharing the household of any director, nominee for director, executive officer, or significant

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shareholder of the Company.  “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, including financial transactions, arrangements or relationships (or series of any of the foregoing) in which the Company participates that involve $120,000 or more with any of the Company’s Directors, officers, employees or significant stockholders (i.e., holders of 5% of the Company’s outstanding stock) or any immediate family member (including a significant other) of any of the foregoing (collectively, “related persons”) or any entity in which any of the Company’s related persons is employed or has with other related persons a collective interest in more than 5%, or in the case of a partnership, for which any of them serves as a general partner or is otherwise associated. Directors, officers and employees must not enter into, develop or continue any such material transaction, arrangement or relationship without obtaining such prior Audit Committee approval.  The CFO shall report to the Audit Committee at regularly scheduled Audit Committee meetings all related party transactions, arrangements or relationships not subject to prior Audit Committee approval.  Further, all instances involving such potential related party transactions, arrangements or relationships regardless of the amount involved must be reported to an Executive Officer who will assess the materiality of the transaction, arrangement or relationship and elevate the matter to the Audit Committee as appropriate.  The Company must report all material related party transactions, arrangements and relationships under applicable accounting rules and the Securities and Exchange Commission’s (the “SEC”) rules and regulations.  Any dealings with a related person 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.

Conflicts of interest or the material nature of a transaction, arrangement 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

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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 Directors and the Directors decline 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 or, as a customer, to gain personal benefit.  No gift or entertainment should ever be 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.

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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, they should 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

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can be misunderstood.  This applies equally to e-mail, internal memos, and formal reports.  Employees should always 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 be 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.

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

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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 they 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)Employees 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

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solve problems.  Supervisors are obligated to report violations of this Code to an Executive Officer.

(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 CEO, CFO, or Chief Operating Officer, knowing that my questions or reports to these sources will be maintained in confidence to the extent practicable.

Employee Name

Signature

Date

Pursuant to Section 2 (c) above: Listing of all Investments in Clients and Competitors (security name, number of securities owned):

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
CT Preferred Trust I		Delaware
CT CDO IV, LLC		Delaware
CT CDO IV LTD.		Cayman Islands
CT CDO IV Corp.		Delaware
CTIMCO Operating Subsidiary, LLC		Delaware
CT Large Loan Manager, LLC		Delaware
CT High Grade Mezzanine Manager, LLC		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 February 26, 2007, 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, 2006.

/s/ ERNST & YOUNG LLP

New York, New York

February 26, 2007

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: February 28, 2007

/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: February 28, 2007

/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, 2006 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

February 28, 2007

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, 2006 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
February 28, 2007