1061630--3/10/2006--CAPITAL_TRUST

related topics

{investment, property, distribution}

{loan, real, estate}

{stock, price, share}

{provision, law, control}

{acquisition, growth, future}

{tax, income, asset}

{debt, indebtedness, cash}

{interest, director, officer}

{loss, insurance, financial}

{personnel, key, retain}

{operation, natural, condition}

{capital, credit, financial}

We may change our investment strategy without shareholder consent which may result in riskier investments than our current investments. We are exposed to the risks involved with making subordinated investments. We may not be able to obtain the level of leverage necessary to optimize our return on investment. We are subject to the risks of holding leveraged investments. Our success depends on the availability of attractive investments and our ability to identify, structure, consummate, manage and realize returns on attractive investments. 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 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 loans and investments may be illiquid which will constrain our ability to vary our portfolio of investments. We may not have control over certain of our loans and investments. We may not achieve our targeted rate of return on our investments. 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 investments in subordinated CMBS are subject to losses. We may invest in troubled assets that are subject to a higher degree of financial risk. We may not be able to acquire eligible investments for a collateralized debt obligation issuance, or may not be able to issue collateralized debt obligation securities on attractive terms, which may require us to utilize more costly financing for our investments. We may not be able to find suitable replacement investments for collateralized debt obligations with reinvestment periods. The use of collateralized debt obligation financings with over-collateralization and interest coverage requirements may have a negative impact on our cash flow. We may be required to repurchase loans that we have sold or to indemnify holders of our collateralized debt obligations. The impact of the events of September 11, 2001 and the resulting effect on terrorism insurance expose us to certain risks. 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 may pursue fund management opportunities related to other classes of investments where we do not have prior investment experience. We face substantial competition from established participants in the private equity market as we offer mezzanine and other funds to third party investors. Our funds are subject to the risk of defaults by third party investors on their capital commitments. Risks Related to Our Company We are dependent upon our senior management team to develop and operate our business. There may be conflicts between the interests of our investment funds and us. We must manage our portfolio in a manner that allows us to rely on an exception from registration under the Investment Company Act of 1940 in order to avoid the consequences of regulation under that Act. We 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. 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. 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. The market value of our class A common stock may be adversely affected by many factors. An increase in market interest rates may lead prospective purchasers of our class A common stock to expect a higher dividend yield, which would adversely affect the market price of our class A common stock. Your ability to sell a substantial number of shares of our class A common stock may be restricted by the low trading volume historically experienced by our class A common stock. Risks Related to our REIT Status Our charter does not permit any individual to own more than over 2.5% of our class A common stock, and attempts to acquire our class A common stock in excess of the 2.5% limit would be void without the prior approval of our board of directors. There are no assurances that we will be able to pay dividends in the future. We will be dependent on external sources of capital to finance our growth. 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. Complying with REIT requirements may cause us to forego otherwise attractive opportunities. Complying with REIT requirements may force us to liquidate or restructure otherwise attractive investments. Complying with REIT requirements may force us to borrow to make distributions to shareholders. The taxable mortgage pool rules may limit the manner in which we effect future securitizations.

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1061630--3/10/2006--CAPITAL_TRUST_INC