Edgar Filing: CAPITAL TRUST INC

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934, as amended

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.............................................CAPITAL TRUST, INC..............................
(Name of Registrant as Specified In Its Charter)

.............................................................................................
(Name of Person(s) Filing Proxy Statement if other than the Registrant)

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CAPITAL TRUST, INC.
410 Park Avenue, 14th Floor
New York, New York 10022

April 30, 2002

Dear Stockholder:

You are cordially invited to attend the 2002 annual meeting of
stockholders of Capital Trust, Inc., which will be held at 10:00 a.m., local
time, on Wednesday, June 5, 2002, at the offices of Paul, Hastings, Janofsky
&Walker LLP, 75 East 55th Street, New York, New York 10022. The matters to be
acted upon at the meeting are the election of directors, the ratification of the
appointment of Ernst & Young LLP as our independent auditors for 2002, and such
other business as may properly come before the meeting, all as described in the
attached notice of annual meeting of stockholders and proxy statement.

If you hold voting stock, it is important that your shares be
represented at the meeting and voted in accordance with your wishes. Whether or
not you plan to attend the meeting, we urge you to complete, date, sign and
return your proxy card in the enclosed prepaid envelope as promptly as possible
so that your shares will be voted at the annual meeting. This will not limit
your right to vote in person or to attend the meeting.

Sincerely,

/s/ SAMUEL ZELL

Samuel Zell
Chairman of the Board

CAPITAL TRUST, INC.
410 Park Avenue, 14th Floor
New York, New York 10022

-------------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To the stockholders of Capital Trust, Inc.:

Notice is hereby given that the 2002 annual meeting of stockholders
(the "Annual Meeting") of Capital Trust, Inc., a Maryland corporation (the
"Company"), will be held at 10:00 a.m., local time, on Wednesday, June 5, 2002,
at the offices of Paul, Hastings, Janofsky &Walker LLP, 75 East 55th Street, New
York, New York 10022, for the following purposes:

1. To elect twelve directors to serve until the Company's next annual
meeting of stockholders and until such directors' successors have been
elected and have qualified.

2. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending December 31, 2002.

3. To transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.

The board of directors of the Company has fixed the close of business
on April 26, 2002 as the record date for determination of stockholders entitled
to notice of, and to vote at, the Annual Meeting and at any adjournment or
postponement thereof.

If you hold voting stock, please complete, date, sign and return the
enclosed proxy card promptly in the enclosed prepaid envelope, whether or not
you plan to attend the Annual Meeting. This will help ensure that your vote is
counted. You may revoke your proxy in the manner described in the proxy
statement at any time before the proxy has been voted at the Annual Meeting.

By Order of the Board of Directors,

/s/ SAMUEL ZELL

Samuel Zell
Chairman of the Board

April 30, 2002

CAPITAL TRUST, INC.
410 Park Avenue, 14th Floor
New York, New York 10022

--------------------

PROXY STATEMENT

FOR

2002 ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON JUNE 5, 2002

--------------------

This proxy statement is being furnished by and on behalf of the board
of directors of Capital Trust, Inc. (the "Company") in connection with the
solicitation of proxies to be voted at the 2002 annual meeting of stockholders
(the "Annual Meeting") to be held at 10:00 a.m., local time, on Wednesday, June
5, 2002, at the offices of Paul, Hastings, Janofsky &Walker LLP, 75 East 55th
Street, New York, New York 10022, and at any adjournment or postponement
thereof.

At the Annual Meeting, stockholders will be asked to

o elect the following nominees (the "Nominees") as directors of the
Company to serve until the Company's next annual meeting of
stockholders and until such directors' successors are elected and have
duly qualified: Samuel Zell, Jeffrey A. Altman, Thomas E. Dobrowski,
Martin L. Edelman, Gary R. Garrabrant, Craig M. Hatkoff, John R.
Klopp, Susan W. Lewis, Sheli Z. Rosenberg, Steven Roth, Lynne B.
Sagalyn, and Michael D. Watson ("Proposal 1"),

o ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending December 31, 2002
("Proposal 2"), and

o transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.

The principal offices of the Company are located at 410 Park Avenue,
14th Floor, New York, New York 10022 and the Company's telephone number is (212)
655-0220.

This proxy statement and the enclosed proxy card are being sent to
stockholders on or about April 30, 2002.

Voting Rights; Record Date

Only holders of record of shares of the Company's class A common stock,
par value $.01 per share ("Class A Common Stock"), at the close of business on
April 26, 2002 (the "Record Date") are entitled to notice of and may vote at the
Annual Meeting. On the Record Date, there were issued and outstanding 18,853,203
shares of Class A Common Stock, each of which is entitled to one vote on the
matters presented for stockholder action at the Annual Meeting.

With respect to each of the two proposals expected to be presented for
a vote of stockholders, the presence, in person or by duly executed proxy, of
the holders of a majority in voting power of the outstanding shares of Class A
Common Stock entitled to vote at the Annual Meeting is necessary to constitute a
quorum in order to transact business. Abstentions will not be counted as votes
cast and will have no effect on the result of the vote, although they will count
toward the presence of a quorum.

The election of each of the Nominees requires a plurality of the votes
cast at the Annual Meeting. The ratification of the appointment of Ernst & Young
LLP as independent auditors requires a majority of the votes cast at the Annual
Meeting.

The Company's officers and directors and a stockholder controlled by a
trust for the benefit of the family of Samuel Zell, the Company's chairman of
the board, own in the aggregate 9,490,810 shares of Class A Common Stock
(approximately 50.3% of the outstanding shares) and have advised the Company
that they intend to vote for (1) the election as a director of the Company of
each of the Nominees, and (2) the ratification of the appointment of Ernst &
Young LLP as the Company's independent auditors for 2002.

Solicitation and Voting of Proxies; Revocation

All duly executed proxies received by the Company in time for the
Annual Meeting will be voted in accordance with the instructions given therein
by the person executing the proxy. In the absence of instructions, duly executed
proxies will be voted for (1) the election as a director of the Company of each
of the Nominees, and (2) the ratification of the appointment of Ernst & Young
LLP as the Company's independent auditors for 2002.

The submission of a signed proxy will not affect the right of a holder
of Class A Common Stock to attend, or to vote in person at, the Annual Meeting.
You may revoke or change your proxy at any time prior to its use at the Annual
Meeting by giving the Company written direction to revoke it, by giving the
Company a new proxy or by attending the meeting and voting in person. Your
attendance at the Annual Meeting will not by itself revoke a proxy given by you.
Written notice of revocation or subsequent proxy should be sent to Capital
Trust, Inc. c/o American Stock Transfer & Trust Company, 6201 Fifteenth Avenue,
Brooklyn, New York 11219, Attention: Paula Caroppoli, or hand-delivered to
Capital Trust, Inc. c/o American Stock Transfer & Trust Company, so as to be
delivered at or before the taking of the vote at the Annual Meeting.

The cost of soliciting proxies will be borne by the Company. In
addition to soliciting proxies by mail, proxies may be solicited by the
Company's directors, officers and other employees by personal interview,
telephone, telegram and other means of communication. Such persons will receive
no additional compensation for such services. Arrangements will also be made
with brokerage houses and other custodians, nominees and fiduciaries for the
forwarding of proxy solicitation materials to the beneficial owners of shares of
the Company's stock held of record by such brokers and other fiduciaries. The
Company will reimburse the brokers and other fiduciaries for their reasonable
out-of-pocket expenses incurred when the solicitation materials are forwarded.

PROPOSAL 1 -- ELECTION OF DIRECTORS

All of the Company's directors will be elected at the Annual Meeting to
serve as directors until the next succeeding annual meeting of stockholders and
until their successors are elected and shall have qualified. The Nominees are
all currently members of the board of directors. All Nominees, if elected, are
expected to serve until the next succeeding annual meeting of stockholders.

The board of directors has been informed that all of the Nominees are
willing to serve as directors but, if any of them should decline or be unable to
act as a director, the individuals named in the proxies will vote for the
election of such other person or persons as they, in their discretion, may
choose. The board of directors has no reason to believe that any such nominees
will be unable or unwilling to serve.

Nominees for Election as Directors

The names, ages as of April 27, 2002, and existing positions with the
Company of the Nominees are as follows:

Name Age Office or Position Held
---- --- -----------------------

Samuel Zell......................... 60 Chairman of the Board of Directors

Jeffrey A. Altman.................. 35 Director

Thomas E. Dobrowski............ 58 Director

Martin L. Edelman................. 60 Director

Gary R. Garrabrant................. 45 Director

Craig M. Hatkoff................... 48 Director and Chairman of the Executive
Committee
John R. Klopp....................... 48 Director, Vice Chairman, Chief Executive
Officer and President

Susan W. Lewis.................... 45 Director

Sheli Z. Rosenberg................. 60 Director

Steven Roth......................... 60 Director

Lynne B. Sagalyn.................. 54 Director

Michael D. Watson................. 45 Director

The name, principal occupation for the last five years, selected
biographical information and the period of service as a director of the Company
of each of the Nominees are set forth below.

Samuel Zell has been chairman of the board of directors of the Company
since July 1997. Mr. Zell is chairman of Equity Group Investments, L.L.C., a
privately held real estate and corporate investment firm ("EGI"), American
Classic Voyages Co., an owner and operator of cruise lines, Anixter
International Inc., a provider of integrated network and cabling systems
("Anixter"), Manufactured Home

Communities, Inc., a REIT specializing in the ownership and management of
manufactured home communities ("MHC"), Chart House Enterprises, Inc., an owner
and operator of restaurants, and Danielson Holding Corporation, a holding
company that offers a variety of insurance products and financial services. He
is chairman of the board of trustees of Equity Residential Properties Trust
("ERPT"), a REIT specializing in the ownership and management of multi-family
housing, and of Equity Office Properties Trust ("EOPT"), a REIT specializing in
the ownership and management of office buildings.

Jeffrey A. Altman has been a director of the Company since November
1997. Mr. Altman is the sole managing partner of Owl Creek Asset Management,
L.P., a manager of distressed securities and value equities hedge funds, which
he founded in February 2002. Mr. Altman previously served since November 1996 as
a senior vice president of Franklin Mutual Advisers, Inc., formerly Heine
Securities Corporation, a registered investment adviser ("FMA"), and a vice
president of Franklin Mutual Series Fund Inc., a mutual fund with assets in
excess of $20 billion, advised by FMA. From August 1988 to October 1996, Mr.
Altman was an analyst with FMA.

Thomas E. Dobrowski has been a director of the Company since August
1998. Mr. Dobrowski is the Managing Director of Real Estate and Natural Resource
Investments for General Motors Asset Management ("GMAM"), an investment manager
for several pension funds of General Motors Corporation ("GM") and its
subsidiaries, as well as for several third party clients. Mr. Dobrowski is a
trustee of EOPT and a director of MHC.

Martin L. Edelman has been a director of the Company since February
1997. Mr. Edelman has been of counsel to Paul, Hastings, Janofsky & Walker LLP,
and prior thereto Battle Fowler LLP, each a law firm that has provided services
to the Company, since 1993. Mr. Edelman was a partner with Battle Fowler LLP
from 1972 through 1993. Mr. Edelman served as president of Chartwell Leisure
Inc., an owner and operator of hotel properties, from January 1996 until it was
sold in March 1998. He has been a director of Cendant Corporation ("Cendant")
and a member of that corporation's executive committee since November 1993. Mr.
Edelman also serves as a director of Acadia Realty Trust.

Gary R. Garrabrant has been a director of the Company since January
1997. Mr. Garrabrant was the vice chairman of the Company from February 1997
until July 1997. Mr. Garrabrant has been chief investment officer of Equity
International Properties, Ltd. ("EIP"), a privately-held company which invests
in real estate companies and properties outside the United States, since July 1,
1998. Mr. Garrabrant is executive vice president of EGI and joined EGI as senior
vice president in January 1996. Mr. Garrabrant is a director of EIP, Fondo de
Valores Immobiliarios ("FVI"), a Latin American real estate company, and various
EIP portfolio companies.

Craig M. Hatkoff has been a director of the Company since July 1997.
From July 1997 to December 2000, Mr. Hatkoff served as a vice chairman of the
Company. Mr. Hatkoff is chairman of Turtle Pond Publications LLC, which is
active in children's publishing and entertainment, and is a private investor in
other entrepreneurial ventures. Mr. Hatkoff was a founder and was a managing
partner of Victor Capital Group, L.P. ("Victor Capital") from 1989 until the
acquisition of Victor Capital by the Company in July 1997. Mr. Hatkoff was a
managing director and co-head of Chemical Realty Corporation, the real estate
investment banking arm of Chemical Banking Corporation, from 1982 until 1989.
From 1978 to 1982, Mr. Hatkoff was the head of new product development in
Chemical Bank's Real Estate Division, where he previously served as a loan
officer.

John R. Klopp has been a director of the Company since January 1997,
the chief executive officer, a vice chairman, and the president of the Company
since February 1997, July 1997, and January 1999, respectively. Mr. Klopp was a
founder and was a managing partner of Victor Capital from 1989

until the acquisition of Victor Capital by the Company in July 1997. Mr. Klopp
was a managing director and co-head of Chemical Realty Corporation from 1982
until 1989. From 1978 to 1982, Mr. Klopp held various positions with Chemical
Bank's Real Estate Division, where he was responsible for originating,
underwriting and monitoring portfolios of construction and permanent loans. He
is a director of Metropolis Realty Trust, Inc., a Manhattan office REIT.

Susan W. Lewis has been a director of the Company since June 2000. Ms.
Lewis has been Executive Vice President and Chief Real Estate Officer and head
of the Real Estate Investment Group of Citigroup Investments Inc. since March
1998. She held the same positions within Travelers Group from 1994 until its
merger with Citicorp, Inc. in March 1998, and she held various other positions
within Travelers Group from 1988 to 1994.

Sheli Z. Rosenberg has been a director of the Company since July 1997.
Since January 2000, Ms. Rosenberg has been vice chairman of EGI, for which she
had previously served as the chief executive officer and president for more than
the past five years. She was a principal of the law firm Rosenberg & Liebentritt
P.C. from 1980 until September 1997. Ms. Rosenberg is a director of MHC, CVS
Corporation, a drugstore chain, Dynergy, Inc., a supplier of electricity and
natural gas, Cendant and Ventas, Inc. She is also a trustee of ERPT and EOPT.

Steven Roth has been a director of the Company since August 1998. Mr.
Roth has been chairman of the board of trustees and chief executive officer of
Vornado Realty Trust ("Vornado") since May 1989 and chairman of the executive
committee of the board of Vornado since April 1980. Since 1968, he has been a
general partner of Interstate Properties, a real estate and investment company,
and, more recently, he has been managing general partner. On March 2, 1995, he
became chief executive officer of Alexander's, Inc., a real estate company. Mr.
Roth is also a director of Alexander's, Inc.

Lynne B. Sagalyn has been a director of the Company since July 1997.
Dr. Sagalyn is the Earle W. Kazis and Benjamin Schore Director of the M.B.A.
Real Estate Program at the Columbia University Graduate School of Business, and
has been a professor and the director of that program since 1992. From 1991 to
1992, she was a visiting professor at Columbia. From 1987 to 1991, she was an
associate professor of Planning and Real Estate Development at the Massachusetts
Institute of Technology. She is also on the faculty of the Weimer School for
Advanced Studies in Real Estate and Land Economics. Dr. Sagalyn is a director
United Dominion Realty Trust, a self-administered REIT in the apartment
communities sector, a director of The Retail Initiative, a board member of J.P.
Morgan U.S. Real Estate Income and Growth Fund and serves on the New York City
Board of Education Chancellor's Commission on the Capital Plan.

Michael D. Watson has been a director of the Company since March 2000.
Mr. Watson has been a senior officer of Citigroup Investments Inc. since March
1998. He was employed by Travelers Group, where he served in various capacities
in its Chicago, Dallas, San Francisco and New York offices, from 1987 until its
merger with Citicorp, Inc. in March 1998.

Vote Required; Recommendation

The election to the board of directors of each of the twelve Nominees
will require the affirmative vote of a plurality of the votes cast at the Annual
Meeting. The board of directors unanimously recommends that stockholders vote
for the election to the board of directors of each of the twelve Nominees.

Board of Directors; Committees

The board of directors is currently comprised of Messrs. Zell, Altman,
Dobrowski, Edelman, Garrabrant, Hatkoff, Klopp, Roth, and Watson, Ms. Lewis, Ms.
Rosenberg and Dr. Sagalyn. The board of directors has four standing committees:
an executive committee, an audit committee, a compensation committee and a
performance compensation committee. The board of directors does not have a
standing nominating committee.

Executive Committee: The executive committee is currently comprised of
Messrs. Garrabrant, Hatkoff and Klopp and Ms. Rosenberg, with Mr. Hatkoff
serving as the committee's chairman. The executive committee is authorized to
exercise all the powers and authority of the board of directors in the
management of the business and affairs of the Company except those powers
reserved, by law or resolution, to the board of directors.

Audit Committee: The audit committee is currently comprised of Mr.
Dobrowski, Dr. Sagalyn and Mr. Watson with Dr. Sagalyn serving as the
committee's chairperson. The audit committee makes recommendations to the board
of directors regarding the selection of the Company's independent auditors,
reviews the plan, scope and results of the audit, and reviews, with the
independent auditors and management, the Company's policies and procedures with
respect to internal accounting and financial controls, changes in accounting
policy and the scope of the non-audit services which may be performed by the
independent auditors.

Compensation Committee: The compensation committee is currently
comprised of Messrs. Altman, Edelman and Klopp, Ms. Rosenberg and Dr. Sagalyn,
with Ms. Rosenberg serving as the committee's chairperson. The compensation
committee establishes the compensation and benefit arrangements for the
non-executive level officers and the key employees of the Company and the
general policies relating to compensation and benefit arrangements of other
employees of the Company, except to the extent that power is vested in the
performance compensation committee. The compensation committee also administers
the stock plans and compensation programs of the Company.

Performance Compensation Committee: The performance compensation
committee is currently comprised of Mr. Altman, Ms. Rosenberg, and Dr. Sagalyn,
with Ms. Rosenberg serving as the committee's chairperson. The performance
compensation committee establishes awards under and administers the Company's
stock plans and compensation programs insofar as they relate to executive
officers of the Company.

During 2001, the board of directors held four meetings. The executive
committee held no meetings in 2001. The audit committee held four meetings in
2001. The compensation committee and the performance compensation committee did
not hold any formal committee meetings in 2001, but rather acted by unanimous
written consent in performing their functions. During 2001, each director
attended at least 75 percent of the number of meetings of the board of directors
(while he or she was a member) and 100 percent of the total number of meetings
of committees on which he or she served.

Compensation of Directors

The Company pays two of its non-employee directors an annual cash
retainer of $30,000, which is paid monthly. Six non-employee directors are not
paid any cash fees for their services as such, but rather are compensated with
an annual award of stock units under the Company's non-employee director stock
plan with a value equal to $30,000. The remaining three non-employee directors
are not compensated for their service as directors. The number of stock units
awarded to each director, which are convertible into an equal number of shares
of Class A Common Stock according to individual

schedules set by each director, is determined quarterly in arrears by dividing
one-quarter of the annual retainer amount ($7,500) by the average closing price
of the Class A Common Stock for the quarter. The stock units vest when issued.
There is no separate compensation for service on committees of the board of
directors. All directors are also reimbursed for travel expenses incurred in
attending board and committee meetings.

Compensation Committee Interlocks and Insider Participation

The compensation committee of the board of directors was comprised
during 2001 of Messrs. Altman, Edelman and Klopp, Ms. Rosenberg and Dr. Sagalyn.
Other than Mr. Klopp, none of the committee's members was an officer or employee
of the Company during 2001. No committee member had any interlocking
relationships requiring disclosure under applicable rules and regulations.

Mr. Zell and Ms. Rosenberg serve as members of the boards of directors
of numerous non-public companies owned or controlled in whole or in part by Mr.
Zell or his affiliates which do not have compensation committees, and in many
cases, the executive officers of those companies include Mr. Zell and Ms.
Rosenberg.

For a description of certain relationships and transactions with
members of the board of directors or their affiliates, see "Certain
Relationships and Related Transactions" beginning on page 18.

Executive and Senior Officers

The following sets forth the positions with the Company, ages as of
April 27, 2001 and selected biographical information for the executive and
senior officers of the Company who are not directors.

Jeremy FitzGerald, age 38, has been a managing director of the Company
since July 1997. Prior to that time, Ms. FitzGerald served as a principal of
Victor Capital and had been employed in various positions at such firm since May
1990. She was previously employed in various positions at PaineWebber
Incorporated.

Stephen D. Plavin, age 42, has been the chief operating officer of the
Company since August 1998. Prior to that time, Mr. Plavin was employed for
fourteen years with the Chase Manhattan Bank and its securities affiliate, Chase
Securities Inc. (collectively "Chase"). Mr. Plavin held various positions within
the real estate finance unit of Chase including the management of: loan
origination and execution, loan syndications, portfolio management, banking
services and REO (real estate owned) sales. Since 1995, he served as a managing
director responsible for real estate client management for Chase's major real
estate relationships. In 1997 he became co-head of Global Real Estate for Chase.
Mr. Plavin serves as a director of Omega Healthcare Investors, Inc., a skilled
nursing real estate investment trust.

Edward L. Shugrue III, age 36, has been the chief financial officer of
the Company since September 1997 and has been a managing director, an assistant
secretary and the treasurer of the Company since July 1997, July 1997 and
January 1999, respectively. Prior to that time, Mr. Shugrue served as a
principal of Victor Capital since January 1997. He previously served as director
of real estate for and a vice president of River Bank America from April 1994
until June 1996 after serving as a vice president of the bank since January
1992. He was previously employed in various positions at Bear, Stearns & Co.
Inc.

Report of the Audit Committee of the Board of Directors1

The board of directors' audit committee carries out oversight functions
with respect to the preparation, review and audit of the Company's financial
statements and operates under a written charter adopted by the board of
directors. The audit committee members are independent within the meaning of the
applicable New York Stock Exchange listing standards. The development and
maintenance of internal controls and procedures and the financial reporting
system, the maintenance of appropriate accounting and financial reporting
principles or policies and the preparation of financial statements in accordance
with generally accepted accounting principles are the responsibility of the
Company's management. The Company's independent auditors perform an independent
audit of the Company's consolidated financial statements in accordance with
generally accepted auditing standards and issue a report thereon. The audit
committee's responsibility is to monitor and oversee the foregoing functions.

The audit committee has met and held discussions with management and
the independent auditors with respect to the Company's consolidated financial
statements and related matters. Management advised the committee that the
Company's consolidated financial statements were prepared in accordance with
generally accepted accounting principles and the committee has reviewed and
discussed the consolidated financial statements with management and the
Company's independent auditors, Ernst & Young LLP. The independent auditors
presented to and reviewed with the audit committee the matters required to be
discussed by Statement on Auditing Standards No. 61 (Communication with Audit
Committees). The Company's independent auditors also provided to the committee
the written disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees) and in connection therewith the
committee discussed with the independent auditors their views as to their
independence. In undertaking its oversight function, the audit committee relied,
without independent verification, on management's representation that the
financial statements have been prepared with integrity and objectivity and in
conformity with accounting principles generally accepted in the United States of
America and on the representations of the independent auditors included in their
report on the Company's financial statements.

Based on the audit committee's considerations discussions with
management and the independent auditors as described above, the audit committee
recommended to the board of directors that the audited consolidated financial
statements be included in the Company's Annual Report on the Form 10-K for the
year ended December 31, 2001 to be filed with the Securities and Exchange
Commission.

Audit Committee

Lynne B. Sagalyn
Thomas E. Dobrowski
Michael D. Watson

---------------
1 The material in this report is not "solicitation material," is not deemed
filed with the Commission, and is not incorporated by reference in any filing of
the Company under the Securities Act of 1933 (the "Securities Act") or the
Securities Exchange Act of 1934 ("Exchange Act"), whether made before or after
the date hereof and irrespective of any general incorporation language in any
filing.

Executive Compensation

The following table sets forth for the years indicated the annual
compensation of the chief executive officer and the other executive officers of
the Company who earned annual salary and bonus in excess of $100,000
(collectively, the "Named Executive Officers").

Summary Compensation Table

-----------------------------------------------------------------------------------------

Annual Compensation (1) Long Term Compensation
-------------------------------------------------------------------------------------------------------------------------------
Restricted Securities
Stock Underlying Other
Name and PrincipalPosition Year Salary($) Bonus($) Award($) Options (#) Compensation ($)(6)
-------------------------- ---- --------- -------- -------- ----------- -------------------

John R. Klopp
Vice Chairman, Chief 2001 600,000 1,400,000 400,000(3) 100,000 20,200
Executive Officer and 2000 600,000 1,750,000(2) -- 100,000 19,500
President 1999 600,000 750,000 -- -- 30,000

Stephen D. Plavin
Chief Operating 2001 380,728 1,000,000 625,000(4) 50,000 20,200
Officer 2000 350,016 750,000 625,000(4) -- 19,500
1999 350,000 1,100,000 312,500(4) -- 14,400

Edward L. Shugrue III 2001 300,000 750,000 350,000(5) 75,000 20,200
2000 300,000 850,000 250,000(5) 75,000 19,500
1999 300,000 750,000 239,585(5) 75,000 14,440

------------------------

(1) The annual compensation presented for 2001 represents the annual base salary
paid during the fiscal year ended December 31, 2001 and the annual bonus
compensation that was paid in February 2002 and accrued as an expense by the
Company for the fiscal year ended December 31, 2001. As permitted by rules
established by the SEC, no amounts are shown with respect to certain
"perquisites" where such amounts do not exceed, in the aggregate, the lesser of
10% of bonus plus salary or $50,000.

(2) Includes a special, one time bonus of $750,000 paid in March 2000 upon the
formation of the Company's strategic venture with Citigroup Investments, Inc.
and the related closing of the venture's first fund, CT Mezzanine Partners I,
LLC.

(3) Represents the value of 88,889 shares of Class A Common Stock awarded to Mr.
Klopp in February 2001 (based on the $4.50 per share NYSE closing price on the
date of the grant). The value of such restricted stock award to Mr. Klopp at
December 31, 2001 was $512,001 (based on the $5.76 per share New York Stock
Exchange ("NYSE") closing price on such date).

(4) Represents the value of 100,000, 100,000 and 50,000 shares of Class A Common
Stock granted to Mr. Plavin on August 31, 1998 and issued during 2001, 2000 and
1999, respectively (based on the $6.25 per share NYSE closing price on the date
of the grant). The value of all such restricted stock awards to Mr. Plavin at
December 31, 2001 was $1,440,000 (based on the $5.76 per share NYSE closing
price on such date).

(5) Represents the value of the 77,778, 60,606 and 41,667 shares of restricted
Class A Common Stock awarded to Mr. Shugrue in February 2001, 2000 and 1999,
respectively (based on the $4.50, $4.125 and $5.75 per share NYSE closing price
on the date of each grant, respectively). The value of all such restricted stock
awards to Mr. Shugrue at December 31, 2001 was $1,037,094 (based on the $5.76
per share NYSE closing price on such date).

(6) Represents contributions made by the Company to the Capital Trust, Inc.
401(k) Profit Sharing Plan.

Employment Agreement

The Company is a party to an employment agreement with John R. Klopp.
The employment agreement provides for a five-year term of employment commencing
as of July 15, 1997. On the fifth anniversary of the commencement of the
employment agreement, and on each succeeding anniversary, the terms of the
employment agreement shall be automatically extended for one additional year
unless, not later than three months prior to such anniversary date, either party
shall have notified the other that it will not extend the term of the agreement.
Pursuant to the employment agreement, Mr. Klopp currently receives for calendar
year 2002 an annual base salary of $600,000, which is subject to further
increases each calendar year to reflect increases in the cost of living or as
otherwise determined in the discretion of the board of directors. Mr. Klopp is
also entitled to an annual incentive cash bonus to be determined by the board of
directors based on individual performance and the profitability of the Company.
Mr. Klopp is also a participant in the incentive stock and other employee
benefit plans of the Company.

If the employment of Mr. Klopp is terminated without cause, with good
reason or following a change of control, as those terms are defined in the
employment agreement, he would be entitled to (i) a severance payment equal to
the greater of the amount payable to him over the remainder of the term of the
employment agreement or an amount equal to the aggregate base salary and cash
incentive bonus paid to him during the previous year; (ii) continued welfare
benefits for two years; and (iii) automatic vesting of all unvested stock
options such that all of his stock options would become immediately exercisable.
Each vested option will remain exercisable for a period of one year following
his termination. The employment agreement provides for a non-competition period
of one year if Mr. Klopp terminates his employment voluntarily or is terminated
for cause.

Stock Options

The following table sets forth stock options issued in 2001 to the
Named Executive Officers. The table also sets forth the hypothetical gains that
would exist for the stock options at the end of their ten-year terms, assuming
compound rates of appreciation of 5% and 10% from the $4.50 and $5.00 market
price on the February 1 and May 7, 2001, respectively, date of grant. The actual
future value of the options will depend on the market value of the Company's
Class A Common Stock.

Option/SAR Grants in Last Fiscal Year

Individual Grants Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Option Term (1)
------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g)

Number of
Securities
Underlying % of Total
Options/ Option/SARs
SARs Granted to Exercise or
Granted Employees in Base Price Expiration
Name (2) Fiscal Year ($/sh) Date 5% ($) 10% ($)
---- --- ----------- ------ ---- ------ -------

John R. Klopp 100,000 22.0% 4.50 2/1/11 283,003 717,184

Stephen D. Plavin 50,000 11.0% 5.00 5/7/11 157,224 398,436

Edward L. Shugrue III 75,000 16.5% 4.50 2/1/11 212,252 537,888

---------------------

(1) The amounts of potential realizable value, which are based on assumed
appreciation rates of 5% and 10% prescribed by Securities and Exchange
Commission rules, are not intended to forecast possible future appreciation, if
any, of the Company's share price. The amounts of potential value with respect
to the options do not account for expiration of the options upon termination of
employment or the phased-in exercise schedule. Future compensation resulting
from the options is based solely on the actual performance of the Company's
share price in the trading market.

(2) Represents shares underlying stock options; none of the executive officers
were granted SARs. One-third of the options become exercisable in equal
increments on the first, second and third anniversaries of the date of grant.

The following table shows the 2001 year-end value of the stock options
held by the Named Executive Officers. None of the Named Executive Officers
exercised stock options during 2001.

Year End 2001 Option/SAR Values

Number of Securities
Underlying Unexercised Value of Unexercised In-the-Money
Options/SARs at Year End Options/SARs at Year End (1)
---------------------------- -------------------------------------

Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------

John R. Klopp 208,333 166,667 $ -- $126,000

Stephen D. Plavin 100,000 50,000 -- 38,000

Edward L. Shugrue III 205,000 150,000 40,750 176,000

----------------------------------

(1) Amounts shown reflect the excess of the market value of the underlying Class
A Common Stock at year end based upon the $5.76 per share closing price reported
on the NYSE on December 31, 2001 over the exercise prices for the stock options.
The actual value, if any, an executive may realize is dependent upon the amount
by which the market price of Class A Common Stock exceeds the exercise price
when the stock options are exercised.

Section 16(a) Beneficial Ownership Compliance

Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (the "Commission") and the
NYSE. Officers, directors and greater than ten percent stockholders are required
by regulation of the Commission to furnish the Company with copies of all
Section 16(a) forms they file.

Based solely on its review of Forms 3, 4 and 5 and amendments thereto
available to the Company and written representations from certain of the
directors, officers and 10% stockholders that no form is required to be filed,
the Company believes that no director, officer or beneficial owner of more than
10% of its Class A Common Stock failed to file on a timely basis reports
required pursuant to Section 16(a) of the Exchange Act with respect to 2001,
except that a Form 3 required to be filed in January 2001 and a Form 4 required
to be filed in May 2001 by Citigroup Inc. and its affiliates as a result of the
acquisition of beneficial ownership of shares underlying previously and newly
acquired warrants was filed late in May 2001 in the case of the Form 3 and
September 2001 in the case of the Form 4, and except that Forms 3 required to be
filed in January 2001 by Rodney F. Dammeyer, GRG Investment Partnership LP,
Crocker-CT General Partnership, Callahan-CT General Partnership and Rosenberg-CT
General Partnership as a result of Citigroup Inc.'s and its affiliates'
acquisition of beneficial ownership of shares underlying previously acquired
warrants and the effect a voting agreement with an affiliate of Citigroup Inc.
were filed late in October 2001.

Report on Executive Compensation2

Introduction

The Company's compensation committees administer its compensation
programs. The compensation committee establishes and administers the
compensation and benefit arrangements for officers and key employees (except to
the extent vested in the performance compensation committee). The performance
compensation committee (which is comprised of the independent members of the
compensation committee) establishes and administers the compensation programs as
they relate to executive officers of the Company and is empowered to accept or
reject, or increase or decrease, any award or component of compensation
recommended by the compensation committee.

Compensation for 2001

The Company's 2001 executive compensation program consisted of three
elements: an annual base salary, annual bonus compensation and long-term
incentive compensation.

Mr. Klopp received his $600,000 annual salary called for by his
employment agreement that was previously approved by the board of directors and
the other executive officers also received their previously established or
negotiated salaries. The performance compensation committee's goal is to provide
competitive executive compensation packages as means of retaining its executive
officers. To that end, the committee strives to compensate executive officers
with salaries that are commensurate with prevailing compensation practices in
the financial services industry. Salaries vary according to the levels of
responsibility undertaken by the executive officers.

The performance compensation committee's goals with annual bonus and
long-term incentive compensation are to focus executive behavior on the
fulfillment of long-term and annual business objectives, and to create a sense
of ownership in the Company that causes executive decisions to be aligned with
the best interests of the Company's stockholders.

Pursuant to a long-term strategic plan adopted by the board of
directors in 1999, the Company continues to pursue a transition from being a
balance sheet lender to managing investments on behalf of third parties. For
2001, the board of directors established the following goals for the Company:

o maximizing the amount of capital raised for the Company's second real
estate mezzanine fund, CT Mezzanine Partners II LP, which is referred
to as Fund II;

o originating new investments for funds under management consistent with
their investment strategy;

o simplifying the capital structure of the Company and eliminating the
dividend paid on preferred stock; and

o increasing earnings per share.

--------------------

1 The material in this report is not "solicitation material," is not deemed
filed with the Commission, and is not incorporated by reference in any filing of
the Company under the Securities Act or the Exchange Act, whether made before or
after the date hereof and irrespective of any general incorporation language in
any filing.

The performance compensation committee considered executive officer
performance in achieving the Company's goals. The Company closed Fund II with
aggregate capital commitments of $845 million, making Fund II the largest
dedicated real estate mezzanine fund in the U.S. The Company originated over
$500 million of new investments for its funds under management in 2001. The
Company also repurchased from private investors more than one-third of the
Company's outstanding stock including all of its preferred stock and thereby
eliminated the preferred stock dividend, and the Company increased earnings per
share by 12%. In recognition of his leadership in achieving these goals, the
performance compensation committee awarded Mr. Klopp a $1,400,000 cash bonus and
a stock option exercisable for 200,000 shares of Class A Common Stock for 2001.
The performance compensation committee awarded cash bonuses, restricted stock
and stock options to other executive officers again based on each executive
officer's contribution to achieving the Company's goals for 2001. In connection
with its evaluation, the committee considered the executive officer's level of
job responsibility and relative influence on the Company's ability to manage
successfully and accomplish the goals.

Section 162(m) of the Code limits the deductibility in the Company's
tax return of compensation over $1 million to any of the executive officers of
the Company unless, in general, the compensation is paid pursuant to a plan
which is performance-related, non-discretionary and has been approved by the
Company's stockholders. The performance compensation committee's policy with
respect to Section 162(m) is to make every reasonable effort to ensure that
compensation is deductible to the extent permitted while simultaneously
providing Company executives with appropriate rewards for their performance.
During 2001, the Company paid its executive officers approximately $1,834,175
aggregate cash compensation that was non-deductible pursuant to Section 162(m).
In awarding the cash bonuses that produced the non-deductible compensation
expense, the performance compensation committee determined that the advantages
to the Company of awarding compensation at that level as a reward for the
previously discussed leadership of Mr. Klopp and the contributions of the other
executive officers outweighed the loss of the tax deduction. The performance
compensation committee will continue to consider on a case-by-case basis whether
particular compensation awards and programs that do not satisfy the conditions
of Section 162(m) outweigh the costs to the Company of the loss of the related
tax deduction.

Performance Compensation Committee

Jeffrey A. Altman
Sheli Z. Rosenberg
Lynne B. Sagalyn

Performance Graph

Set forth below is a line graph comparing the yearly percentage change
in the cumulative total stockholder return on shares of Class A Common Stock
against (i) the cumulative total return of companies listed on the New York
Stock Exchange, (ii) the cumulative total return of a peer group selected in the
previous years by the Company (iStar Financial Inc., Franchise Finance
Corporation of America, Allied Capital Corp., LNR Property Corp. and Ocwen
Financial Corp.) (the "Old Peer Group") and (iii) the cumulative total return of
a peer group newly selected by the Company (iStar Financial Inc., Blackrock,
Inc., Allied Capital Corp., LNR Property Corp. and Federated Investors, Inc.)
(the "New Peer Group"). The Company has selected the New Peer Group as a basis
for comparison because it believes that, as a result of changes in the Company's
operations and the competitive environment and the acquisition of a peer
company, a comparison of shareholder returns to the returns of its newly
selected peer group companies provides a more appropriate basis of comparison.
The five-year period compared commences December 31, 1996 and ends December 31,
2001. This graph assumes that $100 was invested on January 1, 1997 in the
Company and each of the two market indices and the peer group index (at the
December 31, 1996 closing prices), and that all cash distributions were
reinvested. The Class A Common Stock price performance shown on the graph is not
indicative of future price performance.

[Performance Graph depicting stock price performance omitted]

1996 1997 1998 1999 2000 2001
--------------------------------------------------------

CAPITAL TRUST 100.00 409.09 218.18 181.82 179.56 209.45
NYSE MARKET INDEX 100.00 131.56 156.55 171.42 175.51 159.87
OLD PEER GROUP INDEX 100.00 187.88 120.54 94.39 103.85 144.19
NEW PEER GROUP INDEX 100.00 167.96 144.03 154.95 311.27 344.71

The foregoing price performance comparisons shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act, or under the
Exchange Act, except to the extent that the Company specifically incorporates
this graph by reference, and shall not otherwise be deemed filed under such
acts.

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth as of April 26, 2002 certain information
with respect to the beneficial ownership of Class A Common Stock by (i) each
person known to the Company to be the beneficial owner of more than 5% of either
the outstanding Class A Common Stock, (ii) each director and Named Executive
Officer currently employed by the Company and (iii) all directors and executive
officers of the Company as a group. Such information (other than with respect to
directors and executive officers of the Company) is based on a review of
statements filed with the Commission pursuant to Sections 13(d), 13(f) and 13(g)
of the Exchange Act with respect to the Class A Common Stock.

Amount and Nature of Beneficial
Ownership (1)

Five Percent Stockholders, Percent
Directors and Executive Officers Number of Class
-------------------------------- ------ --------

Veqtor Finance Company, L.L.C. (2) 3,192,288 16.9%

Citigroup Inc. (3) 8,528,467 31.1

EOP Operating Limited Partnership (4) 4,273,428(5) 18.5

State Street Bank and Trust Company, as Trustee for General 4,273,428(5) 18.5
Motors Employes Global Group Pension Trust (6)

Vornado Realty, L.P. (7) 4,273,428(5) 18.5

Liberty Wanger Asset Management, L.P. (8) 1,837,300 9.7

Advisors Research, Inc. (9) 1,072,900 5.7

Jeffrey A. Altman 30,000 *

Thomas E. Dobrowski -- (10) --

Martin L. Edelman 101,015(11) *

Gary R. Garrabrant 480,438(11)(12) 2.5

Craig M. Hatkoff 2,497,028(13)(14)(19) 13.1

John R. Klopp 2,704,020(13)(14) 14.1

Susan W. Lewis -- --

Stephen D. Plavin 416,666(15) 2.2

Sheli Z. Rosenberg 445,438(11)(16) 2.4

Steven Roth --(17) --

Lynne B. Sagalyn 51,015(11) *

Edward L. Shugrue III 557,523(15) 2.9

Michael D. Watson -- --

Samuel Zell 221,015(11)(18) 1.2

All executive officers and directors as a group (14 7,504,492 37.4%
persons)
* Represents less than 1%.

(1) The number of shares owned are those beneficially owned as determined
under the rules of the Commission, and such information is not
necessarily indicative of beneficial ownership for any other purpose.
Under such rules, beneficial ownership includes any shares as to which a
person has sole or shared voting power or investment power and any
shares which the person has the right to acquire within 60 days through
the exercise of any option, warrant or right, through conversion of any
security or pursuant to the automatic termination of a power of attorney
or revocation of a trust, discretionary account or similar arrangement.

(2) Zell General Partnership, Inc. ("Zell GP") is the sole member of Veqtor
Finance Company, L.L.C. ("Veqtor"). The sole shareholder of Zell GP is
the Samuel Investment Trust, a trust established for the benefit of the
family of Samuel Zell. Chai Trust Company L.L.C., which is advised by
Equity Group Investments, L.L.C. with respect to its investments,
serves as trustee of Chai Trust Company L.L.C. Veqtor is located at c/o
Equity Group Investments, L.L.C., Two North Riverside Plaza, Chicago,
Illinois 60606.

(3) Beneficial ownership information is based on a statement filed pursuant
to Section 13(d) of the Exchange Act by Citigroup Inc.. Represents
shares underlying warrants indirectly beneficially owned through
indirectly held subsidiaries. The address of Citigroup Inc. is 399 Park
Avenue, New York, NY 10043.

(4) Beneficial ownership information is based on a statement filed pursuant
to Section 13(d) of the Exchange Act by EOP Operating Limited
Partnership ("EOP"). The address of EOP is Two North Riverside Plaza,
Chicago, Illinois 60606.

(5) Represents shares which may be obtained upon conversion of $29,914,000
in convertible amount of Variable Step Up Convertible Trust Preferred
Securities issued by the Company's consolidated Delaware statutory
business trust subsidiary, CT Convertible Trust I (the "CT Trust"), to
each of EOP, State Street Bank and Trust Company, as trustee for
General Motors Employes Global Group Pension Trust (the "GM Trust") and
Vornado Realty L.P. ("VNO").

(6) Beneficial ownership information is based on statements filed pursuant
to Section 13(d) of the Exchange Act by General Motors Asset Management
Corporation ("GMAM") and the GM Trust as another reporting person named
therein. State Street Bank and Trust Company acts as the trustee (the
"Trustee") for the GM Trust, a trust under and for the benefit of
certain employee benefit plans of General Motors Corporation ("GM") and
its subsidiaries. These shares may be deemed to be owned beneficially
by GMIMCo, a wholly owned subsidiary of GM. GMIMCo's principal business
is providing investment advice and investment management services with
respect to the assets of certain employee benefit plans of GM and its
subsidiaries and with respect to the assets of certain direct and
indirect subsidiaries of GM and associated entities. GMIMCo is serving
as the GM Trust's investment manager with respect to these shares and
in that capacity it has sole power to direct the Trustee as to the
voting and disposition of these shares. Because of the Trustee's
limited role, beneficial ownership of the shares by the Trustee is
disclaimed. The address of GMIMCo is 767 Fifth Avenue, New York, New
York 10153.

(7) Beneficial ownership information is based on a statement filed pursuant
to Section 13(d) of the Exchange Act filed by VNO. The address of VNO
is c/o Vornado Realty Trust, Park 80 West, Plaza II, Saddle Brook, New
Jersey 07663.

(8) Beneficial ownership information is based on the Schedule 13G jointly
filed by Liberty Wanger Asset Management, L.P. ("LWAM"), its general
partner, WAM Acquisition GP, Inc. ("WAM GP") and its client, Liberty
Acorn Investment Trust ("Acorn") reporting beneficial ownership of
shares on behalf of discretionary clients, including Acorn. LWAM, WAM
GP and Acorn are located at 227 West Monroe Street, Suite 3000,
Chicago, Illinois 60606.

(9) Beneficial ownership information is based on a statement filed pursuant
to Section 13(f) of the Exchange Act by Advisory Research Incorporated.
The address of Advisory Research Incorporated is 180 North Stetson
Avenue, Suite 5780, Chicago, Illinois 60601.

(10) Does not include the shares that may be deemed beneficially owned by
GMIMCo, as to which Mr. Dobrowski disclaims beneficial ownership.

(11) In each case (that of Mr. Zell, Mr. Edelman, Mr. Garrabrant, Ms.
Rosenberg, and Dr. Sagalyn), includes 26,015 shares which may be
obtained upon conversion of vested stock units. In the case of Mr.
Zell, Mr. Edelman, Mr. Garrabrant, and Dr. Sagalyn, included 120,000,
75,000, 35,000 and 25,000, respectively, shares issuable upon the
exercise of vested stock options.

(12) Includes the 419,423 shares of class A common stock owned by GRG
Investment Partnership LP, for which Mr. Garrabrant serves as the
general partner.

(13) Includes, in the case of Mr. Hatkoff, the 2,330,132 shares of class A
common stock owned by CMH Investment Partnership LP, a family
partnership for which Mr. Hatkoff serves as a general partner.
Includes, in the case of Mr. Klopp, 2,330,132 shares of class A common
stock owned by JRK Investment Partnership LP, a family partnership for
which Mr. Klopp serves as general partner.

(14) Includes 274,999 and 141,667 shares issuable upon the exercise of
vested stock options held by each of Messrs. Klopp and Hatkoff,
respectively. Includes 59,260 shares for Mr. Klopp that are the subject
of restricted stock awards for which he retains voting rights.

(15) Includes 116,666 and 280,000 shares issuable upon the exercise of
vested stock options held by Mr. Plavin and Mr. Shugrue, respectively.
Includes 154,193 shares for Mr. Shugrue that are the subject of
restricted stock awards for which he retains voting rights.

(16) Includes 419,423 shares as class A common stock owned by Rosenberg-CT
General Partnership LP, for which Ms. Rosenberg serves as a general
partner.

(17) Does not include the shares that may be deemed beneficially owned by
VNO, as to which Mr. Roth disclaims beneficial ownership.

(18) Does not include the shares that may be deemed beneficially owned by
EOP, as to which Mr. Zell disclaims beneficial ownership.

(19) Includes 7,229 shares that may be obtained upon conversion of vested
stock units.

Certain Relationships and Related Transactions

Reimbursement Arrangement

Pursuant to an expense reimbursement arrangement with EGI, the Company
has agreed to reimburse EGI the costs for certain general administrative
services to the Company, including, among others, certain legal, tax,
shareholder relations and insurance acquisition services, which are provided by
employees of EGI. The Company had charged to operations $99,648 during the 2001
fiscal year.

Relationships with Martin L. Edelman

Martin L. Edelman, a director of the Company, is of counsel to Paul,
Hastings, Janofsky & Walker LLP, a law firm that provides the Company with
ongoing legal representation with respect to various matters. The Company is
also a party to a consulting agreement, dated as of January 1, 1998, with Mr.
Edelman. Pursuant to the agreement, Mr. Edelman provides consulting services for
the Company including client development and advisory services in connection
with lending and investment banking activities and asset and business
acquisition transactions. The consulting agreement was extended for a one-year
term beginning on January 1, 2002. The agreement is terminable by either party
upon thirty (30) days prior notice and provides for a consulting fee of $8,000
per month. Mr. Edelman is also entitled to participate in the Company's
incentive stock plan.

Venture Agreement with Affiliates of Citigroup Investments Inc.

On March 8, 2000, the Company entered into a strategic relationship
with Citigroup Investments Inc. ("CIG"), pursuant to which, among other things,
their respective affiliates will co-sponsor, commit to invest capital in and
manage high yield commercial real estate mezzanine investment opportunity funds.
The strategic relationship is governed by a venture agreement, dated as of March
8, 2000 (the "Venture Agreement"), amongst Travelers Limited Real Estate
Mezzanine Investments I, LLC ("Limited REMI I"), Travelers General Real Estate
Mezzanine Investments II, LLC, ("General REMI II"), Travelers Limited Real
Estate Mezzanine Investments II, LLC ("Limited REMI II" and together with
Limited REMI I and General REMI II, the "CIG Parties"), CT-F1, LLC, ("CT-F1"),
CT-F2-GP, LLC ("CT-F2-GP"), CT-F2-LP, LLC ("CT-F2-LP"), CT Investment Management
Co., LLC ("CTIMCO" and together with CT-F1, CT-F2-GP and CT-F2-LP, the "CT
Parties ") and the Company. The CIG Parties are affiliates of CIG and the CT
Parties are wholly owned subsidiaries of the Company.

Pursuant to the Venture Agreement, a warrant to purchase 4,250,000
shares of Class A Common Stock was issued and ultimately transferred to Limited
REMI I on March 8, 2000 in connection with the organization and capitalization
of the first investment fund, CT Mezzanine Partners I LLC, and warrants to
purchase 3,015,600, 236,233 and 1,026,634 shares of Class A Common Stock were
issued and ultimately transferred to General REMI II, on April 9, 2001, May 29,
2001 and August 7, 2001, respectively, in connection with the initial and
subsequent closings of the second investment fund, CT Mezzanine Partners II LP.
The Company has no further obligation to issue additional warrants to Citigroup.

Pursuant to the Venture Agreement, the Company increased the number of
directorships comprising the board of directors by two and appointed designees
of the CIG Parties to fill such newly created director positions. Susan W. Lewis
and Michael D. Watson were appointed directors pursuant to the foregoing.

The Company believes that the terms of the foregoing transactions are
no less favorable than could be obtained by the Company from unrelated parties
on an arm's-length basis.

PROPOSAL 2 -- RATIFICATION OF INDEPENDENT AUDITORS

Description of Proposal

The board of directors of the Company has appointed Ernst & Young LLP
as independent auditors of the Company for the fiscal year ending December 31,
2001, and has further directed that the appointment of such accountants be
submitted for ratification by the stockholders at the Annual Meeting. The
Company has been advised by Ernst & Young LLP that neither that firm nor any of
its associates has any relationship with the Company or its subsidiaries other
than the usual relationship that exists between independent certified public
accountants and clients. Ernst & Young LLP will have a representative at the
Annual Meeting who will have an opportunity to make a statement, if he or she so
desires, and who will be available to respond to appropriate questions.

Stockholder ratification of the appointment of Ernst & Young LLP as the
Company's independent auditors is not required by the Company's charter or
otherwise. However, the board of directors is submitting the appointment of
Ernst & Young LLP to the stockholders for ratification as a matter of what it
considers to be good corporate practice. Even if the appointment is ratified,
the board of directors in its discretion may direct the appointment of a
different independent accounting firm at any time during the year if the board
of directors determines that such a change would be in the best interests of the
Company and its stockholders.

Fees billed to Company by Ernst & Young LLP for Fiscal 2001

Audit Fees:

Audit fees billed to the Company by Ernst & Young LLP for the audit of
the Company's annual financial statements for the fiscal year ended December 31,
2001 included in the Company's annual report on Form 10-K and the review of
interim financial statements included in the Company's quarterly reports on Form
10-Q totaled $146,000.

Financial Information Systems Design and Implementation Fees:

The Company did not engage Ernst & Young LLP to provide advice to the
Company regarding financial information systems design and implementation during
the fiscal year ended December 31, 2001.

All Other Fees:

Fees billed to the Company by Ernst & Young LLP for all other non-audit
services rendered to the Company for the fiscal year ended December 31, 2001,
including tax related services, totaled $141,650.

The audit committee of the board of directors was advised of the
services provided by Ernst & Young LLP that are unrelated to the audit of the
annual fiscal year end financial statements and the review of interim financial
statements and has considered whether the provision of such services is
compatible with maintaining Ernst & Young LLP's independence as the Company's
independent auditor.

Vote Required; Recommendation

The affirmative vote of a majority of the votes cast at the Annual
Meeting is required to ratify the appointment of Ernst & Young LLP as the
Company's independent auditors. The board of directors unanimously recommends
that stockholders vote for the ratification of Ernst & Young LLP as the
Company's independent auditors.

ANNUAL REPORT

The Company's annual report to stockholders is being concurrently
distributed to stockholders herewith.

OTHER MATTERS

The management of the Company does not know of any other matters to
come before the Annual Meeting. If, however, any other matters do come before
the Annual Meeting, it is the intention of the persons designated as proxies to
vote in accordance with their discretion on such matters.

STOCKHOLDER PROPOSALS

Any Company stockholder who wishes to submit a stockholder proposal
pursuant to Rule 14a-8 under the Exchange Act for inclusion in the Company's
proxy statement and proxy card for the Company's 2003 annual meeting of
stockholders must submit the proposal to the Company's Secretary no later than
January 1, 2003. Any stockholder who wishes to present a stockholder proposal at
the 2003 annual meeting of stockholders must submit the proposal to the
Company's Secretary in compliance advance notice by-law provisions no earlier
than March 7, 2003 and no later than April 6, 2003. Such submissions should be
delivered to the Company's principal executive offices at 410 Park Avenue, 14th
Floor, New York, New York 10022, Attention: Secretary.