As filed with the Securities and Exchange Commission on July 11, 2003
Registration No. 333-_________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Capital Trust, Inc.
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(Exact name of registrant as specified in its charter)
Maryland
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(State or other jurisdiction of incorporation or organization)
94-6181186
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(I.R.S. Employer Identification Number)
410 Park Avenue, 14th Floor
New York, New York 10022
(212) 655-0220
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(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
John R. Klopp
Chief Executive Officer
Capital Trust, Inc.
410 Park Avenue, 14th Floor
New York, New York 10022
(212) 655-0220
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(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
Michael L. Zuppone, Esq.
Paul, Hastings, Janofsky & Walker LLP
75 East 55th Street
New York, New York 10022
(212) 318-6000
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this registration statement becomes effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities being offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
Calculation of Registration Fee
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Proposed Proposed
Amount to maximum maximum
Title of each class of be offering aggregate Amount of
securities to be registered price per offering registration
registered share(1) price fee
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Class A Common Stock, 1,075,000 $20.73 $22,284,750 $1,802.84
par value $0.01 per
share
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(1) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457(c) of the rules and
regulations promulgated under the Securities Act. Pursuant to Rule 457(c),
the proposed maximum offering price per share is based upon the average of
the high and low trading price for the class A common stock as reported on
the New York Stock Exchange on July 9, 2003.
Pursuant to Rule 429 under the Securities Act, the prospectus which
constitutes part of this registration statement also relates to an
aggregate of 7,201,019 shares of Registrant's Class A Common Stock (after
giving effect to the one (1) for three (3) reverse stock split effected on
April 2, 2003) registered on the registration statement on Form S-3 with
Commission Registration No. 333-103662.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE
WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND
EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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The information in this prospectus is not complete and may be changed. The
selling shareholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where such offer or sale is not
permitted.
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PRELIMINARY PROSPECTUS DATED JULY 11, 2003
SUBJECT TO COMPLETION
CAPITAL TRUST, INC.
8,276,019 Shares of Class A Common Stock
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All of the shares of our class A common stock covered by this prospectus
are beneficially owned by the selling shareholders listed in the section of this
prospectus called "Selling Shareholders." A description of such securities is
set forth in the section of this prospectus called "Description of Our Stock."
This prospectus relates to the offer and sale by the selling shareholders
of up to 8,276,019 shares of class A common stock. Each of the selling
shareholders may sell any or all of its shares covered by this prospectus from
time to time in one or more types of transactions, which may include block
transactions or involve brokers who act as agents for the seller or the buyer,
effected:
o on the New York Stock Exchange or any national securities exchange or
quotation service on which the shares of class A common stock may be listed
or quoted at the time of sale;
o in the over-the-counter market; or
o otherwise than on a national securities exchange or quotation service
or in the over-the-counter market or through the writing of options relating
to such shares.
All shares covered by this prospectus may be sold at fixed prices, at
prevailing market prices at the time of sale, at varying prices determined at
the time of sale or at negotiated prices. Further details regarding the
distribution of the shares covered by this prospectus may be found in this
prospectus in the section entitled "Plan of Distribution."
We have issued 4,002,597 shares of class A common stock to certain of the
selling shareholders and may issue up to 4,273,422 additional shares of class A
common stock to other selling shareholders upon the conversion of our
outstanding convertible trust preferred securities. We are filing the
registration statement of which this prospectus is a part to fulfill our
contractual obligations to the holders of the securities discussed above.
We will not receive any proceeds from the sales effected by the selling
shareholders. We have agreed to bear all expenses related to this offering,
other than underwriting discounts and commissions and any transfer taxes on the
shares of stock that the selling shareholders are offering.
Our class A common stock is listed for trading on the New York Stock
Exchange under the symbol "CT." On July 10, 2003, the last reported sale price
of our class A common stock on the New York Exchange was $20.75.
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Investing in the securities covered by this prospectus involves risks. See
"Risk Factors" beginning on page 2.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is __________, 2003.
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You should rely only on the information contained in this prospectus or
referred to in this prospectus. We have not authorized anyone to provide you
with information different from that contained in this prospectus. The
information contained in this prospectus is accurate only as of the date of this
prospectus, regardless of the time of delivery of this prospectus or any sale of
the shares of stock covered by this prospectus.
Unless the context otherwise indicates, references in this prospectus to
"we," "us," "our" or "Capital Trust" refer to Capital Trust, Inc., a Maryland
corporation.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including the information incorporated into it by
reference, includes forward-looking statements. These statements predict or
describe our future operations as a REIT, the effects of our reverse stock
split, our business plans and strategies, and do not relate solely to historical
matters. We have identified forward-looking statements contained and
incorporated by reference into this prospectus using words such as "believes,"
"expects," "may," "will," "should," "seeks," "approximately," "intends,"
"plans," "estimates", "anticipates" and similar words. Because these statements
reflect our current views concerning future events, they involve risks,
uncertainties and assumptions which may lead to actual results that are
materially different from those contemplated in the forward-looking statements.
Some, but not all, of the factors that may cause these differences are discussed
in the "Risk Factors" section of this prospectus and in other information
incorporated by reference into this prospectus.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements.
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PROSPECTUS SUMMARY
This summary highlights some of the information in this prospectus. It is
not a substitute for the detailed information and financial statements appearing
elsewhere in, or incorporated by reference into, this prospectus. This
prospectus contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from the results
anticipated in these forward-looking statements. You should read the entire
prospectus carefully, including the risk factors and financial statements.
Our Company
We are an investment management and real estate finance company positioned
to take advantage of high-yielding lending and investment opportunities in
commercial real estate and related assets. We make investments, for our own
portfolio and as an investment manager for funds we manage, in various types of
income-producing commercial real estate. Our current investment program
emphasizes senior and junior commercial mortgage loans, direct equity
investments and subordinated interests in commercial mortgage-backed securities.
Pursuant to our current business strategy, we seek to manage our portfolio of
loans and other assets so that a majority of our investments are subordinate to
third-party financing but senior to the owner/operator's equity position and
therefore represent "mezzanine" capital. We are organized and conduct our
operations to qualify as a real estate investment trust (REIT) for federal
income tax purposes.
We are the co-sponsor and exclusive investment manager of CT Mezzanine
Partners II LP, or Fund II, a commercial real estate mezzanine investment fund
which originated approximately $1.2 billion in investments. Our business
strategy is to continue to expand our investment management business by
sponsoring other commercial real estate funds focused on investments obtained
from mezzanine and other financing. We believe that these funds will generate
additional investment management fees and incentive compensation tied to the
performance of their portfolios of investments. We continue to manage our
existing portfolio of balance sheet assets originated prior to the commencement
of our investment management business and are positioned to selectively add to
our balance sheet investments by investing in a diverse array of real estate and
investment management/finance-related assets and enterprises, including
operating companies.
In December 2002, our board of directors authorized our election to be
taxed as a REIT for the 2003 tax year. We will continue to make for our own
account and as investment manager for the account of funds under management,
loans and debt related investments in various types of commercial real estate
and related assets, and, to the extent necessary, we will tailor our balance
sheet investment program to originate or acquire loans and investments to
produce a portfolio that meets the asset and income tests necessary to maintain
our qualification as a REIT. In order to accommodate our REIT status, the legal
structure of future investment funds we sponsor may be different from the legal
structure of our existing investment funds.
We were incorporated in Maryland on April 7, 1998 as a successor to a
business trust organized in the 1960s and our principal executive offices are
located at 410 Park Avenue, 14th Floor, New York, New York 10022, and our
telephone number is (212) 655-0220.
Securities That May Be Offered
This prospectus relates to the offer and sale from time to time of (i) up
to 4,002,597 shares of class A common stock currently held by certain of the
individuals and entities listed under the "Selling Shareholders" section of this
prospectus and (ii) up to 4,273,422 additional shares of class A common stock
which may be issued to other selling shareholders upon the conversion of our
outstanding convertible trust preferred securities.
We will not receive any cash proceeds from the sale by the selling
shareholders of the class A common stock to which this prospectus relates.
RISK FACTORS
An investment in our class A common stock involves various risks. You
should carefully consider the following risk factors in conjunction with the
other information contained and incorporated by reference into this prospectus
before purchasing our class A common stock. If any of the risks discussed in
this prospectus actually occur, our business, operating results, prospects
and/or financial condition could be harmed. This could cause the market price of
our class A common stock to decline and could cause you to lose all or part of
your investment.
Risk Factors Related to Our Business
Because we commenced our investment management business in 2000, we are
subject to risks and uncertainties associated with developing and operating a
new business, and we may not achieve from this new business the investment
returns that we expect.
Our investment management business commenced in 2000 and therefore has a
limited track record of proven results upon which to evaluate our performance.
We will encounter risks and difficulties as we proceed to develop and operate
our investment management business. In order to achieve our goals as an
investment manager, we must:
o manage our mezzanine funds successfully by investing a majority of our
fund capital in suitable investments that meet the funds' specified
investment criteria,
o incent our management and professional staff to the task of developing
and operating the investment management business,
o structure, sponsor and capitalize future real estate related funds and
other investment products under our management that provide investors
with attractive investment opportunities, and
o convince third party investors that an investment in our future funds
will meet their investment objectives and will generate attractive
returns.
There can be no assurance that we will successfully develop and operate
our investment management business to achieve the investment returns we expect.
Our success in developing and operating the investment management business
will depend in part on the demand for real estate related investment
opportunities such as those provided by our mezzanine funds and other real
estate related funds and other investment products.
Our ability to develop, operate and sustain our investment management
business will depend in part on the strength of the market for private equity
investments generally and the demand for real estate related private equity
investments in particular. Markets for real estate related investments can be
materially and adversely affected by factors beyond our control, including
volatility in the global capital markets, adverse changes in general economic
conditions, an unfavorable market for real estate and competition from other
investment opportunities available to third party investors.
We will face substantial competition from established participants in the
private equity market as we offer the mezzanine and other real estate related
funds to third party investors.
We are a recent entrant into the investment management business. As we
offer our mezzanine and other real estate related funds as investment
opportunities to third party investors, we will face significant competition
from established Wall Street investment banking firms and large financial
institutions which have proven track records in marketing and managing private
equity investment funds and are otherwise competitively advantaged because they
have access to pre-existing third party investor networks into which they can
channel competing investment opportunities. If our competitors offer investment
products that are competitive with the mezzanine and
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other fund investments offered by us, we will find it more difficult to attract
investors and to capitalize our mezzanine and other real estate related funds.
Our success in deploying our mezzanine funds' capital to originate or acquire
a targeted portfolio of assets will depend on the availability of, and the
degree of competition for, attractive investments.
Our operating results will be dependent upon the availability of, as well
as our ability to identify, consummate, manage and realize, high yielding real
estate investment opportunities. If we are not successful in investing all
available equity capital for our funds, it will reduce the potential revenues we
earn following our funds' investment period when our management fee base shifts
from the amount of capital commitments to the amount of invested assets. We may
expend significant time and resources in identifying and consummating targeted
investments. In general, the availability of desirable high yielding real estate
opportunities and, consequently, our funds' investment returns will be affected
by the level and volatility of interest rates, by conditions in the financial
markets and by general economic conditions. No assurance can be given 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. We will be engaged in a competitive business and will be
competing for attractive investments with traditional lending sources as well as
existing funds, or funds formed in the future, with similar investment
objectives.
Our loans and investments will 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 value that may result in reductions in the value of real estate
related investments. The performance and value of our loans and investments once
originated or acquired by us will depend on many factors beyond our control. The
ultimate performance and value of our investments will be subject to the varying
degrees of risk generally incident to the ownership and operation of the
commercial property which collateralize or support our investments. The ultimate
performance and value of our loans and investments depends upon the commercial
property owner's ability to operate the property so that it produces the
revenues and cash flow needed to pay the interest and principal due to us on the
loans and investments. Revenues and cash flow may be adversely affected by:
o changes in national economic conditions,
o changes in local real estate market conditions due to changes in
national or local economic conditions or changes in neighborhood
characteristics,
o competition from other properties offering the same or similar
services,
o changes in interest rates and in the availability of mortgage financing
on favorable terms,
o the impact of present or future environmental legislation and
compliance with environmental laws,
o the ongoing need for capital improvements (particularly in older
structures),
o changes in real estate tax rates and other operating expenses,
o 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 result in
uninsured losses,
o adverse changes in zoning laws, and
o other factors that are beyond our control and the control of the
commercial property owners.
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In the event that any of the properties underlying our loans and
investments experience any of the foregoing events or occurrences, the value of,
and return on, such investments would be negatively impacted.
Our balance sheet asset portfolio continues to be concentrated in
mark-to-market mortgage backed securities and related hedges which subjects
us to greater swings in equity and income as we record balance sheet gains
and losses on such assets.
Our venture agreement with affiliates of Citigroup Inc. placed
restrictions on our ability to originate new mezzanine loan investments for our
balance sheet during the investment period for Fund IIwhich resulted in our
balance sheet portfolio becoming more concentrated in longer term fixed rate
mortgage backed securities. We have adopted accounting policies under which such
securities are recorded as available-for-sale and changes in the market value
will impact either or both shareholders' equity or net income depending on the
characterization of the change in market value. If a reduction in market value
is deemed to be permanent (generally due to a change in the credit risk), the
reduction in value will be recorded as a reduction of net income. If any of the
available-for-sale securities are sold, the resulting gain or loss will be
recorded through the income statement. All other changes in market value will
impact shareholders equity only.
While the restrictions on our balance sheet investment activities
diminished when the investment period for Fund II ended and we have begun making
new mezzanine loan investments for our balance sheet, there can be no assurance
that the concentration in mark-to-market mortgage backed securities will be
reduced in the near term through new originations. In an environment of lower
interest rates, there is also a higher risk that our existing non-mark-to-market
loans will pay off early. To the extent our balance sheet remains concentrated
in mark-to-market assets, we will remain subject to potential swings in equity
and income as we record gains and losses on such assets on our balance sheet
which will be partially offset by unrealized gains and losses on hedges. If
interest rates fluctuate and affect significantly the market value of such
mark-to-market assets the corresponding reductions or increases in equity and
income may be significant.
We may not achieve our targeted rate of return on our investments.
We will originate or acquire investments based on our estimates or
projections of overall rates of return on such investments, which in turn are
based on, among other considerations, assumptions regarding the performance of
assets, the amount and terms of available financing 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 have not been anticipated may occur and may have a significant
effect on the actual rate of return received on an investment.
We are currently confronted with a low interest rate environment which
negatively impacts our ability to originate or acquire investments that produce
rates of returns similar to existing investments that were added to our
portfolio during a higher interest rate environment. As we acquire or originate
investments for our balance sheet portfolio (whether as new additions or as
replacements for maturing investments), there can be no assurance that we will
be able to originate or acquire investments that produce rates of return
comparable to rates on existing investments.
We may not be able to obtain the level of leverage necessary to optimize our
return on investment. If we do incur significant leverage, we will be
subject to the risks of holding leveraged investments.
Our return on investment will depend, in part, upon our ability to grow
our funds' portfolio of invested assets through the use of leverage. Our ability
to obtain the necessary leverage on attractive terms will ultimately depend upon
our ability to maintain interest coverage ratios meeting prevailing market
underwriting standards which will vary according to lenders' assessments of our
and our funds' creditworthiness and the terms of the borrowings. The failure to
obtain and/or maintain leverage at desired levels, or to obtain leverage on
attractive terms, could have a material adverse effect on our funds'
performance. Moreover, we are dependent upon a few lenders to provide the
primary credit facilities for our origination or acquisition of loans and
investments.
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Leverage creates an opportunity for increased net income, but at the same
time creates risks. For example, leveraging magnifies changes in the net worth
of our funds. We expect that our funds will leverage assets only when there is
an expectation that leverage will enhance returns, although there can be no
assurance that the use of leverage will prove to be beneficial. Where pledged
assets are marked-to-market, a decline in market value may require us to pledge
additional collateral to secure our borrowings. Moreover, there can be no
assurance that our funds will be able to meet their debt service obligations
and, to the extent that they cannot, they risk the loss of some or all of their
assets or a financial loss if they are required to liquidate assets at a
commercially inopportune time.
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 on the experience, relationships and expertise of our senior management
and key employees. There can be no assurance that these individuals will remain
in our employ. The employment agreement with our chief executive officer, John
R. Klopp, expires in 2004, unless further extended. The loss of the services of
our senior management and key employees could have a material adverse effect on
our operations.
We will be exposed to the risks involved with making subordinated
investments.
Our investments will involve the additional risks attendant to investments
consisting of subordinated loan positions. In many cases, management of our
investments and our remedies with respect thereto, including the ability to
foreclose on the collateral securing such investments, will be subject to the
rights of senior lenders and the rights as set forth in certain intercreditor
agreements.
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 investment program emphasizes loans with "floating" interest
rates to protect against fluctuations in interest rates. However, we may from
time to time make fixed rate loans. In such cases, we may employ various hedging
strategies to limit the effects of changes in interest rates, including engaging
in interest rate swaps, caps, floors and other interest rate exchange contracts.
No strategy can completely insulate us or the funds from the risks associated
with interest rate changes and there is a risk that they may provide no
protection at all. Hedging transactions involve certain additional risks such as
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. There can be no assurance that we will be able to enter
into hedging transactions or that such hedging transactions will adequately
protect us or the funds against the foregoing risks. In addition, cash flow
hedges which are not perfectly correlated with a variable rate financing will
impact our income as gains and losses on the ineffective portion of such hedges
will be recorded.
Our loans and investments may be illiquid which will constrain our ability to
vary our portfolio of investments.
Real estate investments are relatively illiquid. Such illiquidity may
limit our ability to vary our portfolio or our funds' portfolio of investments
in response to changes in economic and other conditions. Illiquidity may result
from the absence of an established market for investments as well as the legal
or contractual restrictions on their resale. In addition, illiquidity may result
from the decline in value of a property securing one of the funds' investments.
There can be no assurance that the fair market value of any of the real property
serving as security will not decrease in the future, leaving our or our funds'
investment under-collateralized or not collateralized at all.
We may invest in troubled assets which 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 and there can be no assurance that our
investment objectives will be realized or that there will be any return on
investment. Furthermore, investments in properties operating in work-out modes
or under bankruptcy protection laws may, in certain circumstances, be subject to
additional potential liabilities that could exceed the
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value of an investor's original investment, including equitable subordination
and/or disallowance of claims or lender liability.
We may not have control over certain of our loans and investments.
Our ability to manage our portfolio of loans and investments will be
subject to the form in which they are made. In certain situations, we or our
funds may:
o acquire only a minority interest,
o co-invest with third parties through partnerships, joint ventures or
other entities, thereby acquiring non-controlling interests,
o rely on independent third party management or strategic partners with
respect to the management of an asset, or
o acquire only a participation in an asset underlying an investment.
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 third party controlling investors or third parties are not involved. For
example, 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 the funds, or
may be in a position to take action contrary to the funds' investment
objectives. In addition, our funds may, in certain circumstances, be liable for
the actions of its third party partners or co-venturers.
Our mezzanine and other funds will be subject to the risk of defaults by
third party investors on their capital commitments.
The capital commitments made by third party investors to our mezzanine and
other funds represent promises by those investors to contribute cash to the
funds from time to time as investments are made by the funds. We will therefore
be 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 fund's investment program or make us liable for breach of
contract, in either case to the detriment of our franchise in the private equity
market.
We must manage our portfolio and the portfolios of our funds 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
this 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." We refer to this category of investments herein as
"Qualifying Interests." In addition, we must maintain an additional minimum of
25% of the value of our total assets in Qualifying Interests or other real
estate-related assets. Because registration as an investment company would have
a material adverse effect on us and our share price, since it would
significantly affect our ability to engage in certain transactions or to
organize ourselves in the manner as we currently do, we intend to maintain our
qualification for this exclusion from registration.
If our portfolio did 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 significant position in assets that are Qualifying
Interests. Altering our portfolio in this manner may have a material adverse
effect on our investment if we are forced to dispose of or acquire assets in an
unfavorable market.
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Risk Factors Relating to Our Stock
Because a limited number of shareholders, including members of our management
team, own a substantial number of our shares, decisions made by them may be
detrimental to your interests.
By virtue of their direct and indirect share ownership, John R. Klopp, a
director and our president and chief executive officer, Craig M. Hatkoff, a
director and former officer, and other shareholders indirectly owned by trusts
for the benefit of our chairman of the board, Samuel Zell, have the power to
significantly influence our affairs and are able to influence the outcome of
matters required to be submitted to shareholders for approval, including the
election of our directors, amendments to our charter, mergers, sales of assets
and other acquisitions or sales. The influence exerted by these shareholders
over the company's affairs might not be consistent with the interests of other
shareholders. We cannot assure you that these shareholders will not exercise
their influence over us in a manner detrimental to your interests. As of the
date hereof, these shareholders collectively own and control 2,171,479 shares of
our class A common stock representing approximately 33.4% of our outstanding
class A common stock. This concentration of ownership may have the effect of
delaying or preventing a change in control of our company and might affect the
market price of our class A common stock.
The conversion of the outstanding convertible trust preferred securities
held by EOP Operating Limited Partnership, Vornado Realty, L.P., and JP Morgan
Chase Bank, as trustee for the General Motors Employe Global Group Pension Trust
and the GMAM Group Pension Trust II could result in other significant
concentrated holdings of class A common stock. EOP Operating Limited
Partnership, Vornado Realty, L.P. and JP Morgan Chase Bank, as trustee for the
General Motors Employe Global Group Pension Trust and the GMAM Group Pension
Trust II may each acquire 1,424,474 shares of our class A common stock.
Officers, directors or other related persons of these securityholders serve on
our board of directors and therefore have the power to significantly influence
our affairs. If these securityholders acquire a significant ownership position,
they may acquire the ability to influence the outcome of matters submitted for
shareholder approval.
Some provisions of our charter and bylaws and Maryland law may deter takeover
attempts, which may limit the opportunity of our shareholders to sell their
shares at a favorable price.
Some of the provisions of our charter and bylaws and Maryland law
discussed below could make it more difficult for a third party to acquire us,
even if doing so might be beneficial to our shareholders, by providing them with
the opportunity to sell their shares at a premium to the then current market
price.
Issuance of Preferred Stock Without Shareholder Approval. Our charter
authorizes our board of directors to authorize the issuance of up to 100,000,000
shares of preferred stock and up to 100,000,000 shares of common stock. Our
charter also authorizes our board of directors, without shareholder approval, to
classify or reclassify any unissued shares of our common stock and preferred
stock into other classes or series of stock and to increase the aggregate number
of shares of stock of any class or series that may be issued. The board
therefore has the power 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, qualifications or
terms or conditions of redemption. No shares of preferred stock are currently
outstanding and we have no present plans for the issuance of any preferred
stock. The issuance of any preferred stock, however, could materially adversely
affect the rights of holders of our common stock, and therefore could reduce its
value. In addition, specific rights granted to future holders of preferred stock
could be used to restrict our ability to merge with, or sell assets to, a third
party. The power of the board of directors to issue preferred stock could make
it more difficult, delay, discourage, prevent or make it more costly to acquire
or effect a change in control, thereby preserving the current shareholders'
control.
Advance Notice Bylaw. Our bylaws contain advance notice procedures for the
introduction of business and the nomination of directors. These provisions could
discourage proxy contests and make it more difficult for you and other
shareholders to elect shareholder-nominated directors and to propose and approve
shareholder proposals opposed by management.
7
Maryland Takeover Statutes. We are subject to the Maryland Business
Combination Act which might enable our management to resist an unsolicited
takeover of our company. The statute substantially restricts the ability of
third parties who acquire, or seek to acquire, control of our company 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 and our company are
prohibited if the acquiror becomes an "interested shareholder" by obtaining
beneficial ownership of 10 percent or more of shareholder voting power. If our
board of directors approved in advance the transaction that would otherwise give
rise to the acquiror attaining such status, the acquiror 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 the strategic interests of our company. 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:
o 80% of the votes entitled to be cast by shareholders and
o 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.
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, the persons described above may
enter into business combinations with us without compliance with the
super-majority vote requirements and the other provisions of the statute.
We are also subject to the Maryland Unsolicited Takeovers Act which
permits our board of directors, among other things, to elect on our company's
behalf to stagger the terms of directors, to increase the shareholder vote
required to remove a director and to provide that shareholder-requested meetings
may be called only upon the request of shareholders entitled to cast at least a
majority of the votes entitled to be cast at the meeting. Such an election would
significantly restrict the ability of third parties to wage a proxy fight for
control of our board of directors as a means of advancing a takeover offer. If
an acquirer was discouraged from offering to acquire us, or prevented from
successfully completing a hostile acquisition, you could lose the opportunity to
sell your shares at a favorable price.
Risk Factors Related to our REIT Election
Our charter does not permit ownership of over 2.5% of our class A common
stock by individuals, and attempts to acquire our common stock in excess of
the 2.5% limit would be void without the prior approval of our board of
directors.
For the purpose of preserving our REIT qualification, our charter would
prohibit direct or constructive ownership by any individual of more than 2.5% of
the lesser of the total number or value of the outstanding shares of our class A
common stock as a means of preventing ownership of more than 50% of our class A
common stock by five or fewer individuals. The charter's constructive ownership
rules are complex and may cause the outstanding class A common stock owned by a
group of related individuals or entities to be deemed to be constructively owned
by one individual. As a result, the acquisition of less than 2.5% of our
outstanding class A common stock by an individual or entity could cause an
individual to own constructively in excess of 2.5% of our outstanding class A
common stock, and thus be subject to the charter's ownership limit. The
ownership limit was established following a review of the aggregate ownership of
the top five direct or constructive individual shareholders. There can be no
assurance that our board of directors, as permitted in the charter, will
increase this ownership limit in the future. Any attempt to own or transfer
shares of our class A common stock in excess of the ownership limit without the
8
consent of our board of directors shall 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.
After reviewing the top five shareholders treated as individuals for REIT
qualification purposes, our board of directors fixed the ownership limit at
2.5%. The charter contains a provision that would exempt certain of our officers
and directors and related persons from the ownership limit. Based on the number
of shares outstanding on the date hereof, this exemption would permit these top
five shareholders collectively to hold up to 40.9% of our outstanding shares of
class A common stock.
The 2.5% ownership limit may have the effect of precluding a change in
control of Capital Trust 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
stockholders (and even if such change in control would not reasonably jeopardize
our REIT status).
There are no assurances of our ability 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. We have not established a dividend policy
providing for the payment of specific dividends at regular intervals. 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 as to our ability to pay dividends in the future.
In addition, some of our distributions may include a return of capital.
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 common stock to expect a
higher dividend yield, which would adversely affect the market price of our
class A common stock.
Recent tax legislation may have negative consequences for REITs.
Recent tax legislation allows certain corporations to pay dividends that
qualify for a reduced tax rate in the hands of certain shareholders. This
legislation generally does not apply to REITs. Although the legislation does not
adversely affect the tax treatment of REITs, it may cause investments in
non-REIT corporations to become relatively more desirable. As a result, the
capital markets may be less favorable to REITs when they seek to raise equity
capital, and the prices at which REIT equity securities trade may decline or
underperform non-REIT corporations.
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 stock.
9
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.
We expect to operate so as to qualify as a REIT under the Internal Revenue
Code. However, qualification as a REIT involves the application of highly
technical and complex Internal Revenue Code provisions for which only a limited
number of judicial or administrative interpretations exist. Even a technical or
inadvertent mistake could jeopardize our REIT status. Furthermore, new tax
legislation, administrative guidance or court decisions, in each instance
potentially with retroactive effect, could make it more difficult or impossible
for us to qualify as a REIT. If we fail to qualify as a REIT in any tax year,
then:
o 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;
o any resulting tax liability could be substantial, could have a material
adverse effect on our book value and could reduce the amount of cash
available for distribution to shareholders; and
o 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.
Complying with REIT requirements may cause us to forego otherwise attractive
opportunities.
In order to qualify as a REIT for federal income tax purposes, we must
continually satisfy tests concerning, among other things, our sources of income,
the nature of our investments in commercial real estate and related assets, the
amounts we distribute to our shareholders and the ownership of our stock. We may
also be required to make distributions to shareholders at disadvantageous times
or when we do not have funds readily available for distribution. The REIT
provisions of the tax code may substantially limit our ability to hedge our
financial assets and related borrowings. 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 investment in securities cannot include more than 10% of the
outstanding voting securities of any one issuer or 10% of the total value of the
outstanding securities of any one issuer. In addition, no more than 5% of the
value of our assets can consist of the securities of any one issuer. If we fail
to comply with these requirements, we must dispose of a portion of our assets
within 30 days after the end of the calendar quarter in order to avoid losing
our REIT status and suffering adverse tax consequences.
Complying with REIT requirements may force us to borrow to make distributions
to shareholders.
From time to time, our taxable income may be greater than our cash flow
available for distribution to shareholders. If we do not have other funds
available in these situations, we may be unable to distribute substantially all
of our taxable income as required by the REIT provisions of the Internal Revenue
Code. Thus, we could be required to borrow funds, sell a portion of our assets
at disadvantageous prices or find another alternative. These options could
increase our costs or reduce our equity.
USE OF PROCEEDS
We will not receive any proceeds from the sale of any securities covered
by this prospectus by the selling shareholders.
10
SELECTED FINANCIAL DATA
The following selected financial data has been derived from the Company's
historical financial statements as of and for the years ended December 31, 2002,
2001, 2000, 1999, and 1998. The per share information presented has been
adjusted to give effect to the one (1) for three (3) reverse stock split of the
Company's outstanding shares of class A common stock as though the reverse stock
split was in effect for all periods presented. Prior to March 8, 2000, the
Company did not serve as investment manager for any funds under management and
therefore only the historical financial information, as of and for the years
ended December 31, 2002, 2001and 2000 reflect operating results from its
investment management business. For these reasons, the Company believes that,
except for the information for the years ended December 31, 2002, 2001 and 2000,
the following information is not indicative of the Company's current business.
Years Ended December 31,
--------------------------------------------
2002 2001 2000 1999 1998
--------- ------- -------- -------- --------
STATEMENT OF OPERATIONS DATA: (in thousands, except for per share data)
REVENUES:
Interest and investment income......$ 47,207 $ 67,728 $ 88,433 $ 89,839 $ 63,954
Income / (loss) from equity
investments in affiliated Funds... (2,534) 2,991 1,530 -- --
Advisory and investment banking
fees.............................. 2,207 277 3,920 17,772 10,311
Management and advisory fees from
Funds............................. 10,123 7,664 373 -- --
-------- ------- -------- -------- --------
Total revenues.................... 57,003 78,660 94,256 107,611 74,265
-------- ------- -------- -------- --------
OPERATING EXPENSES:
Interest expense.................... 17,992 26,348 36,931 39,791 27,665
General and administrative
expenses.......................... 13,996 15,382 15,439 17,345 17,045
Depreciation and amortization....... 992 909 902 345 249
Net unrealized (gain) / loss on
derivative securities and
corresponding hedged risk on CMBS
Securities........................ (21,134) 542 -- -- --
Net realized (gain) / loss on sale
of fixed assets, investments and
settlement of derivative
securities........................ 28,715 -- 64 (35) --
Provision for / (recapture of)
allowance for possible credit
losses............................ (4,713) 748 5,478 4,103 3,555
-------- ------- -------- -------- --------
Total operating expenses.......... 35,848 43,929 58,814 61,549 48,514
-------- ------- -------- -------- --------
Income / (loss) before income tax
expense and distributions and
amortization on Convertible
Trust Preferred Securities........ 21,155 34,731 35,442 46,062 25,751
Income tax expense.................. 22,438 16,882 17,760 22,020 9,367
-------- ------- -------- -------- --------
Income / (loss) before
distributions and amortization
on Convertible Trust Preferred
Securities........................ (1,283) 17,849 17,682 24,042 16,384
Distributions and amortization on
Convertible Trust
Preferred Securities, net of
income tax benefit................ 8,455 8,479 7,921 6,966 2,941
-------- ------- -------- -------- --------
NET INCOME / (LOSS)................. (9,738) 9,370 9,761 17,076 13,443
Less: Preferred Stock dividend and
dividend requirement.............. -- 606 1,615 2,375 3,135
-------- ------- -------- -------- --------
Net income / (loss) allocable to
Common Stock......................$ (9,738) $ 8,764 $ 8,146 $ 14,701 $ 10,308
========= ======= ======== ======== =======
PER SHARE INFORMATION:
Net income / (loss) per share of
Common Stock:
Basic............................$ (1.62) $ 1.30 $ 1.05 $ 2.07 $ 1.70
Diluted..........................$ (1.62) $ 1.12 $ 0.99 $ 1.65 $ 1.32
Weighted average shares of Common
Stock outstanding:
Basic............................ 6,009 6,722 7,724 7,111 6,070
======== ======= ======== ========= =======
Diluted.......................... 6,009 12,041 9,897 14,575 10,208
======== ======= ======== ========= =======
As of December 31,
-------------------------------------------
2002 2001 2000 1999 1998
--------- ------- -------- -------- --------
BALANCE SHEET DATA:
Total assets........................$384,976 $678,800 $644,392 $827,808 $766,438
Total liabilities................... 211,932 428,231 338,584 522,925 472,207
Convertible Trust Preferred
Securities........................ 88,988 147,941 147,142 146,343 145,544
Stockholders' equity................ 84,056 102,628 158,666 158,540 148,687
11
SELLING SHAREHOLDERS
As discussed elsewhere in this prospectus, the selling shareholders are
individuals or entities who or which either hold shares of our class A common
stock or may acquire the same upon the conversion of certain convertible trust
preferred securities and, as discussed under the caption "Plan of Distribution"
below, may include certain of their pledgees, donees, transferees or other
successors-in-interest who receive shares as a gift, pledge, partnership
distribution or other non-sale related transfer. The following table sets forth,
as of the date of this prospectus:
o the name of each selling shareholder;
o the number of shares of class A common stock beneficially owned by each
selling shareholder;
o the number of shares of class A common stock that may be offered for
the account of each selling shareholder; and
o the number and percentage of shares of class A common stock that will
be beneficially owned by each selling shareholder following the
offering to which this prospectus relates.
The information with respect to ownership after the offering assumes the
sale of all of the shares offered and no purchases of additional shares. We have
set forth in the footnotes to the table additional information regarding the
selling shareholders and their shares, including the nature of any position,
office or other material relationship that a selling shareholder has had with
Capital Trust or any of our affiliates within the past three years. The selling
shareholders may offer all or part of the shares covered by this prospectus at
any time or from time to time.
For purposes of the table below, the number of shares "beneficially owned"
are those beneficially owned as determined under the rules of the SEC. 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 for
which the person has the right to acquire such power 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.
Total Number
of Shares of Total Number Percentage
Total Number Class A of Shares of of Shares of
of Shares of Common Stock Class A Class A
Class A that may be Common Stock Common Stock
Common Stock Offered for to to be
Beneficially the Account be Beneficially
Owned Prior of the Beneficially Owned after
to this Selling Owned after this
Name Offering Shareholder this Offering Offering
---- ---------------- --------------- ----------------- --------------
Veqtor Finance Company,
L.L.C. (1) 897,429 897,429 -- --%
CMH Investment
Partnership LP (2) 610,444 (8) 610,444 -- --%
GRG Investment
Partnership LP (3) 64,807 (9) 64,807 -- --%
JRK Investment
Partnership LP (4) 600,044 (10) 600,044 -- --%
Rosenberg-CT General
Partnership (5) 139,807 (11) 139,807 -- --%
EOP Operating Limited
Partnership 1,424,474 (12) 1,424,974 -- --%
Vornado Realty, L.P. 1,424,474 (12) 1,424,974 -- --%
JPMorgan Chase Bank, as
trustee for General
Motors Employe Global
Group Pension Trust (6) 99,713 (13) 99,713 -- --%
JPMorgan Chase Bank, as
trustee for GMAM
Group Pension Trust
II (6) 1,324,761 (14) 1,324,761 -- --%
Stichting Pensioenfonds
ABP 590,066 590,066 -- --%
12
Total Number
of Shares of Total Number Percentage
Total Number Class A of Shares of of Shares of
of Shares of Common Stock Class A Class A
Class A that may be Common Stock Common Stock
Common Stock Offered for to to be
Beneficially the Account be Beneficially
Owned Prior of the Beneficially Owned after
to this Selling Owned after this
Name Offering Shareholder this Offering Offering
---- ---------------- --------------- ----------------- --------------
Samstock, L.L.C. (7) 25,000 25,000 -- --%
WIG LP 37,000 37,000 -- --%
Verna Harrah Trust 50,000 50,000 -- --%
HHS Partnership 15,000 15,000 -- --%
Jerry Markowitz and
Maria Markowitz 15,000 15,000 -- --%
Barbara Clements Heller
Revocable Trust 30,000 30,000 -- --%
Jerome Blank
Irrevocable Trust 18,000 18,000 -- --%
Bernard Osher Trust 60,000 60,000 -- --%
Prism Partners I LP 70,000 70,000 -- --%
Fred Stein 15,000 15,000 -- --%
Sharon B Zell Family
Trust 25,000 25,000 -- --%
JW Family Trust 12,500 12,500 -- --%
Richard F. Levy 10,000 10,000 -- --%
Kenneth D. Tuchman 5,000 5,000 -- --%
Harvey R. Heller 13,500 13,500 -- --%
Ramius Capital Croup,
LLC 22,500 22,500 -- --%
Portside Growth &
Opportunity Fund Ltd 22,500 22,500 -- --%
Santa Fe Art Foundation 15,000 15,000 -- --%
Diane Buchanan Wilsey 50,000 50,000 -- --%
SMS Trust 55,800 55,800 -- --%
ADS 1212 Trust 18,600 18,600 -- --%
You Lucky Dog Trust 18,600 18,600 -- --%
Prima Associates, LP 10,000 10,000 -- --%
The Alpha Fund 10,000 10,000 -- --%
Gaston Caperton 12,000 12,000 -- --%
John Pritzker 6,000 6,000 -- --%
Herb Lau and Carol Lau 1,000 1,000 -- --%
13
Total Number
of Shares of Total Number Percentage
Total Number Class A of Shares of of Shares of
of Shares of Common Stock Class A Class A
Class A that may be Common Stock Common Stock
Common Stock Offered for to to be
Beneficially the Account be Beneficially
Owned Prior of the Beneficially Owned after
to this Selling Owned after this
Name Offering Shareholder this Offering Offering
---- ---------------- --------------- ----------------- --------------
Mellon Bank NA,
Custodian for the
Public Employee
Retirement System of
Idaho 200,000 200,000 -- --%
Boston Safe Deposit and
Trust Company, as
Trustee of the Raytheon
Combined DB/DC Master
Trust 29,900 29,900 -- --%
Boston Safe Deposit and
Trust Company, as
Trustee of the Raytheon
Master Pension Trust 85,100 85,100 -- --%
WHI Growth Fund, LP 90,000 90,000 -- --%
Shoshana Foundation Inc. 2,000 2,000 -- --%
Granite Fund I LLC 50,000 50,000 -- --%
---------------------
(1) Zell General Partnership, Inc., or Zell GP, is the sole managing member of
Veqtor Finance Company, L.L.C. The sole shareholder of Zell GP is the Sam
Investment Trust, a trust established for the benefit of the family of
Samuel Zell, our chairman of the board. Chai Trust Company, L.L.C. serves
as trustee of the Sam Investment Trust.
(2) Craig M. Hatkoff, our former vice chairman and a member of our board of
directors, is the sole general partner of CMH Investment Partnership LP.
(3) Gary R. Garrabrant, a member of our board of directors, is the sole
general partner of GRG Investment Partnership L.P.
(4) John R. Klopp, our president and chief executive officer and a member of
our board of directors, is the sole general partner of JRK Investment
Partnership LP.
(5) Sheli Z. Rosenberg, a member of our board of directors, and Burton X.
Rosenberg are the sole general partners of Rosenberg-CT General
Partnership.
(6) Each trust is a pension trust formed pursuant to the laws of the State of
New York for the benefit of certain employee benefit plans of General
Motors Corporation, or GM, its subsidiaries and unrelated employers. These
shares may be deemed to be owned beneficially by General Motors Investment
Management Corporation, or GMIMCo, a wholly-owned subsidiary of GM. GMIMCo
is registered as an investment adviser under the Investment Advisers Act
of 1940. GMIMCo's principal business is providing investment advice and
investment management services with respect to the assets of certain
employee benefit plans of GM, its subsidiaries and unrelated employers,
and with respect to the assets of certain direct and indirect subsidiaries
of GM and associated entities. GMIMCo is serving as investment manager
with respect to these shares and in that capacity it has the 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.
(7) SZ Investments, L.L.C., or SZI, is the sole member of Samstock, L.L.C. The
sole manager of SZI is Zell GP.
(8) Excludes 18,000 shares of class A common stock owned by Craig M. Hatkoff,
141,667 shares issuable upon the exercise of vested stock options and
11,924 shares issuable upon conversion of vested stock units held by Mr.
Hatkoff.
(9) Excludes 30,710 shares of class A common stock which may be obtained upon
conversion of vested stock units held by Gary R. Garrabrant, and 35,000
shares of class A common stock issuable upon exercise of vested stock
options held by Mr. Garrabrant.
(10) Excludes 69,259 shares of class A common stock owned by John R. Klopp,
29,630 shares of class A common stock subject to an unvested restricted
stock grant, and 424,999 shares issuable upon exercise of vested stock
options held by Mr. Klopp.
(11) Excludes 30,710 shares of class A common stock which may be obtained upon
conversion of vested stock units held by Sheli Z. Rosenberg.
(12) 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 our company's consolidated Delaware statutory
business trust subsidiary, CT Convertible Trust I.
(13) Represents shares which may be obtained upon conversion of $2,093,980 in
convertible amount of Variable Step Up Convertible Trust Preferred
Securities issued by our company's consolidated Delaware statutory
business trust subsidiary, CT Convertible Trust I.
(14) Represents shares which may be obtained upon conversion of $27,820,020 in
convertible amount of Variable Step Up Convertible Trust Preferred
Securities issued by our company's consolidated Delaware statutory
business trust subsidiary, CT Convertible Trust I.
14
PLAN OF DISTRIBUTION
We are registering shares of class A common stock on behalf of the selling
shareholders. As used in this section of the prospectus, the term "selling
shareholders" includes the selling shareholders named in the table above and any
of their pledgees, donees, transferees or other successors-in-interest who
receive shares offered hereby from a selling shareholder as a gift, pledge,
partnership distribution or other non-sale related transfer and who subsequently
sell any of such shares after the date of this prospectus.
All costs, expenses and fees in connection with the registration of the
shares offered hereby will be borne by Capital Trust. Underwriting discounts,
brokerage commissions and similar selling expenses, if any, attributable to the
sale of the securities covered by this prospectus will be borne by the
respective selling shareholders.
The selling shareholders may sell under this prospectus the shares of
class A common stock which are outstanding or are issuable upon conversion of
the convertible trust preferred securities at different times. The selling
shareholders will act independently of us in making decisions as to the timing,
manner and size of each sale. The sales may be made on the New York Stock
Exchange or any national securities exchange or quotation system on which the
shares of class A common stock may be listed or quoted at the time of sale, in
the over-the-counter market or other than in such organized and unorganized
trading markets, in one or more transactions, at:
o fixed prices, which may be changed;
o prevailing market prices at the time of sale;
o varying prices determined at the time of sale; or
o negotiated prices.
The shares may be sold by one or more of the following methods in addition
to any other method permitted under this prospectus:
o a block trade in which the broker-dealer so engaged may sell the shares
as agent, but may position and resell a portion of the block as
principal to facilitate the transaction;
o a purchase by a broker-dealer as principal and resale by such
broker-dealer for its own account;
o an ordinary brokerage transaction or a transaction in which the broker
solicits purchasers;
o a privately negotiated transaction;
o an underwritten offering;
o securities exchange or quotation system sale that complies with the
rules of the exchange or quotation system;
o through the writing of options relating to such shares; or
o through a combination of the above methods of sale.
In connection with sales of the shares of class A common stock, any
selling shareholder may:
o enter into and cover hedging transactions with broker-dealers, that may
in turn engage in short sales of the shares of class A common stock in
the course of hedging the positions they assume;
15
o sell short and deliver shares of class A common stock to close out the
short positions; or
o loan or pledge shares of class A common stock to broker-dealers that in
turn may sell the shares.
We have been advised by the selling shareholders that they have not, as of
the date of this prospectus, entered into any agreements, understandings or
arrangements with underwriters or broker-dealers regarding the sale of their
shares, nor have we been advised that there is an underwriter or broker-dealer
acting as of the date of this prospectus in connection with the proposed sale of
the shares by the selling shareholders.
The selling shareholders may effect such transactions by selling the
shares covered by this prospectus directly to purchasers, to or through
broker-dealers, which may act as agents for the seller and buyer or principals,
or to underwriters who acquire shares for their own account and resell them in
one or more transactions. Such broker-dealers or underwriters may receive
compensation in the form of discounts, concessions, or commissions from the
selling shareholders and/or the purchasers of the shares covered by this
prospectus for whom such broker-dealers may act as agents or to whom they sell
as principal, or both (which compensation as to a particular broker-dealer might
be in excess of customary commissions) and such discounts, concessions, or
commissions may be allowed or re-allowed or paid to dealers.
The selling shareholders and any broker-dealers that participate with the
selling shareholders in the sale of the shares covered by this prospectus may be
deemed to be "underwriters" within the meaning of Section 2(a)(11) of the
Securities Act, and any commissions received by such broker-dealers and any
profit on the resale of the shares sold by them while acting as principals might
be deemed to be underwriting discounts or commissions under the Securities Act.
The selling shareholders and any broker-dealer that may be deemed to be
"underwriters" within the meaning of Section 2(a)(11) of the Securities Act will
be subject to the prospectus delivery requirements of the Securities Act. We
will make copies of this prospectus available to the selling shareholders and
have informed them of their obligation to deliver copies of this prospectus to
purchasers at or before the time of any sale of the shares. Such requirement may
be satisfied by delivery through the facilities of the New York Stock Exchange
pursuant to Rule 153 under the Securities Act.
We have informed the selling shareholders that the anti-manipulation
provisions of Regulation M promulgated under the Securities Exchange Act of
1934, may apply to their sales in the market.
The selling shareholders also may resell all or a portion of their shares
in open market transactions in reliance upon Rule 144 under the Securities Act,
or any other available exemption from required registration under the Securities
Act, provided they meet the criteria and conform to the requirements of such
exemption.
We will file a supplement to this prospectus, if required, pursuant to
Rule 424(b) under the Securities Act upon being notified by a selling
shareholder that any material arrangements have been entered into with a
broker-dealer for the sale of shares through a block trade, special offering,
exchange or secondary distribution or a purchase by a broker-dealer. Such
supplement will disclose:
o the name of each such selling shareholder and of the participating
broker-dealer(s);
o the number of shares involved;
o the price at which such shares were sold;
o the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable;
o that such broker-dealer(s) did not conduct any investigation to verify
the information set out or incorporated by reference in this
prospectus; and
16
o other facts material to the transaction.
In addition, upon receiving notice from a selling shareholder that a
donee, pledgee or transferee or other successor-in-interest intends to sell more
than 500 shares covered by this prospectus, we will file a supplement to this
prospectus pursuant to Rule 424(b) under the Securities Act to identify the
non-sale transferee.
We have agreed with the selling shareholders to keep the registration
statement of which this prospectus is a part effective until all shares are sold
by the selling shareholders or all unsold shares are immediately saleable
without restriction (including without volume limitations) and without
registration under the Securities Act.
The selling shareholders are not restricted as to the price or prices at
which they may sell their shares. Sales of such shares may have an adverse
effect on the market price of the securities, including the market price of the
class A common stock. Moreover, the selling shareholders are not restricted as
to the number of shares that may be sold at any time, and it is possible that a
significant number of shares could be sold at the same time, which may have an
adverse effect on the market price of the class A common stock.
We will bear all costs, expenses and fees in connection with the
registration of the shares. We have agreed to indemnify and hold the selling
shareholders harmless against certain liabilities under the Securities Act that
could arise in connection with the sale by the selling shareholders of the
shares. The selling shareholders will bear all commissions and discounts, if
any, attributable to the sales of the shares. The selling shareholders may agree
to indemnify any broker-dealer or agent that participates in transactions
involving sales of the shares against certain liabilities, including liabilities
arising under the Securities Act.
17
DESCRIPTION OF OUR STOCK
The following description of our common and preferred stock, provisions of
our charter and bylaws and specific provisions of the Maryland General
Corporation Law are only summaries, and are qualified in their entirety by
reference to the Maryland General Corporation Law and to our charter and bylaws
which are filed as exhibits to our registration statement on Form S-3 of which
this prospectus is a part.
General
Under our charter, we may issue up to 200,000,000 shares of stock
comprised of the following:
o 100,000,000 shares of class A common stock, par value $.01 per share;
and
o 100,000,000 shares of preferred stock, par value $.01 per share.
As of the date hereof, 6,500,734 shares of class A common stock were
issued and outstanding and no shares of preferred stock were designated as a
particular class or series or are outstanding. Under Maryland law, our
shareholders generally are not liable for our debts or obligations. The class A
common stock is listed on the New York Stock Exchange under the symbol "CT".
Common Stock
All shares of class A common stock covered by this prospectus are, or upon
their issuance will be, duly authorized, fully paid and nonassessable. Holders
of our common stock are entitled to receive dividends when authorized by our
board of directors out of assets legally available for the payment of dividends.
They are also entitled to share ratably in our assets legally available for
distribution to our shareholders in the event of our liquidation, dissolution or
winding up, after payment of, or adequate provision for, all of our known debts
and liabilities. These rights are subject to the preferential rights of any
other class or series of our stock. All shares of class A common stock have
equal dividend and liquidation rights.
Subject to our charter restrictions on ownership and transfer of our
stock, each outstanding share of class A common stock is entitled to one vote on
all matters to be submitted to a vote of the shareholders. There is no
cumulative voting in the election of our directors and our directors are elected
by a plurality of the votes cast, so the holders of a simple majority of the
outstanding class A common stock, voting at a shareholders meeting at which a
quorum is present, can elect all of the directors nominated for election at the
meeting. Holders of our common stock have no exchange, sinking fund, redemption
or appraisal rights and have no preemptive rights to subscribe for any of our
securities. Because holders of common stock do not have preemptive rights, we
may issue additional shares of stock that may reduce each shareholder's
proportionate voting and financial interest in our company. Rights to receive
dividends on our class A common stock may be restricted by the terms of any
future classified and issued shares of our preferred stock.
Under Maryland law, a Maryland corporation generally cannot dissolve,
amend its charter, merge, sell all or substantially all of its assets, engage in
a share exchange or engage in similar transactions outside the ordinary course
of business unless approved by the affirmative vote of shareholders holding at
least two-thirds of the shares entitled to vote on the matter. However, a
Maryland corporation may provide in its charter for approval of these matters by
a lesser percentage, but not less than a majority of all of the votes entitled
to be cast on the matter. Our charter provides for approval of these matters by
a majority of all votes entitled to be cast on the matter.
Power to Reclassify Shares of Our Stock and to Increase the Number of Shares
of Our Stock
Our charter authorizes our board of directors, without shareholder
approval, to:
o classify and reclassify any unissued shares of our common stock and
preferred stock into other classes or series of stock, and
18
o increase or decrease the aggregate number of shares of stock of any
class or series that may be issued.
Prior to the issuance of shares of each class or series, the board is
required by Maryland law and by our charter to set, subject to our charter
restrictions on transfers of stock, the terms, preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends or other
distributions, qualifications and terms or conditions of redemption for each
class or series. Thus, the board could authorize the issuance of shares of
preferred stock with terms and conditions which could have the effect of
delaying, deferring or preventing a transaction or a change in control of our
company that might involve a premium price for holders of our common stock or
otherwise be in their best interest.
Power to Issue Additional Shares of Common Stock and Preferred Stock
We believe that the power to issue additional shares of our common stock
or preferred stock, increase the aggregate number of shares of stock of any
class or series that we have the authority to issue and to classify or
reclassify unissued shares of our common or preferred stock and thereafter to
issue the classified or reclassified shares provides us with increased
flexibility in structuring possible future financings and acquisitions and in
meeting other needs which might arise. These actions can be taken without
shareholder approval, unless shareholder approval is required by applicable law
or the rules of any stock exchange or automated quotation system on which our
securities may be listed or traded. Although we have no present intention of
doing so, we could issue a class or series of stock that could delay, defer or
prevent a transaction or a change in control of our company that might involve a
premium price for holders of common stock or otherwise be in their best
interest.
Transfer Agent and Registrar
The transfer agent and registrar for all of the securities covered by this
prospectus is American Stock Transfer & Trust Company located in Brooklyn, New
York.
Certain Provisions of Maryland Law and Our Charter and Bylaws
REIT Qualification Restrictions on Ownership and Transfer
Our charter contains restrictions on the number of shares of our stock
that a person may own. No individual may acquire or hold, directly or
indirectly, in excess of 2.5% in value or number of our stock unless they
receive an exemption from our board of directors.
Our charter further prohibits (a) any person from owning shares of our
stock that would result in our being "closely held" under Section 856(h) of the
Internal Revenue Code or otherwise cause us to fail to qualify as a REIT and (b)
any person from transferring shares of our stock if the transfer would result in
our stock being owned by fewer than 100 persons. Any person who acquires or
intends to acquire shares of our stock that may violate any of these
restrictions, or who is the intended transferee of shares of our stock which are
transferred to the Trust, as defined below, is required to give us immediate
written notice and provide us with such information as we may request in order
to determine the effect of the transfer on our status as a REIT. The above
restrictions will not apply if our board of directors determines that it is no
longer in our best interests to continue to qualify as a REIT.
Our board of directors, in its sole discretion, may exempt a person from,
or modify, these limits, subject to such terms, conditions, representations and
undertakings as it may determine. Our board of directors has granted limited
exemptions to certain persons who directly or indirectly own our stock,
including officers and directors and shareholders controlled by them or trusts
for the benefit of their families.
Any attempted transfer of our stock which, if effective, would result in
violation of the above limitations, will cause the number of shares causing the
violation (rounded to the nearest whole share) to be automatically transferred
to a trust, which we refer to as the Trust, for the exclusive benefit of one or
more charitable beneficiaries, which we refer to as the Charitable Beneficiary,
and the proposed transferee will not acquire any rights in the shares. The
automatic transfer will be deemed to be effective as of the close of business on
the business day (as defined in
19
our charter) prior to the date of the transfer. The shares transferred to the
Trust will generally be selected so as to minimize the aggregate value of shares
transferred to the Trust. Shares of our stock held in the Trust will be issued
and outstanding shares. The proposed transferee will not benefit economically
from ownership of any shares of stock held in the Trust, will have no rights to
dividends and no rights to vote or other rights attributable to the shares of
stock held in the Trust. The trustee of the Trust will have all voting rights
and rights to dividends or other distributions with respect to shares held in
the Trust. These rights will be exercised for the exclusive benefit of the
Charitable Beneficiary. Any dividend or other distribution paid prior to our
discovery that shares of stock have been transferred to the Trust will be paid
by the recipient to the Trustee upon demand. Any dividend or other distribution
authorized but unpaid will be paid when due to the Trustee. Any dividend or
distribution paid to the Trustee will be held in trust for the Charitable
Beneficiary. Subject to Maryland law, the Trustee will have the authority (i) to
rescind as void any vote cast by the proposed transferee prior to our discovery
that the shares have been transferred to the Trust and (ii) to recast the vote
in accordance with the desires of the Trustee acting for the benefit of the
Charitable Beneficiary. However, if we have already taken irreversible corporate
action, then the Trustee will not have the authority to rescind and recast the
vote. If necessary to protect our status as a REIT, we may establish additional
Trusts with distinct Trustees and Charitable Beneficiaries to which shares may
be transferred.
Within 20 days of receiving notice from us that shares of our stock have
been transferred to the Trust, the Trustee will sell the shares to a person
designated by the Trustee, whose ownership of the shares will not violate the
above ownership limitations. Upon the sale, the interest of the Charitable
Beneficiary in the shares sold will terminate and the Trustee will distribute
the net proceeds of the sale to the proposed transferee and to the Charitable
Beneficiary as follows. The proposed transferee will receive the lesser of (i)
the price paid by the proposed transferee for the shares or, if the proposed
transferee did not give value for the shares in connection with the event
causing the shares to be held in the Trust (e.g., a gift, devise or other
similar transaction), the Market Price (as defined in our charter) of the shares
on the day of the event causing the shares to be held in the Trust and (ii) the
price received by the Trustee from the sale or other disposition of the shares.
Any net sale proceeds in excess of the amount payable to the proposed transferee
will be paid immediately to the Charitable Beneficiary. If, prior to our
discovery that shares of our stock have been transferred to the Trust, the
shares are sold by the proposed transferee, then (i) the shares shall be deemed
to have been sold on behalf of the Trust and (ii) to the extent that the
proposed transferee received an amount for the shares that exceeds the amount he
was entitled to receive, the excess shall be paid to the Trustee upon demand.
In addition, shares of our stock held in the Trust will be deemed to have
been offered for sale to us, or our designee, at a price per share equal to the
lesser of (i) the price per share in the transaction that resulted in the
transfer to the Trust (or, in the case of a devise or gift, the Market Price at
the time of the devise or gift) and (ii) the Market Price on the date we, or our
designee, accept the offer. We will have the right to accept the offer until the
Trustee has sold the shares. Upon a sale to us, the interest of the Charitable
Beneficiary in the shares sold will terminate and the Trustee will distribute
the net proceeds of the sale to the proposed transferee.
All certificates representing shares of our stock issued in the future
will bear a legend referring to the restrictions described above.
Every owner of more than such percentage as may from time to time be
established by our board of directors (or such lower percentage as required by
the Internal Revenue Code or the regulations promulgated thereunder) of our
stock, within 30 days after the end of each taxable year, is required to give us
written notice, stating his name and address, the number of shares of each class
and series of our stock which he beneficially owns and a description of the
manner in which the shares are held. Each such owner shall provide us with such
additional information as we may request in order to determine the effect, if
any, of his beneficial ownership on our status as a REIT and to ensure
compliance with the ownership limits. In addition, each shareholder shall upon
demand be required to provide us with such information as we may request in good
faith in order to determine our status as a REIT and to comply with the
requirements of any taxing authority or governmental authority or to determine
such compliance.
These ownership limits could delay, defer or prevent a transaction or a
change in control that might involve a premium price for the common stock or
otherwise be in the best interest of the stockholders.
20
Business Combinations
Under Maryland law, "business combinations" between a Maryland corporation
and an interested shareholder or an affiliate of an interested shareholder are
prohibited for five years after the most recent date on which the interested
shareholder becomes an interested shareholder. These business combinations
include a merger, consolidation, share exchange, or, in circumstances specified
in the statute, an asset transfer or issuance or reclassification of equity
securities. An interested shareholder is defined as:
o any person who beneficially owns 10% or more of the voting power of the
corporation's shares; or
o an affiliate or associate of the corporation who, at any time within
the two-year period prior to the date in question, was the beneficial
owner of 10% or more of the voting power of the then outstanding voting
stock of the corporation.
A person is not an interested shareholder under the statute if the board
of directors approved in advance the transaction by which he or she otherwise
would have become an interested shareholder. However, in approving a
transaction, our board of directors may provide that its approval is subject to
compliance, at or after the time of approval, with any terms and conditions
determined by the board.
After the five-year prohibition, any business combination between the
Maryland corporation and an interested shareholder generally must be recommended
by the board of directors of the corporation and approved by the affirmative
vote of at least:
o 80% of the votes entitled to be cast by holders of outstanding shares
of voting stock of the corporation; and
o two-thirds of the votes entitled to be cast by holders of voting stock
of the corporation other than shares held by the interested shareholder
with whom or with whose affiliate the business combination is to be
effected or the shares held by any affiliate or associate of the
interested shareholder.
These super-majority vote requirements do not apply if the corporation's
common shareholders receive a minimum price, as defined under Maryland law, for
their shares in the form of cash or other consideration in the same form as
previously paid by the interested shareholder for its shares.
The statute permits various exemptions from its provisions, including
business combinations that are exempted by the board of directors prior to the
time that the interested shareholder became an interested shareholder.
Our board of directors has adopted resolutions which exempt Veqtor Finance
Company, L.L.C., JRK Investment Partnership LP and CMH Investment Partnership LP
from the five-year prohibition and the super-majority vote requirement. The
business combination statute may discourage others from trying to acquire
control of us and may increase the difficulty of consummating any offer relating
to the same.
Control Share Acquisitions
Maryland 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. A control share acquisition means the acquisition of control shares,
subject to certain exceptions. Shares owned by the acquiror, by officers of the
target corporation or by directors of the target corporation who are also
employees are excluded from shares entitled to vote on the matter. Control
shares are voting shares of stock which, if aggregated with all other shares of
stock owned by the acquiror or in respect of which the acquiror is able to
exercise or direct the exercise of voting power (except solely by virtue of a
revocable proxy), would entitle the acquiror to exercise voting power in
electing directors within one of the following ranges of voting power:
o one-tenth or more but less than one-third;
21
o one-third or more but less than a majority; or
o a majority or more of all voting power.
Control shares do not include shares the acquiror is entitled to vote as a
result of having previously obtained shareholder approval.
A person who has made or proposes to make a control share acquisition may
compel the board of directors of the corporation to call a special meeting of
shareholders to be held within 50 days of demand to consider the voting rights
of the shares. The right to compel the calling of a special meeting is subject
to the satisfaction of certain conditions, including an undertaking to pay the
expenses of the meeting. If no request for a meeting is made, the corporation
may itself present the question at any shareholders meeting.
If voting rights are not approved at the meeting or if the acquiring
person does not deliver an acquiring person statement as required by the
statute, then the corporation may redeem for fair value any or all of the
control shares, except those for which voting rights have previously been
approved. The right of the corporation to redeem control shares is subject to
certain conditions and limitations. Fair value is determined, without regard to
the absence of voting rights for the control shares, as of the date of the last
control share acquisition by the acquiror or of any meeting of shareholders at
which the voting rights of the shares are considered and not approved. If voting
rights for control shares are approved at a shareholders meeting and the
acquiror becomes entitled to vote a majority of the shares entitled to vote, all
other shareholders may exercise appraisal rights. The fair value of the shares
as determined for purposes of 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 (a) to shares
acquired in a merger, consolidation or share exchange if the corporation is a
party to the transaction, or (b) to acquisitions approved or exempted by the
charter or bylaws of the corporation.
Maryland Unsolicited Takeovers Act
The Maryland Unsolicited Takeovers Act applies to any Maryland corporation
that has a class of securities registered under the Securities Exchange Act of
1934 and at least three independent directors. Pursuant to such act, the board
of directors of any Maryland corporation fitting such description, without
obtaining shareholder approval and notwithstanding a contrary provision in its
charter or bylaws, may elect to:
o classify the board;
o increase the required shareholder vote to remove a director to
two-thirds of all the votes entitled to be cast by the shareholders
generally in the election of directors; and
o require that a shareholder requested special meeting need be called
only upon the written request of the shareholders entitled to cast a
majority of all the votes entitled to be cast at the meeting.
Additionally, the board could provide that:
o the number of directors may be fixed only by a vote of the board of
directors,
o each vacancy on the board of directors (including a vacancy resulting
from the removal of a director by the shareholders) may be filled only
by the affirmative vote of a majority of the remaining directors in
office, even if the remaining directors do not constitute a quorum; and
o any director elected to fill a vacancy will hold office for the full
remainder of the term, rather than until the next election of
directors.
22
The Maryland Unsolicited Takeovers Act does not limit the power of a
corporation to confer on the holders of any class or series of preferred stock
the right to elect one or more directors. We currently have more than three
independent directors and therefore our board of directors could elect to
provide for any of the foregoing provisions. As of the date of this prospectus,
our board of directors has not made any such election.
Advance Notice of Director Nominations and New Business
Our bylaws provide that with respect to an annual meeting of shareholders,
nominations of individuals for election to the board of directors and the
proposal of business to be considered by shareholders may be made only:
o pursuant to our notice of the meeting;
o by or at the direction of the board of directors; or
o by a shareholder who was a shareholder of record both at the time of
giving of notice and at the time of the annual meeting, who is entitled
to vote at the meeting and who has complied with the advance notice
procedures of the bylaws.
With respect to special meetings of shareholders, only the business
specified in our notice of the meeting may be brought before the meeting.
Nominations of individuals for election to the board of directors at a special
meeting may only be made:
o pursuant to our notice of the meeting;
o by or at the direction of the board of directors; or
o provided that the board of directors has determined that directors will
be elected at the meeting, by a shareholder who is a shareholder of
record both at the time of giving of notice and at the time of the
special meeting and who is entitled to vote at the meeting and has
complied with the advance notice provisions of the bylaws.
23
LEGAL MATTERS
Venable, Baetjer and Howard, LLP, Baltimore, Maryland, will give its
opinion as to the legality of the shares offered hereby.
EXPERTS
The consolidated financial statements of Capital Trust Inc. and
subsidiaries appearing in Capital Trust Inc. and subsidiaries' Annual Report on
Form 10-K for the year ended December 31, 2002, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given on the authority of such firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any materials we have filed with
the SEC at the SEC's public reference rooms. The SEC also maintains a web site
(http://www.sec.gov) that contains reports, proxy statements and other
information concerning us. Please call the SEC at 1-800-SEC-0330 for information
concerning the operations of the public reference rooms or visit the SEC at the
following locations:
Public Reference Room Midwest Regional Office
450 Fifth Street Citicorp Center
Room 1024 500 West Madison Street
Washington, D.C. 20549 Suite 1400
Chicago, Illinois
60661-2511
We have filed with the SEC a registration statement on Form S-3 under the
Securities Act to register the securities to be sold in this offering. This
prospectus, which is part of the registration statement, does not contain all of
the information set forth in the registration statement or the exhibits and
schedules to the registration statement. For further information regarding
Capital Trust and our securities, please refer to the registration statement and
the documents filed as exhibits to the registration statement.
The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to those filed documents. The information incorporated by
reference is considered to be part of this prospectus, and information that we
file later with the SEC will automatically update and supersede this
information.
The following documents, which have been filed with the SEC, are hereby
incorporated by reference:
o Our current report on Form 8-K filed on May 19, 2003 (File No.
001-14788);
o Our quarterly report on Form 10-Q for the fiscal quarter ended March
31, 2003 filed on May 15, 2003 (File No. 001-14788);
o Our definitive proxy statement on Schedule 14A filed on April 30, 2003
(File No. 001-14788);
o Our current report on Form 8-K filed on April 2, 2003 (File No.
001-14788);
24
o Our annual report on Form 10-K for the year ended December 31, 2002
filed on March 28, 2003 (File No. 001-14788);
o Our definitive proxy statement on Schedule 14A filed on March 3, 2003
(File No. 001-14788);
o Our preliminary proxy statement on Schedule 14A filed on February 14,
2003 (File No. 001-14788); and
o The description of our class A common stock contained in our current
report on Form 8-K filed on July 10, 2003 (File No. 001-14788),
including any amendment or report filed for the purpose of updating
that description.
All other reports and documents subsequently filed by us with the SEC
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
after the date of this prospectus and prior to the termination of the offering
are deemed incorporated by reference into this prospectus and a part hereof from
the date of filing of those documents. Any statement contained in any document
incorporated by reference shall be deemed to be modified or superseded for the
purposes of this prospectus to the extent that a statement contained in a later
document modifies or supersedes such statement. Any statements so modified or
superseded shall not be deemed to constitute a part of this prospectus, except
as modified or superseded.
We will provide without charge to each person to whom this prospectus is
delivered, upon written or oral request of such person, a copy of any or all of
the documents referred to above which have been or may be incorporated by
reference into this prospectus (other than the exhibits to such documents).
Requests for such documents should be directed to Capital Trust, Inc., 410 Park
Avenue, 14th Floor, New York, New York 10022, Attention: Investor Relations
(telephone: (212) 655-0220).
25
=========================================== ===================================
You should rely only on the information ___________________
incorporated or contained in this
prospectus or any supplement. We have
not authorized anyone else to provide you
with different or additional
information. This prospectus is not an 8,276,019 Shares of Class A Common
offer to sell to - nor is it seeking an Stock
offer to buy these securities from - any
person in any jurisdiction in which it is
illegal or impermissible to make an offer CAPITAL TRUST, INC.
or solicitation. You should not assume
that the information in this prospectus
or any supplement is accurate as of any PROSPECTUS
date other than the date on the front of
those documents. __________, 2003
TABLE OF CONTENTS
Page ___________________
----
Note Regarding Forward-Looking
Statements............................i
Prospectus Summary....................1
Risk Factors..........................2
Use of Proceeds......................10
Selected Financial Data..............11
Selling Shareholders.................12
Plan of Distribution.................15
Description of Our Stock.............18
Legal Matters........................24
Experts..............................24
Where You Can Find More Information..24
=========================================== ===================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The expenses payable by us in connection with the registration of the
securities being registered (other than underwriting discounts and commissions)
are estimated as set forth below:
Registration statement filing fee................................... $1,802.84
---------
Transfer agent's fees and expenses*................................. $500.00
------
Accounting fees and expenses*....................................... $8,000.00
--------
Legal fees and expenses*............................................ $25,000.00
---------
Blue sky fees and expenses*......................................... $ -
New York Stock Exchange fees........................................ $ -
Printing and engraving costs*....................................... $500.00
------
Miscellaneous*...................................................... $1,000.00
--------
TOTAL............................................................... $36,802.84
----------
* Estimated pursuant to instruction to Rule 511 of Regulation S-K.
Item 15. Indemnification of Directors and Officers
Maryland law permits a Maryland corporation to include in its charter a
provision limiting the liability of its directors and officers to the
corporation and its shareholders for money damages except for liability
resulting from (a) actual receipt of an improper benefit or profit in money,
property or services, or (b) active and deliberate dishonesty established by a
final judgment and which is material to the cause of action. Our charter
contains such a provision eliminating such liability to the maximum extent
permitted under Maryland law.
Our charter authorizes Capital Trust, to the maximum extent permitted
under Maryland law, to indemnify any present or former director or officer or
any individual who, while a director of Capital Trust and at the request of
Capital Trust, serves or has served another corporation, real estate investment
trust, partnership, joint venture, trust, employee benefit plan or other
enterprise as a director, officer, partner or trustee, from and against any
claim or liability to which that person may become subject or which that person
may incur by reason of his or her status as a present or former director or
officer of Capital Trust and to pay or reimburse such person's reasonable
expenses in advance of final disposition of a proceeding. Our bylaws obligate
us, to the maximum extent permitted by Maryland law, to indemnify any present or
former director or officer or any individual who, while a director of Capital
Trust and at the request of Capital Trust, serves or has served another
corporation, real estate investment trust, partnership, joint venture, trust,
employee benefit plan or other enterprise as a director, officer, partner or
trustee and who is made a party to the proceeding by reason of his service in
that capacity from and against any claim or liability to which that person may
become subject or which that person may incur by reason of his or her status as
a present or former director or officer of Capital Trust and to pay or reimburse
such person's reasonable expenses in advance of final disposition of a
proceeding. The charter and bylaws also permit Capital Trust to indemnify and
advance expenses to any person who served a predecessor of Capital Trust in any
of the capacities described above and any employee or agent of Capital Trust or
a predecessor of Capital Trust.
Maryland law requires a Maryland corporation (unless its charter provides
otherwise, which our charter does not) to indemnify a director or officer who
has been successful in the defense of any proceeding to which he or she is made
a party by reason of his or her service in that capacity. Maryland law permits a
Maryland corporation to indemnify its present and former directors and officers,
among others, against judgments, penalties, fines, settlements and reasonable
expenses actually incurred by them in connection with any proceeding to which
they may be made a party by reason of their service in those or other capacities
unless it is established that (a) the act or
omission of the director or officer was material to the matter giving rise to
the proceeding and (i) was committed in bad faith or (ii) was the result of
active and deliberate dishonesty, (b) the director or officer actually received
an improper personal benefit in money, property or services, or (c) in the case
of any criminal proceeding, the director or officer had reasonable cause to
believe that the act or omission was unlawful. However, under Maryland law, a
Maryland corporation may not indemnify for an adverse judgment in a suit by or
in the right of the corporation or for a judgment of liability on the basis that
personal benefit was improperly received, unless in either case a court orders
indemnification and then only for expenses. In addition, Maryland law permits a
Maryland corporation to advance reasonable expenses to a director or officer
upon the corporation's receipt of (a) a written affirmation by the director or
officer of his or her good faith belief that he or she has met the standard of
conduct necessary for indemnification by the corporation, and (b) a written
undertaking by such director or officer or on his or her behalf to repay the
amount paid or reimbursed by the corporation if it is ultimately determined that
the standard of conduct was not met.
The Company has a "claims-made" directors and officers liability insurance
policy that insures the directors and officers of the Company against loss from
claimed insured wrongful acts. The policy limit of liability is $10,000,000 each
policy year and is subject to retentions for each loss of $100,000, or $500,000
with respect to securities laws related losses, for the Company.
Item 16. Exhibits
The following documents are filed as exhibits to this registration
statement:
Exhibit No.
-----------
3.1 Charter of Capital Trust, Inc. Filed as Exhibit 3.1 to
Registration Statement
on Form S-3 (File No.
333-103662) filed on
March 7, 2003 and
incorporated herein by
reference
3.2 Amended and Restated Bylaws of Capital Filed as Exhibit 3.2 to
Trust, Inc., as amended Current Report on Form
8-K (File No.
001-14788) filed on
January 29, 1999 and
incorporated herein by
reference
5.1 Opinion of Venable, Baetjer and Howard, Filed herewith
LLP as to legality of the shares being
registered
23.1 Consent of Ernst & Young LLP Filed herewith
23.2 Consent of Venable, Baetjer and Howard, Filed herewith
LLP (included in the opinion filed as
Exhibit 5.1).
24.1 Power of Attorney (included under the Filed herewith
caption "Signatures").
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933, as amended.
II-2
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Securities and Exchange
Commission pursuant to Rule 424(b), if, in the aggregate, the
changes in volume and price represent not more than a 20%
change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3, Form S-8, or
Form F-3, and the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of this offering.
(b) The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933,
each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or
persons controlling the registrant pursuant to the foregoing
provisions, the registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is
against such public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expanses incurred or paid by a director,
officer or controlling person of the registrant in the successful
defense if any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, state of New York, on July 11, 2003.
CAPITAL TRUST, INC.
By:/s/ John R. Klopp
-----------------------------
John R. Klopp, Vice Chairman,
Chief Executive Office, and President
POWER OF ATTORNEY
Each person signing below also hereby appoints John R. Klopp and Brian H.
Oswald, and each of them singly, with full power of substitution, his lawful
attorney-in-fact, with full power to execute and file any amendments to the
registration statement, including post-effective amendments, and generally to do
all such things, as such attorney-in-fact may deem appropriate to comply with
the provisions of the Securities Act of 1933 and all requirements of the
Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
/s/ Samuel Zell Chairman of the Board July 11, 2003
------------------------
Samuel Zell
/s/ John R. Klopp Chief Executive Officer, July 11, 2003
------------------------ President and Director
John R. Klopp
/s/ Brian H. Oswald Chief Financial Officer July 11, 2003
------------------------
Brian H. Oswald
/s/ Jeffrey A. Altman Director July 11, 2003
------------------------
Jeffrey A. Altman
/s/ Thomas E. Dobrowski Director July 11, 2003
------------------------
Thomas E. Dobrowski
/s/ Martin L. Edelman Director July 11, 2003
------------------------
Martin L. Edelman
/s/ Gary R. Garrabrant Director July 11, 2003
------------------------
Gary R. Garrabrant
/s/ Craig M. Hatkoff Director July 11, 2003
------------------------
Craig M. Hatkoff
II-4
/s/ Henry N. Nassau Director July 11, 2003
------------------------
Henry N. Nassau
/s/ Sheli Z. Rosenberg Director July 11, 2003
------------------------
Sheli Z. Rosenberg
/s/ Steven Roth Director July 11, 2003
------------------------
Steven Roth
/s/ Lynne B. Sagalyn Director July 11, 2003
------------------------
Lynne B. Sagalyn
II-5
EXHIBIT INDEX
Exhibit No.
-----------
3.1 Charter of Capital Trust, Inc. Filed as Exhibit 3.1 to
Registration Statement
on Form S-3 (File No.
333-103662) filed on
March 7, 2003 and
incorporated herein by
reference
3.2 Amended and Restated Bylaws of Filed as Exhibit 3.2 to
Capital Trust, Inc., as amended Current Report on Form
8-K (File No.
001-14788) filed on
January 29, 1999 and
incorporated herein by
reference
5.1 Opinion of Venable, Baetjer and Filed herewith
Howard, LLP as to legality of the
shares being registered
23.1 Consent of Ernst & Young LLP Filed herewith
23.2 Consent of Venable, Baetjer and Filed herewith
Howard, LLP (included in the opinion
filed as Exhibit 5.1)
24.1 Power of Attorney (included under Filed herewith
the caption "Signatures")